<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
(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, 1998
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 0-19507
SUBMICRON SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3607944
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6330 HEDGEWOOD DRIVE
ALLENTOWN, PENNSYLVANIA 18106
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 391-9200
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.0001
(Title of Class)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Based on the closing sale price of March 25, 1999, the aggregate market value of
the voting stock held by nonaffiliates of the Registrant was $5,928,794.
The number of shares outstanding of the Registrant's Common Stock was 19,888,207
at March 25, 1999.
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Part III of the Annual Report on Form 10-K for the year ended December 31, 1998
of SubMicron Systems Corporation (the "Company") is hereby amended and restated
in its entirety as follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is certain information regarding the Company's
directors and executive officers:
POSITIONS WITH
NAME AGE THE COMPANY
- ---- --- -----------
David J. Ferran 42 President,
Chief Executive Officer
and Director(3)
Robert P. Tetu 47 Vice President and
Chief Operating Officer
John W. Kizer 57 Vice President and
Chief Financial Officer
James S. Molinaro 36 Vice President, Marketing
and European Sales
Richard E. Novak 53 Vice President,
Advanced Technology &
Chief Technical Officer
Mark R. Benham 48 Director(3)(4)(5)
Ronald B. Booth 50 Director(2)(4)
Bonaparte H. Liu 29 Director(2)
Kevin Lynch 37 Director(3)
James Newton 51 Director(2)(4)
Robert J. Wickey 45 Director(1)(4)(5)
- -------------
(1) Term expires at 2001 annual meeting.
(2) Term expires at 2000 annual meeting.
(3) Term expires at 1999 annual meeting.
(4) Member of the Compensation Committee of the Board of Directors.
(5) Member of the Audit Committee of the Board of Directors.
Mr. Ferran became President, Chief Executive Officer and a director of
the Company in May 1997. Prior thereto, Mr. Ferran served as President and Chief
Executive Officer of Tylan General Corporation and its predecessor from 1984,
and as Chairman of its Board of Directors from February 1994 until February
1997, when Tylan General was acquired by Millipore Corp. Mr. Ferran has a B.S.
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in Business Administration from the University of New Hampshire.
Mr. Tetu has been Chief Operating Officer since February 1999. From
July 1998 to January 1999, he served as Vice President of Operations of the
Company. From August 1997 to June 1998, he served as Vice President of
Engineering of the Company. From 1996 to July 1997, he served as Vice President
of Product Operations of Rodel, Inc., a supplier of consumables to the
semiconductor industry, located in Newark, Delaware. Prior to that, he served as
a Business Unit Manager for Avery Dennison, an office supply manufacturer
located in Cincinnati, Ohio. Mr. Tetu has a B.S. in Chemical Engineering from
the University of New Hampshire.
Mr. Kizer has been Vice President, Finance and Chief Financial Officer
of the Company since July 1997, and served as a consultant to the Company from
May 1997 until assuming such position. From June 1996 to May 1997, he was a Vice
President and Corporate Controller of Tylan General. Prior to joining Tylan
General, Mr. Kizer served as Vice President, Finance and Chief Financial Officer
for Robertshaw Controls Company and also held financial management positions at
Trustcorp Bank Ohio and Champion Spark Plug Company. He has over 25 years of
experience in senior financial management positions. Mr. Kizer holds a B.B.A.
degree from the University of Toledo and is a Certified Public Accountant.
Mr. Molinaro, an original founder of the Company, is currently Vice
President, Marketing and European Sales. Mr. Molinaro was Vice President, Chief
Operating Officer and Secretary of the Company from January 1989 until December
1995. As part of a reorganization of the Company's corporate structure, in
December 1995 Mr. Molinaro became the President of the principal operating
subsidiary of the Company, in lieu of his positions with the Company. Mr.
Molinaro served as a director of such subsidiary from 1989 until 1997. Mr.
Molinaro has a B.S. degree in Mechanical Engineering from Pennsylvania State
University.
Dr. Novak has been a Vice President with the Company since 1991. He
currently serves as Vice President, Advanced Technology & Chief Technical
Officer. Dr. Novak earned his Ph.D. in Ceramic Engineering from the University
of Illinois. Previous work experience includes Honeywell, RCA, FSI
International, and he was instrumental in basic research concerning the use of
Gallium-Arsenide in the manufacturing of integrated circuits.
Mr. Benham has been a director of the Company since 1998. Since 1995,
Mr. Benham has been a partner at Celerity Partnerships, private equity fund
companies. Prior to co-founding Celerity Partnerships in 1995, he was a
principal in a predecessor company, IPA Fund. From 1988-1992 he was a Senior
Investment Officer of Citicorp Venture Capital, Ltd. in New York. Prior to
joining Citicorp, Mr. Benham was an advisor to Yamaichi UniVen Co., Ltd., the
venture capital subsidiary of Yamaichi Securities International. Mr. Benham
holds a B.A. degree in English from the University of California, Berkley, and
an M.A. and M.B.A. from the University of Chicago, both with honors. Mr. Benham
is a director of Dynamic Circuits, Inc. and Unarco Commercial Products.
Mr. Booth has been a director of the Company since 1997. Mr. Booth has
been President of Pacific Air Aviation, Inc., an air charter company in Las
Vegas, Nevada, since October 1993. From October 1992 to September 1993, Mr.
Booth was Chief Financial Officer of Arcadian Motor Carrier, Inc., a nationwide
trucking operation, and from September 1984 to October 1992, he was Vice
President of Finance for WestAir Commuter Airlines. Mr. Booth is a Certified
Public Accountant and has a B.S. degree in Business Administration/Accounting
from California State University, Chico.
Mr. Liu has been a director of the Company since January 1999. Mr. Liu
is a principal at Equinox Partners, LLC, a private capital management firm.
Prior to joining Equinox in June 1997, Mr. Liu spent two years in investment
banking at Lehman Brothers. Mr. Liu received a B.A. from the
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University of California, Berkley and a M.P.P. from Harvard University.
Mr. Lynch has been a director of the Company since January 1999. Mr.
Lynch is Chief Financial Officer of Equinox. Prior to such position, Mr. Lynch
was Vice President, Controller of Kleinwort Benson Holdings, Inc. from 1990 to
1996. Mr. Lynch has a B.S. from Fordham University.
Mr. Newton has been a director of the Company since May 1998 and served
as Director of Corporate Culture and Communication of the Company from June 1997
until May 1998. Mr. Newton founded Newton Learning Corporation and has served as
its President since its inception in 1992. Mr. Newton is also Vice President of
Organizational Development for Dura Pharmaceutical.
Mr. Wickey has been a director of the Company since January 1999. Mr.
Wickey is a Managing Director of Equinox. Prior to forming Equinox in 1992, Mr.
Wickey worked in private capital management for six years with Kleinwort Benson
Limited. Mr. Wickey has a B.A. from Saint Anselm College and a M.B.A. from
Cornell University. Mr. Wickey is a director of GDC International, The Tensar
Corporation and Elizabeth Webbing Mills Co.
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ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table shows information about the compensation of the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers at the end of 1998 (collectively, the
"Named Executives").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------- ------------
OTHER ANNUAL AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL SALARY ($) BONUS ($) COMPENSATION ($) COMPENSATION ($)
YEAR (1) (2)
OPTIONS (#)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David J. Ferran 1998 276,169 -- -- --
Chairman of the Board, 1997 210,256(3) 44,943 303,235(4) 1,000,000(5) --
President and Chief
Executive Officer
John W. Kizer 1998 136,731 -- 58,511(7) 25,000(5) --
Chief Financial Officer 1997 81,827(6) -- 60,484(8) 100,000(5) --
and Vice President
Robert P. Tetu 1998 141,164 -- -- 50,000 --
Chief Operating Officer
and Vice President
James S. Molinaro 1998 313,982 -- -- -- --
Vice President, Marketing 1997 340,000 -- -- -- --
and European Sales 1996 340,000 34,000 -- 25,000(5) --
Richard E. Novak 1998 228,387 -- 40,015(9) -- --
Vice President, Advanced 1997 121,576 -- 124,741(10) 125,000(5) --
Technology & Chief 1996 120,001 -- 272,598(10) -- --
Technical Officer
</TABLE>
- --------------------------
(1) Beginning February 1, 1998, each of the Named Executives voluntarily
took a reduction in the base salary called for in his respective
employment agreement. The reductions ranged from 5% to 20% on an
annualized basis.
(2) Except as noted below, none of the Named Executives received any other
annual compensation not categorized as salary or bonus except for
perquisites and other personal benefits which in the aggregate did not
exceed the lesser of $50,000 or 10% of the total annual salary and
bonus reported for such Named Executive.
(3) Mr. Ferran joined the Company in May 1997, and, pursuant to his
employment agreement, was being compensated at an annualized base
salary of $333,333 at the end of 1997.
(4) Consists of relocation expenses reimbursement.
(5) On May 19, 1998, the Company repriced outstanding options held by
employees as of such date to $1.6875 per share, the closing price of
the Company's Common Stock on that day. With the exception of options
to purchase 25,000 shares to Mr. Kizer, all options with this footnote
represent options which were granted prior to 1998.
(6) Mr. Kizer began consulting with the Company in May 1997 and was
appointed Chief Financial Officer of the Company in July 1997.
(7) Includes $55,149 for relocation expenses reimbursement.
(8) Consists of fees paid for consulting services.
(9) Includes $37,015 as reimbursement for unused vacation time.
(10) Consists of royalty payments paid to Mr. Novak pursuant to the terms of
his then existing employment agreement.
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STOCK OPTION GRANTS
The following table contains information concerning grants of stock
options under the Stock Option Plan to each of the Named Executives during 1998.
The Company does not have any plan pursuant to which stock appreciation rights
("SARs") may be granted.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term ($)(1)
----------------- ------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted(#)(2)(3) 1998(3) ($/Sh)(4) Date 5% 10%
- ---- ---------------- ------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
David J. Ferran 1,000,000 25.2 1.6875 5/6/07 930,366 2,291,537
John W. Kizer 25,000 0.61 2.1562 1/20/08 26,531 67,236
125,000(5) 3.03 1.6875 (6) 119,568 296,390
Robert P. Tetu 50,000 1.21 1.6875 8/13/07 46,518 114,577
50,000 1.21 1.1875 6/29/08 53,063 134,472
James S. Molinaro 70,000 1.69 1.6875 (7) 51,056 120,289
Richard E. Novak 125,000 3.03 1.6875 (8) 111,732 273,494
</TABLE>
- --------------------
(1) Illustrates the value that might be realized upon exercise of options
immediately prior to the expiration of their term, assuming specified
compounded rates of appreciation on the Common Stock over the term of
the options. Assumed rates of appreciation are not necessarily
indicative of future stock performance.
(2) All options granted vest in four equal annual installments beginning on
the first anniversary of their date of grant.
(3) On May 19, 1998, all outstanding options held by then current employees
were repriced, as described below. For purposes of this table, such
repriced options are considered newly granted as of such date.
(4) All options were granted at an exercise price equal to the fair market
value of the Common Stock on the date of the grant. On May 19, 1998,
all outstanding options held by then current employees of the Company
as of such date were repriced to $1.6875 per share, the closing price
of the Company's Common Stock on that day. For purposes of this table,
such repriced options are considered newly granted as of such date.
(5) Includes the 25,000 options granted above.
(6) Options for 100,000 shares expire 7/28/07; the remaining 25,000 options
expire 1/20/08.
(7) The options expire as follows: 25,000 expire 3/9/05; 10,000 expire
6/16/05; 10,000 expire 10/5/05; and 25,000 expire 1/31/06.
(8) Options for 18,750 shares expire 1/20/05; the remaining 106,250 options
expire 9/8/07.
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STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information regarding the stock
options exercised by each of the Named Executives during 1998 and the value of
options held by each of the Named Executives at December 31, 1998.
AGGREGATED OPTION EXERCISES IN 1998
AND OPTION VALUES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1998 (#) AT DECEMBER 31, 1998 ($)(1)
--------------------- ---------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David J. Ferran -- -- 250,000 750,000 -- --
John W. Kizer -- -- 25,000 100,000 -- --
Robert P. Tetu -- -- 12,500 87,500 -- --
James S. Molinaro -- -- 70,000 0 -- --
Robert E. Novak -- -- 39,063 85,937 -- --
</TABLE>
(1) None of the Named Executives had outstanding options as of December 31,
1998 with an exercise price below $0.33, the last sale price of the
Common Stock on December 31, 1998.
EMPLOYMENT CONTRACTS
David J. Ferran entered into an employment agreement with the Company
which provides for him to earn a base salary of $333,333, which base salary may
be increased or decreased from time to time, but not to less than $333,333. The
employment agreement has no specific termination; provided, however, in the
event the Company terminates Mr. Ferran's employment without "cause" or if he
should terminate his employment because of "good reason" (each as defined in the
agreement), Mr. Ferran shall be entitled to receive a lump sum payment equal to
the greater of (a) the amount, if any, by which $1,000,000 exceeds the total
amount paid to Mr. Ferran in base salary under such agreement and (b) the sum of
his salary for 18 months at the rate in effect immediately prior to such
termination and an amount equal to the bonus actually paid to Mr. Ferran for the
preceding fiscal year. If such termination follows a "change in control" (as
defined in the agreement), Mr. Ferran shall be entitled to the amount set forth
above plus certain additional amounts. As reflected in the Summary Compensation
Table, beginning February 1, 1998 and ending January 1999, Mr. Ferran
voluntarily took a 20% reduction in his salary.
John W. Kizer, Robert P. Tetu and Robert E. Novak entered into
employment agreements with the Company which provides for them to earn base
salaries of $150,000, $145,000 and $250,000, respectively. The employment
agreements have no specific term; provided, however, in
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the event the Company terminates the relevant Named Executive's employment
without "cause" or if such Named Executives are terminated because of "good
reason" (each as defined in the agreements), such Named Executive will be
entitled to receive a lump sum payment equal to his salary for 12 months at the
rate paid immediately prior to such termination plus an amount equal to the
greater of (a) the total bonus compensation paid to him for the preceding fiscal
year and (b) 25% of his base salary immediately prior to such termination. If
such termination follows a "change in control" (as defined in the agreements),
the Named Executives will be entitled to the amount set forth above plus certain
additional amounts. As reflected in the Summary Compensation Table, beginning
February 1, 1998 and ending January 1999, Messrs. Kizer and Novak voluntarily
took a 10% reduction in their respective salaries and Mr. Tetu voluntarily took
a 5% reduction in his salary.
James S. Molinaro entered into an employment agreement with the Company
which initially provided for a base salary of $265,200, which base salary may be
increased or decreased from time to time in the sole discretion of the Company's
Board. In no event, however, may such base salary be less than $240,000 per
annum. For fiscal 1998, the annual base salary of Mr. Molinaro was fixed at
$340,000. The employment agreement has an initial five-year term expiring in
August 1998 that is automatically renewable at the end of such term for an
additional year and each year thereafter unless either party to the agreement
gives notice of nonrenewal. In the event the Company should terminate the
employment of Mr. Molinaro without cause or if Mr. Molinaro should terminate his
employment because of a material breach by the Company of his employment
agreement, Mr. Molinaro will be entitled to receive a severance benefit equal to
his then annual base salary for a period of three years. However, if such
termination follows a merger or sale of all or substantially all of the
Company's assets, Mr. Molinaro will be entitled to receive a severance benefit
equal to his then annual base salary for a period of five years. As reflected in
the Summary Compensation Table, beginning February 1, 1998 and ending January
1999, Mr. Molinaro voluntarily took a 10% reduction in his salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Benham and Wickey are members of the Compensation Committee of
the Board of Directors. Mr. Benham is a managing member of Celerity Silicon,
L.L.C. and Mr. Wickey is a managing member of the general partner of KB
Mezzanine Fund II, L.P. During 1998, the Company incurred interest and other
charges, excluding original issue discounts, in the aggregate amount of
approximately $2.8 million payable to the KB Mezzanine Fund II, L.P. and
Celerity Silicon, L.L.C.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership as of April 1, 1999 of each person who was known to the
Company to be the beneficial owner of more than 5% of the Common Stock. Each of
the stockholders named below has sole voting and investment power with respect
to such shares, unless otherwise indicated.
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner Number of Shares(1) Percent of Class
- ---------------- ------------------- ----------------
<S> <C> <C>
David F. Levy 2,011,125(2) 9.9
4750 Oakes Road
Suite M
Ft. Lauderdale, FL 33314
James S. Molinaro 1,729,500(3) 8.7
6330 Hedgewood Drive, #150
Allentown, PA 18106
The KB Mezzanine Fund II, 23,350,220(4) 54.0
L.P.
405 Lexington Avenue, 21st
Floor
New York, NY 10174
Celerity Silicon, L.L.C. 5,837,555(4) 22.7
11111 Santa Monica Blvd.,
Suite 1127
Los Angeles, CA 90025
</TABLE>
(1) With respect to each stockholder, includes any shares issuable upon
exercise of any options or warrants held by such stockholder that are
or will become exercisable within sixty days of April 1, 1999.
(2) Includes options to purchase 396,125 shares of Common Stock.
(3) Includes options to purchase 70,000 shares of Common Stock.
(4) This information is based on filings with the Securities and Exchange
Commission by The KB Mezzanine Fund II, L.P. and Celerity Silicon,
L.L.C. on Schedule 13D/A and Form 4. Based on such filings, the
beneficial ownership consists of warrants to purchase 21,595,837 and
5,398,959 shares of Common Stock held by KB Mezzanine and Celerity
respectively and convertible notes convertible into 1,754,383 and
438,596 shares of Common Stock held by KB Mezzanine and Celerity
respectively.
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<PAGE> 10
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of April 1, 1999 of (i) each director of
the Company, (ii) each of the Named Executives and (iii) all the directors and
executive officers as a group. Each of the stockholders named below has sole
voting and investment power with respect to such shares, unless otherwise
indicated.
<TABLE>
<CAPTION>
Name of
Beneficial Owner Number of Shares(1) Percent of Class
- ---------------- ------------------- ----------------
<S> <C> <C>
David J. Ferran 560,000(2) 2.7
Mark R. Benham 5,837,555(3) 22.7
Ronald B. Booth 42,600(4) *
Bonaparte H. Liu 0 --
Kevin Lynch 0 --
Robert J. Wickey 23,350,220(5) 54.0
James Newton 15,000 *
Robert P. Tetu 12,500 *
John W. Kizer 25,000(6) *
James S. Molinaro 1,729,500(7) 8.7
Richard E. Novak 71,697(8) *
All executive officers and 31,644,072(9) 63.6
directors as a group (11
persons)
</TABLE>
- -----------------
* Less than 1 percent.
(1) With respect to each stockholder, includes any shares issuable upon
exercise of any options or warrants beneficially held by such
stockholder that are or will become exercisable within sixty days of
April 1, 1999.
(2) Includes options to purchase 500,000 shares of Common Stock.
(3) Mr. Benham is a managing member of Celerity Silicon, L.L.C., and,
accordingly, may be deemed to beneficially own the shares referred to
in the previous table as being beneficially owned by Celerity. See Note
(4) to the previous table. Mr. Benham disclaims beneficial ownership of
all such shares, except to the extent of his indirect pecuniary
interest therein.
(4) Includes options to purchase 28,400 shares of Common Stock and 7.1
shares of Class A Preferred Stock convertible into 14,200 shares of
Common Stock.
(5) Mr. Wickey is a managing member of the general partner of The KB
Mezzanine Fund II, L.P. and, accordingly, may be deemed to beneficially
own the shares referred to in the previous table as being beneficially
owned by KB Mezzanine. See Note (4) to the previous table. Mr. Wickey
disclaims beneficial ownership of all such shares, except to the extent
of his indirect pecuniary interest therein.
(6) Consists of options to purchase shares of Common Stock.
(7) Includes options to purchase 70,000 shares of Common Stock.
(8) Includes options to purchase 45,313 shares of Common Stock.
(9) Includes options to purchase 668,713 shares of Common Stock; warrants
for the purchase of 26,994,796 shares of Common Stock; and convertible
notes convertible into 2,192,979 shares of Common Stock.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See "Compensation Committee Interlocks and Insider Participation."
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed
on its behalf by the undersigned thereunto duly authorized.
SUBMICRON SYSTEMS CORPORATION
Dated: April 29, 1999 By: /s/ David J. Ferran
------------------------------
David J. Ferran, President and
Chief Executive Officer
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