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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-K
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[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for fiscal year ended March 28, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-21294
Aseco Corporation
(Exact name of registrant as specified in its charter)
Delaware 04-2816806
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
500 Donald Lynch Boulevard, Marlboro, Massachusetts 01752
(Address of principal executive offices)
Registrant's telephone number, including area code
508-481-8896
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X .
The aggregate market value of voting stock held by non-affiliates of the
registrant was $3,850,658 as of May 28, 1999.
3,850,658
(Number of shares of common stock outstanding as of May 28, 1999)
Documents Incorporated by Reference
Part III incorporates by reference certain information from the Registrant's
proxy statement for the annual meeting of stockholders to be held on August
11, 1999.
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PART I
ITEM 1. BUSINESS
Overview
Aseco designs, manufactures and markets test handlers used to automate the
testing of integrated circuits in surface mount packages. Aseco provides high
quality, versatile test handlers designed to maximize the productivity of the
significantly more costly testers with which they operate. Aseco also designs,
manufactures and markets integrated circuit wafer handling and inspection
systems. These systems are used to load, sort and transport wafers during both
manual and automatic inspection as well as other wafer processing steps in the
semiconductor manufacturing process.
Industry Background
The manufacture of integrated circuits (IC's) takes place in ultra-clean
fabrication plants. Flat circular discs of silicon ("wafers"), of extremely
high perfection and purity, are taken through a variety of processes--
principally micro-patterning, where small structures are etched into the
surface, and physical and chemical processes, where material is deposited or
implanted into the structures. Between these major processing steps the wafers
must be transported cleanly and safely and inspected and assessed for quality
and cleanliness. Automated wafer handling and inspection equipment facilitates
the safe transport, handling and defect detection and assessment of wafers
between process steps preventing damage, contamination and breakage which
often results from manual intervention.
Following the manufacturing process, IC devices are tested by semiconductor
manufacturers for quality and electrical performance before shipment to end
users. In addition, volume purchasers of IC devices often test IC devices
during incoming inspection. Test handlers facilitate the fast, automated and
cost-effective testing of IC devices. The automated test process requires two
major pieces of equipment: a tester and a test handler. Testers are
specialized, computer-controlled electronic systems that perform the
electrical test of IC devices, including memory, logic, linear, microprocessor
and Application Specific Integrated Circuit (ASIC) devices. Test handlers are
electro-mechanical systems which are connected to and communicate with the
tester. IC devices are loaded into the test handler and are then stabilized at
a specified temperature to simulate operating extremes for the IC device. The
test handler then transports the IC device to a contactor, which provides an
electrical connection between the IC device and the tester and allows an
interchange of electrical signals between the tester and device under test so
the tester can evaluate the performance of the IC. Finally, the handler
segregates the devices as determined by the tester.
Traditionally, IC devices were attached to one side of a printed circuit
board by means of pins, also referred to as leads, that were inserted into
pre-drilled holes and soldered to the electrical circuits on the board, a
technique known as "through-hole" mounting. Surface mount technology ("SMT"),
an alternative technology which is widely used, involves soldering of IC
devices directly to the surface of the board. This technology has been
increasingly adopted in response to the introduction of more powerful IC
devices with more leads and the demand for ever more increasing
miniaturization. SMT has several distinct advantages over through-hole
technology. First, because IC device leads are not inserted through the board,
IC device leads can be closer together allowing IC devices and the boards they
populate to be smaller. This reduction in IC device size also enhances circuit
processing speed and thus board and system performance. Second, because IC
device leads are not inserted through the board, boards can be populated on
both sides which further reduces overall required board size.
The demand for test handlers is driven primarily by IC device production
levels and technological changes relating to the packaging of integrated
circuits. Because only the test handler has physical contact with the IC
devices, changes in integrated circuit packaging have minimal effect on tester
requirements but generally have a major effect on test handler requirements
and the demand for the test handlers.
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The test handler market is commonly segmented on the basis of the function
of the IC devices handled: test handlers which process memory IC devices, such
as Dynamic Random Access Memory devices (DRAM) and Static Random Access Memory
devices (SRAM), and test handlers which process non-memory IC devices, such as
digital, logic, linear, ASIC and microprocessor devices. Non-memory IC devices
generally have short test times, are often configured with leads on four
sides, come in a wide variety of package configurations and are produced in
relatively small lot sizes. Consequently, non-memory IC device test handlers
must be able to handle devices gently and transport them to and from the
contactor rapidly ("index time") and must be adaptable to accommodate many
different package types. Memory IC devices, by contrast, generally have longer
test times, have leads on just two sides, come in fewer package configurations
and are produced in larger lot sizes. The index time of memory IC device test
handlers is less important because of the long test times of memory IC
devices.
Test handlers capable of facilitating the testing of multiple IC devices
simultaneously ("multi-site test handlers") have been developed to improve
test handler throughput of memory IC devices. Traditionally, multi-site test
handlers have not been used in connection with the testing of non-memory IC
devices. Recently, however, as non-memory IC devices have become more complex
and their test times have correspondingly increased, multi-site test handlers
have been used in connection with the testing of non-memory IC devices as
well. In addition, certain SRAM IC devices possess characteristics typical of
non-memory IC devices, such as shorter test time, leads on four sides and
wider variety of package configurations, therefore creating the demand in the
SRAM market for a multi-site test handler with fast index speed and gentle
handling capabilities.
The majority of DRAM IC devices are manufactured in Japan and Korea while
the majority of non-memory IC devices are manufactured in the United States. A
significant number of SRAM IC devices are manufactured in the United States as
well as in Japan and Korea.
To date, the Company's products have primarily addressed the non-memory
surface mount device portion of the test handler market.
Aseco's Automation Equipment
Test Handlers
Test handlers are used to automate the electrical testing of IC devices. IC
devices are loaded into the handler from tubes, magazines or trays. They are
then transported to a temperature chamber within the test handler where they
are thermally conditioned at temperatures typically ranging from -55 to + 155
Celsius to simulate operating extremes for the IC device. After the IC devices
are stabilized at a specified temperature, the test handler positions the IC
devices within a contactor, which provides an electrical connection between
the IC device and the tester and insulates the tester from the temperature
extremes inside the handler. Test routines can last from fractions of a second
to minutes depending on the type of IC device being tested and the purpose of
the test. After testing, the tester signals the test handler to sort the IC
devices into various categories for shipment, additional testing or disposal.
There are four basic types of test handlers: gravity-feed systems, pick and
place systems, belt-conveyance systems and air-bearing systems. The
appropriate type of test handler is generally determined by the size and lead
configuration of the IC devices being tested. The gravity-feed system, the
oldest of the four test handler types, is the predominant test handler for
through-hole IC devices. As the name indicates, gravity-feed systems rely on
gravity to move IC devices through the test handler. This type of test handler
has the advantage of being able to process IC devices quickly, but has a
greater tendency to damage IC devices with leads on four sides. Damaged leads
can cause soldering defects when the IC devices are mounted on boards, which
in turn increases re-work and warranty costs. Pick and place systems, in
contrast, transport IC devices by means of robotic arms, which prevent the IC
devices from coming into contact with one another and reduce the chance of
lead damage. While pick and place systems are suitable for fragile IC devices
that are susceptible to lead damage such as the Quad Flat Pack (QFP), they
typically process IC devices more slowly than other types of test handlers.
Air-
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bearing systems, which transport IC devices on a bed of air in the temperature
chamber, permit high-speed processing while minimizing the potential for lead
damage characteristic of gravity-feed systems. Belt-conveyance systems move
large quantities of devices quickly into and out of the system on belts
without damaging fragile leads.
Key Test Handler Features
The primary function of the test handler is to automate the testing process
thereby increasing the productivity of the tester resulting in the accurate
testing of IC devices at the lowest per unit cost possible. Important test
handler features include:
Gentle Handling. In order for the test handler user to maximize yield and
the quality of the IC devices it ships, it is imperative that the test handler
not damage the IC devices it processes. Due to their fragility, surface mount
IC device leads are especially susceptible to damage, and as IC devices with
higher lead counts and more fragile leads have become more prevalent, gentle
handling has become an increasingly important test handler feature. Aseco
currently offers test handlers with four IC device transport mediums--gravity-
feed, air-bearing, pick and place and belt-conveyance test handlers. The four
transport mediums allow customers to use the type of test handler most
suitable for the IC device being tested. In addition, Aseco test handlers are
equipped with vacuum stops, limited force contactors and other features to
further minimize lead damage.
Signal Integrity. Signal integrity is the ability of the test handler to
facilitate accurate transmission of electrical signals between the tester and
the IC device being tested. Poor transmission can lead to incorrect test
results. Aseco maximizes its performance in this area by equipping its test
handlers with Aseco's proprietary contactors which position the IC device
under test in close proximity to the tester which allows fast and accurate
signal transmission. If so desired by customers, other contactors can also be
used with Aseco equipment.
Cold Operation. The ability of the test handler to operate for extended
periods of time at cold temperatures (typically -55 Celsius) without
interruption for defrosting is an especially important factor in the overall
productivity of the test handler. Aseco has developed considerable expertise
in thermal engineering and insulation technology which is reflected by the
fact that its test handlers are capable of operating for long periods over
multiple work shifts without interruption.
Productivity. The productivity of a test handler is largely a function of
the rate at which it moves IC devices through the test handler ("throughput")
and the percentage of time the test handler is available for use ("uptime").
The throughput of Aseco's test handlers is enhanced by their use of forced air
to thermally condition IC devices. This produces an effect analogous to wind
chill and minimizes the time IC devices are required to stay in the
temperature chamber. The Company believes its handlers are able to achieve
high uptime because of their relatively simple design that reduces jam rates
and the frequency and duration of required maintenance. Maintenance time is
also reduced by the diagnostic software incorporated in each Aseco test
handler.
Versatility. With the increase in the number of different IC device lead
configurations, an important feature of a test handler is its ability to
accommodate IC devices with different lead configurations. Through the use of
easy to install conversion kits, Aseco's test handlers are currently capable
of processing many different IC device configurations.
Test Handler Products
The Company's test handlers share certain common features including the
ability to operate at cold, ambient and hot temperatures and a menu-driven CRT
user interface that displays test handler performance and diagnostic
information. The following is a complete list of the Company's test handler
product offerings:
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Model S-130 Test Handler
The S-130 is a versatile air-bearing test handler, capable of handling a
broad array of non-memory IC device types. Through the use of conversion kits,
the S-130 is currently able to accommodate a wide variety of IC device
configurations. The S-130 reaches throughput rates of 2,400 devices per hour,
and has the capability to operate at temperatures between -55 and +150
Celsius. The versatility of the S-130 has made it popular with suppliers of
ASIC devices and others who need to test a relatively small number of many
different IC device package types.
Model S-133 Test Handler
The S-133 is a modified version of the S-130 test handler. It offers all the
features and capabilities of the S-130 plus the ability to position the device
for electrical testing of accelerometers while under physical shock. An
accelerometer is a device that activates when a large amount of force is
placed upon it and is used in such applications as car airbags.
Model S-170 Test Handler
The S-170 is a high-speed gravity-feed test handler capable of a throughput
rate of 6,000 IC devices per hour. This test handler is equipped with high
performance contactors and provides test handling at temperatures ranging from
- -55 to +155 Celsius. Changing between different IC device package lead counts
is achieved by simple keypad entry on a menu-driven CRT display. The S-170 is
most appropriate for high volume testing of small surface mount IC devices
having short test times and leads on only two sides such as linear devices.
Model S-170C and S-170D Test Handlers
The S-170C and S-170D are modified versions of the S-170 gravity feed test
handler. Each offers all the features and capabilities of the S-170 plus the
ability to handle a broader spectrum of the popular SOIC package types. In
addition, the S-170D offers plunge to board capability that allows an
electrical connection between the IC device and a device under test ("dut")
board eliminating the need for a contactor and facilitating testing of IC
devices with very short lead lengths.
Model S-170CS Test Handler
The S-170CS is a modified version of the S-170. The S-170CS offers all the
features and capabilities of the S-170 including plunge to board capability.
This test handler, which is used to handle newer chip-scale packages, offers a
significantly faster and less expensive alternative to conventional "pick-and-
place" test handlers traditionally used to handle chip scale packages.
Model S-200 Test Handler
The S-200 is a pick and place test handler, particularly suitable for
handling fragile lead IC devices such as the popular QFP package. The S-200
has a throughput capacity of 1,200 devices per hour and operates at
temperatures ranging from -55 to +155 Celsius. Key features of the S-200
include its simple design, which enhances uptime, and the ease with which it
can be converted to handle different package types plus automatic tray loading
and unloading. A key distinguishing feature is its ability, through the
addition of an optional machine vision system, to provide in-line lead
inspection in addition to its normal electrical test handling capability.
Model S-450 Test Handler
The S-450 test handler employs an air-bearing transport system. This product
incorporates the many features of Aseco's other test handlers, while
incorporating additional capabilities such as a touch screen user interface,
multi-site testing, high throughput and automated IC device loading and
unloading. The S-450 handles PLCC, SOIC(W), Molded Carrier Ring (MCR) devices
and may be used in SRAM applications. The multi-site test capability of the S-
450 allows up to eight IC devices to be tested simultaneously, can be
converted to handle
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numerous IC device package types and, like the Company's other test handler
models, allows testing at hot, cold and ambient temperatures.
Model VT8000 Test Handler
The VT8000 employs a combination of machine vision and multi track belt
conveyance to enable more gentle handling of fragile devices. The VT8000
allows up to 16 IC devices to be tested simultaneously with simplified
conversion kits resulting in cost savings for customers and less complicated
set up and changeover. Machine vision facilitates lead inspection of IC
devices before and after testing to identify parts with damaged leads. The
VT8000 handles a variety of package types and incorporates an optional plunge-
to board feature.
Wafer Handling and Inspection Automation Equipment
Wafer handling and inspection equipment is used to automate the transfer and
inspection of wafers between semiconductor manufacturing process steps.
Generally, wafers are transported through the factory in receptacles called
cassettes. Basic bench top wafer handling equipment extracts a wafer from a
cassette and places it on a horizontal stage where microscope inspection takes
place. More sophisticated bench top equipment facilitates "macro-inspection"
of wafers (i.e., not under a microscope) by placing each wafer on a stage
which tilts and rotates the wafer at all angles under a high intensity lamp to
reveal defects.
During the wafer fabrication process, wafers are tracked in lots (typically
of 25 wafers) which often need to be broken down into sub-lots in order to fit
into certain process equipment and then returned to the original lots. In
order to accomplish this, wafers are identified by alphanumeric or bar-code
symbols etched into the surface of each wafer. Integrated wafer automation
equipment enables the user to select any wafer from a maximum of 100 wafers
(usually 4 lots of 25), identify it automatically, assign it a new position
among the wafers, extract a given number of wafers from a batch, reorder the
wafers or combine two lots or sublots. These wafer sorting devices then are
able to communicate wafer and system status to an external factory computer
enabling the sorter to function as an automation center under the control of
the central factory automation system. Another type of wafer automation
equipment is an integrated inspection station. Such a module enables the user
to extract a wafer from a cassette, place it on a stage, inspect the wafer
under a microscope using a monitor to view the microscope imaging, identify
defects, collect and analyze data and return the wafer to its cassette for
further processing.
Key Wafer Automation Equipment Features
Cleanliness--Semiconductor wafer fabrication is conducted under ultra-clean
conditions; therefore, cleanliness of the equipment which operates in this
environment is important. Aseco achieves cleanliness in its wafer automation
and inspection equipment by covering all moving parts, ensuring that all
moving parts are below the wafer plane and carefully selecting the materials
used to make the equipment.
As wafer sizes and therefore equipment sizes grow and as cleanliness assumes
greater importance, the cost of producing wafer fabrication cleanrooms will
become prohibitively high. As an alternative, minienvironment technology
offers lower costs in the construction of cleanrooms. Within such
minienvironments, only the air immediately above the equipment where the wafer
resides needs to be clean and this area is isolated by shields from the
general area surrounding the equipment. Wafers are carried from process to
process in sealed boxes which interface with the equipment shield via a "SMIF"
Port (Standard Mechanical Interface). Aseco's entire range of benchtop and
integrated systems are compatible with SMIF technology.
Safety of Handling--Each wafer processed by a semiconductor manufacturer
requires dozens of costly passes through each manufacturing process and
ultimately yields numerous individual IC's. As a result, safety of handling,
or zero wafer breakage, is of paramount importance to semiconductor
manufacturers. Aseco has achieved safe handling using designs which
incorporate both hardware sensors and software checks.
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Versatility--An important aspect of Aseco's technology and product range is
the maximum wafer size that it can accommodate. State of the art fabrication
units currently are running 8 inch (200mm) wafers. The next generation wafer
size is expected to be 12 inches. Aseco offers a full range of 6 inch and 8
inch compatible equipment and plans to broaden its product line to accommodate
12-inch wafers in time to take advantage of the construction of fabrication
plants needed to produce 12-inch wafers.
Wafer Handling and Inspection Products
The following is a complete list of the Company's wafer handling and
inspection product offerings:
Model AL-1000
The AL-1000 extracts a wafer from its carrying cassette and places it on a
flat, horizontal stage, usually for microscope inspection. Wafers can be
selected specifically or randomly for quality assurance functions. The
microscope operator is freed from the delicate and potentially damaging task
of manipulating the wafer to concentrate on the inspection task.
Model AV-1000
The AV-1000 shares the same functions and features of an AL-1000 and has a
built in "macro-inspection" stage, which tilts and rotates the wafer at all
angles ensuring good visibility of all surface features of the wafer. A high
intensity lamp shines on the wafer surface revealing wafer defects.
Model AS-1000
The AS-1000 is an integrated solution allowing semiconductor wafers to be
automatically identified and sorted using advanced vision processing. Operator
contact is eliminated as wafer movements are completed by a precision robotic
transfer module ensuring clean and safe transfers. The AS-1000 may be fitted
with an optional SMIF minienvironment SubClass 1, which creates a clean
environment surrounding the cassette transport modules.
Model AI-1000
The AI-1000 is an integrated inspection station that provides fully
automatic detection of surface contamination, damage and process errors and
dimensional tolerance failures on semiconductor wafers. The machine
incorporates an autosizing function for 4 to 8 inch wafers, which speeds set
up and changeover for multi-size fabrication operations. Wafers are pre-
aligned, automatically identified by machine vision and loaded to the
microscope for fine alignment and flaw detection. The machine collects and
stores inspection data for future recall and reference.
Remanufacturing Services
The Remanufacturing Services Group provides services such as machine
upgrades, reconditioning and reconfiguration for all of the Company's test
handler models.
Distribution Agreements
In November 1997, Aseco entered into a distribution agreement with Rasco
A.G. ("Rasco") pursuant to which Aseco markets and sells Rasco's SO1000 test
handler in the United States, Canada and Taiwan. The SO1000 is a high speed,
multi-site gravity fed test handler especially suited to high volume
semiconductor test floors. It is designed to handle small SOIC, SSOP, TSSOP,
MSOP, and SOT packages in dual as well as quad test site configuration.
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Customers
Customers for the Company's products are primarily semiconductor
manufacturers, but also include volume purchasers of IC devices and companies
engaged in the business of testing IC devices for others.
Since its inception, the Company has sold 1,390 test handler systems to
approximately 145 customers in more than 161 worldwide locations. In fiscal
1999, two customers, Analog Devices, Inc., and Motorola accounted for 14% and
13% of net sales, respectively. In fiscal 1998, two customers, Maxim
Integrated Products, Inc and Analog Devices, Inc., accounted for 23% and 16%
of net sales, respectively. In fiscal 1997, one customer, Analog Devices,
Inc., accounted for 17% of net sales.
Sales and Marketing
The Company markets its products primarily through manufacturers'
representative organizations and, in certain geographic regions, a direct
sales force. As of March 28, 1999, the Company had 15 United States
manufacturers' representatives and 11 international manufacturers'
representatives located in England, Germany, France, Israel, Hong Kong, Italy,
Malaysia, Singapore, Sweden, and Taiwan.
The Company's sales organization coordinates the activities of the Company's
manufacturers' representatives and actively participates with them in selling
efforts. Aseco provides sales and technical support to its manufacturers'
representatives through the Company's sales and service offices in Marlboro,
Massachusetts, Santa Clara, California, and Singapore. The Company employs a
direct sales force to market and sell test handlers in New England. The
Company's marketing efforts include participation in industry trade shows and
production of product literature. These efforts are designed to generate sales
leads for the Company's manufacturers' representatives.
To date, the Company's international sales have been primarily to customers
located in the Asia Pacific region (excluding Japan) and Western Europe.
International sales accounted for approximately 39%, 36%, and 52% of the
Company's net sales in fiscal 1999, 1998, and 1997, respectively.
During fiscal 1999 and 1998 a small percentage of the Company's
international sales were invoiced in foreign currencies and, accordingly, were
subject to fluctuating currency exchange rates. The Company's international
sales are subject to certain risks common to many export activities, such as
governmental regulations, export license requirements and the risk of
imposition of tariffs and other trade barriers.
Backlog
The Company's backlog, which consists of customer purchase orders which the
Company expects to fill within the next twelve months, was approximately
$1,285,000 as of March 28, 1999 compared to approximately $4,011,000 as of
March 29, 1998. Because all purchase orders are subject to cancellation or
delay by customers with limited or no penalty, the Company's backlog is not
necessarily indicative of future revenues or earnings. The Company typically
ships its test handlers and wafer automation equipment within eight to ten
weeks of receipt of purchase order and its conversion kits and spare parts
within a shorter period.
Customer Service
The Company believes that strong customer service is important in achieving
its goal of high customer satisfaction. Aseco's customer service organization,
augmented by the Company's engineering personnel, provides product training,
telephone technical support, applications support, maintenance and operations
manuals and on-site service and repair. Such services are provided from the
Company's headquarters in Marlboro, Massachusetts and from one other domestic
and one international field service center, each strategically located near
customers to minimize response time to customer service requests. In addition,
the Company's eleven international manufacturer's representatives maintain
field service centers.
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The Company warranties its products against defects in material and
workmanship for a period of up to one year. To date, the Company's warranty
claims have not been material. The Company believes its accrual for product
warranties at March 28, 1999 is adequate.
Product Development
The Company believes that its future success will depend in large part on
its ability to enhance and broaden, with the input of its customers, its
existing product line to meet the evolving needs of the test handler market.
To date, the Company has relied on internal development and two acquisitions
(the TL-50, the forerunner of the S-200, and the Company's wafer automation
and inspection equipment) to extend its product offering. The Company is
continually engaged in improving its current products and expanding the types
of IC devices its test handlers can accommodate and the size of wafers its
wafer automation equipment can manage. In addition, the Company is currently
focused on the continued development of enhancements and features for its
current automation products. As the semiconductor equipment market continues
to develop, the software component of the Company's products plays an
increasingly important role. The Company currently develops all software in-
house and would as needed expand its expertise in this area by hiring
additional personnel.
Manufacturing and Supply
The Company manufactures its products at its facilities in Marlboro,
Massachusetts. In the second quarter of fiscal 1999, the Company announced a
plan to consolidate its UK wafer handling and inspection operations. This plan
included the closure of the Company's UK facility and related transfer of
manufacturing and other operations to the United States (See "Management's
Discussion and Analysis of Financial Condition and Results of Operations").
The Company's manufacturing operations consist of procurement and inspection
of components and subassemblies, assembly and extensive testing of finished
products.
A significant portion of the components and subassemblies of the Company's
products, including circuit boards, vacuum pumps, optical sensors,
refrigeration units and contactor elements, are manufactured by third parties
on a subcontract basis. Currently all components, subassemblies and parts used
in Aseco's products are available from multiple sources.
Quality and reliability are emphasized in both the design and manufacture of
the Company's equipment. All components and subassemblies are inspected for
mechanical and electrical defects. Fully assembled products are thoroughly
tested and inspected for conformity to specifications of both Aseco and the
customer. Test handler products are tested at all temperatures and with all
the IC device packages to be accommodated.
Competition
The test handler and wafer handling and inspection markets are highly
competitive. Aseco competes with a large number of companies ranging from very
small businesses to large companies, many of which have substantially greater
financial, manufacturing, marketing and product development resources than the
Company. Certain of these companies manufacture and sell both testers and test
handlers. The Company's test handlers are compatible with all major testers,
including those manufactured by companies which sell both testers and test
handlers. The large companies in the overall surface mount IC device test
handler market with which the Company competes include Advantest and Cohu. In
general, the particular companies with which the Company competes vary with
the Company's different markets, with no one company dominating the overall
test handler market. The companies with which the Company competes most
directly in the surface mount non-memory IC device test handler market are
companies such as Multitest, JLSI, Aetrium and Micro Component Technology,
Inc.
The Company's competitors in the wafer handling and inspection market vary
depending upon the type of equipment. The Company's major competitors,
however, in this market are Irvine Optical, Kensington, PST, Cybeq, Leica,
Nikon, Zeiss and JenOptic.
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The Company competes primarily on the basis of the speed, ease-of-use,
accuracy and other performance characteristics of its products, the breadth of
its product lines, the effectiveness of its sales and distribution channels
and its customer service.
Intellectual Property Rights
Aseco attempts to protect the proprietary aspects of its products with
patents, copyrights, trade secret laws and internal nondisclosure safeguards.
The Company has several patents covering certain features of the S-200 and the
contactor elements incorporated in certain of its other test handlers. In
addition, the Company has a patent application pending with respect to the
machine vision technology in the VT8000. The source code for all software
contained in the Company's products is protected as a trade secret and as
unpublished copyrighted work. In addition, the Company has entered into
nondisclosure and assignment of invention agreements with each of its key
employees. Despite these restrictions, it may be possible for competitors or
users to copy aspects of the Company's products or to obtain information which
the Company regards as a trade secret.
Because of the rapid pace of technological changes in the test handler
industry, the Company believes that patent, trade secret and copyright
protection are less significant to its competitive position than factors such
as the knowledge, ability and experience of the Company's personnel, new
product development, frequent product enhancements, name recognition and
ongoing reliable product maintenance and support.
The Company believes that its products and trademarks and other proprietary
rights do not infringe the proprietary rights of third parties. There can be
no assurance, however, that third parties will not assert infringement claims
in the future.
Employees
As of March 28, 1999, Aseco had 116 regular employees and 4 contract
employees including 42 in manufacturing, 36 in engineering and product
development, 11 in general administration and finance, 28 in sales and
marketing and 3 in customer service. None of the Company's employees are
represented by a labor union or are subject to a collective bargaining
agreement. The Company has never experienced a work stoppage and believes that
its employee relations are adequate.
ITEM 2. PROPERTIES
The Company's administrative, manufacturing and product development, and its
principal sales, marketing and field service office is located in Marlboro,
Massachusetts where the Company occupies approximately 61,000 square feet
under a lease that expires in May 2000.
The Company also leases and occupies approximately 2,900 square feet of
space in Santa Clara, California under a lease that expires in fiscal 2001 and
213 square meters of space in Singapore under a lease that expires in
September 2000. The Company uses these latter two locations for sales and
field service support operations.
The Company believes its facilities are adequate for all its reasonable
foreseeable requirements.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during
the last quarter of the fiscal year ended March 28, 1999.
9
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the executive officers of the Company, their
ages, present position and principal occupations held for at least the past
five years.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Sebastian J.
Sicari............. 47 President, Chief Executive Officer
Mary R. Barletta.... 38 Vice President, Chief Financial Officer, Treasurer
Robert L. Murray.... 47 Vice President, Worldwide Customer Support
Robert E. Sandberg.. 41 Vice President, Sales
Richard S. Sidell... 56 Vice President and Chief Technologist
Phillip J. Villari.. 50 Vice President, Engineering & Manufacturing Operations
</TABLE>
Mr. Sicari has been President and Chief Executive Officer of the Company
since August 1998. Mr. Sicari served as President and Chief Operating Officer
of the Company from June 1998 until August 1998. Mr. Sicari served as Vice
President, Finance and Administration and Chief Financial Officer of the
Company from December 1985 until June 1998, served as Treasurer of the Company
from July 1988 until August 1998 and has been a Director since 1993.
Ms. Barletta has been Vice President, Chief Financial Officer of the Company
since June 1998 and Treasurer since August 1998. Ms. Barletta served as Vice
President, Corporate Controller from August 1997 to June 1998 and served as
Corporate Controller since 1993.
Mr. Murray has been Vice President, Worldwide Customer Support since June
1998. Mr. Murray served as Director of Worldwide Customer Support from
February 1997 until June 1998. From January 1992 to January 1997, Mr. Murray
was Director of Worldwide Support at Optronics, a division of Intergraph, a
manufacturer of laser image setters and scanners.
Mr. Sandberg has been Vice President, Sales since June 1998. While working
at Aseco, Mr. Sandberg served as Director of WED Worldwide Sales from April
1998 to June 1998, Director of Asian Operations from April 1997 to April 1998,
Far East Sales Manager from April 1996 to April 1997 and Eastern Region Sales
Manager from January 1994 to April 1996. Prior to January 1994, Mr. Sandberg
was Marketing Manager at Symtek Systems, Inc., a manufacturer of automatic
test handlers.
Dr. Sidell has been Vice President and Chief Technologist since October
1998. From 1996 to 1998, Dr. Sidell was Director of Product Engineering,
Semiconductor Business Unit, Electro Scientific Industries, Inc., a
manufacturer of laser based equipment for circuit fine tuning, memory repair
along with equipment for testing surface mount capacitors. Prior to joining
ESI in 1996, Dr. Sidell was Senior Vice President of Engineering at XRL, Inc.,
a manufacturer of laser-based capital equipment.
Mr. Villari has been Vice President, Engineering & Manufacturing Operations
since June 1998. Mr. Villari served as Vice President, Manufacturing
Operations from April 1998 until June 1998. From July 1995 to March 1998, Mr.
Villari was Director and General Manager, Semiconductor Business Unit, Electro
Scientific Industries, Inc., a manufacturer of laser based equipment for
circuit fine tuning, memory repair along with equipment for testing surface
mount capacitors. From February 1993 to June 1995 Mr. Villari served as
President and CEO of XRL, Inc. a manufacturer of laser based capital
equipment.
Executive officers of the Company are elected by the Board of Directors and
serve until their successors have been duly elected and qualified. There are
no family relationships among any of the executive officers or directors of
the Company.
10
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Aseco Corporation's common stock is traded on the NASDAQ National Market
under the symbol "ASEC." The table below sets forth the high and low sale
prices of the common stock during the two most recent fiscal years:
<TABLE>
<CAPTION>
1999
-------------
Period High Low
- ------ ------ ------
<S> <C> <C>
First Quarter..................................................... $8.00 $3.66
Second Quarter.................................................... 4.31 1.00
Third Quarter..................................................... 2.50 .63
Fourth Quarter.................................................... 2.66 1.19
<CAPTION>
1998
-------------
Period High Low
- ------ ------ ------
<S> <C> <C>
First Quarter..................................................... $13.38 $ 8.63
Second Quarter.................................................... 19.00 10.63
Third Quarter..................................................... 18.88 8.38
Fourth Quarter.................................................... 11.38 7.25
</TABLE>
On May 28, 1999, the closing price of the Company's common stock was $1.00
per share. On such date there were 3,850,658 shares outstanding held of record
by 109 persons. This number does not include stockholders for whom shares are
held in a "nominee" or "street" name.
The Company has not paid cash dividends on its common stock and does not
intend to do so in the foreseeable future. The Company's bank line of credit
prohibits the payment of cash dividends without the bank's consent.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended
-------------------------------------------------
March 28, March 29, March 30, March 31, April 2,
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Net sales................... $ 19,218 $44,246 $34,320 $41,569 $29,192
Income (loss) from
operations................. (14,320) (8,411) 2,623 6,397 3,987
Net income (loss)........... (13,673) (8,143) 2,288 4,406 3,088
Earnings (loss) per share,
diluted.................... (3.64) (2.20) .62 1.17 .85
Balance Sheet Data
Total assets................ $ 15,324 $33,691 $36,640 $36,681 $29,267
Long term capital lease
obligations................ -- 25 29 42 53
Stockholders' equity........ 10,005 23,582 31,113 28,416 22,711
</TABLE>
In the second quarter of fiscal 1999, the Company announced a plan to
consolidate its UK wafer handling and inspection operations. This plan
included the closure of the Company's UK facility and related transfer of
manufacturing and other operations to the United States as well as the
discontinuation of several older product models in an effort to focus the
operation's product offerings. (See Note M to the Consolidated Financial
Statements). In conjunction with this plan, the Company recorded a $2.2
million special charge including a $850,000 charge to cost of sales for
inventory write-downs related to product discontinuation and a $1.3 million
restructuring charge. The principal components of the restructuring charge
include $627,000 for a write-down of fixed and other long-term assets no
longer used by the operation, $241,000 for severance related charges, $325,000
for a write-down of goodwill related to the impairment of such assets
indicated using estimated future cash flows, and $65,000 of lease termination
and related costs. As of January 1999, the closure and transfer were
substantially complete, fixed assets were disposed of and severance related
costs were paid.
In the fourth quarter of fiscal 1999, the Company recorded a special charge
of $6.2 million. The charge reflects the impact of continuing unfavorable
conditions in the semiconductor capital equipment market, a more gradual
recovery than was previously anticipated and expected future technology
changes in this market upon the Company's product line, cost structure and
asset base (See Note M to the Consolidated Financial Statements). Components
of the charge include 1) a $5.0 million charge to cost of goods sold for
write-downs related principally of excess inventory based on revised fiscal
year 2000 and beyond forecasted operating plans; 2) a $351,000 charge to
research and development for the write-down of development equipment no longer
used by the Company as a result of a refocusing of development efforts to
address expected technology changes and; 3) a $854,000 charge to selling,
general and administrative expense including $544,000 related to the write-
down of various assets whose net realizable value was adversely affected based
on revised fiscal year 2000 and beyond forecasted operating plans, $280,000
related to costs associated with the layoff of 13 employees and $30,000
related to the closure of the Company's Malaysian subsidiary.
Net loss for the year ended March 29, 1998 includes i) $1.8 million of
charges resulting from valuation adjustments for inventory being carried in
excess of normal replacement cost and the discontinuation of certain products,
ii) acquired in process research and development costs totaling $6.1 million,
and the write down of goodwill and other intangible assets totaling $963,000,
related to the Company's 1998 acquisition of WED, and iii) approximately
$500,000 of expenses related to the layoff of 40 employees.
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operation--Fiscal 1999 Versus Fiscal 1998
Net sales for fiscal 1999 decreased 57% to $19.2 million from $44.2 million
in fiscal 1998. The decrease in net sales resulted from a 69% decrease in
units shipped during fiscal 1999 compared to fiscal 1998 as a result of an
industry wide semiconductor market downturn causing a drop in demand for
semiconductors and semiconductor capital equipment during the latter part of
fiscal 1998 and throughout fiscal 1999.
As a percentage, international sales increased to 39% of net sales in fiscal
1999 compared to 36% of net sales in fiscal 1998. Approximately 81% of all
international sales were to customers located in the Pacific Rim region.
As noted above, the Company began experiencing declining bookings and, as a
result, lower net sales in the fourth quarter of fiscal 1998 as a result of
adverse market conditions in the semiconductor industry. The Company expects
that such market conditions will continue into the foreseeable future and as a
result, will continue to unfavorably impact bookings and net sales levels for
some period of time. (See Liquidity and Capital Resources)
In the second quarter of fiscal 1999, the Company announced a plan to
consolidate its UK wafer handling and inspection operations. This plan
included the closure of the Company's UK facility and related transfer of
manufacturing and other operations to the United States as well as the
discontinuation of several older product models in an effort to focus the
operation's product offerings. (See Note M to the Consolidated Financial
Statements). In conjunction with this plan, the Company recorded a $2.2
million special charge including a $850,000 charge to cost of sales for
inventory write-downs related to product discontinuation and a $1.3 million
restructuring charge. The principal components of the restructuring charge
include $627,000 for a write-down of fixed and other long-term assets no
longer used by the operation, $241,000 for severance related charges, $325,000
for a write-down of goodwill related to the impairment of such assets
indicated using estimated future cash flows, and $65,000 of lease termination
and related costs. As of January 1999, the closure and transfer were
substantially complete, fixed assets were disposed of and severance related
costs were paid.
In the fourth quarter of fiscal 1999, the Company recorded a special charge
of $6.2 million. The charge reflects the impact of continuing unfavorable
conditions in the semiconductor capital equipment market, a more gradual
recovery than was previously anticipated and expected future technology
changes in this market upon the Company's product line, cost structure and
asset base (See Note M to the Consolidated Financial Statements). Components
of the charge include 1) a $5.0 million charge to cost of goods sold for
write-downs related principally of excess inventory based on revised fiscal
year 2000 and beyond forecasted operating plans; 2) a $351,000 charge to
research and development for the write-down of development equipment no longer
used by the Company as a result of a refocusing of development efforts to
address expected technology changes and; 3) a $854,000 charge to selling,
general and administrative expense including $544,000 related to the write-
down of various assets whose net realizable value was adversely affected based
on revised fiscal year 2000 and beyond forecasted operating plans, $280,000
related to costs associated with the layoff of 13 employees and $30,000
related to the closure of the Company's Malaysian subsidiary. As of June 1999,
fixed assets deemed no longer useable were put out of service and segregated
for disposal, and all severance related costs were paid.
Gross profit for fiscal 1999 was $1.4 million, or 7% of net sales, compared
to $17.5 million, or 40% of net sales, in fiscal 1998. The fiscal 1999 decline
in gross profit resulted from a product shipment mix including a larger
component of the Company's lower gross margin products, manufacturing excess
capacity because of lower production levels and special charges of $5.9
million relating to cost of goods sold, described above, recorded during
fiscal 1999.
Research and development costs decreased 22% to $5.3 million in fiscal 1999
from $6.8 million in fiscal 1998. Fiscal 1999 research and development
expenses included a special charge of $351,000 previously
13
<PAGE>
described. Net of the charge, the decrease in research and development costs
during fiscal 1999 was principally due to decreased headcount.
Selling, general and administrative expenses decreased 30% to $9.1 million
in fiscal 1999 from $13.0 million in fiscal 1998. Selling, general and
administrative expenses included a special charge of $854,000 in fiscal 1999
previously described and a special charge of $1.5 million in fiscal 1998
described in "Results of Operations--Fiscal 1998 versus Fiscal 1997." Net of
such charges in each year, the decrease in selling, general and administrative
expenses during fiscal 1999 was a result of reductions in headcount and strict
controls over discretionary spending during the year.
As a result of the above, the Company generated an operating loss of $14.3
million (including $8.4 million of special charges) for fiscal 1999 compared
to an operating loss of $8.4 million (including $9.4 million of special
charges) for fiscal 1998.
Other income, net consists principally of interest income earned on cash and
cash equivalents and interest expense paid on the Company's outstanding line
of credit balance.
The Company recorded a tax benefit of $690,000 in fiscal 1999 compared to a
tax benefit of $139,000 in fiscal 1998. No tax benefit was recorded in the
third or fourth quarters of fiscal 1999 because no additional benefits from
operating loss carryback provisions were available to the Company. Furthermore
in fiscal 1999, the Company recorded a valuation allowance for deferred tax
assets, principally representing net operating loss carryforwards and other
deferred tax assets the realization of which the Company does not deem more
likely than not.
Net loss for fiscal 1999 was $13.7 million, or $3.64 per share, compared to
net loss for fiscal 1998 of $8.1 million, or $2.20 per share.
Results of Operations--Fiscal 1998 versus Fiscal 1997
Net sales for fiscal 1998 increased 29% to $44.2 million from $34.3 million
in fiscal 1997. The increase in net sales resulted from a 34% increase in
units shipped during fiscal 1998 compared to fiscal 1997 offset in part by a
decrease in average selling price of equipment resulting from large quantity
order discounts earned by customers during fiscal 1998. Although unit sales
increased in each of the first three quarters of fiscal 1998 from the previous
quarter, unit sales declined 10% in the fourth quarter compared to the third
quarter of fiscal 1998 as a result of a drop in the demand for semiconductors
and semiconductor capital equipment experienced in the fourth quarter.
International sales declined to 36% of net sales in fiscal 1998 compared to
52% of net sales in the prior fiscal year. International sales, which
represented approximately 46% of sales through the third quarter of fiscal
1998, decreased substantially to 20% of sales in the fourth quarter as orders
from countries in the Far East slowed.
Gross profit for fiscal 1998 was $17.5 million, or 40% of net sales,
compared to $16.2 million, or 47% of net sales, in fiscal 1997. Fiscal 1998
gross profit was impacted by a special charge, recorded in the fourth quarter,
of $1.8 million, or 4% of net sales, resulting from valuation adjustments for
VT8000 inventory being carried in excess of normal replacement cost, and to a
lesser extent, the discontinuation of certain product lines.
Excluding the special charge, fiscal 1998 gross profit was $19.3 million, or
44% of net sales, a decrease of 3% from the prior fiscal year gross profit
margin percentage. The decrease in gross margin percentage was a result of
higher than normal discount rates earned by customers on larger quantity
orders shipped during fiscal 1998, a shift in product mix away from older
product lines with higher gross margins and manufacturing excess capacity
experienced in the fourth quarter of fiscal 1998.
14
<PAGE>
Research and development costs increased approximately 30% to $6.8 million
in fiscal 1998 from $5.2 million in fiscal 1997. Research and development
costs were 15% of sales in both fiscal years. The increase in such spending
resulted from the addition of Western Equipment Developments (Holdings) Ltd.
("WED") in the first quarter of fiscal 1998 (see Note L to the Consolidated
Financial Statements), and the hiring of additional engineering personnel and
procurement of prototype material for continuing development projects.
Selling, general and administrative expenses increased 56% to $13.0 million
in fiscal 1998 from $8.4 million in fiscal 1997. As a percentage of net sales,
selling, general and administrative expenses increased to 29% of net sales in
fiscal 1998 compared to 24% of net sales in fiscal 1997. Selling, general and
administrative expenses were affected by a special charge of $1.5 million
recorded in the fourth quarter of fiscal 1998. Components of the special
charge were $963,000 related to the writedown of certain intangible assets
associated with the acquisition of WED, as discussed below, and approximately
$500,000 related to costs associated with the layoff of 40 employees.
Excluding the special charge, selling, general and administrative expense for
fiscal 1998 was $11.5 million or 26% of net sales. The balance of the increase
in selling, general and administrative expenses was a result of the addition
of WED in the first quarter of fiscal 1998, increased promotional and trade
show costs related to the VT8000 introduction, increased costs of travel, an
increase to the bad debt reserve to cover potential exposure in accounts
receivable on Far East shipments and costs related to the establishment of a
new sales and service office in Singapore.
The Company's initial allocation of purchase price at the date of its
acquisition of WED resulted in an estimate of acquired in-process research and
development of $4.9 million, and developed technology, goodwill and other
intangibles totaling $3.0 million. However, during 1998, the Company
determined that certain acquired technology was not as developed as originally
expected, and certain in-process technology would require more time to develop
than originally anticipated. At the end of fiscal 1998, the Company completed
the allocation of the purchase price and estimated the fair values of the
acquired in-process research and development, developed technology, goodwill
and other intangibles using estimated future discounted cash flows. The final
allocation resulted in an additional in-process research and development
charge of $1.2 million recorded in the fourth quarter, resulting in an
aggregrate charge of $6.1 million for fiscal 1998. The acquired in-process
research and development had not yet reached technological feasibility and had
no alternative future use. As of the end of fiscal 1998, the Company estimated
that $1.2 million would be expensed over the next three years in connection
with the completion of acquired research and development. During fiscal 1999
the Company incurred approximately $600,000 related to the completion of these
products. None of the new products was completed or shipped in fiscal 1999;
however, the Company expects that such products will be ready for customer
shipment beginning in fiscal 2000. The Company does not expect to exceed its
original estimate of $1.2 million.
Since WED incurred operating losses in fiscal 1998 which were not originally
anticipated, the year end assessments for developed technology and related
goodwill indicated that the amounts originally recorded for these assets would
not be recovered and thus were impaired. Therefore, these assets were written
down to their estimated fair values, resulting in a separate fourth quarter
charge of $963,000, which is included in selling, general and administrative
expenses in the accompanying statement of operations.
As a result of the above, the Company generated an operating loss of $8.4
million for fiscal 1998 (including $9.4 million of fiscal 1998 special
charges) compared to operating income of $2.6 million for fiscal 1997.
Other income, net consists principally of interest income earned on cash and
cash equivalents which decreased in fiscal 1998 because of the lower average
cash balance maintained during the year after the acquisition of WED.
The Company recorded a tax benefit of $139,000 in fiscal 1998 compared to a
tax provision of $1.0 million in fiscal 1997. The Company's tax rate was
affected by the inability to offset losses incurred by WED against income
earned in the United States and the write-off of acquired in process research
and development and goodwill associated with the acquisition of WED, both of
which are not deductible for tax purposes. Furthermore, the Company recorded a
valuation allowance principally representing net operating loss carryforwards
and other
15
<PAGE>
deferred tax assets at WED the realization of which the Company does not deem
to be more likely than not. The effective tax rate for fiscal 1997 was 30%.
Net loss for fiscal 1998 was $8.1 million, or $2.20 per share, compared to
net income for fiscal 1997 of $2.3 million, or $.62 per diluted share.
Liquidity and Capital Resources
The Company historically has funded its operations primarily through cash
flows from operations, bank borrowings and the private and public sale of
equity securities. At March 28, 1999, the Company had cash and cash
equivalents of $754,000, net of borrowings, and working capital of
approximately $7.8 million.
The Company used approximately $3.0 million in cash for operating activities
during fiscal 1999. The primary working capital factors affecting cash from
operations were accounts receivable and accounts payable and accrued expenses.
Accounts receivable decreased approximately $5.1 million as a result of the
decrease in net sales in fiscal 1999 versus fiscal 1998. Accounts payable and
accrued expenses decreased approximately $4.6 million during the fiscal year
as a result of the decrease in business volume in fiscal 1999.
The Company used approximately $579,000 in cash during fiscal 1999 to fund
the acquisition of capital equipment which included the completion of the
Company's implementation of a new enterprise-wide management information
system and $200,000 to fund internal software development costs.
The Company generated cash from financing activities in fiscal 1999 of
approximately $118,000 from employee stock purchases under the Company's
employee stock option and stock purchase plans and $475,000 from borrowings
under the Company's working capital line of credit.
The Company has a revolving line of credit with a bank which expires
November 1, 1999 (the "Line of Credit"). Borrowings under the Line of Credit
were $475,000 and $575,000 at March 28, 1999 and June 27, 1999, respectively.
As of June 27, 1999, maximum availability under the Line of Credit was equal
to the lesser of (i) $1.3 million or (ii) 80% of qualified accounts receivable
(the "Borrowing Base"). Such maximum availability decreases to the lesser of
(i) $350,000 or (ii) the Borrowing Base after the earlier of August 31, 1999
or receipt by the Company of a refund of federal taxes paid by the Company in
respect of fiscal 1998 and prior years, which refund the Company expects will
be approximately $1.3 million. At June 27, 1999, the Borrowing Base was $1.3
million. The Credit Line is secured by all assets of the Company. The credit
agreement establishing the Credit Line prohibits the payment of dividends
without the bank's consent and requires the maintenance of specified debt to
net worth and current ratios. The credit agreement also requires that the
Company maintain a minimum capital base and not incur net losses of more than
a specified amount. As of March 28, 1999, the Company was in default of the
debt to net worth and net loss covenants but has since obtained appropriate
waivers from the bank. The Company is currently refinancing its bank debt and
has received a commitment from another lender to provide a replacement credit
line to the Company. The replacement line of credit will have a two-year term
and will allow for maximum availability of $3.0 million based on a percentage
of qualified accounts receivable and inventory. The line will be secured by
all the assets of the Company and will be subject to certain financial
covenants including specified levels of net worth, and debt to net worth
ratios and limitations on capital expenditures. The replacement line of credit
will accrue interest at a rate of prime plus 1.5%. The bank may alter or
terminate its commitment with respect to the replacement line of credit if
there is any material adverse change in the Company's financial position or
otherwise. However, to the extent that there is a shortfall of funds under the
commitment, management has the ability and intent to adjust the Company's cash
flows to be able to meet operational needs at least through the end of fiscal
2000.
The Company expects to continue to experience a slowdown in the volume of
business due to adverse market conditions in the semiconductor industry, a
more gradual recovery than was previously anticipated and the effect of
expected future technology changes in this market upon the Company's product
line. As a result, the Company intends to monitor, and further reduce if
necessary, its expenses if projected lower net sales levels continue. Although
the Company anticipates that it will incur losses in future quarters which
will negatively
16
<PAGE>
impact its liquidity position, the Company believes that funds generated from
operations, existing cash balances and available borrowing capacity will be
sufficient to meet the Company's cash requirements for at least the next
twelve months. (See Note E and Note O to the Consolidated Financial
Statements). However, if the Company is unable to meet its operating plan, and
in particular its forecast for product shipments, the Company may require
additional capital. There can be no assurance that if the Company is required
to secure additional capital that such capital will be available on reasonable
terms, if at all, at such time as required by the Company.
The Company has been notified by The Nasdaq-Amex Group that the Company
currently is not in compliance with the Nasdaq National Market listing
requirement that the market value of the Company's common stock held by the
public be greater than $5,000,000. If the Company is unable to satisfy this
requirement for at least ten consecutive days prior to September 16, 1999, its
common stock will be delisted at the opening of business on September 20,
1999. Although in that event the Company could apply to list its shares with
the Nasdaq SmallCap Market, its delisting from the Nasdaq National Market
could adversely affect the liquidity of the Company's stock. In addition,
delisting from the Nasdaq National Market might negatively impact the
Company's reputation and, as a consequence, its business.
Year 2000
Historically, certain computer programs have been written using two digits
rather than four to define the applicable year, which could result in a
computer recognizing a date using "00" as the year 1900 rather than the year
2000. This in turn, could result in major system failures or miscalculations,
and is generally referred to as the "Year 2000 Problem".
In the second quarter of fiscal 1999, the Company completed its
implementation of a new enterprise-wide management information system that the
vendor has represented is Year 2000 compliant. In addition, the Company has
completed an assessment of other software used by the Company for Year 2000
compliance and has noted no material instances of non-compliance. On an on-
going basis, the Company reviews each of its new hardware and software
purchases to ensure that it is Year 2000 compliant. The Company also has
conducted a review of its product line and has determined that most of the
products it has sold and will continue to sell do not require remediation to
be Year 2000 compliant. This conclusion is based partly on third party
representations that product components, such as personal computers, will be
year 2000 compliant. The Company had no means of ensuring that such suppliers'
components will be Year 2000 compliant.
The Company is in the process of gathering information about the Year 2000
compliance status of its significant suppliers and customers. Additionally,
the compliance status of the Company's external agents who process vital
Company data such as payroll, employee benefits, and banking information have
been queried for Year 2000 compliance. To date, the Company is not aware of
any such external agent with a Year 2000 issue that would materially impact
the Company's results of operations, liquidity, or capital resources. However,
the Company had no means of ensuring that external agents will be Year 2000
ready.
To date the Company has incurred approximately $870,000 ($207,000 expensed
and $663,000 capitalized for new systems and equipment) related to all phases
of the Year 2000 compliance initiatives.
Although the Company does not believe that it will incur any additional
material costs or experience material disruptions in its business associated
with preparing its internal systems for Year 2000 compliance, there can be no
assurances that the Company will not experience serious unanticipated negative
consequences and/or material costs caused by undetected errors or defects in
the technology used in its internal systems, which is comprised of third party
software and third party hardware that contain embedded software.
The most reasonably likely worst case scenarios would include (i) corruption
of data contained in the Company's internal information systems relating to,
among other things, manufacturing and customer orders, shipments billing and
collections, (ii) hardware failures, (iii) the failure of infrastructure
services provided by government agencies and other third parties (i.e.,
electricity, phone service, water transport, payroll, employee benefits,
etc.), (iv) warranty and litigation expense associated with third-party
software incorporated into the Company's products that is not Year 2000
compliant, and (v) a decline in sales resulting from disruptions in the
economy generally due to Year 2000 issues.
17
<PAGE>
The Company has contingency plans for certain critical applications and is
working on such plans for others. These contingency plans involve among other
actions, manual workarounds and adjusting staffing strategies.
The impact of inflation on the Company's business during the past three
fiscal years has not been significant.
Cautionary Statement for Purposes of "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
This Annual Report on Form 10K contains forward-looking statements relating
to future events or the future financial performance of the Company, including
but not limited to statements contained in Item 1--"BUSINESS" Item 2--
"PROPERTIES" and Item 7--"MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS". Readers are cautioned that such
statements, which may be identified by words including "anticipates,"
"believes," "intends," "estimates," "plans," and other similar expressions,
are only predictions or estimations and are subject to known and unknown risks
and uncertainties, over which the Company has little or no control. In
evaluating such statements, readers should consider the various factors
identified below which could cause actual events, performance or results to
differ materially from those indicated by such statements.
Liquidity--As of June 27, 1999 the Company had net borrowings of $196,000
and working capital of approximately $7.4 million. As a result of anticipated
continued weakness in the semiconductor market, the Company expects to incur
further losses in future quarters which will negatively impact its liquidity
position. Although the Company believes that funds generated from operations,
existing cash balances and available borrowing will be sufficient to meet the
Company's cash requirements for at least the next twelve months, if the
Company is unable to meet its operating plan, the Company may require
additional capital. There can be no assurance that if the Company is required
to secure additional capital that such capital will be available on reasonable
terms, if at all, at such time as required by the Company.
Nasdaq National Market Delisting--The Company has been notified by The
Nasdaq-Amex Group that the Company currently is not in compliance with the
Nasdaq National Market listing requirement that the market value of the
Company's common stock held by the public be greater than $5,000,000. If the
Company is unable to satisfy this requirement for at least ten consecutive
days prior to September 16, 1999, its common stock will be delisted at the
opening of business on September 20, 1999. Although in that event the Company
could apply to list its shares with the Nasdaq SmallCap Market, its delisting
from the Nasdaq National Market could adversely affect the liquidity of the
Company's stock. In addition, delisting from the Nasdaq National Market might
negatively impact the Company's reputation and, as a consequence, its
business.
Semiconductor Market Fluctuations--The semiconductor market has historically
been cyclical and subject to significant economic downturns at various times,
which often have a disproportionate effect on manufacturers of semiconductor
capital equipment. As a result, there can be no assurance that the Company
will not experience material fluctuations in future quarterly or annual
operating results as a result of such a market fluctuation. The semiconductor
industry in recent periods has experienced decreased demand, and it is
uncertain how long these conditions will continue.
Reliance on Supplier--In November 1997, Aseco entered into a distribution
agreement with Rasco A.G. ("Rasco") pursuant to which Aseco markets and sells
Rasco's SO1000 test handler in the United States, Canada and Taiwan. To
achieve its sales objectives, the Company must rely on Rasco to build and ship
test handlers in accordance with a quarterly schedule. There can be no
assurance that Rasco will be able to consistently meet such a schedule.
Accordingly, the Company's operating results are subject to variability from
quarter to quarter and could be adversely affected for a particular quarter if
shipments of Rasco equipment for that quarter were lower than anticipated.
Additionally, termination of the Rasco relationship with the Company could
adversely affect the Company's financial performance. There can be no
assurance that the Company will be able to maintain its current distribution
arrangement with Rasco.
18
<PAGE>
Variability in Quarterly Operating Results--During each quarter, the Company
customarily sells a limited number of systems, thus a change in the shipment
of a few systems in a quarter can have a significant impact on results of
operations for a particular quarter. To achieve sales objectives, the Company
must generally obtain orders for systems to be shipped in the same quarter in
which the order is obtained. Moreover, customers may cancel or reschedule
shipments with limited or no penalty, and production difficulties could delay
shipments. Accordingly, the Company's operating results are subject to
significant variability from quarter to quarter and could be adversely
affected for a particular quarter if shipments for that quarter were lower
than anticipated. Moreover, since the Company ships a significant quantity of
products at or near the end of each quarter, the magnitude of fluctuation is
not known until late in or at the end of any given quarter.
New Product Introductions--The Company's success depends in part on its
continued ability to develop and market new products. There can be no
assurance that the Company will be able to develop and introduce new products
in a timely manner or that such products, if developed, will achieve market
acceptance. Additionally there can be no assurance that the Company will be
able to manufacture such products at profitable levels or in sufficient
quantities to meet customer requirements. The inability of the Company to do
any of the foregoing could have a material adverse effect on the Company's
operating results.
International Operations--In fiscal 1999, 39% of the Company's net sales
were derived from customers in international markets. The Company is therefore
subject to certain risks common to many export activities, such as
governmental regulations, export license requirements, air transportation
disruptions, freight rates and the risk of imposition of tariffs and other
trade barriers. A portion of the Company's international sales are invoiced in
foreign currencies and, accordingly, are subject to fluctuating currency
exchange rates. As such there can be no assurance that the Company will be
able to protect its position by hedging its exposure to currency exchange rate
fluctuations.
Competition--The markets for the Company's products are highly competitive.
The Company's competitors include a number of established companies that have
significantly greater financial, technical, manufacturing and marketing
resources than the Company. The Company also competes with a number of smaller
companies. There can be no assurance that the Company will be able to compete
successfully against current and future sources of competition or that the
competitive pressures faced by the Company will not adversely effect its
profitability or financial performance.
Customer Concentrations--Although the Company has a growing customer base,
from time to time, an individual customer may account for 10% or more of the
Company's quarterly or annual net sales. During the year ended March 28, 1999,
two customers accounted for 14% and 13% of net sales, respectively. The
Company expects that such customer concentration of net sales will continue to
occur from time to time as customers place large quantity orders with the
Company. As a result, the loss of, or significant reduction in purchases by,
any such customer could have an adverse effect on the Company's annual or
quarterly financial results.
Investments in Research & Development--The Company is currently investing in
specific time-sensitive strategic programs related to the research and
development area which the Company believes is critical to its future ability
to compete effectively in the market. As such, the Company plans to continue
to invest in such programs at a planned rate and not to reduce or limit the
increase in such expenditures until such programs are completed. As a result
there can be no assurance that such expenditures will not adversely affect the
Company's quarterly or annual profitability or financial performance.
Reliance on Third Party Distribution Channels--The Company markets and sells
its products primarily through third-party manufacturers' representative
organizations which are not under the direct control of the Company. The
Company has limited internal sales personnel. A reduction in the sales efforts
by the Company's current manufacturers' representatives or a termination of
their relationships with the Company could adversely affect the Company's
operations and financial performance. There can be no assurance that the
Company will be able to retain its current manufacturers' representatives or
its distribution channels by selling directly through its sales employees or
enter into arrangements with new manufacturers' representatives.
19
<PAGE>
Dependence on Key Personnel--The Company's success depends to a significant
extent upon a number of senior management and technical personnel. These
persons are not bound by employment agreements. The loss of the services of a
number of these key persons could have a material adverse effect on the
Company. The Company's future success will depend in large part upon its
ability to attract and retain highly skilled technical, managerial and
marketing personnel. Competition for such personnel in the Company's industry
is intense. There can be no assurance that the Company will continue to be
successful in attracting and retaining the personnel it requires to
successfully develop new and enhanced products and to continue to grow and
operate profitably.
Dependence on Proprietary Technology--The Company's success is dependent
upon proprietary software and hardware which the Company protects primarily
through patents and restrictions on access to its trade secrets. There can be
no assurance that the steps taken by the Company to protect its proprietary
rights will be adequate to prevent misappropriation of its technology or
independent development by others of similar technology. Although the Company
believes that its products and technology do not infringe any existing
proprietary rights of others, the use of patents to protect software and
hardware has increased and there can be no assurance that third parties will
not assert infringement claims against the Company in the future.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk represents the risk of loss that may affect the consolidated
financial statements of the Company due to adverse changes in financial market
prices and rates. The Company's market risk exposure is primarily the result
of fluctuations in foreign exchange rates. The Company has not entered into
derivative or hedging transactions to manage risk in connection with such
fluctuations.
The Company derived approximately 39% of its net sales in fiscal 1999 from
customers based outside of the United States. Certain of the Company's
international sales are denominated in foreign currencies. The price in
dollars of products sold outside the United States in foreign currencies will
vary as the value of the dollar fluctuates against such foreign currencies.
Although the Company's sales denominated in foreign currencies in fiscal 1999
were not material, there can be no assurance that such sales will not be
material in the future and that there will not be increases in the value of
the dollar against such currencies that will reduce the dollar return to the
Company on the sale of its products in such foreign currencies.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Consolidated Financial Statements included in Item 8:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors............................................ 22
Consolidated Balance Sheets as of March 28, 1999 and March 29, 1998....... 23
Consolidated Statements of Operations for the years ended March 28, 1999,
March 29, 1998, and March 30, 1997....................................... 24
Consolidated Statements of Changes in Stockholders' Equity for the years
ended March 28, 1999, March 29, 1998, and March 30, 1997................. 25
Consolidated Statements of Cash Flows for the years Ended March 28, 1999,
March 29, 1998, and March 30, 1997....................................... 26
Notes to Consolidated Financial Statements................................ 27
</TABLE>
21
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Aseco Corporation
We have audited the accompanying consolidated balance sheets of Aseco
Corporation as of March 28, 1999 and March 29, 1998, and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for each of the three years in the period ended March 28, 1999. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a)(2). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and 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 that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Aseco Corporation at March 28, 1999 and March 29, 1998 and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended March 28, 1999 in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Boston, Massachusetts
May 10, 1999, except for Note O as to which the date is July 9, 1999
22
<PAGE>
ASECO CORPORATION
Consolidated Balance Sheets
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
March 28, March 29,
1999 1998
Assets --------- ---------
<S> <C> <C>
Current assets
Cash and cash equivalents................................ $ 1,229 $ 4,431
Accounts receivable, less allowance for doubtful accounts
of $1,027 in 1999 and $781 in 1998...................... 4,041 9,140
Inventories, net......................................... 5,893 11,875
Prepaid expenses......................................... 370 533
Income tax receivable.................................... 1,351 596
Deferred taxes........................................... -- 1,603
Other current assets..................................... 197 29
------- -------
Total current assets................................... 13,081 28,207
Plant and equipment, less accumulated depreciation and am-
ortization................................................ 2,134 4,041
Other assets, net.......................................... 109 1,443
------- -------
$15,324 $33,691
======= =======
Liabilities and Stockholders' Equity
Current liabilities
Line of credit........................................... $ 475 $ --
Accounts payable......................................... 1,964 4,591
Accrued expenses......................................... 2,868 4,886
Current portion of capital lease obligations............. 12 13
------- -------
Total current liabilities.............................. 5,319 9,490
Deferred taxes payable..................................... -- 594
Long-term capital lease obligations........................ -- 25
Stockholders' equity
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued and outstanding................. -- --
Common stock, $.01 par value: 15,000,000 shares autho-
rized, 3,832,799 and 3,731,718 shares issued and out-
standing in 1999 and 1998, respectively................. 38 38
Additional paid in capital................................. 18,321 18,203
Retained earnings (accumulated deficit).................... (8,382) 5,291
Accumulated other comprehensive income:
Foreign currency translation adjustment.................... 28 50
------- -------
Total stockholders' equity............................. 10,005 23,582
------- -------
$15,324 $33,691
======= =======
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
ASECO CORPORATION
Consolidated Statements of Operations
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Year Ended
-------------------------------
March 28, March 29, March 30,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net sales.................................... $ 19,218 $ 44,246 $ 34,320
Cost of sales................................ 17,856 26,761 18,113
--------- --------- ---------
Gross profit............................... 1,362 17,485 16,207
Research and development costs............... 5,305 6,773 5,227
Selling, general and administrative ex-
penses...................................... 9,077 13,023 8.357
Restructuring charge......................... 1,300 -- --
Acquired in process research and development
costs....................................... -- 6,100 --
--------- --------- ---------
Income (loss) from operations.............. (14,320) (8,411) 2,623
Other income (expense):
Interest income............................ 96 309 664
Interest expense........................... (146) (119) (7)
Other, net................................. 7 (61) 11
--------- --------- ---------
(43) 129 668
--------- --------- ---------
Income (loss) before income taxes............ (14,363) (8,282) 3,291
Income tax expense (benefit)................. (690) (139) 1,003
--------- --------- ---------
Net income (loss)............................ $ (13,673) $ (8,143) $ 2,288
========= ========= =========
Earnings (loss) per share, basic............. $ (3.64) $ (2.20) $ .63
========= ========= =========
Shares used to compute earnings (loss) per
share, basic................................ 3,758,000 3,695,000 3,640,000
Earnings (loss) per share, diluted........... $ (3.64) $ (2.20) $ .62
========= ========= =========
Shares used to compute earnings (loss) per
share, diluted.............................. 3,758,000 3,695,000 3,717,000
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
ASECO CORPORATION
Consolidated Statements of Changes in Stockholders' Equity
(in thousands, except share data)
<TABLE>
<CAPTION>
Accumulated
Common Stock Retained Other
--------------- Additional Earnings Comprehensive
Par Paid-in (Accumulated Income
Shares Value Capital Deficit) (Expense) Total
--------- ----- ---------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1996................... 3,611,501 $36 $17,234 $11,146 $-- $28,416
Issuance of shares under
stock plans............ 53,018 1 344 -- -- 345
Tax benefit from
exercise of stock
options................ -- -- 64 -- -- 64
Net income.............. -- -- -- 2,288 -- 2,288
-------
Comprehensive income.... -- -- -- -- -- 2,288
--------- --- ------- ------- ---- -------
Balance at March 30,
1997................... 3,664,519 37 17,642 13,434 -- 31,113
Issuance of shares under
stock plans............ 67,199 1 449 -- -- 450
Tax benefit from
exercise of stock
options................ -- -- 112 -- -- 112
Net loss................ -- -- -- (8,143) -- (8,143)
Foreign currency
translation
adjustment............. -- -- -- -- 50 50
-------
Comprehensive loss...... (8,093)
--------- --- ------- ------- ---- -------
Balance at March 29,
1998................... 3,731,718 38 18,203 5,291 50 23,582
Issuance of shares under
stock plans............ 101,081 -- 118 -- -- 118
Net loss................ -- -- -- (13,673) -- (13,673)
Foreign currency
translation
adjustment............. -- -- -- -- (22) (22)
-------
Comprehensive loss...... (13,695)
--------- --- ------- ------- ---- -------
Balance at March 28,
1999................... 3,832,799 $38 $18,321 $(8,382) $ 28 $10,005
========= === ======= ======= ==== =======
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
ASECO CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Year ended
------------------------------
March 28, March 29, March 30,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net income (loss)................................ $(13,673) $(8,143) $ 2,288
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation................................... 1,505 1,238 776
Amortization................................... 290 484 166
Deferred taxes................................. 1,009 (471) (310)
Lower of cost or market and other inventory
adjustments................................... 5,600 1,777 --
Acquired in process research and development
costs and write down of goodwill and other in-
tangibles..................................... 763 7,063 --
Fixed asset write down......................... 476 -- --
Restructuring charge........................... 774 -- --
Changes in assets and liabilities:
Accounts receivable............................ 5,099 639 3,193
Inventories, net............................... 544 (4,595) (2,179)
Prepaid expenses............................... 73 (33) (61)
Accounts payable and accrued expenses.......... (4,645) 1,296 (2,665)
Income taxes receivable/payable................ (755) (184) (91)
Other current assets........................... (168) (469) (84)
Other assets, net.............................. 140 -- 9
-------- ------- -------
Total adjustments............................ 10,705 6,745 (1,246)
-------- ------- -------
Cash (used in) provided by operating
activities.................................. (2,968) (1,398) 1,042
Investing activities:
Acquisition, net of cash acquired.............. -- (6,079) --
Acquisition of machinery and equipment......... (579) (1,768) (992)
Proceeds from sale of machinery and equipment.. -- 17 --
Increase in software development costs......... (200) (383) (243)
-------- ------- -------
Cash used in investing activities............ (779) (8,213) (1,235)
Financing activities:
Loan to officer................................ -- -- (140)
Net proceeds from issuance of common stock..... 118 450 345
Increase (reduction) of working line of
credit........................................ 475 (477) --
Reductions of capital lease obligations........ (26) (15) (13)
-------- ------- -------
Cash (used in) provided by financing
activities.................................. 567 (42) 192
Effect of exchange rate changes.............. (22) 2 --
-------- ------- -------
Net decrease in cash and cash equivalents.... (3,202) (9,651) (1)
Cash and cash equivalents at the beginning of the
year............................................ 4,431 14,082 14,083
-------- ------- -------
Cash and cash equivalents at the end of the
year............................................ $ 1,229 $ 4,431 $14,082
======== ======= =======
</TABLE>
See notes to consolidated financial statements
26
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All tabular amounts in thousands except share and per share amounts)
Note A--Nature of Business
Aseco (the "Company") designs, manufactures and markets test handlers used
to automate the testing of integrated circuits in surface mount packages.
Aseco provides high quality, versatile test handlers designed to maximize the
productivity of the significantly more costly testers with which they operate.
Aseco also design, manufactures and markets integrated circuit wafer handling
and inspection systems. These systems are used to load, sort and transport
wafers during both manual and automatic inspection as well as other wafer
processing steps in the semiconductor manufacturing process. The Company
markets its products principally in North America, the Asia Pacific region and
Western Europe and sells its products principally to integrated circuit
manufacturers.
The Company expects to continue to experience a slowdown in the volume of
business due to adverse market conditions in the semiconductor industry, a
more gradual recovery than was previously anticipated and the effect of
expected future technology changes in this market upon the Company's product
line. As a result, the Company intends to monitor, and further reduce if
necessary, its expenses if projected lower net sales levels continue. Although
the Company anticipates that it will incur losses in future quarters which
will negatively impact its liquidity position, the Company believes that funds
generated from operations, existing cash balances and available borrowing
capacity will be sufficient to meet the Company's cash requirements for at
least the next twelve months. (See Note E and Note O to the Consolidated
Financial Statements). However, if the Company is unable to meet its operating
plan, and in particular its forecast for product shipments, the Company may
require additional capital. There can be no assurance that if the Company is
required to secure additional capital that such capital will be available on
reasonable terms, if at all, at such time as required by the Company.
Note B--Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All
intercompany balances and transactions are eliminated.
Use of Estimates: The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.
Cash and Cash Equivalents: The Company considers all highly liquid
investments with maturities of three months or less at the time of purchase to
be cash equivalents.
The Company invests its excess cash in high quality commercial paper (No
such amounts at March 28, 1999 and March 29, 1998) and money market funds (No
such amounts at March 28, 1999 and $885,000 at March 29, 1998), all of which
are cash equivalents as of fiscal year end. Management determines the
appropriate classification of these investments at the time of purchase as
either held-to-maturity, available-for-sale or trading and re-evaluates such
designation at each balance sheet date. Given the short-term nature of the
Company's investments and their availability for use in the Company's current
operations, these amounts are considered to be available-for-sale.
Available-for-sale securities are carried at fair market value and
unrealized gains or losses are reported as a separate component of
stockholders' equity. At March 29, 1998, the cost of the Company's investments
in cash equivalents approximated their fair market value.
27
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Inventories: Inventories are stated at the lower of cost or market, using
the first-in, first-out method to determine cost.
Plant and Equipment: Plant and equipment are stated at cost. Depreciation is
provided using the straight-line method over the estimated useful lives of the
applicable assets which are generally three to seven years. Leasehold
improvements and equipment under capital leases are being amortized over the
lives of the leases. To determine if the value of plant and equipment is
impaired, the Company uses estimated future cash flows as the method for
estimating the related write-down. Assets no longer used are written down to
salvage value at the time of retirement.
Intangible Assets and Goodwill: The Company has certain intangible assets
including software development costs, developed technology and goodwill. The
Company amortizes these assets over their estimated useful lives as follows:
<TABLE>
<S> <C>
Software development costs.......................................... 3 years
Developed technology, goodwill and others........................... 15 years
</TABLE>
Accumulated amortization associated with these assets was $1,891,000 and
$1,760,000 at March 28, 1999 and March 29, 1998, respectively. In determining
the value of impaired goodwill, the Company has adopted the use of estimated
future discounted cash flows as the method for estimating the related write-
down.
Warranty Costs: Estimated warranty costs are accrued upon shipment of
product.
Revenue Recognition: Revenue is recognized generally upon shipment of
product, and when special contractual criteria apply, upon acceptance.
Earnings Per Share: Basic earnings (loss) per common share is based on the
weighted average common shares outstanding. Diluted earnings (loss) per share
includes the dilutive effects of options, warrants, and convertible
securities. There was no effect of dilutive stock options on the total shares
used to compute diluted earnings (loss) per share in fiscal 1999 and fiscal
1998. The effect of dilutive stock options on the total shares used to compute
diluted earnings (loss) per share was 77,000 in fiscal 1997.
Stock Based Compensation: The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related interpretations in accounting for its stock-based
compensation plans, rather than the alternative fair value accounting provided
for under Financial Accounting Standards Board Statement No. 123, "Accounting
for Stock-Based Compensation." Under ABP 25, for those options granted in
which the exercise price equals or exceeds the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
Recent Accounting Pronouncements: In the first quarter of fiscal 1999, the
Company adopted Statement of Financial Accounting Standards No. 130 "Reporting
Comprehensive Income" (SFAS 130) which establishes standards for reporting and
display of comprehensive income and its components in a full set of general-
purpose financial statements. Under this standard, certain revenues, expenses,
gains and losses recognized during the period are included in comprehensive
income, regardless of whether they are considered to be results of operations
of the period. The adoption of this standard had no material impact on the
Company's financial position.
In the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards No. 131 "Disclosures About Segments of an
Enterprise and Related Information" (SFAS 131) which establishes
28
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
standards for the way that public companies report selected information about
operating segments in annual financial statements and requires that those
companies report selected information about operating segments in interim
financial reports to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The Company has not yet adopted Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133) which is required to be adopted in fiscal 2000. Adoption of this standard
is not expected to have a material impact on the Company's financial position
or results of operations.
Reclassification: Certain prior years' amounts have been reclassified to
conform to the current years' presentation.
Note C--Inventories, net
Net inventories consisted of the following:
<TABLE>
<CAPTION>
March 28, March 29,
1999 1998
--------- ---------
(In thousands )
<S> <C> <C>
Raw materials............................................ $1,966 $ 5,612
Work in process.......................................... 3,441 4,712
Finished goods........................................... 486 1,551
------ -------
$5,893 $11,875
====== =======
</TABLE>
Note D--Plant and Equipment
Plant and equipment consisted of the following:
<TABLE>
<CAPTION>
March 28, March 29,
1999 1998
--------- ---------
(In thousands)
<S> <C> <C>
Machinery and equipment.................................. $3,076 $4,365
Office furniture and equipment........................... 3,398 3,602
Property under capital lease............................. 578 578
Leasehold improvements................................... 289 251
------ ------
7,341 8,796
Less accumulated depreciation and amortization........... 5,207 4,755
------ ------
$2,134 $4,041
====== ======
</TABLE>
During the year ended March 28, 1999 and March 29, 1998, the Company
transferred approximately $108,000 and $790,000, respectively of equipment
from inventory to fixed assets for use as manufacturing test equipment.
Note E--Indebtedness
The Company has a $5.0 million revolving credit line with a bank, which
expires on September 1, 1999 (See Note O to the Consolidated Financial
Statements). At March 28, 1999, borrowings under such credit line were
$475,000 and an additional $1.9 million was available for borrowing. The
revolving credit line is secured
29
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
by all assets of the Company. The credit agreement establishing this line of
credit prohibits the payment of dividends without the bank's consent and
requires maintenance of specified debt to net worth and current ratios. The
credit agreement also requires that the Company maintain a minimum capital
base and not incur net losses of more than a specified amount. As of March 28,
1999, the Company was in default of the net worth and net income covenants
(See Note O to the Consolidated Financial Statements). Borrowings bear
interest at the bank's prime rate plus 1.5%, which was 9.25% at March 28,
1999. There was no borrowing outstanding as of March 29, 1998.
Cash payments of interest were approximately $146,000, 119,000, and $7,000,
for the years ended March 28, 1999, March 29, 1998, and March 30, 1997
respectively.
Note F--Leases
The Company leases a building in Marlboro, Massachusetts for its corporate
and manufacturing activities. The Company also leases sales offices in Santa
Clara, California and Singapore.
The operating lease for the Massachusetts facility expires in the year 2000,
subject to the Company's option to extend the term for an additional three-
year period. Rent expense for this lease is approximately $350,000 per year.
In addition, the lease is subject to escalation for increases in operating
expenses and real estate taxes.
The Company also leases equipment under capital and non-cancelable operating
leases expiring through the year 2001.
The following is a schedule of required minimum lease payments under
operating leases at March 28, 1999:
<TABLE>
<CAPTION>
Operating
Leases
--------------
(In thousands)
<S> <C>
2000........................................................ $517
2001........................................................ 72
----
Total minimum lease payments................................ $589
====
</TABLE>
Total rent expense for the years ended March 28, 1999, March 29, 1998, and
March 30, 1997 was approximately $480,000, $510,000, and $372,000,
respectively.
Note G--Stockholders' Equity
The Board of Directors may, at its discretion, designate one or more series
of preferred stock and establish the voting, dividend, liquidation, and other
rights and preferences of the shares of each series, and provide for the
issuance of shares of any series. At March 28, 1999, no shares of preferred
stock were outstanding.
Note H--Stock Plans and Employee Benefits
Omnibus Stock Plan: The Company's 1993 Omnibus Stock Plan ( the "Omnibus
Plan") is administered by the Compensation Committee of the Board of Directors
and provides for the issuance of up to 1,230,000 shares of common stock
pursuant to the exercise of options or in connection with awards or direct
purchases of stock. Options granted under the Omnibus Plan may be either
incentive stock options or non-qualified stock options. Incentive stock
options may only be granted under the Omnibus Plan to employees and officers
of the Company. Non-qualified stock options may be granted to, awards of stock
may be made to, and direct purchases of stock may be made by, employees,
officers, consultants or directors of the Company. The terms of the awards or
grants, including the number of shares, the duration and rate of exercise of
each option, the option price per share, and the determination of any
restrictions to be placed on the grants or awards, are determined by the
Compensation Committee of the Board of Directors.
30
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Non-Employee Director Stock Option Plan: The Company's 1993 Non-Employee
Director Stock Option Plan (the "Director Plan") provides for the grant of
non-qualified stock options to non-employee directors of the Company for the
purchase of up to an aggregate of 165,000 shares of common stock. Under the
Director Plan, each non-employee director is entitled to receive, when first
elected to serve as a director, an option to purchase 15,000 shares. In
addition, each non-employee director is entitled to receive on April 30 of
each year an option to purchase 2,500 shares. The exercise price of the
options is equal to the fair market value of the underlying common stock on
the date of grant. Options granted under the plan may only be exercised with
respect to vested shares. One-half of the shares subject to such options vest
on the first anniversary of the date of the grant and the balance vest on the
second anniversary of the grant.
The following is a summary of activity with respect to the Company's stock
option plans:
<TABLE>
<CAPTION>
Weighted
Average
Options Exercise Price
---------- --------------
<S> <C> <C>
Outstanding at March 31, 1996..................... 744,500 $13.30
Granted......................................... 458,000 10.37
Exercised....................................... (33,400) 5.67
Canceled........................................ (449,000) 17.72
---------- ------
Outstanding at March 30, 1997..................... 720,100 8.91
Granted......................................... 317,500 9.92
Exercised....................................... (38,600) 6.16
Canceled........................................ (130,200) 10.11
---------- ------
Outstanding at March 29, 1998..................... 868,800 9.33
Granted......................................... 1,063,800 1.57
Exercised....................................... (3,600) .72
Canceled........................................ (1,115,000) 7.64
---------- ------
Outstanding at March 28, 1999..................... 814,000 $ 1.47
========== ======
</TABLE>
As of March 28, 1999, March 29, 1998, and March 30, 1997, there were
outstanding options exercisable for approximately 473,000, 538,000, and
430,000, respectively. As of March 28, 1999, shares available for future grant
were 91,000 shares in the Director Plan and 360,000 shares in the Omnibus
Plan.
The range of exercises prices for options outstanding at March 28, 1999 was
$.29-$13.44. The range of exercise prices is wide due to the inclusion of
options granted at a lower fair market value in years preceding the Company's
initial public offering in March 1993.
In fiscal 1997, 391,000 options outstanding under the Company's 1993 Omnibus
Stock Plan having an exercise price of $18.69 per share were cancelled and
290,250 new shares were issued at a price of $10.38 per share representing the
fair value on the date of issuance. All other terms of these options,
including the vesting period associated with each option remained the same.
In fiscal 1999, 915,000 options outstanding under the Company's 1993 Omnibus
Stock Plan having exercise prices ranging from $3.16 to $18.69 per share were
cancelled and 595,000 new shares were issued at a price of $.75 per share
representing the fair value on the date of issuance. All other terms of these
options, including the vesting period associated with each option remained the
same.
31
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes information about options outstanding at
March 28, 1999:
<TABLE>
<CAPTION>
Weighted Weighted Weighted Average
Range of Options Average Options Average Remaining
Exercise Prices Outstanding Price Exercisable Price Contractual Life
--------------- ----------- -------- ----------- -------- ----------------
<S> <C> <C> <C> <C> <C>
$.29-$.75 750,000 $ .75 420,000 $ .75 8 Years
$5.38-$8.98 20,000 $ 7.34 9,000 $ 7.31 8 Years
$10.63-$13.44 44,000 $11.09 44,000 $11.09 7 Years
------- -------
814,000 473,000
</TABLE>
Employee Stock Purchase Plan: The Company's Employee Stock Purchase Plan
(the "Purchase Plan") is administered by the Board of Directors or by its
designee (the "Administrator") and entitles employees of the Company to
purchase shares of the Company's common stock through payroll deductions over
offering periods specified by the Administrator. Shares may be purchased at a
price equal to the lesser of 85% of the fair market value of the common stock
on the first day of the offering period, or 85% of the fair market value of
the common stock on the last day of the offering period. A total of 150,000
shares have been reserved for issuance under the Purchase Plan. During fiscal
1999 and 1998, a total of approximately 93,000 and 28,600 shares of common
stock, respectively, were issued under this plan. As of March 28, 1999, there
were no further shares available for grant under this Plan; however, on March
15, 1999 the Board of Directors approved an increase in the number of shares
issuable under the Purchase Plan from 150,000 to 300,000, subject to
subsequent shareholder approval.
Disclosure of pro forma information regarding net income and earnings per
share is required by FASB Statement No. 123 "Accounting for Stock-Based
Compensation", and has been determined as if the Company had accounted for its
employee stock plans under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average assumptions
for fiscal years 1999, 1998 and 1997, respectively: risk-free interest rates
of 4.49%, 6.28% and 4.73%; dividend yields of 0% in all years; volatility
factors of the expected market price of the Company's common stock of 1.07,
.475 and .485; and a weighted-average expected life of the options of 3.3,
3.6, and 3.0 years.
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.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because 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 weighted average grant date fair value of options granted during fiscal
1999, 1998, and 1997 was $1.15, $4.34 and $4.12, respectively. The weighted
average grant date fair value of options associated with the Company's
Employee Stock Purchase Plan for fiscal 1999, 1998, and 1997 was $.56, $1.17,
and $1.47 respectively.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
March 28, March 29, March 30,
1999 1998 1997
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Pro forma net income/(loss)................... $(14,460) $(9,165) $1,633
Pro forma earnings (loss) per share........... $ (3.85) $ (2.48) $ .44
</TABLE>
32
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Savings Plan: Under the Company's Savings Plan (the "401(k) Plan"), eligible
employees are permitted to make pre-tax contributions up to 15% of their
salary, subject to certain limitations imposed by Section 401(k) of the
Internal Revenue Code. In addition, employees may contribute up to 10% of
their salary to the 401(k) Plan on an after tax basis. The Company may, but is
not required to, contribute for the benefit of the employees of the Company an
amount determined each year by the Company. For the years ended March 29,
1998, and March 30, 1997, the Company contributed approximately $131,000, and
$110,000, respectively to the 401(k) Plan. No Company contribution was made
for the year ended March 28, 1999.
Stockholder Rights Plan: On August 15, 1996, the Board of Directors adopted
a Stockholder Rights Plan. Pursuant to the Stockholder Rights Plan, each share
of common stock has an associated right. Under certain circumstances, each
right entitles the holder to purchase from the Company one one-thousandth of a
share of junior preferred stock at an exercise price of $55.00 per one one-
thousandth of a share, subject to adjustment.
The rights are not exercisable and cannot be transferred separately from the
common stock until ten days after a person acquires or obtains the right to
acquire 15% or more or makes a tender offer for 30% or more of the Company's
common stock. Upon exercise, each right will entitle the holder to purchase,
in lieu of preferred stock, at the right exercise price, common stock having a
value of two times the exercise price of the right. In addition, if the
Company is either (i) acquired in a merger or other business combination in
which the Company is not the surviving entity, or (ii) sells or transfers 50%
or more of its assets or earning power to another party, each right will
entitle its holder to purchase, upon exercise, common stock of the acquiring
Company having a value equal to two times the exercise price of the right.
The rights have certain anti-takeover effects, in that they would cause
substantial dilution to a person or group that attempts to acquire a
significant interest in the Company on terms not approved by the Board of
Directors. The rights expire on August 15, 2006 but may be redeemed by the
Company for $.01 per right at any time prior to the tenth day following a
person's acquisition of 15% or more of the Company's common stock. So long as
the rights are not separately transferable, the Company will issue one right
with each new share of common stock issued.
33
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note I--Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of March 28, 1999 and
March 29, 1998 are as follows:
<TABLE>
<CAPTION>
Total Current Non-current
------ ------- -----------
(In thousands)
<S> <C> <C> <C>
1999
Deferred tax liabilities:
Tax over book depreciation................... $ (263) -- $(263)
Capitalized software......................... (42) -- (42)
Capital vs. operating lease.................. (65) $ (65) --
Other........................................ (32) (32) --
------ ------ -----
Total deferred tax liabilities................. (402) (97) (305)
Deferred tax assets:
Asset valuation allowances................... 3,390 3,390 --
Net operating loss carryforwards............. 1,060 -- 1,060
Product warranty............................. 59 59 --
Other........................................ 328 328 --
------ ------ -----
Total deferred tax assets...................... 4,837 3,777 1,060
Valuation allowance for deferred tax assets.... (4,435) (3,680) (755)
------ ------ -----
Net deferred tax assets........................ 402 97 305
------ ------ -----
Net deferred tax assets (liabilities).......... $ -- $ -- $ --
====== ====== =====
<CAPTION>
Total Current Non-current
------ ------- -----------
(In thousands)
<S> <C> <C> <C>
1998
Deferred tax liabilities:
Tax over book depreciation................... $ (398) -- $(398)
Capitalized software......................... (196) -- (196)
Capital vs. operating lease.................. (78) $ (78) --
Other........................................ (32) (32) --
------ ------ -----
Total deferred tax liabilities................. (704) (110) (594)
Deferred tax assets:
Asset valuation allowances................... 1,384 1,384 --
Product warranty............................. 152 152 --
Net operating loss carryforwards............. 571 -- 571
Other........................................ 368 291 77
------ ------ -----
Total deferred tax assets...................... 2,475 1,827 648
Valuation allowance for deferred tax assets.... (762) (114) (648)
------ ------ -----
Net deferred tax assets........................ 1,713 1,713 --
------ ------ -----
Net deferred tax assets (liabilities).......... $1,009 $1,603 $(594)
====== ====== =====
</TABLE>
34
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Significant components of the provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
Year ended
-----------------------------
March 28, March 29, March 30,
1999 1998 1997
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Current federal tax............................... $(1,699) $ 318 $1,211
Current state tax................................. -- 14 102
Deferred federal tax.............................. 827 (451) (258)
Deferred state tax................................ 182 (20) (52)
------- ----- ------
$ (690) $(139) $1,003
======= ===== ======
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory rate
to income tax expense is as follows:
<TABLE>
<CAPTION>
Year ended
-----------------------------
March 28, March 29, March 30,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Tax at U.S. statutory rates...................... (34.0)% (34.0)% 34.0 %
State income taxes, net of federal benefit....... -- -- 3.1
Foreign sales corporation........................ -- (1.6)% (3.7)
Tax credits...................................... -- (.8)% (4.9)
Acquired in-process research and development..... -- 25.0 % --
Non deductible goodwill and other intangibles.... -- 4.6 % --
Unbenefitted foreign net operating loss.......... -- 4.8 % --
Unbenefitted domestic net operating loss......... 7.4 % -- --
Unbenefitted asset valuation reserve............. 18.2 % -- --
Forfeited foreign net operating losses........... 2.9 % -- --
Goodwill amortization............................ 1.5 %
Other, net....................................... (0.7)% .3 % 2.0
----- ----- ----
(4.8)% (1.7)% 30.5 %
===== ===== ====
</TABLE>
During the year ended March 29, 1998 the Company recorded a tax benefit of
approximately $112,000 related to the exercise of non-qualified stock options
which amounts have been credited to additional paid-in capital.
Income taxes paid in the years ended March 28, 1999, March 29, 1998, and
March 30, 1997, were $110,000, $827,000, and $1,404,000, respectively.
The Company has domestic net operating loss carryforwards of approximately
$6,400,000 which will begin to expire in fiscal year 2019. In addition, the
Company has approximately $1,150,000 of net operating losses, which will
continue indefinitely. During the year, the net operating loss carryforward
related to its UK subsidiary expired as a result of the shut down of the
operations.
35
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note J--Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
March 28, March 29,
1999 1998
--------- ---------
(In thousands)
<S> <C> <C>
Accrued commissions...................................... $ 756 $1,199
Accrued compensation and benefits........................ 853 1,215
Accrued warranty......................................... 245 823
Other.................................................... 1,014 1,649
------ ------
$2,868 $4,886
====== ======
</TABLE>
As of March 28, 1999 the Company accrued approximately $300,000 related to
costs associated with the layoff of 13 employees and the shutdown of the
Company's Malaysian subsidiary, which are included in selling, general and
administrative expenses in the accompanying Statement of Operations.
As of March 29, 1998 the Company accrued approximately $500,000 related to
costs associated with the layoff of 40 employees, which are included in
selling, general and administrative expense in the accompanying Statement of
Operations.
Note K--Segment, Geographic, Customer Information and Concentration of Credit
Risk
The Company designs, manufactures and markets semiconductor automation
equipment and has one reportable operating segment based on the consolidated
operating results of the Company. Net sales from customers attributed to the
United States and other geographic areas are as follows:
<TABLE>
<CAPTION>
Year ended
-----------------------------
March 28, March 29, March 30,
1999 1998 1997
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
United States.................................. $11,742 $28,147 $16,495
Taiwan......................................... 2,491 4,454 6,841
Pacific Rim.................................... 3,601 8,640 7,944
Europe......................................... 902 2,697 2,512
Other.......................................... 482 308 528
------- ------- -------
$19,218 $44,246 $34,320
======= ======= =======
</TABLE>
The Company does not hold a material amount of long-lived assets outside of
the United States.
The Company sells its products principally to integrated circuit
manufacturers. The Company performs periodic credit evaluations of its
customers' financial condition. The Company's accounts receivable included
balances owed by one customer which represented 18% of total trade accounts
receivable as of March 28, 1999, and two customers which represented 16% and
26% of total trade accounts receivable as of March 29, 1998.
Two customers accounted for 14% and 13% of net sales for the year ended
March 28, 1999. Two customers accounted for 23% and 16% of net sales for the
year ended March 29, 1998. One customer accounted for 17% of net sales for the
year ended March 30, 1997.
36
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note L--Acquisition
On May 23, 1997, the Company acquired 100% of the outstanding stock of
Western Equipment Developments (Holdings) Ltd. ("WED"), located in Plymouth,
England, for approximately $6,100,000 in cash. WED designs, manufacturers and
markets integrated circuit wafer handling robot and inspection systems used to
load, sort, transport and inspect wafers during the semiconductor
manufacturing process. The acquisition was accounted for as a purchase and
accordingly, the results of operations of the acquired business have been
included in the Company's consolidated financial statements commencing May 23,
1997.
The purchase price was allocated to the tangible and intangible assets
acquired and liabilities assumed based on their estimated fair values.
Intangible assets acquired consisting of developed technology, and acquired
in-process research and development were valued using risk adjusted cash flow
models under which estimated future cash flows were discounted taking into
account risks related to existing and future target markets and to the
completion of the products expected to be ultimately marketed by the Company,
and assessments of the life expectancy of the underlying technology. The
Company's initial allocation of purchase price at the date of the acquisition
resulted in an estimate of acquired in-process research and development of
$4,900,000 and developed technology, goodwill and other intangibles totaling
$3,005,000.
However, during fiscal 1998 the Company determined that certain acquired
technology was not as developed as originally expected, and certain in-process
technology would require more time to develop than originally anticipated. At
the end of fiscal 1998, the Company completed the allocation of the purchase
price and estimated the fair values of the acquired in-process research and
development, developed technology, goodwill and other intangibles using
estimated future discounted cash flows. The final allocation resulted in an
additional in-process research and development charge of $1,200,000 recorded
in the fourth quarter, resulting in an aggregate year to date charge of
$6,100,000. Since WED incurred operating losses in fiscal 1998 which were not
originally anticipated, the year end assessments for developed technology and
related goodwill indicated that the amounts originally recorded for these
assets would not be recovered and thus were impaired. Therefore, these assets
were written down to their estimated fair values, resulting in a separate
fourth quarter charge of $963,000, which is included in Selling, General and
Administrative expenses in the accompanying statement of operations.
The following table summarized the unaudited pro-forma consolidated results
of operations as if the acquisition had been made at the beginning of each of
the periods presented.
<TABLE>
<CAPTION>
March 29, March 30,
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
Net sales............................................... $45,274 $39,303
Net loss................................................ (9,519) (4,878)
Earnings (loss) per share............................... $ (2.58) $ (1.31)
</TABLE>
Note M--Restructuring and Other Charges
In the second quarter of fiscal 1999, the Company announced a plan to
consolidate its UK wafer handling and inspection operations. This plan
included the closure of the Company's UK facility and related transfer of
manufacturing and other operations to the United States as well as the
discontinuation of several older product models in an effort to focus the
operation's product offerings. In conjunction with this plan, the Company
recorded a $2.2 million special charge including a $850,000 charge to cost of
sales for inventory write-downs related to product discontinuation and a $1.3
million restructuring charge. The principal components of the restructuring
charge include $627,000 for a write-down of fixed and other long-term assets
no longer used by the operation, $241,000 for severance related charges,
$325,000 for a write-down of goodwill related to the impairment of such assets
indicated using estimated future cash flows, and $65,000 of lease termination
and
37
<PAGE>
ASECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
related costs. As of January 1999, the closure and transfer were substantially
complete, fixed assets were disposed of and severance related costs were paid.
In the fourth quarter of fiscal 1999, the Company recorded a special charge
of $6.2 million. The charge reflects the impact of continuing unfavorable
conditions in the semiconductor capital equipment market, a more gradual
recovery than was previously anticipated and expected future technology
changes in this market upon the Company's product line, cost structure and
asset base. Components of the charge include 1) a $5.0 million charge to cost
of goods sold for write-downs related principally of excess inventory based on
revised fiscal year 2000 and beyond forecasted operating plans; 2) a $351,000
charge to research and development for the write-down of development equipment
no longer used by the Company as a result of a refocusing of development
efforts to address expected technology changes and; 3) a $854,000 charge to
selling, general and administrative expense including $544,000 related to the
write-down of various assets whose net realizable value was adversely affected
based on revised fiscal year 2000 and beyond forecasted operating plans,
$280,000 related to costs associated with the layoff of 13 employees and
$30,000 related to the closure of the Company's Malaysian subsidiary.
Note N--Related Party Transactions
On April 15, 1996, the Company loaned $140,000 to an executive officer, who
is also a director of the Company. The loan bears interest at the rate of
5.33% per annum, compounded annually, and is due and payable in full on the
earlier of the termination of the executive officer's employment with the
Company or April 15, 1999. The loan is secured by shares of the Company's
common stock owned by the executive officer (See Note O of Consolidated
Financial Statement).
Note O--Subsequent Events
On June 22, 1999 the Company entered into a loan modification agreement (the
"Credit Agreement") which extends the expiration date of its revolving line of
credit with a bank to November 1, 1999 (the "Line of Credit"). Borrowings
under the Line of Credit were $475,000 and $575,000 at March 28, 1999 and June
27, 1999, respectively. Terms of the Credit Agreement specify that as of June
22, 1999, maximum availability under the Line of Credit was equal to the
lesser of (i) $1.3 million or (ii) 80% of qualified accounts receivable (the
"Borrowing Base"). Such maximum availability decreases to the lesser of (i)
$350,000 or (ii) the Borrowing Base after the earlier of August 31, 1999 or
receipt by the Company of a refund of federal taxes paid by the Company in
respect of fiscal 1998 and prior years, which refund the Company expects will
be approximately $1.3 million. At June 27, 1999, the Borrowing Base was $1.3
million. The Credit Line is secured by all assets of the Company. The Credit
Agreement establishing the Credit Line prohibits the payment of dividends
without the bank's consent and requires the maintenance of specified debt to
net worth and current ratios. The Credit Agreement also requires that the
Company maintain a minimum capital base and not incur net losses of more than
a specified amount. As of March 28, 1999, the Company was in default of the
debt to net worth and net loss covenants but has since obtained appropriate
waivers from the bank.
The Company is currently refinancing its bank debt and has received a
commitment from another lender to provide a replacement credit line to the
Company. The replacement line of credit will have a two year term and will
allow for maximum availability of $3.0 million based on a percentage of
qualified accounts receivable and inventory. The line will be secured by all
the assets of the Company and will be subject to certain financial covenants
including specified levels of net worth, and debt to net worth ratios and
limitations on capital expenditures. The replacement line of credit will
accrue interest at a rate of prime plus 1.5%. The bank may alter or terminate
its commitment with respect to the replacement line of credit if there is any
material adverse change in the Company's financial position or otherwise.
However, to the extent that there is a shortfall of funds under
38
<PAGE>
the commitment, management has the ability and intent to adjust the Company's
cash flows to be able to meet operational needs at least through the end of
fiscal 2000.
On July 6, 1999, an executive officer repaid $140,000 to the Company in
settlement of the principal portion of an outstanding loan (See Note N). The
Board of Directors agreed to forgive interest accrued on the loan through July
6, 1999.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is included in the Company's Proxy
Statement to be filed in connection with the Company's 1999 Annual Meeting of
Stockholders to be held on August 11, 1999, under the section captioned
"Election of Officers" and is incorporated herein by reference thereto.
The information required by this item with respect to executive officers of
the Company is set forth under the caption "Executive Officers of the
Registrant" in Part I of this Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included in the Company's Proxy
Statement to be filed in connection with the Company's 1999 Annual Meeting of
Stockholders to be held on August 11, 1999, under the section captioned
"Executive Officer Compensation" and is incorporated herein by reference
thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is included in the Company's Proxy
Statement to be filed in connection with the Company's 1999 Annual Meeting of
Stockholders to be held on August 11, 1999, under the section captioned "Stock
Ownership of Directors, Nominees, Executive Officers and Principal
Stockholders" and is incorporated herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On April 15, 1996, the Company loaned $140,000 to Sebastian J. Sicari, a
director and executive officer of the Company. The loan bears interest at the
rate of 5.33% per annum, compounded annually, and is due and payable in full
on the earlier of the termination of Mr. Sicari's employment with the Company
or April 15, 1999. At March 28, 1999, principal and accrued interest on the
loan totaled $163,599. The loan is secured by shares of the Company's common
stock owned by Mr. Sicari. On July 6, 1999, Mr. Sicari repaid $140,000 to the
Company in settlement of the principal portion of the outstanding loan. The
Company agreed to forgive interest accrued on the loan through July 6, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The following consolidated financial statements are included in Item 8:
<TABLE>
<C> <S>
Consolidated Balance Sheets as of March 28, 1999 and March 29, 1998
Consolidated Statements of Operations for the years ended March 28, 1999,
March 29, 1998, and March 30, 1997
Consolidated Statements of Changes in Stockholders' Equity for the years
ended March 28, 1999, March 29, 1998 and March 30, 1997
Consolidated Statements of Cash Flows for the years ended March 28, 1999,
March 29, 1998 and March 30, 1997
</TABLE>
39
<PAGE>
(a)2. Financial Statement Schedules
<TABLE>
<CAPTION>
Page
----
<S> <C>
Schedule II--Valuation and Qualifying Accounts............................. F-1
</TABLE>
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.
(a)3. Listing of Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
3.2 Third Restated Certificate of Incorporation of the Company, filed as
Exhibit 3.2 to the Registration Statement on Form S-1 (SEC File No.
33-57644) filed with the Commission on January 29, 1993 and
incorporated herein by reference.
3.3 Certificate of Designations, Rights, Preferences and Privileges of
Series A Junior Preferred Stock of the Company, filed herewith.
3.4 Amended and Restated By-laws of the Company, filed as Exhibit 4.2 to
the Registration Statement on Form S-8 (SEC File No. 333-18337) filed
with the Commission on December 19, 1996 and incorporated herein by
reference.
4.2 Rights Agreement dated August 15, 1996 between the Company and State
Street Bank & Trust Company as Rights Agent (including the exhibits
thereto), incorporated by reference from the Company's Registration
Statement on Form 8-A filed with the Commission on August 26, 1996.
4.3 Amendment No. 1 to the Rights Agreement dated January 2, 1997 between
the Company and American Stock Transfer & Trust Company, filed as
Exhibit 4.2 to the Company's Form 10-Q for the quarter ended December
29, 1996 and incorporated herein by reference.
10.2 1993 Non-Employee Director Stock Option Plan (as amended and restated
as of August 11, 1998), filed as Exhibit 10.2 to the Company's Form
10-Q for the quarter ended September 27, 1998 and incorporated herein
by reference.
10.3 1993 Employee Stock Purchase Plan (as amended and restated as of June
18, 1998), filed as Exhibit 99.1 to the Registration Statement on Form
S-8 (SEC File No. 333-68907) filed with the Commission on December 15,
1998 and incorporated herein by reference.
10.4 1993 Omnibus Stock Plan, as amended and restated as of June 14, 1996,
filed as Exhibit 10.1 to the Registration Statement on Form S-8 (SEC
File No. 333-18337) filed with the Commission on December 19, 1996 and
incorporated herein by reference.
10.5 Lease dated April 13, 1993, between the Company and CIGNA Investments,
Inc., filed as Exhibit 10.5 to the Registration Statement on Form S-1
(SEC File No. 33-57644) filed with the Commission on January 29, 1993
and incorporated herein by reference.
10.6 $5,000,000 Revolving Note dated November 27, 1998 made by the Company
and payable to Fleet National Bank, filed herewith.
10.7 Inventory, Accounts Receivable and Intangibles Security Agreement from
the Company to Fleet National Bank, filed herewith.
10.8 Supplementary Security Agreement from the Company to Fleet National
Bank, filed herewith.
10.9 Letter Agreement between the Company and Fleet National Bank dated
November 27, 1998, filed herewith.
10.10 Modification Agreement between the Company and Fleet National Bank
dated June 22, 1999, filed herewith.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
*10.11 Severance agreement dated December 30, 1996, between the Company and
Sebastian J. Sicari, filed herewith.
*10.12 Letter Agreement between Sebastian J. Sicari and the Company, dated
August 11, 1998, filed herewith.
*10.13 Severance Agreement dated July 8, 1998, by and between the Company and
Mary R. Barletta, filed herewith.
*10.14 Severance Agreement dated July 8, 1998, by and between the Company and
Phillip Villari, filed herewith.
*10.15 Severance Agreement dated July 8, 1998, by and between the Company and
Robert L. Murray, filed herewith.
*10.16 Severance Agreement dated July 8, 1998, by and between the Company and
Robert E. Sandberg, filed herewith.
*10.17 Severance Agreement dated October 21, 1998, by and between the Company
and Richard S. Sidell, filed herewith.
*10.18 Separation Agreement dated August 11, 1998, by and between the Company
and Carl S. Archer, filed herewith.
10.19 Promissory Note between the Company and Sebastian J. Sicari dated
April 15, 1996, and filed as Exhibit 10.13 to the Company's Form 10-Q
for the quarter ended December 29, 1996 and incorporated herein by
reference.
10.20 Pledge Agreement between the Company and Sebastian J. Sicari dated
April 15, 1996, filed as Exhibit 10.15 to the Company's Form 10-Q for
the quarter ended December 29, 1996 and incorporated herein by
reference.
10.21 Share Purchase Agreement dated as of May 23, 1997 by and among the
Company and each of the shareholders of Western Equipment Developments
(Holdings) Limited filed as Exhibit 2.1 to the Company's Form 8-K
dated May 23, 1997 and incorporated herein by reference.
10.22 Tax Deed dated May 23, 1997 by and among the Company and certain
shareholders of Western Equipment Developments (Holdings) Limited
filed as Exhibit 2.2 to the Company's Form 8-K dated May 23, 1997 and
incorporated herein by reference.
10.23 Escrow Agreement dated as of May 23, 1997 by and among the Company and
David Carr and Philip Steven Walsh as representatives for certain
shareholders of Western Equipment Developments (Holdings) Limited
filed as Exhibit 2.3 to the Company's Form 8-K dated May 23, 1997 and
incorporated herein by reference.
21 Subsidiaries of the Company, filed herewith.
23.1 Consent of Ernst & Young LLP, filed herewith.
27 Financial Data Schedule, filed herewith.
- --------
* Management contract or compensation plan or arrangement required to be
filed as an exhibit pursuant to Item (c) of Form 10-K.
</TABLE>
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K with the Securities and Exchange
Commission during the fiscal quarter ended March 28, 1999.
41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ASECO Corporation
/s/ Sebastian J. Sicari
By: _________________________________
Sebastian J. Sicari
President and Chief Executive
Officer
July 13, 1999
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 and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title(s) Date
--------- -------- ----
<S> <C> <C>
/s/ Sebastian J. Sicari President, Chief Executive July 13, 1999
______________________________________ Officer and Director
Sebastian J. Sicari (Principal Executive
Officer)
/s/ Mary R. Barletta Vice President, Chief July 13, 1999
______________________________________ Financial Officer,
Mary R. Barletta Treasurer (Principal
Financial and Accounting
Officer)
/s/ Carl S. Archer, Jr. Director July 13, 1999
______________________________________
Carl S. Archer, Jr.
Director July 13, 1999
______________________________________
Dr. Sheldon Buckler
Director July 13, 1999
______________________________________
Dr. Gerald Wilson
/s/ Dr. Sheldon Weinig Director July 13, 1999
______________________________________
Dr. Sheldon Weinig
</TABLE>
42
<PAGE>
SCHEDULE II
ASECO CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charges to
beginning costs and Other Balance at
Classification of year expenses Deductions Changes (1) end of year
-------------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year ended March 28,
1999
Allowance for doubtful
accounts............... $781,000 $200,000 $ 30,000 $ 79,000(2) $1,027,000
Year ended March 29,
1998
Allowance for doubtful
accounts............... $407,000 $407,000 $358,000 $325,000(1) $ 781,000
Year ended March 30,
1997
Allowance for doubtful
accounts............... $397,000 $100,000 $ 90,000 -- $ 407,000
</TABLE>
- --------
(1) Represents the balance of the allowance for doubtful accounts of the
acquisition date May 23, 1997. (See Note L to Consolidated Financial
Statements.)
(2) Represents additional allowance for doubtful accounts resulting from final
settlement of acquisition purchase price. (See Note L to Consolidated
Financial Statements.)
43
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF DESIGNATIONS, RIGHTS, PREFERENCES
------------------------------------------------
AND PRIVILEGES OF
SERIES A JUNIOR PREFERRED STOCK
OF
ASECO CORPORATION
(Pursuant to Section 151 of the Delaware General Corporation Law)
The undersigned, Sebastian J. Sicari and Robert V. Jahrling, III, do hereby
certify:
1. That they are the duly elected and acting Vice President, Finance and
Administration and Secretary, respectively, of ASECO CORPORATION, a Delaware
corporation (the "Corporation").
2. That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on August 15, 1996 adopted the following resolutions creating a series
of shares of Preferred Stock designated as Series A Junior Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board
of Directors does hereby provide for the issue of a series of Preferred
Stock, $0.01 par value, of the Corporation, to be designated "Series A
Junior Preferred Stock," initially consisting of 15,000 shares and to the
extent that the designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions of the
Series A Junior Preferred Stock are not stated and expressed in the
Certificate of Incorporation, does hereby fix and herein state and express
such designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions thereof, as
follows (all terms used herein which are defined in the Certificate of
Incorporation shall be deemed to have the meanings provided therein):
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Preferred Stock," par value $0.01 per share, and
the number of shares constituting such series shall be 15,000.
1
<PAGE>
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Preferred Stock shall be entitled to
receive when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on
the last day of March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date")
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to,
subject to the provision for adjustment hereinafter set forth, 1,000 times
the aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share
of Series A Junior Preferred Stock. In the event the Corporation shall at
any time after August 15, 1996 (the "Rights Declaration Date") (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
amount to which holders of shares of Series A Junior Preferred Stock were
entitled immediately prior to such event under the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common
Stock that ere outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Junior Preferred Stock, unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue
of such shares,
2
<PAGE>
or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of
Series A Junior Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events
such dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Preferred Stock
in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares
of Series A Junior Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no
more than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
Preferred Stock shall have the following voting rights.
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock to a smaller
number of shares, then in each such case the number of votes per share to
which holders of shares of Series A Junior Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the corporation.
(C) Except as required by law, holders of Series A Junior Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
3
<PAGE>
Section 4. Certain Restrictions.
--------------------
(A) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for
consideration any shares of Common Stock after the first issuance of a
share or fraction of a share of Series A Junior Preferred Stock unless
concurrently therewith it shall declare a dividend on the Series A Junior
Preferred Stock as required by Section 2 hereof.
(B) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Preferred Stock as provided in Section 2 are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Junior
Preferred Stock outstanding shall have been paid in full, the Corporation
shall not
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Preferred Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with Series A Junior
Preferred Stock, except dividends paid ratably on the Series A Junior
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Junior
Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding
up) to the Series A Junior Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares
of Series A Junior Preferred Stock, or any shares of stock ranking on
a parity with the Series A Junior Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
4
<PAGE>
(C) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior Preferred
Stock unless, prior thereto, the holders of shares of Series A Junior
Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date
of such payment, plus an amount equal to the greater of (1)$1,000 per
share, provided that in the event the Corporation does not have sufficient
assets, after payment of its liabilities and distribution to holders of
Preferred Stock ranking prior to the Series A Junior Preferred Stock,
available to permit payment in full of the $1,000 per share amount, the
amount required to be paid under this Section 6(A)(1) shall, subject to
Section 6(B) hereof, equal the value of the amount of available assets
divided by the number of outstanding shares of Series A Junior Preferred
Stock or (2) subject to the provisions for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount to be distributed to the
holders of Common Stock (the greater of (1) or (2), the "Series A
Liquidation Preference"). In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount to which holders of shares of
Series A Junior Preferred Stock were entitled immediately prior to such
event under clause (2) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number
of shares of Common Stock that were outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
5
<PAGE>
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference
and the liquidation preferences of all other series of Preferred Stock, if
any, which rank on a parity with the Series A Junior Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Junior Preferred Stock shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A Junior Preferred
-------------
Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preference or special rights of the Series A Junior
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series A Junior
Preferred Stock, voting separately as a class.
6
<PAGE>
Section 11. Fractional Shares. Series A Junior Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Junior Preferred Stock.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this Corporation be, and they
hereby are, authorized and directed to prepare and file a Certificate of
Designations, Rights, Preferences and Privileges in accordance with the
foregoing resolution and the provisions of Delaware law and to take such
actions as they may deem necessary or appropriate to carry out the intent
of the foregoing resolution."
3. That the authorized number of shares of Preferred Stock of the
Corporation is 1,000,000 and that no such Preferred Stock has been issued.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 15th day of
August, 1996.
/s/ Sebastian J. Sicari
--------------------------
Name: Sebastian J. Sicari
Title: Vice President,
Finance and Administration
Attest:
/s/ Robert V. Jahrling, III
- ------------------------------
Name: Robert V. Jahrling, III
Title: Secretary
7
<PAGE>
EXHIBIT 10.6
------------
PROMISSORY NOTE
$5,000,000.00 Boston, Massachusetts
November 27, 1998
FOR VALUE RECEIVED, the undersigned Aseco Corporation, a Delaware
corporation (the "Borrower") hereby promises to pay to the order of FLEET
NATIONAL BANK (the "Bank") the principal amount of Five Million and 00/100
($5,000,000.00) Dollars or such portion thereof as may have been advanced by the
Bank or may hereafter be advanced by the Bank pursuant to (S)1.2 of that certain
letter agreement of even date herewith between the Bank and the Borrower (as
same may be from time to time amended, modified, supplemented and/or restated,
the "Letter Agreement") and remains outstanding from time to time hereunder
("Principal"), with interest, at the rate hereinafter set forth, on the daily
balance of all unpaid Principal, from the date hereof until payment in full of
all Principal and interest hereunder. Capitalized terms used herein and not
defined herein shall have the respective meanings ascribed to them in the Letter
Agreement.
Interest on all unpaid Principal shall be due and payable monthly in
arrears, on the first day of each month, commencing on the first such date after
the advance of any Principal and continuing on the first day of each month
thereafter and on the date of payment of this note in full, at a fluctuating
rate per annum (computed on the basis of a year of three hundred sixty (360)
days for the actual number of days elapsed) which shall at all times (except as
described in the next sentence) be equal to the sum of (i) one and one-half
(1.5%) percent plus (ii) the Prime Rate, as in effect from time to time (but in
no event in excess of the maximum rate permitted by then applicable law), with a
change in the aforesaid rate of interest to become effective on the same day on
which any change in the Prime Rate is effective. Overdue Principal and, to the
extent permitted by law, overdue interest shall bear interest at a fluctuating
rate per annum which at all times shall be equal to the sum of (i) four (4%)
percent per annum plus (ii) the per annum rate otherwise payable under this note
(but in no event in excess of the maximum rate permitted by then applicable
law), compounded monthly and payable on demand. As used herein, "Prime Rate"
means that variable rate of interest per annum designated by the Bank from time
to time as its prime rate, it being understood that such rate is merely a
reference rate and does not necessarily represent the lowest or best rate being
charged to any customer. If the entire amount of any required Principal and/or
interest is not paid within ten (10) days after the same is due, the Borrower
shall pay to the Bank a late fee equal to five percent (5%) of the required
payment.
All outstanding Principal and all interest accrued thereon shall be due and
payable in full on the first to occur of: (i) an acceleration under (S)5.2 of
the Letter Agreement or (ii) the
-1-
<PAGE>
EXHIBIT 10.6
------------
Expiration Date. The Borrower may at any time and from time to time prepay all
or any portion of said Principal, without premium or penalty. Under certain
circumstances set forth in the Letter Agreement, prepayments of Principal may be
required.
Payments of both Principal and interest shall be made, in lawful currency
of the United States in immediately available funds, at the office of the Bank
located at One Federal Street, Boston, Massachusetts 02110, or at such other
address as the Bank may from time to time designate.
The undersigned Borrower irrevocably authorizes the Bank to make or cause
to be made, on the books of the Bank, at or following the time of making any
Revolving Loan (as defined in the Letter Agreement) and of receiving any payment
of Principal, an appropriate notation reflecting such transaction and the then
aggregate unpaid balance of Principal. Failure of the Bank to make any such
notation shall not, however, affect any obligation of the Borrower hereunder or
under the Letter Agreement. The unpaid Principal amount of this note, as
recorded by the Bank from time to time on such schedule or on such books, shall
constitute presumptive evidence of the aggregate unpaid principal amount of the
Revolving Loans.
The Borrower hereby (a) waives notice of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b) waives presentment, demand, notice, protest and all
other demands and notices generally in connection with the delivery, acceptance,
performance, default or enforcement of or under this note, and (c) agrees to
pay, to the extent permitted by law, all reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred or paid by
the Bank in enforcing this note and any collateral or security therefor, all
whether or not litigation is commenced.
This note is the Revolving Note referred to in the Letter Agreement. This
note is subject to prepayment as set forth in the Letter Agreement. The
maturity of this note may be accelerated upon the occurrence of an Event of
Default, as provided in the Letter Agreement.
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED ON THIS NOTE OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY RELATED DOCUMENTS OR OUT OF
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF ANY PERSON. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR
THE BANK TO ACCEPT THIS NOTE AND TO MAKE REVOLVING LOANS AS CONTEMPLATED IN THE
LETTER AGREEMENT.
-2-
<PAGE>
EXHIBIT 10.6
------------
Executed, as an instrument under seal, as of the day and year first above
written.
CORPORATE SEAL ASECO CORPORATION
ATTEST:
/s/ Sebastian J. Sicari By: /s/Mary R. Barletta
- ------------------------- ----------------------
Witness Name: Mary R. Barletta
Title: Chief Financial Officer
-3-
<PAGE>
EXHIBIT 10.7
------------
Inventory, Accounts Receivable
and Intangibles Security Agreement
FLEET BANK (SHORT FORM)
- --------------------------------------------------------------------------------
NOVEMBER 27, 1998
----------------------------------
Date
To secure the due payment and performance of all of the liabilities and
obligations hereunder of the undersigned, herein called "Borrower", to: FLEET
NATIONAL BANK hereinafter called "Bank", and all other liabilities and
obligations of Borrower to Bank of every name and nature whatsoever, direct or
indirect, absolute or contingent, now existing or hereafter arising or acquired,
including, without limitation, the due payment and performance of all
liabilities and obligations under any and all notes, all hereinafter called
"Obligations", the Borrower hereby grants to Bank a continuing security interest
in:
(a) All accounts, contracts, contract rights, notes, bills, drafts,
acceptances, general intangibles, choses in action, and all other debts,
obligations and liabilities, in whatever form, owing to Borrower from any
person, firm or corporation, or any other legal entity, whether now existing or
hereafter arising, now or hereafter received by or belonging or owing to
Borrower, for goods sold by it or for services rendered by it or however
otherwise same may have been established or created, all guarantees and
securities therefor, all right, title and interest of Borrower in the
merchandise or services which gave rise thereto, including the rights of
reclamation and stoppage in transit, all rights of an unpaid seller of
merchandise or services, and in the proceeds thereof, including, without
limitation, all proceeds of credit, fire or other insurance, and any tax
refunds.
(b) All goods, merchandise, raw materials, goods and work in process,
finished goods and other tangible personal property, now owned or hereafter
acquired and held for sale or lease, or furnished or to be furnished under
contract of service, or used or consumed in Borrower's business and in the
products and proceeds thereof, including, without limitation, all proceeds of
fire or other insurance. This portion of the collateral being sometimes
referred to as "Inventory".
All of the accounts and other property as set forth in (a) above and
Inventory as set forth in (b) above and the other property described in the
Rider attached hereto are hereinafter referred to collectively as "Collateral".
The Collateral and all proceeds and products thereof shall be security for
all Obligations. Until all Obligations have been fully satisfied, Bank's
security interest in the Collateral and all proceeds and products thereof, shall
continue in full force and effect and Bank will at all times after the
occurrence and during continuance of an Event of Default (as defined in the
Letter Agreement of even date between Bank and Borrower) have the right to take
physical possession of the Inventory and to maintain such possession on
Borrower's premises or to remove the
<PAGE>
EXHIBIT 10.7
------------
Inventory or any part thereof to such other places as Bank may desire. If Bank
exercises Bank's right to take possession of the Inventory, Borrower shall, upon
Bank's demand, assemble the Inventory and make it available to Bank at a place
reasonably convenient to Bank.
If Borrower shall fail to pay, when due,* any of the Obligations or shall
fail to observe or perform any of the provisions of this Agreement or any other
agreement now or hereafter entered into between Bank and Borrower, Borrower
shall be in default hereunder. In the event of such default all Obligations of
Borrower to Bank shall, at the option of the Bank, and without notice to or
demand upon Borrower become and be immediately due and payable and thereupon
Bank may exercise any and all rights and remedies of a secured party available
under the Uniform Commercial Code and all other applicable law.
Borrower represents, warrants and covenants that all Inventory is and will
be owned by Borrower, free of all other liens and encumbrances, and shall be
kept by Borrower at 500 DONALD LYNCH BOULEVARD, MARLBOROUGH, MA 01752 and that
Borrower shall not (without Bank's prior written approval) remove the Inventory
therefrom except for the purposes of sale in the ordinary course of business.
Except for sales made in the ordinary course of business, Borrower shall
not sell, encumber, grant a security interest in or dispose of or permit the
sale, encumbrance or disposal of any Collateral without Bank's prior written
consent. A sale in the ordinary course of business shall not include a transfer
in total or partial satisfaction of a debt.
Borrower shall perform any and all steps requested by Bank to perfect
Bank's security interest in the Collateral, such as executing and filing
financing or continuation statements in form and substance satisfactory to Bank.
If any Inventory is in the possession or control of any of Borrower's agents or
processors, Borrower shall notify such agents or processors of Bank's interest
therein, and upon request instruct them to hold all such Inventory for Bank's
account and subject to Bank's instructions. A physical listing of all
Inventory, wherever located, shall be taken by Borrower whenever requested by
Bank, and a copy of each such physical listing shall be supplied to Bank. Bank
may examine and inspect the Inventory at any time;*
Borrower agrees to keep all the Inventory insured with coverage and amounts
not less than that usually carried by one engaged in a like business and in any
event not less than that required by Bank with loss payable to the Bank and
Borrower, as their interests may appear, hereby appointing Bank as attorney for
Borrower in obtaining, adjusting, settling and cancelling such insurance and
endorsing any drafts. All premiums on such insurance shall be paid by Borrower
and the policies delivered to Bank. If Borrower fails to do so, Bank may
procure such insurance and charge the cost to Borrower's loan account. As
further assurance for the payment and performance of the Obligations, Borrower
hereby assigns to Bank all sums including returned or unearned premiums, which
may become payable under any policy of insurance on the Collateral and Borrower
hereby directs each insurance company issuing any such policy to make payment of
such sums directly to Bank.
<PAGE>
EXHIBIT 10.7
------------
If in the event of the sale of the Collateral the proceeds thereof are
insufficient to pay all amounts to which Bank is legally entitled, Borrower will
be liable for the deficiency, together with interest thereon and the reasonable
fees of any attorney employed by Bank to collect such deficiency.
Bank shall have the right to enforce any remedies hereunder alternatively,
successively or concurrently. A waiver of any default of Borrower shall not be
a waiver of any subsequent, similar or other default. No delay in the exercise
of any of Bank's rights or remedies hereunder shall constitute a waiver of such
right or remedy or of any other right or remedy.
This Agreement shall not be construed to be in limitation of or in
substitution for any other grant of security interest from Borrower to Bank made
prior to or contemporaneously herewith, and no other such grant of a security
interest made subsequent to or contemporaneously herewith shall be construed to
be in limitation of or in substitution for this Agreement unless expressly and
specifically provided therein.
This Agreement shall take effect as a sealed instrument, shall be governed
by and construed according to the laws of the Commonwealth of Massachusetts,
shall be binding upon the heirs, executors, administrators, successors and
assigns of Borrower and shall inure to the benefit of the successors and assigns
of Bank.
*SEE RIDER ATTACHED HERETO
Witnessed by: ASECO CORPORATION
-------------------------------------
BORROWER
/s/Sebastian J. Sicari By: /s/ Mary R. Barletta
- -------------------------- ---------------------------------
Its Chief Financial Officer
FLEET NATIONAL BANK
Address: 500 Donald Lynch Boulevard
-----------------------------
NUMBER AND STREET
By: /s/ Thomas M. Davies Marlborough, MA 01752
---------------------- -------------------------------------
Its CITY, COUNTY AND STATE
<PAGE>
EXHIBIT 10.7
------------
RIDER TO INVENTORY, ACCOUNTS RECEIVABLE
AND INTANGIBLES SECURITY AGREEMENT
FROM ASECO CORPORATION
TO FLEET NATIONAL BANK
The foregoing Inventory, Accounts Receivable and Intangibles Security
Agreement (the "IAR Security Agreement") is modified as follows:
1. For the purposes of the IAR Security Agreement, the "Collateral" will
be deemed to include all of the following (collectively, the "Intangibles"), all
whether now existing and owned by the Borrower or hereafter arising or acquired:
all of the Borrower's know-how, trade secrets, copyrights, patents, trade names,
trademarks, service marks and licenses and the goodwill of the business
associated with the foregoing, including, without limitation, the patents and
patent applications described on Exhibit A hereto and the goodwill of the
business associated therewith. The Borrower hereby grants to the Bank a
security interest in the Intangibles to secure payment and performance of the
Obligations. Except as shown on Exhibit A hereto, none of the Intangibles owned
by the Borrower is the subject of any state or federal registration. The
Borrower agrees that it will not dispose of any of the Intangibles or any
interest therein or grant a security interest in any of the Intangibles (other
than to the Bank) nor suffer or permit to exist any other encumbrance thereon
without, in each instance, the prior written consent of the Bank. The Borrower
warrants that it has unencumbered title to or right to use the Intangibles and
full right and authority to grant to the Bank the within security interest in
the Intangibles. The Borrower agrees to defend its title to the Intangibles and
to take all steps reasonably necessary to preserve its title to the Intangibles
and ability to use same, including defense of any claims of infringement and
action against any infringers. Upon the occurrence of any Event of Default (as
defined in the Letter Agreement of even date herewith between the Bank and the
Borrower), the Borrower will assemble and make available to the Bank all books,
records and data, whether in written form or electronically recorded
representing any of the Intangibles (including, without limitation, all source
codes for the Borrower's software).
2. The IAR Security Agreement is modified by inserting into the first
sentence of fourth grammatical paragraph thereof, immediately after the words
"when due", the following:
"(continuing beyond such notice and/or grace period, if any,
so that same constitutes an Event of Default under the
aforesaid Letter Agreement)"
3. The IAR Security Agreement is modified by deleting the period at the
end of the seventh grammatical paragraph thereof and by substituting in its
stead the following:
", upon reasonable notice and during normal business hours,
except that if an Event of Default under the aforesaid
Letter Agreement has occurred and is continuing, the Bank
may make such inspection at any time and without any
requirement for notice."
<PAGE>
EXHIBIT 10.7
------------
TRADEMARKS, PATENTS AND COPYRIGHTS
PATENTS
-------
Patents with United States Registration
- ---------------------------------------
<TABLE>
<CAPTION>
Patent Description Reg. No. Issue Date
- --------------------------------------------------------------- ---------- ---------------
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Utility contractor for testing integrated circuit chips 5,177,436 January 5, 1993
mounted in molded carrier rings
- --------------------------------------------------------------------------------------------
Utility contact set for test apparatus for testing integrated 4,686,468 August 11, 1987
circuit package
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Patent Applications
- -------------------
- --------------------------------------------------------------------------------------------
Description Serial No. Filing Date
- ----------- ---------- ---------------
- --------------------------------------------------------------------------------------------
Automatic semiconductor part handler 08/878,426 July 31, 1996
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
TRADEMARKS
- --------------------------------------------------------------------------------------------
Marks with Federal Registration
- -------------------------------
- --------------------------------------------------------------------------------------------
Marks Registration No./Reg. Date Use
----- -------------------------- ---
- --------------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------
None.
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Marks with Pending Applications
- -------------------------------
- --------------------------------------------------------------------------------------------
Marks Serial No./Filing Date Use
- ----- ---------------------- ---
- --------------------------------------------------------------------------------------------
<S> <C> <C>
None.
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
COPYRIGHTS
----------
- --------------------------------------------------------------------------------------------
Work Author Owner Registration Registered
---- ------ ----- ------------ ----------
Number
------
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
None.
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.8
------------
Supplementary Security Agreement
Security Interest in Goods and Chattels
November 27, 1998
-------------------------------
DATE
To: Fleet National Bank
Gentlemen:
This is a supplement to our Inventory, Accounts Receivable and Intangibles
Security Agreement (the "Agreement") with you bearing the effective date of even
date herewith. It is hereby incorporated into said Agreement, shall have a term
concurrent therewith and is a part thereof.
1. In addition to your other security, we hereby grant you a continuing
security interest in all machinery, equipment and other goods (as defined in
Article 9 of the Uniform Commercial Code) whether now owned or hereafter
acquired by us and wherever located, all replacements and substitutions therefor
or accessions thereto and all proceeds thereof (all herein referred to
collectively as "Collateral") and including, also without limitation, all
proceeds of fire or other insurance covering the aforesaid property.
2. The Collateral shall be security for all Obligations (as defined in the
Agreement). Until all Obligations have been fully satisfied, your security
interest in the Collateral shall continue in full force and effect and you will
at all times after the occurrence of any Event of Default under the letter
agreement described below have the right to the physical possession of the
Collateral and to maintain such possession on our premises or to remove the
Collateral or any part thereof to such other places as you may desire. If you
exercise your right to take possession of the Collateral, we shall, upon your
demand, assemble the Collateral and make it available to you at a place
reasonably convenient to you. In addition, with respect to all Collateral, you
shall have all of the rights and remedies set forth in the Agreement and all of
the rights and remedies provided in the Uniform Commercial Code.
3. [Deleted]
4. We represent, warrant the covenant that (a) the Collateral is in our
possession at 500 Donald Lynch Boulevard, Marlborough, County of Middlesex,
Commonwealth of Massachusetts; (b) we are the lawful owners of the Collateral
and have the sole right and lawful authority to deliver this instrument; (c) the
Collateral and every part thereof is and will be free and clear of all security
interests, liens and encumbrances of every kind, nature and description except
as follows: purchase money security interests and other exceptions permitted by
letter agreement of even date herewith between the Borrower and the Bank, and we
will warrant and defend the Collateral against the claims and demands of all
persons; (d) we will keep the Collateral free and clear of all attachments,
levies, taxes, liens, security interests and encumbrances of every kind and
nature, except as listed above, and we will at our own cost and expense, keep
the Collateral in a good state of repair and will
<PAGE>
EXHIBIT 10.8
------------
not waste or destroy the same or any part thereof except for items disposed of
in the ordinary course to the extent expressly permitted by the aforesaid letter
agreement and will not be negligent in the care and use thereof; (e) we will not
without your prior written consent, sell, assign, mortgage, lease or otherwise
dispose of the Collateral except for obsolete or worn out items disposed of in
the ordinary course and except for liens permitted by the aforesaid letter
agreement; (f) we will insure the Collateral in your name against loss or damage
by fire, theft, burglary, pilferage, and such other hazards as you shall
specify, in amounts and under policies by insurers acceptable to you, and if we
fail to do so, you may procure such insurance and charge the cost to our loan
account; (g) as further assurance for the payment and performance of the
Obligations, we hereby assign to you all sums, including returned or unearned
premiums, which may become payable under any policy of insurance on the
Collateral and we hereby direct each insurance company issuing any such policy
to make payment of such sums directly to you; (h) except for items disposed of
in the ordinary course to the extent expressly permitted by the aforesaid letter
agreement we will not remove the Collateral from its present location without
your prior written consent and we will at all times, allow you or your
representatives free access to and right of inspection of the Collateral (see
attached Rider); (i) we will comply with the terms and conditions of any leases
covering the premises wherein the Collateral is located and any orders,
ordinances, laws or statutes of any city, state or other governmental department
having jurisdiction with respect to such premises or the conduct of business
thereon, and, when requested by you, we will execute any written instruments and
do any other acts necessary to effectuate more fully the purposes and provisions
of the Agreement; (j) we will indemnify and save you harmless from all loss,
cost, damage, liability or expenses including attorneys' fees that you may
sustain or incur by reason of defending or protecting your security interest or
the priority thereof or enforcing the Obligations, or in the prosecution or
defense of any action or proceeding concerning any matter growing out of or
connected with the Agreement, the Obligations or the Collateral (see attached
Rider).
5. You may, at your option, discharge any taxes, liens, security interests
or other encumbrances at any time levied or placed on the Collateral and not
permitted by the letter agreement and you may pay for the maintenance and
preservation of the Collateral and we will reimburse you on demand for any
payment made or any expense incurred by you pursuant to the foregoing
authority, with interest at the rate provided in the Agreement.
Very truly yours,
Witnessed by: ASECO CORPORATION
-----------------------------------------------
BORROWER
/s/ Sebastian J. Sicari
- -------------------------
By: /s/Mary R. Barletta
-------------------------------------------
Its: Chief Financial Officer
Accepted at Boston, Massachusetts /s/ 11/30/98
------------
FLEET NATIONAL BANK
By: /s/Thomas W. Daires
--------------------------------------------
Its: Senior Vice President
<PAGE>
EXHIBIT 10.8
------------
RIDER TO SUPPLEMENTARY SECURITY AGREEMENT
FROM ASECO CORPORATION TO FLEET NATIONAL BANK
The foregoing Supplementary Security Agreement Agreement-Security Interest
in Goods and Chattels (the "Supplementary Security Agreement") is modified as
follows:
1. By inserting into Subsection 4(h) of the Supplementary Security
Agreement, immediately after the words "inspection of the Collateral", the
following:
", such access and right of inspection to be upon reasonable notice
and during normal business hours, except that if an Event of Default
under the aforesaid letter agreement has occurred and is continuing,
the Bank may exercise such rights of access and inspection at any time
and without any requirement for notice;"
2. By deleting the period at the end of Subsection 4(j) of the
Supplementary Security Agreement and by substituting in its stead the following:
", except for any such loss, cost, damage, liability or expenses
arising out of the Bank's gross negligence or willful misconduct."
<PAGE>
Exhibit 10.9
ASECO CORPORATION
500 Donald Lynch Boulevard
Marlborough, MA 01752
November 27, 1998
Fleet National Bank
One Federal Street
Boston, MA 02110
Gentlemen:
This letter agreement will set forth certain understandings between Aseco
Corporation, a Delaware corporation (the "Borrower") and Fleet National Bank
(the "Bank") with respect to Revolving Loans (hereinafter defined) to be made by
the Bank to the Borrower, with respect to letters of credit which may hereafter
be issued by the Bank for the account of the Borrower and with respect to other
facilities to be provided by the Bank for the Borrower. This letter agreement
amends and restates in its entirety that certain letter agreement dated November
27, 1992, as amended and modified (as so amended and modified, the "Prior
Agreement") between the Borrower and Fleet Bank of Massachusetts, N.A., the Bank
having succeeded by merger to the rights of Fleet Bank of Massachusetts, N.A.
thereunder. In consideration of the mutual promises contained herein and in the
other documents referred to below, and for other good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, the
Borrower and the Bank agree as follows:
I. AMOUNTS AND TERMS
-----------------
1.1. Reference to Documents. Reference is made to (i) that certain
----------------------
$5,000,000 principal amount promissory note (the "Revolving Note") of even date
herewith made by the Borrower and payable to the order of the Bank, (ii) that
certain Inventory, Accounts Receivable and Intangibles Security Agreement and
that certain Supplementary Security Agreement -Security Interest in Goods and
Chattels, each of even date herewith, from the Borrower to the Bank
(collectively, the "Security Agreement"), (iii) a Security Agreement (Patents)
of even date herewith (the "Intellectual Property Security Agreement") from the
Borrower to the Bank relating to the Borrower's registered patents, and (iv) a
pledge agreement (the "Pledge") from the Borrower to the Bank with respect to
the capital stock of Aseco Investment Corporation ("Securities Corp.") and a
related letter of representations from Securities Corp.
1.2. The Borrowing; Revolving Note. Subject to the terms and conditions
-----------------------------
hereinafter set forth, the Bank will make loans ("Revolving Loans") to the
Borrower, in such amounts as the Borrower may request, on any Business Day prior
to the first to occur of (i) the Expiration Date, or (ii) the earlier
termination of the within-described revolving financing arrangements
-1-
<PAGE>
pursuant to (S)5.2 or (S)6.7; provided, however, that (1) the aggregate
principal amount of Revolving Loans outstanding shall at no time exceed the
Maximum Revolving Amount (hereinafter defined) and (2) the Aggregate Bank
Liabilities (hereinafter defined) shall at no time exceed the Borrowing Base
(hereinafter defined). Within such limits, and subject to the terms and
conditions hereof, the Borrower may obtain Revolving Loans, repay Revolving
Loans and obtain Revolving Loans again on one or more occasions. The Revolving
Loans shall be evidenced by the Revolving Note and interest thereon shall be
payable at the times and at the rate provided for in the Revolving Note. Overdue
principal of the Revolving Loans and, to the extent permitted by law, overdue
interest shall bear interest at a fluctuating rate per annum which at all times
shall be equal to the sum of (i) four (4%) percent per annum plus (ii) the per
annum rate otherwise payable under the Revolving Note (but in no event in excess
of the maximum rate from time to time permitted by then applicable law),
compounded monthly and payable on demand. The Borrower hereby irrevocably
authorizes the Bank to make or cause to be made, on a schedule attached to the
Revolving Note or on the books of the Bank, at or following the time of making
each Revolving Loan and of receiving any payment of principal, an appropriate
notation reflecting such transaction and the then aggregate unpaid principal
balance of the Revolving Loans. The amount so noted shall constitute presumptive
evidence as to the amount owed by the Borrower with respect to principal of the
Revolving Loans. Failure of the Bank to make any such notation shall not,
however, affect any obligation of the Borrower or any right of the Bank
hereunder or under the Revolving Note. All payments of interest, principal and
any other sum payable hereunder and/or under the Revolving Note and/or with
respect to any of the other Obligations shall be made to the Bank, in lawful
money of the United States in immediately available funds, at its office at One
Federal Street, Boston, MA 02110 or to such other address as the Bank may from
time to time direct. All payments received by the Bank after 2:00 p.m. on any
day shall be deemed received as of the next succeeding Business Day. All monies
received by the Bank shall be applied first to fees, charges, costs and expenses
payable to the Bank under this letter agreement, the Revolving Note and/or any
of the other Loan Documents and/or with respect to any of the other Obligations,
next to interest then accrued on account of any Revolving Loans or letter of
credit reimbursement obligations or on any of the other Obligations and only
thereafter to principal of the Revolving Loans, the letter of credit
reimbursement obligations and the other Obligations. All interest and fees
payable hereunder and/or under the Revolving Note and/or with respect to any of
the other Obligations shall be calculated on the basis of a 360-day year for the
actual number of days elapsed.
1.3. Repayment; Renewal. The Borrower shall repay in full all Revolving
------------------
Loans and all interest thereon upon the first to occur of: (i) the Expiration
Date or (ii) an acceleration under (S)5.2(a) following an Event of Default. The
Borrower may repay, at any time, without penalty or premium, the whole or any
portion of any Revolving Loan. In addition, if at any time the Borrowing Base
is in an amount which is less than the then outstanding Aggregate Bank
Liabilities, the Borrower will forthwith pay so much of the Revolving Loans as
may be required (or arrange for the termination of such letters of credit as may
be required) so that the Aggregate Bank Liabilities will not exceed the
Borrowing Base. The Bank may, at its sole discretion, renew the financing
arrangements described in this letter agreement by extending the
-2-
<PAGE>
Expiration Date in a writing signed by the Bank and accepted by the Borrower.
Neither the inclusion in this letter agreement or elsewhere of covenants
relating to periods of time after the Expiration Date, nor any other provision
hereof, nor any action (except a written extension pursuant to the immediately
preceding sentence), non-action or course of dealing on the part of the Bank
will be deemed an extension of, or agreement on the part of the Bank to extend,
the Expiration Date.
1.4. Advances and Payments. The proceeds of all Revolving Loans shall be
---------------------
credited by the Bank to a general deposit account maintained by the Borrower
with the Bank. The proceeds of each Revolving Loan will be used by the Borrower
solely for working capital purposes and other general corporate purposes
(including loans to Subsidiaries, but only within the limits set forth in (S)4.5
below).
The Bank may charge any general deposit account of the Borrower at the Bank
with the amount of all payments of interest, principal and other sums due, from
time to time, under this letter agreement and/or the Revolving Note and/or with
respect to any letter of credit and/or with respect to any of the other
Obligations; and will thereafter notify the Borrower of the amount so charged.
The failure of the Bank so to charge any account or to give any such notice
shall not affect the obligation of the Borrower to pay interest, principal or
other sums as provided herein or in the Revolving Note or with respect to any
letter of credit or with respect to any of the other Obligations.
Whenever any payment to be made to the Bank hereunder or under the
Revolving Note or with respect to any letter of credit or with respect to any of
the other Obligations shall be stated to be due on a day which is not a Business
Day, such payment may be made on the next succeeding Business Day, and interest
payable on each such date shall include the amount thereof which shall accrue
during the period of such extension of time. All payments by the Borrower
hereunder and/or in respect of the Revolving Note and/or with respect to any
letter of credit or any of the other Obligations shall be made net of any
impositions or taxes and without deduction, set-off or counterclaim,
notwithstanding any claim which the Borrower may now or at any time hereafter
have against the Bank.
1.5. Letters of Credit. The Bank has issued for the account of the
-----------------
Borrower a stand-by letter of credit (the "Existing L/C") in the stated amount
of $200,000. The Existing L/C has been issued for a per annum fee of 1.5% of
the maximum stated amount thereof (payable in advance), and is subject to the
Bank's standard documentation and such other terms and conditions as were agreed
to by the Bank and the Borrower at the time of issuance. In addition, the
Borrower shall be liable to pay to the Bank the Bank's then customary
negotiation, transfer, drawing and other fees in connection with the Existing
L/C.
In addition to the foregoing, at the Borrower's request, the Bank may from
time to time, in its sole discretion, issue one or more letters of credit for
the account of the Borrower; provided that at the time of such issuance and
after giving effect thereto (A) the aggregate stated amounts of all letters of
credit issued under this paragraph will not exceed $500,000 and
-3-
<PAGE>
(B) the Aggregate Bank Liabilities will not exceed the lesser of (i) $5,000,000
or (ii) the then effective Borrowing Base. Any such letter of credit will be
issued for such fee and upon such terms and conditions as may be agreed to by
the Bank and the Borrower at the time of issuance. The Borrower hereby
authorizes the Bank, without further request from the Borrower, to cause the
Borrower's liability to the Bank for reimbursement of funds drawn under any such
letter of credit to be repaid from the proceeds of a Revolving Loan to be made
hereunder. The Borrower hereby irrevocably requests that such Revolving Loans be
made.
1.6. ACH Transactions. The Bank may from time to time prior the Expiration
----------------
Date, at the request of the Borrower, initiate automated clearinghouse ("ACH")
transactions for the Borrower; provided that the Bank's total ACH Exposure shall
not (unless otherwise agreed by the Bank in its sole discretion) exceed
$1,500,000 at any one time. ACH transactions will bear such fees and charges
and as may be agreed upon by the Bank and the Borrower and will be governed by
the Bank's then current documentation and practices with respect to such
transactions. As used herein, "ACH Exposure" as determined at any date means
the sum of (i) all amounts then owed by the Borrower to the Bank in connection
with any ACH transaction pursuant to which the Bank has advanced funds on behalf
of the Borrower plus (ii) the maximum amount which could be owed by the Borrower
(assuming settlement within two (2) Business Days of each date when funds are
advanced) to the Bank in connection with all ACH transactions then authorized by
the Borrower but as to which the Bank has not yet advanced funds.
1.7. Foreign Exchange Contracts. During the term of this letter agreement
--------------------------
and subject to the terms and conditions hereof, the Bank may from time to time
prior to the Expiration Date, at the Borrower's request, provide to the Borrower
one or more forward contracts ("Foreign Exchange Contracts") for the purchase by
the Borrower of foreign currency from the Bank; provided that (i) each such
Foreign Exchange Contract will be at such pricing as the Bank and the Borrower
may agree at the time of execution of such Foreign Exchange Contract, (ii) the
documentation for each such Foreign Exchange Contract will be in such form as is
then customarily used by the Bank for transactions of this type, (iii) the
Foreign Exchange Contracts will be used by the Borrower to minimize its exposure
to the fluctuation of the value of those foreign currencies in which payments
are expected to be made to the Borrower by customers or in which the Borrower is
required to make payments to suppliers, (iv) the United States Dollar equivalent
of all amounts subject to the Foreign Exchange Contracts will not exceed
$10,000,000 in the aggregate and (v) the F/X Exposure will at no time exceed
$1,500,000. As used herein, "F/X Exposure" as determined at any date means the
sum of (i) all amounts then owed by the Borrower to the Bank in connection with
settlement of any Foreign Exchange Contract, plus (ii) the maximum two-day
settlement amount for all then outstanding Foreign Exchange Contracts.
1.8. Conditions to Advance. Prior to the making of the initial Revolving
---------------------
Loan or the issuance of any letter of credit hereunder or the initiation of any
ACH transaction or the issuance of any Foreign Exchange Contract hereunder, the
Borrower shall deliver to the Bank duly executed copies of this letter
agreement, the Security Agreement, the Intellectual Property
-4-
<PAGE>
Security Agreement, the Revolving Note and the documents and other items listed
on the Closing Agenda delivered herewith by the Bank to the Borrower, all of
which shall be satisfactory in form and substance to the Bank and its counsel.
Without limiting the foregoing, any Revolving Loan or letter of credit
issuance or ACH transaction or the issuance of a Foreign Exchange Contract
(including the initial Revolving Loan, letter of credit issuance, ACH
transaction or the issuance of a Foreign Exchange Contract) is subject to the
further conditions precedent that on the date on which such Revolving Loan is
made or such letter of credit is issued or such ACH transaction is initiated or
such Foreign Exchange Contract is issued (and after giving effect thereto):
(a) All statements, representations and warranties of the Borrower made in
this letter agreement and/or in the Security Agreement shall continue to be
correct in all material respects as of the date of such Revolving Loan or the
date of issuance of such letter of credit or the date of such ACH transaction or
the date of issuance of such Foreign Exchange Contract, as the case may be,
except any such statements, representations and warranties which are
specifically stated herein as being made as of a particular date.
(b) All covenants and agreements of the Borrower contained herein and/or in
any of the other Loan Documents shall have been complied with in all material
respects on and as of the date of such Revolving Loan or the date of issuance of
such letter of credit or the date of such ACH transaction or the date of
issuance of such Foreign Exchange Contract, as the case may be.
(c) No event which constitutes, or which with notice or lapse of time or
both could constitute, an Event of Default shall have occurred and be
continuing.
(d) No material adverse change shall have occurred in the financial
condition of the Borrower from that disclosed in the financial statements then
most recently furnished to the Bank (being, at the date hereof, the Borrower's
management-generated financial statements as at September 27, 1998).
Each request by the Borrower for any Revolving Loan or for the issuance of
any letter of credit or for any ACH transaction or for the issuance of any
Foreign Exchange Contract, and each acceptance by the Borrower of the proceeds
of any Revolving Loan or delivery of a letter of credit or delivery of a Foreign
Exchange Contract, will be deemed a representation and warranty by the Borrower
that at the date of any such event, and after giving effect thereto, all of the
conditions set forth in the foregoing clauses (a)-(d) of this (S)1.8 will be
satisfied. Each request for a Revolving Loan or letter of credit issuance will
be accompanied by a Borrowing Base certificate on a form satisfactory to the
Bank, executed by the chief financial officer of the Borrower, unless such a
certificate shall have been previously furnished as required by clause (iv) of
(S)3.6 setting forth the Borrowing Base as at the most recent month-end prior to
the date of the requested borrowing or the requested letter of credit issuance,
as the case may be.
-5-
<PAGE>
II. REPRESENTATIONS AND WARRANTIES
------------------------------
2.1. Representations and Warranties. In order to induce the Bank to enter
------------------------------
into this letter agreement and to make Revolving Loans hereunder and/or issue
letters of credit hereunder and/or engage in ACH transactions for the Borrower
and/or issue Foreign Exchange Contracts, the Borrower warrants and represents to
the Bank as follows:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of Delaware. The Borrower has full corporate power
to own its property and conduct its business as now conducted, to grant the
security interests contemplated by the Security Agreement and the Intellectual
Property Security Agreement and to enter into and perform this letter agreement
and the other Loan Documents. The Borrower is duly qualified to do business and
is in good standing in Massachusetts and is also duly qualified to do business
in and is in good standing in each other jurisdiction in which the Borrower
maintains any facility, sales office, warehouse or other location, and in each
other jurisdiction where the failure so to qualify could (singly or in the
aggregate with all other such failures) have a material adverse effect on the
financial condition, business or prospects of the Borrower, all such
jurisdictions being listed on item 2.1(a) of the attached Disclosure Schedule.
At the date hereof, the Borrower has no Subsidiaries, except as shown on said
item 2.1(a) of the attached Disclosure Schedule. The Borrower is not a member
of any partnership or joint venture.
(b) The execution, delivery and performance by the Borrower of this letter
agreement and each of the other Loan Documents have been duly authorized by all
necessary corporate and other action and do not and will not:
(i) violate any provision of, or require (as a prerequisite to
effectiveness) any filings (other than filings under the Uniform Commercial
Code), registration, consent or approval under, any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award presently
in effect having applicability to the Borrower;
(ii) violate any provision of the charter or by-laws of the Borrower,
or result in a breach of or constitute a default or require any waiver or
consent under any indenture or loan or credit agreement or any other
material agreement, lease or instrument to which the Borrower is a party or
by which the Borrower or any of its properties may be bound or affected or
require any other consent of any Person; or
(iii) result in, or require, the creation or imposition of any lien,
security interest or other encumbrance (other than in favor of the Bank)
upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower.
(c) This letter agreement and each of the other Loan Documents has been
duly executed and delivered by the Borrower and each is a legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its respective terms.
-6-
<PAGE>
(d) Except as described on item 2.1(d) of the attached Disclosure Schedule,
there are no actions, suits, proceedings or investigations pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which could hinder or
prevent the consummation of the transactions contemplated hereby or call into
question the validity of this letter agreement or any of the other Loan
Documents or any action taken or to be taken in connection with the transactions
contemplated hereby or thereby or which in any single case or in the aggregate
might result in any adverse change in the business, prospects, condition,
affairs or operations of the Borrower or any Subsidiary, which change would be
material to the Borrower and its Subsidiaries, taken as a whole.
(e) The Borrower is not in violation of any term of its charter or by-laws
as now in effect. Neither the Borrower nor any Subsidiary of the Borrower is in
material violation of any term of any mortgage, indenture or judgment, decree or
order, or any other instrument, contract or agreement to which it is a party or
by which any of its property is bound which in any single case or in the
aggregate might result in any adverse change in the business, prospects,
condition, affairs or operations of the Borrower or any Subsidiary which change
would be material to the Borrower and its Subsidiaries, taken as a whole.
(f) The Borrower has filed (and has caused each of its Subsidiaries to
file) all federal, state and local tax returns, reports and estimates required
to be filed by the Borrower and/or by any such Subsidiary. All such filed
returns, reports and estimates are proper and accurate and the Borrower or the
relevant Subsidiary has paid all taxes, assessments, impositions, fees and other
governmental charges required to be paid in respect of the periods covered by
such returns, reports or estimates. No deficiencies for any tax, assessment or
governmental charge have been asserted or assessed, and the Borrower knows of no
material tax liability or basis therefor.
(g) The Borrower is in compliance (and each Subsidiary of the Borrower is
in compliance) with all requirements of law, federal, state and local, and all
requirements of all governmental bodies or agencies having jurisdiction over it,
the conduct of its business, the use of its properties and assets, and all
premises occupied by it, failure to comply with any of which could (singly or in
the aggregate with all other such failures) have a material adverse effect upon
the assets, business, financial condition or prospects of the Borrower and its
Subsidiaries, taken as a whole. Without limiting the foregoing, the Borrower
has all the material franchises, licenses, leases, permits, certificates and
authorizations needed for the conduct of its business and the use of its
properties and all premises occupied by it, as now conducted, owned and used.
(h) The audited financial statements of the Borrower as at March 29, 1998
and the management-generated statements of the Borrower as at September 27,
1998, each heretofore delivered to the Bank, are complete and accurate and
fairly present the financial condition of the Borrower as at the respective
dates thereof and for the periods covered thereby, except that
-7-
<PAGE>
the management-generated statements do not have footnotes and thus do not
present the information which would normally be contained in footnotes to
financial statements. Neither the Borrower nor any of the Borrower's
Subsidiaries has any liability, contingent or otherwise, not disclosed in the
aforesaid financial statements or in any notes thereto that could materially
affect the financial condition of the Borrower. Since September 27, 1998, there
has been no material adverse development in the business, condition or prospects
of the Borrower, and the Borrower has not entered into any transaction other
than in the ordinary course.
(i) The principal place of business and chief executive office of the
Borrower are located at 500 Donald Lynch Boulevard, Marlborough, MA 01752. All
of the books and records of the Borrower are located at said address. Except as
described on item 2.1(i) of the attached Disclosure Schedule, no assets of the
Borrower are located at any other address. Said item 2.1(i) of the attached
Disclosure Schedule sets forth the names and addresses of all record owners of
any premises where any material amount of Collateral is located.
(j) The Borrower owns or has a valid right to use all of the patents,
licenses, copyrights, trademarks, trade names and franchises ("Intellectual
Property") now being used to conduct its business, all of which are described on
item 2.1(j) of the attached Disclosure Schedule. None of the Intellectual
Property owned by the Borrower is represented by a registered copyright,
trademark, patent or other federal or state registration, except as shown on
said item 2.1(j). The conduct of the Borrower's business as now operated does
not conflict with valid patents, licenses, copyrights, trademarks, trade names
or franchises of others in any manner that could materially adversely affect the
business, prospects, assets or condition, financial or otherwise, of the
Borrower.
(k) None of the executive officers or key employees of the Borrower is
subject to any agreement in favor of anyone other than the Borrower which limits
or restricts that person's right to engage in the type of business activity
conducted or proposed to be conducted by the Borrower or which grants to anyone
other than the Borrower any rights in any inventions or other ideas susceptible
to legal protection developed or conceived by any such officer or key employee.
(l) The Borrower is not a party to any contract or agreement which now has
or, as far as can be foreseen by the Borrower at the date hereof, may have a
material adverse effect on the financial condition, business, prospects or
properties of the Borrower.
(m) The Borrower has reviewed the software which it uses in its business
for "Year 2000" compliance and has determined that such software will continue
to function in the manner intended without material interruption of service or
other difficulty resulting from the "Year 2000 problem". The Borrower will, at
the request of the Bank, provide such reports and other information as the Bank
may reasonably request in order to evidence such Year 2000 compliance.
-8-
<PAGE>
III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
------------------------------------------------
Without limitation of any other covenants and agreements contained herein
or elsewhere, the Borrower agrees that so long as the financing arrangements
contemplated hereby are in effect or any Revolving Loan or any of the other
Obligations shall be outstanding or any letter of credit issued hereunder shall
be outstanding or any Foreign Exchange Contract shall be outstanding or any
amount shall be owed by the Borrower in respect of any ACH transaction or any
Foreign Exchange Contract:
3.1. Legal Existence; Qualification; Compliance. The Borrower will
------------------------------------------
maintain (and will cause each Subsidiary of the Borrower to maintain) its
corporate existence and good standing in the jurisdiction of its incorporation;
provided that the Borrower may cause WED to be dissolved after WED conveys its
assets to the Borrower. The Borrower will remain qualified to do business and
in good standing in Massachusetts. The Borrower will qualify to do business and
will remain qualified and in good standing (and the Borrower will cause each
domestic Subsidiary of the Borrower (other than WED) to qualify and remain
qualified and in good standing) in each jurisdiction where the Borrower or such
Subsidiary, as the case may be, maintains any plant, sales office, warehouse or
other facility and in each other jurisdiction in which the failure so to qualify
could (singly or in the aggregate with all other such failures) have a material
adverse effect on the financial condition, business or prospects of the Borrower
and its Subsidiaries, taken as a whole. The Borrower will comply (and will
cause each Subsidiary of the Borrower to comply) with its charter documents and
by-laws, to the extent applicable. The Borrower will comply with (and will
cause each Subsidiary of the Borrower to comply with) all applicable laws, rules
and regulations (including, without limitation, ERISA and those relating to
environmental protection) other than (i) laws, rules or regulations the validity
or applicability of which the Borrower or such Subsidiary shall be contesting in
good faith by proceedings which serve as a matter of law to stay the enforcement
thereof and (ii) those laws, rules and regulations the failure to comply with
any of which could not (singly or in the aggregate) have a material adverse
effect on the financial condition, business or prospects of the Borrower and its
Subsidiaries, taken as a whole.
3.2. Maintenance of Property; Insurance. The Borrower will maintain and
----------------------------------
preserve (and will cause each Subsidiary of the Borrower to maintain and
preserve) all of its material fixed assets in good working order and condition,
making all necessary repairs thereto and replacements thereof. The Borrower
will maintain all such insurance as may be required under the Security Agreement
and will also maintain, with financially sound and reputable insurers, insurance
with respect to its property and business against such liabilities, casualties
and contingencies and of such types and in such amounts as shall be reasonably
satisfactory to the Bank from time to time and in any event all such insurance
as may from time to time be customary for companies conducting a business
similar to that of the Borrower in similar locales, with the Bank named as loss
payee with respect to all Collateral.
3.3. Payment of Taxes and Charges. The Borrower will pay and discharge
----------------------------
(and will cause each Subsidiary of the Borrower to pay and discharge) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or property, including, without limitation, taxes, assessments, charges
or levies relating to real and personal property,
-9-
<PAGE>
franchises, income, unemployment, old age benefits, withholding, or sales or
use, prior to the date on which penalties would attach thereto, and all lawful
claims (whether for any of the foregoing or otherwise) which, if unpaid, might
give rise to a lien upon any property of the Borrower or any such Subsidiary,
except any of the foregoing which is being contested in good faith and by
appropriate proceedings which serve as a matter of law to stay the enforcement
thereof and for which the Borrower (or such Subsidiary, as the case may be) has
established and is maintaining adequate reserves. The Borrower will pay, and
will cause each of its Subsidiaries to pay, in a timely manner, all lease
obligations, all trade debt, purchase money obligations, equipment lease
obligations and all of its other material Indebtedness. The Borrower will
perform and fulfill all material covenants and agreements under any leases of
real estate, agreements relating to purchase money debt, equipment leases and
other material contracts. The Borrower will maintain in full force and effect,
and comply with the terms and conditions of, all permits, permissions and
licenses necessary or desirable for its business.
3.4. Accounts. The Borrower will maintain its principal depository and
--------
operating accounts with the Bank.
3.5. Conduct of Business. The Borrower will conduct, in the ordinary
-------------------
course, the business in which it is presently engaged. The Borrower will not,
without the prior written consent of the Bank, directly or indirectly (itself or
through any Subsidiary) enter into any other lines of business, businesses or
ventures.
3.6. Reporting Requirements. The Borrower will furnish to the Bank:
----------------------
(i) Within 2 days after the Borrower files with the Securities and
Exchange Commission ("SEC") its Annual Report on Form 10-K for any fiscal
year of the Borrower (but in any event within 120 days after the end of
each such fiscal year), a copy of the annual audit report for such fiscal
year for the Borrower, including therein consolidated and consolidating
balance sheets of the Borrower and Subsidiaries as at the end of such
fiscal year and related consolidated and consolidating statements of
income, stockholders' equity and cash flow for the fiscal year then ended.
The annual consolidated financial statements shall be certified by
independent public accountants selected by the Borrower and reasonably
acceptable to the Bank, such certification to be in such form as is
generally recognized as "unqualified".
(ii) Within 30 days after the end of each month, consolidated balance
sheets of the Borrower and its Subsidiaries and related consolidated
statements of income and stockholders' equity and cash flow, unaudited but
complete and accurate and prepared in accordance with generally accepted
accounting principles consistently applied fairly presenting the financial
condition of the Borrower as at the dates thereof and for the periods
covered thereby (except that such monthly statements need not contain
footnotes) and certified as accurate (subject to normal year-end audit
adjustments, which shall not be material) by the chief financial officer of
the Borrower, such balance sheets to be as at the end of such month and
such statements of income
-10-
<PAGE>
and stockholders' equity and cash flow to be for such month and for the
fiscal year to date, in each case together with a comparison to budget.
(iii) At the time of delivery of each annual or monthly statement of
the Borrower, a certificate executed by the chief financial officer of the
Borrower stating that he or she has reviewed this letter agreement and the
other Loan Documents and has no knowledge of any default by the Borrower in
the performance or observance of any of the provisions of this letter
agreement or of any of the other Loan Documents or, if he or she has such
knowledge, specifying each such default and the nature thereof. Each
financial statement given as at the end of any fiscal quarter of the
Borrower will also set forth the calculations necessary to evidence
compliance with (S)(S)3.7-3.10.
(iv) Monthly, within 15 days after the end of each month, (A) an aging
report in form satisfactory to the Bank covering all Receivables of the
Borrower outstanding as at the end of such month, (B) a certificate of the
chief financial officer of the Borrower setting forth the Borrowing Base as
at the end of such month (except that the Borrowing Base certificate
otherwise required with respect to Borrowing Base as at November 30, 1998
may be given with respect to Borrowing Base as at December 1, 1998) and
(C) an accounts payable aging, all in form reasonably satisfactory to the
Bank.
(v) Promptly after receipt, a copy of all audits or reports submitted
to the Borrower by independent public accountants in connection with any
annual, special or interim audits of the books of the Borrower and any
"management letter" prepared by such accountants. The management letter for
each fiscal year will be delivered within 120 days after the close of such
fiscal year. The Borrower will provide to the Bank, prior to the first
Revolving Loan or other extension of credit under this letter agreement, a
copy of the management letter for the fiscal year ended March 29, 1998.
(vi) As soon as possible and in any event within five days of the
occurrence of any Event of Default or any event which, with the giving of
notice or passage of time or both, would constitute an Event of Default,
the statement of the Borrower setting forth details of each such Event of
Default or event and the action which the Borrower proposes to take with
respect thereto.
(vii) Promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
to which the Borrower or any Subsidiary of the Borrower is a party;
provided that nothing in this clause (vii) will be deemed to require the
Borrower to give notice of any such action, suit or proceeding in which
only monetary damages are sought and the damages so sought are less than
$50,000.
-11-
<PAGE>
(viii) Promptly upon filing any registration statement or listing
application (or any supplement or amendment to any registration statement
or listing application) with the SEC or any successor agency or with any
stock exchange or with the National Association of Securities Dealers
quotations system, a copy of same.
(ix) A copy of each periodic or current report filed with the SEC or
any successor agency and each annual report, proxy statement and other
communication sent to shareholders or other securityholders generally, such
copy to be provided to the Bank promptly upon such filing with the SEC or
such communication with shareholders or securityholders, as the case may
be.
(x) Promptly upon applying for, or being granted, a federal or state
registration for any copyright, trademark or patent or purchasing any
registered copyright, trademark or patent, written notice to the Bank
describing same, together with all such documents as may be required to
give the Bank a fully perfected first priority security interest in each
such copyright, trademark or patent.
(xi) Promptly after the Borrower has knowledge thereof, written notice
of any development or circumstance which may reasonably be expected to have
a material adverse effect on the business, properties, assets, or
condition, financial or otherwise, of the Borrower and its Subsidiaries
taken as a whole.
(xii) Promptly upon request, such other information respecting the
financial condition, operations, Receivables, inventory, machinery or
equipment of the Borrower or any Subsidiary as the Bank may from time to
time reasonably request.
3.7. Debt to Worth. The Borrower will maintain as at the last day of each
-------------
fiscal quarter of the Borrower (each, a "Determination Date") (commencing with
its results as at September 27, 1998) on a consolidated basis a Leverage Ratio
which is less than 1.0 to 1. As used herein, "Leverage Ratio" means, as at any
Determination Date, the ratio of (x) the total consolidated Senior Liabilities
of the Borrower and/or its Subsidiaries then outstanding to (y) the Borrower's
then consolidated Capital Base.
3.8. Capital Base. The Borrower will maintain as at each Determination
------------
Date (commencing December 27, 1998) a consolidated Capital Base of not less than
the following: as at December 27, 1998 - not less than $15,400,000; and as at
March 28, 1999 and as at each Determination Date thereafter - not less than
$14,300,000.
3.9. Profitability. The Borrower will not incur a quarterly consolidated
-------------
Net Loss in excess of $1,600,000 for its fiscal quarter ending December 27,
1998, nor a quarterly consolidated Net Loss in excess of $1,400,000 for its
fiscal quarter ending March 28, 1999, nor a quarterly consolidated Net Loss in
excess of $1,100,000 for its fiscal quarter ending June 27, 1999 or any
subsequent fiscal quarter. Without limitation of the foregoing, the Borrower
will not incur an annual consolidated Net Loss in excess of $7,900,000 for its
fiscal year ending March 28, 1999.
-12-
<PAGE>
3.10. Current Ratio. The Borrower will maintain as at the end of each
-------------
fiscal quarter of Borrower (commencing with its results as at September 27,
1998) a Current Ratio which is greater than 2.0 to 1. As used herein, "Current
Ratio" means, as at any date when same is to be determined, the ratio of (x) Net
Current Assets to (y) consolidated Current Liabilities.
3.11. Books and Records. The Borrower will maintain (and will cause each
-----------------
of its Subsidiaries to maintain) complete and accurate books, records and
accounts which will at all times accurately and fairly reflect all of its
transactions in accordance with generally accepted accounting principles
consistently applied. The Borrower will, at any reasonable time and from time to
time upon reasonable written notice and during normal business hours (and at any
time and without any necessity for notice following the occurrence of an Event
of Default), permit the Bank, and any agents or representatives thereof, to
examine and make copies of and take abstracts from the records and books of
account of, and visit the properties of the Borrower and any of its
Subsidiaries, and to discuss its affairs, finances and accounts with its
officers, directors and/or independent accountants, all of whom are hereby
authorized and directed to cooperate with the Bank in carrying out the intent of
this (S)3.11. Each financial statement of the Borrower hereafter delivered
pursuant to this letter agreement will be complete and accurate and will fairly
present the financial condition of the Borrower as at the date thereof and for
the periods covered thereby. Without limitation of the foregoing, the Bank may
conduct field audits of the Borrower and may arrange for equipment appraisals at
such reasonable intervals as the Bank may determine and the Borrower will pay
the reasonable costs thereof.
IV. NEGATIVE COVENANTS
------------------
Without limitation of any other covenants and agreements contained herein
or elsewhere, the Borrower agrees that so long as the financing arrangements
contemplated hereby are in effect or any Revolving Loan or any of the other
Obligations shall be outstanding or any letter of credit issued hereunder shall
be outstanding or any Foreign Exchange Contract shall be outstanding or any
amount shall be owed by the Borrower in respect of any ACH transaction or any
Foreign Exchange Contract:
4.1. Indebtedness. The Borrower will not create, incur, assume or suffer
------------
to exist any Indebtedness (nor allow any of its Subsidiaries to create, incur,
assume or suffer to exist any Indebtedness), except for:
(i) Indebtedness owed to the Bank, including, without limitation, the
Indebtedness represented by the Revolving Note and any Indebtedness in
respect of letters of credit issued by the Bank or in respect of any ACH
transactions or in respect of any Foreign Exchange Contracts;
(ii) Indebtedness of the Borrower or any Subsidiary for taxes,
assessments and governmental charges or levies not yet due and payable;
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<PAGE>
(iii) unsecured current liabilities of the Borrower or any Subsidiary
(other than for money borrowed or for purchase money Indebtedness with
respect to fixed assets) incurred upon customary terms in the ordinary
course of business;
(iv) purchase money Indebtedness (including, without limitation,
Indebtedness in respect of capitalized equipment leases) owed to equipment
vendors and/or lessors for equipment purchased or leased by the Borrower
for use in the Borrower's business, provided that the total of Indebtedness
permitted under this clause (iv) plus presently-existing equipment
financing permitted under clause (v) of this (S)4.1 will not exceed
$1,000,000 in the aggregate outstanding at any one time;
(v) other Indebtedness existing at the date hereof (including,
without limitation, existing Subordinated Debt), but only to the extent set
forth on item 4.1 of the attached Disclosure Schedule;
(vi) any guaranties or other contingent liabilities expressly
permitted pursuant to (S)4.3;
(vii) net intercompany amounts (not to exceed $5,800,000 in the
aggregate) due from WED;
(viii) loans made by the Borrower to Securities Corp. or by
Securities Corp. to the Borrower; and
(ix) net intercompany amounts due from Subsidiaries other than WED
and Securities Corp.; provided that same do not exceed $800,000 in the
aggregate outstanding at any one time exclusive of amounts permitted by
clauses (vii) and (viii) above.
4.2. Liens. The Borrower will not create, incur, assume or suffer to
-----
exist (nor allow any of its Subsidiaries to create, incur, assume or suffer to
exist) any mortgage, deed of trust, pledge, lien, security interest, or other
charge or encumbrance (including the lien or retained security title of a
conditional vendor) of any nature (collectively, "Liens"), upon or with respect
to any of its property or assets, now owned or hereafter acquired, except that
the foregoing restrictions shall not apply to:
(i) Liens for taxes, assessments or governmental charges or levies on
property of the Borrower or any of its Subsidiaries if the same shall not
at the time be delinquent or thereafter can be paid without interest or
penalty;
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar Liens arising in the ordinary course of
business for sums not yet due or which are being contested in good faith
and by appropriate proceedings which serve as a matter of law to stay the
enforcement thereof and as to which adequate reserves have been made;
-14-
<PAGE>
(iii) pledges or deposits under workmen's compensation laws,
unemployment insurance, social security, retirement benefits or similar
legislation;
(iv) Liens in favor of the Bank;
(v) Liens in favor of equipment vendors and/or lessors securing
purchase money Indebtedness to the extent permitted by clause_(iv) of
(S)4.1; provided that no such Lien will extend to any property of the
Borrower other than the specific items of equipment financed; or
(vi) other Liens existing at the date hereof, but only to the extent
and with the relative priorities set forth on item 4.2 of the attached
Disclosure Schedule.
Without limitation of the foregoing, the Borrower covenants and agrees that
it will not enter into (and will not suffer or permit any of its Subsidiaries to
enter into) any agreement or understanding (each, a "Restrictive Agreement")
with any Person other than the Bank which could prohibit or restrict in any
manner the right of the Borrower or any such Subsidiary to grant to the Bank any
Lien on any of its assets. The Borrower represents and warrants that, at the
date of this letter agreement, neither the Borrower nor any such Subsidiary is
party to any such Restrictive Agreement.
4.3. Guaranties. The Borrower will not, without the prior written consent
----------
of the Bank, assume, guarantee, endorse or otherwise become directly or
contingently liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) (and will not permit any of its Subsidiaries so to assume,
guaranty or become directly or contingently liable) in connection with any
indebtedness of any other Person, except (i) guaranties by endorsement for
deposit or collection in the ordinary course of business and (ii) guaranties
existing at the date hereof and described on item 4.3 of the attached Disclosure
Schedule.
4.4. Dividends. The Borrower will not, without the prior written consent
---------
of the Bank, make any distributions to its shareholders, pay any dividends
(other than dividends payable solely in capital stock of the Borrower) or
redeem, purchase or otherwise acquire, directly or indirectly any of its capital
stock.
4.5. Loans and Advances. The Borrower will not make (and will not permit
------------------
any Subsidiary to make) any loans or advances to any Person, including, without
limitation, the Borrower's directors, officers and employees, except (i)
existing loans described in item 4.5 of the attached Disclosure Schedule, (ii)
loans made by the Borrower or by any Subsidiary of the Borrower which give rise
to Indebtedness permitted by clauses (vii), (viii) and (ix) of (S)4.1; and (iii)
advances to such directors, officers or employees with respect to expenses
incurred by them
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<PAGE>
in the ordinary course of their duties and advances against salary, all of which
advances will not exceed, in the aggregate, $100,000 outstanding at any one
time.
4.6. Investments. The Borrower will not, without the Bank's prior written
-----------
consent, invest in, hold or purchase any stock or securities of any Person (nor
will the Borrower permit any of its Subsidiaries to invest in, purchase or hold
any such stock or securities) except (i) readily marketable direct obligations
of, or obligations guarantied by, the United States of America or any agency
thereof, (ii) other investment grade debt securities (including, without
limitation, rated investment grade fixed or variable rate tax-exempt securities)
and bankers' acceptances with ratings approved by the Bank, (iii) mutual funds,
the assets of which are primarily invested in items of the kind described in the
foregoing clauses (i) and (ii) of this (S)4.6, (iv) deposits with or
certificates of deposit issued by the Bank and any other obligations of the Bank
or the Bank's parent, (v) deposits in any other bank organized in the United
States having capital in excess of $100,000,000, (vi) contributions by the
Borrower to the capital of Securities Corp. representing the interest on loans
made by the Borrower to Securities Corp. and (vii) investments in any
Subsidiaries now existing or hereafter created by the Borrower pursuant to
(S)4.7 below; provided that in any event the Tangible Net Worth of the Borrower
alone (exclusive of its investment in Subsidiaries and any debt owed by any
Subsidiary to the Borrower) will not be less than 90% of the consolidated
Tangible Net Worth of the Borrower and Subsidiaries.
4.7. Subsidiaries; Acquisitions. Neither the Borrower nor any of its
--------------------------
Subsidiaries will, without the prior written consent of the Bank, form or
acquire any Subsidiary or make any other acquisition of the stock of any other
Person or of all or substantially all of the assets of any other Person, except
that the Borrower may make acquisitions of the stock or assets of another Person
so long as the aggregate consideration (whether in cash, stock or other
property) for all such acquisitions consummated in any fiscal year of the
Borrower does not exceed $1,000,000 per fiscal year. The Borrower will not
become a partner in any partnership.
4.8. Merger. The Borrower will not, without the prior written consent of
------
the Bank, merge or consolidate with any Person, or sell, lease, transfer or
otherwise dispose of any material portion of its assets (whether in one or more
transactions), other than sale of inventory in the ordinary course.
4.9. Affiliate Transactions. The Borrower will not, without the prior
----------------------
written consent of the Bank, enter into any transaction (other than an
investment in or loan to a Subsidiary of the Borrower to the extent expressly
permitted by this letter agreement), including, without limitation, the
purchase, sale or exchange of any property or the rendering of any service, with
any affiliate of the Borrower, except in the ordinary course of and pursuant to
the reasonable requirements of the Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than would be obtained in a
comparable arms'-length transaction with any Person not an affiliate; provided
that nothing in this (S)4.9 shall be deemed to prohibit the payment of salary or
other similar payments to any officer or director of the Borrower at a level
consistent with the salary and other payments being paid at the date of this
letter agreement and heretofore
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<PAGE>
disclosed in writing to the Bank, nor to prevent the hiring of additional
officers at a salary level consistent with industry practice, nor to prevent
reasonable periodic increases in salary, nor to prohibit any of the transactions
relating to Indebtedness permitted by clauses (vii), (viii) and/or (ix) of
(S)4.1. For the purposes of this letter agreement, "affiliate" means any Person
which, directly or indirectly, controls or is controlled by or is under common
control with the Borrower; any officer or director or former officer or director
of the Borrower; any Person owning of record or beneficially, directly or
indirectly, 5% or more of any class of capital stock of the Borrower or 5% or
more of any class of capital stock or other equity interest having voting power
(under ordinary circumstances) of any of the other Persons described above; and
any member of the immediate family of any of the foregoing. "Control" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of any Person, whether through ownership
of voting equity, by contract or otherwise.
4.10. Change of Address, etc. The Borrower will not change its name or
----------------------
legal structure, nor will the Borrower move its chief executive offices or
principal place of business from the address described in the first sentence of
(S)2.1(i) above, nor will the Borrower remove any books or records from such
address, nor will the Borrower keep any Collateral at any location other than
the premises described in (S)2.1(i), without, in each instance, giving the Bank
at least 30 days' prior written notice and providing all such financing
statements, certificates and other documentation as the Bank may request in
order to maintain the perfection and priority of the security interests granted
or intended to be granted pursuant to the Security Agreement. The Borrower will
not change its fiscal year or methods of financial reporting unless, in each
instance, prior written notice of such change is given to the Bank and prior to
such change the Borrower enters into amendments to this letter agreement in form
and substance satisfactory to the Bank in order to preserve unimpaired the
rights of the Bank and the obligations of the Borrower hereunder.
4.11. Hazardous Waste. Except as provided below, the Borrower will not
---------------
dispose of or suffer or permit to exist any hazardous material or oil on any
site or vessel owned, occupied or operated by the Borrower or any Subsidiary of
the Borrower, nor shall the Borrower store (or permit any Subsidiary to store)
on any site or vessel owned, occupied or operated by the Borrower or any such
Subsidiary, or transport or arrange the transport of, any hazardous material or
oil (the terms "hazardous material", "oil", "site" and "vessel", respectively,
being used herein with the meanings given those terms in Mass. Gen. Laws,
Ch. 21E or any comparable terms in any comparable statute in effect in any other
relevant jurisdiction). Except as otherwise expressly provided below, the
Borrower shall provide the Bank with written notice of (i) the storage or
transport of any hazardous material or oil by the Borrower or any Subsidiary of
the Borrower, (ii) any release or known threat of release of any hazardous
material or oil at or from any site or vessel owned, occupied or operated by the
Borrower or any Subsidiary of the Borrower, and (iii) any incurrence of any
expense or loss by any government or governmental authority in connection with
the assessment, containment or removal of any hazardous material or oil known to
the Borrower for which expense or loss the Borrower or any Subsidiary of the
Borrower may be liable. Notwithstanding the foregoing, the Borrower and its
Subsidiaries may use, store and transport and arrange for the transport or
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disposal of, and need not notify the Bank of the use, storage, arrangement for
transport, disposal or transportation of, (x) oil as fuel for their respective
facilities or for vehicles or machinery used in the ordinary course of their
respective businesses and (y) hazardous materials that are solvents, cleaning
agents or other materials used in the ordinary course of the respective business
operations of the Borrower and its Subsidiaries, as long as in each case the
Borrower or the Subsidiary concerned (as the case may be) has obtained and
maintains in effect any governmental permits, licenses and approvals necessary
for such use, storage, transportation, arranging for transport or disposal,
complies with all requirements of federal, state and local law applicable to
such use, storage, transportation, arrangement for transport or disposal, and in
any event disposes of such materials (not consumed in the ordinary course) only
through licensed providers of hazardous waste removal services.
4.12. No Margin Stock. No proceeds of any Revolving Loan shall be used
---------------
directly or indirectly to purchase or carry any margin security.
4.13. Subordinated Debt. The Borrower will not directly or indirectly
-----------------
make any optional or voluntary prepayment or purchase of Subordinated Debt or
modify, alter or add any provisions with respect to payment of Subordinated
Debt. In any event, the Borrower will not make any payment of any principal of
or interest on any Subordinated Debt at any time when there exists, or if there
would result therefrom, any Event of Default hereunder.
V. DEFAULT AND REMEDIES
--------------------
5.1. Events of Default. The occurrence of any one of the following events
-----------------
shall constitute an Event of Default hereunder:
(a) The Borrower shall fail to make any payment of principal of or interest
on the Revolving Note on or before the date when due; or the Borrower shall fail
to pay when due any amount owed to the Bank in respect of any letter of credit
now or hereafter issued by the Bank or in respect of any Foreign Exchange
Contract or in respect of any ACH transaction; or
(b) Any representation or warranty of the Borrower contained herein shall
at any time prove to have been incorrect in any material respect when made or
any representation or warranty made by the Borrower in connection with any
Revolving Loan or letter of credit or any ACH transaction or any Foreign
Exchange Contract shall at any time prove to have been incorrect in any material
respect when made; or
(c) The Borrower shall default in the performance or observance of any
agreement or obligation under any of (S)(S)3.1, 3.3, 3.6, 3.7, 3.8, 3.9 or 3.10
or Article IV; or
(d) The Borrower shall default in the performance of any other term,
covenant or agreement contained in this letter agreement and such default shall
continue unremedied for 30 days after notice thereof shall have been given to
the Borrower; or
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<PAGE>
(e) Any default on the part of the Borrower or any Subsidiary of the
Borrower shall exist, and shall remain unwaived or uncured beyond the expiration
of any applicable notice and/or grace period, under any other contract,
agreement or undertaking now existing or hereafter entered into with or for the
benefit of the Bank (or any affiliate of the Bank); or
(f) Any default shall exist and remain unwaived or uncured with respect to
any Subordinated Debt of the Borrower or with respect to any instrument
evidencing, guaranteeing or otherwise relating to any such Subordinated Debt, or
any such Subordinated Debt shall not have been paid when due, whether by
acceleration or otherwise, or shall have been declared to be due and payable
prior to its stated maturity, or any event or circumstance shall occur which
permits, or with the lapse of time or the giving of notice or both would permit,
the acceleration of the maturity of any Subordinated Debt by the holder or
holders thereof; or
(g) Any default shall exist and remain unwaived or uncured with respect to
any other Indebtedness of the Borrower or any Subsidiary of the Borrower in
excess of $100,000 in aggregate principal amount or with respect to any
instrument evidencing, guaranteeing, securing or otherwise relating to any such
Indebtedness, or any such Indebtedness in excess of $100,000 in aggregate
principal amount shall not have been paid when due, whether by acceleration or
otherwise, or shall have been declared to be due and payable prior to its stated
maturity, or any event or circumstance shall occur (and shall have continued
beyond the expiration of any applicable notice and/or grace period) giving the
holder or holders of such Indebtedness the right to accelerate the maturity
thereof; or
(h) The Borrower shall be dissolved, or the Borrower or any Subsidiary of
the Borrower (other than WED after it transfers its assets to the Borrower)
shall become insolvent or bankrupt or shall cease paying its debts as they
mature or shall make an assignment for the benefit of creditors, or a trustee,
receiver or liquidator shall be appointed for the Borrower or any Subsidiary of
the Borrower (other than WED after it transfers its assets to the Borrower) or
for a substantial part of the property of the Borrower or any such Subsidiary
(other than WED after it transfers its assets to the Borrower), or bankruptcy,
reorganization, arrangement, insolvency or similar proceedings shall be
instituted by or against the Borrower or any such Subsidiary (other than WED
after it transfers its assets to the Borrower) under the laws of any
jurisdiction (except for an involuntary proceeding filed against the Borrower or
any Subsidiary of the Borrower which is dismissed within 60 days following the
institution thereof); or
(i) Any attachment, execution or similar process in an amount of $50,000 or
more shall be issued or levied against any of the property of the Borrower or
any Subsidiary and such attachment, execution or similar process shall not be
paid, stayed, released, vacated or fully bonded within 10 days after its issue
or levy; or
(j) Any final uninsured judgment in excess of $100,000 shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of competent
jurisdiction; or
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<PAGE>
(k) The Borrower or any Subsidiary of the Borrower shall fail to meet its
minimum funding requirements under ERISA with respect to any employee benefit
plan (or other class of benefit which the PBGC has elected to insure) or any
such plan shall be the subject of termination proceedings (whether voluntary or
involuntary) and there shall result from such termination proceedings a
liability of the Borrower or any Subsidiary of the Borrower to the PBGC which in
the reasonable opinion of the Bank may have a material adverse effect upon the
financial condition of the Borrower or any such Subsidiary; or
(l) The Security Agreement or any other Loan Document shall for any reason
(other than due to payment in full of all amounts secured or evidenced thereby
or due to discharge in writing by the Bank) not remain in full force and effect;
or
(m) The security interests and liens of the Bank in and on any of the
Collateral which is of a type that perfection may be had by filing UCC-1
financing statements shall for any reason (other than due to payment in full of
all amounts secured thereby or due to written release by the Bank) not be fully
perfected liens and security interests; or
(n) At any time, 50% or more of the outstanding shares of any class of
equity securities of the Borrower shall be owned by any Person or by any "group"
(as defined in the Securities Exchange Act of 1934, as amended, and the
regulations thereunder); or
(o) There shall occur any other material adverse change in the condition
(financial or otherwise), operations, properties, assets, liabilities or
earnings of the Borrower.
5.2. Rights and Remedies on Default. Upon the occurrence of any Event of
------------------------------
Default, in addition to any other rights and remedies available to the Bank
hereunder or otherwise, the Bank may exercise any one or more of the following
rights and remedies (all of which shall be cumulative):
(a) Declare the entire unpaid principal amount of the Revolving Note then
outstanding, all interest accrued and unpaid thereon and all other amounts
payable under this letter agreement, and all other Indebtedness of the Borrower
to the Bank, to be forthwith due and payable, whereupon the same shall become
forthwith due and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower.
(b) Terminate the revolving financing arrangements provided for by this
letter agreement; and the Bank may also terminate all facilities provided for
herein for letters of credit, ACH transactions and/or Foreign Exchange
Contracts.
(c) Exercise all rights and remedies hereunder, under the Revolving Note,
under the Security Agreement, under the Intellectual Property Security
Agreement, under the Pledge and under each and any other agreement with the
Bank; and exercise all other rights and remedies which the Bank may have under
applicable law.
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<PAGE>
5.3. Set-off. In addition to any rights now or hereafter granted under
-------
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, the Bank is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any
kind to the Borrower or to any other Person, all of which are hereby expressly
waived, to set off and to appropriate and apply any and all deposits and any
other Indebtedness at any time held or owing by the Bank or any affiliate
thereof to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Bank under
this letter agreement or otherwise, irrespective of whether or not the Bank
shall have made any demand hereunder and although said obligations, liabilities
or claims, or any of them, may then be contingent or unmatured and without
regard for the availability or adequacy of other collateral. As further
security for the Obligations, the Borrower also grants to the Bank a security
interest with respect to all its deposits and all securities or other property
in the possession of the Bank or any affiliate of the Bank from time to time,
and, upon the occurrence of any Event of Default, the Bank may exercise all
rights and remedies of a secured party under the Uniform Commercial Code. ANY
AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY OF THE OBLIGATIONS PRIOR TO
THE EXERCISE BY THE BANK OF ITS RIGHT OF SET-OFF UNDER THIS SECTION ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
5.4. Letters of Credit. Without limitation of any other right or remedy of
-----------------
the Bank, (i) if an Event of Default shall have occurred and the Bank shall have
accelerated the Revolving Loans or (ii) if this letter agreement and/or the
revolving financing arrangements described herein shall have expired or shall
have been earlier terminated by either the Bank or the Borrower for any reason,
the Borrower will forthwith deposit with the Bank in cash a sum equal to the
total of all then undrawn amounts of all outstanding letters of credit issued by
the Bank for the account of the Borrower. Upon the occurrence of any event
described in clause (i) or clause (ii) of the immediately preceding sentence,
the Bank may also require the Borrower to cash collateralize the outstanding F/X
Exposure and ACH Exposure.
VI. MISCELLANEOUS
-------------
6.1. Costs and Expenses. The Borrower agrees to pay on demand reasonable
------------------
all costs and expenses (including, without limitation, reasonable legal fees) of
the Bank in connection with the preparation, execution and delivery of this
letter agreement, the Security Agreement, the Revolving Note and all other
instruments and documents to be delivered in connection with any Revolving Loan
or any letter of credit issued hereunder and/or any of the other Obligations and
any amendments or modifications of any of the foregoing, as well as the
reasonable costs and expenses (including, without limitation, the reasonable
fees and expenses of legal counsel) incurred by the Bank in connection with
preserving, enforcing or exercising, upon default, any rights or remedies under
this letter agreement, the Security Agreement, the Revolving Note and all other
instruments and documents delivered or to be delivered hereunder or in
connection herewith or in connection with any other Obligation, all whether or
not legal action is instituted. In addition, the Borrower shall be obligated to
pay any and all stamp and
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<PAGE>
other taxes payable or determined to be payable in connection with the execution
and delivery of this letter agreement, the Security Agreement, the Revolving
Note and all other instruments and documents to be delivered in connection with
any Obligation. Any fees, expenses or other charges which the Bank is entitled
to receive from the Borrower under this Section shall bear interest from the
date of any demand therefor until the date when paid at a rate per annum equal
to the sum of (i) four (4%) percent plus (ii) the per annum rate otherwise
payable under the Revolving Note (but in no event in excess of the maximum rate
permitted by then applicable law).
6.2. Capital Adequacy. If the Bank shall have reasonably determined that
----------------
the adoption or phase-in after the date hereof of any applicable law, rule or
regulation regarding capital requirements for banks or bank holding companies,
or any change therein after the date hereof, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive of such entity regarding
capital adequacy (whether or not having the force of law) has or would have the
effect of reducing the return on the Bank's capital with respect to the
Revolving Loans, the within-described revolving loan facility and/or letters of
credit issued for the account of the Borrower and/or any of the other
Obligations to a level below that which the Bank could have achieved (taking
into consideration the Bank's policies with respect to capital adequacy
immediately before such adoption, phase-in, change or compliance and assuming
that the Bank's capital was then fully utilized) but for such adoption, phase-
in, change or compliance by any amount deemed by the Bank to be material:
(i) the Bank shall promptly after its determination of such occurrence give
notice thereof to the Borrower; and (ii) the Borrower shall pay forthwith to the
Bank as an additional fee such amount as the Bank certifies to be the amount
that will compensate it for such reduction with respect to the Revolving Loans,
the within-described revolving loan facility and/or such letters of credit
and/or any of the other Obligations.
A certificate of the Bank claiming compensation under this Section shall be
conclusive in the absence of manifest error. Such certificate shall set forth
the nature of the occurrence giving rise to such compensation, the additional
amount or amounts to be paid to it hereunder and the method by which such
amounts were determined. In determining such amounts, the Bank may use any
reasonable averaging and attribution methods. No failure on the part of the
Bank to demand compensation on any one occasion shall constitute a waiver of its
right to demand such compensation on any other occasion and no failure on the
part of the Bank to deliver any certificate in a timely manner shall in any way
reduce any obligation of the Borrower to the Bank under this Section.
6.3. Facility Fees. With respect to the within arrangements for Revolving
-------------
Loans, the Borrower will pay to the Bank, on the date of this letter agreement
and thereafter on the first day of each calendar quarter (commencing January 1,
1999), a non-refundable quarterly facility fee of $6,250 per calendar quarter
(appropriately pro-rated for any partial calendar quarter), payable in advance.
In addition, if the within-described revolving financing arrangements are
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<PAGE>
terminated by the Borrower for any reason or by the Bank as the result of the
Borrower's default, the Borrower shall forthwith upon such termination pay to
the Bank a sum equal to all of the fees which would have become due pursuant to
the immediately preceding sentence from the date of such termination through the
Expiration Date. The fees described in this Section are in addition to any
balances and fees required by the Bank or any of its affiliates in connection
with any other services now or hereafter made available to the Borrower.
6.4. Other Agreements. The provisions of this letter agreement are not in
----------------
derogation or limitation of any obligations, liabilities or duties of the
Borrower under any of the other Loan Documents or any other agreement with or
for the benefit of the Bank. No inconsistency in default provisions between
this letter agreement and any of the other Loan Documents or any such other
agreement will be deemed to create any additional grace period or otherwise
derogate from the express terms of each such default provision. No covenant,
agreement or obligation of the Borrower contained herein, nor any right or
remedy of the Bank contained herein, shall in any respect be limited by or be
deemed in limitation of any inconsistent or additional provisions contained in
any of the other Loan Documents or in any such other agreement.
6.5. Governing Law. This letter agreement and the Revolving Note shall be
-------------
governed by, and construed and enforced in accordance with, the laws of The
Commonwealth of Massachusetts.
6.6. Addresses for Notices, etc. All notices, requests, demands and other
--------------------------
communications provided for hereunder shall be in writing and shall be mailed or
delivered to the applicable party at the address indicated below:
If to the Borrower:
Aseco Corporation
500 Donald Lynch Boulevard
Marlborough, MA 01752
Attention: Mary R. Barletta, Chief Financial Officer
If to the Bank:
Fleet National Bank
High Technology Group
Mail Code: MA OF D07A
One Federal Street
Boston, MA 02110
Attention: Lucie Burke, Vice President
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All
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<PAGE>
such notices, requests, demands and other communications shall be deemed
delivered on the earlier of (i) the date received or (ii) the date of delivery,
refusal or non-delivery indicated on the return receipt if deposited in the
United States mails, sent postage prepaid, certified or registered mail, return
receipt requested, addressed as aforesaid.
6.7. Binding Effect; Assignment; Termination. This letter agreement shall
---------------------------------------
be binding upon the Borrower, its successors and assigns and shall inure to the
benefit of the Borrower and the Bank and their respective permitted successors
and assigns. The Borrower may not assign this letter agreement or any rights
hereunder without the express written consent of the Bank. The Bank may, in
accordance with applicable law, from time to time assign or grant participations
in this letter agreement, the Revolving Loans, the Revolving Note and/or the
letters of credit issued hereunder and/or any of the other Obligations. Without
limitation of the foregoing generality:
(i) The Bank may at any time pledge all or any portion of its rights
under the Loan Documents (including any portion of the Revolving
Note) to any of the 12 Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No
such pledge or the enforcement thereof shall release the Bank
from its obligations under any of the Loan Documents.
(ii) The Bank shall have the unrestricted right at any time and from
time to time, and without the consent of or notice to the
Borrower, to grant to one or more banks or other financial
institutions (each, a "Participant") participating interests in
the Bank's obligation to lend hereunder and/or any or all of the
Revolving Loans held by the Bank hereunder. In the event of any
such grant by the Bank of a participating interest to a
Participant, whether or not upon notice to the Borrower, the Bank
shall remain responsible for the performance of its obligations
hereunder and the Borrower shall continue to deal solely and
directly with the Bank in connection with the Bank's rights and
obligations hereunder. The Bank may furnish any information
concerning the Borrower in its possession from time to time to
prospective assignees and Participants; provided that the Bank
shall require any such prospective assignee or Participant to
agree in writing to maintain the confidentiality of such
information to the same extent as the Bank would be required to
maintain such confidentiality.
The Borrower may terminate this letter agreement and the financing
arrangements made herein by giving written notice of such termination to the
Bank together with payment of the sum described in the second sentence of
(S)6.3; provided that no such termination will release or waive any of the
Bank's rights or remedies or any of the Borrower's obligations under this letter
agreement or any of the other Loan Documents unless and until the Borrower has
paid in full the Revolving Loans and all interest thereon and all fees and
charges payable in connection therewith and all letters of credit issued
hereunder have been terminated.
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6.8. Consent to Jurisdiction. The Borrower irrevocably submits to the non-
-----------------------
exclusive jurisdiction of any Massachusetts court or any federal court sitting
within The Commonwealth of Massachusetts over any suit, action or proceeding
arising out of or relating to this letter agreement and/or the Revolving Note
and/or any of the other Obligations. The Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of venue of any such suit, action or proceeding brought in
such a court and any claim that any such suit, action or proceeding has been
brought in an inconvenient forum. The Borrower agrees that final judgment in
any such suit, action or proceeding brought in such a court shall be enforced in
any court of proper jurisdiction by a suit upon such judgment, provided that
service of process in such action, suit or proceeding shall have been effected
upon the Borrower in one of the manners specified in the following paragraph of
this (S)6.8 or as otherwise permitted by law.
The Borrower hereby consents to process being served in any suit, action or
proceeding of the nature referred to in the preceding paragraph of this (S)6.8
either (i) by mailing a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to it at its address set forth in (S)6.6
(as such address may be changed from time to time pursuant to said (S)6.6) or
(ii) by serving a copy thereof upon it at its address set forth in (S)6.6
(as such address may be changed from time to time pursuant to said (S)6.6).
6.9. Severability. In the event that any provision of this letter
------------
agreement or the application thereof to any Person, property or circumstances
shall be held to any extent to be invalid or unenforceable, the remainder of
this letter agreement, and the application of such provision to Persons,
properties or circumstances other than those as to which it has been held
invalid and unenforceable, shall not be affected thereby, and each provision of
this letter agreement shall be valid and enforced to the fullest extent
permitted by law.
6.10. Replacement Note. Upon receipt of an affidavit of an officer of the
----------------
Bank as to the loss, theft, destruction or mutilation of the Revolving Note or
of any other Loan Document which is not of public record and, in the case of any
such mutilation, upon surrender and cancellation of such Revolving Note or other
Loan Document, the Borrower will issue, in lieu thereof, a replacement Revolving
Note or other Loan Document in the same principal amount (as to the Revolving
Note) and in any event of like tenor.
6.11. Usury. All agreements between the Borrower and the Bank are hereby
-----
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the Revolving Note or otherwise, shall the
amount paid or agreed to be paid to the Bank for the use or the forbearance of
the Indebtedness represented by the Revolving Note exceed the maximum
permissible under applicable law. In this regard, it is expressly agreed that it
is the intent of the Borrower and the Bank, in the execution, delivery and
acceptance of the Revolving Note, to contract in strict compliance with the laws
of The Commonwealth of Massachusetts. If, under any circumstances whatsoever,
performance or fulfillment of any
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<PAGE>
provision of the Revolving Note or any of the other Loan Documents at the time
such provision is to be performed or fulfilled shall involve exceeding the limit
of validity prescribed by applicable law, then the obligation so to be performed
or fulfilled shall be reduced automatically to the limits of such validity, and
if under any circumstances whatsoever the Bank should ever receive as interest
an amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal balance
evidenced by the Revolving Note and not to the payment of interest. The
provisions of this (S)6.11 shall control every other provision of this letter
agreement and of the Revolving Note.
6.12. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY KNOWINGLY,
--------------------
VOLUNTARILY AND INTENTIONALLY MUTUALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS LETTER AGREEMENT, THE REVOLVING NOTE OR ANY OTHER LOAN DOCUMENTS OR OUT OF
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
BANK TO ENTER INTO THIS LETTER AGREEMENT AND TO MAKE REVOLVING LOANS AND EXTEND
OTHER CREDIT AS CONTEMPLATED HEREIN.
6.13. Amendment and Restatement. This letter agreement amends and
-------------------------
restates in its entirety the Prior Agreement, and any and all defaults under the
Prior Agreement are hereby waived. Upon the execution and delivery of this
letter agreement, neither the Borrower nor the Bank will have any further
obligations to each other under the Prior Agreement; provided that the Borrower
shall remain obligated to pay all interest, fees and other charges accruing
under the Prior Agreement to the date of this letter agreement, whether or not
same are presently due and payable. All loans outstanding under the Prior
Agreement at the date hereof will be deemed at this date (without any
requirement for further documentation) to become Revolving Loans for the
purposes of this letter agreement and to be evidenced by the Revolving Note.
All letters of credit outstanding under the Prior Agreement at the date hereof
will be deemed at this date (without any requirement for further documentation)
to become letters of credit issued under this letter agreement.
VII. DEFINED TERMS
-------------
7.1. Definitions. In addition to terms defined elsewhere in this letter
-----------
agreement, as used in this letter agreement, the following terms have the
following respective meanings:
"ACH Exposure" - As defined in (S)1.6.
"Aggregate Bank Liabilities" - At any time, the sum of (i)_the principal
amount of all Revolving Loans then outstanding, plus (ii) all then undrawn
----
amounts of letters of credit issued by the Bank for the account of the Borrower
(other than the Existing L/C described in the first
-26-
<PAGE>
paragraph of (S)1.5), plus (iii) all amounts then drawn on any such letter of
credit which at said date shall not have been reimbursed to the Bank by the
Borrower.
"Borrowing Base" - As determined at any date, 80% of the aggregate
principal amount of the Qualified Receivables of the Borrower then outstanding.
"Business Day" - Any day which is not a Saturday, nor a Sunday nor a public
holiday under the laws of the United States of America or The Commonwealth of
Massachusetts applicable to a national bank.
"Capital Base" - At any time, the sum of (i) the consolidated Tangible Net
Worth of the Borrower and Subsidiaries then existing, plus (ii) the principal
amount of Subordinated Debt of the Borrower then outstanding (nothing contained
herein being deemed to authorize the incurrence of any additional Subordinated
Debt).
"Collateral" - All property now or hereafter owned by the Borrower or in
which the Borrower now or hereafter has any interest which is described as
"Collateral" in the Security Agreement or in the Pledge or in (S)7.2(b) below.
"Current Liabilities" - All liabilities of the Borrower and/or any
Subsidiary of the Borrower which would properly be shown as current liabilities
on a consolidated balance sheet of the Borrower prepared in accordance with
generally accepted accounting principles consistently applied. Further,
"Current Liabilities" will in any event be deemed to include all Revolving
Loans.
"Determination Date" - As defined in (S)3.7.
"ERISA" - The Employee Retirement Income Security Act of 1974, as amended.
"Existing L/C" - As defined in (S)1.5.
"Expiration Date" - September 1, 1999, unless extended pursuant to (S)1.3,
which extension may be given or withheld by the Bank in its sole discretion.
"F/X Exposure" - As defined in (S)1.7.
"Indebtedness" - All obligations of a Person, whether current or long-term,
senior or subordinated, which in accordance with generally accepted accounting
principles would be included as liabilities upon such Person's balance sheet at
the date on which Indebtedness, is to be determined, and shall also include
guaranties, endorsements (other than for collection in the ordinary course of
business) or other arrangements whereby responsibility is assumed for the
obligations of others, whether by agreement to purchase or otherwise acquire the
obligations of others, including any agreement, contingent or otherwise, to
furnish funds through the purchase of goods, supplies or services for the
purpose of payment of the obligations of others.
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<PAGE>
"Liabilities" - All Indebtedness of the Borrower and/or any of its
Subsidiaries which would properly be shown as liabilities on the face of a
consolidated balance sheet of the Borrower prepared in accordance with generally
accepted accounting principles consistently applied, and not merely in the
footnotes to such balance sheet.
"Loan Documents" - Each of this letter agreement, the Revolving Note, the
Security Agreement, the Intellectual Property Security Agreement, the Pledge and
each other instrument, document or agreement evidencing, securing, guaranteeing
or relating in any way to any of the Revolving Loans or any of the letters of
credit issued hereunder or to any Foreign Exchange Contract or ACH transaction,
all whether now existing or hereafter arising or entered into.
"Maximum Revolving Amount" - At any date as of which same is to be
determined, the amount by which (x) $5,000,000 exceeds (y) the sum of (i) all
then undrawn amounts of letters of credit issued by the Bank for the account of
the Borrower (other than the Existing L/C described in the first paragraph of
(S)1.5), plus (ii) all amounts then drawn on any letter of credit which at said
date shall not have been reimbursed to the Bank by the Borrower.
"Net Current Assets" - Such current assets of the Borrower as consist of
cash, cash-equivalents, Receivables (less an allowance for bad debt consistent
with the Borrower's prior experience) and inventory (including finished goods
inventory, raw materials and work-in-process, net of a reserve for damaged,
obsolete or returned inventory and any other reserves required by generally
accepted accounting principles consistently applied).
"Net Income" (or "Net Loss") - The book net income (or book net loss, as
the case may be) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with
generally accepted accounting principles consistently applied.
"Obligations" - All Indebtedness, covenants, agreements, liabilities and
obligations, now existing or hereafter arising, made by the Borrower with or for
the benefit of the Bank or owed by the Borrower to the Bank in any capacity.
"Obligations" includes, without limitation, the Revolving Loans and obligations
with respect to ACH transactions, letters of credit and Foreign Exchange
Contracts issued hereunder.
"PBGC" - The Pension Benefit Guaranty Corporation or any successor thereto.
"Person" - An individual, corporation, limited liability company,
partnership, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Pledge" - As defined in (S)1.1 above.
"Prior Agreement" - As defined in the introductory paragraph of this letter
agreement.
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<PAGE>
"Qualified Receivables" - Only those Receivables of the Borrower which
arise out of bona fide sales made to customers of the Borrower (which customers
are located in the United States and are unrelated to the Borrower) in the
ordinary course of the Borrower's business and which remain unpaid no more than
90 days past the respective invoice dates of such Receivables, the payment of
which is not in dispute. Unless the Bank in its sole discretion otherwise
determines with respect to any Receivable, a Receivable which would otherwise be
a Qualified Receivable shall be deemed not to be a Qualified Receivable (i) if
the Bank does not have a fully perfected first priority security interest in
such Receivable; (ii) if such Receivable is not free and clear of all interests
in favor of any Person other than the interests of the Borrower and the Bank;
(iii) if such Receivable is subject to any deduction, off-set, contra account,
counterclaim or condition; (iv) if a field examination made by the Bank fails to
confirm that such Receivable exists and satisfies all of the criteria set forth
herein to be a Qualified Receivable; (v) if such Receivable is not properly
invoiced at the date of sale; (vi) if the customer or account debtor has
disputed liability or made any claim with respect to the Receivable or the
merchandise covered thereby or with respect to any other Receivable due from
said customer to the Borrower; (vii) if the customer or account debtor has filed
a petition for bankruptcy or any other application for relief under the
Bankruptcy Code or has effected an assignment for the benefit of creditors, or
if any petition or any other application for relief under the Bankruptcy Code
has been filed against said customer or account debtor, or if the customer or
account debtor has suspended business, become insolvent, ceased to pay its debts
as they become due, or had or suffered a receiver or trustee to be appointed for
any of its assets or affairs; (viii) if the customer or account debtor has
failed to pay other Receivables so that an aggregate of 25% of the total
Receivables owing to the Borrower by such customer or account debtor has been
outstanding for more than 90 days past their respective due dates; (ix) if such
Receivable is owed by the United States government or any agency or department
thereof (unless assigned to the Bank under the Federal Assignment of Claims
Act); or (x) if the Bank reasonably believes that collection of such Receivable
is insecure or that it may not be paid by reason of financial inability to pay
or otherwise, or that such Receivable is not for any reason suitable for use as
a basis for borrowing hereunder (provided that no Receivable which would
otherwise be a Qualified Receivable will be deemed not to be a Qualified
Receivable due to the application of this clause (x) unless the Bank shall have
given the Borrower at least 30 days' prior notice that the Receivable in
question (or all Receivables owed by the same account debtor) will not be
considered to be Qualified Receivables due to the application of this clause
(x)). Notwithstanding the first sentence of this definition, the Borrower may
include within "Qualified Receivables" any Receivable which meets all of the
criteria set forth above to be a Qualified Receivable except that the relevant
customer is located outside the United States; provided that such Receivable is
secured by a letter of credit in form and substance satisfactory to the Bank and
issued by a financial institution satisfactory to the Bank or is insured by
Eximbank credit insurance or other credit insurance satisfactory to the Bank.
Further, if credit insurance meeting the criteria of the immediately preceding
sentence becomes applicable to any Receivable during the month of December 1998
and such insurance is retroactive to December 1, 1998, the Borrower may at any
time thereafter prior to January 15, 1999 deliver to the Bank a pro forma
Borrowing Base certificate as at December 1, 1998 giving effect to such
retroactive
-29-
<PAGE>
credit insurance and such pro forma certificate will be deemed to replace any
Borrowing Base certificate as at December 1, 1998 theretofore delivered pursuant
to clause (iv) of (S)3.6.
"Receivables" - All of the Borrower's present and future accounts and
accounts receivable representing a right to payment for goods sold or for
services rendered.
"Revolving Note" - As defined in (S)1.1.
"Senior Liabilities" - All Liabilities which are not Subordinated Debt.
"Subordinated Debt" - Any Indebtedness of the Borrower which is expressly
subordinated, pursuant to a subordination agreement in form and substance
satisfactory to the Bank, to all Indebtedness now or hereafter owed by the
Borrower to the Bank.
"Subsidiary" - Any corporation or other entity of which the Borrower and/or
any of its Subsidiaries, directly or indirectly, owns, or has the right to
control or direct the voting of, fifty (50%) percent or more of the outstanding
capital stock or other ownership interest having general voting power (under
ordinary circumstances).
"Tangible Net Worth" - An amount equal to the total assets of any Person
(excluding (i) the total intangible assets of such Person and (ii) any assets
representing amounts due from any officer or employee of such Person or from any
Subsidiary of such Person) minus the total liabilities of such Person. Total
intangible assets shall be deemed to include, but shall not be limited to, the
excess of cost over book value of acquired businesses accounted for by the
purchase method, formulae, trademarks, trade names, patents, patent rights and
deferred expenses (including, but not limited to, unamortized debt discount and
expense, organizational expense, capitalized software costs and experimental and
development expenses).
"WED" - Western Equipment Developments (Holdings) Ltd., a Subsidiary of the
Borrower.
Any defined term used in the plural preceded by the definite article shall
be taken to encompass all members of the relevant class. Any defined term used
in the singular preceded by "any" shall be taken to indicate any number of the
members of the relevant class.
7.2. Security Agreement. (a) The Borrower acknowledges and agrees that
------------------
the "Obligations" described in and secured by the Security Agreement include,
without limitation, all of the obligations of the Borrower under the Revolving
Note and/or this letter agreement and/or with respect to any letter of credit
which may be issued by the Bank for the account of the Borrower, as well as
obligations in respect of ACH transactions and Foreign Exchange Contracts.
(b) The Security Agreement is hereby modified to provide as follows:
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<PAGE>
(i) That the "Collateral" subject thereto includes, without limitation
and in addition to the Collateral described therein, all of the Borrower's
files, books and records (including, without limitation, all electronically
recorded data) all whether now owned or existing or hereafter acquired,
created or arising. The Borrower hereby grants to the Bank a security
interest in all such Collateral in order to secure the full and prompt
payment and performance of all of the Obligations.
(ii) That, upon the occurrence of any Event of Default (as defined in
(S)5.1 of this letter agreement), the Bank may, at any time, notify account
debtors that the Collateral has been assigned to the Bank and that payments
by such account debtors shall be made directly to the Bank. At any time
after the occurrence of an Event of Default, the Bank may collect the
Borrower's Receivables, or any of same, directly from account debtors and
may charge the collection costs and expenses to the Borrower.
-31-
<PAGE>
This letter agreement is executed, as an instrument under seal, as of the
day and year first above written.
Very truly yours,
ASECO CORPORATION
By: /s/Mary R. Barletta
------------------------------------
Name:
Title: Chief Financial Officer
Accepted and agreed:
FLEET NATIONAL BANK
By: /s/Thomas W. Davies
---------------------------
Its Senior Vice President
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<PAGE>
DISCLOSURE SCHEDULE
Item 2.1(a) Jurisdictions in which Borrower is qualified; Subsidiaries
Item 2.1(d) Litigation
Item 2.1(i) Collateral locations; record owners
Item 2.1(j) Intellectual property
Item 4.1 Existing Indebtedness
Item 4.2 Existing Liens
Item 4.3 Existing Guaranties
Item 4.5 Existing Loans
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<PAGE>
EXHIBIT 10.10
LOAN MODIFICATION AGREEMENT
---------------------------
THIS AGREEMENT, effective this 22/nd/ day of June, 1999 (the "Effective
Date"), is by and between Aseco Corporation ("Obligor") and Fleet National Bank
(the "Bank").
STATEMENT OF FACTS
------------------
The Obligor is obligated to the Bank as evidenced by the following
documents:
1. Revolving Note dated November 27, 1998, in the original principal
amount of $5,000,000.00, executed by the Obligor in favor of the Bank
("Revolving Note");
2. Letter Agreement dated November 27, 1998 between the Obligor and the
Bank ("Loan Agreement");
3. Inventory, Accounts Receivable and Intangibles Security Agreement
dated November 27, 1998, executed by the Obligor in favor of the Bank;
4. Supplementary Security Agreement dated November 27, 1998, executed by
the Obligor in favor of the Bank;
5. Pledge of Stock of Aseco Investment Corp. in favor of the Bank; and
6. Stand by Letter of Credit executed by the Bank for the account of the
Obligor.
The foregoing documents, as they may have been amended or restated, and any
documents executed or delivered in connection therewith, are herein collectively
referred to as the "Loan Documents." The Bank is the holder of the Loan
Documents.
By letter dated June 16, 1999, the Obligor acknowledged that it is in
default of certain covenants under the Loan Documents, which defaults constitute
events of default pursuant to the terms of the Loan Documents, and requested
that the Bank waive certain existing covenant defaults and extend the maturity
date of the Loan Agreement.
TERMS OF THE AGREEMENT
----------------------
In consideration of the mutual promises contained in this Agreement and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Bank and the Obligor agree as follows:
1. Acknowledgment by the Obligor. The Obligor hereby acknowledges and
-----------------------------
agrees that it is in material default of its obligations to the Bank under the
Loan Documents, beyond any
<PAGE>
applicable periods of notice, cure or grace, and that it has no defenses or
off-sets that it could or would assert in the case of the Bank's exercise of its
rights and remedies thereunder.
2. Representations and Warranties. In order to induce the Bank to enter
------------------------------
into this Agreement, the Obligor hereby affirms and restates as of the date
thereof and hereof each of the representations and warranties contained in the
Loan Documents.
3. Waiver of Defaults. Subject to the Obligor's performance of all of
------------------
its obligations under this agreement, including without limitation the payment
of the Extension Fee (as defined below), and in consideration of the
representations and warranties set forth herein, the Bank hereby waives the
following specific covenant defaults under the Loan Agreement:
a. [Section 3.8] The Obligor's failure to maintain on a consolidated
basis a Capital Base not less than $14,300,000 at March 28, 1999;
and
b. [Section 3.9] The Obligor's failure to incur a quarterly
consolidated Net Loss less than $1,100,000 for its fiscal quarter
ended March 28, 1999; and the Obligor's failure to incur an
annual consolidated Net Loss less than $7,900,000 for its fiscal
year ended March 28, 1999.
The foregoing waiver does not constitute (a) a waiver of any other default under
the Loan Documents whether or not now known to the Bank or which may occur
subsequent to the Effective Date; or (b) an agreement to forbear on account of
any default under the Loan Documents not now known to the Bank or which may
occur subsequent to the Effective Date.
4. Agreements by Obligor. The Obligor agrees:
---------------------
(a) to pay the Bank an extension and waiver fee of Twenty Thousand
Dollars ($20,000.00) (the "Extension Fee") in two equal
installments, one each upon execution of this Agreement and on
September 1, 1999. In the event that the Obligor fully repays its
obligations to the Bank under the Loan Documents prior to
September 1, 1999, the Bank agrees to waive payment of the second
installment.
(b) to pay, within three (3) days of the Bank's presentment of
invoices, all costs incurred by the Bank in connection with the
negotiation, preparation, administration and enforcement of this
Agreement and the Loan Documents including, without limitation,
reasonable attorneys' fees, including but not limited to the fees
and expenses of Mirick, O'Connell, DeMallie & Lougee, LLP, search
fees incurred in connection with lien searches, and the fees and
expenses of Edwards and Angell in the amount of $6,032.58,
evidenced by that firm's invoice dated February 5, 1999;
2
<PAGE>
(c) that there exist no claims by the Obligor against the Bank or its
agents, successors, assigns, attorneys or officers, and, to the
extent that any such claims exist, the Obligor hereby expressly
and irrevocably waives such claims;
(d) to continue to timely make all payment required under the Loan
Documents;
(e) to execute and deliver such documents as are required hereunder
or under the Loan Documents or which may be necessary or
reasonable to effectuate or evidence the amendments and
transactions referenced herein; and
(f) to seek refinancing of its indebtedness to the Bank.
5. Release of Bank. Effective upon the execution of this Agreement by
---------------
the Obligor, and in consideration of the Bank's agreement to enter into this
Agreement, to the extent that the Obligor may have any offsets, defenses or
claims in relation to any of its obligations to the Bank, the Obligor and its
partners, subsidiaries, affiliates, parents, officers, directors, employees,
agents, attorneys, heirs, successors, assigns, and executors (collectively, the
"Obligor Parties"), jointly and severally, release, acquit and forever discharge
the Bank and its subsidiaries, affiliates, parents, officers, directors,
employees, agents, attorneys, successors and assigns, both present and former
(collectively, the "Lender Affiliates") of and from any and all manners of
action and actions, cause and causes of action, suits, debts, controversies,
damages, judgments, executions, claims and demands whatsoever asserted or
unasserted, in contract, tort, law or in equity which the Obligor Parties ever
had or now have, from the beginning of time until the Effective Date, upon or
against the Bank or the Lender Affiliates by reason of any matter, cause causes
or thing whatsoever, including, without limitation, any presently existing claim
or defense whether or not presently suspected, contemplated or anticipated and
including but not limited to any claim that relates to, in whole or in part,
directly or indirectly (i) the making or administration of the loans evidenced
by the Loan Documents, including, without limitation, such claims and defenses
based on fraud, mistake, duress, usury, misrepresentation, or any other claim
based on so-called "lender liability theories"; (ii) any covenants, agreements,
duties, or obligations set forth in the Loan Documents; (iii) the actions or
omissions of any of the Bank and/or the Lender Affiliates in connection with the
initiation or continuing exercise of any right or remedy contained in the Loan
Documents or at law or in equity; (iv) lost profits; (v) loss of business
opportunity; (vi) increased financing costs; (vii) increased legal or
administrative fees; or (viii) damages to business reputation.
6. Modification of Loan Documents. The Bank and the Obligor agree that
------------------------------
the Loan Documents are hereby amended as follows:
(a) Loan Agreement Covenant Amendments: Covenants shall continue to
be tested on the last day of each fiscal quarter at existing
levels with the
3
<PAGE>
exception of Section 3.8 of the Loan Agreement, until the
expiration of the maturity date (as extended herein). Section 3.8
of the Loan Agreement is hereby amended to required the Obligor
to maintain on a consolidated basis a Capital Base of not less
than $8,000,000 at June 27, 1999 and September 26, 1999. Section
3.10 of the Loan Agreement is hereby amended to reflect that, in
calculating the Current Ratio, the anticipated tax refund (see
Section 10, below) shall be included as a Current Asset;
(b) Maturity Date: The maturity date of the Loan Agreement shall be
extended from September 1, 1999 to November 1, 1999;
(c) Equity or Permitted Debt Issuance: In the event the Obligor shall
raise funds from the issuance of either debt permitted by the
Bank (consistent with the Loan Agreement) and/or equity
instruments, such funds will be applied to the outstanding
indebtedness under the Loan Agreement;
(d) Default Rate of Interest: Upon the occurrence of an event of
default, inclusive of the scheduled maturity date as extended
herein, the default rate charged by the Lender shall be 18% per
annum;
(e) Revolving Note Availability: The maximum availability under the
Revolving Note shall be:
(i) the lesser of $1,300,000 or the amount available under the
Borrowing Base (as defined in the Loan Agreement) until the
earlier of August 31, 1999 or the Bank's receipt of the
Obligor's 1998 Federal Income Tax Return and refund request
and 1995 Federal Income Tax refund request (as set forth in
Section 10, below), which refunds were requested on June 22,
1999; and
(ii) after the earlier of August 31, 1999 or the Bank's receipt
of the tax refunds and until the maturity date, as extended
herein, the lesser of $350,000 or the amount available under
the Borrower Base.
(f) Request for Advances Under the Revolving Note: All requests for
advances under the Revolving Note shall be submitted directly to
the Bank, to the attention of Alisa B. Cure, Vice President, for
approval and shall be accompanied by a Borrowing Base
Certificate, displaying adequate current levels of Eligible
Accounts Receivable, as of the date of the request.
4
<PAGE>
(g) Other Commitment Amounts: ACH Transactions (as defined in the
Loan Agreement) for the Obligor shall be limited to a maximum of
$225,000. No additional stand-by letters of credit shall be
issued, and the ability to open the Foreign Exchange Contracts
(as defined in the Loan Agreement) will be eliminated.
7. Financial Consultant/Field Examination. The Obligor acknowledges and
--------------------------------------
agrees that the Bank or its counsel shall engage, at the expense of the Obligor,
an independent financial consultant (i) to perform field examination(s) of the
Obligor's accounts receivable and inventory collateral, internal controls, and
reporting systems and/or (ii) to review and evaluate the Obligor's business
plan, previously delivered to the Bank. Furthermore, the Obligor shall afford
such consultant cooperation and access at any reasonable time, upon reasonable
notice, to the books and records of the Obligor.
8. Delivery of Financial Information. The Obligor shall deliver or cause
---------------------------------
to be delivered to the Bank, in addition to the Obligor's existing reporting
requirements under the Loan Documents, an updated Rolling Thirteen (13) Week
Cash Flow Forecast by the first business day of each week, whereby the first
four (4) week period shall be deleted and updated with the four (4) week period
immediately succeeding the last week included in the previous report.
9. Cooperation. The Obligor and its management shall cooperate fully
-----------
with the Bank's representatives and/or agents in the conduct of a field
examination of their books and records. Further, the Obligor shall promptly
reimburse the Bank for all costs associated with such field examination.
The Obligor shall fully cooperate with the Bank's undertaking of updated
appraisals of equipment if undertaken. Upon presentation, the Obligor shall
reimburse the Bank for the expenses associated with such appraisals.
10. Assignment of 1998 Federal Income Tax Refund. The Obligor hereby
--------------------------------------------
irrevocably and unconditionally assigns to the Bank, effective as of the
Effective Date, any payment due to or received by the Obligor as a refund with
respect to the Obligor's 1998 Federal Income Tax Return and 1995 Federal Income
Tax Return. The Obligor shall promptly deliver to the Bank a copy of said tax
return(s), executed by the Obligor's CEO or CFO and prepared by Ernst & Young.
The Obligor agrees to execute and deliver such documents as the Bank deems
reasonable and necessary to effectuate or evidence said assignment, and to cause
the tax refunds to be sent to an account designated by the Bank, including,
without limitation, IRS Form 8302 (Application for Electronic Funds Transfer of
Tax Refund of $1 Million or More), which documents may be attached to the tax
return and filed concurrent with the tax refund request(s) under the direction
of the Bank's counsel. In the event that all or part of the refunds are
received by the Obligor, the Obligor shall immediately pay over such refunds to
the Bank. Proceeds from any tax refunded shall first be applied to the
outstanding balance due under the Loan Documents,
5
<PAGE>
with any excess available for the benefit of the Obligor. It shall be an event
of default under the Loan Documents if the Obligor fails to immediately pay over
such refunds to the Bank.
11. Payments. All payments required under this Agreement, including those
--------
for fees, costs, and expenses incurred by the Bank, shall be made when due, and
to the extent available, may be debited directly from the Obligor's demand
deposit accounts at the Bank. The Bank shall provide a copy of the invoices for
payment, via facsimile, to the Obligor and allow the Obligor the opportunity to
remit payment via check within five (5) business days prior to the debiting the
Obligor's demand deposit account(s) for said reimbursement.
12. Validity of the Loan Documents. The Obligor acknowledges that (a) the
------------------------------
liabilities arising out of the Loan Documents are the valid and binding
obligations of the Obligor enforceable in accordance with their terms; (b) the
liens, encumbrances, mortgages and security interests granted to the Bank
pursuant to the Loan Documents remain valid, binding, perfected and enforceable;
and (c) the Bank may enforce the payment and performance of the obligations
under the Loan Documents and in accordance with applicable law, except to the
extent the Bank has agreed to limit its rights pursuant to this Agreement. The
Bank reserves and does not waive any of its rights under the Loan Documents, the
terms and conditions of which remain in full force and effect, except as
specifically modified by this Agreement.
13. Authority. The Obligor represents and warrants to the Bank: (a) all
---------
necessary corporate action to be taken in connection with the execution,
delivery and performance of this Agreement has been duly taken; and (b) the
execution, delivery and performance by the Obligor of this Agreement does not
constitute a violation or breach of the Obligor's Articles of Organization, by-
laws, declaration of trust or any other agreement or law by which the Obligor is
bound.
14. Notices. Any notice, request, direction, consent, approval, waiver or
-------
other communication required or permitted under this Agreement to be sent to the
Bank must be in writing and will become effective only if provided (in addition
to as provided in the Loan Documents) as follows:
Send original to: Fleet National Bank
111 Westminster Street
RIMO M20A
Providence, RI 02903
Attn: Alisa B. Cure, Vice President
with a copy to: Mirick, O'Connell, DeMallie & Lougee, LLP
100 Front Street
Worcester, MA 01608
Attn: Joseph H. Baldiga, Esq.
6
<PAGE>
15. Conflicting Provisions. If any conflict arises between the provisions
----------------------
of this Agreement and the provisions of the Loan Documents, the provisions of
this Agreement will prevail. All other provisions of the Loan Documents will
remain in effect.
16. Governing Law. This Agreement will be interpreted and construed under
-------------
the laws of the Commonwealth of Massachusetts, regardless of the domicile of any
party, and will be considered to have been made, executed and performed in
Worcester County, Massachusetts. All claims, disputes and other matters in
question arising out of this Agreement will be decided by proceedings instituted
and litigated in a court of competent jurisdiction sitting in Worcester County,
Massachusetts.
17. Consent to Jurisdiction; Waivers. THE OBLIGOR HEREBY IRREVOCABLY AND
--------------------------------
UNCONDITIONALLY (A) SUBMITS TO PERSONAL JURISDICTION IN THE COMMONWEALTH OF
MASSACHUSETTS OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS, AND (B) WAIVES ANY AND ALL PERSONAL
RIGHTS UNDER THE LAWS OF ANY STATE (I) TO THE RIGHT, IF ANY, TO TRIAL BY JURY,
(II) TO OBJECT TO JURISDICTION WITHIN THE COMMONWEALTH OF MASSACHUSETTS OR VENUE
IN ANY PARTICULAR FORUM WITHIN THE COMMONWEALTH OF MASSACHUSETTS, AND (III) TO
THE RIGHT, IF ANY, TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN ACTUAL DAMAGES.
EXECUTED as a sealed instrument effective as of the day and year first
above written.
FLEET NATIONAL BANK
/s/ Alisa Cure By: /s/ Fred Manning
- -------------------------------- --------------------------------
Witness
Its:
ASECO CORPORATION
/s/ Sebastian J. Sicari By: /s/ Mary R. Barletta
- -------------------------------- --------------------------------
Witness
Its:
7
<PAGE>
EXHIBIT 10.11
SEVERANCE AGREEMENT
-------------------
This Severance Agreement is entered into as of this 30th day of December,
1996 by and between Aseco Corporation, a Delaware corporation (the "Company"),
and Sebastian J. Sicari (the "Employee").
Recitals:
--------
WHEREAS, the Employee is an executive officer of the Company; and
WHEREAS, the Company and the Employee wish to provide for the payment of
certain severance compensation by the Company to the Employee in the event the
Employee's employment by the Company is terminated.
NOW, THEREFORE, in consideration of the Employee's continued service to the
Company and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Definitions.
-----------
"Benefit Period" shall mean the twelve (12)-month period following the
Termination Date, in the context of Section 2, and the twenty-four (24)-month
period following the Termination Date, in the context of Section 3.
"Cause" shall be deemed to exist if the Board of Directors of the Company
in good faith determines, after giving the Employee notice and an opportunity to
be heard, that the Employee has committed an act constituting fraud,
embezzlement, larceny or theft.
"Change in Control" shall mean (i) the sale, lease, transfer or other
disposition by the Company of all or substantially all of its assets in a single
transaction or a series of related transactions; (ii) the merger or
consolidation of the Company with another entity in which the stockholders of
the Company immediately prior to such merger or consolidation hold less than 50%
of the outstanding voting stock of the surviving or resulting corporation
immediately following such transaction; or (iii) the sale or exchange (to or
with any person or entity other than the Company) by the stockholders of the
Company of more than 50% of the outstanding voting stock of the Company in a
single transaction or series of related transactions.
<PAGE>
"Ineligibility Period" shall mean that portion of the applicable Benefit
Period when the Employee is ineligible for coverage under the Company's group
life or group health insurance policies.
"Termination Date" shall mean the effective date of the termination of the
Employee's employment with the Company.
2. Severance Other Than Following a Change in Control.
--------------------------------------------------
In the event the Employee's employment by the Company is terminated for any
reason other than (i) for Cause by the Company, (ii) voluntary resignation by
the Employee or (iii) the Employee's death, and Section 3 is inapplicable, the
Company shall (i) pay the Employee within five (5) days after the Termination
Date a lump sum amount equal to the sum of (A) twelve (12) times the Employee's
monthly base salary in effect at the time of such termination plus (B) the
average of the annual bonus amounts paid to the Employee in respect of the
Company's two fiscal years immediately preceding the Termination Date (less
applicable withholding taxes and FICA with respect to (A) and (B)) and (ii)
continue to provide during the Benefit Period life and health insurance coverage
to the Employee, with benefits substantially comparable to those provided to
executive officers of the Company generally immediately prior to such
termination. Notwithstanding the foregoing, the Company shall have the right, in
lieu of providing such coverage during any Ineligibility Period, to pay the
Employee an amount equal to 200% of the amount it would have cost the Company to
provide such coverage during such Ineligibility Period, assuming the Employee
were eligible for coverage under the Company's group insurance policies and
assuming further no increase in premium costs under such policies after the
commencement of such Ineligibility Period.
3. Severance Following a Change in Control.
---------------------------------------
Except as provided in the last sentence of this Section 3, in the event the
Employee's employment by the Company is terminated for any reason whatsoever,
including voluntary resignation by the Employee, within twenty-four months
following a Change in Control, the Company shall (i) pay the Employee within
five days after the Termination Date a lump sum amount equal to the sum of (A)
twenty-four (24) times the Employee's monthly base salary in effect at the time
of such termination plus (B) two times the average of the annual bonus amounts
paid to the Employee in respect of the Company's two fiscal years immediately
preceding the Termination Date (less applicable withholding taxes and FICA with
respect to (A) and (B)) and (ii) continue to provide during the Benefit Period
life and health insurance coverage to the Employee, with benefits substantially
comparable to those provided to executive officers of the Company
2
<PAGE>
generally immediately prior to such termination. Notwithstanding the foregoing,
the Company shall have the right, in lieu of providing such coverage during any
Ineligibility Period, to pay the Employee an amount equal to 200% of the amount
it would have cost the Company to provide such coverage during any Ineligibility
Period, assuming the Employee were eligible for coverage under the Company's
group insurance policies and assuming further no increase in premium costs under
such policies after the commencement of the Ineligibility Period.
Notwithstanding anything to the contrary contained in this Agreement, the
Employee shall not be entitled to any severance benefits pursuant to Section 2
or this Section 3 if the Employee's employment by the Company is terminated by
the Company for Cause.
4. Vesting of Stock. Upon a Change in Control, the vesting of all stock
----------------
options held by the Employee and exercisable to purchase common stock of the
Company shall be accelerated so that all such options shall be immediately
exercisable in full.
5. Miscellaneous.
-------------
5.1 This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of this Agreement, including without
limitation that certain letter agreement dated October 23, 1990.
5.2 This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
5.3 This Agreement shall be construed, interpreted and enforced in
accordance with the laws of The Commonwealth of Massachusetts.
5.4 This Agreement shall be binding upon and inure to the benefit of
both parties and their respective successors and assigns, including any
corporation with which or into which the Company may be merged or which may
succeed to its assets or business.
5.5 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
5.6 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
ASECO CORPORATION
By:
------------------------------
Title:
------------------------------
EMPLOYEE
---------------------------------------
Sebastian J. Sicari
4
<PAGE>
EXHIBIT 10.12
August 11, 1998
Mr. Sebastian J. Sicari
63 Townsend Farms Road
Boxford, Massachusetts 01921
RE: Stock Options
- -----------------
Dear Sebastian:
On behalf of the Compensation Committee of the Board of Directors of Aseco
Corporation (the "Company") please accept this letter as confirmation that,
notwithstanding the terms of the stock option agreements pursuant to which your
options to purchase common stock of the Company were granted (Schedule A
----------
attached lists your stock options), in the event your employment with the
Company is terminated for any reason except for cause (as defined in your
severance agreement with the Company as of December 30, 1996), each of your
options shall be exercisable at any time prior to the earlier of (i) the third
anniversary of the date your employment with the Company terminates or (ii) the
expiration date of the option.
Sincerely yours,
/s/ Dr. Sheldon Buckler
- --------------------------------------
Dr. Sheldon Buckler
Chairman of the Compensation Committee
<PAGE>
SCHEDULE A
----------
Grant Date Number of Shares Exercise Price Expiration Date
- ---------- ---------------- -------------- ---------------
1/12/94 75,000 $ 5.375 01/12/2004
05/15/95 10,000 $13.00 05/15/2005
08/23/96 67,500 $10.375 08/23/96
10/18/96 22,500 $ 9.875 10/18/2006
05/10/97 25,000 $ 9.875 05/10/2007
08/11/98 60,000 $ 3.16 08/11/2008
<PAGE>
Exhibit 10.13
SEVERANCE AGREEMENT
-------------------
This Severance Agreement is entered into as of this 8th day of July, 1998
by and between Aseco Corporation, a Delaware corporation (the "Company"), and
Mary R. Barletta (the "Employee").
Recitals:
--------
WHEREAS, the Employee is an executive officer of the Company; and
WHEREAS, the Company and the Employee wish to provide for the payment of
certain severance compensation by the Company to the Employee in the event the
Employee's employment by the Company is terminated.
NOW, THEREFORE, in consideration of the Employee's continued service to the
Company and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Definitions.
-----------
"Benefit Period" shall mean the twelve (12)-month period following the
Termination Date.
"Cause" shall be deemed to exist if the Board of Directors of the Company
or its successor in good faith determines, after giving the Employee notice and
an opportunity to be heard, that the Employee has committed an act constituting
fraud, embezzlement, larceny or theft.
"Change in Control" shall mean (i) the sale, lease, transfer or other
disposition by the Company of all or substantially all of its assets in a single
transaction or a series of related transactions; (ii) the merger or
consolidation of the Company with another entity in which the stockholders of
the Company immediately prior to such merger or consolidation hold less than 50%
of the outstanding voting stock of the surviving or resulting corporation
immediately following such transaction; or (iii) the sale or exchange (to or
with any person or entity other than the Company) by the stockholders of more
than 50% of the outstanding voting stock of the Company in a single transaction
or series of related transactions.
"Good Reason" shall mean a material reduction in the duties and
responsibilities of the Employee or the assignment to the Employee of duties and
responsibilities that are inconsistent in a material and adverse respect with
his or her current position.
"Ineligibility Period" shall mean that portion of the Benefit Period when
the Employee is ineligible for coverage under the Company's group life or group
health insurance policies.
"Termination Date" shall mean the effective date of the termination of the
Employee's employment with the Company.
<PAGE>
2. Severance.
---------
In the event the Employee's employment by the Company is terminated
(i) without Cause by the Company or any successor or (ii) for Good Reason by the
Employee, in either case within twelve (12) months following a Change in
Control, the Company or its successor shall (A) pay the Employee within five
days after the Termination Date a lump sum amount equal to twelve (12) times the
Employee's monthly base salary in effect at the time of such termination (less
applicable withholding taxes and FICA) and (B) continue to provide during the
Benefit Period life and health insurance coverage to the Employee, with benefits
substantially comparable to those provided to executive officers of the Company
generally immediately prior to such termination. Notwithstanding the foregoing,
the Company shall have the right, in lieu of providing such coverage during any
Ineligibility Period, to pay the Employee an amount equal to 200% of the amount
it would have cost the Company to provide such coverage during any Ineligibility
Period, assuming the Employee were eligible for coverage under the Company's
group insurance policies and assuming further no increase in premium costs under
such policies after the commencement of any Ineligibility Period.
3. Acceleration of Vesting; Extension of Exercise Period of Stock Options.
----------------------------------------------------------------------
Upon a Change in Control, all options held by the Employee to purchase
common stock of the Company shall become fully vested and immediately
exercisable in full, notwithstanding any terms to the contrary contained in the
stock option agreements pursuant to which such options were granted. In the
event the Employee's employment by the Company is terminated (i) without Cause
by the Company or any successor or (ii) for Good Reason by the Employee, in
either case, within twelve (12) months following a Change in Control, all
options held by the Employee to purchase common stock of the Company shall be
exercisable at any time prior to the earlier of (i) the first anniversary of the
date of termination of the Employee's employment with the Company and (ii) the
expiration date of the option, notwithstanding any terms to the contrary
contained in the stock option agreements pursuant to which such options were
granted.
4. Miscellaneous.
-------------
4.1 This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of this Agreement.
4.2 This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
2
<PAGE>
4.3 This Agreement shall be construed, interpreted and enforced in
accordance with the laws of The Commonwealth of Massachusetts.
4.4 This Agreement shall be binding upon and inure to the benefit of
both parties and their respective successors and assigns, including any
corporation with which or into which the Company may be merged or which may
succeed to its assets or business.
4.5 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
4.6 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
ASECO CORPORATION
By: /s/ Sebastian J. Sicari
------------------------------
Title: President & COO
------------------------------
EMPLOYEE
/s/ Mary R. Barletta
----------------------------------
Mary R. Barletta
3
<PAGE>
Exhibit 10.14
SEVERANCE AGREEMENT
-------------------
This Severance Agreement is entered into as of this 8th day of July, 1998
by and between Aseco Corporation, a Delaware corporation (the "Company"), and
Philip Villari (the "Employee").
Recitals:
--------
WHEREAS, the Employee is an executive officer of the Company; and
WHEREAS, the Company and the Employee wish to provide for the payment of
certain severance compensation by the Company to the Employee in the event the
Employee's employment by the Company is terminated.
NOW, THEREFORE, in consideration of the Employee's continued service to the
Company and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Definitions.
-----------
"Benefit Period" shall mean the twelve (12)-month period following the
Termination Date.
"Cause" shall be deemed to exist if the Board of Directors of the Company
or its successor in good faith determines, after giving the Employee notice and
an opportunity to be heard, that the Employee has committed an act constituting
fraud, embezzlement, larceny or theft.
"Change in Control" shall mean (i) the sale, lease, transfer or other
disposition by the Company of all or substantially all of its assets in a single
transaction or a series of related transactions; (ii) the merger or
consolidation of the Company with another entity in which the stockholders of
the Company immediately prior to such merger or consolidation hold less than 50%
of the outstanding voting stock of the surviving or resulting corporation
immediately following such transaction; or (iii) the sale or exchange (to or
with any person or entity other than the Company) by the stockholders of more
than 50% of the outstanding voting stock of the Company in a single transaction
or series of related transactions.
"Good Reason" shall mean a material reduction in the duties and
responsibilities of the Employee or the assignment to the Employee of duties and
responsibilities that are inconsistent in a material and adverse respect with
his or her current position.
"Ineligibility Period" shall mean that portion of the Benefit Period when
the Employee is ineligible for coverage under the Company's group life or group
health insurance policies.
"Termination Date" shall mean the effective date of the termination of the
Employee's employment with the Company.
<PAGE>
2. Severance.
---------
In the event the Employee's employment by the Company is terminated
(i) without Cause by the Company or any successor or (ii) for Good Reason by the
Employee, in either case within twelve (12) months following a Change in
Control, the Company or its successor shall (A) pay the Employee within five
days after the Termination Date a lump sum amount equal to twelve (12) times the
Employee's monthly base salary in effect at the time of such termination (less
applicable withholding taxes and FICA) and (B) continue to provide during the
Benefit Period life and health insurance coverage to the Employee, with benefits
substantially comparable to those provided to executive officers of the Company
generally immediately prior to such termination. Notwithstanding the foregoing,
the Company shall have the right, in lieu of providing such coverage during any
Ineligibility Period, to pay the Employee an amount equal to 200% of the amount
it would have cost the Company to provide such coverage during any Ineligibility
Period, assuming the Employee were eligible for coverage under the Company's
group insurance policies and assuming further no increase in premium costs under
such policies after the commencement of any Ineligibility Period.
3. Acceleration of Vesting; Extension of Exercise Period of Stock Options.
----------------------------------------------------------------------
Upon a Change in Control, all options held by the Employee to purchase
common stock of the Company shall become fully vested and immediately
exercisable in full, notwithstanding any terms to the contrary contained in the
stock option agreements pursuant to which such options were granted. In the
event the Employee's employment by the Company is terminated (i) without Cause
by the Company or any successor or (ii) for Good Reason by the Employee, in
either case, within twelve (12) months following a Change in Control, all
options held by the Employee to purchase common stock of the Company shall be
exercisable at any time prior to the earlier of (i) the first anniversary of the
date of termination of the Employee's employment with the Company and (ii) the
expiration date of the option, notwithstanding any terms to the contrary
contained in the stock option agreements pursuant to which such options were
granted.
4. Miscellaneous.
-------------
4.1 This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of this Agreement.
4.2 This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
2
<PAGE>
4.3 This Agreement shall be construed, interpreted and enforced in
accordance with the laws of The Commonwealth of Massachusetts.
4.4 This Agreement shall be binding upon and inure to the benefit of
both parties and their respective successors and assigns, including any
corporation with which or into which the Company may be merged or which may
succeed to its assets or business.
4.5 The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or substance
of any section of this Agreement.
4.6 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
ASECO CORPORATION
By: /s/ Sebastian J. Sicari
------------------------------
Title: President & COO
------------------------------
EMPLOYEE
/s/ Philip Villari
----------------------------------
Philip Villari
3
<PAGE>
Exhibit 10.15
SEVERANCE AGREEMENT
-------------------
This Severance Agreement is entered into as of this 8th day of July, 1998
by and between Aseco Corporation, a Delaware corporation (the "Company"), and
Robert L. Murray (the "Employee").
Recitals:
--------
WHEREAS, the Employee is an executive officer of the Company; and
WHEREAS, the Company and the Employee wish to provide for the payment of
certain severance compensation by the Company to the Employee in the event the
Employee's employment by the Company is terminated.
NOW, THEREFORE, in consideration of the Employee's continued service to the
Company and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Definitions.
-----------
"Benefit Period" shall mean the twelve (12)-month period following the
Termination Date.
"Cause" shall be deemed to exist if the Board of Directors of the Company
or its successor in good faith determines, after giving the Employee notice and
an opportunity to be heard, that the Employee has committed an act constituting
fraud, embezzlement, larceny or theft.
"Change in Control" shall mean (i) the sale, lease, transfer or other
disposition by the Company of all or substantially all of its assets in a single
transaction or a series of related transactions; (ii) the merger or
consolidation of the Company with another entity in which the stockholders of
the Company immediately prior to such merger or consolidation hold less than 50%
of the outstanding voting stock of the surviving or resulting corporation
immediately following such transaction; or (iii) the sale or exchange (to or
with any person or entity other than the Company) by the stockholders of more
than 50% of the outstanding voting stock of the Company in a single transaction
or series of related transactions.
"Good Reason" shall mean a material reduction in the duties and
responsibilities of the Employee or the assignment to the Employee of duties and
responsibilities that are inconsistent in a material and adverse respect with
his or her current position.
"Ineligibility Period" shall mean that portion of the Benefit Period when
the Employee is ineligible for coverage under the Company's group life or group
health insurance policies.
"Termination Date" shall mean the effective date of the termination of the
Employee's employment with the Company.
<PAGE>
2. Severance.
---------
In the event the Employee's employment by the Company is terminated
(i) without Cause by the Company or any successor or (ii) for Good Reason by the
Employee, in either case within twelve (12) months following a Change in
Control, the Company or its successor shall (A) pay the Employee within five
days after the Termination Date a lump sum amount equal to twelve (12) times the
Employee's monthly base salary in effect at the time of such termination (less
applicable withholding taxes and FICA) and (B) continue to provide during the
Benefit Period life and health insurance coverage to the Employee, with benefits
substantially comparable to those provided to executive officers of the Company
generally immediately prior to such termination. Notwithstanding the foregoing,
the Company shall have the right, in lieu of providing such coverage during any
Ineligibility Period, to pay the Employee an amount equal to 200% of the amount
it would have cost the Company to provide such coverage during any Ineligibility
Period, assuming the Employee were eligible for coverage under the Company's
group insurance policies and assuming further no increase in premium costs under
such policies after the commencement of any Ineligibility Period.
3. Acceleration of Vesting; Extension of Exercise Period of Stock Options.
----------------------------------------------------------------------
Upon a Change in Control, all options held by the Employee to purchase
common stock of the Company shall become fully vested and immediately
exercisable in full, notwithstanding any terms to the contrary contained in the
stock option agreements pursuant to which such options were granted. In the
event the Employee's employment by the Company is terminated (i) without Cause
by the Company or any successor or (ii) for Good Reason by the Employee, in
either case, within twelve (12) months following a Change in Control, all
options held by the Employee to purchase common stock of the Company shall be
exercisable at any time prior to the earlier of (i) the first anniversary of the
date of termination of the Employee's employment with the Company and (ii) the
expiration date of the option, notwithstanding any terms to the contrary
contained in the stock option agreements pursuant to which such options were
granted.
4. Miscellaneous.
-------------
4.1 This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of this Agreement.
4.2 This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
2
<PAGE>
4.3 This Agreement shall be construed, interpreted and enforced in
accordance with the laws of The Commonwealth of Massachusetts.
4.4 This Agreement shall be binding upon and inure to the benefit of
both parties and their respective successors and assigns, including any
corporation with which or into which the Company may be merged or which may
succeed to its assets or business.
4.5 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
4.6 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
ASECO CORPORATION
By: /s/ Sebastian J. Sicari
------------------------------
Title: President & COO
---------------------------
EMPLOYEE
/s/ Robert L. Murray
----------------------------------
Robert L. Murray
3
<PAGE>
Exhibit 10.11
SEVERANCE AGREEMENT
-------------------
This Severance Agreement is entered into as of this 8th day of July, 1998
by and between Aseco Corporation, a Delaware corporation (the "Company"), and
Robert E. Sandberg (the "Employee").
Recitals:
--------
WHEREAS, the Employee is an executive officer of the Company; and
WHEREAS, the Company and the Employee wish to provide for the payment of
certain severance compensation by the Company to the Employee in the event the
Employee's employment by the Company is terminated.
NOW, THEREFORE, in consideration of the Employee's continued service to the
Company and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Definitions.
-----------
"Benefit Period" shall mean the twelve (12)-month period following the
Termination Date.
"Cause" shall be deemed to exist if the Board of Directors of the Company
or its successor in good faith determines, after giving the Employee notice and
an opportunity to be heard, that the Employee has committed an act constituting
fraud, embezzlement, larceny or theft.
"Change in Control" shall mean (i) the sale, lease, transfer or other
disposition by the Company of all or substantially all of its assets in a single
transaction or a series of related transactions; (ii) the merger or
consolidation of the Company with another entity in which the stockholders of
the Company immediately prior to such merger or consolidation hold less than 50%
of the outstanding voting stock of the surviving or resulting corporation
immediately following such transaction; or (iii) the sale or exchange (to or
with any person or entity other than the Company) by the stockholders of more
than 50% of the outstanding voting stock of the Company in a single transaction
or series of related transactions.
"Good Reason" shall mean a material reduction in the duties and
responsibilities of the Employee or the assignment to the Employee of duties and
responsibilities that are inconsistent in a material and adverse respect with
his or her current position.
"Ineligibility Period" shall mean that portion of the Benefit Period when
the Employee is ineligible for coverage under the Company's group life or group
health insurance policies.
"Termination Date" shall mean the effective date of the termination of the
Employee's employment with the Company.
<PAGE>
2. Severance.
---------
In the event the Employee's employment by the Company is terminated (i)
without Cause by the Company or any successor or (ii) for Good Reason by the
Employee, in either case within twelve (12) months following a Change in
Control, the Company or its successor shall (A) pay the Employee within five
days after the Termination Date a lump sum amount equal to twelve (12) times the
Employee's monthly base salary in effect at the time of such termination (less
applicable withholding taxes and FICA) and (B) continue to provide during the
Benefit Period life and health insurance coverage to the Employee, with benefits
substantially comparable to those provided to executive officers of the Company
generally immediately prior to such termination. Notwithstanding the foregoing,
the Company shall have the right, in lieu of providing such coverage during any
Ineligibility Period, to pay the Employee an amount equal to 200% of the amount
it would have cost the Company to provide such coverage during any Ineligibility
Period, assuming the Employee were eligible for coverage under the Company's
group insurance policies and assuming further no increase in premium costs under
such policies after the commencement of any Ineligibility Period.
3. Acceleration of Vesting; Extension of Exercise Period of Stock Options.
----------------------------------------------------------------------
Upon a Change in Control, all options held by the Employee to purchase
common stock of the Company shall become fully vested and immediately
exercisable in full, notwithstanding any terms to the contrary contained in the
stock option agreements pursuant to which such options were granted. In the
event the Employee's employment by the Company is terminated (i) without Cause
by the Company or any successor or (ii) for Good Reason by the Employee, in
either case, within twelve (12) months following a Change in Control, all
options held by the Employee to purchase common stock of the Company shall be
exercisable at any time prior to the earlier of (i) the first anniversary of the
date of termination of the Employee's employment with the Company and (ii) the
expiration date of the option, notwithstanding any terms to the contrary
contained in the stock option agreements pursuant to which such options were
granted.
4. Miscellaneous.
-------------
4.1 This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of this Agreement.
4.2 This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
2
<PAGE>
4.3 This Agreement shall be construed, interpreted and enforced in
accordance with the laws of The Commonwealth of Massachusetts.
4.4 This Agreement shall be binding upon and inure to the benefit of
both parties and their respective successors and assigns, including any
corporation with which or into which the Company may be merged or which may
succeed to its assets or business.
4.5 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
4.6 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
ASECO CORPORATION
By: /s/ Sebastian J. Sicari
------------------------------
Title: President & COO
------------------------------
EMPLOYEE
/s/ Robert E. Sandberg
----------------------------------
Robert E. Sandberg
3
<PAGE>
Exhibit 10.17
SEVERANCE AGREEMENT
-------------------
This Severance Agreement is entered into as of this 21st day of October,
1998 by and between Aseco Corporation, a Delaware corporation (the "Company"),
and Richard S. Sidell (the "Employee").
Recitals:
--------
WHEREAS, the Employee is an executive officer of the Company; and
WHEREAS, the Company and the Employee wish to provide for the payment of
certain severance compensation by the Company to the Employee in the event the
Employee's employment by the Company is terminated.
NOW, THEREFORE, in consideration of the Employee's continued service to the
Company and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Definitions.
-----------
"Benefit Period" shall mean the twelve (12)-month period following the
Termination Date.
"Cause" shall be deemed to exist if the Board of Directors of the Company
or its successor in good faith determines, after giving the Employee notice and
an opportunity to be heard, that the Employee has committed an act constituting
fraud, embezzlement, larceny or theft.
"Change in Control" shall mean (i) the sale, lease, transfer or other
disposition by the Company of all or substantially all of its assets in a single
transaction or a series of related transactions; (ii) the merger or
consolidation of the Company with another entity in which the stockholders of
the Company immediately prior to such merger or consolidation hold less than 50%
of the outstanding voting stock of the surviving or resulting corporation
immediately following such transaction; or (iii) the sale or exchange (to or
with any person or entity other than the Company) by the stockholders of more
than 50% of the outstanding voting stock of the Company in a single transaction
or series of related transactions.
"Good Reason" shall mean a material reduction in the duties and
responsibilities of the Employee or the assignment to the Employee of duties and
responsibilities that are inconsistent in a material and adverse respect with
his or her current position.
"Ineligibility Period" shall mean that portion of the Benefit Period when
the Employee is ineligible for coverage under the Company's group life or group
health insurance policies.
"Termination Date" shall mean the effective date of the termination of the
Employee's employment with the Company.
<PAGE>
2. Severance.
---------
In the event the Employee's employment by the Company is terminated
(i) without Cause by the Company or any successor or (ii) for Good Reason by the
Employee, in either case within twelve (12) months following a Change in
Control, the Company or its successor shall (A) pay the Employee within five
days after the Termination Date a lump sum amount equal to twelve (12) times the
Employee's monthly base salary in effect at the time of such termination (less
applicable withholding taxes and FICA) and (B) continue to provide during the
Benefit Period life and health insurance coverage to the Employee, with benefits
substantially comparable to those provided to executive officers of the Company
generally immediately prior to such termination. Notwithstanding the foregoing,
the Company shall have the right, in lieu of providing such coverage during any
Ineligibility Period, to pay the Employee an amount equal to 200% of the amount
it would have cost the Company to provide such coverage during any Ineligibility
Period, assuming the Employee were eligible for coverage under the Company's
group insurance policies and assuming further no increase in premium costs under
such policies after the commencement of any Ineligibility Period.
3. Acceleration of Vesting; Extension of Exercise Period of Stock Options.
----------------------------------------------------------------------
Upon a Change in Control, all options held by the Employee to purchase
common stock of the Company shall become fully vested and immediately
exercisable in full, notwithstanding any terms to the contrary contained in the
stock option agreements pursuant to which such options were granted. In the
event the Employee's employment by the Company is terminated (i) without Cause
by the Company or any successor or (ii) for Good Reason by the Employee, in
either case, within twelve (12) months following a Change in Control, all
options held by the Employee to purchase common stock of the Company shall be
exercisable at any time prior to the earlier of (i) the first anniversary of the
date of termination of the Employee's employment with the Company and (ii) the
expiration date of the option, notwithstanding any terms to the contrary
contained in the stock option agreements pursuant to which such options were
granted.
4. Miscellaneous.
-------------
4.1 This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of this Agreement.
4.2 This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
2
<PAGE>
4.3 This Agreement shall be construed, interpreted and enforced in
accordance with the laws of The Commonwealth of Massachusetts.
4.4 This Agreement shall be binding upon and inure to the benefit of
both parties and their respective successors and assigns, including any
corporation with which or into which the Company may be merged or which may
succeed to its assets or business.
4.5 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
4.6 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
ASECO CORPORATION
By: /s/ Sebastian J. Sicari
------------------------------
Title: President & CEO
---------------------------
EMPLOYEE
/s/ Richard S. Sidell
----------------------------------
Richard S. Sidell
3
<PAGE>
Exhibit 10.18
SEPARATION AGREEMENT
--------------------
This Separation Agreement is entered into as of this 11th day of August,
1998 by and between Aseco Corporation, a Delaware corporation (the "Company"),
and Carl S. Archer, Jr. ("Archer").
Recitals:
--------
WHEREAS, Archer has served as the President and Chief Executive Officer of
the Company;
WHEREAS, Archer relinquished his position as President of the Company on
May 12, 1998 and as Chief Executive Officer of the Company on August 11, 1998;
WHEREAS, Archer and the Company are parties to a Severance Agreement dated
as of December 30, 1996 (the "1996 Severance Agreement"); and
WHEREAS, in connection with the termination of Archer's employment with the
Company, the Company and Archer wish to provide for the payment of certain
compensation and the provision of certain benefits to Archer by the Company in
lieu of Archer's rights under the 1996 Severance Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Interim Employment. From the date of this Agreement until October 31,
1998 (the "Employment Period"), Archer shall remain a full-time employee of the
Company reporting directly to the Chief Executive Officer of the Company.
2. Consulting. From November 1, 1998 until August 10, 1999 (the
"Consulting Period", and together with the Employment Period, the "Service
Period"), Archer shall render such executive-level consulting services as the
Chief Executive Officer of the Company may reasonably request; provided,
however, that Archer shall not be required to render more than 5 days of service
per month and shall not be required to travel outside of Massachusetts in
connection with performing such services. Archer's obligations under this
Section 2 shall terminate upon a Change in Control (as defined below).
3. Compensation. As consideration for agreeing to provide the foregoing
employment and consulting services, the Company shall pay Archer during the
Service Period a fee of $200,000, payable in bi-weekly installments (net of all
applicable withholding taxes). The Company's obligation under this Section 3
shall be absolute and unconditional, but shall terminate upon a Change in
Control.
<PAGE>
4. Severance Payments. As consideration for past services rendered by
Archer, the Company shall pay him $15,000 per month (net of all applicable
withholding taxes) during the two-year period commencing on the first
anniversary of the date of this Agreement; provided, however, that upon a Change
in Control the Company shall pay Archer an amount equal to $560,000 minus the
total amount theretofore paid to him pursuant to Sections 3 and 4 of this
Agreement. The Company, in its sole discretion, shall have the right to prepay
any or all amounts that it is required to pay pursuant to Sections 3 and 4 of
this Agreement. As used in this Agreement, the term "Change in Control" shall
mean (i) the sale, lease, transfer or other disposition by the Company of all or
substantially all of its assets in a single transaction or a series of related
transactions; (ii) the merger or consolidation of the Company with another
entity in which the stockholders of the Company immediately prior to such merger
or consolidation hold less than 50% of the outstanding voting stock of the
surviving or resulting corporation immediately following such transaction; or
(iii) the sale or exchange (to or with any person or entity other than the
Company) by the stockholders of the Company of more than 50% of the outstanding
voting stock of the Company in a single transaction or series of related
transactions.
5. Benefits Continuation. During the four-year period commencing on the
date of this Agreement, the Company shall provide to Archer the health, dental
and life insurance benefits made generally available to executive officers of
the Company; provided, however, that the Company shall have no obligation to
provide the foregoing benefits if the annual cost to the Company of doing so is
greater than $15,000. In the event the annual cost to the Company of providing
the foregoing benefits is greater than $15,000 Archer may either pay the Company
an amount equal to the excess (and the Company shall thereafter be obligated to
provide such benefits) or Archer may designate certain of the foregoing benefits
the annual cost of which to the Company is less than $15,000 (and the Company
shall thereupon be obligated to provide the benefits so designated.)
6. Stock Options. Exhibit A hereto lists all options held by Archer to
purchase shares of the Company's common stock. Notwithstanding the terms of the
stock option agreements pursuant to which such options were granted and the
termination of Archer's employment by the Company, each such option shall be
exercisable at any time prior to the earlier of (i) August 11, 2001 and (ii) the
expiration date of the option. Each of the options listed on Exhibit A shall be
fully vested and therefore exercisable in full as of the date of this Agreement.
2
<PAGE>
7. Release. Archer does hereby release, acquit, remise and forever
discharge the Company, its agents, officers, directors, shareholders, employees,
affiliates, successors and assigns (collectively, "Released Parties") from all
claims (including, without limitation, any claim to employment or reemployment,
wages, or back wages, fees, expenses, benefits or compensation), damages,
demands, liabilities, equities and causes of action of every kind and character,
both known and unknown, in contract, tort or otherwise, including those past and
present, accruing to Archer against the Released Parties, or any of them, at any
time prior to the date of this Agreement. Archer hereby acknowledges and
warrants that he is over eighteen years of age, is of sound mind, has fully read
and understands all terms and conditions set forth herein, has had an
opportunity to fully consult with his own counsel in connection herewith and is
entering into this Agreement voluntarily and without any promise or benefit
other than as set forth herein.
8. Miscellaneous.
-------------
(a) This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, whether written or oral,
relating to the subject matter of this Agreement, including without limitation
the 1996 Severance Agreement.
(b) This Agreement may be amended or modified only by a written instrument
executed by both the Company and Archer.
(c) This Agreement shall be construed, interpreted and enforced in
accordance with the laws of The Commonwealth of Massachusetts.
(d) This Agreement shall be binding upon and inure to the benefit of both
parties and their respective heirs, successors and assigns, including any entity
with which or into which the Company may be merged or which may succeed to its
assets or business.
(e) The captions of the sections of this Agreement are for convenience of
reference only and in no way define, limit or affect the scope or substance of
any section of this Agreement.
(f) In case any provision of this Agreement shall be invalid, illegal or
otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
ASECO CORPORATION
By: /s/ Sebastian J. Sicari
--------------------------------
Title: President
-----------------------------
/s/ Carl S. Archer, Jr.
------------------------------------
Carl S. Archer, Jr.
4
<PAGE>
Exhibit A
---------
<TABLE>
<CAPTION>
Number of Expiration
Grant Date Shares Exercise Price Date
- ---------- ------ -------------- ----
<S> <C> <C> <C>
01/12/94 90,000 $ 5.375 01/12/2004
- ------------------------------------------------------------------
08/23/96 108,750 $10.375 08/23/2006
- ------------------------------------------------------------------
10/18/96 36,250 $ 9.875 10/18/2006
- ------------------------------------------------------------------
05/10/97 30,000 $ 9.875 05/10/2007
- ------------------------------------------------------------------
08/11/98 20,000 $ 3.16 08/11/2008
- ------------------------------------------------------------------
</TABLE>
5
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Percentage of Voting
Securities Owned by
Organized Under Registrant as of
Law Of March 28, 1999
--------------- --------------------
<S> <C> <C>
Aseco Investment Corporation Massachusetts 100%
Aseco International Sales Corporation Barbados 100%
Aseco International Inc. Delaware 100%
Aseco Malaysia Sdn. Bhd. Malaysia 100%
Aseco (Singapore) Pte. Ltd. Singapore 100%
Aseco Branch, Inc. Delaware 100%
Western Equipment Developments (Holdings)
Ltd. England 100%
</TABLE>
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-66250, 33-80425, 33-89036, 333-18337 and 333-68907) of Aseco
Corporation of our report dated May 10, 1999, except of Note O, as to which the
date is July 9, 1999, with respect to the consolidated financial statements and
schedule of Aseco Corporation included in the Annual Report (Form 10-K) for the
year ended March 28, 1999.
ERNST & YOUNG LLP
Boston, Massachusetts
July 9, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 28,
1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-28-1999
<PERIOD-START> MAR-30-1998
<PERIOD-END> MAR-28-1999
<CASH> 1,229
<SECURITIES> 0
<RECEIVABLES> 5,068
<ALLOWANCES> 1,027
<INVENTORY> 5,893
<CURRENT-ASSETS> 13,081
<PP&E> 7,341
<DEPRECIATION> 5,207
<TOTAL-ASSETS> 15,324
<CURRENT-LIABILITIES> 5,319
<BONDS> 0
0
0
<COMMON> 38
<OTHER-SE> 9,967
<TOTAL-LIABILITY-AND-EQUITY> 15,324
<SALES> 19,218
<TOTAL-REVENUES> 19,218
<CGS> 17,856
<TOTAL-COSTS> 17,856
<OTHER-EXPENSES> 15,682
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 146
<INCOME-PRETAX> (14,363)
<INCOME-TAX> (690)
<INCOME-CONTINUING> (13,673)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,673)
<EPS-BASIC> (3.64)
<EPS-DILUTED> (3.64)
</TABLE>
