<PAGE>
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997
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 0-20229
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RF POWER PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
----------------
NEW JERSEY 22-2361086
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization Number)
1007 LAUREL OAK ROAD
VOORHEES, NEW JERSEY 08043
(Address of principal executive offices, zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 627-6100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<S> <C>
Title of each class Name of each exchange on which registered
COMMON STOCK, $.01 PAR VALUE PER SHARE AMERICAN STOCK EXCHANGE
</TABLE>
----------------
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]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on February 10, 1998 (based on the closing price on such date as
reported on the American Stock Exchange was $34,020,028.(/1/)
As of February 10, 1998, 12,147,661 shares of Common Stock, $.01 par value
per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III--Portions of the Registrant's definitive Proxy Statement with respect
to the Registrant's 1997 Annual Meeting of Shareholders, to be filed not later
than 120 days after the close of the Registrant's fiscal year.
----------------
(1) Calculated by excluding all shares that may be deemed to be beneficially
owned by executive officers, directors and five percent shareholders of
the Registrant, without conceding that all such persons are "affiliates"
of the Registrant for purposes of the Federal securities laws.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
RF Power Products, Inc. (the "Company") designs, manufactures and markets
radio frequency ("RF") power delivery systems, consisting of generators and
matching networks. The generator provides the radio frequency power and the
matching network provides the power flow control to the customer's equipment.
The Company's products are sold principally to semiconductor capital equipment
manufacturers. The Company's power delivery systems are a critical component
of the process chambers of semiconductor manufacturing equipment. RF Power
offers semiconductor capital equipment manufacturers power delivery systems
that cover a wide range of power and frequency levels and are adjustable to
the precise power and frequency levels required by the manufacturers. The
Company believes that the wide range and adjustability of its power delivery
systems, together with their high reliability, enables semiconductor capital
equipment manufacturers to increase throughput, improve yields and decrease
manufacturing expenses and cost of ownership. The Company's products are also
sold to capital equipment manufacturers in the flat panel display and thin
film disk media industries.
The Company's products are flexible and the Company offers specialized
design engineering to its customers in order to integrate the Company's
products into specific applications. The Company believes its products may
have applications in a number of other industries, including medical and
surgical instrumentation, food processing and preparation and materials
processing.
The Company's power delivery systems incorporate a microprocessor into the
power generator, enabling the Company and the customer to have the benefit of
performance and application enhancements. The benefits to the Company include
the ability to perform self diagnosis during final testing and during first
service procedures. The benefits to the customer include the ability to
program the generator through a wide range of performance specifications as
well as to communicate with the generator from a central controller via
communication ports. In addition, the cluster tool systems used in computer
integrated manufacturing production lines enable the customer to command,
control and communicate with the power source. The Company believes that this
ability is a valuable asset in production control. The microprocessor
controlled power delivery system enables the Company to customize the software
included in its generators to the specific needs of a customer.
The Company markets and sells its products in three principal markets: the
United States, Europe and Asia Pacific. The Company markets its products
through a direct sales force in the United States from its headquarters in
Voorhees, New Jersey and its regional offices in Santa Clara, California and
Austin, Texas. The European market is supported directly through the Company's
United Kingdom office. In the Asia Pacific market, the Company markets its
products through technical sales representatives in Korea and Taiwan and
through a distributor in Japan. The Company has an employee in Korea to
provide technical support to current and potential Korean customers.
The Company's strategy is to (i) maintain and enhance its position as a
technology leader in the application of power delivery systems in the
semiconductor capital equipment market, (ii) leverage its technology into new
applications and new markets, (iii) expand its product offerings by providing
complete power solutions to its customers, and (iv) increase the use of
modular components in its products and enhance and refine its manufacturing
processes.
RECENT DEVELOPMENTS
Contracts. In September 1997, the Company was awarded a two year contract
extension to supply the radio frequency power delivery systems, including
generators and associated matching networks, for a major semiconductor
equipment manufacturer. This contract is an extension of a contract originally
entered into in 1994. The contract includes both new products and products
currently supplied. The Company estimates that gross revenues from the
contract will be approximately $18 million over the next two years.
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Bank Loans. In December 1996, the Company entered into a $500,000 loan
agreement with the New Jersey Economic Development Authority to finance
certain purchases of equipment for its new facility, which it moved into in
December 1996. The loan is for a five-year term at an interest rate of 5% with
principal and interest paid monthly. The equipment purchased with the proceeds
of the loan secures the loan. All of the $500,000 had been drawn down by the
second quarter of fiscal 1997.
In February 1997, under the terms of its line of credit with a local
commercial bank, the Company exercised its option to convert to a term loan a
portion of the line of credit in the amount of $1,000,000, reducing the line
of credit by the same amount. The entire $1,000,000 loan had been drawn down
by the second quarter of fiscal 1997.
In January 1998 the Company revised the credit facility with its commercial
bank. The new credit facility is for a $6,000,000 revolving line of credit.
The Company has the option to convert to a term loan up to $1,000,000 of the
line of credit for the purchase of capital equipment, which if exercised
reduces the line of credit by the amount converted. The rate of interest for
both the term loan and revolving line of credit are based on current LIBOR
rates plus a variable percentage based on the Company's quarterly cash flow
performance. Under the terms of the credit facility, the Company is required
to maintain certain minimum financial ratios as defined in the credit facility
agreement and is prohibited from paying dividends.
PRODUCTS
Solid-State and Tube-Type Generators
The Company manufactures a line of solid-state, computer-controlled radio
frequency generators and a line of high-power tube-type generators. Solid-
state generators are presently available for power requirements of up to 5,000
watts and are sold primarily to capital equipment manufacturers in the
semiconductor equipment, flat panel, thin film and analytical equipment
markets. The solid-state generators are designed to be compact in size and
reliable in performance. For the fiscal year ended November 30, 1997, ("fiscal
1997") and the fiscal year ended November 30, 1996 ("fiscal 1996"), shipments
of solid-state generators accounted for 68% and 71% of sales, respectively.
Tube-type generators are available at power levels from 10,000 to 25,000 watts
and are primarily sold to capital equipment manufacturers ("Capital Equipment
Manufacturers") in the film disc media market. For fiscal 1997 and fiscal
1996, shipments of tube-type generators accounted for 7% and 4% of net sales,
respectively.
Matching Networks
The Company also manufactures matching networks, which are systems composed
primarily of variable inductors and capacitors with application-specific
circuits that can be designed to a customer's specific power requirements.
Matching networks are designed to optimize the power flow from a generator to
a process chamber by changing (i.e. tuning) the inductor and capacitor values.
The Company manufactures general purpose matching networks and matching
networks that are designed for a customer's specific model of equipment. For
fiscal 1997 and fiscal 1996, matching networks accounted for 21% and 22%,
respectively, of the Company's net sales.
MARKET OVERVIEW
The Company's products are sold for use in equipment used to manufacture
semiconductor products and flat-panel displays for use in equipment used in
the film and media markets and for use in analytical instruments. The
Company's net sales during fiscal 1997 in the semiconductor equipment, flat-
panel displays, film disc media and analytical instruments markets were
approximately 62%, 25%, 9% and 4%, respectively.
A primary focus of the Company's current marketing efforts is the
semiconductor equipment market. Capital Equipment Manufacturers in the
semiconductor equipment market typically purchase solid-state generators
because the power requirements for the equipment they manufacture are
typically 5,000 watts or less. These semiconductor products are the building
blocks for computers, including personal computers, workstations and
mainframes, automotive electronics, telecommunications and consumer
electronics. The Company's power
3
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systems are used in semiconductor equipment to provide the precise excitation
required to achieve the plasma processes of deposition and etching of thin
films. The dielectric and metal thin film layers are key technologies in the
manufacture of advanced integrated circuits, which are the building blocks for
microprocessors, memories and logic elements.
Flat-panel display, such as active matrix liquid crystal displays, field
emission displays and plasma displays, are making strong inroads into the
traditional cathode ray tube (CRT) market, particularly in the computer
display area, and are expected to expand their penetration in the laptop,
desktop, and workstation, automotive, avionics and consumer electronics
markets. The Company is a Capital Equipment Manufacturer supplier to many key
flat-panel equipment manufacturers.
Management of the Company estimates the flat-panel display market to be
approximately the same size as the semiconductor market. However, since most
of the growth potential in this market is expected to come from equipment
manufacturers in the Far East, the Company's growth potential is dependent on
its relationship with its distributor and sales representatives in Asia. See
"Business--Marketing, Sales and Service."
In the film disc media market, the Company is currently a niche supplier of
high-power tube-type generators of at least 10,000 watts. Typical applications
of the Company's products by manufacturers in the film disc media market
include magnetic disc, disc drive and head manufacturing. Management of the
Company believes that the manufacturers in the film disc media market are
moving towards radio frequency technology, even though the majority of
manufacturers in the film disc media market currently use direct current
technology. Management of the Company believes that since the Company is one
of the few manufacturers of high-power products that offers service and
support in all of its sales areas, the Company is in a position to take
advantage of the anticipated growing demand for higher throughput equipment.
The Company also sells to the analytical instruments market that uses solid-
state technology for inductively coupled plasma sources in instruments that
are used for elemental analysis of materials. Typical applications of
inductively coupled plasma type analytical instruments include mass
spectroscopy of soils, solids and liquid chemicals as used in the chemical,
pharmaceutical, electronics, toxic waste and agricultural industries.
Management of the Company believes there is significant opportunity for the
Company to expand into new markets; however, there can be no assurance that
the Company will be able to enter any new markets successfully.
RESEARCH AND PRODUCT DEVELOPMENT
The market for radio frequency power systems has been characterized by
moderate technological change and rapid product innovation. In many instances,
the high-end tube-type products utilize technology that is over twenty years
old. Accordingly, the Company is engaged in a research and product development
program directed toward improving existing products and developing new
products and a more moderate technological research and development program
directed toward updating its technology in the high-end radio frequency power
supply industry. The Company's current production includes new lines of low
frequency and high frequency generators and matching networks.
The Company maintains an engineering and technical staff of 44 people, a
majority of whose time is spent in research and development. The Company has
increased product development activity and is supplementing existing
engineering experience with outside professionals. The Company uses technical
consultants to assist with product development and has expanded such use in
developing strategic relations with some universities, research centers and
customers with specialized engineering capabilities.
Research and product development costs are expensed as incurred. During
fiscal 1997, fiscal 1996 and fiscal 1995, the Company spent approximately
$4,585,000, $3,528,000 and $2,343,000, respectively, for research and product
development.
There can be no assurance that the Company's research and product
development efforts will be successful or that such efforts will not be
rendered obsolete by the research efforts and technological advances made by
others.
4
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MARKETING, SALES AND SERVICE
The Company markets and sells its products in three principal markets: the
United States, Europe and Asian Pacific.
In the United States and Europe, the Company sells and services its products
directly through its own sales personnel. In addition, in December of 1995 the
Company established a Korean office to provide technical support in the Korean
market. Elsewhere, the Company uses distributors or sales representatives.
In the United States and United Kingdom offices, the Company's direct sales
force works with the Company's existing Capital Equipment Manufacturer
customers to integrate the Company's products with the customers' product
development. The direct sales force also works with end users that are either
retrofitting existing equipment or developing specifications for equipment
orders. In addition, the Company offers technical assistance to its Capital
Equipment Manufacturer customers during the customers' product development
phase in order to encourage the use of the Company's products.
In fiscal 1993, the Company entered into an exclusive distributorship
agreement with Astech Corporation, a Japanese distributor ("Astech") and
related party to the Company, to distribute the Company's products in Japan.
The agreement commenced in August 1993 and terminates in August 1998. Astech
manufactures a line of radio frequency products that is complementary to the
Company's product line. As a result, Astech can provide not only sales and
service support but also technical input on product design and development.
The Company and Astech are combining forces to secure new accounts by offering
to the customer a total power system, i.e., a low frequency generator
(provided by the Company) and a matching network (provided by Astech). This
combined cooperative effort has resulted in establishing new relationships
with key customers in Japan.
During fiscal 1997, approximately 86% of the Company's sales were in the
domestic market, 6% in Europe, 7% through its distributor and sales
representatives in the Asian Pacific region and 1% in other foreign markets.
The Company has one distributor in Japan (described above) and sales
representatives in six countries. Net sales in Europe for fiscal 1997 were
approximately $2,189,000. Net sales in the Asian Pacific market for fiscal
1997 were approximately $2,265,000 (of which $1,677,000 were in the Japanese
market).
During fiscal 1997, sales to Applied Materials, Inc., Lam Research and
Alcatel Comptech and the distribution agreement with Astech accounted for 23%,
15%, 10% and 5% of the Company's net revenues, respectively.
The following table sets forth the approximate percentages and amounts of
net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------
1997 1996 1995
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<S> <C> <C> <C>
Area Net Sales
Domestic....................................... 86% 85% 82%
Europe......................................... 6% 8% 11%
Asia Pacific................................... 7% 6% 6%
Other Foreign.................................. 1% 1% 1%
------- ------- -------
Total........................................ 100% 100% 100%
======= ======= =======
Area Net Sales ($000's)
Domestic....................................... $29,045 $26,383 $21,642
Europe......................................... 2,189 2,437 2,777
Asia Pacific................................... 2,265 1,790 1,727
Other Foreign.................................. 335 469 221
------- ------- -------
Total........................................ $33,834 $31,079 $26,367
======= ======= =======
</TABLE>
5
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BACKLOG
The Company had backlog believed to be firm as of February 10, 1998 and
February 11, 1997 of approximately $8,500,000 and approximately $6,800,000,
respectively. All of the backlog as of February 10, 1998 is expected to be
filled by the end of the fiscal year ending November 30, 1998.
COMPETITION
The Company's products are sold in highly competitive markets. The Company
competes in these markets by emphasizing product quality, state-of-the-art
technology in its third generation of power supply products, support and
service and competitive pricing. The Company believes that it offers a greater
range of power levels and a wider range of frequencies for its radio frequency
generators and a more complete package of radio frequency peripheral equipment
than any other competitor in its field. However, there can be no assurance
that levels of competition in the Company's particular product markets will
not intensify or that the Company's technological advantages will not be
reduced or lost as a result of technological advances by competitors or
changes in radio frequency generator technology. Many of the Company's
competitors may have greater financial and other resources than the Company.
The Company's primary competition consists of (i) major suppliers of power
systems that service several market segments, (ii) suppliers that service
niche markets and (iii) captive manufacturers that manufacture their own power
supplies. The Company's primary competition comes from Advanced Energy
Industries, Inc. and ENI, Inc. Management of the Company believes that the
modular manufacturing process it employs permits production efficiencies
through incremental volume additions to the production line. Management of the
Company believes its modular assembly of products, which uses common
components in the Company's products, provides it with a current market
advantage over its competition.
MANUFACTURING AND ASSEMBLY
The Company currently purchases from suppliers the majority of the
components used in the assembly process. In an effort to maximize its
efficiency and product quality, the Company continues its efforts to outsource
substantially all subassemblies so that the Company will be able to
concentrate on final assembly and testing. In addition, the Company adopted a
series of internationally accepted technical standards known as ISO 9001,
which were established by the International Organization for Standardization
to determine whether manufacturing plants, regardless of national origin,
implement sound, basic-quality procedures. The guidelines were designed to be
shared by many industrialized nations. The Company has also installed a
comprehensive and integrated MRP II based manufacturing system.
The Company has multiple commercial sources for the components and supplies
it acquires from outside sources. The Company carries a significant amount of
supplies and inventory because of the production time required for certain
products, the lead time needed to acquire certain components parts to meet the
delivery requirements of its customers and the Company's desire to provide
quality service on its systems in the field.
For all of its solid-state generator products, the Company employs a modular
assembly process that uses common components to enable the Company to provide
flexibility in design and efficiency in production. Specifically, there are
typically five building blocks for each solid-state generator: an exciter, a
power amplifier; a control system (microcontroller); an interconnecter; and a
filter/combiner. The first three items are common modules that are used in all
of the Company's solid-state generators. For example, because the basic design
for both air- and water-cooled power generators are similar, the components
are used the same way in both types of generators. The common module approach
to product assembly provides flexibility in manufacturing, which reduces the
assembly time for each product. This approach to product assembly also
provides the Company with a more efficient inventory system by reducing the
number and types of components the Company must purchase and stock.
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PATENTS
The Company currently holds one patent which is for an electronic matching
network. The Company believes that its success is generally less dependent
upon patent protection than on the scientific and engineering skills that are
applied to its products.
EMPLOYEES
As of February 10, 1998, the Company had 173 employees, of whom 19 were in
administration, 44 in engineering, 15 in sales and marketing, 14 in field
service and 81 in manufacturing.
The Company is not subject to any collective bargaining agreements and
believes that its relations with its employees are good.
GOVERNMENT REGULATIONS
The Federal Communications Commission ("FCC") regulates companies that
manufacture radio frequency products in order to prevent interference with
authorized radio communication services. The regulations are industry
standards and require manufacturers of radio frequency products to construct
their products in accordance with good engineering practice with sufficient
shielding and filtering to provide adequate suppression of emissions on
frequencies outside the approved radio frequency bands. Management believes
the Company's products are designed and manufactured to comply with the FCC
regulations.
ITEM 2. PROPERTIES
The Company's principal executive, administrative and manufacturing
operations are located in an approximately 78,000 square foot facility in
Voorhees, New Jersey. The facility is leased by the Company for a ten year
term ending in December 2006. The lease provides for current monthly payment
of $51,750. The Company's future obligations over the term of the lease total
approximately $5,589,000. In addition to the annual rentals, the Company pays
taxes, insurance and maintenance relating to the leased property.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
Executive Officers of the Registrant
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Joseph Stach..................... 59 President, Chief Executive Officer and
Chairman of the Board
Christopher Ben.................. 37 Treasurer and Chief Financial Officer
Kevin Wilson..................... 42 Secretary and Chief Operating Officer.
</TABLE>
Joseph Stach has been President, Chief Executive Officer and Chairman of the
Board of the Company since April 1992. Dr. Stach joined the Company as
President in July 1991. From April 1991 to July 1991, Dr. Stach was Executive
Vice President of Plasma-Therm and from March 1988 until he joined Plasma-
Therm, Dr. Stach was the director of the Center for Microelectronics Research
at the University of South Florida.
Christopher Ben was appointed Treasurer and Chief Financial Officer in
January 1998. From March 1994 until January 1998 Mr. Ben was Chief Operating
Officer of the Company. From December 1992 until January 1998 Mr. Ben was
Secretary of the Company. From September 1987 to February 1994 Mr. Ben was
General Manager of the Company
Kevin Wilson was appointed Secretary and Chief Operating Officer in January
1998. From August 1996 until January 1998 Mr. Wilson was Vice President of
Engineering. From 1992 until August 1996, Mr. Wilson was President and CEO of
Innovative Systems and Technologies Corp.
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PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock was listed on the American Stock Exchange
Emerging Company Marketplace ("AMEX/ECM") on April 29, 1994. On June 29, 1995
the Company's stock moved to the primary list on the American Stock Exchange
(AMEX) where it is traded under the symbol RFP. As of February 10, 1998 there
were 579 record holders of the shares of Common Stock. There have been no
dividends declared during the past three fiscal years with respect to the
Company's Common Stock and the Company anticipates that for the foreseeable
future, any net earnings will be retained by the Company as working capital
and no dividends will be paid. In addition, the Company's term loan with a
commercial bank prohibits the payment of cash dividends.
The following table sets forth the high and low sales prices (as reported by
the AMEX) for the Company's Common Stock for fiscal years 1997 and 1996:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1997
First Quarter.......................................... 3 2 5/16
Second Quarter......................................... 4 3/16 2 11/16
Third Quarter.......................................... 6 3
Fourth Quarter......................................... 6 3
1996
First Quarter.......................................... 6 1/4 4 3/4
Second Quarter......................................... 8 4
Third Quarter.......................................... 7 3
Fourth Quarter......................................... 3 3/4 2 1/4
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of selected financial data of the Company for
each of the five years ended on the dates set forth below, which should be
read in conjunction with the financial statements of the Company and the notes
thereto.
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
---------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales............................. $33,834 $31,079 $26,367 $16,302 $10,930
Income (loss) before extraordinary
credit and cumulative effect of
change in accounting for income
taxes.............................. 1,695 1,227 1,517 1,095 245
Extraordinary credit-Tax benefit of
operating loss carryforwards......... -- -- -- -- 58
------- ------- ------- ------- -------
Income (loss) before cumulative effect
of change in accounting for income
taxes................................ 1,695 1,227 1,517 1,095 303
Cumulative effect of change in
accounting for income taxes.......... -- -- 275 --
------- ------- ------- ------- -------
Net income (loss)..................... $ 1,695 $ 1,227 $ 1,517 $ 1,370 $ 303
======= ======= ======= ======= =======
Per share data:
Income (loss) before extraordinary
Credit and cumulative effect of
Change in accounting for income
Taxes................................ $ .14 $ .10 $ .12 $ .10 $ .03
Extraordinary credit.................. -- -- -- -- .01
Cumulative effect of change in
Accounting for income taxes.......... -- -- -- .03 --
------- ------- ------- ------- -------
Net income (loss)..................... $ .14 $ .10 $ .12 $ .13 $ .04
<CAPTION>
NOVEMBER 30,
---------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total assets.......................... $17,821 $12,048 $12,915 $ 6,683 $ 4,254
Long-term debt, less current portion.. 1,499 904 310 621 722
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company designs, manufactures and markets radio frequency power delivery
systems. A power delivery system consists of a generator, which provides radio
frequency power, and, in many cases, a matching network, which controls the
flow of power into the customer's equipment. The Company's products are sold
principally to semiconductor capital equipment manufacturers, which use them
as a critical component of the process chambers of the semiconductor
manufacturing equipment. The Company's products are also sold to capital
equipment manufacturers in the flat panel display and thin film disk media
industries.
The semiconductor equipment industry accounted for approximately 62% and 66%
of the Company's sales in 1997 and 1996, respectively. Over the past few years
the semiconductor industry has experienced strong growth which has benefited
the Company. The future growth of the Company will depend in substantial part
on continued growth of the semiconductor equipment industry.
Over fiscal years 1995 and 1994, the Company had experienced significant
sales growth. This growth outpaced increases in operating expenses, resulting
in significant increases in gross margins during this period. In the second
half of fiscal year 1996 through the first half of fiscal 1997, sales in the
semiconductor capital equipment market decreased significantly. This affected
the Company's results, especially in operating expenses, which resulted in
unabsorbed labor and overhead costs which are expensed as incurred. The
Company's net sales and gross profit were also adversely impacted. The Company
took steps to reduce fixed costs and to bring variable expenses into line with
the then current pace of operations. During the second half of fiscal 1997,
sales increased in both the semiconductor and thin film disk media markets,
resulting in improved operating results. However, the Asian financial market
crisis did produce some slowdown in sales late in the fourth quarter of fiscal
1997 and will adversely affect fiscal 1998 results.
The Company feels it is important to continue investing in the development
of new products for the next generation of semiconductor and flat panel
display manufacturing equipment, as well as for new applications of radio
frequency technology in medical devices, food and material processing. This is
reflected in the research and development expenses incurred in both fiscal
year 1997 and 1996.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items in
the Company's consolidated statements of operations as a percentage of net
sales.
PERCENTAGE OF SALES
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
-------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Net Sales............................................ 100.0% 100.0% 100.0%
Cost of products sold................................ 60.5 64.3 59.5
----- ----- -----
Gross profit......................................... 39.5 35.7 40.5
Research and development............................. 13.5 11.4 8.9
Selling and administrative........................... 18.3 17.5 17.8
Compensation from stock purchase agreements.......... -- -- 3.0
----- ----- -----
Income from operations............................... 7.7 6.8 10.8
Interest, net........................................ .3 .3 .2
-----
Income before income taxes........................... 7.4 6.5 10.6
Income tax expense................................... 2.4 2.6 4.9
----- ----- -----
NET INCOME........................................... 5.0% 3.9% 5.7%
===== ===== =====
</TABLE>
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Net Sales
Net sales were $33.8 million, $31.1 million and $26.4 million for the years
ended November 30, 1997, 1996 and 1995, respectively, which represents an
increase of 9% from 1996 to 1997 and an increase of 18% from 1995 to 1996. The
increase is the result of continued growth in the unit volume of sales to
capital equipment manufacturers in the semiconductor, thin film disc media and
flat panel display industries. Net sales to these industries increased 11% for
1997 and 20% for 1996. Sales by the Company to Applied Materials, Inc., Lam
Research and Alcatel Comptech accounted for 23%, 15% and 10% of net revenues
for 1997 and 21%, 14% and 7% of net revenues for 1996, respectively.
Gross Profit
The Company's gross profit expressed as a percentage of sales was 40%, 36%
and 40% for the years ended November 30, 1997, 1996 and 1995, respectively.
The increase in gross profit in 1997 results from increased sales to both the
semiconductor and thin film disc media markets. The decrease in gross profit
in 1996 is the result of the decline in sales to the semiconductor market
which resulted in under absorbed labor and overhead costs and the additional
inventory obsolescence reserves.
Research and Development
The Company's research and development expenses are associated with
developing new products and improving existing product designs. Research and
development expenses were $4.6 million, $3.5 million and $2.3 million for the
years ended November 30, 1997, 1996, and 1995, respectively, which represents
an increase of 30% from 1996 to 1997 and 51% from 1995 to 1996. Research and
development expenses increased primarily due to the purchase of a three
dimensional mechanical design automation software package, PC board software
and related computer hardware, and additional engineering staff to support the
Company's development program. The Company's ability to increase its research
and development efforts is dependent upon its ability to continue to attract
or train radio frequency engineers. The Company cannot be assured of finding
experienced radio frequency engineers because of their scarcity and the
competitiveness of the market for these individuals.
Selling and Administrative
Selling and administrative expenses were $6.2 million, $5.4 million and $4.7
million for the fiscal years 1997, 1996 and 1995, respectively. This
represents 18% of sales for the years ended November 30, 1997, 1996 and 1995.
This represents a 14% increase from 1996 to 1997 and a 15% increase from 1995
to 1996.
Selling and administrative expenses increased $.8 million in 1997 and as a
percent of sales was comparable to 1996. The increase is the result of
increased personnel in administration, sales and service, sales increases,
increase in commissions resulting from increased sales levels, costs
associated with a vendor's failed component and bonuses to company personnel.
Expenses rose $.7 million in 1996 and as a percent of sales was comparable to
1995. The increase was the result of costs related to the opening of a Korean
office and for its staff, a reserve for rent and other expenses for the
Company's old facility, write-off of expenses related to a terminated
secondary offering of the Company's stock and professional fees related to a
medical joint venture.
Compensation from Stock Purchase Agreements
Compensation from stock purchase agreements of $784,000 in fiscal 1995
resulted from settlement agreements entered into by the Company, its former
legal counsel and three of its executives to correct unintended tax
consequences of these executives' stock purchase agreements. The settlement
and compensation charge had no effect on cash, working capital or equity over
what would have occurred had the unintended tax consequences not resulted.
Income Taxes
In 1997, the effective tax rate was 32% compared with 39% in 1996. The rate
decreased over the past year due primarily to increased research and
development tax credits reducing both the federal and state tax liabilities.
The 1996 tax rate increased over the prior year due primarily to an increase
in state taxes. Excluding the $784,000 adjustment, representing a permanent
difference, the effective rate for 1995 was 36%.
10
<PAGE>
Liquidity and Capital Resources
The Company's cash requirements are currently being funded through
operations coupled with the proceeds of stock options and bank financing. In
1995 funds were provided primarily from operations of $1,776,000 and $571,000
of debt. Approximately $1,074,000 of funds were used for the purchase of
machinery and equipment and computer equipment and an additional $155,000 was
expended for a technology purchase. Excess funds were used to repay $697,000
of debt. In 1996 funds were provided primarily from operations of $369,000 and
$2,386,000 of debt. Approximately $1,384,000 was used for the purchase of
machinery and equipment, computer equipment and transportation vehicles.
Additional funds were used to repay $1,671,000 of debt. Funding in 1997 of
$787,000 was provided from operations and $2,065,000 from debt. Approximately
$2,315,000 of funds were used for the purchase of leasehold improvements and
machinery and equipment for the new corporate headquarters and computer
hardware and software for the engineering department. Additional funds were
used to pay $556,000 in debt.
In May 1996, the Company established a new banking relationship with a local
commercial bank and terminated its relationship with its prior bank. The
Company repaid its prior bank's term loan and the outstanding balance on its
line of credit from a new credit facility provided by the Company's new bank.
The new credit facility was for a $1,400,000 term loan and a $4,000,000
revolving line of credit. This increased the Company's lines of credit from
$1,500,000 to $4,000,000. On January 17, 1997 the Company signed an amendment
to the credit facility that revised a financial covenant in order to satisfy
the Company's compliance with such covenant at November 30, 1996.
The Company had the option to convert to a term loan a portion of the line
of credit and reduce the line of credit by the amount termed out. In February
1997, the Company exercised this option for a $1,000,000 term loan.
In January of 1998 the Company revised the credit facility with its
commercial bank. The new credit facility is for a $6,000,000 revolving line of
credit. The Company has the option to convert to a term loan up to $1,000,000
of the line of credit for the purchase of capital equipment, which if
exercised reduces the line of credit.
In December 1996, the Company entered into a $500,000 loan agreement with
the New Jersey Economic Development Authority to finance certain purchases of
equipment for its new facility. The loan, all of which was drawn down by the
second quarter of fiscal 1997, is for a five year term at an interest rate of
5% with principal and interest paid monthly. The loan is secured by the
equipment purchased with the proceeds of the loan.
The increase in the Company's trade receivables and inventories coupled with
the related increase in accounts payable and accrued expenses are the result
of the increased sales volume to the semiconductor and thin film disc media
capital equipment manufacturers.
The Company believes that funds generated from operations, in addition to
its current banking line of credit, should be sufficient to meet the Company's
capital requirements for the immediate future.
The Company requires substantial capital for research and development and
inventories. The Company's capital equipment requirements, although
significant this year related mainly to its new facility, are not expected by
management to continue to be substantial. Management of the Company believes
that the aforementioned funding, coupled with working capital generated by
operations and the Company's cost reduction program should be sufficient to
meet the Company's capital requirements for the immediate future.
Year 2000 Exposure
Many information systems have been designed to function based on years that
begin with 19. The Company believes that it has taken the necessary steps to
ensure that the Company's business operations and systems will not be
materially adversely affected by the year 2000 problem and that no material
expenditures will be required with respect to such problem.
11
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements are set forth in this report beginning at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company terminated the engagement of Grant Thornton, LLP ("Grant
Thornton") as independent accountant to audit and certify the Company's
financial statements, effective on the filing of its fiscal year ended
November 30, 1995 Form 10-K. The decision to terminate Grant Thornton was
approved by the Board of Directors.
The audit reports of Grant Thornton on the financial statements of the
Company for the fiscal years ended November 30, 1995 did not contain an
adverse opinion or a disclaimer of opinion, nor was it qualified or modified
as to uncertainty, audit scope, or accounting principles except for an
explanatory paragraph that referred to a change in accounting for income
taxes.
There were no disagreements with Grant Thornton during the fiscal year ended
November 30, 1995, or in any subsequent interim period through the filing of
this Form 10-K on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction of Grant Thornton, would have caused Grant Thornton to make
reference to such disagreement in connection with its opinion on the Company's
financial statements.
Effective upon the filing of 1995's Form 10-K, the Company engaged KPMG Peat
Marwick LLP to serve as independent accountant to audit the Company's
financial statements.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following
the end of the Company's fiscal year, and is hereby incorporated above
reference thereto.
ITEM 11. EXECUTIVE COMPENSATION
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following
the end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following
the end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days following
the end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
12
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
1.FINANCIAL STATEMENTS.
Independent Auditors' Report--KPMG Peat Marwick LLP
Independent Auditors' Report--Grant Thornton LLP
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
2.FINANCIAL STATEMENT SCHEDULE.
Schedule II--Valuation and Qualifying Accounts
3.EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.1* Agreement and Plan of Reorganization dated July 13, 1992 between
Registrant and Plasma-Therm, Inc. (Exhibit 2 filed July 14, 1992, to
the Registrants Form 8 amendment to the Registrant's Form 10
Registration Statement filed May 19, 1992 No. 0-020229 [the "1992
Registration Statement"]).
3.1* Amended and Restated Certificate of Incorporation of the Registrant,
as amended (Exhibit 3.1 to the Registrant's Annual Report on Form 10-
K for the fiscal year ended November 30, 1996 [the "1996 Form 10-
K"]).
3.2* Amended and Restated By-laws of the Registrant (Exhibit 3.2 to the
1996 Form 10-K).
4.1* 1992 Stock Option Plan, as amended, of the Registrant dated March 24,
1993 (Exhibit 4.1 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended November 30, 1993 [the "1993 Form 10-K"]).
4.2* 1993 Non-Employee Directors Stock Option Plan of the Registrant dated
March 24, 1993 (Exhibit 4.2 to the 1993 Form 10-K).
10.1* Employment Agreement dated December 1, 1993 between the Registrant and
Joseph Stach and amendment to Employment Agreement dated January 19,
1994 (Exhibit 10.1 to the 1993 Form 10-K).
10.2* Sublease Agreement dated November 1, 1992 between the Registrant and
Test Technology, Inc. for office, manufacturing and warehouse space
at 502 Gibbsboro-Marlton Road, Voorhees, New Jersey 08043 (Exhibit
10.2 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended November 30, 1992 [the "1992 Form 10-K"]).
10.3* License Agreement dated May 13, 1992 between the Registrant and
Plasma-Therm, Inc. (Exhibit 10E to the 1992 Registration Statement).
10.4* Distribution Agreement dated August 10, 1993 between the Registrant
and Astech Corporation (Exhibit 10.10 to the 1993 Form 10-K).
10.5* Stock Purchase and Subscription Agreement dated July 16, 1993 by and
between the Registrant and Mitsuyuki Umino (Exhibit 10.11 to the 1993
Form 10-K).
10.6* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Joseph Stach (Exhibit 10.12 to the 1993 Form 10-K).
10.7* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Christopher Ben (Exhibit 10.13 to the 1993 Form 10-K).
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.8* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Domenic Golato (Exhibit 10.14 to the 1993 Form 10-K).
10.9* Stock Purchase Agreement dated February 18, 1994 between the
Registrant and Arthur Zafiropoulo (Exhibit 10.15 to the 1993 Form 10-
K).
10.10* Stock Purchase Agreement dated February 18, 1994 between the
Registrant and Gerald M. Starek (Exhibit 10.16 to the 1993 Form 10-
K).
10.11* Master Purchase Order and Sales Agreement dated May 1994 between the
Registrant and Applied Materials, Inc. and Master Purchase Order and
Sales Agreement Revision I dated November 9, 1994 between the
Registrant and Applied Materials, Inc. (Exhibit 10.17 to the 1994
Form 10-K).
10.12* Purchase Agreement dated October 14, 1994 between the Registrant and
Plasma Therm Incorporated (Exhibit 10.18 to the 1994 Form 10-K).
10.13* Purchase Agreement dated October 28, 1994 between the Registrant and
Plasma Etch, Inc. (Exhibit 10.19 to the 1994 Form 10-K).
10.14* Technology Transfer, License and Sales Agreement between the
Registrant and Brounley Associates, Inc. (Exhibit 10.20 to the 1994
Form 10-K).
10.15* Purchase Agreement dated November 9, 1995 between the Registrant and
Plasma and Material Technology, Inc. (Exhibit 10.20 to the 1995 Form
10-K).
10.16* Purchase Agreement dated October 16, 1995 between the Registrant and
Plasma Therm, Incorporated. (Exhibit 10.25 to the 1995 Form 10-K).
10.17* Purchase Agreement dated June 5, 1995 between the Registrant and
Mattson Technology. (Exhibit 10.26 to the 1995 Form 10-K).
10.18* Lease Agreement dated March 18, 1996 and amendments dated June 21,
1996 and August 30, 1996 between the Registrant and Laurel Oak Road,
L.L.C. for office, manufacturing and warehouse space at 1007 Laurel
Oak Road, Voorhees, N.J. 08043 (Exhibit 10.18 to the 1996 Form 10-K).
10.19* Revolving Line of Credit Agreement ($4,000,000) dated May 24, 1996 and
amendment dated January 17, 1997 between the Registrant and Mellon
Bank, N.A. (Exhibit 10.19 to the 1996 Form 10-K).
10.20* Note and Security Agreement ($4,000,000) dated May 24, 1996 and
amendment dated January 17, 1997 between the Registrant and Mellon
Bank, N.A. (Exhibit 10.20 to the 1996 Form 10-K).
10.21* Note and Security Agreement ($1,400,000) dated May 24, 1996 and
amendment dated January 17, 1997 between the Registrant and Mellon
Bank, N.A. (Exhibit 10.21 to the 1996 Form 10-K).
10.22* Loan Agreement ($1,400,000) dated May 24, 1996 and amendment dated
January 17, 1997 between the Registrant and Mellon Bank, N.A.
(Exhibit 10.22 to the 1996 Form 10-K)
10.23* Direct Loan Agreement dated December 20, 1996 between the Registrant
and the New Jersey Economic Development Authority (Exhibit 10.23 to
the 1996 Form 10-K).
10.24* Promissory Note and Security Agreement dated February 11, 1994 and
amendment dated January 21, 1997 between the Registrant and Joseph
Stach (Exhibit 10.24 to the 1996 Form 10-K).
10.25* Promissory Note and Security Agreement dated February 11, 1994 and
amendment dated January 21, 1997 between the Registrant and
Christopher Ben (Exhibit 10.25 to the 1996 Form 10-K).
10.26* Promissory Note and Security Agreement dated February 11, 1994 and
amendment dated January 21, 1997 between the Registrant and Domenic
Golato (Exhibit 10.26 to the 1996 Form 10-K).
10.27 Second Amendment, dated February 27, 1997, to Revolving Line of Credit
Agreement dated May 24, 1996 between the Registrant and Mellon Bank,
N.A.
10.28 Third Amendment, dated May 28, 1997, to Revolving Line of Credit
Agreement dated May 24, 1996 between the Registrant and Mellon Bank,
N.A.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.29 Fourth Amendment, dated December 31, 1997, to Revolving Line of Credit
Agreement dated May 24, 1996 between the Registrant and Mellon Bank,
N.A.
10.30 Second Amendment, dated February 27, 1997, to Note and Security
Agreement ($4,000,000) dated May 24, 1996 between the Registrant and
Mellon Bank, N.A.
10.31 Third Amendment, dated May 28, 1997, to Note and Security Agreement
($4,000,000) dated May 24, 1996 between the Registrant and Mellon
Bank, N.A.
10.32 Fourth Amendment, dated December 31, 1997, to Note and Security
Agreement ($4,000,000) dated May 24, 1996 between the Registrant and
Mellon Bank, N.A.
10.33 Note and Security Agreement ($500,000) and supplement dated February
27, 1997 between the Registrant and Mellon Bank, N.A.
10.34 Amendment, dated May 28, 1997, to Note and Security Agreement dated
February 27, 1997 between the Registrant and Mellon Bank, N.A.
11* See Note 1 to the Financial Statements.
21* Subsidiaries of the Registrant (Exhibit 21 to the 1996 Form 10-K).
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Grant Thornton LLP.
27 Financial Data Schedule.
</TABLE>
- --------
*Incorporated by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
November 30, 1997.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, hereunto duly authorized.
RF Power Products, Inc.
s/ Joseph Stach
By: _________________________________
JOSEPH STACH,CHAIRMAN OF THE BOARD
AND PRESIDENT
Date: February 26, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Joseph Stach Chairman of the Board February 26,
- ------------------------------------- and President (Chief 1998
JOSEPH STACH Executive Officer )
/s/ Arthur Zafiropoulo Director February 26,
- ------------------------------------- 1998
ARTHUR ZAFIROPOULO
/s/ Gerald Starek Director February 26,
- ------------------------------------- 1998
GERALD STAREK
/s/ Raymond Farnham Director February 26,
- ------------------------------------- 1998
RAYMOND FARNHAM
/s/ Christopher Ben Treasurer and CFO February 26,
- ------------------------------------- (Principal Accounting 1998
CHRISTOPHER BEN Officer and CFO)
16
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements:
Independent Auditors' Report--KPMG Peat Marwick LLP. .............. F-1
Report of Independent Certified Public Accountants--Grant Thornton
LLP. ............................................................. F-2
Consolidated Balance Sheets as of November 30, 1997 and 1996....... F-3
Consolidated Statements of Income for the Years ended November 30,
1997, 1996, and 1995.............................................. F-4
Consolidated Statements of Shareholders' Equity for the Years ended
November 30, 1997, 1996, and 1995................................. F-5
Consolidated Statements of Cash Flows for the Years ended November
30, 1997, 1996, and 1995.......................................... F-6
Notes to Consolidated Financial Statements......................... F-7
Financial Statement Schedule:
Schedule II--Valuation and Qualifying Accounts..................... F-18
</TABLE>
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
RF Power Products, Inc.:
We have audited the accompanying consolidated balance sheets of RF Power
Products, Inc. and subsidiary as of November 30, 1997 and 1996, and the
related consolidated statements of income, shareholders' equity, and cash
flows for the years then ended. In connection with our audit of these
consolidated financial statements, we also have audited the consolidated
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the 1997 and 1996 consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
RF Power Products, Inc. and subsidiary as of November 30, 1997 and 1996, and
the results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
January 16, 1998
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholders and Board of Directors
RF Power Products, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of RF Power
Products, Inc. and Subsidiary as of November 30, 1995, and the related
consolidated statements of earnings, shareholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of RF Power
Products, Inc. and Subsidiary as of November 30, 1995, and the consolidated
results of their operations and their consolidated cash flows for the year
then ended in conformity with generally accepted accounting principles.
As described in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1994.
Grant Thornton LLP
Philadelphia, Pennsylvania
January 10, 1996
F-2
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 570,453 546,984
Accounts receivable, net of allowance of $159,000--
1997; $140,000--1996............................... 7,669,713 4,815,182
Inventories......................................... 5,417,012 3,474,689
Prepaid expenses and other.......................... 89,337 370,461
Deferred income taxes............................... 483,847 410,395
----------- ----------
14,230,362 9,617,711
----------- ----------
Property and equipment................................ 3,520,411 2,221,312
Other assets.......................................... 70,256 208,501
----------- ----------
$17,821,029 12,047,524
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable........................................ $ 999,721 434,663
Current portion of long-term debt................... 700,000 350,000
Accounts payable.................................... 3,066,048 1,163,698
Accrued expenses.................................... 1,083,048 512,323
Accrued payroll..................................... 295,223 250,921
----------- ----------
6,144,040 2,711,605
----------- ----------
Long-term debt, less current portion.................. 1,498,610 904,167
----------- ----------
Commitments (note 11)
Shareholders' equity:
Common stock; $.01 par value; authorized--19,000,000
shares: issued and outstanding: 1997--12,147,661
shares; 1996--12,123,140 shares.................... 121,477 121,231
Additional paid-in capital.......................... 6,414,029 6,372,235
Retained earnings................................... 3,710,062 2,015,286
Less: Notes receivable from shareholders............ (67,189) (77,000)
----------- ----------
10,178,379 8,431,752
----------- ----------
$17,821,029 12,047,524
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Net sales................................... $33,834,179 31,079,249 26,366,607
Cost of products sold....................... 20,454,706 19,999,113 15,689,472
----------- ---------- ----------
Gross profit................................ 13,379,473 11,080,136 10,677,135
Research and development.................... 4,584,931 3,527,673 2,343,009
Selling and administrative.................. 6,180,071 5,436,591 4,689,791
Compensation from stock purchase agree-
ments...................................... -- -- 784,000
----------- ---------- ----------
Income from operations...................... 2,614,471 2,115,872 2,860,335
Interest expense, net....................... 122,128 88,904 59,634
----------- ---------- ----------
Income before income taxes.................. 2,492,343 2,026,968 2,800,701
Income tax expense.......................... 797,567 800,000 1,283,673
----------- ---------- ----------
Net income.................................. $ 1,694,776 1,226,968 1,517,028
=========== ========== ==========
Net income per share........................ $ .14 .10 .12
=========== ========== ==========
Weighted average number of shares used in
computing net income per share............. 12,324,049 12,336,322 12,253,460
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK RETAINED NOTES
------------------- ADDITIONAL EARNINGS RECEIVABLE
SHARES PAID-IN (ACCUMULATED FROM
ISSUED AMOUNT CAPITAL DEFICIT) SHAREHOLDERS
---------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at November 30,
1994................... 11,001,314 $110,013 4,341,428 (728,710) (231,000)
Issuance of stock on
exercise of options and
warrants............... 1,048,929 10,489 90,143 -- --
Tax benefit related to
shares acquired by
employees under stock
compensation plans..... -- -- 1,783,700 -- --
Net income.............. -- -- -- 1,517,028 --
Repayment of notes
receivable............. -- -- -- -- 77,000
---------- -------- --------- --------- --------
Balance at November 30,
1995................... 12,050,243 120,502 6,215,271 788,318 (154,000)
Issuance of stock on
exercise of options and
warrants............... 72,897 729 8,981 -- --
Tax benefit related to
shares acquired by
employees under stock
compensation plans..... -- -- 147,983 -- --
Net income.............. -- -- -- 1,226,968 --
Repayment of notes
receivable............. -- -- -- -- 77,000
---------- -------- --------- --------- --------
Balance at November 30,
1996................... 12,123,140 121,231 6,372,235 2,015,286 (77,000)
Issuance of stock on
exercise of options.... 24,521 246 13,129 -- --
Tax benefit related to
shares acquired by
employees under stock
compensation plans..... -- -- 28,665 -- --
Net income.............. -- -- -- 1,694,776 --
Repayment of notes
receivable............. -- -- -- -- 9,811
---------- -------- --------- --------- --------
Balance at November 30,
1997................... 12,147,661 $121,477 6,414,029 3,710,062 (67,189)
========== ======== ========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income.............................. $ 1,694,776 1,226,968 1,517,028
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization......... 1,127,918 694,725 548,663
Compensation from stock purchase
agreements........................... -- -- 784,000
Deferred income taxes................. (73,452) 298,815 (586,830)
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable......................... (2,854,531) 316,197 (2,309,596)
Decrease (increase) in inventories.. (1,942,323) 965,686 (2,021,528)
Decrease (increase) in prepaid
expenses and other................. 281,124 (247,168) (22,676)
(Decrease) increase in accounts
payable and accrued liabilities.... 2,588,574 (2,966,582) 3,956,295
Decrease (increase) in other........ (35,335) 79,975 (89,328)
----------- ---------- ----------
Net cash provided by operating
activities............................... 786,751 368,616 1,776,028
----------- ---------- ----------
Cash flows from investing activities
Capital expenditures.................... (2,314,823) (1,383,534) (1,073,867)
Technology purchase..................... -- -- (155,000)
----------- ---------- ----------
Net cash used in investing activities..... (2,314,823) (1,383,534) (1,228,867)
----------- ---------- ----------
Cash flows from financing activities
Short-term (repayments) borrowings,
net.................................... 565,058 (65,337) 250,000
Proceeds from issuance of long-term
debt................................... 1,500,000 2,386,005 320,767
Payments of long-term debt.............. (555,557) (1,606,216) (697,053)
Proceeds from sale of common stock under
stock option plan, including related
tax benefit............................ 42,040 157,693 100,632
----------- ---------- ----------
Net cash provided by (used in) financing
activities............................... 1,551,541 872,145 (25,654)
----------- ---------- ----------
Net increase (decrease) in cash........... 23,469 (142,773) 521,507
Cash and cash equivalents at beginning of
year..................................... 546,984 689,757 168,250
----------- ---------- ----------
Cash and cash equivalents at end of year.. $ 570,453 546,984 689,757
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1997, 1996, AND 1995
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
RF Power Products, Inc. and Subsidiary (the Company) designs, manufactures
and markets radio frequency power delivery systems, consisting of generators,
matching networks and peripheral equipment primarily for original equipment
manufacturers in the semiconductor, analytical instrument and thin film disc
media markets. The Company's business depends substantially on the capital
expenditures of semiconductor manufacturers, which, in turn, depend upon the
current and anticipated market demand for semiconductors. Approximately 62%
and 66% of the Company's sales for the years ended November 30, 1997 and 1996,
respectively, were made to semiconductor capital equipment manufacturers.
Basis of Presentation
The consolidated financial statements include the accounts of RF Power, Inc.
and its wholly-owned subsidiary, RFPP Foreign Sales Corporation. During 1997
the Company formed RF Medical Technologies, LLC (RF Medical). The Company owns
50% of RF Medical and intends to account for it under the equity method of
accounting, although the venture has not been involved in any material
transactions to date. All intercompany balances and transactions have been
eliminated.
Use of Estimates
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 period. Actual results could differ from those estimates. Estimates
are used when accounting for allowance for uncollectible accounts receivable,
slow moving and obsolete inventory and product warranty.
Concentration of Credit Risk
The Company's revenues generally are concentrated among a small number of
customers, the majority of which are in the semiconductor industry. Accounts
receivable from companies operating in the semiconductor industry at November
30, 1997 and 1996 totaled approximately $4,042,000 or 53% and $2,348,000 or
49% of total accounts receivable, respectively.
Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash and
cash equivalents at November 30, 1997 and 1996 consist of cash and money
market funds.
Accounts Receivable and Bad Debts
The Company grants credit to customers and generally requires no collateral.
To minimize its risk, the Company performs ongoing credit evaluations of its
customers' financial condition. Bad debt expense charged to operations was
approximately $75,000, $52,400, and $16,600 in fiscal years 1997, 1996, and
1995, respectively.
Inventories
Inventories are stated at the lower of standard cost which approximates
actual cost (first-in, first-out method), or market. Cost includes material,
labor, and manufacturing overhead.
F-7
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997, 1996, AND 1995
Depreciation and Amortization
Depreciation and amortization of property and equipment is provided by
generally using the straight-line method over the useful lives of the related
assets or, for leasehold improvements, the lesser of the useful life or the
related lease term. The estimated useful lives used in computing depreciation
of machinery and equipment, and transportation equipment is 3-5 years. In
fiscal 1996 the Company wrote off approximately $61,000 in leasehold
improvements in connection with its move to a new facility.
Intangibles and Research and Development
Certain technology rights which have been acquired by purchase are
capitalized at cost and amortized on a straight-line basis over 5 years.
Amortization expense related to such technology rights was $173,579, $59,508,
and $165,746 for the years ended November 30, 1997, 1996, and 1995,
respectively. Research and development costs are expensed as incurred.
Warranty Policy
The Company estimates the anticipated costs of repairing products under
warranty based on the historical average cost of the repairs and provides for
this cost on the accrual basis. The Company offers warranty coverage for its
systems for one to two years.
Revenue Recognition
The Company recognizes revenue when product is shipped, except for certain
customers where terms are FOB-destination, in which case revenue is recognized
upon delivery.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes
which it adopted, effective December 1, 1993. Under the liability method
specified by SFAS No. 109, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of
assets and liabilities as measured by the enacted tax rates which will be in
effect when these differences reverse. Deferred tax expense (benefit) is the
result of changes in deferred tax assets and liabilities.
Per Share Data
Per share data is computed based upon the weighted average number of shares
of common stock, adjusted for the potential conversion of dilutive common
stock equivalents. The fully dilutive earnings per share data is not shown
since the dilution is not material.
Financial Instruments
The Company's financial instruments, principally accounts receivable,
accounts payable and debt, are carried at cost which approximates fair value.
Reclassification
Certain reclassifications have been made to conform to the current year's
presentation.
F-8
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997, 1996, AND 1995
New Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") issued a new standard,
Statement of Financial Accounting Standards No. 125, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities ("FAS
125"), which provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. As required
the Company adopted this new standard for its fiscal year ended November 30,
1996. The adoption of this new statement did not have a material impact on the
Company's financial position or results of operations.
The FASB issued two new standards, Statement of Financial Accounting
Standards No. 128, Earnings per Share, and Statement of Financial Accounting
Standards No. 129, Disclosure of Information about Capital Structure, which
the Company will adopt for its fiscal year ended November 30, 1998. The
adoption of these new statements will not have a material impact on the
Company's financial position or results of operations.
The FASB also issued three new standards, Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income; Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information; and Statement of Financial Accounting Standards No. 132,
Employers' Disclosures about Pensions and Other Postretirement Benefits, which
as permitted, the Company will adopt for its fiscal year ended November 30,
1999. The adoption of these new statements will not have any impact on the
Company's financial position or results of operations.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Raw materials, net of reserve of $300,512--1997;
$305,081--1996...................................... $2,604,724 $1,668,762
Work-in-process...................................... 1,051,065 265,232
Finished goods, net of reserve of $262,821--1997;
$247,143--1996...................................... 1,761,223 1,540,695
---------- ----------
$5,417,012 $3,474,689
========== ==========
</TABLE>
Inventory reserves have been provided for obsolete and excess parts relating
to previous generations of equipment, inventory assessed as slow-moving and
evaluation units. The charge to operations amounted to approximately $216,500,
$606,000, and $21,500 in fiscal years 1997, 1996, and 1995, respectively.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Property and equipment, at cost:
Machinery and equipment................................ $5,252,611 $3,524,535
Transportation equipment............................... 54,641 54,641
Leasehold improvements................................. 863,525 437,201
---------- ----------
6,170,777 4,016,377
Less: accumulated depreciation and amortization........ 2,650,366 1,795,065
---------- ----------
$3,520,411 $2,221,312
========== ==========
</TABLE>
F-9
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997, 1996, AND 1995
The Financial Accounting Standards Board (FASB) issued a new standard, SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which provides guidance on when to recognize and how
to measure impairment losses of long-lived assets and certain identifiable
intangibles and how to value long-lived assets to be disposed of. As required,
the Company adopted this new standard for its fiscal year ended November 30,
1997. The adoption of this new statement did not have a material impact on the
Company's financial position or results of operations.
(4) RELATED PARTY TRANSACTIONS
In August 1993 the Company entered into a five-year exclusive
distributorship agreement with Astech to distribute the Company's products in
Japan. The President and Chief Executive Officer of Astech was a member of the
Company's Board of Directors prior to his resignation in December of 1996.
Sales to Astech represented approximately 5%, 5%, and 6% of net sales by the
Company in fiscal years 1997, 1996, and 1995, respectively.
Included in accounts payable and accounts receivable of the Company at
November 30, 1997 and 1996, respectively are net amounts due to and due from
related parties (Astech) of $145,526 and $37,495, respectively. Included in
accounts payable of the Company at November 30, 1995 are net amounts due to
related parties of $550,407. Transactions with affiliates consist of the
following:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Sales to related parties (Astech).......... $1,621,464 $1,614,943 $3,506,634
Purchases from related parties (Astech).... 970,574 1,316,888 2,779,986
</TABLE>
In December 1993 the Company entered into an employment agreement (the
"Employment Agreement") with Dr. Stach, Chief Executive Officer and President
of the Company, which was amended in February 1994 and October 1994. The
Employment Agreement is for a five-year term ending November 1998, and
provides for an annual base salary and a bonus based on the Company's after-
tax net income, with both the annual salary and the bonus to be as determined
annually by the Company's Compensation Committee. The Employment Agreement
provides that Dr. Stach may be terminated at any time, with or without cause.
If Dr. Stach is terminated for cause, the Company must pay Dr. Stach's salary
and benefits for one year. If Dr. Stach is terminated without cause, the
Company must pay Dr. Stach's compensation and benefits for the balance of the
term of the Employment Agreement.
See note 9 for affiliated transactions with respect to a loan agreement.
(5) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------
1997 1996
---------- --------
<S> <C> <C>
Rent and other expenses for idle facility (note 11)......... $ -- $217,385
Bonuses..................................................... 300,000 --
Income tax payable.......................................... 131,387 65,883
Warranty accrual............................................ 330,000 75,000
Other....................................................... 321,661 154,055
---------- --------
$1,083,048 $512,323
========== ========
</TABLE>
F-10
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997, 1996, AND 1995
(6) CREDIT ARRANGEMENTS
In May 1996 the Company signed a new credit facility (the Credit Facility)
with a commercial bank and terminated the credit agreement with its prior
bank. The Company repaid the term loan and the outstanding balance on its line
of credit with its prior bank with funds from the Credit Facility. The Credit
Facility is for a $1,400,000 four-year term loan (note 7) and a $4,000,000
revolving line of credit. The term loan contains an option to convert to a
fixed rate of interest. The Company has the option to term out a portion of
the revolving line of credit, which if exercised, reduces the revolving line
of credit by the amount termed out. In 1997 the Company exercised this option
and termed out $1,000,000 from the revolving line of credit. The rate of
interest for both the term loan and revolving line of credit is based on
current LIBOR rates plus a variable percentage based on the Company's
quarterly cash flow performance. Borrowings under the term loan and revolving
line of credit are secured by substantially all of the Company's assets and
borrowings under the revolving line of credit are subject to a percentage of
eligible accounts receivable. Borrowings under the revolving line of credit
are $999,721 at an interest rate of 8.50% on November 30, 1997. At November
30, 1997 $2,000,279 of the revolving line of credit was available. Under the
terms of the Credit Facility, the Company is required to maintain certain
minimum financial ratios as defined in the Credit Facility agreement and is
prohibited from paying dividends.
In January of 1998 the Company revised the credit facility with its
commercial bank. The new credit facility is for a $6,000,000 revolving line of
credit. The Company has the option to term out up to $1,000,000 of the line of
credit for the purchase of capital equipment, which if exercised reduces the
line of credit.
(7) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Note payable to a financial institution with interest
at the LIBOR rate, plus 1.50% (7.2187% at November
30, 1997 and 6.875% at November 30, 1996). Principal
and interest are paid monthly for a four-year term
commencing June 1, 1996............................. $ 904,167 $1,254,167
Notes payable to a financial institution with
interest at the LIBOR rate, plus 1.50% (7.2187% at
November 30, 1997). Principal and interest are paid
monthly for a four-year term commencing February 27,
1997................................................ 875,000 --
Notes payable to the NJEDA with interest at a 5%
rate. Principal and interest are paid monthly for a
five-year term commencing January 1, 1997........... 419,443 --
---------- ----------
2,198,610 1,254,167
Less current portion................................. 700,000 350,000
---------- ----------
$1,498,610 $ 904,167
========== ==========
</TABLE>
Principal payments on long-term debt in 1998 through 2002 are $700,000,
$700,000, $554,167, $225,000 and $19,443, respectively.
In December 1996 the Company entered into a term loan agreement with the New
Jersey Economic Development Authority (NJEDA) for $500,000 with a five year
term. The interest rate for the loan is 5% and it is secured by the machinery
and equipment purchased with the loan proceeds.
F-11
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997, 1996, AND 1995
(8) OPTIONS
The Company has a stock option plan for its employees, consultants, and
advisors. This plan authorizes the granting of both incentive stock options
and nonqualified stock options to purchase up to 1,818,399 shares at November
30, 1997 (497,168 of which were approved by the Board of Directors in November
1997 and are subject to shareholders approval). No options may be granted
after July 10, 2002.
The exercise price of incentive stock options may not be less than 100% of
the fair market value of the Company's common stock. Nonqualified options may
be granted at less than the fair market value on the date of grant.
The Company also has a stock option plan for its nonemployee directors. This
plan authorizes the granting of nonqualified stock options to purchase up to
480,000 shares at November 30, 1997. No options may be granted after March 23,
2003.
The Company has reserved 2,298,399 shares of common stock for these plans.
Statement of Financial Accounting Standards No. 123,Accounting for Stock-
Based Compensation ("FAS 123") was adopted by the Company effective December
1, 1996. As permitted by FAS 123, the Company has elected to continue to
follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees ("APB 25") in accounting for its stock option plans. Under APB
25, the Company does not recognize compensation expense on the issuance of its
stock options because the option terms are fixed and the exercise price equals
the market price of the underlying stock on the grant date.
Had compensation cost for the Company's stock-based compensation plans been
determined consistent with FAS 123, the Company's net income and net income
per share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Net income:
As reported.......................................... $1,694,776 $1,226,968
Pro forma............................................ 1,602,621 1,186,825
Net income per share:
As reported.......................................... 0.14 0.10
Pro forma............................................ 0.13 0.10
</TABLE>
The fair value for stock options granted in 1997 and 1996 was estimated at
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions for 1997 and 1996: risk-free interest
rates of 5.83% and 5.71%; dividend yield of 0%; expected common stock market
price volatility factor of .76 and .69; and a weighted average expected life
of the stock options of 3 years. The weighted average value of options granted
in 1997 and 1996 was $2.52 and $1.39 per share, respectively. The options
generally vest 25% at the date of grant and 25% in each of the succeeding
three years.
These pro forma calculations only include the effects of 1997 and 1996
grants. As such, the impacts are not necessarily indicative of the effects on
reported net income and net income per share of future years.
F-12
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997, 1996, AND 1995
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
As the Company's employee stock options have characteristics significantly
different from those of traded options, and as changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The following table summarizes the transactions of all of the Company's
stock option plans for the three-year period ended November 30, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
--------- --------
<S> <C> <C>
Options outstanding, November 30, 1994................. 786,043 $0.11
Granted................................................ 125,000 2.63
Exercised.............................................. (548,929) 0.08
Cancelled.............................................. (3,400) 0.22
-------- -----
Options outstanding, November 30, 1995 (190,810
exercisable).......................................... 358,714 1.38
Granted................................................ 262,850 2.92
Exercised.............................................. (72,897) 0.12
Cancelled.............................................. (12,361) 0.87
-------- -----
Options outstanding, November 30, 1996 (141,376
exercisable).......................................... 536,306 2.36
Granted................................................ 135,900 4.73
Exercised.............................................. (24,521) 0.55
Cancelled.............................................. (53,225) 2.13
-------- -----
Options outstanding, November 30, 1997 (323,454
exercisable).......................................... 594,460 $3.00
======== =====
</TABLE>
The following table summarizes information about stock options outstanding
at November 30, 1997:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER WEIGHTED EXERCISE NUMBER EXERCISE
RANGE OF OUTSTANDING AT AVERAGE PRICE OF AT EXERCISABLE PRICE OF
EXERCISE NOVEMBER 30, MAXIMUM REMAINING OUTSTANDING NOVEMBER 30, EXERCISABLE
PRICES 1997 LIFE LIFE OPTIONS 1997 OPTIONS
- -------- -------------- ------------- --------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
$0.22................... 47,708 5 to 10 years 2.8 $0.22 47,708 $0.22
1.13.................... 20,000 5 years 1.4 1.13 20,000 1.13
2.25 to 2.88............ 381,250 7 to 10 years 7.7 2.80 218,020 2.78
3.63.................... 10,000 10 years 9.0 3.63 10,000 3.63
4.50 to 4.94............ 120,500 10 years 10.0 4.59 23,976 4.59
5.81.................... 15,000 10 years 9.7 5.81 3,750 5.81
</TABLE>
On November 11, 1996, in order to retain and provide incentive to key
members of the management group, the Board of Directors of the Company
approved a repricing of outstanding stock options to purchase 274,850 shares
that were in excess of the then market price per share of common stock (the
"repriced options"). The exercise price of the repriced options was revised to
$2.88 per share which represented the closing market price per share of common
stock on November 11, 1996.
F-13
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997, 1996, AND 1995
On November 17, 1997, the Board of Directors of the Company approved the
cancellation of outstanding stock options to purchase 95,900 shares which had
exercise prices in excess of the current market price of the Company's stock.
The Board then issued new options to the same people in the same amounts with
an exercise price equal to the closing market price per common share of $4.50
per share.
(9) STOCK PURCHASE AND SUBSCRIPTION AGREEMENT
On February 11, 1994, the Company entered into three Stock Purchase
Agreements (the Agreements) with three officers of the Company. Pursuant to
the terms of the Agreements, the officers purchased an aggregate of 1,400,000
shares of the Company's common stock at a purchase price of $.22 per share.
The purchase price was based on the fair market value as of February 10, 1994
as determined by a valuation performed by an independent party. One-fourth of
the aggregate purchase price under each Agreement was paid to the Company on
the date of execution and the balance of the purchase price is represented by
three Promissory Note and Security Agreements (the Notes). The principal
amount due under the Notes is payable in three installments due in February
1995, February 1996, and February 2000. The Notes accrue interest on the
unpaid principal amount at 6.5% per annum.
On May 30, 1995, the Company entered into settlement agreements with its
former legal counsel and three of its executives to correct unintended tax
consequences of the executives' stock purchase agreements. Under terms of the
settlement agreement, the Company agreed to accelerate the vesting of the
stock, which resulted in a tax benefit to the Company which will be
transferred indirectly to the individuals as part of the settlement agreement.
This transaction resulted in a one-time, noncash compensation charge to
earnings which is reflected as compensation from stock purchase agreements.
Further, as part of the settlement, the Company has also agreed to guarantee a
note payable by the executives of approximately $300,000. The settlement and
compensation charge had no effect on cash, working capital or equity over what
would have occurred had the unintended tax consequences not resulted.
(10) INCOME TAXES
Effective December 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method (note 1). The
components of income tax expense were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- ----------
<S> <C> <C> <C>
Current:
State................................... $318,844 $ 304,988 $ 44,728
Federal................................. 552,175 333,368 42,075
Deferred tax (benefit):
State................................... (14,879) (111,829) (52,120)
Federal................................. (58,573) 273,473 (534,710)
Charge equivalent to tax benefit related
to shares acquired by employees under
stock.................................... -- -- 1,783,700
-------- --------- ----------
Total..................................... $797,567 $800,000 $1,283,673
======== ========= ==========
</TABLE>
F-14
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997, 1996, AND 1995
The effective income tax rates differed from the statutory federal income
tax rates as follows in the fiscal years ended November 30, 1997, 1996 and
1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income taxes at statutory rates............................ 34.0% 34.0% 34.0%
Increase (decrease) in taxes resulting from:
State taxes, net of federal tax benefit.................. 3.9 4.3 6.3
Research and development tax credits..................... (9.6) (0.1) (2.5)
Compensation from stock purchase agreements.............. -- -- 8.8
Other, net............................................... 3.7 1.3 (0.8)
---- ---- ----
32.0% 39.5% 45.8%
==== ==== ====
</TABLE>
Net deferred tax assets for the years ended November 30, 1997 and 1996
consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Deferred tax asset:
Research and development tax credit carryforwards........ $223,615 --
Allowance for doubtful accounts.......................... 63,343 55,790
Vacation accrual......................................... 83,907 74,232
Inventory reserve........................................ 223,891 219,975
Warranty reserve......................................... 131,156 29,876
Depreciation of property and equipment................... (28,487) 30,522
Other.................................................... 10,037
-------- -------
Gross deferred tax assets.................................. 707,462 410,395
Deferred tax asset valuation allowance..................... (223,615) --
-------- -------
Net deferred tax assets.................................... $483,847 410,395
======== =======
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which temporary differences representing net future deductible
amounts become deductible. Management considers projected future taxable
income, and tax planning strategies in making this assessment. Based upon the
projections for future taxable income over the period which deferred tax
assets are deductible, management believes it is more likely than not that the
Company will realize these deductible differences at November 30, 1997. The
Company will periodically assess and re-evaluate the status of its recorded
deferred tax asset.
Research and development credit carryforwards will begin expiring in 2011.
(11) LEASE COMMITMENTS
In March 1996 the Company entered into a ten-year lease agreement and
subsequently relocated its main offices in December 1996. The new lease
provides for aggregate present minimum rentals of approximately $5,600,000
over the term of the lease. In addition to the minimum rentals, the Company
pays taxes, insurance and maintenance relating to the leased property.
F-15
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997, 1996, AND 1995
The approximate future minimum rental payments required under all operating
leases are as follows:
<TABLE>
<S> <C>
Year ending November 30,
1998............................................................ $ 723,016
1999............................................................ 715,359
2000............................................................ 684,258
2001............................................................ 629,264
2002............................................................ 620,948
Thereafter...................................................... $2,484,000
</TABLE>
The total rental expense for all operating leases for the years ended
November 30, 1997, 1996, and 1995 was approximately $652,000, $287,000, and
$241,000, respectively.
(12) MAJOR CUSTOMER INFORMATION
Three customers accounted for 48% of net sales in 1997. Two customers
accounted for 35% of net sales in 1996 and one customer accounted for 33% of
net sales in 1995. See note 4 for sales to related parties.
(13) GEOGRAPHIC SEGMENT INFORMATION
Foreign sales were 14%, 15%, and 18% of total sales, respectively, for the
fiscal years ended November 30, 1997, 1996 and 1995. Net sales by geographic
segment area are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
United States.............................. $29,045,048 26,383,256 21,641,711
Europe..................................... 2,189,058 2,437,488 2,776,404
Asian Pacific.............................. 2,265,411 1,789,766 1,727,013
Other foreign.............................. 334,662 468,739 221,479
----------- ---------- ----------
$33,834,179 31,079,249 26,366,607
=========== ========== ==========
</TABLE>
(14) CASH FLOW INFORMATION
The following is supplemental cash flow information for the years ended
November 30:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- ------
<S> <C> <C> <C>
Cash paid for:
Interest........................................... $127,009 105,380 89,664
Income taxes....................................... 676,338 523,483 30,587
</TABLE>
(15) EMPLOYEE BENEFIT PLAN
The Company sponsors an employee savings plan (the "Plan") covering
substantially all employees under Section 401(k) of the Internal Revenue Code.
Employees are eligible to contribute to the Plan after one year of service.
The Company contributes 10% of the amount contributed by the employees.
Company contributions were approximately $39,500, $34,000, and $21,500 for the
years ended November 30, 1997, 1996 and 1995, respectively.
F-16
<PAGE>
RF POWER PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOVEMBER 30, 1997, 1996, AND 1995
(16) UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTER
------------------------------------------- TOTAL
1997 FIRST SECOND THIRD FOURTH YEAR
---- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales............... $5,434,985 8,218,622 10,117,022 10,063,550 33,834,179
Gross profit............ 1,804,173 3,238,117 4,202,994 4,134,189 13,379,473
Net income (loss)....... (173,462) 381,114 774,900 712,224 1,694,776
Earnings (loss) per
share.................. (.01) .03 .06 .06 .14
<CAPTION>
QUARTER
------------------------------------------- TOTAL
1996 FIRST SECOND THIRD FOURTH YEAR
---- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales............... $8,258,864 9,484,006 7,979,403 5,356,976 31,079,249
Gross profit............ 3,225,439 3,708,429 2,767,431 1,378,837 11,080,136
Net income (loss)....... 677,330 897,462 247,098 (594,922) 1,226,968
Earnings (loss) per
share.................. .06 .07 .02 (.05) .10
</TABLE>
During the fourth quarter of the fiscal year ending November 30, 1996, the
Company recorded inventory reserves of approximately $460,000 and recorded the
remaining noncancelable lease payments and wrote off the related leasehold
improvements aggregating approximately $217,000 in connection with its move to
a new facility.
F-17
<PAGE>
SCHEDULE II
RF POWER PRODUCTS, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
------------------
BALANCE BALANCE
AT AT
BEGINNING OTHER END OF
DESCRIPTION OF PERIOD EXPENSE DEDUCTIONS PERIOD
----------- --------- ------- ---------- --------
<S> <C> <C> <C> <C>
Year ended November 30, 1996
Allowance for doubtful accounts......... $106,060 42,400 (8,405) $140,055
Inventory obsolescence reserve.......... $101,575 605,946 (155,297) $552,224
Year ended November 30, 1997
Allowance for doubtful accounts......... $140,055 75,000 (55,667) $159,378
Inventory obsolescence reserve.......... $552,224 216,546 (205,437) $563,333
</TABLE>
F-18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ----
<C> <S> <C>
2.1* Agreement and Plan of Reorganization dated July 13, 1992
between Registrant and Plasma-Therm, Inc. (Exhibit 2 filed
July 14, 1992, to the Registrants Form 8 amendment to the
Registrant's Form 10 Registration Statement filed May 19, 1992
No. 0-020229 [the "1992 Registration Statement"]).
3.1* Amended and Restated Certificate of Incorporation of the
Registrant, as amended (Exhibit 3.1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended November 30,
1996 [the "1996 Form 10-K"]).
3.2* Amended and Restated By-laws of the Registrant (Exhibit 3.2 to
the 1996 Form 10-K).
4.1* 1992 Stock Option Plan, as amended, of the Registrant dated
March 24, 1993 (Exhibit 4.1 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended November 30, 1993 [the
"1993 Form 10-K"]).
4.2* 1993 Non-Employee Directors Stock Option Plan of the Registrant
dated March 24, 1993 (Exhibit 4.2 to the 1993 Form 10-K).
10.1* Employment Agreement dated December 1, 1993 between the
Registrant and Joseph Stach and amendment to Employment
Agreement dated January 19, 1994 (Exhibit 10.1 to the 1993
Form 10-K).
10.2* Sublease Agreement dated November 1, 1992 between the
Registrant and Test Technology, Inc. for office, manufacturing
and warehouse space at 502 Gibbsboro-Marlton Road, Voorhees,
New Jersey 08043 (Exhibit 10.2 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended November 30,
1992 [the "1992 Form 10-K"]).
10.3* License Agreement dated May 13, 1992 between the Registrant and
Plasma-Therm, Inc. (Exhibit 10E to the 1992 Registration
Statement).
10.4* Distribution Agreement dated August 10, 1993 between the
Registrant and Astech Corporation (Exhibit 10.10 to the 1993
Form 10-K).
10.5* Stock Purchase and Subscription Agreement dated July 16, 1993
by and between the Registrant and Mitsuyuki Umino (Exhibit
10.11 to the 1993 Form 10-K).
10.6* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Joseph Stach (Exhibit 10.12 to the 1993 Form
10-K).
10.7* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Christopher Ben (Exhibit 10.13 to the 1993 Form
10-K).
10.8* Stock Purchase Agreement dated February 11, 1994 between the
Registrant and Domenic Golato (Exhibit 10.14 to the 1993 Form
10-K).
10.9* Stock Purchase Agreement dated February 18, 1994 between the
Registrant and Arthur Zafiropoulo (Exhibit 10.15 to the 1993
Form 10-K).
10.10* Stock Purchase Agreement dated February 18, 1994 between the
Registrant and Gerald M. Starek (Exhibit 10.16 to the 1993
Form 10-K).
10.11* Master Purchase Order and Sales Agreement dated May 1994
between the Registrant and Applied Materials, Inc. and Master
Purchase Order and Sales Agreement Revision I dated November
9, 1994 between the Registrant and Applied Materials, Inc.
(Exhibit 10.17 to the 1994 Form 10-K).
10.12* Purchase Agreement dated October 14, 1994 between the
Registrant and Plasma Therm Incorporated (Exhibit 10.18 to the
1994 Form 10-K).
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS PAGE
------- ----------------------- ----
<C> <S> <C>
10.13* Purchase Agreement dated October 28, 1994 between the
Registrant and Plasma Etch, Inc. (Exhibit 10.19 to the 1994
Form 10-K).
10.14* Technology Transfer, License and Sales Agreement between the
Registrant and Brounley Associates, Inc. (Exhibit 10.20 to the
1994 Form 10-K).
10.15* Purchase Agreement dated November 9, 1995 between the
Registrant and Plasma and Material Technology, Inc. (Exhibit
10.20 to the 1995 Form 10-K).
10.16* Purchase Agreement dated October 16, 1995 between the
Registrant and Plasma Therm, Incorporated. (Exhibit 10.25 to
the 1995 Form 10-K).
10.17* Purchase Agreement dated June 5, 1995 between the Registrant
and Mattson Technology. (Exhibit 10.26 to the 1995 Form 10-K).
10.18* Lease Agreement dated March 18, 1996 and amendments dated June
21, 1996 and August 30, 1996 between the Registrant and Laurel
Oak Road, L.L.C. for office, manufacturing and warehouse space
at 1007 Laurel Oak Road, Voorhees, N.J. 08043 (Exhibit 10.18
to the 1996 Form 10-K).
10.19* Revolving Line of Credit Agreement ($4,000,000) dated May 24,
1996 and amendment dated January 17, 1997 between the
Registrant and Mellon Bank, N.A. (Exhibit 10.19 to the 1996
Form 10-K).
10.20* Note and Security Agreement ($4,000,000) dated May 24, 1996 and
amendment dated January 17, 1997 between the Registrant and
Mellon Bank, N.A. (Exhibit 10.20 to the 1996 Form 10-K).
10.21* Note and Security Agreement ($1,400,000) dated May 24, 1996 and
amendment dated January 17, 1997 between the Registrant and
Mellon Bank, N.A. (Exhibit 10.21 to the 1996 Form 10-K).
10.22* Loan Agreement ($1,400,000) dated May 24, 1996 and amendment
dated January 17, 1997 between the Registrant and Mellon Bank,
N.A. (Exhibit 10.22 to the 1996 Form 10-K).
10.23* Direct Loan Agreement dated December 20, 1996 between the
Registrant and the New Jersey Economic Development Authority
(Exhibit 10.23 to the 1996 Form 10-K).
10.24* Promissory Note and Security Agreement dated February 11, 1994
and amendment dated January 21, 1997 between the Registrant
and Joseph Stach (Exhibit 10.24 to the 1996 Form 10-K).
10.25* Promissory Note and Security Agreement dated February 11, 1994
and amendment dated January 21, 1997 between the Registrant
and Christopher Ben (Exhibit 10.25 to the 1996 Form 10-K).
10.26* Promissory Note and Security Agreement dated February 11, 1994
and amendment dated January 21, 1997 between the Registrant
and Domenic Golato (Exhibit 10.26 to the 1996 Form 10-K).
10.27 Second Amendment, dated February 27, 1997, to Revolving Line of
Credit Agreement dated May 24, 1996 between the Registrant and
Mellon Bank, N.A.
10.28 Third Amendment, dated May 28, 1997, to Revolving Line of
Credit Agreement dated May 24, 1996 between the Registrant and
Mellon Bank, N.A.
10.29 Fourth Amendment, dated December 31, 1997, to Revolving Line of
Credit Agreement dated May 24, 1996 between the Registrant and
Mellon Bank, N.A.
10.30 Second Amendment, dated February 27, 1997, to Note and Security
Agreement ($4,000,000) dated May 24, 1996 between the
Registrant and Mellon Bank, N.A.
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS PAGE
------- ----------------------- ----
<C> <S> <C>
10.31 Third Amendment, dated May 28, 1997, to Note and Security
Agreement ($4,000,000) dated May 24, 1996 between the
Registrant and Mellon Bank, N.A.
10.32 Fourth Amendment, dated December 31, 1997, to Note and Security
Agreement ($4,000,000) dated May 24, 1996 between the
Registrant and Mellon Bank, N.A.
10.33 Note and Security Agreement ($500,000) and supplement dated
February 27, 1997 between the Registrant and Mellon Bank, N.A.
10.34 Amendment, dated May 28, 1997, to Note and Security Agreement
dated February 27, 1997 between the Registrant and Mellon
Bank, N.A.
11* See Note 1 to the Financial Statements.
21* Subsidiaries of the Registrant (Exhibit 21 to the 1996 Form 10-
K).
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Grant Thornton LLP.
27 Financial Data Schedule.
</TABLE>
- --------
*Incorporated by reference.
iii
<PAGE>
EXHIBIT 10.27
SECOND AMENDMENT TO REVOLVING LINE OF CREDIT AGREEMENT
------------------------------------------------------
THIS SECOND AMENDMENT TO REVOLVING LINE OF CREDIT AGREEMENT (this
"Agreement") made as of this 27th day of February, 1997 between RF POWER
PRODUCTS, INC., a New Jersey corporation (the "Borrower"), and MELLON BANK,
N.A., a national banking association (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower and the Bank are parties to a Revolving Line of
Credit Agreement dated May 28th, 1996 (the "Credit Agreement"), pursuant to
which the Bank agreed to extend to the Borrower a Four Million Dollar
($4,000,000) revolving credit facility (capitalized terms used herein but not
defined in this Agreement shall have the meaning ascribed to them in the Credit
Agreement);
WHEREAS, the Credit Agreement was previously amended in order to
permit, among other things, equipment financing in the amount of $500,000
pursuant to that certain First Amendment to Revolving Credit Agreement dated as
of February __, 1997;
WHEREAS, the Borrower has requested that the Bank further amend
certain provisions of the Credit Agreement in order to elect the term-out
option; and
WHEREAS, the Bank is willing to grant such request, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and intending to be legally bound, the Borrower and the Bank hereby
covenant and agree as follows:
1. Amendments. Upon the execution and delivery by the Borrower and
----------
the Bank of this Agreement and the Second Amendment to Note and Security
Agreement dated of even date herewith (the "Note Amendment"), the Credit
Agreement shall be amended as follows:
(a) The definition of Commitment Amount appearing on page 1 of the
Credit Agreement is hereby amended by deleting it in its entirety and replacing
it with the following:
COMMITMENT The lesser of (i) $3,500,000,
AMOUNT:
or (ii) 80% of Eligible Accounts (as hereinafter defined) less
----
the amount of any outstanding principal which Borrower has
elected to term out under the Alternative Principal Amortization
provisions of the Note.
<PAGE>
(b) The Credit Agreement shall be amended to reflect that references
in the Credit Agreement to the "Note" shall be references to the Note and
Security Agreement as amended by the Note Amendment and as may be still further
amended, modified or supplemented from time to time.
2. Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants to the Bank that the Borrower is not in default under the Note, the
Credit Agreement or any other document executed in connection therewith.
3. Other Terms Confirmed. All other terms and conditions of the
---------------------
Credit Agreement, including, without limitation, the Supplement attached
thereto, are hereby confirmed and shall remain in full force and effect without
modification. From and after the effectiveness of the amendments set forth in
Section 1 hereof, all references in any document or instrument to the Credit
Agreement shall mean the Credit Agreement as amended by this Agreement.
4. No New Indebtedness. The Borrower specifically acknowledges and
-------------------
agrees that this Agreement shall not represent in any way the extension of any
new credit by the Bank to the Borrower, or the satisfaction of any indebtedness
evidenced by the Credit Agreement as amended hereby or the Note.
5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
6. Headings. The descriptive headings which are used in this
--------
Agreement are for convenience only and shall not affect the meaning of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
Attest: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun /s/ Domenic N. Golato
------------------- --------------------------
By: Domenic N. Golato
Chief Financial Officer
[Corporate Seal]
MELLON BANK, N.A.
By: /s/ Anthony W. LaMarca
-------------------------
Anthony W. LaMarca
Vice President
<PAGE>
EXHIBIT 10.28
THIRD AMENDMENT TO REVOLVING LINE OF CREDIT AGREEMENT
-----------------------------------------------------
THIS THIRD AMENDMENT TO REVOLVING LINE OF CREDIT AGREEMENT (this
"Agreement") made as of this 28th day of May, 1997 between RF POWER PRODUCTS,
INC., a New Jersey corporation (the "Borrower"), and MELLON BANK, N.A., a
national banking association (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower and the Bank are parties to a Revolving Line of
Credit Agreement dated May 24, 1996 (the "Credit Agreement"), pursuant to which
the Bank agreed to extend to the Borrower a Four Million Dollar ($4,000,000)
revolving credit facility (capitalized terms used herein but not defined in this
Agreement shall have the meaning ascribed to them in the Credit Agreement);
WHEREAS, the Credit Agreement was previously amended in order to
permit, among other things, equipment financing in the amount of $500,000
pursuant to that certain First Amendment to Revolving Credit Agreement dated as
of January 17, 1997;
WHEREAS, the Credit Agreement was also amended in order to allow the
Borrower to term out and reduce the principal amount outstanding in connection
with the Credit Agreement by $500,000 (to $3,500,000) pursuant to that certain
Second Amendment to Revolving Line of Credit Agreement dated as of February 27,
1997;
WHEREAS, the Borrower has requested that the Bank further amend
certain provisions of the Credit Agreement in order to elect the term-out of an
additional $500,000; and
WHEREAS, the Bank is willing to grant such request, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and intending to be legally bound, the Borrower and the Bank hereby
covenant and agree as follows:
1. Amendments. Upon the execution and delivery by the Borrower and
----------
the Bank of this Agreement and the Third Amendment to Note and Security
Agreement dated of even date herewith (the "Note Amendment"), the Credit
Agreement shall be amended as follows:
(a) The definition of Commitment Amount appearing on page 1 of the
Credit Agreement is hereby amended by deleting it in its entirety and replacing
it with the following:
COMMITMENT The lesser of (i) $3,000,000,
AMOUNT:
<PAGE>
or (ii) 80% of Eligible Accounts (as hereinafter defined) less
----
the amount of any outstanding principal which Borrower has
elected to term out under the Alternative Principal Amortization
provisions of the Note.
(b) The Credit Agreement shall be amended to reflect that references
in the Credit Agreement to the "Note" shall be references to the Note and
Security Agreement as amended by the Note Amendment and as may be still further
amended, modified or supplemented from time to time.
2. Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants to the Bank that the Borrower is not in default under the Note, the
Credit Agreement or any other document executed in connection therewith.
3. Other Terms Confirmed. All other terms and conditions of the
---------------------
Credit Agreement, including, without limitation, the Supplement attached
thereto, are hereby confirmed and shall remain in full force and effect without
modification. From and after the effectiveness of the amendments set forth in
Section 1 hereof, all references in any document or instrument to the Credit
Agreement shall mean the Credit Agreement as amended by this Agreement.
4. No New Indebtedness. The Borrower specifically acknowledges and
-------------------
agrees that this Agreement shall not represent in any way the extension of any
new credit by the Bank to the Borrower, or the satisfaction of any indebtedness
evidenced by the Credit Agreement as amended hereby or the Note.
5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
6. Headings. The descriptive headings which are used in this
--------
Agreement are for convenience only and shall not affect the meaning of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
Attest: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun /s/ Domenic N. Golato
--------------------- --------------------------
By: Domenic N. Golato
Chief Financial Officer
[Corporate Seal]
MELLON BANK, N.A.
By: /s/ Anthony W. LaMarca
--------------------------
Anthony W. LaMarca
Vice President
<PAGE>
EXHIBIT 10.29
FOURTH AMENDMENT TO REVOLVING LINE OF CREDIT AGREEMENT
------------------------------------------------------
THIS FOURTH AMENDMENT TO REVOLVING LINE OF CREDIT AGREEMENT (this
"Agreement") made as of this 31st day of December, 1997 between
RF POWER PRODUCTS, INC., a New Jersey corporation (the "Borrower"), and MELLON
BANK, N.A., a national banking association (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower and the Bank are parties to a Revolving Line of
Credit Agreement dated May 24, 1996 (the "Credit Agreement"), pursuant to which
the Bank agreed to extend to the Borrower a Four Million Dollar ($4,000,000)
revolving credit facility (capitalized terms used herein but not defined in this
Agreement shall have the meaning ascribed to them in the Credit Agreement);
WHEREAS, the Credit Agreement was previously amended in order to
permit, among other things, equipment financing in the amount of $500,000
pursuant to that certain First Amendment to Revolving Credit Agreement dated as
of January 17, 1997;
WHEREAS, the Credit Agreement was also amended in order to allow the
Borrower to term out and reduce the principal amount outstanding in connection
with the Credit Agreement by $500,000 (to $3,500,000) pursuant to that certain
Second Amendment to Revolving Line of Credit Agreement dated as of February 27,
1997;
WHEREAS, the Credit Agreement was again amended in order to allow the
Borrower to term out and reduce the principal amount outstanding in connection
with the Credit Agreement by an additional $500,000 (to $3,000,000) pursuant to
that certain Third Amendment to Revolving Line of Credit Agreement dated as of
May 28, 1997;
WHEREAS, the Borrower has requested that the Bank further amend
certain provisions of the Credit Agreement in order to, among other things,
increase the maximum principal amount available under the revolving credit
facility to $6,000,000; and
WHEREAS, the Bank is willing to grant such request, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and intending to be legally bound, the Borrower and the Bank hereby
covenant and agree as follows:
1. Amendments. Upon the execution and delivery by the Borrower and
----------
the Bank of this Agreement and the Fourth Amendment to Note and Security
Agreement dated of even date herewith (the "Note Amendment"), the Credit
Agreement shall be amended as follows:
<PAGE>
(a) The definition of Commitment Amount appearing on page 1 of the
Credit Agreement is hereby amended by deleting it in its entirety and replacing
it with the following:
COMMITMENT The lesser of (i) $6,000,000,
AMOUNT:
or (ii) 80% of Eligible Accounts (as hereinafter defined) less
----
the amount of any outstanding principal which Borrower has
elected to term out under the Alternative Principal Amortization
provisions of the Note.
(b) The definition of Commitment Period appearing on page 1 of the
Credit Agreement is hereby amended by replacing the date May 30, 1998 with May
30, 1999.
(c) The definition of Cash Flow set forth in paragraph 5(a) of the
Supplement to Revolving Line of Credit Agreement (the "Supplement") shall be
deleted in its entirety and replaced with the following:
(a) "Cash Flow" means EBITDA minus capital expenditures, cash
--------- ------
taxes and dividends, all as measured on a rolling four-quarters basis and
as determined in accordance with GAAP.
(d) The following definition of EBITDA shall be included as paragraph
5(d) to the Supplement:
(d) "EBITDA" means earnings before interest, taxes,
------
depreciation, and amortization, all as measured on a rolling four-quarters
basis and as determined in accordance with GAAP.
(e) The Credit Agreement shall be amended to reflect that references
in the Credit Agreement to the "Note" shall be references to the Note and
Security Agreement as amended by the Note Amendment and as may be still further
amended, modified or supplemented from time to time.
2. Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants to the Bank that the Borrower is not in default under the Note, the
Credit Agreement or any other document executed in connection therewith.
3. Other Terms Confirmed. All other terms and conditions of the
---------------------
Credit Agreement, including, without limitation, the Supplement attached
thereto, are hereby confirmed and shall remain in full force and effect without
modification. From and after the effectiveness of the amendments set forth in
Section 1 hereof, all references in any document or instrument to the Credit
Agreement shall mean the Credit Agreement as amended by this Agreement.
4. No New Indebtedness. The Borrower specifically acknowledges and
-------------------
agrees that this Agreement shall not represent in any way the extension of any
new credit by the Bank to the Borrower, or the satisfaction of any indebtedness
evidenced by the Credit Agreement as amended hereby or the Note.
2
<PAGE>
5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
6. Headings. The descriptive headings which are used in this
--------
Agreement are for convenience only and shall not affect the meaning of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
Attest: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun /s/ Domenic N. Golato
---------------------- ---------------------------
By: Domenic N. Golato
Chief Financial Officer
[Corporate Seal]
MELLON BANK, N.A.
By: /s/ Marita McGough Carb
--------------------------
Marita McGough Carb
Vice President
3
<PAGE>
EXHIBIT 10.30
SECOND AMENDMENT TO NOTE AND SECURITY AGREEMENT
-----------------------------------------------
THIS SECOND AMENDMENT TO NOTE AND SECURITY AGREEMENT (this
"Agreement") made as of this 27th day of February, 1997 between RF POWER
PRODUCTS, INC., a New Jersey corporation (the "Borrower"), and MELLON BANK,
N.A., a national banking association (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower is the maker of a certain Note and Security
Agreement to the Bank in the original principal amount of Four Million Dollars
($4,000,000.00) dated May 24th, 1996 (the "Note") (capitalized terms used herein
but not defined in this Agreement shall have the meaning ascribed to them in the
Note);
WHEREAS, the Note was previously amended in order to permit, among
other things, equipment financing in the amount of $500,000 pursuant to that
certain First Amendment to Note and Security Agreement dated as of February __,
1997;
WHEREAS, the Borrower has requested that the Bank further amend
certain provisions of the Note in order to elect the term-out option provided
therein; and
WHEREAS, the Bank is willing to grant such request, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and in the Credit Amendment referred to below, and intending to be
legally bound, the Borrower and the Bank hereby covenant and agree as follows:
1. Amendments. Upon the satisfaction of any condition precedent
----------
contained in the Second Amendment to Revolving Line of Credit Agreement dated as
of even date herewith (the "Credit Amendment") and the execution and delivery of
this Agreement by the Borrower and the Bank, the Note shall be amended as
follows:
(a) The Note shall be amended to reflect that notwithstanding any
provision in the Note to the contrary, the maximum principal amount of the Note
has been reduced to $3,500,000 by virtue of the Borrower's election of the term-
out option set forth in Section 3 of the Supplement to Note and Security
Agreement (the "Supplement") annexed to and made a part of the Note. Wherever
the figure $4,000,000 shall appear in the Note or the Supplement, it shall be
replaced with the figure $3,500,000.
(b) The Note shall be amended to reflect that references in the Note
to the "Credit Agreement" shall be references to the Revolving Line of Credit
<PAGE>
Agreement as amended by the Credit Amendment and as may be still further
amended, modified or supplemented from time to time.
2. Election of Alternative Principal Amortization. The Borrower
----------------------------------------------
hereby elects the term-out option set forth in Section 3 of the Supplement such
that $500,000 of the outstanding principal balance of the Note as of this date
shall be amortized over a forty-eight (48) month period. The amount chosen by
the Borrower to be amortized shall be evidenced by a Note and Security Agreement
dated of even date herewith in the original principal amount of $500,000 from
the Borrower in favor of the Bank (the "New Note").
3. Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants to the Bank that the Borrower is not in default under the Note, the
Credit Agreement or any other document executed in connection therewith.
4. Other Terms Confirmed. All other terms and conditions of the
---------------------
Note, including, without limitation, the supplements annexed thereto and made a
part thereof, are hereby confirmed and shall remain in full force and effect
without modification. From and after the effectiveness of the amendments set
forth in Section 1 hereof, all references in any document or instrument to the
Note shall mean the Note as amended by this Agreement.
5. No New Indebtedness. The Borrower specifically acknowledges and
-------------------
agrees that neither this Agreement nor the New Note shall represent in any way
the extension of any new credit by the Bank to the Borrower, or the satisfaction
of any indebtedness evidenced by the Credit Agreement or the Note as amended
hereby.
6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
7. Headings. The descriptive headings which are used in this
--------
Agreement are for convenience only and shall not affect the meaning of any
provision of this Agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
Attest: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun /s/ Domenic N. Golato
-------------------- -----------------------------
Name: By: Domenic N. Golato
Title: Chief Financial Officer
[Corporate Seal]
MELLON BANK, N.A.
By: /s/ Anthony W. LaMarca
-------------------------
Anthony W. LaMarca
Vice President
-3-
<PAGE>
EXHIBIT 10.31
THIRD AMENDMENT TO NOTE AND SECURITY AGREEMENT
----------------------------------------------
THIS THIRD AMENDMENT TO NOTE AND SECURITY AGREEMENT (this "Agreement")
made as of this 28th day of May, 1997 between RF POWER PRODUCTS, INC., a New
Jersey corporation (the "Borrower"), and MELLON BANK, N.A., a national banking
association (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower is the maker of a certain Note and Security
Agreement to the Bank in the original principal amount of Four Million Dollars
($4,000,000.00) dated May 24, 1996 (the "Note") (capitalized terms used herein
but not defined in this Agreement shall have the meaning ascribed to them in the
Note);
WHEREAS, the Note was previously amended in order to permit, among
other things, equipment financing in the amount of $500,000 pursuant to that
certain First Amendment to Note and Security Agreement dated as of January 17,
1997;
WHEREAS, the Note was also amended in order to allow the Borrower to
term out and reduce the principal amount outstanding under the Note by $500,000
(to $3,500,000) pursuant to that certain Second Amendment to Note and Security
Agreement dated as of February 27, 1997;
WHEREAS, the Borrower has requested that the Bank further amend
certain provisions of the Note in order to elect the term-out of an additional
$500,000; and
WHEREAS, the Bank is willing to grant such request, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and in the Credit Amendment referred to below, and intending to be
legally bound, the Borrower and the Bank hereby covenant and agree as follows:
1. Amendments. Upon the satisfaction of any condition precedent
----------
contained in the Third Amendment to Revolving Line of Credit Agreement dated as
of even date herewith (the "Credit Amendment") and the execution and delivery of
this Agreement by the Borrower and the Bank, the Note shall be amended as
follows:
(a) The Note shall be amended to reflect that notwithstanding any
provision in the Note to the contrary, the maximum principal amount of the Note
has been reduced to $3,000,000 by virtue of the Borrower's election of the term-
out option set forth in Section 3 of the Supplement to Note and Security
Agreement (the "Supplement") annexed to and made a part of the Note. Wherever
<PAGE>
the figure $3,500,000 shall appear in the Note or the Supplement, it shall be
replaced with the figure $3,000,000.
(b) The Note shall be amended to reflect that references in the Note
to the "Credit Agreement" shall be references to the Revolving Line of Credit
Agreement as amended by the Credit Amendment and as may be still further
amended, modified or supplemented from time to time.
2. Election of Alternative Principal Amortization. The Borrower
----------------------------------------------
hereby elects the term-out option set forth in Section 3 of the Supplement such
that $500,000 of the outstanding principal balance of the Note as of this date
shall be amortized over a FORTY-EIGHT (48) MONTH PERIOD. This amount is in
addition to the $500,000 amount previously chosen by the Borrower to be
amortized which is currently evidenced by a Note and Security Agreement dated
February 27, 1997 from the Borrower in favor of the Bank (the "New Note").
Simultaneous with the execution and delivery of this Agreement, the New Note
shall be amended in order to reflect the increase in the face amount of the New
Note from $500,000 to $1,000,000.
3. Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants to the Bank that the Borrower is not in default under the Note, the
Credit Agreement or any other document executed in connection therewith.
4. Other Terms Confirmed. All other terms and conditions of the
---------------------
Note, including, without limitation, the supplements annexed thereto and made a
part thereof, are hereby confirmed and shall remain in full force and effect
without modification. From and after the effectiveness of the amendments set
forth in Section 1 hereof, all references in any document or instrument to the
Note shall mean the Note as amended by this Agreement.
5. No New Indebtedness. The Borrower specifically acknowledges and
-------------------
agrees that neither this Agreement nor the New Note shall represent in any way
the extension of any new credit by the Bank to the Borrower, or the satisfaction
of any indebtedness evidenced by the Credit Agreement or the Note as amended
hereby.
6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
7. Headings. The descriptive headings which are used in this
--------
Agreement are for convenience only and shall not affect the meaning of any
provision of this Agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
Attest: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun /s/ Domenic N. Golato
- -------------------- -----------------------------
Name: By: Domenic N. Golato
Title: Chief Financial Officer
[Corporate Seal]
MELLON BANK, N.A.
By: /s/ Anthony W. LaMarca
-------------------------
Anthony W. LaMarca
Vice President
-3-
<PAGE>
EXHIBIT 10.32
FOURTH AMENDMENT TO NOTE AND SECURITY AGREEMENT
-----------------------------------------------
THIS FOURTH AMENDMENT TO NOTE AND SECURITY AGREEMENT (this
"Agreement") made as of this 31st day of December, 1997 between RF POWER
PRODUCTS, INC., a New Jersey corporation (the "Borrower"), and MELLON BANK,
N.A., a national banking association (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower is the maker of a certain Note and Security
Agreement to the Bank in the original principal amount of Four Million Dollars
($4,000,000.00) dated May 24, 1996 (the "Note") (capitalized terms used herein
but not defined in this Agreement shall have the meaning ascribed to them in the
Note);
WHEREAS, the Note was previously amended in order to permit, among
other things, equipment financing in the amount of $500,000 pursuant to that
certain First Amendment to Note and Security Agreement dated as of January 17,
1997;
WHEREAS, the Note was also amended in order to allow the Borrower to
term out and reduce the principal amount outstanding under the Note by $500,000
(to $3,500,000) pursuant to that certain Second Amendment to Note and Security
Agreement dated as of February 27, 1997;
WHEREAS, the Note was again amended in order to allow the Borrower to
term out and reduce the principal amount outstanding under the Note by an
additional $500,000 (to $3,000,000) pursuant to that certain Third Amendment to
Note and Security Agreement dated as of May 28, 1997;
WHEREAS, the Borrower has requested that the Bank further amend
certain provisions of the Note in order to, among other things, (i) increase the
maximum principal amount available under the Note, and (ii) adjust the pricing;
and
WHEREAS, the Bank is willing to grant such request, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and in the Credit Amendment referred to below, and intending to be
legally bound, the Borrower and the Bank hereby covenant and agree as follows:
1. Amendments. Upon the satisfaction of any condition precedent
----------
contained in the Fourth Amendment to Revolving Line of Credit Agreement dated as
of even date herewith (the "Credit Amendment") and the execution and delivery of
this Agreement by the Borrower and the Bank, the Note shall be amended as
follows:
<PAGE>
(a) The Note shall be amended to reflect that notwithstanding any
provision in the Note to the contrary, the maximum principal amount of the Note
is increased to $6,000,000. Wherever the figure $3,000,000 shall appear in the
Note or the Supplement to Note and Security Agreement (the "Supplement") annexed
to and made a part of the Note, it shall be replaced with the figure $6,000,000.
(b) The interest rate spread provision set forth in paragraph 5 of
the Supplement shall be deleted in its entirety and replaced with the following:
5. Interest Rate Spread. The Undersigned shall pay a basis
--------------------
point spread under this Note on the LIBOR Rate option based on the
Undersigned's financial performance as measured by the Cash Flow Ratio (as
defined in the Credit Agreement) and effective on the first day following
receipt of the Undersigned's quarterly financial statements and continuing
until receipt of the Undersigned's quarterly financial statements for the
following fiscal quarter:
<TABLE>
<CAPTION>
LIBOR Rate Plus
Cash Flow Ratio Basis Point Spread
- --------------- -------------------------------
<S> <C>
Greater than 2.00 to 1.00 LIBOR + 100 b.p.
Less than or equal to 2.00 to 1.00 but greater than or equal to LIBOR + 125 b.p.
1.50 to 1.00
</TABLE>
(c) The definition of Maturity Date set forth in paragraph 12 of the
Supplement shall be amended by replacing the date May 30, 1998 with May 30,
1999.
(d) The Note shall be amended to reflect that references in the Note
to the "Credit Agreement" shall be references to the Revolving Line of Credit
Agreement as amended by the Credit Amendment and as may be still further
amended, modified or supplemented from time to time.
2. Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants to the Bank that the Borrower is not in default under the Note, the
Credit Agreement or any other document executed in connection therewith.
3. Other Terms Confirmed. All other terms and conditions of the
---------------------
Note, including, without limitation, the Supplement annexed thereto and made a
part thereof, are hereby confirmed and shall remain in full force and effect
without modification. From and after the effectiveness of the amendments set
forth in Section 1 hereof, all references in any document or instrument to the
Note shall mean the Note as amended by this Agreement.
-2-
<PAGE>
4. No Satisfaction of Indebtedness. The Borrower specifically
-------------------------------
acknowledges and agrees that this Agreement shall not represent in any way the
satisfaction of any indebtedness evidenced by the Credit Agreement or the Note
as amended hereby.
5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
6. Headings. The descriptive headings which are used in this
--------
Agreement are for convenience only and shall not affect the meaning of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
Attest: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun /s/ Domenic N. Golato
- ---------------------- -----------------------------
Name: By: Domenic N. Golato
Title: Chief Financial Officer
[Corporate Seal]
MELLON BANK, N.A.
By: /s/ Marita McGough Carb
---------------------------
Marita McGough Carb
Vice President
-3-
<PAGE>
EXHIBIT 10.33
NOTE AND SECURITY AGREEMENT [MELLON PSFS LOGO]
$500,000.00 February 27, 1997
For Value Received, AND INTENDING TO BE LEGALLY BOUND, UNDERSIGNED, AS DEFINED
BELOW, PROMISES TO PAY TO MELLON BANK N.A. ("BANK") OR ITS ORDER AT
PHILADELPHIA, PENNSYLVANIA THE SUM OF FIVE HUNDRED THOUSAND 00/100 DOLLARS
($500,000.00), OR SUCH LESSER OR GREATER PRINCIPAL AMOUNT AS MAY BE OUTSTANDING
FROM TIME TO TIME UNDER A TERM LOAN ESTABLISHED BY BANK FOR THE BENEFIT OF
UNDERSIGNED, WITH INTEREST ON THE OUTSTANDING BALANCE FROM THE DATE OF THIS NOTE
AND SECURITY AGREEMENT ("NOTE") AT THE RATE(S) ("CONTRACTUAL RATE(S)") SPECIFIED
HEREIN.
See attached Supplement to Note and Security Agreement.
Upon the occurrence of any Event of Default (as defined below), at Bank's
option, interest shall accrue at a rate equal to two percent (2%) per annum
above the Contractual Rate(s) specified until the earlier of (a) the date that
such Event of Default has been cured, (b) until and including the date of
maturity hereof, or (c) if this Note is payable on demand, until and including
the date for payment in full set forth in any such demand, whichever the case
may be.
After maturity, whether by acceleration or otherwise, or if this Note is payable
on demand, after the date for payment in full set forth in any such demand, at
Bank's option, interest shall accrue at a rate equal to two percent (2%) per
annum above the Contractual Rate(s) until all sums due hereunder are paid.
Interest shall continue to accrue after the entry of judgment by confession or
otherwise at a rate of two percent (2%) above the Contractual Rate(s) until all
sums due hereunder and/or under the judgment are paid. This is the Note or one
of the Notes referred to in that Revolving Line of Credit Agreement dated May
24, 1996 between Undersigned and Bank, as the same may be supplemented from time
to time.
If any payment (including without limitation any regularly scheduled payment,
balloon payment and final payment) is not paid within 10 days after it is due,
Undersigned will pay a late charge as specified below, regardless of whether the
payment due consists of principal and interest, principal only or interest only:
[x ] 4% of the unpaid portion of the payment due
[ ] $ __________
[ ] the greater of $ __________, or ______% of the unpaid portion of the
payment due
[ ] late payment charge does not apply
Such late charge shall be in addition to any increase made to the Contractual
Rate(s) applicable to the outstanding balance hereof as a result of maturity of
this Note or otherwise, as well as in addition to any other applicable fees,
charges and costs.
Undersigned shall have the right, at its option, to prepay this Note in whole at
any time or in part from time to time. Any such prepayment shall be applied
first to any accrued but unpaid interest, secondly to the prepayment charge, if
any, discussed below, and lastly to the unpaid installments of principal in the
reverse order of their scheduled maturities. In the event that any portion of
<PAGE>
principal of this Note accruing interest at a fixed rate is prepaid for any
reason whatsoever, whether by declaration, acceleration, demand or otherwise and
whether or not an Event of Default has occurred, a prepayment charge shall be
due and payable by Undersigned to Bank, calculated as described in the
Prepayment Addendum, if any, which references this Note, from Undersigned to
Bank, incorporated herein by reference and made a part hereof. All such
prepayments shall be subject to all terms and conditions of any such Prepayment
Addendum.
So long as Bank is the holder hereof, Bank's books and records shall be
presumed, except in the case of manifest error, to accurately evidence at all
times all amounts outstanding under this Note and the date and amount of each
advance and payment made pursuant hereto.
The prompt and faithful performance of all of Undersigned's obligations
hereunder, including without limitation time of payment, is of the essence of
this Note.
1. SECURITY INTEREST. Undersigned hereby grants to Bank a security interest in
the following property now owned or hereafter acquired by Undersigned.
[_] ________ The securities described below, together with all cash, stock or
other dividends or distributions paid upon or made in respect of such securities
in any form; all securities received in addition to or in exchange for such
securities; and all subscription rights incident to such securities;
______ all equipment, wherever located, including machinery, motor vehicles,
furniture and fixtures;
______ all inventory (whether held for sale or lease or to be furnished under
contracts of service), raw materials, work in process, and materials used or
consumed in the conduct of Undersigned's business, and all books, records,
invoices and other documents which describe or evidence the same; and
_____ all accounts, contracts rights, general intangibles, choses in action,
instruments, chattel paper, documents (including all documents of title and
warehouse receipts) and all rights to the payment of money, however evidenced or
arising.
[_] ________ Other.
In addition to the foregoing, Undersigned: (1) grants to Bank a security
interest in all substitutions for, renewals of, improvements, replacements and
additions to, and the products and proceeds (cash and non-cash) of all of the
foregoing property and any insurance policies relating thereto; (2) grants to
Bank a security interest in, lien upon, and right of setoff against, all deposit
accounts, credits, securities, moneys or other property of Undersigned which may
at any time be in the possession of, delivered to, or owed by Bank, including
any proceeds or returned or unearned premiums of insurance, and the proceeds of
all the foregoing property; and (3) assigns to Bank all moneys which may become
payable on any policy of insurance required to be maintained under this Note,
including any returned or unearned premiums.
All such property subject to Bank's security interests described in this Section
1 is referred to herein collectively as the "Collateral." With respect to
Section 4 hereunder, the term "Collateral" shall not include the property
described in Subsection (2) of this Section 1.
-2-
<PAGE>
All security interests in Collateral shall be deemed to arise and be perfected
under and governed by the Uniform Commercial Code, except to the extent that
such law does not apply to certain types of transactions or Collateral, in which
case applicable law shall govern.
2. OBLIGATIONS SECURED. The Collateral shall secure the following obligations
("Obligations") of Undersigned to Bank: (a) all amounts at any time owing or
payable under this Note; (b) all costs and expenses incurred by Bank in the
collection or enforcement of this Note or the protection of the Collateral; (c)
all future advances made by Bank for taxes, levies, insurance, and repairs to or
maintenance of the Collateral; and (d) any other indebtedness, liability or
obligation of Undersigned to Bank, past, present or future, direct or indirect,
absolute or contingent, individual, joint or several, now due or to become due,
whether as drawer, maker, endorser, guarantor, surety or otherwise, except that
none of the security interests created herein shall secure any obligation
incurred by Undersigned which is defined as "consumer credit" by Federal Reserve
Board Regulation Z, 12 C.F.R. (S)226.1 et seq., and is not exempted from the
application of that Regulation.
3. REPRESENTATIONS. Undersigned hereby makes the following representations and
warranties which shall be true and correct on the date of this Note and shall
continue to be true and correct at the time of the creation of any Obligation
secured hereby and until the Obligations secured hereby shall have been paid in
full: (a) Undersigned's residence and/or Chief Executive Office, as the case
may be, is as stated below or as otherwise stated in a subsequent written notice
delivered to Bank pursuant to the terms hereof; (b) Undersigned has good and
marketable title to the Collateral subject to no security interest, lien or
encumbrance, except as indicated to the contrary to Bank in writing prior to the
execution of this Note; and (c) if any of the Undersigned is an individual, each
such individual is at least 18 years of age and under no legal disability or
incapacity.
4. COVENANTS. Undersigned covenants and agrees that until the Obligations
secured hereby have been paid in full, Undersigned shall: (a) use the proceeds
of the loan evidenced hereby only for the business purpose(s) specified to the
Bank at or prior to the execution hereof: (b) not permit use of the Collateral
for any illegal purposes; (c) promptly notify Bank in writing of any change in
its or their residence or Chief Executive Officer; (d) maintain at all times
good and marketable title to all Collateral, free and clear of any security
interest, lien or encumbrance (except as to which Bank may grant its prior
written consent pursuant to Section 4 (c) below), and defend such title against
the claims and demands of all persons; (e) not (1) lease, mortgage, pledge or
encumber the Collateral, (2) permit the Collateral's identity to be lost, (3)
permit the Collateral to be levied upon or attached under any legal process, (4)
permit or cause any security interest or lien to arise with respect to the
Collateral (other than those created in this Note), or (5) sell, part with
possession of, or otherwise dispose of the Collateral or any rights therein,
except as Bank may grant its prior specific written consent with respect to acts
or events specified in Subsections (1), (4), or (5) hereof; (f) purchase and
maintain policies of insurance (including flood insurance) to protect the
Collateral or other property against such risks and casualties, and in such
amounts, as shall be required by Bank and/or applicable law, which policies
shall (1) be in form and substance satisfactory to Bank, (2) at Bank's option,
designate Bank as loss payee and/or as additional insured, and/or contain a
lender's loss payable endorsement, and (3) be (or certificates evidencing same
shall be) deposited with Bank; (g) provide, upon request, financial or other
information, documentation or certifications to Bank (including balance sheets
and income statements), all in form and content satisfactory to Bank; (h)
execute, upon demand by Bank, any financing statements or other documents which
Bank may deem necessary to perfect or maintain perfection of the security
-3-
<PAGE>
interest(s) created in this Note and pay, upon demand by Bank, (1) all costs and
fees pertaining to the filing of any financing, continuation or termination
statements, mortgages, satisfaction pieces, judgments and any other type of
document which Bank deems necessary or desirable to be filed with regard to
security interests which secure the indebtedness evidenced or secured hereby,
regardless of whether such security interests were granted by Undersigned, and
(2) all costs and expenses incurred by Bank in connection with any collateral
securing this Note (including without limitation all advances made by Bank for
taxes, levies, insurance, repairs to or maintenance of the collateral, appraisal
or valuation of the collateral, and determination and monitoring of flood hazard
status), regardless of whether such collateral is owned by Undersigned; and (i)
pay upon demand by Bank, all amounts incurred by Bank in connection with any
action or proceeding taken or commenced by Bank to enforce or collect this Note
or protect, insure or realize upon the Collateral, including attorney's fees
equal to the lesser of (a) 20% of the above sum and interest then due hereunder
or $500.00, whichever is greater, or (b) the maximum amount permitted by law,
and attorney's costs and all costs of legal proceedings.
5. ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition to the
representations, warranties and covenants set forth in this Note, the Loan
Agreement (if any) and any other document executed and delivered in connection
with this Note and/or the Loan Agreement, Undersigned hereby represents,
warrants, covenants and agrees, on behalf of itself and each of its subsidiaries
and affiliates, if any, that: (a) each of them now has and will continue to
have all Environmental Permits (as hereinafter defined) necessary for the
conduct of each of their businesses and operations; (b) each of them conducts
and will continue to conduct each of their businesses and operations in material
compliance with all applicable Environmental Laws (as hereinafter defined) and
Environmental Permits; (c) there does not exist, nor will any of them permit to
exist, any event or condition that requires or is likely to require any of them
under any Environmental Law to pay or expend funds by way of fines, judgments,
damages, cleanup, remediation or the like in an aggregate amount, the payment of
which could reasonably be expected to interfere substantially with normal
operations of Undersigned or materially adversely affect the financial condition
of Undersigned; (d) Undersigned shall notify Bank, in writing within five (5)
business days, upon becoming aware of any pending or threatened proceeding,
suit, investigation, allegation or inquiry regarding any alleged event or
condition that, if resolved unfavorably to Undersigned or any of Undersigned's
subsidiaries or affiliates, is likely to cause Undersigned or any of its
subsidiaries or affiliates under any Environmental Law to pay or expend funds by
way of fines, penalties, administrative actions, judgments, damages, cleaning,
remediation or the like, or cause Undersigned or any of its subsidiaries or
affiliates to pay or expand funds for any third party claims, proceedings,
actions or judgments for personal injury or property damage resulting from an
event or condition relating to Hazardous Substances (as hereinafter defined) or
from a release or threatened release of Hazardous Substances; and (e)
Undersigned shall provide at Undersigned's cost, upon request by Bank,
certifications, documentation, copies of pleadings and other information
regarding the above, all in form and content satisfactory to Bank.
6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default" hereunder: (a) default in payment or performance of any
of the Obligations evidenced or secured by this Note or any other evidence of
liability of Undersigned to Bank which remains uncured for longer than 10 days;
(b) the breach by any Obligor (defined as Undersigned and each surety or
guarantor of any of Undersigned's liabilities to Bank, as well as any person or
entity granting Bank a security interest in property to secure the Obligations
evidenced hereby) of any covenant contained in the Loan Agreement (if any), this
Note, or in any separate security, guarantee or suretyship agreement between
-4-
<PAGE>
Bank and any Obligor, the occurrence of any default hereunder or under the terms
of any such agreement, or the discovery by Bank of any false or misleading
representation made by any Obligor herein or in any such agreement or in any
other information submitted to Bank by any Obligor; (c) with respect to any
Obligor: (1) death or incapacity of any individual or general partner, or (2)
dissolution of any partnership or corporation; (d) any assignment for the
benefit of creditors by any Obligor; (e) insolvency of any Obligor; (f) the
filing or commencement of any petition, action, case or proceeding, voluntary or
involuntary, under any state or federal law regarding bankruptcy, insolvency,
reorganization, receivership or dissolution, including the Bankruptcy Reform Act
of 1978, as amended, by or against any Obligor; (g) default under the terms of
any lease of or mortgage on the premises where any property securing the
indebtedness evidenced by this Note is located which remains uncured for longer
than 10 days; (h) garnishment, tax assessment, attachment or taking by
governmental authority or other creditor of any property of any Obligor which is
in Bank's possession or which constitutes security for any obligations evidenced
or secured hereby; (i) entry of judgment against any Obligor in any court of
record; (j) the assessment against any Obligor by the Internal Revenue Service
or any other federal, state or local taxing authority of unpaid taxes, or the
issuance of a levy or the entering of a lien in connection therewith; (k) the
maturity of any life insurance policy held as collateral for this Note by reason
of the death of the insured or otherwise; (l) the revocation, termination,
cancellation, denial of liability, or the attempt of any of the foregoing, by
any Obligor of any obligation or liability whatsoever of the Obligor to Bank,
including without limitation any security, guarantee or suretyship agreement;
or (m) default by Undersigned in the payment of any indebtedness of Undersigned
or in the performance of Undersigned's obligations (other than indebtedness or
obligations evidenced by this Note or any other evidence of liability of
Undersigned to Bank) and such default shall continue for more than any
applicable grace period.
7. ACCELERATION; REMEDIES. Upon either (i) the occurrence of any Event of
Default, or (ii) if this Note is payable on demand, such demand by Bank: (a)
all amounts due under this Note, including the unpaid balance of principal and
interest hereof, shall become immediately due and payable at the option of Bank,
without any demand or notice whatsoever; and (b) Bank may immediately and
without demand exercise any of its rights and remedies granted herein, under
applicable law, or which it may otherwise have, against the Undersigned, the
Collateral, or otherwise. Notwithstanding any provision to the contrary herein,
upon the occurrence of an Event of Default as described in Section 6(f) hereof,
all amounts due under this Note, including without limitation the unpaid balance
of principal and interest hereof, shall become immediately due and payable,
without any demand, notice or further action by Bank whatsoever, and an action
therefor shall immediately accrue.
8. BANK'S RIGHTS. Undersigned hereby authorizes Bank, and Bank shall have the
continuing right, at its sole option and discretion, to: (a) do anything which
Undersigned is required but fails to do hereunder, and in particular Bank may,
if Undersigned fails to do so, (1) insure or take any reasonable steps to
protect the Collateral, (2) pay all taxes, levies, expenses and costs arising
with respect to the Collateral, or (3) pay any premiums payable on any policy of
insurance required to be obtained or maintained hereunder; (b) direct any
insurer to make payment of any insurance proceeds, including any returned or
unearned premiums, directly to Bank, and apply such moneys to any Obligations
evidenced or secured hereby in such order or fashion as Bank may elect; (c)
inspect the Collateral at any reasonable time; (d) pay any amounts Bank elects
to pay or advance hereunder on account of insurance, taxes or other costs, fees
or charges arising in connection with the Collateral, either directly to the
payee of such cost, fee or charge, directly to Undersigned or to such payee(s)
and Undersigned jointly; (e) pay the proceeds of the loan evidenced by this Note
-5-
<PAGE>
to any or all of the Undersigned individually or jointly, or to such other
persons as any of the Undersigned may direct; and (f) add any amounts paid or
incurred by Bank under Section 4(i), Section 4(j), Section 8(a) or Section 8(d)
to the principal amount of the indebtedness evidenced by this Note.
In addition to all rights given to Bank by this Note, Bank shall have all the
rights and remedies of a secured party under any applicable law, including
without limitation, the Uniform Commercial Code.
9. DEFINITIONS; MISCELLANEOUS PROVISIONS. (a) Undersigned waives protest of
all commercial paper at any time held by Bank on which Undersigned is in any way
liable, notice of nonpayment at maturity of any and all accounts, and (except
where requested hereby) notice of action taken by Bank; and hereby ratifies and
confirms whatever Bank may do. Bank shall be entitled to exercise any right
notwithstanding any prior exercise, failure to exercise, or delay in exercising
any such right. (b) Bank shall retain the lien of any judgment entered on
account of the indebtedness evidenced hereby, as well as any security interest
previously granted to secure repayment of the indebtedness evidenced hereby.
Undersigned warrants that Undersigned has no defense whatsoever to any action or
proceeding that may be brought to enforce or realize on any such judgment or
security interest. (c) If any provision hereof shall for any reason be held
invalid or unenforceable, no other provision shall be affected thereby, and this
Note shall be construed as if the invalid or unenforceable provision had never
been a part of it. The descriptive headings of this Note are for convenience
only and shall not in any way affect the meaning or construction of any
provision hereof. (d) The rights and privileges of Bank contained in this Note
shall inure to the benefit of its successors and assigns, and the duties of
Undersigned shall bind all heirs, personal representatives, successors and
assigns. (e) This Note shall in all respects be governed by the laws of the
state in which this Note is payable (except to the extent that federal law
governs), and all references to the Uniform Commercial Code shall be deemed to
refer to the Uniform Commercial Code as enacted in such state. (f) Undersigned
hereby irrevocably appoints Bank and each holder hereof as Undersigned's
attorney-in-fact to: (1) endorse Undersigned's name to any draft or check which
may be payable to Undersigned in order to collect the proceeds of any insurance
or any returned or unearned premiums in respect of any policies of insurance
required to be maintained hereunder; and (2) take any action Bank deems
necessary to perfect or maintain perfection of any security interest granted to
Bank herein, including executing any document on Undersigned's behalf.
Undersigned hereby acknowledges that this appointment of Bank and each holder
hereof as attorney-in-fact is irrevocable and is coupled with an interest. (g)
Undersigned shall bear the risk of loss of, damage to, or destruction of the
Collateral, and Undersigned hereby releases Bank from all claims for loss or
damage to the Collateral, and Undersigned hereby releases Bank from all claims
for loss or damage to the Collateral caused by any act or omission on the part
of Bank, except for willful misconduct. (h) "Chief Executive Office" means the
place from which the main part of the business operations of an entity is
managed. (i) "Environmental Law" means any federal, state or local
environmental law, statute, regulation, rule, ordinance, court or administrative
order or decree, or private agreement or interpretation, now or hereafter in
existence, relating to the manufacture, distribution, labeling, use, handling,
collection, storage, treatment, disposal or otherwise of Hazardous Substances,
or in any way relating to pollution or protection of the environment or public
health. (j) "Environmental Permit" means any federal, state or local permit,
license or authorization issued under or in connection with any Environmental
Law. (k) "Hazardous Substances" means petroleum and petroleum products,
radioactive materials, asbestos, radon, lead containing materials, sewage or any
materials or substances defined as or included in the definition of "hazardous
wastes," "hazardous substances," "hazardous materials," "toxic substances,"
"hazardous air pollutants," "toxic pollutants," "pollution," or terms of similar
-6-
<PAGE>
meaning as those terms are used in any Environmental Law. (l) "Undersigned"
refers individually and collectively to all makers of this Note, including, in
the case of any partnership, all general partners of such partnership
individually and collectively, whether or not such partners sign below.
Undersigned shall each be jointly and severally bound by the terms hereof and,
with respect to any partnership executing this Note, each general partner shall
be bound hereby both in such general partner's individual and partnership
capacities. (m) Copies or reproductions of this document or of any financing
statement may be filed as a financing statement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.)
-7-
<PAGE>
Signatures
Witness the due execution hereof.
- -------------------------------------------------------------------------------
Witness: Individual:
x x (Seal)
- ------------------------------- ------------------------------------
Address:
- ------------------------------- ------------------------------------
Witness: Individual:
x x (Seal)
- ------------------------------- ------------------------------------
Address:
RF POWER PRODUCTS, INC.
------------------------------------
Corporation or Other Entity
- ------------------------------- ------------------------------------
Attest/Witness: By: (Signature and Title)
x /s/ Paul S. Zaun x /s/ Domenic Golato, CFO (Seal)
- ------------------------------- ------------------------------------
By: (Signature and Title)
x (Seal)
------------------------------------
(Corporate Seal) Business Address
1007 Laurel Oak
-----------------------------------
Voorhees, NJ 08043
-8-
<PAGE>
SUPPLEMENT TO NOTE AND SECURITY AGREEMENT
-----------------------------------------
This Supplement to Note and Security Agreement ("Supplement") is annexed to
and is part of the Note and Security Agreement dated as of February 27, 1997 of
Undersigned, payable to Mellon Bank, N.A. ("Bank"), in the stated principal
amount of $500,000.00 ("Facility"). Such Note and Security Agreement as
supplemented by this Supplement shall be referred to as the Note. Capitalized
terms used without further definition herein shall have the meaning set forth in
the Note.
1. Restatement/Reaffirmation. This Note evidences $500,000 of the
-------------------------
principal balance of that certain Note and Security Agreement dated as of May
24, 1996 in the original principal amount of $4,000,000 from Undersigned to Bank
(the "Original Note") in accordance with the term-out option set forth in
Paragraph 3 of the Supplement to Note and Security Agreement annexed to and made
a part of the Original Note. This Note does not extinguish the Undersigned's
obligation to repay the indebtedness evidenced by, or the security interest
granted by, the Original Note. Instead, this Note represents a portion of the
obligation to repay the Original Note. The Undersigned further acknowledges and
confirms its grant to Bank of a continuing first priority security interest in
the Undersigned's equipment, inventory and accounts in order to secure the
portion of the Original Note payable hereunder.
2. Payment-Interest. Interest shall be payable at each of the following
----------------
times: (a) if at the Prime-Based Rate or the As-Offered Fixed Rate, on the
first day of each month, payable in arrears, beginning April 1, 1997 until the
end of the As-Offered Fixed Rate Period specified in each Notification or
February 28, 2001 (the "Maturity Date"); and (b) if at the LIBOR Rate, at the
end of each LIBOR Rate Period specified in each Notification. Undersigned
understands and agrees that any payments of principal, interest or other sums
required under this Note may be deducted on the due date, without notice by
Bank, from any deposit account maintained by Undersigned with Bank.
3. Payment-Principal. Principal shall be payable in forty-seven (47)
-----------------
equal consecutive monthly installments of $10,416.66 each. The initial
principal installment will be due and payable on April 1, 1997 and thereafter on
the first day of each month. There shall be a final forty-eighth payment of all
remaining unamortized principal on the Maturity Date.
4. Interest Rate Options. (a) The outstanding principal balance of this
---------------------
Note shall earn interest at the Prime-Based Rate, provided however that, subject
---------------------
to the terms of paragraph 4(b) below, by giving Notification, Undersigned may
request to have all or such portion of the outstanding principal of this Note as
hereinafter permitted earn interest, instead, at the As-Offered Fixed Rate or
the LIBOR Rate as follows: (i) with respect to the principal amount outstanding
under the Facility, from the date of a Notification until the end of the As-
Offered Fixed Rate Period or the LIBOR Rate Period (as applicable) specified in
the Notification; and/or (ii) with respect to the principal amount of any
portion of the Facility outstanding and earning interest at the As-Offered Fixed
Rate or the LIBOR Rate at the time of the Notification related to such principal
amount, from the expiration of the then current As-Offered Fixed Rate Period or
LIBOR Rate Period related to such principal amount until the end of the As-
Offered Fixed Rate Period or LIBOR Rate Period (as applicable) specified in the
Notification; and/or (iii) with respect to all or any portion of the principal
amount of the Facility outstanding and earning interest at the Prime-Based Rate
<PAGE>
at the time of Notification, from the date set forth in the Notification until
the end of the As-Offered Fixed Rate Period or LIBOR Rate Period (as applicable)
specified in the Notification. There shall be no more than one (1) advance of
principal accruing interest at the As-Offered Fixed Rate and no more than one
(1) advance of principal accruing interest at the LIBOR Rate outstanding at any
one time. The Undersigned shall, in selecting any interest rate option and/or
interest rate period, allow for scheduled principal installment repayments.
(b) Undersigned understands and agrees: (i) that Bank, from time to
time, may refuse any request of Undersigned to select, convert to or renew the
As-Offered Fixed Rate or LIBOR Rate, as the case may be, if Bank determines in
good faith (which determination shall be conclusive) that the Undersigned is in
default under the Note or that such interest rate is impractical or unlawful due
to any law, regulation, rule, guideline or interpretation or administration to
which Bank may be subject, (ii) that subject to the provisions of this Note, the
Prime-Based Rate, the As-Offered Fixed Rate or the LIBOR Rate may apply
simultaneously to the different parts of the outstanding principal of this Note,
(iii) that the As-Offered Fixed Rate or LIBOR Rate, as the case may be, may
apply simultaneously to various portions of the outstanding principal for
various As-Offered Fixed Rate Periods or LIBOR Rate Periods, as the case may be,
(iv) that the As-Offered Fixed Rate or LIBOR Rate, as the case may be,
applicable to any portion of outstanding principal may be different from the As-
Offered Fixed Rate or LIBOR Rate, as the case may be, applicable to any other
portion of outstanding principal and (v) that the Bank shall have the right to
terminate any As-Offered Fixed Rate Period or LIBOR Rate Period, as the case may
be, and the interest rate applicable thereto, prior to maturity of such Rate
Period, if Bank determines in good faith (which determination shall be
conclusive) that continuance of such interest rate has been made impractical or
unlawful by any law, regulation, rule, guideline or interpretation or
administration to which Bank may be subject, in which event the principal to
which such terminated Rate Period relates thereafter shall earn interest at the
Prime-Based Rate.
5. Interest Rate Spread. The Undersigned shall pay a basis point spread
--------------------
under this Note on its LIBOR Rate Option based on the Undersigned's financial
performance based on its Cash Flow Ratio (as defined in the Credit Agreement)
and effective on the first day following receipt of the Undersigned's quarterly
financial statements and continuing until receipt of the Undersigned's quarterly
financial statements for the following fiscal quarter:
<TABLE>
<CAPTION>
Cash Flow Ratio LIBOR Rate Plus
- --------------- Basis Point Spread
------------------------------
<S> <C>
Less than 2.50 to 1.00 LIBOR + 150 b.p.
Greater than or equal to 2.50 to 1.00,
But less than 3.50 to 1.00 LIBOR + 125 b.p.
Greater than or equal to 3.50 to 1.00 LIBOR + 100 b.p.
</TABLE>
6. Prime-Based Rate Fallback. After expiration of any As-Offered Fixed
Rate Period or LIBOR Rate Period, as applicable, any principal portion
corresponding to such Rate Period which has not been converted or renewed in
accordance with paragraph 4 hereof shall earn interest automatically at the
Prime-Based Rate from the date of expiration of such Rate Period until paid in
full, unless and until Undersigned requests and Bank approves a conversion to
the As-Offered Fixed Rate or the LIBOR Rate, as applicable, in accordance with
-2-
<PAGE>
paragraph 4. With respect to any principal amount, if Undersigned fails to
request the As-Offered Fixed Rate option or the LIBOR Rate option, as the case
may be, by giving Bank a Notification, or if Bank fails to approve such request
when made, such principal amount shall be deemed to earn interest at the Prime-
Based Rate.
7. Voluntary Repayment. Prior to the occurrence of an Event of Default
-------------------
hereunder, (a) Undersigned shall have the right at its option from time to time
to prepay that portion of the outstanding principal balance hereof which is
earning interest at such time at the Prime-Based Rate in whole or in part
without any Repayment Premium; and (b) Undersigned shall have the right to
prepay all or any portion of the outstanding principal balance hereof which is
earning interest at the As-Offered Fixed Rate or the LIBOR Rate, provided
--------
however that, any prepayments of principal earning interest at the As-Offered
- ------------
Fixed Rate or the LIBOR Rate shall be applied to the unpaid installments of
principal in the reverse order of their maturities and shall be accompanied by
the Repayment Premium applicable thereto.
8. Indemnity. Undersigned shall indemnify Bank against any loss or
---------
expense (including loss of margin) which Bank has sustained or incurred as a
consequence of: (a) any payment, prepayment or conversion of any principal
amount earning interest at the As-Offered Fixed Rate or the LIBOR Rate, as the
case may be, on a day other than the last day of the corresponding Rate Period
(whether or not any such payment is made pursuant to demand by Bank under this
Note and whether or not any such payment is consented to by Bank, unless Bank
shall have expressly waived such indemnity in writing); (b) any attempt by
Undersigned to revoke in whole or part any Notification given pursuant to this
Note; (c) any attempt by Undersigned to convert or renew any principal amount
earning interest at the As-Offered Fixed Rate or the LIBOR Rate, as the case may
be, on a day other than the last day of the corresponding applicable Rate Period
(whether or not such conversion or renewal is consented to by Bank, unless Bank
shall have expressly waived such indemnity in writing); or (d) any Event of
Default.
If Bank sustains any such loss or expense it shall from time to time
notify Undersigned of the amount determined in good faith by Bank (which
determination shall be conclusive) to be necessary to indemnify Bank for such
loss or expense. Such amount shall be due and payable by Undersigned on demand.
9. Records. The unpaid principal amount of this Note, the unpaid
-------
interest accrued thereon, the interest rate or rates applicable to such unpaid
principal amount, the duration of such applicability and the date and amount of
each payment or demand shall at all times be ascertained from the books and
records created by Bank, which shall be conclusive absent manifest error.
All notices (including any Notification) under this Note shall be in
writing or by telephone promptly confirmed in writing, and all such writings
shall be sent by first-class, first-class express or certified mail or by hand
delivery, in all cases with charges prepaid, provided that Bank may act in
reliance on any telephonic notice prior to receipt of written confirmation. All
notices shall be sent to Undersigned at the address stated on the signature page
hereof or in accordance with the last unrevoked written direction from
Undersigned to Bank. All notices by Undersigned shall be effective when
received by Bank at its address at Mellon Bank, N.A., Plymouth Meeting Executive
Campus, 610 W. Germantown Pike, Suite 200, Plymouth Meeting, PA 19462,
Attention: Middle Market Banking, and all notices by Bank shall be effective
when telephoned, deposited in the mail or hand delivered. Written notices or
-3-
<PAGE>
confirmations by Undersigned shall not be deemed records of Bank within the
meaning of this paragraph whether or not received by Bank and, in the event that
any written notice sent by Undersigned in confirmation of telephonic notice
differs from Bank's records of such telephonic notice, Bank may act in reliance
upon such telephonic notice as if written notice were not received, provided
that Bank has acted in good faith. Bank may conclusively rely without inquiry
on any notice or confirmation purporting to be from or authorized by Undersigned
and such reliance shall be presumed to be correct.
10. Time of Essence. The prompt and faithful performance of all of
---------------
Undersigned's obligations hereunder, including without limitation time of
payment, is of the essence of this Note.
11. Definitions. As used in this Note: "As-Offered Fixed Rate" means a
----------- ---------------------
per annum rate of interest (computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed) offered by Bank to Undersigned.
"As-Offered Fixed Rate Period" means for any portion of principal for which
- -----------------------------
Undersigned elects the As-Offered Fixed Rate the period of time for which such
As-Offered Fixed Rate shall apply to such principal portion. "LIBOR Rate" means
----------
for any day during each LIBOR Rate Period the per annum rate of interest
(computed on a basis of a year of 360 days and actual days elapsed) determined
by Bank by adding (a) the per annum rate of interest (rounded upward to the
nearest 1/100 of 1%) obtained by dividing (i) the rate of interest estimated in
good faith by Bank in accordance with its usual procedures (which determination
shall be conclusive) to be the average of the rate per annum for deposits, in an
amount of U.S. Dollars comparable to the amount of principal relating to such
LIBOR Rate Period and having maturities comparable to such LIBOR Rate Period,
offered to major money center banks in the London interbank market at or about
11:00 a.m., London time, two London Business Days prior to such LIBOR Rate
Period, (ii) a number equal to 1.00 minus the LIBOR Rate Reserve Percentage for
-----
such day, and (b) the applicable basis point spread. "LIBOR Rate Period" means
-----------------
for any portion of principal for which Undersigned elects the LIBOR Rate the
period of time for which such rate shall apply to such principal portion. LIBOR
Rate Periods shall be for periods of 30, 60 and 90 days and for no other length
of time. "LIBOR Rate Reserve Percentage" for any day means the percentage
-----------------------------
(rounded upward to the nearest 1/100 of 1%), as determined in good faith by Bank
(which determination shall be conclusive) as representing for such day the
maximum effective percentage as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the reserve
requirements (including, without limitation, supplemental, marginal and
emergency reserve requirements) for Bank with respect to eurocurrency funding.
"Notification" means telephonic notice (which shall be irrevocable) by
------------
Undersigned to Bank that Undersigned has requested that the As-Offered Fixed
Rate or the LIBOR Rate, as the case may be, shall apply to some portion of the
principal amount of this Note in accordance with the provisions of paragraph 4
hereof, which notice shall be given no later than 1:00 p.m., local time at the
place where this Note is payable, on the day (which shall be a day on which Bank
is opened for business) on which such election is to become effective, or if the
LIBOR Rate is requested, 1:00 p.m., local time at the place where this Note is
payable, on the day which is at least three (3) business days prior to the day
(which shall be a day on which Bank is opened for business) on which such
election is to become effective, which notice shall specify (i) that the As-
Offered Fixed Rate or LIBOR Rate option is being selected; (ii) the principal
amount to be subject to the As-Offered Fixed Rate or the LIBOR Rate; (iii)
whether such amount is a renewal of a previous request of the As-Offered Fixed
Rate or the LIBOR Rate, a conversion from the Prime-Based Rate or LIBOR Rate to
the As-Offered Fixed Rate, a conversion from the Prime-Based Rate or As-Offered
Fixed Rate to the LIBOR Rate, or a combination thereof; (iv) the Rate Period
selected; and (v) the date on which such request is to become effective (which
-4-
<PAGE>
date shall be a date selected in accordance with paragraph 4(a) hereof).
"Prime-Based Rate" means a per annum rate of interest, calculated on an 360 day
- -----------------
basis but charged on the actual number of days elapsed, equal to the rate of
interest announced from time to time by Bank as its Prime Rate which rate is not
necessarily the lowest interest rate charged by the Bank for loans, such Prime-
Based Rate to change from time to time as of the effective date of each change
in the Prime Rate. "Repayment Premium" means the amount which Undersigned shall
-----------------
pay to Bank as a premium in connection with a repayment of outstanding principal
earning interest at the As-Offered Fixed Rate or the LIBOR Rate, as applicable,
at the time of repayment, which amount shall be the amount determined by Bank to
be the difference between (a) the present value of the interest payments that
would have been paid in the future to Bank by Undersigned on such repaid portion
of principal accruing at the As-Offered Fixed Rate or the LIBOR Rate or as
applicable, but for such repayment, and (b) the present value of the interest
payments that would be paid in the future to Bank at the United States Treasury
Rate if on or about the date of repayment Bank made a hypothetical investment of
the repaid portion of principal accruing at a fixed rate of interest in United
States Treasury securities maturing on or about the date that the repaid portion
of principal would have matured but for such repayment and bearing interest
accruing from the date of repayment, payable on each date on which Undersigned,
but for such repayment, would have paid interest on the repaid portion of
principal. "Undersigned" means, individually and collectively, all makers of
-----------
this Note. "United States Treasury Rate" means a rate of interest per annum,
---------------------------
equal to (rounded downward to the nearest 1/100 of one percent) the annual yield
Bank could obtain by purchasing on the date of repayment United States Treasury
Securities with semi-annual interest payments, maturing on or about the date on
which the repaid portion of principal would have matured.
WITNESS the due execution and delivery hereof, intending to be legally
bound.
ATTEST: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun By: /s/ Domenic N. Golato
- ----------------------------- -----------------------
By: Domenic N. Golato
Title: Chief Financial Officer
Accepted by:
MELLON BANK, N.A.
/s/ Anthony W. LaMarca
---------------------------
Anthony W. LaMarca
Vice President
-5-
<PAGE>
EXHIBIT 10.34
AMENDMENT TO NOTE AND SECURITY AGREEMENT
----------------------------------------
THIS AMENDMENT TO NOTE AND SECURITY AGREEMENT (this "Agreement") made
as of this 28th day of May, 1997 between RF POWER PRODUCTS, INC., a New Jersey
corporation (the "Borrower"), and MELLON BANK, N.A., a national banking
association (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower is the maker of a certain Note and Security
Agreement to the Bank in the original principal amount of Five Hundred Thousand
Dollars ($500,000.00) dated February 27, 1997 (the "Note") (capitalized terms
used herein but not defined in this Agreement shall have the meaning ascribed to
them in the Note);
WHEREAS, the Note reflects a portion of the principal once outstanding
under the Note and Security Agreement dated as of May 24, 1996 from the Borrower
in favor of the Bank (the "Original Note"), which principal the Borrower elected
to amortize pursuant to the term-out option available in connection with the
Original Note;
WHEREAS, the Borrower has requested that the Bank further amend
certain provisions of the Original Note and the Note in order to elect the term-
out of an additional $500,000; and
WHEREAS, the Bank is willing to grant such request, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Borrower and the Bank hereby covenant and agree as follows:
1. Amendments. Upon the execution and delivery of this Agreement by
----------
the Borrower and the Bank, the Note shall be amended as follows:
(a) The Note shall be amended to reflect that notwithstanding any
provision in the Note to the contrary, the maximum principal amount of the Note
has been increased to $1,000,000. Wherever the figure $500,000 shall appear in
the Note, it shall be replaced with the figure $1,000,000.
(b) Section 1 to the Supplement to Promissory Note and Security
Agreement (the "Supplement") is deleted in its entirety and replaced with the
following:
<PAGE>
2(a) Restatement/Reaffirmation. This Note evidences $1,000,000
-------------------------
of the principal balance of that certain Note and Security Agreement dated
as of May 24, 1996 in the original principal amount of $4,000,000 from
Undersigned to Bank (the "Original Note") in accordance with the term-out
option set forth in Paragraph 3 of the Supplement to Note and Security
Agreement annexed to and made a part of the Original Note. This Note does
not extinguish the Undersigned's obligation to repay the indebtedness
evidenced by, or the security interest granted by, the Original Note.
Instead, this Note represents a portion of the obligation to repay the
Original Note. The Undersigned further acknowledges and confirms its grant
to Bank of a continuing first priority security interest in the
Undersigned's equipment, inventory and accounts in order to secure the
portion of the Original Note payable hereunder.
(c) Section 3 to the Supplement is deleted in its entirety and
replaced with the following:
Payment-Principal. Principal shall be payable in forty-seven
-----------------
(47) equal consecutive monthly installments of $20,833.33 each. The
initial principal installment will be due and payable on July 1, 1998 and
thereafter on the first day of each month. There shall be a final forty-
eighth payment of all remaining unamortized principal on the MATURITY DATE.
2. Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants to the Bank that the Borrower is not in default under the Note, the
Credit Agreement or any other document executed in connection therewith.
3. Other Terms Confirmed. All other terms and conditions of the
---------------------
Note, including, without limitation, the supplements annexed thereto and made a
part thereof, are hereby confirmed and shall remain in full force and effect
without modification. From and after the effectiveness of the amendments set
forth in Section 1 hereof, all references in any document or instrument to the
Note shall mean the Note as amended by this Agreement.
4. No New Indebtedness. The Borrower specifically acknowledges and
-------------------
agrees that neither this Agreement nor the New Note shall represent in any way
the extension of any new credit by the Bank to the Borrower, or the satisfaction
of any indebtedness evidenced by the Credit Agreement or the Note as amended
hereby.
5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
-2-
<PAGE>
6. Headings. The descriptive headings which are used in this
--------
Agreement are for convenience only and shall not affect the meaning of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
Attest: RF POWER PRODUCTS, INC.
/s/ Paul S. Zaun /s/ Domenic N. Golato
- -------------------------- -----------------------------
Name: By: Domenic N. Golato
Title: Chief Financial Officer
[Corporate Seal]
MELLON BANK, N.A.
By: /s/ Anthony W. LaMarca
-------------------------
Anthony W. LaMarca
Vice President
-3-
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
RF Power Products, Inc.:
We consent to incorporation by reference in the registration statements
(No. 33-59414, No. 33-73922 and No. 333-34563) on Form S-8 of RF Power Products,
Inc. of our report dated January 16, 1998, relating to the consolidated balance
sheets of RF Power Products, Inc. and subsidiary as of November 30, 1997 and
1996, and the related consolidated statements of income, shareholders' equity,
and cash flows for the years then ended, and related schedule, which report
appears in the November 30, 1997 annual report on Form 10-K of RF Power
Products, Inc.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
February 25, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 10, 1996 accompanying the
consolidated financial statements included in the Annual Report of RF Power
Products, Inc. and Subsidiary on Form 10-K for the year ended November 30, 1995.
We hereby consent to the incorporation by reference of said report in the
Registration Statements of RF Power Products, Inc. and Subsidiary on Forms S-8
(File No. 33-59414, effective March 12, 1993, File No. 33-73922, effective
January 7, 1994, and File No. 333-34563, effective August 28, 1997).
Grant Thornton LLP
Philadelphia, Pennsylvania
February 24, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
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