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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR 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 0-17297
BTU INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 04-2781248
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
23 ESQUIRE ROAD, NORTH BILLERICA, MASSACHUSETTS 01862-2596
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (978) 667-4111
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None Registered
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of Each Class
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Common Stock, $.01 Par Value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K [ ].
The aggregate market value of the shares of Common Stock, $.01 par value,
of the Company held by non-affiliates of the Company was $56,670,790 on March
29, 2000.
Indicate number of shares outstanding of the Registrant's Common Stock, par
value $.01 per share, as of the latest practicable date: As of March 29, 2000:
6,864,688 shares.
DOCUMENTS INCORPORATED HEREIN BY REFERENCE
The following documents are incorporated herein by reference: Part II - Portions
of the Annual Report to Stockholders, for the year ended December 31, 1999; and
Part III - Portions of the Proxy Statement for the 2000 Annual Meeting of
Stockholders , both of which are to be filed with the Securities and Exchange
Commission.
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BTU INTERNATIONAL, INC.
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PART I
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Item 1 Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
Item 4A Executive Officers of the Registrant
PART II
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Item 5 Market for Registrant's Common Equity
and Related Stockholder Matters
Item 6 Selected Financial Data
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8 Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure
PART III
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Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners
and Management
Item 13 Certain Relationships and Related Transactions
PART IV
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Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
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PART I
ITEM 1. BUSINESS
We design, manufacture, sell and support advanced thermal processing
systems used primarily in advanced semiconductor packaging and the assembly of
printed circuit boards (PCBs). We believe we are the leading supplier of solder
reflow systems used by electronics original equipment manufacturers (OEMs) and
contract electronics manufacturers (CEMs). In addition, we produce high
temperature advanced thermal processing systems for manufacturing ceramics
components for electronics and a variety of specialty applications.
Our customers serve the advanced segments of the electronics industry in
which complex, high density PCBs and components are used. Our customers
typically require high throughput, high yield and highly reliable advanced
thermal processing systems with tightly controlled temperature and atmosphere
parameters of the type realizable with our products.
Our products are sold worldwide through our direct technical sales force
and through independent sales representatives. Among our top revenue generating
customers in 1999 are such industry leaders as Celestica Incorporated, Intel
Corporation, Lucent Technologies Inc., Motorola, Inc., Nokia Corporation,
Samsung Corporation and Solectron Corporation.
Our principal offices are located at 23 Esquire Road, North Billerica,
Massachusetts 01862. Our telephone number is (978) 667-4111. We also have sales
and service facilities throughout North America, Europe and Asia. Our corporate
website is www.btu.com.
INDUSTRY BACKGROUND
Growth in Electronics. Demand is growing rapidly for increasingly
sophisticated electronic devices such as notebook computers, cellular phones,
and personal digital assistants (PDAs). Other types of electronics equipment are
becoming more complex, including data communications equipment such as switches,
routers and servers, broadband access products such as cable modems and ethernet
accessories and consumer products such as automobile electronics and digital
cameras.
Integral to the growth in electronics are the advances in technology which
result in producing smaller, lighter and cheaper end products. These advances
are achieved, in part, by increasing the performance and reducing the cost,
size, weight and power requirements of the components that comprise electronic
devices, such as electronic assemblies, PCBs and semiconductors. In response to
these developments, OEMs and CEMs are increasingly employing more sophisticated
manufacturing and assembly techniques and more advanced manufacturing equipment.
ELECTRONICS MANUFACTURING PROCESS. Electronics manufacturing processes
include integrated circuit manufacturing, integrated circuit packaging and the
assembly of PCBs. In the advanced semiconductor packaging and PCB assembly
processes, several precision thermal processes are required to connect and bond
integrated circuits (ICs) to semiconductor packages and packaged circuits and
other components to PCBs. The attachment process, which creates a permanent
physical and electrical bond, is called solder reflow, or reflow. For example,
the PCB assembly process involves heating a PCB upon which solder pads have been
printed and electronic components have been placed. A convection thermal
processing system heats the PCB until just above the melting point of the solder
pads and then provides a controlled cooling cycle, resulting in a permanent
physical and electrical bond between the PCB and the electronic components.
Flux, which is produced by vaporized solder during the solder reflow thermal
processing cycle, must be contained and collected. Following the bonding
process, voids must be filled with an epoxy material which is then thermally
cured.
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The growth in the electronics industry is driving manufacturers to demand
more versatile, more reliable and more advanced capital equipment. Other factors
that drive the demand for advanced thermal processing systems include:
- Rapid growth in contract electronics manufacturing;
- Sharp growth in manufacturing capacity at leading cellular phone
producers;
- Technological advances in semiconductor packaging and PCB assembly;
- Globalization of major electronics manufacturers;
- Move toward lead-free solder;
- Replacement of palladium with nickel in capacitors; and
- Increased velocity of new product introductions.
TECHNOLOGICAL CHALLENGES
Advanced thermal processing systems present significant engineering
challenges related to temperature control, atmosphere control, product handling,
flux containment and disposal, and high system up time.
Advanced thermal processing systems maintain accurate and uniform
temperatures within their process chambers. The temperature within the process
chamber is influenced by the rate at which components are moved through the
system and the weight and density of the PCBs. In addition, the thermal
processing system's heat convection rate must be varied and controlled as
different components and PCBs are processed. The chamber must also dispense heat
uniformly across the PCBs and components at precise temperatures so that all of
the solder will reflow properly without damaging the components. Also,
components must be heated and cooled at closely preset rates in order to avoid
damage caused by thermal stress.
Another technological challenge for advanced thermal processing systems is
achieving precisely controlled atmospheric conditions within the process
chamber. In order to facilitate thermal processing without damage to components,
many advanced thermal processing systems use a substantially oxygen-free
atmosphere of nitrogen or hydrogen in their process chambers. If such gases are
used, the entry of contaminating air must be substantially eliminated, even
though the product enters and exits the system continuously from the ambient
atmosphere. Maintaining a pure and controlled atmosphere in the process chamber,
while minimizing the consumption of nitrogen or hydrogen gases in order to
reduce operating costs, presents significant engineering challenges.
Handling PCBs in advanced thermal processing systems requires highly
reliable conveyance systems that can easily be converted to process a wide
variety of products having different specifications, often on side-by-side
tracks through the process chamber. The product handling system must also fully
support different sizes of PCBs to eliminate yield loss which could be caused by
the sagging of PCBs at elevated temperatures during the heating process.
Volatile compounds in the flux, which is vaporized during the solder reflow
thermal processing cycle, must be contained and collected so that they do not
condense in the system and damage the environment. The efficient containment,
collection and disposal of the flux are important factors in achieving high
system up time, high throughput and reliability.
The mechanical components in advanced thermal processing systems must
operate almost continuously in a demanding, elevated temperature environment
with frequent thermal cycles. The use of materials that are resistant to high
temperature and thermal stress is important to achieving high reliability.
OUR SOLUTION
We deliver a broad range of advanced thermal processing systems to serve
the needs of electronics manufacturers that require high throughput, process
yields and reliability with tightly controlled process parameters. Our systems
enable our customers to increase advanced semiconductor packaging and PCB
assembly throughput and yield by providing precise atmosphere and temperature
control. In addition to the high performance of our products, we believe the
quality standards of our organization and our worldwide service and support are
important to our success with industry leading global electronics manufacturers.
ATMOSPHERE UNIFORMITY AND CONTROL. Our advanced thermal processing systems
provide precision control over atmospheric conditions within their process
chambers by integrating our gas curtain and physical curtain technologies. Our
systems are capable of excluding virtually all oxygen from the reflow and curing
process steps to maintain the integrity of the process chamber atmosphere. In
addition, our systems minimize the consumption of nitrogen or hydrogen, thereby
reducing the operating cost of maintaining the atmosphere.
ACCURATE AND UNIFORM TEMPERATURE. Our high rate convection heating modules
provide controlled heating capacities across many different sizes of PCBs,
thereby enabling our customers to maximize throughput regardless of their
product mix. In addition, our systems apply heat uniformly across each PCB and
its semiconductor and other components, which is critical to ensure that
complete reflow occurs. Heat up and cool down profiles are also closely
controlled for process consistency and the protection of component parts.
REPEATABILITY FROM SYSTEM TO SYSTEM. We provide a high degree of
repeatability from system to system through our closely characterized atmosphere
and temperature controls and the reliability of our systems. This is a critical
attribute because our customers must achieve uniform manufacturing performance
in plants located throughout the world.
PROCESSING FLEXIBILITY. Major electronics manufacturers process many sizes
of PCBs and often need rapid product changeover capabilities. Our systems can
process PCBs of different sizes with minimal or no reconfiguration. Rapid
changeover reduces down time and increases manufacturing volume. In addition,
due to their very high volume requirements, our customers may require the
ability to process multiple
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PCBs simultaneously side by side through the same process chamber. Our systems
afford our customers the flexibility to achieve side-by-side processing.
RELIABILITY. Our customers place a high premium on reliability. Reliability
is a major contributor to low cost of ownership because high up time can
increase the productivity of an entire production line. We believe our advanced
thermal processing systems are the most reliable in our customers' production
lines and among the most reliable advanced thermal processing systems in the
electronics industry.
WORLDWIDE CUSTOMER SUPPORT. We provide our customers with global technical
service support, in depth process engineering support and fast delivery of our
systems and parts. We provide our customer support through our on-site direct
service organization and our independent sales and service representatives,
supplemented with telephonic support and extensive customer training programs
twenty- four hours a day, seven days a week.
PRODUCTS
We supply a broad range of advanced thermal processing systems, the
majority of which are used by OEMs and CEMs in the electronics manufacturing
industry. The major application for our products is currently in the PCB
assembly industry for solder reflow. Our advanced thermal processing systems are
used in the bonding process necessary for the manufacture of advanced
semiconducter packages and PCB assemblies. In addition, our products are used
for such custom applications as the sintering of ceramics, the brazing of metals
and the deposition of thin film coatings.
ELECTRONICS MANUFACTURING
PCB Reflow and Cure. We currently sell two series of advanced thermal
processing systems used in the solder reflow and cure stages of PCB assembly as
well as a new generation of systems under development.
The PARAGON series of advanced convection reflow systems, using specialized
fan drives, is rated up to 400(degrees)C and operates in air or nitrogen
atmospheres. The Paragon series utilizes an impingement technology to transfer
heat to the PCB. The Paragon series is designed to handle a wide range of board
sizes and can process loads of up to three pounds per square foot in a
controlled atmosphere. Using the thermal power arrays of five kilowatt heaters,
the Paragon can process PCBs in dual track configurations by engaging multiple
board supports, thereby enabling our customers to double production without
increasing the machine's footprint. This feature is primarily used in the
production of PCBs for cellular phones.
The solder reflow process requires the thermal processing system to manage
flux residues outgassed during the processing of the PCBs. The Paragon advanced
thermal processing systems are equipped with a patented flux management system
that isolates the flux outside the main process chamber, thereby helping to
maintain the integrity of the atmosphere and facilitate easy disposal. The
Paragon also features a closed loop convection control system to provide
repeatable processes and controllable convection flows used in direct chip
attach processes.
The Paragon series is available in three models based on the heated lengths
of the thermal processing chambers. The heated length is based on the required
production rate and loading requirements. The Paragon advanced thermal
processing systems, with a 400(degrees)C temperature rating, are capable of
processing lead-free solder. The Paragon series ranges in price from $70,000 to
$160,000.
The VIP series of fan based reflow and curing systems is rated up to
300(degrees)C and is available in either air or air/nitrogen configurations. The
VIP series also utilizes an impingement convection technology. The VIP uses 2.5
kilowatt heaters and is available in various heated lengths. The VIP series can
be upgraded to process lead-free materials and ranges in price from $40,000 to
$100,000.
We are developing, and expect to be selling by the second half of 2000, the
PYRAMAX series of thermal processing systems. This series is designed on a
single platform to be rapidly configurable, which will reduce our product build
cycle and allow us to meet customer demands for shorter delivery lead times. The
Pyramax offers our customers reduced capital cost, lower nitrogen consumption
and reduced scheduled maintenance cycles.
Our new Pyramax series provides increased process flexibility due to its
ability to process PCBs up to 24 inches wide. The Pyramax series, rated up to
400(degrees)C, is capable of operating in air or nitrogen atmospheres and has
increased convection flow for greater performance. The Pyramax systems will be
offered in various heated lengths and range in price from $70,000 to $150,000.
Our Pyramax series will be capable of processing lead-free solder.
The VIP and Pyramax advanced thermal processing systems can also be used
for advanced semiconductor packaging.
Advanced Semiconductor Packaging. We sell several systems for the thermal
processes used in advanced semiconductor packaging.
Wafer Bump Reflow. Our TCAS series of continuous belt advanced thermal
processing systems is rated up to 800(degrees)C and is designed for wafer
bump reflow. It can operate in a variety of controlled atmospheres
including hydrogen using patented gas barrier technology to achieve a high
purity hydrogen atmosphere. Our TCAS systems range in price from $100,000
to $300,000 and are available in various belt widths and heated lengths.
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Flip Chip Reflow in Package. Flip Chip Reflow physically and
electronically attaches the die to its package. Our TRS thermal processing
system is rated up to 350(degrees)C, operates in air or nitrogen and uses
an impingement convection system, which is unique for this application.
This system uses a gas amplifier instead of a fan to drive convection
flow. The TRS is currently used for flip chip reflow in the semiconductor
packaging industry. Our TRS has the capability to control nitrogen
atmospheres with oxygen levels below five parts per million which is
critical in the flip chip reflow process for high input/output
applications. Our TRS advanced thermal processing systems range in price
from $100,000 to $150,000.
Ball Grid Array Solder Sphere Attach Reflow. The VIP series, with
nitrogen atmosphere capability, is used for the attachment of solder balls
to the semiconductor package. Our VIP series, as configured with 70 inches
of heated length and nitrogen atmosphere, is used for the solder reflow
process. See "VIP" above.
Epoxy Underfill Cure. The VIP series, operating in a clean dry air
atmosphere, is used to cure the epoxy underfill materials in various
advanced semiconductor packaging technologies. To reduce footprint, the
VIP utilizes dual or triple track conveyance system for materials
requiring longer cure times. As part of the process, the VIP is used for
heating the epoxy underfill materials thereby keeping the material flowing
under the chip prior to the curing process.
Hybrid Circuits and Discrete Components. We offer a range of products that
are used in the manufacturing of multilayer ceramic capacitors and thick film
hybrid circuits.
Multilayer Ceramic Capacitors and Hybrid Circuits. We have developed
a new BME PUSHER thermal processing system for manufacturing advanced
nickel-based MLCCs. The process requires the sintering of the nickel
electrode in a very controlled multi atmosphere containing nitrogen,
hydrogen and oxygen at 1300(degrees) to 1400(degrees)C. The BME Pusher
controls partial pressures of oxygen, critical in the sintering process,
and ranges in price from $800,000 to $1.0 million.
We also supply a second type of system for MLCC manufacturing. Our
VMCA series of continuous belt advanced thermal processing systems, rated
up to 1100(degrees)C in air or nitrogen atmospheres, is used for firing
copper thick film for terminations of MLCC. The VMCA utilizes an advanced
gas scrubbing system to control the binder removal phase in the
termination firing process. The VMCA is available in various belt widths
and heated lengths and ranges in price from $100,000 to $150,000.
Thick Film Resistors and Conductors. The TFF and the VM series of
continuous belt advanced thermal processing systems is rated up to
1050(degrees)C in air. These systems are used for firing thick film pastes
in the production of hybrid circuits and can achieve an across belt
temperature uniformity of +/- 1(degrees)C. Such thermal uniformity is
critical in the production of resistor circuits. These systems are
available in various belt widths and heated lengths and range in price
from $50,000 to $180,000.
CUSTOM APPLICATIONS
We design and manufacture custom high temperature systems used in such
applications as metals brazing, ceramic sintering and thin film coatings.
Metals Brazing. The TCA series of continuous advanced thermal processing
systems is rated up to 1150(degrees)C and operates in a variety of atmospheres.
This series is used for a range of thermal processing applications including
brazing of metals such as aluminum oil coolers for the automotive industry. The
TCA series utilizes a patented system to enhance temperature uniformity and
increase product throughput. The TCA series is available in a variety of belt
widths and heated lengths and ranges in price from $70,000 to $500,000.
Ceramic Sintering. The WBE WALKING BEAM thermal processing system is rated
up to 1800(degrees)C and operates in a hydrogen reducing atmosphere. This series
is primarily used for sintering of multilayer ceramics and nuclear fuel pellets
that are used in the production of nuclear power. The WBE Walking Beam is
designed for high volume production applications with very heavy loads. It uses
a walking beam transport system to eliminate friction associated with advanced
thermal processing systems that use pusher technology. This system ranges in
price from $500,000 to $1.5 million.
We also offer a PUSHER thermal processing system which is rated up to
1800(degrees)C in a hydrogen reducing atmosphere. The Pusher is used in lower
volume applications for the sintering of ceramics and nuclear fuels. These
systems range in price from $500,000 to $1.0 million.
Thin Film Coatings. The TCD series of continuous advanced thermal
processing systems is used for the deposition of thin film coatings at
atmospheric pressure. Typical processes include the deposition of
anti-reflective coatings on silicon or glass. The TCD series is available in a
variety of belt widths and heated lengths and ranges in price from $300,000 to
$600,000.
CUSTOMERS
Many of our principal customers are large-volume global OEMs and CEMs that
produce ICs and assemble PCBs for use in the manufacture of electronic devices.
Many of our customers use our products in multiple facilities worldwide. Our CEM
customers include industry leaders such as Celestica and Solectron. Our OEM
customers include leaders in the their respective industries such as Intel and
Lucent as well as those in the telecommunications industry such as Motorola,
Nokia, and Samsung.
Our largest revenue generating customers have historically accounted for a
significant percentage of our net sales. In 1999, aggregate sales to our ten
largest customers accounted for approximately 50% of our net sales. In 1999,
sales to Solectron, our largest customer for that year, represented nearly 18%
of our total net sales. In 1998, Solectron and Intel represented approximately
14% and 13% of our net sales, respectively. In 1997, Solectron represented
approximately 14% of our net sales.
SALES AND MARKETING
We market and sell our products through our direct sales force and
independent sales representatives throughout the world and we promote our
products through industry-wide venues such as trade shows. Our direct sales
force is responsible for educating the marketplace, generating leads and
creating sales programs and literature. Our on-site direct service organization
and our manufacturers representatives provide ongoing services to customers
using our products. These services include implementing continuous improvement
tools related both to the cost of our products and to their technical
performance. These service functions allow us to market future sales within our
current customer base. In addition, our management and sales teams participate
in periodic trade conventions, through which we aggressively market our products
to potential customers.
We market our systems and services globally. Approximately 68% of our net
sales originate outside the United States, with Asia Pacific and Europe
representing 30% and 26% of net sales, respectively.
RESEARCH, DEVELOPMENT AND ENGINEERING
Our research, development and engineering efforts are directed toward
enhancing existing products and developing our next generation of products. Our
expenses for research, development and engineering increased from $4.6 million
in 1998 to $4.8 million in 1999. A large percent of our research, development
and engineering budget in 1999 was spent on the development of a new solder
reflow platform and in the design of our MLCC sintering systems.
We have developed close working relationships between our key customers and
our product engineering teams. These relationships enable us to incorporate our
customers' feedback and needs into our product development efforts.
We have reduced the time it takes to introduce new products and lowered
research, development and engineering costs by integrating product design,
manufacturing, engineering and after sales support documentation. We also have
begun an information technology initiative to develop language-independent
electronic service and repair support.
MANUFACTURING AND SUPPLIERS
Our principal manufacturing operations consist of final assembly, systems
integration and testing at our facility in North Billerica, Massachusetts. We
outsource the manufacture of most of our components to a number of different
suppliers and maintain close relationships with these key suppliers. We have a
list of qualified alternative suppliers in the event we exceed the capacity of
our key suppliers.
We made a significant investment to modernize our manufacturing operations
in 1998. In the future, we expect to make additional investments in software and
capital equipment related to our information technology infrastructure and
customer support. We have outsourced the manufacture of most of our significant
component systems in the last two years, thereby reducing cycle time and
increasing our inventory turnover. We adhere closely to the principles of total
quality management and have been ISO 9001 certified since March 1998. Our
customers, suppliers and employees are encouraged to provide feedback and make
suggestions for product improvements. These increased efficiencies in our
manufacturing operations have dramatically increased our net sales per employee.
INTELLECTUAL PROPERTY
We seek to protect our intellectual property by filing patents on
proprietary features of our advanced thermal processing systems and by
challenging third parties that we believe infringe on our patents. We also
protect our intellectual property rights with nondisclosure and confidentiality
agreements with employees, consultants and key customers and with our
trademarks, trade secrets and copyrights. As a global supplier of equipment, we
recognize that the laws of certain foreign countries may not protect our
intellectual property to the same extent as the laws of the United States.
We license some software programs from third party developers and
incorporate them into our products. Generally, these agreements grant us
non-exclusive licenses to use the software and terminate only upon a material
breach by us. We believe that such licenses are generally available on
commercial terms from a number of licensors.
We initiated a legal action on June 12, 1998 against Electrovert, Inc., a
Division of Cookson Group PLC (Electrovert) and one of Electrovert's
subsidiaries, claiming that the flux condenser on their advanced thermal
processing system infringes on our patent. Electrovert and its subsidiary have
filed two counter suits, claiming that parts of our thermal processing
technology infringe on their patents. We intend to vigorously protect our
proprietary rights in these actions.
BACKLOG
Backlog at December 31, 1999 was $11.3 million, compared to $10.9 million
at December 31, 1998. As of December 31, 1999, we expected to ship our year end
backlog within 6 to 20 weeks. Most of our backlog for solder reflow systems is
expected to be shipped within 3 to 8 weeks. The backlog of our custom systems is
expected to be shipped within 12 to 20 weeks. We include in backlog only those
orders for which the customer has signed a purchase order and a delivery
schedule has been specified. Because of possible changes in delivery schedules
and order cancellations, our backlog at any particular date is not necessarily
representative of sales for any subsequent period.
COMPETITION
Several companies compete with us in selling advanced thermal processing
systems to OEMs and CEMs. Although price is a factor in buying decisions
on price, we believe that technological leadership, process capability,
throughput, environmental safeguards, uptime, mean time-to-repair, cost of
ownership and after-sale support have become increasingly important factors. We
compete primarily on the basis of these criteria, rather than on the basis of
price.
Our principal competitors for advanced semiconductor packaging and PCB
assembly equipment vary by product application. Our principal competitors for
solder reflow systems are Electrovert-Speedline Technologies (a Cookson
Electronic Company), Heller Industries, and Vitronics-Soltec, Inc. (a Dover
Technologies Company). Our MLCC systems will primarily compete with systems
produced by Tokai, a Japanese manufacturer. Our high temperature systems for
thick film, hybrid circuits, ceramics and other applications compete primarily
against systems sold by Lindberg (a Unit of SPX Corp.), SierraTherm Production
Furnaces, Inc., Centrotherm and Harper International Corp.
EMPLOYEES
As of March 1, 2000, we had 294 employees, of whom 87 are engaged in sales,
marketing and service, 33 in research, development and engineering, 34 in
finance and administration and 140 in operations. None of our employees is
represented by a collective bargaining agreement, and we believe that we have
satisfactory relations with our employees.
ENVIRONMENTAL
Compliance with laws and regulations regarding the discharge of materials
into the environment, or otherwise relating to the protection of the
environment, has not had any material effects on the capital expenditures,
earnings or competitive position of the Company. The Company does not anticipate
any material capital expenditures for environmental control facilities in 2000.
ITEM 2. PROPERTIES
FACILITIES
We maintain our headquarters in North Billerica, Massachusetts, where we
own a 150,000 square foot manufacturing facility. We currently operate our
manufacturing facility on a full time first shift and a partial second shift
basis. In England, we lease a facility for our European sale and service
operations. We also rent office space in Paris, France. In Asia, we lease sales
and service offices in Shanghai and Beijing, China; Singapore; Penang, Malaysia;
and Cavite, Philippines. We believe that our plant and capital equipment provide
sufficient manufacturing capacity through 2000.
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ITEM 3. LEGAL PROCEEDINGS
There were no material legal proceedings pending as of the time of this
filing.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of 1999.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
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NAME AGE POSITIONS
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Paul J. van der Wansem 60 Chairman of the Board of Directors,
President and Chief Executive Officer
Santo J. DiNaro 54 Executive Vice President
Thomas P. Kealy 57 Vice President, Corporate Controller
and Chief Accounting Officer
James M. Griffin 42 Vice President of Sales-Americas
</TABLE>
Paul J. van der Wansem has been President, Chief Executive Officer and a
member of our board of directors since 1979. From December 1977 to 1981, he
served as Vice President of Holec, N.V., a Dutch electronics company, and from
1978 to 1981, he was also president of Holec (USA), Inc. From 1973 to 1977, he
worked as a Management Consultant for the Boston Consulting Group, Inc. From
1970 to 1973, Mr. van der Wansem worked as an Adjunct Director of First National
City Bank in Amsterdam and New York. Mr. van der Wansem received an
undergraduate degree in automotive engineering from Bromsgrove College, England
and holds an M.B.A. from IMD, Switzerland.
Santo J. DiNaro has been Executive Vice President of our company since May
1999. He joined our company as Vice President of Operations and Engineering in
December 1997. Prior to joining our company, Mr. DiNaro served as head of
Engineering at Varian's Ion Implant Division and previously was the Operations
Manager. Mr. DiNaro was with Varian for 17 years. Mr. DiNaro has a B.S. in
Mechanical Engineering from Northeastern University.
Thomas P. Kealy has been Vice President, Corporate Controller and Chief
Accounting Officer of our company since February 1991. He has been the Corporate
Controller since joining our company in July 1985. Prior to 1985, Mr. Kealy
served for 14 years in various financial management positions, including
Division Controller for Polaroid Corporation. Earlier he was the Corporate
Controller for Coro, Inc. and Lebanon, Inc. Mr. Kealy holds a B.S. in Finance
and Accounting from Bentley College and an M.B.A. from Clark University.
James M. Griffin has been Vice President Sales-Americas of our company
since February 2000. Previously, Mr. Griffin was our Director of Sales-North
America. Mr. Griffin has held a number of positions within our company's sales
organization. Mr. Griffin has been with our company for 17 years. Mr. Griffin
attended Worcester Polytechnic Institute in the mechanical engineering program.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
Our common stock has been listed on the Nasdaq National Market System under
the symbol "BTUI" since February 7, 1989. The following table sets forth, for
the periods indicated, the high and low closing prices of our common stock as
reported on the Nasdaq National Market System.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
First Quarter............................................. $ 5.53 $ 4.25
Second Quarter............................................ 5.00 4.13
Third Quarter............................................. 4.25 2.50
Fourth Quarter............................................ 3.63 2.19
Fiscal Year Ended December 31, 1999:
First Quarter............................................. 4.00 3.00
Second Quarter............................................ 5.00 2.69
Third Quarter............................................. 5.75 4.00
Fourth Quarter............................................ 5.75 4.31
</TABLE>
As of March 29, 2000 there were approximately 519 stockholders of record.
5
<PAGE> 8
DIVIDEND POLICY
Our policy is to retain earnings to provide funds for the operation and
expansion of our business. We have not paid cash dividends on our common stock
and do not anticipate that we will do so in the foreseeable future. The payment
of dividends in the future will depend on our growth, profitability, financial
condition and other factors that our board of directors may deem relevant.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated statement of operations data for each of the
fiscal years ended December 31, 1997, December 31, 1998 and December 31, 1999
and the selected consolidated balance sheet data as of December 31, 1998 and
December 31, 1999 have been derived from our consolidated financial statements
audited by Arthur Andersen LLP, independent public accountants, and are included
elsewhere in this Form 10-K. The selected consolidated statement of operations
data for the fiscal years ended December 31, 1995 and December 31, 1996 and the
selected consolidated balance sheet data as of December 31, 1995, December 31,
1996 and December 31, 1997 have been derived from audited financial statements
not included in this Form 10-K. This data should be read together with our
consolidated financial statements and related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" appearing
elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $58,274 $45,811 $52,118 $56,468 $70,476
Cost of goods sold................................. 32,022 26,768 30,431 33,985 42,478
------- ------- ------- ------- -------
Gross profit..................................... 26,252 19,043 21,687 22,483 27,998
Selling, general and administrative................ 15,583 14,123 15,349 16,021 19,471
Research, development and engineering.............. 4,266 3,850 3,808 4,575 4,786
Restructuring charge(1)............................ -- -- 530 -- --
------- ------- ------- ------- -------
Operating income................................. 6,403 1,070 2,000 1,887 3,741
Interest income (expense), net..................... (290) (255) (10) (46) 8
Other income (expense)............................. 90 82 (341) 73 24
Gain on sale of minority investment(2)............. -- 3,400 -- -- --
------- ------- ------- ------- -------
Income before provision for income taxes........... 6,203 4,297 1,649 1,914 3,773
Net income from continuing operations.............. 5,073 744 1,250 1,533 2,838
Net income....................................... $ 5,073 $ 3,560 $ 1,250 $ 1,533 $ 2,838
======= ======= ======= ======= =======
Earnings per share, diluted, from continuing
operations(3) ................................... $ 0.68 $ 0.11 $ 0.17 $ 0.22 $ 0.41
======= ======= ======= ======= =======
Earnings per share, diluted........................ $ 0.68 $ 0.49 $ 0.17 $ 0.22 $ 0.41
======= ======= ======= ======= =======
Weighted average shares outstanding, diluted....... 7,320 7,338 7,336 7,118 6,968
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 6,145 $10,218 $11,873 $10,594 $12,431
Working capital.................................... 18,005 25,268 26,098 24,961 26,693
Total liabilities.................................. 17,138 14,556 16,821 15,478 17,346
Total assets....................................... 35,834 36,763 40,379 38,615 43,149
Stockholders' equity............................... 18,696 22,207 23,558 23,137 25,803
</TABLE>
- ------------
(1) In 1997, we incurred a one-time restructuring charge resulting from the
implementation of our strategy to outsource subassemblies and change our
approach in our sales and service support in certain Asia Pacific
countries.
(2) In 1996, we sold our 19.4% minority interest in Bruce Technologies
International, Inc. for $7.0 million. As a result, we recognized a pretax
gain on this investment of $3.4 million, net of direct expenses.
(3) Earnings per share from continuing operations exclude the sale of the
minority interest in Bruce Technologies, Inc.
6
<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We design, manufacture, sell and support advanced thermal processing
systems used primarily in the assembly of PCBs and in advanced semiconductor
packaging. We believe we are the leading supplier of solder reflow systems used
by OEMs and CEMs. In addition, we produce advanced high temperature processing
systems for manufacturing ceramic components for electronic devices and a
variety of specialty applications.
We derive our net sales from customers around the world. Our customers
include large multinational OEMs and CEMs requiring advanced thermal processing
equipment solutions. In 1999, net sales to our five largest customers accounted
for 42.0% of our total net sales. Our net sales in 1999 were dispersed
worldwide, with approximately 32.0% to customers in the United States, 30.0% to
Asia Pacific customers, 26.0% to European customers and 12.0% to customers in
the rest of the world. Over the past three years, the percentage of our net
sales to international customers has increased from 50.0% in 1997 to 68.0% in
1999. This shift reflects the continued trend toward offshore manufacturing by
our U.S.-based multinational customers and the successful penetration of new
non-U.S. based customers.
RESULTS OF OPERATIONS
The following table sets forth the percentage of net sales of certain items
in our consolidated financial statements for the periods indicated.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
------------------------
1997 1998 1999
----- ----- ------
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
Cost of goods sold.......................................... 58.4% 60.2% 60.3%
----- ----- ------
Gross profit.............................................. 41.6% 39.8% 39.7%
Operating expenses:
Selling, general and administrative....................... 29.5% 28.4% 27.6%
Research, development and engineering..................... 7.3% 8.1% 6.8%
Restructuring charge...................................... 1.0% 0.0% 0.0%
----- ----- ------
Operating income.......................................... 3.8% 3.3% 5.3%
Interest income............................................. 0.9% 0.7% 0.6%
Interest expense............................................ (0.9)% (0.8)% (0.6)%
Other income (expense), net................................. (0.7)% 0.1% 0.0%
----- ----- ------
Income before provision for income taxes.................... 3.2% 3.4% 5.4%
Income taxes................................................ 0.8% 0.7% 1.3%
----- ----- ------
Net Income.................................................. 2.4% 2.7% 4.0%
===== ===== ======
</TABLE>
7
<PAGE> 10
FISCAL YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1998
Net Sales. Net sales increased 24.8% from $56.5 million in 1998 to $70.5
million in 1999. The increase in 1999 net sales reflects the higher demand for
our products, primarily by our large multinational OEMs and CEMs. This increase
in net sales also reflects growth of approximately 14.0% in the electronics
manufacturing market and the gain in market share we have achieved with our
medium and high end solder reflow systems.
The percentage of net sales attributable to our customers in the United
States declined by 3.3%, net sales attributable to our customers in Europe
increased by 2.2%, net sales attributable to our Asia Pacific customers
increased by 1.1% and there was a minimal percentage change in net sales in the
rest of the world. The larger growth rate in net sales to European and Asia
Pacific customers reflects the trend toward offshore manufacturing by our
U.S.-based and multinational customers and our increased sales to overseas
domestic manufacturers. The effect of price changes for specific products has
not materially impacted the change in net sales for the periods presented.
Gross Profit. Gross profit increased 24.5% from $22.5 million in 1998 to
$28.0 million in 1999 and, as a percentage of net sales, decreased from 39.8% in
1998 to 39.7% in 1999. The increase in gross profit for 1999 was due to the
increase in net sales in 1999.
Selling, General and Administrative. Selling, general and administrative
increased 21.5% from $16.0 million in 1998 to $19.5 million in 1999, and as a
percentage of net sales, decreased from 28.4% to 27.6%. The higher costs in 1999
were primarily the result of a $14.0 million increase in our net sales. The
higher selling, general and administrative in 1999 can be attributed to an
increase in customer service support for our worldwide customer base and higher
selling expenses. In 1999, sales commission expense was higher as the number of
products sold through agents increased. Warranty costs were also higher in 1999
due to our rapid growth and the increase in the use of outside service
contractors in the latter part of the year. In addition, higher bonuses were
recorded in 1999 compared to 1998, due to the increase in net income.
Research, Development and Engineering. Research, development and
engineering increased 4.6% from $4.6 million in 1998 to $4.8 million in 1999,
and as a percentage of net sales, decreased from 8.1% in 1998 to 6.8% in 1999.
In 1999, we increased our investment in new product development.
Operating Income. Operating income increased 98.3% from $1.9 million in
1998 to $3.7 million in 1999, and as a percentage of net sales, increased from
3.3% in 1998 to 5.3% in 1999. In 1999, the increase in operating income was the
result of a 24.8% increase in net sales over 1998. In addition, our cost
structure for sales, general and administrative and research, development and
engineering increased at a lower rate than did the net sales percentage.
Income Taxes. Income taxes increased from $381,000 in 1998 to $935,000 in
1999. Our effective tax rates were 19.9% in 1998 and 24.8% in 1999. The 1999 and
1998 effective tax rates reflect the use of net operating loss carryforwards
available to our UK subsidiary, which was profitable in 1999 and 1998. During
1999 and 1998, we recorded the benefit of these net operating losses, resulting
in the lower effective tax rates. Our statutory federal income tax rate is
34.0%.
8
<PAGE> 11
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1997
Net Sales. Net sales increased 8.3% from $52.1 million in 1997 to $56.5
million in 1998. The increase in net sales in 1998 reflects the higher demand
for our products, primarily by our large multinational customers, despite a
decline in the overall market for capital equipment in electronics manufacturing
during the period. In addition, we saw an increase in net sales of our large
thermal processing systems for the sintering of nuclear fuels.
During 1998, the percentage of net sales attributable to our customers in
the United States declined by 14.7%. This was offset by a 4.9% increase in net
sales to our Asia Pacific customers, a 1.0% increase in net sales to our
European customers and an 8.8% increase in net sales to customers in the rest of
the world. The increase in non-United States net sales was due to expansion in
production by multinational companies to offshore facilities and our market
penetration of non-domestic customers. The effect of price changes for specific
products has not materially impacted the change in net sales for the periods
presented.
Gross Profit. Gross profit increased 3.7% from $21.7 million in 1997 to
$22.5 million in 1998, and as a percentage of net sales, decreased from 41.6% in
1997 to 39.8% in 1998. The increase in gross profit for 1998 was due to the
increase in net sales compared to 1997. The decrease in the gross margin
percentage in 1998 was due to our product mix and price pressure for our more
competitive, high volume products.
Selling, General and Administrative. Selling, general and administrative
increased 4.4% from $15.3 million in 1997 to $16.0 in 1998 and, as a percentage
of net sales, decreased from 29.5% in 1997 to 28.4% in 1998. The higher costs in
1998 were primarily the result of an increase of $4.4 million in net sales and
resulting increased costs for sales and service to support our increasing
worldwide customer base. These increases in costs were offset by a lower overall
commission expense as we increased our direct sales and service locations in
certain Asia Pacific countries.
Research, Development and Engineering. Research, development, and
engineering increased 20.1% from $3.8 million in 1997 to $4.6 million in 1998,
and as a percentage of net sales, increased from 7.3% in 1997 to 8.1% in 1998.
In 1998, the increase in research, development and engineering was the result of
adding and implementing new engineering management resources and technologies.
Operating Income. Operating income decreased 5.7% from $2.0 million in
1997 to $1.9 million in 1998, and as a percentage of net sales, decreased from
3.8% in 1997 to 3.3% in 1998. In 1998, the decrease in operating income resulted
from a $530,000 one time restructuring charge incurred as the result of the
implementation of our strategy to outsource subassemblies and a change in
strategy for our sales and service support in certain Asia Pacific countries.
Income Taxes. Income taxes decreased from $399,000 in 1997 to $381,000 in
1998. Our effective tax rates were 24.2% in 1997 and 19.9% in 1998. The 1998 and
1997 effective tax rates reflect the use of net operating loss carryforwards
available to our UK subsidiary, which was profitable in 1998 and 1997. During
1998 and 1997, we recorded the benefit of these net operating losses, resulting
in the lower effective tax rates. Our statutory federal income tax rate is
34.0%.
9
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, we had $12.4 million in cash and cash equivalents,
an increase of $1.8 million compared to December 31, 1998. The increase was
primarily a result of cash flow from operations.
We have an unsecured revolving line of credit that allows for aggregate
borrowings, including letters of credit, up to $14.0 million. We may elect to
borrow at either the bank's base rate or the Eurodollar rate in effect from time
to time. This loan agreement was extended in 1999 until April 30, 2004 and is
subject to certain financial covenants. No amounts were outstanding under this
agreement as of December 31, 1999 or at any time in 1999.
We have a mortgage note that is secured by our real property. The mortgage
note had an outstanding balance at December 31, 1999 of approximately $5.1
million. The mortgage requires monthly payments of $53,922, which includes
interest calculated at the rate of 8.125% per annum. A final balloon payment of
approximately $3.8 million is due on July 1, 2004 upon maturity of the mortgage
note.
During 1999, we invested approximately $1.8 million in capital improvements
to enhance our information technology infrastructure and to develop several
equipment prototypes. We do not presently have any outstanding commitments for
capital expenditures that would have a material impact on our liquidity and
future capital resources.
During 1999, we repurchased an additional 87,000 shares of our common stock
for $372,000. This stock buy back program reduced the number of outstanding
shares of stock during 1999 by 1.3%. These repurchases were approved by our
board of directors in 1998.
We expect that our current cash position, ability to borrow necessary funds
and cash flows from operations will be sufficient to meet our corporate,
operating and capital requirements into 2001.
MARKET RISK DISCLOSURE
Our primary market risk exposure is in the area of foreign currency
exchange rate risk. We are exposed to currency exchange rate fluctuations as
they pertain to invoices for parts and labor in our foreign service locations.
As of December 31, 1999, all of our long-term debt and capital lease
obligations are fixed rate financial instruments, thus we are not exposed to
interest rate risk resulting from variable interest rate of its debts.
OTHER MATTERS
The impact of inflation and the effect of foreign exchange rate changes
during 1999 have not had a material impact on our business and financial
results.
10
<PAGE> 13
RECENT ACCOUNTING DEVELOPMENTS
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements," which provides additional
guidance in applying generally accepted accounting principles for revenue
recognition to a company's consolidated financial statements. SAB No. 101
addresses several issues, including the timing for recognizing revenue derived
from arrangements that provide for customer acceptance or product installation
after shipment and transfer of title.
Our existing revenue recognition policy is to recognize revenue at the time
the customer takes title of the product, generally at the time of shipment,
because we have routinely met our installation obligations and obtained customer
acceptance. Applying the requirements of SAB No. 101 to the present arrangements
used in our thermal processing systems sales may result in a change in our
accounting policy for revenue recognition and the deferral of the revenue for
some equipment sales until installation is complete and accepted by the
customer. We are currently evaluating the impact that SAB No. 101 might have on
our revenue recognition policies. However, there will be no impact on our cash
flows from operations as a result of this change.
We are required to report the impact of SAB No. 101, as amended by SAB No.
101A, no later than the second fiscal quarter of the fiscal year 2000. The
effect of the change will be recognized as a cumulative effect of a change in
accounting principle as of January 1, 2000. Accordingly, the first quarter of
year 2000 financial results may be restated to the extent that SAB No. 101 is
relevant and material. Prior year financial statements will not be restated. We
are also considering potential changes to our standard contracts that could
mitigate the impact of SAB No. 101 in the future.
In June 1998, the Financial Standards Accounting Board issued Statement of
Financial Accounting Standard (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in income unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the statement of income and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. SFAS No. 133, as
amended by SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities Deferral of the Effective Date of FASB Statement No. 133," shall be
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000. SFAS No. 133 cannot be applied retroactively. SFAS No. 133, as amended,
must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at our election, before
January 1, 1998). We have not yet quantified the impact of adopting SFAS No. 133
on our consolidated financial statements and have not determined the timing nor
method of its adoption of the statement. However, we do not expect that the
adoption of this statement will have a material impact on our financial position
or results of operations.
11
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by item 8 of Form 10-K is presented here in the
following order:
Unaudited Quarterly Financial Information...................
Consolidated Balance Sheet as of December 31, 1999 and
1998......................................................
Consolidated Statement of Operations for the years ended
December 31, 1999, 1998, and 1997.........................
Consolidated Statement of Stockholders' Equity for the years
ended December 31, 1999, 1998 and 1997....................
Consolidated Statement of Cash Flows for the years ended
December 31, 1999, 1998 and 1997..........................
Notes to Consolidated Financial Statements..................
Report of Independent Public Accounts.......................
UNAUDITED QUARTERLY RESULTS OF OPERATIONS
The following table presents unaudited statements of operations data for
each of the eight quarters in the period ended December 31, 1999 with such data
expressed as a percentage of net sales for the period indicated. We believe that
all necessary adjustments have been included to present fairly the quarterly
information when read in conjunction with our consolidated financial statements.
The operating results for any quarter are not necessarily indicative of the
results for any subsequent period.
12
<PAGE> 15
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------
MAR. 29, JUNE 28, SEPT. 27, DEC. 31, MAR. 28, JUNE 27, SEPT. 26, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......................... $12,101 $14,314 $14,039 $16,014 $15,876 $16,199 $17,795 $20,606
Cost of goods sold................ 7,162 8,533 8,472 9,818 9,773 9,683 10,780 12,242
------- ------- ------- ------- ------- ------- ------- -------
Gross profit...................... 4,939 5,781 5,567 6,196 6,103 6,516 7,015 8,364
Selling, general and
administrative.................. 3,673 3,974 4,017 4,357 4,330 4,371 4,845 5,925
Research, development and
engineering..................... 1,172 1,235 964 1,204 1,053 1,247 1,148 1,338
------- ------- ------- ------- ------- ------- ------- -------
Income from operations............ 94 572 586 635 720 898 1,022 1,101
Interest income (expense), net.... 6 (22) (15) (15) 22 (39) 26 (1)
Other income (expense), net....... 4 40 11 18 39 6 (44) 23
------- ------- ------- ------- ------- ------- ------- -------
Income before taxes............... 104 590 582 638 781 865 1,004 1,123
Income tax (benefit) provision.... (22) 110 181 112 237 257 303 138
------- ------- ------- ------- ------- ------- ------- -------
Net income...................... $ 126 $ 480 $ 401 $ 526 $ 544 $ 608 $ 701 $ 985
======= ======= ======= ======= ======= ======= ======= =======
Earnings per share, diluted....... $ 0.02 $ 0.07 $ 0.06 $ 0.08 $ 0.08 $ 0.09 $ 0.10 $ 0.14
======= ======= ======= ======= ======= ======= ======= =======
Weighted average shares,
diluted......................... 7,360 7,212 7,060 6,856 6,910 6,925 7,010 7,019
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------
MAR. 29, JUNE 28, SEPT. 27, DEC. 31, MAR. 28, JUNE 27, SEPT. 26, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE OF NET SALES:
Net sales......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................ 59.2 59.6 60.3 61.3 61.6 59.8 60.6 59.4
------- ------- ------- ------- ------- ------- ------- -------
Gross profit...................... 40.8 40.4 39.7 38.7 38.4 40.2 39.4 40.6
Selling, general and
administrative.................. 30.4 27.8 28.6 27.2 27.3 27.0 27.2 28.8
Research, development and
engineering..................... 9.7 8.6 6.9 7.5 6.6 7.7 6.5 6.5
------- ------- ------- ------- ------- ------- ------- -------
Income from operations............ 0.8 4.0 4.2 4.0 4.5 5.5 5.7 5.3
Interest income (expense), net.... 0.0 (0.2) (0.1) (0.1) 0.1 (0.2) 0.1 (0.0)
Other income (expense), net....... 0.0 0.3 0.1 0.1 0.2 0.0 (0.2) 0.1
------- ------- ------- ------- ------- ------- ------- -------
Income before taxes............... 0.9 4.1 4.1 4.0 4.9 5.3 5.6 5.4
Income tax (benefit) provision.... (0.2) 0.8 1.3 0.7 1.5 1.6 1.7 0.7
------- ------- ------- ------- ------- ------- ------- -------
Net income...................... 1.0% 3.4% 2.9% 3.3% 3.4% 3.8% 3.9% 4.8%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
Net sales increased from $12.1 to $20.6 million over the eight quarters in
1998 and 1999. During this period, net sales increased in each quarter, except
in the third quarter of 1998 and the first quarter of 1999. Historically, net
sales in the first quarter of every year have been the lowest in the year due to
the buying patterns of our customers. Overall growth in net sales resulted from
the continued growth in electronics manufacturing and our increase in market
share.
Gross profits as a percentage of net sales during the last eight quarters
have ranged between 38.4% and 40.8%. We outsourced our subassemblies in order to
maximize our core competencies and utilize more flexible manufacturing
processes.
Our selling, general and administrative has generally increased over the
quarters to support our expanding worldwide customer base. Research, development
and engineering is related to the development of new products, including our
MLCC system. However, these operating costs have generally decreased as a
percentage of net sales over the quarterly periods displayed.
Income from operations in this period has increased in absolute amounts in
every quarter. Net income has risen every quarter, except in the third quarter
of 1998, from $126,000 in the first quarter of 1998 to $985,000 in the fourth
quarter of 1999.
Earnings per share, diluted increased from $0.02 in the first quarter 1998
to $0.14 in the last quarter 1999.
13
<PAGE> 16
BTU INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (Notes 1 and 11)................ $12,431 $10,594
Trade accounts receivable, less reserves of $160 in 1999
and 1998 (Note 1)...................................... 14,563 12,427
Inventories (Note 1)...................................... 9,617 10,084
Other current assets (Note 6)............................. 678 411
------- -------
Total current assets.............................. 37,289 33,516
------- -------
Property, Plant and Equipment, at cost (Notes 1 and 3)
Land...................................................... 210 210
Buildings and improvements................................ 7,329 7,186
Machinery and equipment................................... 6,513 5,675
Furniture and fixtures.................................... 830 828
------- -------
14,882 13,899
Less-accumulated depreciation.......................... 9,341 9,159
------- -------
Net property, plant and equipment...................... 5,541 4,740
------- -------
Other assets, net of accumulated amortization of $441 in
1999 and $434 in 1998..................................... 319 359
------- -------
Total Assets...................................... $43,149 $38,615
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt and capital lease
obligations (Note 3)................................... $ 267 $ 226
Trade accounts payable (Note 9)........................... 6,665 5,382
Customer deposits......................................... -- 124
Accrued expense (Note 2).................................. 3,664 2,823
------- -------
Total current liabilities......................... 10,596 8,555
Long-term debt and capital lease obligations less current
maturities (Notes 3 and 11)............................... 4,953 5,167
Deferred income taxes (Notes 1 and 6)....................... 1,797 1,756
------- -------
Total Liabilities................................. $17,346 $15,478
------- -------
Commitments and contingencies (Note 3)
Stockholders' Equity (Note 8):
Class A preferred stock, $1.00 par value --
Authorized -- 2,000,000 shares Issued and
outstanding -- none.................................... -- --
Series preferred stock, $1.00 par value --
Authorized -- 5,000,000 shares
Issued and outstanding -- none......................... -- --
Common Stock, $.01 par value --
Authorized -- 25,000,000 shares
Issued -- 7,770,446, outstanding 6,794,536 in 1999 and
Issued -- 7,695,924, outstanding 6,806,763 in 1998..... 78 77
Additional paid-in capital................................ 20,543 20,322
Retained earnings......................................... 8,432 5,594
Less treasury stock at cost 975,910 and 889,161 shares, at
December 31, 1999 and 1998, respectively............... (3,538) (3,166)
Accumulated other comprehensive income (Note 1)........... 288 310
------- -------
Total stockholders' equity........................ 25,803 23,137
------- -------
Total Liabilities and Stockholders' Equity........ $43,149 $38,615
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
14
<PAGE> 17
BTU INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net sales (Notes 1, 4, and 5)............................... $70,476 $56,468 $52,118
Cost of goods sold.......................................... 42,478 33,985 30,431
------- ------- -------
Gross profit................................................ 27,998 22,483 21,687
------- ------- -------
Selling, general and administrative (Note 9).............. 19,471 16,021 15,349
Research, development and engineering (Note 1)............ 4,786 4,575 3,808
Restructuring charge...................................... -- -- 530
------- ------- -------
Operating income............................................ 3,741 1,887 2,000
Interest income........................................... 440 405 478
Interest expense (Note 3)................................. (432) (451) (488)
Other income (expense).................................... 24 73 (341)
------- ------- -------
Income before provision for income taxes.................... 3,773 1,914 1,649
Provision for income taxes (Notes 1 and 6)................ 935 381 399
------- ------- -------
Net income.................................................. $ 2,838 $ 1,533 $ 1,250
======= ======= =======
Earnings per share:
Basic..................................................... $ 0.42 $ 0.22 $ 0.17
======= ======= =======
Diluted................................................... $ 0.41 $ 0.22 $ 0.17
======= ======= =======
Weighted average number of shares outstanding:
Basic shares.............................................. 6,799 7,068 7,291
Effect of Dilutive Options................................ 169 50 45
------- ------- -------
Diluted Shares............................................ 6,968 7,118 7,336
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
15
<PAGE> 18
BTU INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK INCOME EQUITY
------ ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996............. $76 $20,115 $2,811 $(1,183) $388 $22,207
Net income............................. -- -- 1,250 -- -- 1,250
Translation adjustment................. -- -- -- -- (35) (35)
Sales of common stock and exercise of
stock options (Note 8)............... 1 108 -- -- -- 109
Tax benefit of stock options
exercised............................ -- 27 -- -- -- 27
--- ------- ------ ------- ---- -------
BALANCE AT DECEMBER 31, 1997............. 77 20,250 4,061 (1,183) 353 23,558
Net income............................. -- -- 1,533 -- -- 1,533
Translation adjustment................. -- -- -- (43) (43)
Sale of common stock and exercise of
stock options (Note 8)............... -- 72 -- -- -- 72
Purchase of treasury stock............... -- -- -- (1,983) -- (1,983)
------- ------ ------- ---- -------
BALANCE AT DECEMBER 31, 1998............. 77 20,322 5,594 (3,166) 310 23,137
Net income............................. -- -- 2,838 -- -- 2,838
Translation adjustment................. -- -- -- -- (22) (22)
Sales of common stock and exercise of
stock options (Note 8)............... 1 187 -- -- -- 188
Tax benefits of options exercised...... -- 34 -- -- -- 34
Purchase of treasury stock............. -- -- -- (372) -- (372)
--- ------- ------ ------- ---- -------
BALANCE AT DECEMBER 31, 1999............. $78 $20,543 $8,432 $(3,538) $288 $25,803
=== ======= ====== ======= ==== =======
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Net income.................................................. $2,838 $1,533 $1,250
Other comprehensive income
Foreign currency translation adjustment................... (22) (43) (35)
------ ------ ------
Comprehensive income........................................ $2,816 $1,490 $1,215
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
16
<PAGE> 19
BTU INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 2,838 $ 1,533 $ 1,250
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization............................. 1,120 1,119 961
Deferred income taxes..................................... 41 (491) 44
Net changes in operating assets and liabilities:
Accounts receivable....................................... (2,136) (93) (1,704)
Inventories............................................... 467 (56) (268)
Other current assets...................................... (267) 713 537
Accounts payable.......................................... 1,283 (631) 1,889
Customer deposits......................................... (124) (304) (13)
Accrued expenses.......................................... 841 227 523
Other assets.............................................. 33 50 (193)
------- ------- -------
Net cash provided by operating activities.............. 4,096 2,067 3,026
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net............. (1,842) (1,248) (1,294)
------- ------- -------
Net cash used in investing activities.................. (1,842) (1,248) (1,294)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term debt and capital lease
obligations............................................... (245) (144) (300)
Issuance of common stock.................................... 188 72 109
Proceeds from mortgage reference............................ -- -- 122
Tax benefit of stock options exercised...................... 34 -- 27
Purchase of treasury stock.................................. (372) (1,983) --
------- ------- -------
Net cash used in financing activities.................. (395) (2,055) (42)
------- ------- -------
EFFECT OF EXCHANGE RATES ON CASH............................ (22) (43) (35)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 1,837 (1,279) 1,655
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 10,594 11,873 10,218
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $12,431 $10,594 $11,873
======= ======= =======
</TABLE>
Supplemental disclosures of cash flow information are included in Note 10.
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE> 20
BTU INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
BTU International, Inc. and its wholly owned subsidiaries (the Company) are
primarily engaged in the design, manufacture, sale, and service of thermal
processing systems, which are used as capital equipment in various manufacturing
processes, primarily in the electronics industry.
PRINCIPLES OF CONSOLIDATION AND THE USE OF ESTIMATES
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could vary
from these estimates.
CASH AND CASH EQUIVALENTS
The Company has classified certain liquid financial instruments, with
original maturities of less than three months, as cash equivalents.
INVENTORIES
Inventories consist of material, labor and overhead and are valued at the
lower of cost or market value. Cost is determined by the first-in, first-out
(FIFO) method for all inventories.
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1999 1998
------ -------
<S> <C> <C>
Raw Materials and manufactured components................. $4,431 $ 4,970
Work-in-progress.......................................... 3,532 3,395
Finished goods............................................ 1,654 1,719
------ -------
$9,617 $10,084
====== =======
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
The Company provides for depreciation using the straight-line method over a
period sufficient to amortize the cost of the asset over its useful life. The
estimated useful lives for depreciation purposes are as follows:
<TABLE>
<S> <C>
Buildings and improvements.................................. 8-25 years
Machinery and equipment..................................... 2-8 years
Furniture and fixtures...................................... 5-8 years
</TABLE>
Maintenance and repairs are charged to operations as incurred. When
equipment and improvements are sold or otherwise disposed of, the asset cost and
accumulated depreciation are removed from the accounts, and the resulting gain
or loss, if any, is included in the results of operations.
18
<PAGE> 21
BTU INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Deferred tax assets and liabilities are recognized for the expected future
tax consequences of events that have been included in the consolidated financial
statements or tax returns. The amounts of deferred tax assets or liabilities are
based on the difference between the financial statement and tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
TRANSLATION OF FOREIGN CURRENCIES
Foreign currencies are translated in accordance with SFAS No. 52, "Foreign
Currency Translation." Under this standard, assets and liabilities of the
Company's foreign operations are translated into United States dollars at
current exchange rates. Income and expense items are translated at weighted
average rates of exchange prevailing during the year. Gains and losses arising
from translation are accumulated as a separate component of stockholders'
investment. Exchange gains and losses (if any) arising from transactions
denominated in foreign currencies are included in income as incurred. Such
exchange gains or losses were not material during the periods presented.
PATENTS
The Company has patents in the United States and certain foreign countries
for certain of its products and processes. No value has been assigned to these
patents in the accompanying consolidated financial statements.
REVENUE RECOGNITION
Revenue is recognized based upon completion of the earnings process, which
typically occurs upon the shipment of product to the customer, except for large
contracts that are not completed within the normal operating cycle of the
business, which are accounted for on a percentage completion basis. Under the
percentage completion method, revenues are recognized in proportion to costs
incurred compared to total estimated costs and a provision is made for any
anticipated loss. As of December 31, 1999 and 1998, $0 and $53,000,
respectively, of revenue was recognized on the percentage of completion method
for systems not yet shipped. During these years, revenue recognized using the
percentage completion method included in net sales was 2.3% for 1999 and 6.1%
for 1998.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering costs are charged to expense as
incurred.
EARNINGS PER SHARE INFORMATION
Earnings Per Share (EPS) is presented under two calculations, Basic and
Diluted. Basic EPS is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding during
the period. Diluted EPS is computed using the weighted average number of common
and dilutive potential common shares outstanding during the period, using the
treasury stock method. Options outstanding that were not included in the
determination of diluted EPS, because they were antidilutive, were 289,778 in
1999, 27,800 in 1998 and 42,500 in 1997.
RECLASSIFICATION
Certain prior year financial statement information has been reclassified to
conform with the current year presentation.
19
<PAGE> 22
BTU INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMPREHENSIVE INCOME
The Company classifies items of other comprehensive income by their nature
in a financial statement and displays the accumulated balance of other
comprehensive income separately from retained earnings and additional paid in
capital in the equity section of the Balance Sheet. The only item of
comprehensive income other than net income is translation gains and losses from
foreign exchange, recorded in the equity section of the Balance Sheets.
Comprehensive Income is presented in the accompanying consolidated statements of
comprehensive income.
SEGMENT INFORMATION
The Company reports segment information as required by SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." The chief
operating decisions maker organizes segments within the company for making
operating decisions and assessing performance. Reportable segments are based on
products and services, geography, legal structure and management structure. (see
Note 12)
SAB NO. 101 REVENUE RECOGNITION IN FINANCIAL STATEMENTS
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements," which provides additional
guidance in applying generally accepted accounting principles for revenue
recognition in company's consolidated financial statements. SAB No. 101
addresses several issues including the timing for recognizing revenue derived
from arrangements that involve either contractual customer acceptance provisions
or installation of the product occurs after shipment and transfer of title.
The Company's existing revenue recognition policy is to recognize revenue
at the time the customer takes title of the product, generally at the time of
shipment, because the Company has routinely met its installation obligations and
obtained customer acceptance. Applying the requirements of SAB No. 101 to the
present arrangements used in the Company's thermal processing equipment sales
may result in a change in the Company's accounting policy for revenue
recognition and the deferral of the revenue for some equipment sales until
installation is complete and accepted by the customer. The Company is currently
evaluating the impact that SAB No. 101 might have on its revenue recognition
policies. However, there will be no impact on the Company's cash flows from
operations as a result of this change.
The Company is required to report the impact of SAB No. 101, as amended by
SAB No. 101A, no later than the second fiscal quarter of the fiscal year 2000.
The effect of the change will be recognized as a cumulative effect of a change
in accounting principle as of January 1, 2000, thus the first quarter of year
2000 financial results may be restated to the extent that SAB No. 101 is
relevant and material. Prior year financial statements will not be restated. The
Company is also considering potential changes to its standard contracts that
could mitigate the impact of SAB No. 101 on a go forward basis.
20
<PAGE> 23
BTU INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2: ACCRUED EXPENSES
Accrued expenses at December 31, 1999 and 1998 consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Accrued commissions........................................ $1,390 $ 976
Accrued warranty........................................... 660 535
Accrued income taxes....................................... 255 281
Accrued bonus.............................................. 519 60
Other...................................................... 840 971
------ ------
$3,664 $2,823
====== ======
</TABLE>
(3) DEBT, CAPITAL LEASES, COMMITMENTS AND CONTINGENCIES
Debt at December 31, 1999 and 1998 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Mortgage note payable...................................... $5,089 $5,312
Capital lease obligations, interest rates ranging from
10.2% to 11.1%, net of interest of $38 and $26 in 1999
and 1998, respectively................................... 131 81
------ ------
5,220 5,393
Less current maturities.................................... 267 226
------ ------
$4,953 $5,167
====== ======
</TABLE>
The mortgage note payable is secured by the Company's land and building and
requires monthly payments of $53,922, including interest at 8.125%. This
mortgage note payable has a balloon payment of $3,825,000 due and payable at
maturity on July 1, 2004.
The capital lease obligations relate to various equipment leases used in
the operation of the business.
Under the terms of the debt, the minimum repayments of long-term debt and
capital lease obligations by year are as follows (in thousands):
<TABLE>
<CAPTION>
8.125% CAPITAL
MORTGAGE LEASES TOTAL
-------- ------- ------
<S> <C> <C> <C>
2000..................................................... $ 242 $ 25 $ 267
2001..................................................... 263 29 292
2002..................................................... 285 29 314
2003..................................................... 309 22 331
2004..................................................... 3,990 26 4,016
------ ---- ------
$5,089 $131 $5,220
====== ==== ======
</TABLE>
At December 31, 1999, the Company has an unsecured revolving line of credit
with a US bank which allows for aggregate borrowings and/or letters of credit of
up to $14,000,000. Borrowings are available to the Company at either the Bank's
base rate or a Eurodollar rate, as elected by the Company. This loan facility is
available to the Company until April 30, 2004, subject to compliance with
certain financial covenants. At December 31, 1999, the Company was in compliance
with all covenants of this agreement. As of December 31, 1999, no amounts were
outstanding under this unsecured revolving line of credit.
21
<PAGE> 24
BTU INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company conducts its UK operations in a facility that is under a
long-term operating lease expiring in 2010. Rent expense under this lease was
approximately $143,000 in 1999, $145,000 in 1998, and $143,000 in 1997. In 1995,
the Company sublet a portion of this leased space. The initial term of the
sublease is five years. Under the terms of the sublease, the Company will
receive approximately $132,000 per year. At the end of the initial five year
sublet period, the sublease can be extended at market rates for two subsequent
and concurrent five year periods. As of December 31, 1999, the future minimum
lease commitment for this facility is $2,765,000, payable as follows: $240,000
for the year 2000, $273,000 for each of 2001, 2002, 2003 and 2004 and $1,433,000
thereafter through 2010.
The Company is a party to a patent lawsuit it originated and to various
claims arising in the normal course of business. Management believes the
resolution of these matters will not have a material impact on the Company's
results of operations or financial condition.
(4) FOREIGN OPERATIONS
The following table shows the amounts and percentages of the Company's
revenues by geographic region, for the last three years:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
United States.......................... $22,552 32% $19,946 35% $26,061 50%
Europe................................. 18,324 26 13,446 24 11,862 23
Asia Pacific........................... 21,143 30 16,295 29 12,512 24
Rest of World.......................... 8,457 12 6,781 12 1,683 3
</TABLE>
(5) CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Statement of Financial Accounting Standards No. 105, "Disclosure of
Information about Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risk," requires disclosure
of any significant off-balance-sheet and credit risk concentrations. The Company
has no significant off-balance-sheet concentrations such as foreign exchange
contracts, option contracts or other foreign hedging arrangements. The Company
maintains the majority of its cash and cash equivalent balances with one
financial institution.
One customer represented 18% of revenue in 1999. Two customers represented
14% and 13% respectively of revenue in 1998. One customer represented
approximately 14% of revenues in 1997.
(6) INCOME TAXES
The components of income before provision for income taxes are as follows
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Domestic................................................. $2,163 $ 881 $1,040
Foreign.................................................. 1,610 1,033 609
------ ------ ------
Total.................................................... $3,773 $1,914 $1,649
====== ====== ======
</TABLE>
22
<PAGE> 25
BTU INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For the years ended December 31, 1999, 1998 and 1997, the Company's
provisions for income taxes were as shown below (in thousands):
<TABLE>
<CAPTION>
FEDERAL STATE FOREIGN TOTAL
------- ----- ------- -----
<S> <C> <C> <C> <C>
December 31, 1999
Current........................................ $ 662 $ 177 $55 $ 894
Deferred....................................... 85 (44) 0 41
----- ----- --- -----
$ 747 $ 133 $55 $ 935
===== ===== === =====
December 31, 1998
Current........................................ $ 491 $ 345 $36 $ 872
Deferred....................................... (216) (275) 0 (491)
----- ----- --- -----
$ 275 $ 70 $36 $ 381
===== ===== === =====
December 31, 1997
Current........................................ $ 308 $ 47 $ 0 $ 355
Deferred....................................... 39 5 0 44
----- ----- --- -----
$ 347 $ 52 $ 0 $ 399
===== ===== === =====
</TABLE>
The differences between the statutory United States federal income tax rate
of 34% and the Company's effective tax rate are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
------ ----- -----
<S> <C> <C> <C>
Tax provision at United States statutory rate............. $1,283 $ 650 $ 561
State and foreign income taxes, net of federal benefit.... 142 94 48
Utilization of foreign net operating loss carryforwards... (498) (293) (189)
Non-deductible and other.................................. 8 (70) (21)
------ ----- -----
Total provision........................................... $ 935 $ 381 $ 399
====== ===== =====
</TABLE>
23
<PAGE> 26
BTU INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes and prepaid income taxes are comprised of the
following at December 31, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Revenues recognized for books, not tax................... $(2,860) $(3,814)
Accelerated tax depreciation............................. 0 (68)
Other.................................................... (116) (116)
------- -------
Total deferred liabilities..................... $(2,976) $(3,998)
======= =======
Inventory reserves....................................... 331 371
Inventory capitalization................................. 74 71
Accruals and other....................................... 577 460
Foreign net operating loss carryforward.................. 0 498
Accelerated tax depreciation............................. 65 0
Federal tax credit carryforwards......................... 132 1,340
------- -------
Total deferred assets.......................... 1,179 2,740
------- -------
Total net deferred liability................... (1,797) (1,258)
Valuation allowance...................................... 0 (498)
------- -------
Net deferred income tax liability........................ $(1,797) $(1,756)
======= =======
</TABLE>
The valuation allowance at December 31, 1998 related to uncertainty
surrounding the realization of the foreign net operating loss carryforwards. For
the year ended December 31, 1999 the Company realized the use of the foreign net
operating loss carryforwards. As of December 31, 1999, the Company has AMT
credit carryforwards of $132,000, which are subject to review and possible
adjustment by the Internal Revenue Service. Included in other current assets is
a refundable income tax receivable of $344,000 as of December 31, 1999 and
$36,000 as of December 31, 1998. During 1999, the Company's UK subsidiary used
the $1,292,000 of net operating loss carryforwards available at December 31,
1998.
(7) EMPLOYEE BENEFITS
The Company has management incentive and profit sharing plans for its
executives and all of its employees. These plans provide for bonuses upon the
attainment of certain financial targets. Under these plans, $688,000, $100,000
and $89,000 was expensed in 1999, 1998 and 1997, respectively.
The Company has a deferred 401(k) contribution plan that is available to
cover all domestic employees of the Company who have met certain length of
service requirements. Subject to non-discriminatory restrictions on highly
compensated employees, participants can voluntarily contribute up to 17% of
their compensation to the plan, and the Company, at its discretion, may match
this contribution up to a stipulated percentage. The Company's expense under the
plan was $206,000, $187,000, and $170,000 for the years ended December 31, 1999,
1998 and 1997, respectively.
(8) STOCK OPTION AND PURCHASE PLANS
The Company has three stock option plans. The 1989 Stock Plan for Directors
(1989 Plan) provides for stock options to certain directors of the Company. The
1993 Equity Incentive Plan (1993 Plan) provides for stock options for employees
and the Company's non-employee directors. Under the terms of the 1993 Plan,
other stock awards can also be granted at the discretion of the Company's Board
of Directors. The 1998 Stock Option Plan for Non-Employee Directors (1998 Plan)
provides for stock options to non-employee directors of the Company.
24
<PAGE> 27
BTU INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under each plan, the exercise price of the options is not less than fair
market value at the date of the grants. The 1989 Plan options expire over seven
years and the 1993 Plan options expire over periods not to exceed 10 years. The
1998 Plan options expire over a period not to exceed seven years. In May 1998
the shareholders approved the addition of 500,000 shares available to be awarded
under the 1993 Plan and also approved the 1998 Plan with 50,000 shares available
for future grants. Shares available for future stock option grants, pursuant to
these plans, were 174,041 at December 31, 1999, 410,893 at December 31, 1998,
and 127,763 at December 31, 1997.
In September 1998, the Board of Directors approved the repricing of
employee stock options issued during 1996, 1997 and 1998. A total of 545,480
options were repriced to $2.875 per share, which was the fair market value of
the repricing, with a new vesting and expiration schedule.
A summary of all stock option activity for the years ended December 31,
1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------- -------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF PRICE PER OF PRICE PER OF PRICE PER
SHARES SHARE SHARES SHARE SHARES SHARE
------- --------- -------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year... 632,040 $2.92 367,690 $3.91 189,095 $3.64
Granted............................ 280,112 4.92 301,560 4.26 234,500 3.98
Exercised.......................... (49,885) 2.36 (2,520) 1.88 (24,405) 2.50
Forfeited.......................... (43,260) 2.93 (34,690) 3.65 (31,500) 3.90
Terminated due to repricing........ -- -- (545,480) 4.24 -- --
Issued due to repricing............ -- -- 545,480 2.88 -- --
------- ----- -------- ----- ------- -----
Outstanding at end of year......... 819,007 $3.64 632,040 $2.92 367,690 $3.91
======= ===== ======== ===== ======= =====
Options exercisable at end of
year............................. 166,043 $3.05 43,380 $2.64 66,790 $2.92
======= ===== ======== ===== ======= =====
</TABLE>
At December 31, 1999 the outstanding options have exercise prices ranging
from $2.69 to $5.50 and a weighted average remaining contractual life of 4.3
years.
The following table summarizes information for options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- -------------------------
WEIGHTED WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE AVERAGE
PRICES NUMBER REMAINING LIFE EXERCISE PRICE NUMBER EXERCISE PRICE
------------ ------- -------------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C>
$2.69 - 3.00 512,729 4.0 yrs $2.88 146,168 $2.88
3.01 - 4.00 14,500 5.3 yrs 3.82 6,250 3.79
4.01 - 5.50 291,778 4.7 yrs 4.96 13,625 4.60
------- ------- ----- ------- -----
819,007 4.3 yrs 3.64 166,043 3.05
------- ------- ----- ------- -----
</TABLE>
The Company has an Employee Stock Purchase Plan. Under the terms of the
plan, employees are entitled to purchase shares of common stock at the lower of
85% of fair market value at the beginning or the end of each six-month option
period. A total of 300,000 shares has been reserved for issuance under this
plan, of which 18,090 remain available at December 31, 1999. During 1999, a
total of 23,157 shares were purchased at prices ranging from $2.55 to $4.14 per
share.
The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock option and purchase plans.
Accordingly, no compensation cost has been recognized
25
<PAGE> 28
BTU INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
related to the plans. Had compensation cost for the plans been determined based
on the fair value at the grant dates for the awards under these plans consistent
with SFAS No. 123, "Accounting for Stock-Based Compensation", the Company's net
income and net income per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net Income:
As reported.......................................... $2,838 $1,533 $1,250
Pro forma............................................ 2,455 1,514 1,140
Income per basic share:
As reported.......................................... $ 0.42 $ 0.22 $ 0.17
Pro forma............................................ 0.36 0.21 0.16
Income per diluted share:
As reported.......................................... $ 0.41 $ 0.22 $ 0.17
Pro forma............................................ 0.35 0.21 0.16
</TABLE>
Pro forma compensation costs were estimated using the Black-Scholes option
pricing model using the following weighted average assumptions for grants in
1999, 1998 and 1997, respectively; a dividend yield rate of 0 for each year;
expected lives of 4.8, 4.9 and 5.0 years; expected volatility of 64.6%, 63.1%
and 68.2%; and risk free interest rates of 6.2%, 4.8% and 6.4%. The weighted
average fair value of options granted during 1999, 1998 and 1997 was $2.91,
$1.97 and $2.48, respectively.
As the SFAS No. 123 presentation has not been applied to options granted
prior to January 1, 1995, the resulting pro forma reduction in net earnings and
earnings per share may not be representative of what could be expected in future
years.
(9) RELATED PARTY TRANSACTIONS
During 1999 and 1998, certain transactions were made between the Company
and certain related parties, all of which management believes were at arms'
length. These transactions included payments to one of the Company's directors
for consulting services of $15,000 and $16,000 in 1999 and 1998, respectively.
The Company also had related party transactions with respect to the purchase of
certain software development and components from a company which is partially
owned by one of the Company's key employees. The amount of contract software and
hardware purchased from this party in the ordinary course of doing business was
$904,000 and $775,000 in 1999 and 1998, respectively; as well, $1,000 and
$66,000 is included in trade accounts payable on the Consolidated Balance Sheets
as of December 31, 1999 and 1998, respectively.
(10) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
--------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid (received) during the year for:
Interest.................................................. $ 432 $451 $ 488
Income Taxes.............................................. 1,172 32 (391)
Non-cash transactions:
Capital asset and lease obligation additions............... 72 64 --
</TABLE>
(11) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate
that value.
a. Cash and Cash Equivalents - The carrying amount of these assets on the
Company's Consolidated Balance Sheets approximates their fair value because of
the short maturities of these instruments.
b. Long-term Debt and Capital Lease Obligations - The fair value of
long-term indebtedness as of December 31, 1999 and 1998 was approximately
$5,220,000 and $5,527,000, respectively, based on a discounted cash flow
analysis, using the prevailing cost of capital for the Company as of each date.
(12) SEGMENT REPORTING
Segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision-maker in deciding how to allocate resources and in assessing
performance. The Company operates as a single business segment called thermal
processing capital equipment.
The thermal processing capital equipment segment consists of the designing,
manufacturing, selling and servicing of thermal processing equipment and related
process controls for use in the electronics, power generation, automotive and
other industries. This business segment includes the supply of solder reflow
systems used for surface mount applications in printed circuit board assembly.
Thermal processing equipment is used in: low temperature curing/encapsulation;
hybrid integrated circuit manufacturing; integrated circuit packaging and
sealing; and processing multi-chip modules. In addition, the thermal process
equipment is used for sintering nuclear fuel for commercial power generation, as
well as brazing and the sintering of ceramics and powdered metals, and the
deposition of precise thin film coatings. The business segment's customers are
multinational original equipment manufacturers and contract manufacturing
companies.
The accounting policies of segment reporting are the same as those
described in Note 1 "Summary of Significant Accounting Policies." The Company
evaluates the performance of operating results taken as a whole. Geographic data
concerning the thermal processing business segment is shown at Note 4.
26
<PAGE> 29
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT
- -------------------------------------------------------------------------------
To the Shareholders and Board of Directors of BTU International, Inc.:
We have audited the accompanying consolidated balance sheets of BTU
International, Inc. (a Delaware corporation) and subsidiaries (the Company) as
of December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity, comprehensive income and cash flows for each
of the three years in the period ended December 31, 1999. These consolidated
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 auditing standards generally accepted
in the United States. 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 that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of BTU
International, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
------------------------
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 4, 2000
27
<PAGE> 30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the executive officers of the Company is included
in Item 4A of Part I.
Information relating to the directors of the Company is included under the
caption "Election of Directors" in the 2000 Proxy Statement for BTU
International, Inc. and is incorporated herein by reference.
Information related to compliance with Section 16(a) of the Exchange Act is
included under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" in the 2000 Proxy Statement for BTU International, Inc. and is
incorporated here by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is included under the
caption "Executive Compensation" in the 2000 Proxy Statement for BTU
International, Inc. and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to the security ownership of certain beneficial owners
and management is included under the caption "Beneficial Ownership of Shares" in
the 2000 Proxy Statement for BTU International, Inc. and is incorporated herein
by reference.
28
<PAGE> 31
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements. The financial statements listed in Item 8:
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, above are filed as
part of this Annual Report on Form 10-K.
2. Financial Statement Schedule. The financial statement schedule II -
VALUATION AND QUALIFYING ACCOUNTS is filed as part of this Annual
Report on Form 10-K.
3. Exhibits. The exhibits listed in the accompanying Exhibit Index
are filed as part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of 1999.
29
<PAGE> 32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To BTU International, Inc.:
We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements included in BTU
International, Inc.'s (the Company's) annual report to stockholders incorporated
by reference in this Form 10-K, and have issued our report thereon dated
February 4, 2000. Our audit was made for the purpose of forming an opinion on
those consolidated financial statements taken as a whole. The schedule listed in
the preceding index is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, based on our audit, fairly
states, in all material respects, the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
- -----------------------
Arthur Andersen LLP
Boston, Massachusetts
February 4, 2000
30
<PAGE> 33
Schedule II
BTU INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
For the Year Ended December 31, 1999
------------------------------------
<TABLE>
<CAPTION>
Additions
-----------------------------
Balance Charged
at to costs Charged Balance
beginning and to other Deductions- at end
Description of period expenses accounts (A) of period
- ----------- --------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts $160 $-- $-- $-- $160
</TABLE>
For the Year Ended December 31, 1998
------------------------------------
<TABLE>
<CAPTION>
Additions
-----------------------------
Balance Charged
at to costs Charged Balance
beginning and to other Deductions- at end
Description of period expenses accounts (A) of period
- ----------- --------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts $160 $-- $-- $-- $160
</TABLE>
For the Year Ended December 31, 1997
------------------------------------
<TABLE>
<CAPTION>
Additions
-----------------------------
Balance Charged
at to costs Charged Balance
beginning and to other Deductions- at end
Description of period expenses accounts (A) of period
- ----------- --------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts $160 $-- $-- $-- $160
</TABLE>
(A) Amounts indicated as deductions are for amounts charged against these
reserves in the ordinary course of business.
31
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BTU INTERNATIONAL, INC.
Date: March 30, 2000 By: /s/ PAUL J. VAN DER WANSEM
Paul J. van der Wansem
President, Chief Executive
Officer (principal executive
officer) and Director
Date: March 30, 2000 By: /s/ THOMAS P. KEALY
Thomas P. Kealy
Vice President Corporate
Controller and Chief
Accounting Officer (principal
financial and accounting officer)
Date: March 30, 2000 By:
Dr. Jeffrey Chuan Chu
Director
Date: March 30, 2000 By: /s/ DAVID A.B. BROWN
David A.B. Brown
Director
Date: March 30, 2000 By: /s/ JOSEPH F. WRINN
Joseph F. Wrinn
Director
32
<PAGE> 35
EXHIBIT INDEX
The following designated exhibits are, as indicated below, either filed
herewith or have heretofore been filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Securities Exchange Act of
1934 and are referred to and incorporated herein by reference to the following
SEC Filings: Registration Statement Filing on Form S-1 ("33-24882"), the annual
report as reported on the 1989 Form 10-K ("1989 10-K"), the annual report as
reported on the 1991 Form 10-K ("1991 10-K"), the annual report as reported on
the 1992 Form 10-K ("1992 10-K"), the annual report as reported on the 1993 Form
10K ("1993 10-K"), the annual report as reported on the 1994 Form 10K ("1994
10-K"), Or the quarterly report as reported on 9-28-97 Form 10Q(9-28-97 10-Q) Or
the quarterly report as reported on 6-28-98 Form 10Q(6-28-98 10-Q).
<TABLE>
<CAPTION>
SEC
Exhibit Docket
------- ------
<S> <C> <C>
EXHIBIT 3. ARTICLES OF INCORPORATION AND BY-LAWS
Incorporated herein by reference:
3.1 Certificate of Incorporation, as amended. 3.1 33-24882
3.2 By-Laws. 3.2 33-24882
EXHIBIT 4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING DEBENTURES
Incorporated herein by reference:
4.0 Specimen Common Stock Certificate. 4.0 33-24882
EXHIBIT 10. MATERIAL CONTRACTS
10.13 1988 Employee Stock Purchase Plan. * 10.13
10.15 1989 Stock Option Plan for Directors. * 10.15
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
<S> <C> <C>
10.37 BTU International, Inc. 1993 Equity Incentive Plan * 10.37
10.39 BTU(UK) Limited and RD International (UK) Limited underlease, 10.39 1994 10-K
relating to Unit B15 Southwood Summit Centre
10.42 Mortgage note between BTU International, Inc. and John Hancock
Mutual Life Insurance Company, dated June 30, 1997 10.42 9-28-97 10-Q
10.43 Credit Agreement between BTU International, Inc. and US Trust,
dated September 5, 1997 10.43 9-28-97 10-Q
10.44 Amendment to the 1993 Equity Incentive Plan* 10.44
10.45 1998 Stock Option Plan for Non-Employee Directors* 10.45
10.46 First Amendment to Credit Agreement between
BTU International, Inc. and US Trust, dated December 16, 1999 10.46
10.47 Amendment No. 1 to 1988 Employee Stock Purchase Plan
dated June 15, 1989* 10.47
10.48 Amendment No. 2 to 1988 Employee Stock Purchase Plan
dated February 20, 1991.* 10.48
10.49 Amendment No. 2 to 1993 Equity Incentive Plan* 10.49
EXHIBIT 11. STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Filed herewith:
11.0 Calculation of net income per common share
EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANT
Filed herewith:
21.0 Subsidiaries of the Registrant.
EXHIBIT 23. CONSENTS OF EXPERTS AND COUNSEL
Filed herewith:
23.1 Consent of Arthur Andersen LLP
EXHIBIT 27. FINANCIAL DATA SCHEDULE
Filed herewith:
27.0 Financial Data Schedule
</TABLE>
* Indicates management contract or compensatory plan or arrangement.
34
<PAGE> 1
Exhibit 10.13
BTU INTERNATIONAL, INC.
1988 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE OF PLAN.
This 1988 Employee Stock Purchase Plan (the "Plan") is intended to
provide a method by which eligible employees of BTU International, Inc. ("BTU")
and its participating subsidiaries (BTU and such subsidiaries being hereinafter
referred to as the "Company") may use voluntary, systematic payroll deductions
to purchase shares of BTU Common Stock ("Stock") and thereby acquire an interest
in the future of the Company. For purposes of the Plan, a subsidiary is any
corporation in which BTU owns, directly or indirectly, stock possessing 50% or
more of the total combined voting power of all classes of stock and which has
been designated by the Board (as defined in Section 16) as a participating
subsidiary.
2. OPTIONS TO PURCHASE STOCK
Under the Plan, there is available an aggregate of not more than
100,000 shares of Stock (subject to adjustment as provided in Section 15) for
sale pursuant to the exercise of options ("options") granted under the Plan to
employees (within the meaning of Section 3401(c) of the Internal Revenue Code of
1986 (the "Code")) of the Company ("employees") who meet the eligibility
requirements set forth in Section 3 hereof ("eligible employees"). The Stock to
be delivered upon exercise of options under the Plan may be either shares of
BTU authorized but unissued Stock of shares of reacquired Stock, as the Board
shall determine.
3. ELIGIBLE EMPLOYEES
Except as otherwise provided below, each employee who has completed six
months or more of continuous service in the employ of the Company shall be
eligible to participate in the Plan.
(a) Any employee who immediately after the grant of an option to
him would (in accordance with the provisions of Sections 423
and 425 (d) of the Code) own Stock possessing 5% or more of
the total combined voting power or value of all classes of
Stock of the employer corporation or of its parent or
subsidiary corporations, as defined in Section
<PAGE> 2
425 of the Code, shall not be eligible to receive an option to
purchase stock pursuant to the Plan.
(b) No employee shall be granted an option under the Plan which
would permit his rights to purchase shares of stock under all
employee stock purchase plans of the Company and any parent
and subsidiary corporations to accrue at a rate which exceeds
$25,000 in fair market value of such stock (determined at the
time the option is granted) for each calendar year during
which any such option granted to such employee is outstanding
at any time, as provided in Sections 423 and 425 of the Code.
(c) No employee shall be eligible to participate in the Plan
unless such employee's customary employment with the Company
is in excess of twenty hours in each week and in excess of
five months in each calendar year.
4. METHOD OF PARTICIPATION
The period July 1, 1989 to December 31, 1989, and thereafter the
periods January 1 to June 30, and July 1 to December 31 of each year shall be
option periods. Each person who will be an eligible employee on the first day of
any option period may elect to participate in the Plan by executing and
delivering to BTU, at least 15 days prior to such day, a payroll deduction
authorization in accordance with Section 5. Such employee shall thereby become a
participant ("participant") on the first day of such option period and shall
remain a participant until his participation is terminated as provided in the
Plan.
5. PAYROLL DEDUCTION
The payroll deduction authorization shall request withholding at a rate
of not less than 0.5% nor more than 10% (increasing in increments of 0.5%) from
the participant's Compensation by means of substantially equal payroll
deductions over the option period. For purposes of the Plan, "Compensation"
shall mean all regular base compensation paid to the participant by the Company
and currently includible in his gross income, including any withholding or
deductions, but excluding bonuses, commissions, incentive compensation and other
similar amounts. A participant may change the withholding rate of his payroll
deduction authorization by written notice delivered to BTU at least 15 days
prior to the first day of the option period as to which the change is to be
effective. All amounts withheld in accordance with a
- 2 -
<PAGE> 3
participant's payroll deduction authorization shall be credited to a withholding
account for such participant.
6. GRANT OF OPTIONS
Each person who is a participant on the first day of an option period
shall as of such day be granted an option for such period. Such option shall be
for the number of whole shares of Stock to be determined by dividing (a) the
balance in the participant's withholding account on the last day of the option
period, by (b) the purchase price per share of the Stock determined under
Section 7. The Board shall reduce, on a substantially proportionate basis, the
number of shares of Stock receivable by each participant upon exercise of his
option for an option period in the event that the number of shares then
available under the Plan is otherwise insufficient.
7. PURCHASE PRICE
The purchase price of Stock issued pursuant to the exercise of an
option shall be 85% of the fair market value of the Stock at (a) the time of
grant of the option or (b) the time at which the option is deemed exercised,
whichever is less. Fair market value shall mean the Closing Price of the Stock.
The "Closing Price" of Stock on any business day shall be the last sale price as
reported on the principal market on which the Stock is traded or, if no last
sale is reported, then the mean between the highest bid and lowest asked prices
on that day. A good faith determination by the Board as to fair market value
shall be final and binding.
8. EXERCISE OF OPTIONS
If any employee is a participant in the Plan on the last business day
of an option period, he shall be deemed to have exercised the option granted to
him for that period. Upon such exercise, the Company shall apply the balance of
the participant's withholding account to the purchase of the number of whole
shares of Stock determined under Section 6 and as soon as practicable
thereafter, BTU shall issue and deliver certificates for said shares to the
participant. No fractional shares shall be issued hereunder. Any balance of a
participant's withholding account shall be returned to the participant, except
that any such balance representing a fractional share shall be retained in the
withholding account and applied to the next option period.
9. INTEREST.
No interest will be payable on withholding accounts.
- 3 -
<PAGE> 4
10. CANCELLATION AND WITHDRAWAL
A participant who holds an option under the Plan may at any time prior
to exercise thereof under Section 8 cancel all (but not less than all) of his
options by written notice delivered to BTU. Upon such cancellation, the balance
in his withholding account shall be returned to him in the month following
withdrawal.
A participant may terminate his payroll deduction authorization as of
any date by written notice delivered to BTU and shall thereby cease to be a
participant as of such date. Any participant who voluntarily terminates his
payroll deduction authorization prior to the last business day of an option
period shall be deemed to have cancelled his option.
11. TERMINATION OF EMPLOYMENT
Except as provided in the immediately following sentence, upon the
termination of a participant's service with the Company for any reason,
including without limitation death, retirement, resignation, layoff or
discharge, he shall cease to be a participant, and any option held by him under
the Plan shall be deemed cancelled, the balance of his withholding account shall
be returned to him, and he shall have no further rights under the Plan.
Notwithstanding the immediately preceding sentence, in the event that a
participant commences a leave of absence during an option period and such leave
of absence has been approved by the Board, such participant shall be eligible to
participate in the Plan with respect to such option period to the extent of
payroll deductions withheld during such option period.
12. LIMITATIONS ON RESALE
The Plan is intended to provide to employees of BTU a favorable
opportunity to acquire shares of Stock at prices below the prevailing current
market price so that they will be able to participate as stockholders in BTU,
and this purpose would not be furthered if participants disposed of Stock
acquired pursuant to the Plan immediately after its acquisition. Therefore, no
participant shall sell or otherwise dispose of any Stock acquired pursuant to
the Plan if such disposition would occur within the period beginning at the end
of the option period with respect to which such Stock was acquired and ending on
the date six months later unless such participant notifies BTU in writing of
such intended disposition and the number of shares of Stock of which such
participant intends to dispose and unless such notice is received by BTU not
less than 15 days prior to such intended disposition. Upon receipt of such
notice, BTU shall automatically have the option, exercisable at any time prior
- 4 -
<PAGE> 5
to the fifteenth day after such notice has been received by BTU, to repurchase
from such participant the number of shares of Stock specified in such notice at
a price per share equal to the price at which such participant acquired such
shares from BTU pursuant to the Plan. No interest will be payable on any amounts
so paid by BTU to any participant. Each certificate representing shares of Stock
delivered pursuant to the Plan shall bear an appropriate legend to give notice
of the restrictions on transfer contained in this Section 12.
13. PARTICIPANT'S RIGHTS NOT TRANSFERABLE
All participants granted options under the Plan shall have the same
rights and privileges, and each participant's rights and privileges under any
option granted under the Plan shall be exercisable during his lifetime only by
him, and shall not be sold, pledged, assigned, or transferred in any manner. In
the event any participant violates the terms of this Section, any options held
by him may be terminated by the Company and upon return to the participant of
the balance of his withholding account, all his rights under the Plan shall
terminate.
14. EMPLOYMENT RIGHTS
Nothing contained in the provisions of the Plan shall be construed to
give to any employee the right to be retained in the employ of the Company or to
interfere with the right of the Company to discharge any employee at any time;
nor shall it be construed to give the Company the right to require any employee
to remain in its employ or to interfere with any employee's right to terminate
his employment at any time.
15. CHANGE IN CAPITALIZATION
In the event of any change in the outstanding Stock of BTU by reason of
a stock dividend, split-up, recapitalization, merger, consolidation,
reorganization, or other capital change, the aggregate number and class of
shares available under the Plan and the number and class of shares under option
but not exercised, the option price, and the share limit provided for in Section
6 shall be appropriately adjusted.
16. ADMINISTRATION OF PLAN
The Plan shall be administered by the Board of Directors of BTU (the
"Board"), which shall have the right to determine any questions which may arise
regarding the interpretation and application of the provisions of the Plan and
to make, administer, and interpret such rules and regulations as it shall deem
necessary or advisable.
- 5 -
<PAGE> 1
Exhibit 10.15
BTU INTERNATIONAL, INC.
1989 STOCK OPTION PLAN FOR DIRECTORS
1. PURPOSE
The purpose of this 1989 Stock Option Plan for Directors (the "Plan")
is to advance the interests of BTU International, Inc. (the "Company") by
enhancing the ability of the Company to attract and retain non-employee
directors who are in a position to make significant contributions to the success
of the Company and to reward directors for such contributions through ownership
of shares of the Company's common stock (the "Stock").
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors (the "Board") of the Company designated by the Board for that
purpose. Unless and until a Committee is appointed the Plan shall be
administered by the entire Board, and references in the Plan to the "Committee"
shall be deemed references to the Board. The Committee shall have authority, not
inconsistent with the express provisions of the Plan, (a) to grant options in
accordance with the Plan to such directors as are eligible to receive options;
(b) to prescribe the form or forms of instruments evidencing options and any
other instruments required under the Plan and to change such forms from time to
time; (c) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (d) to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations of the Committee shall be conclusive and
shall bind all parties. Subject to Section 8, the Committee shall also have the
authority, both generally and in particular instances, to waive compliance by a
director with any obligation to be performed by him or her under an option and
to waive any condition or provision of an option.
<PAGE> 2
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which the Plan is
approved by the Board of Directors of the Company, but the Plan and any options
granted pursuant to the Plan shall be subject to the later approval thereof by
the shareholders of the Company. No option shall be granted under the Plan after
the completion of ten years from the date on which the Plan was adopted by
the Board, but options previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. Subject to adjustment as provided in Section
4(c), the aggregate number of shares of Stock that may be delivered upon the
exercise of options granted under the Plan shall be 20,000. If any option
granted under the Plan terminates without having been exercised in full, the
number of shares of Stock as to which such option was not exercised shall be
available for future grants within the limits set forth in this Section 4(a).
(b) Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's capital
stock, the number and kind of shares of stock or securities of the Company
subject to options then outstanding or subsequently granted under the Plan, the
maximum number of shares or securities that may be delivered under the Plan, the
exercise price, and other relevant provisions shall be appropriately adjusted by
the Committee, whose determination shall be binding on all persons.
5. ELIGIBILITY FOR OPTIONS
Directors eligible to receive options under the Plan ("Eligible Directors")
shall be any director who (i) is not an employee of the Company, and (ii) is not
a holder of more than 5% of the outstanding shares of the Stock or a person who
is in control of such holder.
- 2 -
<PAGE> 3
6. TERMS AND CONDITIONS OF OPTIONS
(a) Number of Options. Eligible Directors, excluding those who are
directors on the date of adoption of the Plan, shall be awarded an initial grant
covering 2,000 shares of Stock on the date of his or her first election.
Following the initial grants, each Eligible Director (including persons
who were directors on the date of adoption of the Plan) shall be awarded options
covering 500 shares of Stock on April 30, 1990 and each anniversary thereof,
provided such individual is then an Eligible Director. Each grant made prior to
shareholder approval of this Plan shall be subject to shareholder approval, and
no such option shall be exercisable prior to that time.
(b) Exercise Price. The exercise price of each option shall be 100% of
the fair market value per share of the Stock at the time the option is granted,
but not less, in the case of an original issue of authorized stock, than par
value per share. For this purpose, "fair market value" shall have the same
meaning as it does in the provisions of the Internal Revenue Code (the "Code")
and the regulations thereunder applicable to incentive options.
(c) Duration of Options. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be the date which is seven years
from the date the option was granted.
(d) Exercise of options.
(1) Each option shall become exercisable in accordance with the
following formula:
(A) One year after the date of the grant, the option
shall become exercisable to the extent of twenty-five
percent (25%) of the shares covered thereby, and
(B) On each of the second, third and fourth anniversaries
of the date of the grant the option shall become
exercisable as to an additional twenty-five percent
(25%) of the shares covered thereby.
(2) Any exercise of an option shall be in writing, signed by the
proper person and delivered or mailed
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to the Company, accompanied by (a) the option certificate and
any other documents required by the Committee and (b) payment
in full for the number of shares for which the option is
exercised.
(3) If an option is exercised by the executor or administrator of
a deceased director, or by the person or persons to whom the
option has been transferred by the director's will or the
applicable laws of descent and distribution, the Company shall
be under no obligation to deliver Stock pursuant to such
exercise until the Company is satisfied as to the authority of
the person or persons exercising the option.
(e) Payment for and Delivery of Stock. Stock purchased under the Plan
shall be paid for as follows: (i) in cash or by certified check, bank draft or
money order payable to the order of the Company, (ii) through the delivery of
shares of Stock having a fair market value on the last business day preceding
the date of exercise equal to the purchase price or (iii) by a combination of
cash and Stock as provided in clauses (i) and (ii) above.
An option holder shall not have the rights of a shareholder with regard
to awards under the Plan except as to Stock actually received by him under the
Plan.
The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (b) if the outstanding Stock
is at the time listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange upon official
notice of issuance, and (c) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
option, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
(f) Nontransferability of Options. No option may be transferred other
than by will or by the laws of descent and
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<PAGE> 5
distribution, and during a director's lifetime an option may be exercised only
by him or her.
(g) Death. Upon the death of any Eligible Director granted options
under this Plan, all options not then exercisable shall terminate. All options
held by the director that are exercisable immediately prior to death may be
exercised by his or her executor or administrator, or by the person or persons
to whom the option is transferred by will or the applicable laws of descent and
distribution, at any time within six months after the director's death (subject,
however, to the limitations of Section 6(c) regarding the maximum exercise
period for such option). After completion of that six-month period, such options
shall terminate to the extent not previously exercised.
(h) Other Termination of Status of Director. If a director's service
with the Company terminates for any reason other than death, all options held by
the director that are not then exercisable shall terminate. Options that are
exercisable on the date of termination shall continue to be exercisable for a
period of three months (subject to Section 6(c)), but shall terminate
immediately if the director was removed for cause or resigned under
circumstances which in the opinion of the Committee casts such discredit on him
as to justify termination of his options. After completion of that three-month
period, such options shall terminate to the extent not previously exercised,
expired or terminated.
(i) Mergers, etc. Subject to Section 7, in the event of any merger or
consolidation involving the Company, any sale of substantially all of the
Company's assets or a dissolution or liquidation of the Company all options
hereunder will terminate, but at least 20 days prior to the effective date of
any such merger, sale, dissolution, or liquidation, the Committee shall make all
options outstanding hereunder immediately exercisable, provided that, unless the
event will give rise to a Change of Control (as hereinafter defined) or it is
anticipated that a Change of Control will coincide with or follow the event, the
Committee may instead arrange that the successor or surviving corporation, if
any, grant replacement options.
7. CHANGE OF CONTROL
Notwithstanding any other provision of this Plan, in the event of a
Change of Control of the Company as defined in Exhibit A hereto each option held
by each Eligible Director will immediately become fully exercisable.
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8. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of options to a director
shall affect the Company's right to grant to such director options that are not
subject to the Plan, to issue to such directors Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
directors.
The Committee may at any time discontinue granting options under the
Plan. The Committee may at any time or times amend the Plan for the purpose of
satisfying any changes in applicable laws or regulations or for any other
purpose which may at the time be permitted by law, or may at any time terminate
the Plan as to any further grants of options, provided that (except to the
extent expressly required or permitted herein above) no such amendment shall,
without the approval of the shareholders of the Company, (a) increase the
maximum number of shares available under the Plan, (b) increase the number of
options granted to Eligible Directors, (c) amend the definition of Eligible
Director so as to enlarge the group of directors eligible to receive options
under the Plan, (d) reduce the price at which options may be granted, (e) change
or extend the times at which options may be granted, or (f) amend the provisions
of this Section 8, and no such amendment shall adversely affect the rights of
any director (without his or her consent) under any option previously granted.
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<PAGE> 7
EXHIBIT A
A Change of Control will occur for purposes of this Plan if (i) any
individual, corporation, partnership, company or other entity (a "Person")
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of securities of the Company representing more than 30% of
the combined voting power of the Company's then outstanding securities (other
than as a result of acquisitions of such securities from the Company), (ii)
there is a change of control of the Company of a kind which would be required to
be reported under Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Securities Exchange Act of 1934 (the "Act) (or a similar item in a similar
schedule or form), whether or not the Company is then subject to such reporting
requirement, (iii) the Company is a party to, or the stockholders approve, a
merger, consolidation, or other reorganization (other than (a) a merger,
consolidation or other reorganization which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent, either by remaining outstanding or by being converted into vesting
securities of the surviving entity, more than 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger, consolidation, or other reorganization, or (b) a
merger, consolidation, or other reorganization effected to implement a
recapitalization of the Company, or similar transaction, in which no Person
acquires more than 20% of the combined voting power of the Company's then
outstanding securities), a sale of all or substantially all assets, or a plan of
liquidation, or (iv) individuals who, at the date hereof, constitute the Board
cease for any reason to constitute a majority thereof, provided, however, that
any director who is not in office at the date hereof but whose election by the
Board or whose nomination for election by the Company's shareholders was
approved by a vote of at least a majority of the directors then still in office
who either were directors at the date hereof or whose election or nomination for
election was previously so approved (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Act) shall be deemed to have been in office at the date here of for
purposes of this definition.
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<PAGE> 8
Notwithstanding the foregoing provisions of this Exhibit A, a "Change
of Control" will not be deemed to have occurred solely because of the
acquisition of securities of the Company (or any reporting requirements under
the Act relating thereto) by an employment benefit plan maintained by the
Company for its employees.
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<PAGE> 1
Exhibit 10.37
BTU INTERNATIONAL, INC.
1993 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this 1993 Equity Incentive Plan (the "Plan") is to advance
the interests of BTU International, Inc. (the "Company") by enhancing its
ability to attract and retain employees and other persons or entities who are in
a position to make significant contributions to the success of the Company and
its subsidiaries through ownership of shares of the Company's common stock
("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Loans
or Supplement Grants, or combinations thereof, all as more fully described
below.
2. ADMINISTRATION
The administrator of the Plan (the "Administrator") will be the Board of
Directors of the Company (the "Board") or a committee of the Board. The
Administrator will have authority, not inconsistent with the express provisions
of the Plan and in addition to other authority granted under the Plan, to (a)
grant Awards at such time or times as it may choose; (b) determine the size of
each Award, including the number of shares of Stock subject to the Award; (c)
determine the type or types of each Award; (d) determine the terms and
conditions of each Award; (e) waive compliance by a Participant (as defined
below) with any obligations to be performed by the Participant under an Award
and waive any term or condition of an Award; (f) amend or cancel an existing
Award in whole or in part (and if an award if canceled, grant another Award in
its place on such terms as the Administrator shall specify), except that the
Administrator may not, without the consent of the holder of an Award, take any
action under this clause with respect to such Award if such action would
adversely affect the rights of such holder; (g) prescribe the form or forms of
instruments that are required or deemed appropriate under the Plan, including
any written notices and elections required of Participants, and change such
forms from time to time; (h) adopt, amend and rescind rules and regulations for
the administration of the Plan; and (i) interpret the Plan and decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such
<PAGE> 2
determinations and actions of the Administrator, and all other determinations
and actions of the Administrator made or taken under authority granted by any
provision of the Plan, will be conclusive and will bind all parties. Nothing in
this paragraph shall be construed as limiting the power of the Administrator to
make adjustments under Section 7.3 or Section 8.6.
The Administrator may, in its discretion, delegate some or all of its
powers with respect to the Plan to a committee (the "Committee"), in which
event all references (as appropriate) to the Administrator hereunder shall be
deemed to refer to the Committee. The Committee, if one is appointed, shall
consist of at least two directors. A majority of the members of the Committee
shall constitute a quorum, and all determinations of the Committee shall be made
by a majority of its members. Any determination of the Committee under the Plan
may be made without notice or meeting of the Committee by a writing signed by a
majority of the Committee members. On and after registration of the Stock under
the Securities Exchange Act of 1934 (the "1934 Act"), the Administrator shall
delegate the power to select directors and officers to receive Awards under the
Plan and the timing, pricing and amount of such Awards to a committee of two or
more directors, all members of which shall be disinterested persons within the
meaning of Rule 16b-3 promulgated under Section 16 of the 1934 Act.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Grants of Awards under the plan may be made prior
to that date (but after Board adoption of the Plan), subject to such approval of
the Plan.
No Award may be granted under the Plan after February 1, 2003, but Awards
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be 541,183.
If any Award requiring exercise by the Participant for delivery of Stock
terminates without having been exercised in full, or if any Award payable in
Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
will be available for future grants.
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<PAGE> 3
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
The Administrator shall establish the maximum number of Awards that may be
granted as cash-only Awards intended to qualify under Rule 16a-1(c)(3)(i)
promulgated under Section 16 of the 1934 Act prior to the issuance of any such
Awards.
5. ELIGIBILITY AND PARTICIPATION
Those eligible to receive Awards under the Plan ("Participants") will be
persons in the employ of the Company or any of its subsidiaries ("Employees")
and other persons or entities (including without limitation non-Employee
directors of the Company or a subsidiary of the Company) who, in the opinion of
the Administrator, are in a position to make a significant contribution to the
success of the Company or its subsidiaries. A "subsidiary" for purposes of the
Plan will be a corporation in which the Company owns, directly or indirectly,
stock possessing 50% or more of the total combined voting power of all classes
of stock.
6. TYPES OF AWARDS
6.1. OPTIONS
(a) Nature of Options. An Option is an Award entitling the recipient on
exercise thereof to purchase Stock at a specified exercise price.
Both "incentive stock options," as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") (any Option intended to qualify as
an incentive stock option being hereinafter referred to as an "ISO"), and
Options that are not incentive stock options, may be granted under the Plan.
ISOs shall be awarded only to Employees.
(b) Exercise Price. The exercise price of an Option will be determined by
the Administrator subject to the following:
(1) The exercise price of an ISO shall not be less than 100% (110% in
the case of an ISO granted to a ten-percent shareholder) of the fair market
value of the Stock subject to the Option, determined as of the time the
Option is granted. A "ten-percent shareholder" is any person who at the
time of grant owns, directly or indirectly, or is deemed to own by reason
of the attribution rules of section 424(d) of the Code, stock possessing
more than 10% of the
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<PAGE> 4
total combined voting power of all classes of stock of the Company or of
any of its subsidiaries.
(2) In no case may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share
of the Stock.
(3) The Administrator may reduce the exercise price of an Option at
any time after the time of grant, but in the case of an Option originally
awarded as an ISO, only with the consent of the Participant.
(c) Duration of Options. The latest date on which an Option may be
exercised will be the tenth anniversary (fifth anniversary, in the case of an
ISO granted to a ten-percent shareholder) of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Administrator at the time the Option was granted.
(d) Exercise of Options. Options granted under any single Award will become
exercisable at such time or times, and on such conditions, as the Administrator
may specify. The Administrator may at any time and from time to time accelerate
the time at which all or any part of the Option may be exercised.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Administrator and (2) payment in full in accordance with
paragraph (e) below for the number of shares for which the Option is exercised.
(e) Payment for Stock. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so provided by the
Administrator (not later than the time of grant, in the case of an ISO) (i)
through the delivery of shares of Stock which have been outstanding for at least
six months (unless the Administrator expressly approves a shorter period) and
which have a fair market value on the last business day preceding the date of
exercise equal to the exercise price, or (ii) by delivery of a promissory note
of the Option holder to the Company, payable on such terms as are specified by
the Administrator, or (iii) by delivery of an unconditional and irrevocable
undertaking by a broker to deliver promptly to the Company sufficient funds to
pay the exercise price, or (iv) by any combination of the permissible forms of
payment; provided, that if the Stock delivered upon exercise of the Option is
an original issue of authorized Stock, at least so much of the exercise price as
represents the par value of such Stock must be paid other than by the Option
holder's promissory note or personal check.
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<PAGE> 5
(f) Discretionary Payments. If the fair market value of shares of Stock
subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2 below) exceeds the exercise price
of the Option at the time of its exercise, the Administrator may cancel the
Option and cause the Company to pay in cash or in shares of Common Stock (at a
price per share equal to the fair market value per share) to the person
exercising the Option an amount equal to the difference between the fair market
value of the Stock which would have been purchased pursuant to the exercise
(determined on the date the Option is cancelled) and the aggregate exercise
price which would have been paid. The Administrator may exercise its discretion
to take such action only if it has received a written request from the person
exercising the Option, but such a request will not be binding on the
Administrator.
6.2. Stock Appreciation Rights.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
Award entitling the recipient on exercise of the Right to receive an amount, in
cash or Stock or a combination thereof (such form to be determined by the
Administrator), determined in whole or in part by reference to appreciation in
Stock value.
In general, a Stock Appreciation Right entitles the Participant to receive,
with respect to each share of Stock as to which the Right is exercised, the
excess of the share's fair market value on the date of exercise over its fair
market value on the date the Right was granted. However, the Administrator may
provide at the time of grant that the amount the recipient is entitled to
receive will be adjusted upward or downward under rules established by the
Administrator to take into account the performance of the Stock in comparison
with the performance of other stocks or an index or indices of other stocks. The
Administrator may also grant Stock Appreciation Rights providing that following
a change in control of the Company, as determined by the Administrator, the
holder of such Right will be entitled to receive, with respect to each share of
Stock subject to the Right, an amount equal to the excess of a specified value
(which may include an average of values) for a share of Stock during a period
preceding such change in control over the fair market value of a share of Stock
on the date the Right was granted.
(b) Grant of Stock Appreciation Riqhts. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the time
the Option is granted.
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(c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights are
granted in tandem with Options, the following will apply:
(1) The Stock Appreciation Right will be exercisable only at such time
or times, and to the extent, that the related Option is exercisable and
will be exercisable in accordance with the procedure required for exercise
of the related Option.
(2) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(3) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only with the
related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the fair market value of the Stock subject to the
Option exceeds the exercise price of such option.
(d) Exercise of Independent Stock Appreciation Rights. A Stock Appreciation
Right not granted in tandem with an Option will become exercisable at such time
or times, and on such conditions, as the Administrator may specify. The
Administrator may at any time accelerate the time at which all or any part of
the Right may be exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by any other documents required by the Administrator.
6.3. Restricted and Unrestricted Stock.
(a) Nature of Restricted Stock Award. A Restricted Stock Award entitles the
recipient to acquire, for a purchase price equal to at least par value, shares
of Stock subject to the restrictions described in paragraph (d) below
("Restricted Stock").
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(b) Acceptance of Award. A Participant who is granted a Restricted Stock
Award will have no rights with respect to such Award unless the Participant
accepts the Award by written instrument delivered or mailed to the Company
accompanied by payment in full of the specified purchase price, if any, of the
shares covered by the Award. Payment may be by certified or bank check or other
instrument acceptable to the Administrator.
(c) Rights as a Stockholder. A Participant who receives Restricted Stock
will have all the rights of a stockholder with respect to the Stock, including
voting and dividend rights, subject to the restrictions described in paragraph
(d) below and any other conditions imposed by the Administrator at the time of
grant. Unless the Administrator otherwise determines, certificates evidencing
shares of Restricted Stock will remain in the possession of the Company until
such shares are free of all restrictions under the Plan.
(d) Restrictions. Except as otherwise specifically provided by the Plan,
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of, and if the Participant ceases to be a Participant by
reason of death or otherwise suffers a Status Change (as defined at Section 7.2
below) for any reason, must be offered to the Company for purchase for the
amount of cash paid for the Stock, or forfeited to the Company if no cash was
paid. These restrictions will lapse at such time or times, and on such
conditions, as the Administrator may specify. The Administrator may at any time
accelerate the time at which the restrictions on all or any part of the shares
will lapse.
(e) Notice of Election. Any Participant making an election under Section
83(b) of the Code with respect to Restricted Stock must provide a copy thereof
to the Company within 10 days of the filing of such election with the Internal
Revenue Service.
(f) Other Awards Settled with Restricted Stock. The Administrator may, at
the time any Award described in this Section 6 is granted, provide that any or
all the Stock delivered pursuant to the Award will be Restricted Stock.
(g) Unrestricted Stock. The Administrator may, in its sole discretion,
approve the sale to any Participant of shares of Stock free of restrictions
under the Plan for a price which is not less than the par value of the Stock.
6.4. Deferred Stock.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Administrator may specify. The
Administrator
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may at any time accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any Award described in this Section 6 is
granted, the Administrator may provide that, at the time Stock would otherwise
be delivered pursuant to the Award, the Participant will instead receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.
6.5. Performance Awards; Performance Goals.
(a) Nature of Performance Awards. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Administrator) following
the attainment of Performance Goals. Performance Goals may be related to
personal performance, corporate performance, departmental performance or any
other category of performance deemed by the Administrator to be important to the
success of the Company. The Administrator will determine the Performance Goals,
the period or period during which performance is to be measured and all other
terms and conditions applicable to the Award.
(b) Other Awards Subject to Performance Condition. The Administrator may,
at the time any Award described in this Section 6 is granted, impose the
condition (in addition to any conditions specified or authorized in this Section
6 or any other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.6. Loans and Supplemental Grants.
(a) Loans. The Company may make a loan to a Participant ("Loan"), either on
the date of or after the grant of any Award to the Participant. A Loan may be
made either in connection with the purchase of Stock under the Award or with the
payment of any Federal, state or local income tax with respect to income
recognized as a result of the Award. The Administrator will have full authority
to decide whether to make a Loan and to determine the amount, terms and
conditions of the Loan, including the interest rate (which may be zero), whether
the Loan is to be secured or unsecured or with or without recourse against the
borrower, the terms on which the Loan is to be repaid and the conditions, if
any, under which it may be forgiven.
(b) Supplemental Grants. In connection with any Award, the Administrator
may at the time such Award is made or at a later date, provide for and grant a
cash award to the Participant ("Supplemental Grant") not to exceed an amount
equal to (1) the amount of any federal, state and local income tax on income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate,
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plus (2) an additional amount on a grossed-up basis intended to make the
Participant whole on an after-tax basis after discharging all the Participant's
income tax liabilities arising from all payments under this Section 6. Any
payments under this subsection (b) will be made at the time the Participant
incurs Federal income tax liability with respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. Death.
If a Participant dies, the following will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution, at any time within the one year-period ending with the first
anniversary of the Participant's death (or such shorter or longer period as the
Administrator may determine), and shall thereupon terminate. In no event,
however, shall an Option or Stock Appreciation Right remain exercisable beyond
the latest date on which it could have been exercised without regard to this
Section 7. Except as otherwise determined by the Administrator, all Options and
Stock Appreciation Rights held by a Participant immediately prior to death that
are not then exercisable shall terminate at death.
(b) Except as otherwise determined by the Administrator, all Restricted
Stock held by the Participant must be transferred to the Company (and, in the
event the certificates representing such Restricted Stock are held by the
Company, such Restricted Stock will be so transferred without any further action
by the Participant) in accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance Award,
or Supplemental Grant to which the Participant was not irrevocably entitled
prior to death will be forfeited and the Award canceled as of the time of death,
unless otherwise determined the Administrator.
7.2. Termination of Service (Other Than By Death).
If a Participant who is an Employee ceases to be an Employee for any reason
other than death, or if there is a termination (other than by reason of death)
of the consulting, service or similar relationship in respect of which a
non-Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being hereinafter referred to as a "Status
Change"), the following will apply:
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(a) Except as otherwise determined by the Administrator, all Options and
Stock Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change. Any Options or Rights that were exercisable immediately prior to the
Status Change will continue to be exercisable for a period of three months (or
such shorter or longer period as the Administrator may determine), and shall
thereupon terminate, unless the Award provides by its terms for immediate
termination in the event of a Status Change or unless the Status Change results
from a discharge for cause which in the opinion of the Administrator casts such
discredit on the Participant as to justify immediate termination of the Award.
In no event, however, shall an Option or Stock Appreciation Right remain
exercisable beyond the latest date on which it could have been exercised without
regard to this Section 7. For purposes of this paragraph, in the case of a
Participant who is an Employee, a Status Change shall not be deemed to have
resulted by reason of (i) a sick leave or other bona fide leave of absence
approved for purposes of the Plan by the Administrator, so long as the
Employee's right to reemployment is guaranteed either by statute or by contract,
or (ii) a transfer of employment between the Company and a subsidiary or between
subsidiary, or to the employment of a corporation (or a parent or subsidiary
corporation of such corporation) issuing or assuming an option in a transaction
to which section 424(a) of the Code applies.
(b) Except as otherwise determined by the Administrator, all Restricted
Stock held by the Participant at the time of the Status Change must be
transferred to the Company (and, in the event the certificates representing such
Restricted Stock are held by the Company, such Restricted Stock will be so
transferred without any further action by the Participant) in accordance with
Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance Award,
or Supplemental Grant to which the Participant was not irrevocably entitled
prior to the Status Change will be forfeited and the Award cancelled as of the
date of such Status Change unless otherwise determined by the Administrator.
7.3. Certain Corporate Transactions.
In the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), all outstanding Awards
will terminate as of the
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<PAGE> 11
effective date of the covered transaction. Prior to the effective date of the
covered transaction, the Administrator in its sole discretion may, with respect
to any or all Awards (or any portion thereof) then outstanding:
(a) (1) in the case of Options and Stock Appreciation Rights, make them
exercisable in full, (2) remove the restrictions from shares of Restricted
Stock, (3) cause the Company to make payment and provide benefits, in whole or
in part, under Deferred Stock Awards, Performance Awards, and Supplemental
Grants which would have been made or provided with the passage of time had the
transaction not occurred and the Participant not suffered a Status Change (or
died), (4) remove any performance-related or other conditions, and (5) forgive
all or any portion of the principal of or interest on a Loan; or
(b) with respect to an outstanding Award held by a Participant who,
following the covered transaction, will be employed by or otherwise providing
services to a corporation which is a surviving or acquiring corporation in such
transaction or an affiliate of such a corporation, arrange to have such
surviving or acquiring corporation or affiliate grant to the Participant a
replacement award which, in the judgment of the Administrator, is substantially
equivalent to the Award;
provided, that nothing in this Section 7.3 shall be construed as obligating the
Administrator to take any action under either (a) or (b) above.
8. GENERAL PROVISIONS
8.1. Documentation of Awards.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Administrator from time to time. Such instruments may be in
the form of agreements to be executed by both the Participant and the Company,
or certificates, letters or similar instruments, which need not be executed by
the Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. Rights as a Stockholder, Dividend Equivalents.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Administrator
may, on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's
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<PAGE> 12
Award had such Stock been outstanding. Without limitation, the Administrator may
provide for payment to the Participant of amounts representing such dividends,
either currently or in the future, or for the investment of such amounts on
behalf of the Participant.
8.3. Conditions or Delivery of Stock.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange or national market system, until the
shares to be delivered have been listed or authorized to be listed on such
exchange or system upon official notice of notice of issuance, and (d) until all
other legal matters in connection with the issuance and delivery of such shares
have been approved by the Company's counsel. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Award, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. Tax Withholding.
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Administrator will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Administrator with regard to such requirements, prior to the delivery of any
Stock. If and to the extent that such withholding is required, the Administrator
may permit the Participant or such other person to elect at such time and in
such manner as the Administrator provides to have the Company hold back from the
shares to be delivered, or to deliver to the Company, Stock having a value
calculated to satisfy the withholding requirement. In the
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<PAGE> 13
alternative, the Administrator may, at the time of grant of any such Award,
require that the Company withhold from any shares to be delivered Stock with a
value calculated to satisfy applicable tax withholding requirements.
If at the time an ISO is exercised the Administrator determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Administrator may require
as a condition of exercise that the person exercising the ISO agree (a) to
inform the Company promptly of any disposition (within the meaning of section
424(c) of the Code) of Stock received upon exercise, and (b) to give such
security as the Administrator deems adequate to meet the potential liability of
the Company for the withholding requirements and to augment such security from
time to time in any amount reasonably deemed necessary by the Administrator to
preserve the adequacy of such security.
8.5. Nontransferability of Awards.
No Award (other than an Award in the form of an outright transfer of cash
or Unrestricted Stock) may be transferred other than by will or by the laws of
descent and distribution, and during an employee's lifetime an Award requiring
exercise may be exercised only by the Participant (or in the event of the
Participant's incapacity, the person or persons legally appointed to act on the
Participant's behalf).
8.6. Adjustments in the Event of Certain Transactions.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization after the
effective date of the Plan, the Administrator will make appropriate adjustments
to the maximum number of shares that may be delivered under the Plan under
Section 4 above, and will also make appropriate adjustments to the number and
kind of shares of stock or securities subject to Awards then outstanding or
subsequently granted, any exercise prices relating to Awards and any other
provision of Awards affected by such change.
(b) The Administrator may also make adjustments of the type described in
paragraph (a) above to take into account material changes in law or in
accounting practices or principles, distributions to common stockholders other
than stock dividends or normal cash dividends, mergers, consolidations,
acquisitions, dispositions or similar corporate transactions, or any other
event, if the Administrator determines that adjustments are appropriate to avoid
distortion in the operation of the Plan.
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<PAGE> 14
8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Administrator in any particular
case, the loss of existing or potential profit in Awards granted under the Plan
will not constitute an element of damages in the event of termination of an
employment, service or similar relationship even if the termination is in
violation of an obligation of the Company to the Participant.
8.8. DEFERRAL OF PAYMENTS.
The Administrator may agree at any time, upon request of the Participant,
to defer the date on which any payment under an Award will be made.
8.9. PAST SERVICES AS CONSIDERATION.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Administrator may determine that such price has been
satisfied by past services rendered by the Participant.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock be issued to
Employees.
The Administrator may at any time or times amend the Plan or any
outstanding Award for any purpose which may at the time be permitted by law, or
may at any time terminate the Plan as to any further grants of Awards, provided
that (except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under section 422 of the Code
and to continue to qualify under Rule 16b-3 promulgated under Section 16 of the
1934 Act.
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<PAGE> 15
APPROVAL OF AMENDMENT NO. 1 TO THE 1993 EQUITY INCENTIVE PLAN
The 1993 Equity Incentive Plan (the "Incentive Plan") is administered
by the Compensation Committee and is designed to advance the Company's interests
by enhancing its ability to attract and retain employees and others in a
position to make significant contributions to the success of the Company through
ownership of shares of Common Stock. A total of 541,183 shares of Common Stock
which became available due to the expiration of the previous 1982 Stock Option
Plan, have been reserved for issuance under the Incentive Plan, subject to
adjustment for stock dividends and similar events. As of April 7, 1997 there
were 324,053 shares of Common Stock available for award. The closing price of
the Common Stock on that date was $ 2.75.
The Incentive Plan was adopted by the Board of Directors on February
22, 1993. Stockholders approved the Incentive Plan at the Annual Meeting of
Stockholders held on May 14. 1993. On April 23, 1997, the Board of Directors
adopted Amendment No. 1 to the Incentive Plan (the "Amendment") which provides
for per-individual limitations on the number of shares of Common Stock issuable
upon exercise of options and stock appreciation rights ("SARs") under the
Incentive Plan in order to comply with Section 162(m) of the Internal Revenue
Code. Stockholders are being requested to approve the Amendment at the Annual
Meeting. If the Amendment is not approved by the Stockholders, no additional
grants of options or SARs under the Incentive Plan will be permitted to be made
to the Named Executive Officers. The following summary, of the Incentive Plan
and the Amendment is qualified in its entirety by the full text of the Incentive
Plan and the Amendment which are available without charge upon request to Thomas
P. Kealy. Vice President, Corporate Controller and Chief Accounting Officer.
GENERAL
Under the Incentive Plan, the Compensation Committee may grant stock
options (both incentive stock options and nonstatutory options), stock
appreciation rights, restricted stock, unrestricted stock, deterred stock
grants, and performance awards, as well as loans in connection with such grants
and awards and cash payments intended to offset income taxes due with respect to
any such grant or award. Awards under the Incentive Plan may also include
provision for the payment of dividend equivalents with respect to the shares
subject to the awards. Employees of the Company and its subsidiaries and other
persons or entities who, in the Compensation Committee's opinion, are in a
position to make a significant contribution to the success of the Company are
eligible to receive awards under the Incentive Plan. The Amendment provides that
(i) the maximum number of shares of Common Stock for which options may be
granted to any individual in any year of the Incentive Plan shall be 250.000 and
(ii) the maximum number of shares of Common Stock subject to stock appreciation
rights granted to an individual in any year of the Incentive Plan shall likewise
be 250,000. These per-individual limitations are intended to be construed and
applied consistent with the rules and regulations under Section 162(m) of the
Internal Revenue Code.
Stock Options. The exercise price of an incentive stock option granted
under the Incentive Plan may not be less than 100% (1 l 0% in the case of ten
percent shareholders) of the fair market value of the Common Stock at the time
of grant. The exercise price of a nonstatutory option granted under the
Incentive Plan is determined by the Compensation Committee. The Compensation
Committee sets the term of each option, which cannot exceed ten years from grant
(five years from grant in the case of an incentive stock option granted to a
ten percent shareholder), and specifies the time or times each option will be
exercisable. The exercise price may be paid in cash or check acceptable to the
Company. Subject to certain additional limitations, the Compensation Committee
may also permit the exercise price to be paid by tendering shares of Common
Stock, by using a promissory note, by delivering to the Company an undertaking
by a broker to deliver promptly sufficient funds to pay the exercise price, or a
combination of the foregoing.
Stock Appreciation Rights (SARs). SARs may be granted either alone or
in tandem with stock option grants. Each SAP, entitles the participant, in
general, to receive upon exercise the excess of a share's fair market value at
the date of exercise over the share's fair market value on the date the SAP, was
granted. The Incentive Plan also provides for SARs entitling the participant,
upon exercise, to receive an amount based on certain other measures, including
SARs that entitle the recipient to receive, following a change in control or
the Company as determined by the Compensation Committee, an amount measured by
specified values or averages of values prior to the change in control. If an SAR
is granted in tandem with an option, the SAR will be exercisable only to the
extent the option is exercisable. To the extent the option is exercised, the
accompanying SAR will cease to be exercisable, and vice versa.
<PAGE> 16
Stock Awards. The Incentive Plan provides for awards of nontransferable
shares of restricted Common Stock subject to forfeiture as well as of
unrestricted shares of Common Stock. Restricted Common Stock must be forfeited
to the Company if the participant ceases to be an employee before the
restriction lapse. Other awards under the Incentive Plan may also be settled
with restricted Common Stock.
The Incentive Plan also provides for deferred grants entitling the
recipient to receive shares of Common Stock in the future at such times and on
such conditions as the Compensation Committee may specify and performance awards
entitling the recipient to receive cash or Common Stock following the attainment
of performance goals determined by the Compensation Committee. Performance
conditions and provisions for deferred stock may also be attached to other
awards under the Incentive Plan.
The Compensation Committee may approve loans from the Company in
connection with the purchase of Common Stock under an award or the payment of
taxes in connection with an award, and may provide for outright cash grants to
make participants whole for certain taxes. A loan under the Incentive Plan will
have such provision as the Compensation Committee determines but may not have a
term exceeding ten years.
Except as otherwise provided by the Compensation Committee, if a
participant dies, options and SARs exercisable immediately prior to death may be
exercised by the participant's executor, administrator or transferee during a
period of one year following such death (or for the remainder of the original
term, if less). Options and SARs not exercisable at a participant's death
terminate. Outstanding awards of Restricted Stock must be transferred to the
Company upon a participant's death and, similarly, Deferred Stock grants,
performance awards and supplemental awards to which a participant is not
irrevocably entitled will be forfeited unless otherwise provided.
In the case of termination of a participant's association with the
Company for reasons other than death, options and SARs remain exercisable, to
the extent they were exercisable immediately prior to termination, for three
months (or for the remainder of their original term. if less), shares of
Restricted Stock must be resold to the Company and other awards terminate,
except as otherwise provided.
In the case of certain mergers, consolidations or other transactions in
which the Company is acquired or is liquidated, all outstanding awards will
terminate. The Compensation Committee may, however, in its discretion cause
unvested awards to vest or become exercisable, remove performance or other
conditions on the exercise of or vested right to an award, or in certain
circumstances provide for replacement awards.
FEDERAL TAX EFFECTS
The following discussion summarizes certain federal income tax
consequences of the exercise and receipt of options under the Incentive Plan.
The summary does not purport to cover federal employment tax or other federal
tax consequences that may be associated with the plans, nor does it cover state,
local or non-U.S., taxes.
Incentive Stock Options. In general, an optionee realizes no taxable
income upon the grant or exercise of an incentive stock oration ("ISO").
However, the exercise of an ISO may result in an alternative 'minimum tax
liability to the optionee. With certain exceptions, a disposition of shares
purchased under an ISO within two years from the date of grant or within one
year after exercise produces ordinary income to the optionee (and a deduction to
the Company) equal to the value of the shares at the time of exercise less the
exercise price. Any additional gain recognized in the disposition is treated as
a capital gain for which the Company is not entitled to a deduction. If the
optionee does not dispose of the shares until after the expiration of these
one-and two-year holding periods, any gain or loss recognized upon a subsequent
sale is treated as a long-term capital gain or loss for which the Company is not
entitled to a deduction.
<PAGE> 17
Nonstatutory Options. In general, in the case of a nonstatutory option,
the optionee has no taxable income at the time of grant but realizes income in
connection with exercise of the option in an amount equal to the excess (at time
of exercise) of the fair market value of the shares acquired upon exercise over
the exercise price; a corresponding deduction is available to the Company; and
upon a subsequent sale or exchange of the shares, appreciation and depreciation
after the date of exercise is treated as capital gain or loss for which the
Company is not entitled to a deduction.
In general, an ISO that is exercised more than three months after
termination of employment (other than termination by reason of death) is treated
as a nonstatutory option. ISOs granted after 1986 are also treated as
nonstatutory options to the extent they first become exercisable by an
individual in any calendar year for shares having a fair market value
(determined as of the date of grant) in excess of $100,000.
Under the so-called "golden parachute" provisions of the Internal
Revenue Code, options that vest in connection with a change in control of the
Company may be required to be valued and taken into account in determining
whether the participant has received payments in the nature of compensation that
are contingent on the change in control ("parachute payments") equal to or
greater than three tunes the participant's average compensation for the five
years ended prior to the year in which the change in control occurs. If this
limit is exceeded, the excess of the participant's parachute payments over one
times the five-year average base amount may be subject to an additional 20%
federal tax and may be nondeductible to the Company.
<PAGE> 1
Exhibit 10.44
AMENDMENT NO. 1
BTU INTERNATIONAL. INC.
1993 EQUITY INCENTIVE PLAN
1. REFERENCE TO THE PLAN.
Reference is hereby made to the BTU international, Inc. (the "Company")
1993 Equity Incentive Plan (the "Plan"). Terms defined in the Plan and not
otherwise defined herein are used herein with the meanings so defined.
2. AMENDMENT TO THE PLAN.
Subject to approval by the stockholders of the Company, Section 4 of
the Plan is hereby amended by adding the following paragraph at the end thereof:
"The maximum number of shares of Stock for which Options may
be granted to any individual in any one year shall be 250.000. The
maximum number of shares of Stock subject to Stock Appreciation Rights
granted to an}.' individual in any one year shall likewise be 250,000.
The per-individual limitations described in this paragraph shall be
construed and applied consistent with the rules and regulations under
Section 162(m) of the Internal Revenue Code."
<PAGE> 1
Exhibit 10.45
BTU INTERNATIONAL, INC.
1998 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of this 1998 Stock Option Plan for Non-Employee Directors
(the "Plan") is to advance the interests of BTU International, Inc. (the
"Company") by enhancing the ability of the Company to attract and retain
non-employee directors who are in a position to make significant contributions
to the success of the Company and to reward directors for such contributions
through the awarding of options ("Options") to purchase shares of the Company's
common stock (the "Stock").
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors (the "Board") of the Company designated by the Board for that
purpose. Unless and until a Committee is appointed the Plan shall be
administered by the entire Board, and references in the Plan to the "Committee"
shall be deemed references to the Board. The Committee shall have authority, not
inconsistent with the express provisions of the Plan, (a) to grant Options in
accordance with the Plan to such directors as are eligible to receive Options;
(b) to prescribe the form or forms of instruments evidencing Options and any
other instruments required under the Plan and to change such forms from time to
time; (c) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (d) to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations of the Committee shall be conclusive and
shall bind all parties. Subject to Section 7, the Committee shall also have the
authority, both generally and in particular instances, to waive compliance by a
director with any obligation to be performed by him or her under an Option and
to waive any condition or provision of an Option.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which the Plan is
approved by the Board of Directors of the Company, subject to approval by the
stockholders of the Company. No Option shall be granted under the Plan after the
completion of ten years from the date on which the Plan was adopted by the
Board, but Options previously granted may extend beyond that date.
<PAGE> 2
4. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. Subject to adjustment as provided in Section
4(c), the aggregate number of shares of Stock that may be delivered upon the
exercise of Options granted under the Plan shall be 50,000. If any Option
granted under the Plan terminates without having been exercised in full, the
number of shares of Stock as to which such Option was not exercised shall be
available for future grants within the limits set forth in this Section 4(a).
(b) Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's capital
stock, after the effective date of the Plan, the number and kind of shares of
stock or securities of the Company subject to Options then outstanding or
subsequently granted under the Plan, the maximum number of shares or securities
that may be delivered under the Plan, the exercise price, and other relevant
provisions shall be appropriately adjusted by the Committee, whose determination
shall be binding on all persons.
The Committee may also adjust the number of shares subject to
outstanding awards and the exercise price and the terms of outstanding awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, consolidations or mergers (except those described in
Section 6(j)), acquisitions or dispositions of stock or property or any other
event if it is determined by the Board that such adjustment is appropriate to
avoid distortion in the operation of the Plan.
5. ELIGIBILITY FOR OPTIONS
A Director eligible to receive Options under the Plan (an "Eligible
Director") shall be any director who is not an employee of the Company or of any
subsidiary of the Company, and (ii) is not a holder of more than 5% of the
outstanding shares of the Stock, or a person who is in control of such holder.
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<PAGE> 3
6. TERMS AND CONDITIONS OF OPTIONS
(a) Formula Options. On the date that the Board approves this Plan,
each person who is then an Eligible Director shall be awarded on such date an
Option covering 1,000 shares of Stock, subject to stockholder approval of the
Plan. Each Eligible Director elected for the first time thereafter shall also be
awarded on the date of his or her first election an Option covering 2,000 shares
of Stock. Thereafter, immediately following the annual meeting of stockholders,
each Eligible Director shall be awarded an Option covering 1,000 shares of
Stock. The Options awarded under this paragraph (a) are referred to as "Formula
Options."
(b) Discretionary Options. The Committee shall also have the authority
under this Plan to award Options to purchase Stock to Eligible Directors in such
amounts and on such terms not inconsistent with this Plan as it shall determine
at the time of the award. The Options awarded under this paragraph (b) are
referred to herein as "Discretionary Options."
(c) Exercise Price. The exercise price of each Formula Option shall be
100% of the fair market value per share of the Stock at the time the Option is
granted. The exercise price of each Discretionary Options shall be set by the
Committee. In no event, however, shall the Option price be less, in the case of
an original issue of authorized stock, than par value per share. For purposes of
this paragraph, the fair market value of a share of Stock will be the mean
between the high and low sale prices as reported on the principal market on
which the Stock is traded or, if no sales are reported, the fair market value as
determined in good faith by the Committee.
(d) Duration of Options. The latest date on which a Option may be
exercised (the "Final Exercise Date") shall be (i) in the case of Formula
Options, the date which is seven years from the date the Option was granted and
(ii) in the case of Discretionary Options, such date as the Committee may
determine, but in no event later than seven years from the date the Option was
granted.
(e) Exercise of Options.
(1) Each Formula Option shall become exercisable as to one-fourth
of the shares covered thereby on each anniversary of the date
of the grant. Each Discretionary Option shall become
exercisable at such time or times as the Committee shall
determine.
(2) Any exercise of an Option shall be in writing, signed by the
proper person and delivered or mailed to the Company,
accompanied by (i) any
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<PAGE> 4
documentation required by the Committee and (ii) payment in
full for the number of shares for which the Option is
exercised.
(3) If an Option is exercised by the executor or administrator of
a deceased director, or by the person or persons to whom the
Option has been transferred by the director's will or the
applicable laws of descent and distribution, the Company shall
be under no obligation to deliver Stock pursuant to such
exercise until the Company is satisfied as to the authority of
the person or persons exercising the Option.
(f) Payment for and Delivery of Stock. Stock purchased under the Plan
shall be paid for as follows: (i) in cash or by check (acceptable to the Company
in accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (ii) if so permitted by the
Committee, (A) through the delivery of shares of Stock (which, in the case of
shares of Stock acquired from the Company, have been outstanding for at least
six months) having a fair market value on the last business day preceding the
date of exercise equal to the purchase price or (B) by having the Company hold
back from the shares transferred upon exercise Stock having a fair market value
on the last business day preceding the date of exercise equal to the purchase
price or (C) by delivery of a promissory note of the Option holder to the
Company, such note to be payable on such terms as are specified or (D) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price or (E) by any
combination of the permissible forms of payment; provided, that if the Stock
delivered upon exercise of the Option is an original issue of authorized Stock,
at least so much of the exercise price as represents the par value of such Stock
shall be paid other than with a personal check or promissory note of the Option
holder.
An Option holder shall not have the rights of a shareholder with regard
to awards under the Plan except as to Stock actually received by him or her
under the Plan.
The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (b) if the outstanding Stock
is at the time listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange upon official
notice of issuance, and (c) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
Option, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
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<PAGE> 5
(g) Nontransferability of Options. Except as the Committee shall
otherwise provide, no Option may be transferred other than by will or by the
laws of descent and distribution, and during a director's lifetime an Option may
be exercised only by him or her.
(h) Death. Except as the Committee shall otherwise provide, upon the
death of any director granted Options under this Plan, all Options not then
exercisable shall terminate. All Options held by the director that are
exercisable immediately prior to death may be exercised by his or her executor
or administrator, or by the person or persons to whom the Option is transferred
by will or the applicable laws of descent and distribution, at any time within
six months after the director's death (subject, however, to the limitations of
Section 6(d) regarding the maximum exercise period for such Option). After
completion of that six-month period, such Options shall terminate to the extent
not previously exercised.
(i) Other Termination of Service. Except as the Committee shall
otherwise provide, if a director's service with the Company terminates for any
reason other than death, all Options held by the director that are not then
exercisable shall terminate. Options that are exercisable on the date of
termination shall continue to be exercisable for a period of three months
(subject to Section 6(d)), but shall terminate immediately if the director was
removed for cause or resigned under circumstances which, in the opinion of the
Committee, casts such discredit on him or her as to justify termination of his
Options. After completion of that three-month period, such Options shall
terminate to the extent not previously exercised, expired or terminated.
(j) Mergers, etc. Subject to the second paragraph of this paragraph
6(j), in the event of a consolidation or merger in which the Company is not the
surviving corporation (other than a consolidation or merger in which the holders
of Stock of the Company acquire a majority of the voting stock of the surviving
corporation) or which results in the acquisition of substantially all the
Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of a sale or transfer
of substantially all of the Company's assets or a dissolution or liquidation of
the Company, all Options hereunder will terminate, but 20 days prior to the
anticipated effective date of any such merger, consolidation, sale, dissolution,
or liquidation, all Options outstanding hereunder that are not otherwise
exercisable shall become immediately exercisable, provided, that if the
transaction is a merger or consolidation that is accounted for as a pooling of
interests the Committee shall arrange to have the successor or surviving
corporation assume all Options outstanding under this Plan, with such
adjustments to the number of shares covered by such Options and the exercise
price thereof as may be necessary to reflect the exchange ratio provided for in
the transaction. Such assumed options shall otherwise be on terms and conditions
substantially equivalent to those set forth in this Plan, shall be immediately
exercisable and, except as to Eligible
-5-
<PAGE> 6
Directors who become directors of the acquiring or surviving corporation, shall
terminate on the 180th day following the consummation of the transaction.
Options held by Eligible Directors who become directors of the acquiring or
surviving corporation shall be governed, mutatis mutandis, by the provisions of
this Plan and the agreement evidencing the Option surrendered in substitution.
Notwithstanding any other provision of this Plan, in the event of a
Change in Control of the Company as defined in Exhibit A hereto each Option held
by each Eligible Director will immediately become fully exercisable.
7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, TERMINATION
AND EFFECTIVENESS
Neither adoption of the Plan nor the grant of Options to a director
shall affect the Company's right to grant to such director Options that are not
subject to the Plan, to issue to such directors Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
directors.
The Committee may at any time terminate the Plan as to any further
grants of Options. The Committee may at any time or times, amend the Plan for
any purpose which may at the time be permitted by law, but no such amendment
shall adversely affect the rights of any Optionee (without the Optionee's
consent) under any Option previously granted.
- 6 -
<PAGE> 7
EXHIBIT A
A Change in Control will occur for purposes of this Plan if (i) any
individual, corporation, partnership, company or other entity (a "Person")
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of securities of the
Company representing more than 30% of the combined voting power of the Company's
then outstanding securities (other than as a result of acquisitions of such
securities from the Company), (ii) there is a change in control of the Company
of a kind which would be required to be reported under Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Exchange Act (or a similar item in a
similar schedule or form), whether or not the Company is then subject to such
reporting requirement, (iii) the Company is a party to, or the stockholders
approve, a merger, consolidation, or other reorganization (other than (a) a
merger, consolidation or other reorganization which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent, either by remaining outstanding or by being converted into voting
securities of the surviving entity, more than 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger, consolidation, or other reorganization, or (b) a
merger, consolidation, or other reorganization effected to implement a
recapitalization of the Company, or similar transaction, in which no Person
acquires more than 20% of the combined voting power of the Company's then
outstanding securities), a sale of all or substantially all assets, or a plan of
liquidation, or (iv) individuals who, at the date hereof, constitute the Board
cease for any reason to constitute a majority thereof, provided, however, that
any director who is not in office at the date hereof but whose election by the
Board or whose nomination for election by the Company's shareholders was
approved by a vote of at least a majority of the directors then still in office
who either were directors at the date hereof or whose election or nomination for
election was previously so approved (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be deemed to have been in office at the date
hereof for purposes of this definition.
Notwithstanding the foregoing provisions of this Exhibit A, a "Change
in Control" will not be deemed to have occurred solely because of the
acquisition of beneficial ownership of securities of the Company by an
employment benefit plan maintained by the Company for its employees.
- 7 -
<PAGE> 1
Exhibit 10.46
FIRST AMENDMENT TO CREDIT AGREEMENT
AGREEMENT AND AMENDMENT made as of the 16th day of December, 1999, by and
between USTrust ("Lender") and BTU International, Inc. ("Borrower").
WHEREAS, Lender and Borrower are parties to a Credit Agreement dated
September 5, 1997 (the "Credit Agreement") and certain other Loan Documents (as
defined in the Credit Agreement) under which Lender has made loans and extended
credit, form time to time, to Borrower;
WHEREAS, the Borrowers have requested that Lender agree to amend the Credit
Agreement to, among other things, extend the Termination Date under the Credit
Agreement and modify the Debt Service Coverage Ratio;
WHEREAS, Lender is prepared to agree to the foregoing amendments but only
on the terms and subject to the conditions set forth herein,
NOW, THEREFORE, based on these premises, and in consideration of the mutual
promises herein contained, and other good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged, Lender and Borrowers hereby
agree:
SECTION 1. DEFINITIONS.
Capitalized terms not defined herein shall have the meanings ascribed to
them in the Credit Agreement.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT. Borrower and Lender agree that the
Credit Agreement is amended as follows:
2.1 Section 5.5(d) of the Credit Agreement is deleted and replaced
with the following:
"(d) Debt Service Coverage Ratio. Allow the ratio of (i) EBITDA of
Borrower minus unfinanced Capital Expenditures minus cash income taxes
paid that apply to the current year's Earnings minus Dividends and
Distributions, to (ii) Borrower's interest expense plus Current
Maturities of Long Term Debt, calculated retrospectively for the
period of the immediately preceding four fiscal quarters, to be less
than 1.20 to 1.00 on the last day of any fiscal quarter, provided that
for purposes of determining the Debt Service Coverage Ratio,
unfinanced Capital Expenditures shall not be deducted from the
numerator of the ratio, so long as any Loans or Letters of Credit
outstanding under this Agreement do not exceed $2,000,000 in the
aggregate."
2.2 Schedule I of the Credit Agreement is amended to delete the
definition of "Termination Date" and to replace it with the following:
"Termination Date" - the earlier of (a) April 30, 2004, and (b) the
date the Lender's Commitment to make Loans is terminated pursuant to
Section 7.2 of Article 7."
SECTION 3. ACKNOWLEDGMENT OF OBLIGATIONS AND COLLATERAL.
3.1 Borrower hereby acknowledges and agrees that it is unconditionally
liable to Lender for the prompt and punctual performance of all
Obligations under the Credit Agreement and other
<PAGE> 2
Loan Documents, and that Borrower has no defenses, counterclaims or
offsets with respect to the full payment and performance of all
Obligations.
3.2 Borrower hereby acknowledge and agree that Lender has and shall
continue to have valid and enforceable and duly perfected security
interests in and to all Collateral to secure the Obligations.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that each of the warranties and
representations contained in the Credit Agreement and each other Loan Document
is accurate and complete as of the date hereof.
SECTION 5. CONTINUING EFFECT OF CREDIT AGREEMENT.
Except as expressly set forth herein, or in any other documents to be
executed and delivered in connection herewith, the Loan Documents shall remain
in full force and effect in accordance with their terms.
SECTION 6. MISCELLANEOUS.
This Amendment, together with the Loan Documents, contains the entire
agreement of the parties with respect to the subject matter and supersedes all
prior negotiations, offers and discussions relating thereto. This Amendment may
be amended, modified, waived, discharges or terminated only by a writing signed
by the party to be charged with such amendment, modification, discharge or
termination. This Amendment shall be governed by Massachusetts law. This
Amendment may be executed by one or more of the parties in separate
counterparts, and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
Executed under seal as of date set forth above.
BTU INTERNATIONAL, INC.
By: T. Kealy
--------
Name: T. Kealy
Title Vice President
USTRUST
By: John E. Bukala
--------------
Name: John E. Bukala
Title Vice President
<PAGE> 1
Exhibit 10.47
Amendment No. 1 to
1988 Employee Stock Purchase Plan
This amendment, dated as of June 15, 1989, amends the BTU International,
Inc. 1988 Employee Stock Purchase Plan (the "Plan"). Terms defined in the Plan
and not otherwise defined herein are used herein as so defined.
WITNESSETH
WHEREAS, the Board of Directors of BTU International, Inc. (the
"Company") has authorized the Plan;
WHEREAS, the Board of Directors of the Company has reserved shares of
the Company's Common Stock to be issued in accordance with the Plan; and
WHEREAS, pursuant to Section 17 of the Plan, the Board of Directors now
desires to amend certain provisions of the Plan in order to clarify the intent
of the Board of Directors in approving the Plan;
NOW, THEREFORE, the Plan is hereby amended by striking the paragraph in
Section 12 of the Plan and by inserting in its place the words "INTENTIONALLY
OMITTED".
IN WITNESS WHEREOF, the Board of Directors has caused this Amendment
No. 1 to the Plan to be filed with the Plan and has caused the Plan to be
amended hereby.
<PAGE> 1
Exhibit 10.48
BTU INTERNATIONAL, INC.
1988 Employee Stock Purchase Plan
Amendment
By unanimous resolution of the Board of Directors of BTU International,
Inc. (the "Company") dated February 20, 1991, which resolution was approved by
the shareholders of the Company on May 10, 1991, the number of shares of the
Company's Common Stock, $.01 par value per share, authorized for issuance under
the 1988 Employee Stock Purchase Plan (the "Plan") was increased by 200,000,
raising the total from 100,000 to 300,000 shares.
As amended, Paragraph 2 of the Plan reads in its entirety as follows:
"2. OPTIONS TO PURCHASE STOCK
Under the Plan, there is available an aggregate of not more
than 300,000 shares of Stock (subject to adjustment as provided in
Section 15) for sale pursuant to the exercise of options ("options")
granted under the Plan to employees (within the meaning of Section
3401(c) of the Internal Revenue Code of 1986 (the "Code")) of the
Company ("employees") who meet the eligibility requirements set forth
in Section 3 hereof ("eligible employees"). The Stock to be delivered
upon exercise of options under the Plan may be either shares of BTU
authorized but unissued Stock or shares of reacquired Stock, as the
Board shall determine."
<PAGE> 1
Exhibit 10.49
AMENDMENT NO. 2
BTU INTERNATIONAL, INC.
1993 EQUITY INCENTIVE PLAN
1. REFERENCE TO THE PLAN.
Reference is hereby made to the BTU International, Inc. (the "Company")
1993 Equity Incentive Plan as amended by Amendment No. 1 to the BTU
International, Inc. 1993 Equity Incentive Plan (as amended, the "Plan"). Terms
defined in the Plan and not otherwise defined herein are used herein with the
meanings so defined.
2. AMENDMENT TO THE PLAN.
Subject to the approval of the stockholders of the Company, Section 4
of the Plan is hereby amended by deleting the first sentence thereof and
replacing it with the following sentence:
"Subject to the adjustment as provided in Section 8.6 below,
the aggregate number of shares of Stock that may be delivered under the
Plan will be 1,041,183."
<PAGE> 1
Exhibit 11.0
BTU INTERNATIONAL, INC.
CALCULATION OF NET INCOME PER COMMON SHARE
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income $ 2,838 $ 1,533 $ 1,250
Net income applicable to
common stockholders $ 2,838 $ 1,533 $ 1,250
========== ========== ==========
Weighted average number of shares outstanding
Basic Shares 6,798,735 7,068,432 7,290,548
Effect of Dilutive Options 168,952 49,136 45,154
---------- ---------- ----------
Diluted Shares 6,967,687 7,117,568 7,335,702
========== ========== ==========
Earnings Per Share
Basic $ 0.42 $ 0.22 $ 0.17
---------- ---------- ----------
Diluted $ 0.41 $ 0.22 $ 0.17
---------- ---------- ----------
</TABLE>
<PAGE> 1
Exhibit 21.0
SUBSIDIARIES OF THE REGISTRANT
------------------------------
BTU Overseas, Limited (Fed. I.D. #04-2757966)
BTU Engineering FSC, Inc. (Fed. I.D. #04-2736403)
BTU Europe LTD
BTU GmbH
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 4, 2000 included in and incorporated by reference in this
Form 10-K, into the Company's previously filed Registration Statements on Form
S-8 File No. 33-28344, File No. 33-29113, File No. 33-41757, File No. 33-59045,
File No. 33-59081 and File No. 333-94713. It should be noted that we have not
audited any financial statements of the Company subsequent to December 31, 1999
or performed any audit procedures subsequent to the date of our report.
/s/ ARTHUR ANDERSEN LLP
---------------------------------
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BTU
INTERNATIONAL, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-K
1999.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 12,431
<SECURITIES> 0
<RECEIVABLES> 14,723
<ALLOWANCES> 160
<INVENTORY> 9,617
<CURRENT-ASSETS> 37,289
<PP&E> 14,882
<DEPRECIATION> 9,341
<TOTAL-ASSETS> 43,149
<CURRENT-LIABILITIES> 10,596
<BONDS> 4,953
0
0
<COMMON> 78
<OTHER-SE> 25,725
<TOTAL-LIABILITY-AND-EQUITY> 43,149
<SALES> 70,476
<TOTAL-REVENUES> 70,476
<CGS> 42,478
<TOTAL-COSTS> 42,478
<OTHER-EXPENSES> 4,786
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 432
<INCOME-PRETAX> 3,773
<INCOME-TAX> 935
<INCOME-CONTINUING> 2,838
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,838
<EPS-BASIC> 0.42
<EPS-DILUTED> 0.41
</TABLE>
