<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended June 30, 1996
Commission File Number 0-21626
ELECTROGLAS, INC.
(exact name of registrant as specified in its charter)
DELAWARE 77-0336101
(state or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
2901 Coronado Drive
Santa Clara, CA 95054
Telephone: (408) 727-6500
(address of principal executive
offices and telephone number)
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
requirement for the past 90 days.
Yes X No
As of July 31, 1996, 18,175,442 shares of the Registrant's common stock, $0.01
par value, were issued and outstanding.
<PAGE> 2
INDEX
ELECTROGLAS, INC.
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
Consolidated condensed statements of income - Three months
and six months ended June 30, 1996 and June 30, 1995 ................ 3
Consolidated condensed balance sheets - June 30, 1996
and December 31, 1995 ............................................... 4
Consolidated condensed statements of cash flows - Six months
ended June 30, 1996 and June 30, 1995 ............................... 5
Notes to consolidated condensed financial statements -
June 30, 1996 ....................................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ....................... 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders ................. 12
Item 6. Exhibits and Reports on Form 8-K .................................... 12
SIGNATURES ................................................................... 13
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
ELECTROGLAS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 48,869 $39,399 $100,704 $73,321
Cost of sales 23,903 17,732 47,748 32,998
-------- ------- -------- -------
Gross profit 24,966 21,667 52,956 40,323
-------- ------- -------- -------
Operating expenses:
Engineering, research and
development 4,862 3,264 9,493 6,223
Selling, general and administrative 7,475 6,068 14,769 11,579
-------- ------- -------- -------
Total operating expenses 12,337 9,332 24,262 17,802
-------- ------- -------- -------
Operating income 12,629 12,335 28,694 22,521
Interest income 1,158 935 2,311 1,815
Other (expense) income, net (13) 192 36 175
-------- ------- -------- -------
Income before income taxes 13,774 13,462 31,041 24,511
Provision for income taxes 4,821 4,859 10,864 8,947
-------- ------- -------- -------
Net income $ 8,953 $ 8,603 $ 20,177 $15,564
======== ======= ======== =======
Net income per share $ 0.50 $ 0.48 $ 1.12 $ 0.87
======== ======= ======== =======
Shares used in per share calculations 18,020 17,963 18,089 17,881
======== ======= ======== =======
</TABLE>
See accompanying notes to consolidated condensed financial statements
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<PAGE> 4
ELECTROGLAS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
(Unaudited) (1)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 10,485 $ 6,796
Short-term investments 112,259 111,448
Accounts receivable, net 39,637 32,081
Inventories 23,893 23,527
Prepaid expenses and other current assets 619 1,054
Deferred income taxes 7,383 7,383
-------- --------
Total current assets 194,276 182,289
Deferred income taxes 4,821 4,821
Equipment and leasehold improvements, net 6,702 4,313
Other assets 427 318
-------- --------
Total assets $206,226 $191,741
======== ========
Liabilities and stockholders' equity
Current liabilities:
Short-term borrowings $ 2,375 $ 1,952
Accounts payable 7,809 7,713
Accrued liabilities 19,229 18,663
Income taxes payable 2,865 6,019
-------- --------
Total current liabilities 32,278 34,347
Stockholders' equity:
Preferred stock, $0.01 par value; authorized
1,000,0000; none outstanding -- --
Common stock, $0.01 par value; authorized
40,000,000; issued and outstanding 18,043,863
at June 30, 1996 and 18,010,738 at
December 31, 1995 180 180
Additional paid in capital 87,434 87,000
Retained earnings 90,391 70,214
-------- --------
178,005 157,394
Less cost of common stock in treasury;
250,000 at June 30, 1996 4,057 --
-------- --------
Total stockholders' equity 173,948 157,394
-------- --------
Total liabilities and stockholders' equity $206,226 $191,741
======== ========
</TABLE>
(1) The information in this column was derived from the Company's audited
consolidated financial statements for the year ended December 31, 1995.
See accompanying notes to consolidated financial statements
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<PAGE> 5
ELECTROGLAS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
----------------
June 30,
--------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 20,177 $ 15,564
Changes to income not affecting cash 1,323 986
Net changes in current assets and current liabilities (9,979) (8,982)
--------- --------
Cash provided by operating activities 11,521 7,568
Cash flow from investing activities:
Capital expenditures (3,341) (1,314)
Purchase of investments (125,781) (72,181)
Maturities of investments 124,499 63,283
Other assets (133) (103)
--------- --------
Cash used in investing activities (4,756) (10,315)
Cash flow from financing activities:
Short-term borrowings 423 1,182
Sales of common stock, net of issuance costs 583 2,745
Purchase of treasury stock (4,057) --
--------- --------
Cash (used in) provided by financing activities (3,051) 3,927
Effect of exchange rate changes (25) 190
--------- --------
Net increase in cash and cash equivalents 3,689 1,370
Cash and cash equivalents at beginning of period 6,796 7,347
--------- --------
Cash and cash equivalents at end of period $ 10,485 $ 8,717
========= ========
</TABLE>
See accompanying notes to consolidated condensed financial statements
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<PAGE> 6
ELECTROGLAS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE: 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete consolidated
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for fair presentation have
been included. These consolidated condensed financial statements should be read
in conjunction with the audited consolidated financial statements for the year
ended December 31, 1995, included in the Company's Annual Report on Form 10-K.
Operating results for the three and six month periods ended June 30, 1996 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1996.
The Company's fiscal year end is December 31. The Company's fiscal quarters end
on the Saturday nearest the end of the calendar quarter. For convenience, the
Company has indicated that its quarters end on March 31, June 30 and September
30.
USE OF ESTIMATES - The preparation of the accompanying unaudited consolidated
condensed financial statements requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from those estimates.
NOTE: 2 - INVENTORIES
Inventories comprised the following:
<TABLE>
<CAPTION>
June 30, December 31,
(in thousands) 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
Raw materials $11,330 $12,360
Work in process 7,790 6,932
Finished goods (including
demonstration units) 4,773 4,235
- ----------------------------------------------------------------
$23,893 $23,527
================================================================
</TABLE>
NOTE: 3 - NET INCOME PER SHARE
Net income per share is computed using the weighted average number of common
shares and dilutive common equivalent shares attributable to stock options
outstanding during the period.
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<PAGE> 7
NOTE: 4 - STOCK REPURCHASE PROGRAM
On March 14, 1996, the Board of Directors authorized the repurchase of up to
1,000,000 shares of the Company's common stock on the open market. During the
quarter, the Company repurchased 250,000 shares of it's common stock at a cost
of $4,057,000.
NOTE: 5 - SUBSEQUENT EVENT
On July 1, 1996, the Company offered to reprice stock options granted to
employees at the June 28, 1996 closing market value of $14.25. This offer
is with respect to unexercised stock options granted subsequent to January 1,
1994.
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<PAGE> 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis may contain forward-looking statements
that reflect the Company's current judgement regarding the matters addressed by
such statements. Such statements apply to future events and, therefore, are
subject to risks and uncertainties that could cause actual results to differ
significantly. Important factors that could cause actual results to differ are
described in the following discussion and are particularly noted under "Factors
that may affect Results and Financial Conditions" on page 10.
The components of the Company's statements of income, expressed as a percentage
of net sales, are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 48.9 45.0 47.4 45.0
----- ----- ----- -----
Gross profit 51.1 55.0 52.6 55.0
----- ----- ----- -----
Operating expenses:
Engineering, research and
development 9.9 8.3 9.4 8.5
Selling, general and administrative 15.3 15.4 14.7 15.8
----- ----- ----- -----
Total operating expenses 25.2 23.7 24.1 24.3
----- ----- ----- -----
Operating income 25.9 31.3 28.5 30.7
Interest income 2.3 2.4 2.3 2.5
Other income, net -- 0.5 -- 0.2
----- ----- ----- -----
Income before income taxes 28.2 34.2 30.8 33.4
Provision for income taxes 9.9 12.4 10.8 12.2
----- ----- ----- -----
Net income 18.3% 21.8% 20.0% 21.2%
===== ===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
Net Sales
Net sales for the quarter ended June 30, 1996 were $48,869,000, a 24.0% increase
over net sales of $39,399,000 for the same period last year. Net sales for the
first six months of 1996 were $100,704,000, a 37.3% increase over net sales of
$73,321,000 for the same period last year. The increase in both periods was due
primarily to increased unit sales and, to a lesser extent, higher average
selling prices.
-8-
<PAGE> 9
For the quarters ended June 30, 1996 and 1995, net sales comprised of the
Horizon 4000 series (59.8% and 59.6%, respectively), the 2000 series (29.1% and
26.2%, respectively) and aftermarket sales, consisting primarily of service,
spare parts and upgrades (11.1% and 14.2%, respectively).
For the six months ended June 30, 1996 and 1995, net sales comprised of the
Horizon 4000 series (60.1% and 56.9%, respectively), the 2000 series (28.0% and
29.0%, respectively) and aftermarkets sales (11.9% and 14.1%, respectively).
For the quarter ended June 30, 1996, international sales accounted for 46.2% of
net sales as compared to 44.2% for the same period last year. This was due
primarily to increased European sales in the 1996 quarter over 1995. For the
first six months of 1996, international sales accounted for 43.7% of net sales
as compared to 49.2% for the same period last year. This was due to stronger
U.S. sales for the first six months of 1996 over 1995. Increased European sales
were offset partially by a decrease in Japanese sales for the first six months
of 1996 over 1995.
In recent months, the semiconductor industry has been experiencing volatility in
terms of product demand and pricing which have caused semiconductor
manufacturers to exercise caution in making their capital equipment decisions.
As a result of the uncertainties in this current market environment, any
rescheduling or cancellations of planned capital purchases by semiconductor
manufacturers will cause the Company's sales to fluctuate on a quarterly basis.
Gross Profit
Gross profit, as a percentage of sales, was 51.1% for the second quarter of
1996, compared to 55.0% for the second quarter of 1995. For the first six months
of 1996, gross profit was 52.6% compared to 55.0% for the first six months of
1995. The decrease in gross profit for both periods was primarily a result of
higher material and warranty costs incurred in 1996.
Engineering, Research and Development
Engineering, research and development expenses were $4,862,000 for the second
quarter of 1996, up 49.0% from $3,264,000 in the comparable quarter of a year
ago. For the first six months of 1996, these expenses were $9,493,000, up 52.5%
from $6,223,000 for the same period last year. These increases reflect the
Company's commitment to engineering resources necessary to continue efforts in
developing new and existing products, as demonstrated by the introduction of a
new model to the Horizon 4000 series, the 4090, in July 1996.
Selling, General and Administrative
Selling, general and administrative expenses were $7,475,000 for the second
quarter of 1996, up 23.2% from $6,068,000 in the comparable quarter last year.
For the first six months of 1996, these expenses were $14,769,000, up 27.5% from
$11,579,000 for the same period last year. The Company has increased its
staffing levels, paid higher commissions on the increased sales volume, and
increased employee incentive compensation due to increased operating income.
Income Taxes
The Company's estimated effective tax rate for the three months and six months
ended June 30, 1996 was 35.0% compared to 36.1% and 36.5% for the comparable
periods in 1995. The decrease is primarily attributable to greater tax exempt
investment income and increased benefits received from foreign sales.
-9-
<PAGE> 10
FACTORS THAT MAY AFFECT RESULTS AND FINANCIAL CONDITIONS
The Company's future results may be affected by inherent uncertainties that
exist in the worldwide semiconductor equipment industry. Such uncertainties
include, but are not limited to, capital expenditures of semiconductor
manufacturers, competitive pricing pressures, product volume and mix, the
availability of needed components, the availability of skilled employees, timing
of orders received, fluctuations in foreign exchange rates, development of new
products, enhancement of existing products, and the introduction of competitors'
products having technological and/or pricing advantages. As a result, the
Company's operating results and financial condition may fluctuate, especially
when measured on a quarterly basis.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1996, operating activities provided cash of
$11,521,000. This was primarily due to net income of $20,177,000, offset by an
increase in accounts receivable of $7,556,000 and a decrease in income taxes
payable of $3,154,000. The increase in accounts receivable was due mainly to
higher European sales for the period coupled with the longer payment cycles
experienced in this region. The decrease in income taxes payable was due to
second quarter estimated tax payments. As a result of these changes, working
capital increased to $161,998,000 at June 30, 1996, from $147,942,000 at
December 31, 1995.
The Company used $4,756,000 of cash for investing activities, including
$1,282,000 for net purchases of investments and $3,341,000 for capital
expenditures on design and test equipment and leasehold improvements to the
Company's facilities.
Cash used in financing activities was $3,051,000. This was due to the repurchase
of 250,000 shares of the Company's common stock at a cost of $4,057,0000 during
the quarter, offset by the sale of common stock under employee stock plans
generating $583,000 and additional borrowings by the Company's Japanese
subsidiary contributing $423,000. At June 30, 1996, the Company's Japanese
subsidiary had lines of credit with Japanese banks with a total borrowing
capacity of approximately $6,000,000 (denominated in Yen). Amounts outstanding
under these facilities were $2,375,000 at June 30, 1996. These facilities enable
the Company's Japanese subsidiary to finance its working capital requirements
locally.
Historically, the Company has generated cash in an amount sufficient to fund its
operations. The Company believes that cash on hand and cash generated from
operations will be sufficient to meet the Company's working capital and capital
expenditure requirements at least through the next twelve months.
-10-
<PAGE> 11
VOLATILITY OF STOCK PRICE
The Company believes that any of the following factors can cause the price of
the Company's Common Stock to fluctuate, perhaps substantially: announcements of
developments related to the Company's business, fluctuations in the Company's
operating results, sales of substantial amounts of securities of the Company in
the marketplace, general conditions in the semiconductor industry or worldwide
economy, a shortfall in revenue or earnings from or changes in analysts'
expectations, announcements of technological innovations or new products or
enhancements by the Company or its competitors, developments in patents or other
intellectual property rights, and changes in the Company's relationships with
certain customers and suppliers. In addition, in recent years, the stock market
in general, and the market for the shares of small capitalization stocks in
particular, including the Company's, have experienced extreme price fluctuations
which have often been unrelated to the operating performance of affected
companies. There can be no assurance that the market price of the Company's
Common Stock will not continue to experience significant fluctuations in the
future, including fluctuations that are unrelated to the Company's performance.
-11-
<PAGE> 12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
At the Company's Annual Meeting of Stockholders held on May 21, 1996, the
stockholders:
(1) elected Neil R. Bonke and Curtis S. Wozniak as Class III directors.
Neil R. Bonke received 15,903,481 affirmative votes, 82,976 negative
votes and no abstentions. Curtis S. Wozniak received 15,906,163
affirmative votes, 80,294 negative votes and no abstentions. The
following directors continued in office after the meeting - Joseph F.
Dox, Roger D. Emerick and Robert J. Frankenberg.
(2) ratified and approved an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common
Stock of the Company from 20,000,000 to 40,000,000, with 14,882,797
affirmative votes, 1,082,840 negative votes and 20,820 abstentions.
(3) ratified the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 1996, with
15,952,829 affirmative votes, 20,839 negative votes and 12,789
abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.10* Electroglas, Inc. Restricted Stock Bonus Agreement
Between Electroglas, Inc. and Curtis S. Wozniak
10.11* Change of Control Agreement between Electroglas, Inc.
and Curtis S. Wozniak dated as of April 4, 1996.
* Management contracts, or company compensatory plans or
arrangements
(b) Reports on Form 8-K: None
-12-
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ELECTROGLAS, INC.
(Registrant)
DATE: August 2, 1996 BY: /s/ Armand J. Stegall
----------------------- ---------------------
Armand J. Stegall
Duly authorized officer of
the registrant, and Chief
Financial Officer
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<PAGE> 1
EXHIBIT 10.10
ELECTROGLAS, INC. RESTRICTED STOCK BONUS AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of July, 1996, between
Electroglas, Inc. (the "Company") and Curtis S. Wozniak ("Recipient").
W I T N E S S E T H:
WHEREAS, the Company has adopted the Electroglas, Inc. 1993 Long-Term
Stock Incentive Plan (the "Plan"), which Plan is hereby incorporated in this
Agreement by reference and made a part of it; and
WHEREAS, the Company desires that Recipient accept employment with the
Company, and has determined that it would be in the interest of the Company and
its shareholders to grant the Stock provided for in this Agreement to the
Recipient as an incentive for Recipient to become an employee of the Company and
for achievements in the future by Recipient;
NOW, THEREFORE, in consideration of the mutual convenants hereinafter
set forth, the parties to this Agreement hereby agree as follows:
1. RESTRICTED STOCK BONUS. Contemporaneously with the execution of this
Agreement, the Company will issue to Recipient 100,000 shares of Common Stock of
the Company (the "Stock"). Stock certificates evidencing the Stock will be
retained by the Company, accompanied by blank stock powers executed by
Recipient, for the period during which the Stock constitutes Restricted Stock
pursuant to the terms of Sections 2 and 3, hereof. All shares of Stock issued
hereunder shall be deemed issued to Recipient as fully paid and nonassessable
shares, and Recipient shall have all rights of a stockholder with respect
thereto, including the right to vote, receive dividends (including stock
dividends), participate in stock splits or other recapitalizations, and exchange
such shares in a merger, consolidation or other reorganization. Company shall
pay any applicable stock transfer taxes. The term "Stock" refers not only to the
Stock granted hereunder, but also to all securities received in replacement of
the Stock, as a stock dividend or as a result of any stock split,
recapitalization, merger, reorganization, exchange or the like, and all other
new, substituted or additional securities or other properties to which Recipient
is entitled by reason of Recipient's ownership of the Stock.
<PAGE> 2
2. RESTRICTIONS. No Stock issued to the Recipient hereunder shall be
sold, transferred by gift, pledged, hypothecated, or otherwise transferred or
disposed of by the Recipient prior to the date when the Recipient shall become
vested in such Stock pursuant to Section 3, hereof, and such Stock shall
constitute "Restricted Stock" for purposes of this Agreement until such date. If
Recipient terminates employment with the Company for any reason, with or without
cause, other than death, total and permanent disability or retirement at normal
retirement age at a time when the Recipient holds any Restricted Stock, such
Restricted Stock shall be deemed reconveyed to the Company without payment of
any consideration by the Company, and Company shall thereafter be the legal and
beneficial owner of the Restricted Stock and shall have all rights and interest
in or related thereto without further action by Recipient. Any attempt to
transfer Stock in violation of this Section 2 shall be null and void and shall
be disregarded by the Company.
3. VESTING. For purposes of this Agreement, the term "vest" shall mean
with respect to any share of the Stock that such share is no longer subject to
the restrictions on transfer set forth in Section 2 and that such share is
released from the reconveyance provision of that Section . If Recipient would
become vested in any fraction of a share of Stock on any date, such fractional
share shall not vest and shall remain Restricted Stock until the Recipient
becomes vested in the entire share. The Stock subject to this Agreement shall
vest in its entirety upon the earlier of Recipient's death, total and permanent
disability, retirement at normal retirement age, or April 19, 2001; provided,
however, that such vesting shall be accelerated if the closing stock price of
the Company's common stock is greater or equal to the following Closing Price
Targets on the following target dates of this agreement:
<TABLE>
<CAPTION>
Target Date Closing Price Target
----------- --------------------
<S> <C>
April 19, 1998 $57.00
April 19, 1999 $42.75
April 19, 2000 $28.50
</TABLE>
Reference: Stock price July 1, 1996 $14.25
If the Company terminates Recipient's employment other than for Cause or if
Recipient terminates his employment for Good Reason (both as defined in the
Electroglas Change of Control Agreement entered into between Recipient and the
Company, dated April 4, 1996), and the shares of Stock subject to this Agreement
shall then be unvested, the anniversary dates for vesting and acceleration
thereof shall in each case be one year earlier. The Electroglas Change of
Control Agreement referred to above shall be applicable to this Agreement and
shall govern any termination of employment after a Change of Control.
<PAGE> 3
4. WITHHOLDING OF TAXES. Recipient shall provide the Company with a
copy of any timely election made pursuant to Section 83(b) of the Internal
Revenue Code or similar provision of state law (collectively, and "83(b)
Election"). If Recipient makes a timely 83(b) Election, Recipient shall
immediately pay the Company (or the Affiliate that employs Recipient) the amount
necessary to satisfy any applicable federal, state, and local income and
employment tax withholding requirements. If Recipient does not make a timely
83(b) Election, Recipient shall, either at the time that the restrictions lapse
under this Agreement and the Plan or at the time withholding is otherwise
required by any applicable law, pay the Company (or the Affiliate that employs
Recipient) the amount necessary to satisfy any applicable federal, state, and
local income and employment tax withholding requirements.
5. ADDITIONAL SECURITIES. Any securities received as the result of
ownership of Restricted Stock (hereinafter called "Additional Securities"),
including, but not by way of limitation, warrants, options and securities
received as a stock dividend or stock split, or as a result of a
recapitalization or reorganization, shall be retained by the Company in the same
manner and subject to the same conditions as the Restricted Stock with respect
to which they were issued. Recipient shall be entitled to direct the Company to
exercise any warrant or option received as Additional Securities upon supplying
the funds necessary to do so, in which event the securities so purchased shall
constitute Additional Securities, but the Recipient may not direct the Company
to sell any such warrant or option. If Additional Securities consist of a
convertible security, Recipient may exercise any conversion right, and any
securities so acquired shall constitute Additional Securities. Additional
Securities shall be subject to the provisions of Sections 2 and 3, above, in the
same manner as the Restricted Stock.
6. LEGENDS; STOP TRANSFER.
(a) All certificates for shares of the Stock shall bear the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS
OF THAT CERTAIN RESTRICTED STOCK BONUS AGREEMENT BETWEEN THE COMPANY
AND THE HOLDERS HEREOF, DATED APRIL 19, 1996. THE SHARES REPRESENTED BY
THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH SUCH
AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(b) The certificates for shares of the Stock shall also bear any legend
required by any applicable state securities law.
<PAGE> 4
7. NO EFFECT ON TERMS OF EMPLOYMENT. THIS AGREEMENT SHALL NOT CONFER
UPON RECIPIENT ANY RIGHT WITH RESPECT TO CONTINUATION OF HIS EMPLOYMENT WITH THE
COMPANY OR ITS AFFILIATES, NOR SHALL IT INTERFERE IN ANY WAY WITH ANY RIGHT OF
RECIPIENT OR THE COMPANY, OR ANY OF ITS AFFILIATES THAT MAY EXIST TO TERMINATE
RECIPIENT'S EMPLOYMENT WITH THE COMPANY OR AN AFFILIATE AT ANY TIME FOR ANY
REASON WITH OR WITHOUT CAUSE OR TO CHANGE THE TERMS OF EMPLOYMENT OF RECIPIENT.
8. SECTION 83(B) ELECTION. Recipient hereby represents that he
understands (a) the contents and requirements of the 83(b) Election, (b) the
application of Section 83(b) to the receipt of the Stock by Recipient pursuant
to this Agreement, (c) the nature of the election to be made by Recipient under
Section 83(b), and (d) the effect and requirements of the 83(b) Election under
relevant state and local tax laws. Recipient further represents that he does not
intend to file an election pursuant to Section 83(b) with the Internal Revenue
Service within thirty (30) days following receipt of the Stock hereunder, and
submit a copy of such election with his federal tax return for the calendar year
in which the date of this Agreement falls. Recipient is a resident of the State
of California. Recipient covenants to inform the Company of any change in
Recipient's state of residency.
9. DISTRIBUTIONS. The Company shall disburse to Recipient all
dividends, interest and other distributions paid or made in cash or property
(other than Additional Securities) with respect to Restricted Stock and
Additional Securities, less any applicable federal or state withholding
obligations.
10. SUCCESSORS. This Agreement shall be binding upon and shall insure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
11. NOTICE. Any notice or other document required to be given or sent
pursuant to the terms of this Agreement shall be sufficiently given or served
hereunder to any party when transmitted by registered or certified mail, postage
prepaid, addressed to the party to be served as follows:
Company: Electroglas, Inc.
3045 Stender Way
Santa Clara, CA 95054
<PAGE> 5
Recipient: At Recipient's address as it appears under
Recipient's signature to this Agreement, or to such
other address as Recipient may specify in writing to
the Company.
Any party may designate another address for receipt of notices so long as notice
is given in accordance with this Section .
12. LOCK-UP AGREEMENT.
(a) Recipient, if requested by the Company and the lead underwriter
of any public offering of the Common Stock or other securities of the Company
(the "Lead Underwriter"), hereby irrevocably agrees not to sell, contract to
sell, grant any option to purchase, transfer the economic risk of ownership in,
make any short sales of, pledge or otherwise transfer or dispose of any interest
in any Common Stock or any securities convertible into or exchangeable or
exercisable for or any other rights to purchase or acquire Common Stock (except
Common Stock included in such public offering or acquired on the public market
after such offering) during the 180-day period following the effective date of a
registration statement of the Company filed under the Securities Act, or such
shorter period of time as the Lead Underwriter shall specify. Recipient further
agrees to sign such documents as may be requested by the Lead Underwriter to
effect the foregoing and agrees that the Company may impose stop-transfer
instructions with respect to such Common Stock subject until the end of such
period. The Company and Recipient acknowledge that each Lead Underwriter of a
public offering of the Company's stock, during the period of such offering and
for the 180-day period thereafter, is an intended beneficiary of this Section
12.
(b) Notwithstanding the foregoing, Section 12(a) shall not prohibit
Recipient from transferring any shares of Common Stock or securities convertible
into or exchangeable or exercisable for the Company's Common Stock either during
Recipient's lifetime or on death by will or intestacy to Recipient's immediate
family or to a trust the beneficiaries of which are exclusively Recipient and/or
a member or members of Recipient's immediate family; provided, however, that
prior to any such transfer, each transferee shall execute an agreement pursuant
to which each transferee shall agree to receive and hold such securities subject
to the provisions of Section 12 hereof. For the purposes of this paragraph, the
term "immediate family" shall mean spouse, lineal descendant, father, mother,
brother or sister of the transferor.
(c) During the period from identification as a lead Underwriter in
connection with any public offering of the Company's Common Stock until the
earlier of (i) the expiration of the lock-up period
<PAGE> 6
specified in Section 12(a) in connection with such offering or (ii) the
abandonment of such offering by the Company and the Lead Underwriter, the
provisions of the Section 12 may not be amended or waived except with the
consent of the Lead Underwriter.
13. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Restricted Stock Bonus Agreement as of the date first above written.
ELECTROGLAS, INC. RECIPIENT
By s/ Neil R. Bonke s/ Curtis S. Wozniak .
--------------------------------- ----------------------------------
Neil R. Bonke, Chairman Curtis S. Wozniak
265 Willowbrook Drive
Portola Valley, CA 94028
<PAGE> 1
EXHIBIT 10.11
CHANGE OF CONTROL AGREEMENT
This Agreement is made this 4th day of April, 1996 between Curtis S.
Wozniak (the "Executive") and Electroglas, Inc., a Delaware corporation (the
"Company").
WHEREAS, the Executive is employed by the Company; and
WHEREAS, the Company desires to retain the services of Executive in the
event of a change of control (as hereinafter defined) of the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Definitions.
(a) Change of Control. For purposes of this Agreement
only, a "Change of Control" shall be defined as:
(i) a merger or consolidation in which the Company
is not the surviving entity, except for (1) a transaction in which the
principal purpose is to change the state of the Company's incorporation, or
(2) a transaction in which the Company's stockholders immediately prior to such
merger or consolidation hold (by virtue of securities received in exchange for
their shares in the Company) securities of the surviving entity representing
more than fifty percent (50%) of the total voting power of such entity
immediately after such transaction;
(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Company, unless the Company's
stockholders immediately prior to such sale, transfer or other disposition hold
(by virtue of securities received in exchange for their shares in the Company)
securities of the purchaser or other transferee representing more than fifty
percent (50%) of the total voting power of such entity immediately after such
transaction; or
(iii) any reverse merger in which the Company is the
surviving entity but in which the Company's stockholders immediately prior to
such merger do not hold (by virtue of their shares in the Company held
immediately prior to such transaction) securities of the Company representing
more than fifty percent (50%) of the total voting power of the Company
immediately after such transaction.
1
<PAGE> 2
(b) Cause. For purposes of this Agreement only, the Company shall have
"Cause" to terminate the Executive's employment hereunder only on the basis of
(i) fraud, (ii) misappropriation, (iii) embezzlement or (iv) willful engagement
by the Executive in misconduct, which misconduct is demonstrably and materially
injurious to the Company and its subsidiaries, taken as a whole. No act, or
failure to act, on the part of the Executive shall be considered "willful"
unless done, or omitted to be done, by the Executive without a reasonable and
actual belief that the action or omission was in the best interests of the
Company and its subsidiaries.
(c) Good Reason. "Good Reason" shall exist if: (i) there is an
assignment to the Executive of any duties materially inconsistent with or which
constitutes a material change in the Executive's position, duties,
responsibilities or status with the Company, or a material change in the
Executive's reporting responsibilities, titles or offices; or removal of the
Executive from or failure to reelect the Executive to any of such positions,
except in connection with the termination of employment for Cause, or due to
disability, retirement, death or termination of employment by the Executive
other than for Good Reason; (ii) there is a reduction by the Company in the
Executive's annual salary then in effect, other than a reduction similar in
percentage to a reduction generally applicable to similarly situated employees
of the Company; (iii) the Company acts in any way that would adversely affect
the Executive's participation in or materially reduce the Executive's benefits
under any benefit plan of the Company in which the Executive is participating or
deprive the Executive of any material fringe benefit enjoyed by the Executive,
except those changes generally affecting similarly situated employees of the
Company; or (iv) the Company reduces the number of paid vacation days to which
the Executive is then entitled.
(d) Closing Date. "Closing Date" shall mean the date of the first
closing of any transactions constituting a Change of Control.
(e) Termination Date. "Termination Date" shall mean the date the
Executive's employment is terminated by the Company other than for Cause or is
terminated by the Executive for Good Reason.
(f) Company. "Company" shall mean Electroglas, Inc. and its successors
or assigns (including without limitation, any entity, entities or persons
acquiring control of the Company through a Change of Control).
2. Continuation of Salary and Benefits; Vesting of Equity Incentives. If,
during the twelve (12) month period following the Closing Date of a Change of
Control, the Company shall terminate the Executive's employment other than for
Cause or the Executive shall terminate his employment for Good Reason, then in
such event:
(a) Continuation of Salary. The Company shall continue to pay the
Executive's base salary in effect as of the Termination Date for a period of
twelve (12) months after the Termination Date. Such salary shall be paid to the
Executive in accordance with the Company's regular payroll practices then
currently in effect;
2
<PAGE> 3
(b) Bonus. In addition to the salary continuation set forth in
Section 2(a) above, the Company shall pay the Executive a bonus according to
the following formula:
(i) If the Termination Date occurs after the Executive's bonus
for the last completed fiscal year has been determined by the Compensation
Committee of the Board of Directors (the "Compensation Committee") and paid to
the Executive, then the Executive shall receive a bonus in the amount of no
less than:
X[1] + X[1](Y/365)
(ii) If the Termination Date occurs before the Executive's bonus
for the last completed fiscal year has been determined by the Compensation
Committee and paid to the Executive, then the Executive shall receive a bonus
in the amount of no less than:
2(X[2]) + X[2](Y/365)
where:
"X[1]" = the bonus amount paid to the Executive for
the last completed fiscal year;
"X[2]" = the bonus amount paid to the Executive for
the fiscal year prior to the last completed fiscal year; and
"Y" = the number of days in the current fiscal year prior to
and including the Termination date.
The bonus shall be paid in equal monthly payments over a period of
twelve (12) months after the Termination Date. Such amount shall be payable to
the Executive regardless of the Company's financial performance, and shall not
be conditioned on the Company's continued satisfaction of any goals or criteria
required by any compensation plan;
(c) Medical and Dental Benefits. For the period that salary
continuation payments are being made, the Company shall either: (i) continue
the Executive's medical and dental benefits as such benefits are generally
offered to the Company's employees as of the Termination Date, or (ii)
reimburse the Executive for COBRA payments made by the Executive to maintain
his medical and dental benefits, as applicable under the Company's insurance
policies;
(d) Life Insurance and Car Allowance. For the period that salary
continuation payments are being made, the Company shall continue payment of the
Executive's life insurance premiums and car allowance, if applicable.
3
<PAGE> 4
(e) Vacation Pay. The Company shall pay the Executive any
accrued but unused vacation time as of the Termination Date:
(f) Stock Options, Performance Shares or Units and
Restricted Shares or Units. Any stock option, performance share or unit, or
restricted share or unit shall vest in its entirety and become exercisable or,
with respect to such performance share or unit or restricted share or unit, be
released from restrictions on transfer and repurchase rights, immediately prior
to Termination Date; provided that, at least one (1) year has elapsed between
the date of this Agreement and the Termination Date; and
(g) Extension of Stock Option Exercise Term. All vested
stock options held by the Executive as of the Termination Date shall expire six
(6) months after the Termination Date.
3. No Employment Agreement. Employment at Will. Executive and the
Company each acknowledge and agree that: (i) this Agreement does not provide
for the terms and conditions of Executive's employment with the Company prior
to any Change of Control and does not require or obligate Executive to provide
services to the Company or the Company to continue to employ Executive; and
(ii) Executive's employment with the Company is and remains an employment
relationship terminable at will and without advance notice by either Executive
or the Company.
4. Release of the Company and Its Affiliates. Upon a termination
of Executive's employment with the Company following a Change of Control for
which Executive is entitled to payments or other benefits pursuant to Section 2
above and subject to full performance by the Company of its obligations
hereunder, Executive hereby forever and completely releases and discharges the
following (and each of them): (i) the Company and (ii) any past, present or
future agents, attorneys, directors, officers, stockholders, employees,
affiliates, predecessors and successors of the Company, of and from any and all
claims and demands of every kind and nature, in law, equity or otherwise, known
or unknown, suspected or unsuspected, disclosed or undisclosed, including but
not limited to all claims and demands of every kind and nature, known or
unknown, suspected or unsuspected, disclosed or undisclosed, for damages
actual, consequential or exemplary, past, present and future, arising out of or
in any way related to the severance payment or vesting of the Executive's
salary, bonus, benefits, stock options, or any other compensation pursuant to
Section 2 above.
5. Notices. All notices or other communications required or
permitted hereunder shall be made in writing and shall be deemed to have been
duly given if delivered by hand, by facsimile or mailed, postage prepaid, by
certified or registered mail, return receipt requested, and addressed to the
Company at:
4
<PAGE> 5
Electroglas, Inc.
3045 Stender Way
Santa Clara, CA 95054
Attention: Chief Executive Officer
or to the Executive at:
__________________________________
__________________________________
__________________________________
Notice of change of address shall be effective only when done in
accordance with this Section.
6. Successors. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
7. Governing Law. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California.
8. Entire Agreement. This Agreement represents the entire Agreement
and understanding between the Company and the Executive concerning the
Executive's termination of employment with the Company after a Change in
Control. This Agreement supersedes any prior agreement or understanding of the
parties with respect to the subject matter hereof.
9. No Oral Modification. This Agreement may only be amended in a
writing signed by the Executive and the Company.
10. Counterparts. This Agreement may be executed in counterparts, and
each counterpart shall have the same force and effect as the original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
11. Attorneys' Fees. If any legal action, arbitration or other
proceeding is brought to interpret or enforce the terms of this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
any other costs incurred in that proceeding, in addition to any other relief to
which it is entitled.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
ELECTROGLAS, INC., EXECUTIVE:
a Delaware corporation
By: /s/ Neil R. Bonke /s/ Curtis S. Wozniak
----------------------------- ---------------------------------
[Signature]
Title: Chairman Curtis S. Wozniak
-------------------------- ---------------------------------
[Print Name]
6
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