<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
__________________
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended December 25, 1999
-----------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
COMMISSION FILE NUMBER 0-22646
-------
Applied Science and Technology, Inc.
(Name of Issuer in its Charter)
__________________________________
DELAWARE 04-2962110
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
35 CABOT ROAD, WOBURN, MASSACHUSETTS 01801-1053
(Address of Principal Executive Offices) (Zip Code)
_________________________________________
(781) 933-5560
(Registrant's Telephone Number, Including Area Code)
_________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the 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 the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
COMMON STOCK, $0.01 PAR VALUE 11,697,157
--------------------------------- ------------------------
Class Outstanding as of 2/4/00
<PAGE>
Applied Science and Technology, Inc. and Subsidiaries
INDEX
<TABLE>
<CAPTION>
Title PAGE
- - ---- ----
<C> <S> <C>
Part I. Financial Information
Item 1 Financial Statements
Consolidated Statements of Operations for the Three Months and
Six Months Ended December 25, 1999 and December 26, 1998 2
Consolidated Balance Sheets -
December 25, 1999, and June 26, 1999 3
Consolidated Statements of Cash Flows for the Six Months Ended
December 25, 1999 and December 26, 1998 4
Notes to Consolidated Financial Statements 5
Item 2 Management's Discussion and Analysis of Results of Operations
and Financial Condition 8
Item 3 Quantitative and Qualitative Disclosure about Market Risk 12
PART II. OTHER INFORMATION
Items 1-5 12
Item 6 13
SIGNATURES 14
Appendix 15
</TABLE>
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
Applied Science and Technology, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 25, DECEMBER 26, DECEMBER 25, DECEMBER 26,
1999 1998 1999 1998
-------------- -------------- -------------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Product sales, net $28,784 $15,726 $57,300 $26,573
Research contract revenue 0 116 32 236
Other revenue 2,282 1,012 4,336 2,145
------- ------- ------- -------
Total revenue 31,066 16,854 61,668 28,954
------- ------- ------- -------
Cost of sales and revenue:
Product sales and other revenue 18,087 12,301 37,504 23,145
Research contracts 0 54 3 135
------- ------- ------- -------
Total cost of sales and revenue 18,087 12,355 37,507 23,280
------- ------- ------- -------
Gross profit 12,979 4,499 24,161 5,674
------- ------- ------- -------
Operating expenses:
Research and development expenses 3,397 2,244 6,092 4,569
Selling expenses 2,138 1,173 4,165 2,375
General and administrative expenses 3,039 1,808 5,611 3,672
Restructuring charge 0 0 0 1,497
------- ------- ------- -------
Total operating expenses 8,574 5,225 15,868 12,113
------- ------- ------- -------
Earnings (loss) from operations 4,405 (726) 8,293 (6,439)
------- ------- ------- -------
Other income (expense):
Interest expense 0 (8) 0 (20)
Interest income 441 63 848 187
Other income (expense) (99) 77 (107) 69
------- ------- ------- -------
Total other income 342 132 741 236
------- ------- ------- -------
Earnings (loss) before income taxes 4,747 (594) 9,034 (6,203)
Income tax expense (benefit) 1,584 (158) 3,242 (2,286)
------- ------- ------- -------
Net earnings (loss) $ 3,163 $ (436) $ 5,792 $(3,917)
======= ======= ======= =======
Basic earnings (loss) per share $ 0.27 $ (0.05) $ 0.50 $ (0.46)
------- ------- ------- -------
Diluted earnings (loss) per share $ 0.26 $ (0.05) $ 0.48 $ (0.46)
------- ------- ------- -------
Weighted average common shares
outstanding used to calculate
basic earnings (loss) per share 11,602 8,603 11,501 8,594
======= ======= ======= =======
Weighted average common shares
outstanding used to calculate
diluted earnings (loss) per share 12,349 8,603 12,182 8,594
======= ======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 25, June 26,
1999 1999
----------- -----------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,628 $ 31,775
Investments, short term 4,988 0
Trade receivables 22,680 18,093
Other receivables 647 906
Inventories 16,290 12,419
Prepaid expenses and other assets 549 386
Deferred income taxes 1,091 1,514
-------- --------
Total current assets 63,873 65,093
-------- --------
Property, plant and equipment:
Land 473 473
Building 1,652 1,652
Equipment 14,117 11,181
Furniture and fixtures 1,054 1,043
Leasehold improvements 2,209 2,193
-------- --------
19,505 16,542
Less accumulated depreciation and amortization (9,408) (8,394)
-------- --------
Net property and equipment 10,097 8,148
-------- --------
Other assets:
Investments, long term 5,116 0
Patents, net 988 992
Goodwill, net of accumulated amortization 8,135 3,967
Deferred income taxes 2,600 1,936
Notes receivable, less current maturities 374 394
Other, net 0 5
-------- --------
Total other assets 17,213 7,294
-------- --------
$ 91,183 $ 80,535
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,357 $ 5,496
Accrued expenses 4,750 3,471
Accrued compensation expense and related costs 3,111 2,624
Accrued income taxes 1,596 607
Commissions payable and customer advances 1,183 616
-------- --------
Total current liabilities 15,997 12,814
-------- --------
Stockholders' equity:
Common stock 116 114
Additional paid-in capital 71,648 70,045
Retained earnings (accumulated deficit) 3,668 (2,124)
Less: Notes receivable for common stock purchases 0 (148)
Accumulated comprehensive income (loss) (246) (166)
-------- --------
Total stockholders' equity 75,186 67,721
-------- --------
$ 91,183 $ 80,535
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
DECEMBER 25, DECEMBER 26,
1999 1998
-------------- --------------
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities $ $
<S> <C> <C>
Net earnings (loss) 5,792 (3,917)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used for) operating activities:
Depreciation 1,583 1,412
Amortization 538 306
Deferred income taxes (241) (2,286)
Loss on disposal of assets 13 625
Equipment transferred to inventory 280 -
Changes in operating assets and liabilities:
Trade receivables (4,587) 684
Inventories (3,224) 1,302
Prepaid expenses and other assets (230) 28
Notes receivable 19 233
Accounts payable (138) (1,600)
Accrued expenses 2,398 (44)
Accrued income taxes 988 236
-------------- --------------
Net cash provided by (used for)
operating activities 3,191 (3,021)
-------------- --------------
Cash flows from investing activities:
Acquisition of subsidiaries, less cash acquired (6,208) (23)
Additions to property and equipment (2,616) (1,010)
Purchase of short term cash investments (4,988) -
Investments in other assets - 40
Acquisition-related receivable - (806)
Advances to subsidiary prior to acquisition - (800)
Patent costs (83) (10)
Purchase of long term investments (5,116) -
-------------- --------------
Net cash used for
investing activities (19,011) (2,609)
-------------- --------------
Cash flows from financing activities:
Net borrowing under notes payable bank - 172
Repayment of notes payable - (206)
Repayment of notes receivable for common stock purchase 148 -
Net proceeds from issuance of common stock 1,605 7
-------------- --------------
Net cash provided by (used for)
financing activities 1,753 (27)
-------------- --------------
Effect of exchange rate changes on cash (80) 141
-------------- --------------
Net decrease in cash and cash equivalents (14,147) (5,516)
Cash and cash equivalents at beginning of period 31,775 7,687
-------------- --------------
Cash and cash equivalents at end of period $ 17,628 $ 2,171
============== ==============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ - $ 20
-------------- --------------
Income taxes $ 1,526 $ 236
============== ==============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1) BASIS OF PRESENTATION
The unaudited financial statements as of December 25, 1999 and December 26,
1998, and for the three-month and six-month periods then ended, have been
prepared in accordance with generally accepted accounting principles and
include all adjustments which, in the opinion of management, are necessary
to present fairly the results of operations for the periods then ended.
All such adjustments are of a normal recurring nature. These financial
statements should be read in conjunction with the financial statements for
the year ended June 26, 1999 and the notes thereto included in our Form 10-
K filed with the Securities and Exchange Commission.
The results of our operations for any interim period are not necessarily
indicative of the results of our operations for a full fiscal year.
2) EARNINGS (LOSS) PER SHARE
The weighted average number of shares used to compute diluted earnings
(loss) per share consisted of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
(IN THOUSANDS) (IN THOUSANDS)
----------------------------------------- -------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 25, DECEMBER 26,
1999 1998 1999 1998
------------------ ------------------ ------------------ --------------
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding 11,602 8,603 11,501 8,594
Weighted average common
equivalent shares due to stock
options 747 0 681 0
------------------ ------------------ ------------------ --------------
12,349 8,603 12,182 8,594
================== ================== ================== ===============
</TABLE>
Weighted average common equivalent shares relating to stock options were
not included in the weighted average shares used to compute diluted loss
per share for the three and six months ended December 26, 1998, as they
had an antidilutive effect.
3) ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
(in thousands)
DECEMBER 25, JUNE 26,
1999 1999
----------------------------------------------------------------
<S> <C> <C>
Accounts receivable, trade $ 22,623 $ 17,653
Notes receivable, current portion 771 1,175
Allowance for doubtful accounts (714) (735)
------------------------- --------------------------
$ 22,680 $ 18,093
========================= ==========================
</TABLE>
5
<PAGE>
4) INVENTORIES
<TABLE>
<CAPTION>
(in thousands)
DECEMBER 25, JUNE 26,
1999 1999
---------------------------------------------------------
<S> <C> <C>
Raw materials $ 11,834 $ 7,906
Work in process 2,401 3,458
Finished goods 2,055 1,055
--------------- ------------
$ 16,290 $ 12,419
=============== ============
</TABLE>
5) RESEARCH AND DEVELOPMENT COSTS
All research and development costs are expensed as incurred. Research and
development expenses attributable to research contracts are included in
costs of sales and revenue.
6) COMMITMENTS
We may borrow up to $8,000,000 from a bank under an unsecured demand line
of credit with interest at the bank's prime rate (8.5% at December 25,
1999). Borrowings under the line are limited to 100% of our cash balance
plus 80% of domestic accounts receivable under 90 days outstanding. As of
December 25, 1999, there were no borrowings against the line of credit.
7) STOCKHOLDER'S EQUITY
Capital stock consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
NUMBER OF SHARES
----------------------------------------------------------------------------
AUTHORIZED ISSUED AND OUTSTANDING
DECEMBER 25, JUNE 26,
1999 1999
------------------- -----------------
Preferred stock:
<S> <C> <C> <C>
Preferred stock, $0.1 par value 1,000 - -
----------------------------------------------------------------------------
Total preferred stock 1,000 - --
----------------------------------------------------------------------------
Common stock:
Common stock, $0.1 par value 30,000 11,667 11,417
----------------------------------------------------------------------------
Total common stock 30,000 11,667 11,417
----------------------------------------------------------------------------
Total capital stock 31,000 11,667 11,417
----------------------------------------------------------------------------
</TABLE>
8) COMPREHENSIVE INCOME
Accumulated other comprehensive income, a component of stockholders'
equity, consists solely of foreign currency translation. The components of
total comprehensive income (loss) were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED Six Months Ended
(IN THOUSANDS) (IN THOUSANDS)
----------------------------------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 25, DECEMBER26,
1999 1998 1999 1998
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Net income (loss) $ 3,163 $ (436) $ 5,792 $ (3,917)
Comprehensive income (loss) $ (84) $ (3) $ (80) $ 141
--------- -------- ---------- ---------
$ 3,079 $ (439) $ 5,712 $ (3,776)
========= ======== ========== =========
</TABLE>
6
<PAGE>
9) ACQUISITIONS
On August 24, 1999, we completed the acquisition of the Shamrock product
line from Sputtered Films, Inc. for a total purchase price of $6,208,083.
The purchase price was paid in cash.
10) BUSINESS SEGMENTS
We have four reportable segments, Semiconductor, Medical and Industrial,
Systems and Corporate, that have separate financial results that are
reviewed by our chief operating decision-maker. Identifiable assets and
capital expenditures data are presented geographically as they are managed
on that basis.
<TABLE>
<CAPTION>
Three Months Ended
(in thousands)
Semi- Medical and
Conductor Industrial Systems Corporate Total
<S> <C> <C> <C> <C> <C>
December 25, 1999
Net sales $ 22,624 5,674 2,768 - $ 31,066
Inter-segment net sales 627 1 - - 628
Profit (loss) from operations 6,258 976 (416) (2,413) 4,405
Depreciation 369 90 106 254 819
Semi- Medical and
Conductor Industrial Systems Corporate Total
<S> <C> <C> <C> <C> <C>
December 26, 1998
Net sales $ 9,167 6,833 854 - $ 16,854
Inter-segment net sales 387 - - - 387
Profit (loss) from operations (359) 845 (182) (1,030) (726)
Depreciation 408 143 45 51 647
Six Months Ended
(in thousands)
Semi- Medical and
Conductor Industrial Systems Corporate Total
<S> <C> <C> <C> <C> <C>
December 25, 1999
Net sales $ 45,764 9,643 6,261 - $ 61,668
Inter-segment net sales 1,366 12 - - 1,378
Profit (loss) from operations 11,942 726 (242) (4,133) 8,293
Depreciation 752 166 196 469 1,583
Semi- Medical and
Conductor Industrial Systems Corporate Total
<S> <C> <C> <C> <C> <C>
December 26, 1998
Net sales $ 15,082 12,616 1,256 - $ 28,954
Inter-segment net sales 435 1,033 - - 1,468
Profit (loss) from operations (3,132) (958) (337) (2,012) (6,439)
Depreciation 890 311 99 112 1,412
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
GENERAL
ASTeX provides precision reactive gas solutions to the OEM semiconductor,
medical, and industrial markets, and complete process systems for advanced
packaging and magnetic sensor applications. ASTeX's broad product line is based
on a decade of leadership in core technologies, including precision reactive gas
processing, specialized power sources, and system integration. Depending on
customers' needs, ASTeX provides varying levels of integration, from components
to subsystems to complete process solutions. ASTeX helps customers maximize
their competitive advantage by improving time to market while reducing costs and
complexity.
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED DECEMBER 25,
1999 AND DECEMBER 26, 1998
The following table compares the consolidated statements of operations for the
three-month and six-month periods ended December 25, 1999 and December 26, 1998,
expressed as a percentage of total revenue.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 25, DECEMBER 26, DECEMBER 25, DECEMBER 26,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Product sales, net 92.7% 93.3% 92.9% 91.8%
Research contract revenue 0.0% 0.7% 0.1% 0.8%
Other revenue 7.3% 6.0% 7.0% 7.4%
------- ------- ------- -------
Total revenue 100.0% 100.0% 100.0% 100.0%
------- ------- ------- -------
Cost of sales and revenue:
Product sales and other revenue 58.2% 73.0% 60.8% 79.9%
Research contracts 0.0% 0.3% (0.0%) 0.5%
------- ------- ------- -------
Total cost of sales and revenue 58.2% 73.3% 60.8% 80.4%
------- ------- ------- -------
Gross profit 41.8% 26.7% 39.2% 19.6%
------- ------- ------- -------
Operating expenses:
Research and development expenses 10.9% 13.3% 9.9% 15.7%
Selling expenses 6.9% 7.0% 6.8% 8.2%
General and administrative expenses 9.8% 10.7% 9.1% 12.7%
Restructuring charge 0.0% 0.0% 0.0% 5.2%
------- ------- ------- -------
Total operating expenses 27.6% 31.0% 25.8% 41.8%
------- ------- ------- -------
Earnings (loss) from operations 14.2% (4.3%) 13.4% (22.2%)
------- ------- ------- -------
Other income (expense)
Interest expense 0.0% 0.0% 0.0% 0.0%
Interest income 1.4% 0.4% 1.4% 0.6%
Other (0.3%) 0.4% (0.2%) 0.2%
------- ------- ------- -------
Total other income 1.1% 0.8% 1.2% 0.8%
------- ------- ------- -------
Earnings (loss) before income taxes 15.3% (3.5%) 14.6% (21.4%)
Income tax expense (benefit) 5.1% (0.9%) 5.3% (7.9%)
------- ------- ------- -------
Net earnings (loss) 10.2% (2.6%) 9.4% (13.5%)
======= ======= ======= =======
</TABLE>
8
<PAGE>
REVENUE
Total revenue increased by 84% to a record $31.1 million in the second quarter
of fiscal 2000 and increased by 113% to $61.7 million for the first six months
of fiscal 2000 compared to revenue of
$16.9 million in the second quarter of fiscal 1999 and $29.0 million for the
first six months of fiscal 1999. The increase is primarily due to an increase
in our semiconductor capital equipment business, which grew by 147% to $22.6
million in the second quarter of fiscal 2000 and by 203% to $45.8 million for
the first six months of fiscal 2000. This growth was driven primarily by the
recovery of the semiconductor capital equipment business, and was reflected
across the entire line of our new and existing semiconductor products. System
group revenue increased to $2.8 million for the second quarter of fiscal 2000
from $0.8 million and increased to $6.3 million for the six months of fiscal
2000 compared to $1.3 million for the first six months of fiscal 1999. The
medical and industrial segment of the business decreased by 17% to $5.7 million
for the second quarter of fiscal 2000 and decreased by 24% to $9.7 million for
the six months of fiscal 2000 compared to the first six months of fiscal 1999,
primarily due to declines in volume to several customers and a price decrease to
one customer.
GROSS PROFIT
Gross profit increased to 42% of total revenue in the second quarter of fiscal
2000 and increased to 39% of total revenue for the first six months of fiscal
2000 compared to 27% of total revenue for the second quarter of fiscal 1999 and
20% of total revenue for the first six months of fiscal 1999. Gross margin
improved due to increased volume, favorable product mix with higher gross
margin, improved manufacturing efficiencies, and a lower fixed cost structure
due to plant consolidations undertaken in fiscal 1999. Gross margins for the
first six months of fiscal 1999 were adversely impacted by a $1.1 million
inventory write-down in the first six months.
RESEARCH AND DEVELOPMENT EXPENSES
Net research and development expense increased by 51% to $3.4 million or 11% of
total revenue in the second quarter of fiscal 2000 and increased by 33% to $6.1
million or 10% of total revenue in the six months of fiscal 2000 compared to
$2.2 million or 13% of total revenues in the second quarter of fiscal 1999 and
$4.6 million or 16% of total revenue for the first six months of fiscal 1999.
As a percent of revenue, R&D expenses were lower in the first six months of
fiscal 2000 because of higher sales compared to comparable periods in fiscal
1999. On an absolute dollar basis, research and development expenses rose
primarily as a result of expenditures in connection with support for new modular
products and development of products for the systems group.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling expenses increased by 82% to $2.1 million or 7% of total revenue in the
second quarter of fiscal 2000 and increased by 75% to $4.2 million or 7% of
total revenue for the first six months of fiscal 2000 compared to $1.2 million
or 7% of total revenue in the second quarter of fiscal 1999 and $2.4 million or
8% of total revenue for the first six months of fiscal 1999. The increase is
due to the creation of Global Customer Operations (GCO) during the second half
of fiscal 1999 and increased staffing of marketing, sales, service, and product
management in the second half of fiscal 1999 as well as in the six months of
fiscal 2000 in order to better meet customer sales and service needs on a global
basis. General and administrative expenses increased to $3.0 million or 10% of
total revenue in the second quarter of fiscal 2000 and increased to $5.6 million
or 9% of total revenue for the first six months of fiscal 2000 compared to $1.8
million or 11% of total revenue in the second quarter of fiscal 1999 and $3.7
million or 13% of total revenue for the first six months of fiscal 1999. The
increase is primarily due to goodwill amortization, administrative expenses
associated with acquisition activity and expansion of our management team.
As a result of consolidation of two facilities, we incurred a restructuring
charge of $1.5 million in the first quarter of fiscal 1999 for the costs of
severance, abandonment of leasehold improvements
9
<PAGE>
and fixed assets, and for facility costs, primarily future lease payments.
There was no comparable cost in the six months of fiscal 2000.
OPERATING INCOME (LOSS)
We had operating income of $4.4 million or 14% of total revenues in the second
quarter of fiscal 2000 and $8.3 million or 13% of total revenues for the first
six months of fiscal 2000 compared to a loss of $0.7 million or 4% of total
revenue in the second quarter of fiscal 1999 and a loss of $6.4 million or 22%
of total revenue for the first six months of fiscal 1999. The increase in
operating income is due to increased revenues, improved gross margin, and lower
operating expenses as a percentage of sales, compared to the second quarter and
the first six months of fiscal 1999.
OTHER INCOME AND INCOME TAXES
Total other income increased to $342,000 in the second quarter and to $741,000
for the six months of fiscal 2000 primarily due to interest income earned on
short and long term cash investments from proceeds of our March 1999 public
stock offering. We had income tax expense of $1.6 million in the second quarter
of fiscal 2000 and income tax expense of $3.2 million for the first six months
of fiscal 2000 compared to tax benefits of $158,000 in the second quarter of
fiscal 1999 and $2.3 million in the first six months of fiscal 1999. Earnings
in the second quarter of fiscal 2000 were enhanced by a reduced effective tax
rate for the quarter due to the retroactive reinstatement of the research and
experimentation tax credit.
LIQUIDITY AND CAPITAL RESOURCES
At December 25, 1999, we had cash and investments of $27.7 million consisting of
$17.6 million of cash and equivalents, short term investments of $5.0 million
and long term investments of $5.1 million. Working capital was $47.9 million at
December 25, 1999. At June 26, 1999, we had cash and cash equivalents of $31.8
million and working capital of $52.3 million.
During the six months ended December 25, 1999, our cash and cash equivalent
position decreased by $14.1 million as we invested in short term investments of
$5.0 million and long term investments of $5.1 million. Cash provided by
operating activities was $3.2 million, and was comprised of $5.8 million of net
income and non-cash depreciation and amortization of $2.1 million offset by $4.7
million used for changes in working capital (including changes in deferred
income taxes). Cash provided by financing activities was $1.8 million, due to
the exercise of stock options. Cash used for financing activities consisted
primarily of $6.2 million for the August 1999 acquisition of the Shamrock
product line from Sputtered Films, Inc., $2.7 million for additions to property,
plant and equipment, and the purchase of short and long term investments
previously discussed.
We have a credit facility with a bank which consists of an $8 million unsecured
demand line of credit with interest at the bank's prime rate which was 8.5% at
December 25, 1999. There were no borrowings in connection with this line during
the current year. Availability under the line is limited to $7 million due to a
$1 million letter of credit issued against the credit facility associated with
our new lease in Wilmington, MA. We are in the process of negotiating a
potential purchase of this facility for approximately $11 million. We expect
the transaction would close early in our fourth quarter and would be primarily
financed by a term loan from a bank secured by the property.
We will continue to use our cash resources for developing new products,
expanding sales and marketing, performing collaborative product development
projects, capital expenditures in connection with the planned facility and for
general working capital. We seek new ventures and/or acquisitions that will
enhance our position in our markets with potential to increase revenue and
profitability.
10
<PAGE>
EFFECTS OF INFLATION
We believe that inflation has not had a significant impact on our revenues or
operating results.
YEAR 2000 DISCLOSURE
Many currently installed computer systems and software products are dependent
upon internal calendars coded to accept only two digit entries in the date code
field. These date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies may need to be upgraded to comply
with Year 2000 requirements.
We updated our major financial reporting and ERP systems prior to the Year 2000
with SAP R/3. We are currently using SAP R/3 in our facility in Woburn, MA, and
our facility in Colorado Springs, Colorado. The software package used by ASTeX
Sorbios was upgraded in April 1999. We conducted a review of our manufacturing
equipment and facilities to ensure Year 2000 compliance. We addressed the Year
2000 preparedness of our critical suppliers and our major customers and related
electronic data interfaces with these third parties. We completed a systematic
review of our products in operation at customer locations and had identified
non-compliant products and offered all necessary modifications to make them
compliant.
As of February 7, 2000, we have not experienced any Year 2000 problems with our
software, facilities, critical suppliers or our products.
BACKLOG
Backlog consists of purchase orders for standard products and contracts for
research and development. At December 25, 1999, backlog was approximately $18.7
million, essentially all of which was for standard product. The backlog at
December 26, 1998 was approximately $12.9 million, of which $12.0 million was
for standard products, and $0.9 million was for research contracts. We expect
to complete and ship all standard product backlog during the next six months and
all research contracts during the next twelve months. The backlog excludes
orders under certain supply agreements with major semiconductor capital
equipment manufacturers which have become a significant percentage of our
revenues in the last year. Our multi-year supply agreements, as well as certain
government contracts, typically provide for cancellation or modification with
little or no penalty. In addition, customers may push out deliveries, put firm
orders on hold, or cancel existing orders with little or no penalty.
Accordingly, we believe backlog is not necessarily a reliable indicator of
future sales.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements regarding anticipated
results of operations, the cyclical nature of the semiconductor equipment
industry, liquidity and other matters. These statements, in addition to
statements made in conjunction with the words "anticipate," "expect," "believe,"
"intend," "seek," "estimate," and similar expressions, are forward-looking
statements that are based on management's current expectations and are subject
to a number of factors and uncertainties that could cause actual results to
differ materially from those described in the forward-looking statements. Such
risks and uncertainties include, but are not limited to the following: business
conditions and growth in certain market segments and the general economy;
fluctuating operating results; new product development; the cyclical nature of
the semiconductor equipment industry; uncertainties concerning Asian and
European markets and currencies; the impact of competitive products and pricing;
increased or continued market acceptance of our products and
11
<PAGE>
proposed products; availability of materials; the loss of the services of one or
more of our key employees, dependence on significant customers; the availability
of additional capital to fund expansion on acceptable terms, if at all; and
other risks and uncertainties indicated from time to time in our filings with
the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk represents the risk of change in value of short-term investments and
financial instruments caused by fluctuations in investment prices, interest
rates and foreign currency exchange rates.
We address market risks in accordance with established policies. Our risk
management activities involve risk and uncertainties and accordingly, results
could differ materially from those projected.
INTEREST RATE RISK. Due to the fact that long-term notes receivable mature
within 4 years, management has determined that the fair value does not differ
materially from the carrying amount. Long term instruments, which are held to
maturity, will mature on or before July, 2001. We do not believe interest rate
risk is material.
FOREIGN EXCHANGE RISK. We do not obtain a significant amount of sales
denominated in other than U.S. currency.
INVESTMENT RISK. Our investment securities are United States government or
government backed instruments and are considered low risk.
PART II. OTHER INFORMATION
-----------------
ITEMS 1, 2, 3 AND 5: NONE
ITEM 4
On November 18, 1999, the Company held its Annual Meeting of Stockholders to
vote on the following proposals:
1. To elect three members of the Board of Directors for a three-year term.
Nominees for Director were: (a) Donald K. Smith; (b) Michel deBeaumont; and
(c) John Bertucci ("Proposal No. 1");
2. To consider and vote upon a resolution increasing the number of shares
under the Company's 1993 Stock Option Plan to 3,750,000 shares ("Proposal
No. 2");
3. To ratify the appointment of KPMG LLP as the Company's independent auditors
for Fiscal Year 2000 ("Proposal No. 3").
Of the 11,479,630 shares of the Company's Common Stock of record as of October
14, 1999 eligible to be voted at the meeting, a total of approximately
10,101,382 shares were voted, or approximately 88% of the Company's issued and
outstanding shares of Common Stock entitled to vote on these matters. Each of
the proposals was adopted, with the vote total as follows:
12
<PAGE>
Proposal #1:
- - -----------
<TABLE>
<CAPTION>
Votes For Votes Withheld Abstentions Broker Non-Votes
------------------- ---------------------- ------------------- ------------------------
<S> <C> <C> <C> <C>
John R. Bertucci 9,714,852 386,530 0 0
Michel de Beaumont 9,714,852 386,530 0 0
Donald K. Smith, Ph.D. 9,714,852 386,530 0 0
Proposal #2: 4,642,726 3,354,131 43,230 2,061,295
- - ------------------------
Proposal #3: 10,046,743 13,539 41,100 0
- - ------------------------
</TABLE>
On January 8, 2000 Mr. Smith resigned from the Board as a result of time
commitments to his new business.
ITEM 6
a) Exhibits:
-- --------
Exhibit 10.1 Key Employee Agreement for William S. Hurley
Exhibit 10.2 Key Employee Agreement for John Ross
Exhibit 10.3 Key Employee Agreement for John Schuss
27 Financial Data Schedule
b) Reports on Form 8-K: None
-- -------------------
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated:
APPLIED SCIENCE AND TECHNOLOGY, INC.
(Registrant)
Name Capacity Date
- - ---- -------- ----
/s/Richard S. Post Chairman of the Board, Chief February 8, 2000
- - ------------------
Richard S. Post Executive Officer and President
(principal executive officer)
/s/William S. Hurley Chief Financial Officer, February 8, 2000
- - --------------------
William S. Hurley Senior Vice President of Finance
(principal financial and
accounting officer)
14
<PAGE>
EXHIBIT 10.1
-------------------------------------------------
KEY EMPLOYEE AGREEMENT
-------------------------------------------------
As of November 11, 1999
To: William S. Hurley
23 Overlook Drive
Westboro, MA 01581
The undersigned, Applied Science and Technology, Inc., a Delaware
corporation, as well as its successors and assigns (hereinafter collectively
referred to as the "Company"), hereby agree with you as follows:
1. Position and Responsibilities.
-----------------------------
1.1 You shall serve as Chief Financial Officer/Senior Vice President
(or in such other capacity as shall be designated by the President or Board of
Directors and reasonably acceptable to you). You will, to the best of your
ability, devote your full time and best efforts to the performance of your
duties hereunder and the business and affairs of the Company and perform such
duties as may be assigned to you by or on authority of the Company's President
from time to time and the duties customarily associated with such capacity from
time to time and at such place or places as the Company shall designate are
appropriate and necessary in connection with such employment.
1.2 You will duly, punctually and faithfully perform and observe any
and all rules and regulations which the Company may now or shall hereafter
establish governing the conduct of its business.
1.3 You will report directly to the Company's President and will be
based out of the Company's Woburn office.
2. Term of Employment.
------------------
2.1 The initial term of this Agreement shall be for the period set
forth on Exhibit A annexed hereto commencing with the date hereof. Thereafter,
---------
this Agreement shall be automatically renewed for successive periods of one
year, unless you or the Company shall give the other party not less than thirty
(30) days written notice of non-renewal. Your employment with the Company may be
terminated as provided in Section 2.2.
A-1
<PAGE>
2.2 The Company shall have the right, upon written notice to you, to
terminate your employment:
(a) immediately at any time for "Cause" (as defined herein
subject to your right of cure and right to dispute as provided in Section
2.3 herein); or
(b) at any time, without "Cause," provided that the Company
shall be obligated to pay to you the Severance Benefits set forth in
Section 6, Exhibit A, plus any sums then due to you, including those
---------
expenses as are provided for in Section 4 of Exhibit A, less (i) applicable
---------
taxes and other required withholdings, and (ii) any amounts you may owe to
the Company. Payments under this Section 2.2 (b) shall not be due or
payable if you are terminated at any time for "Cause" or if you voluntarily
resign from your employment.
2.3 For purposes of Section 2.2, the term "Cause" shall mean (a)
gross negligence or willful misconduct in the performance of assigned duties;
(b) material and repetitive refusal to perform or discharge the duties or
responsibilities assigned by the President of the Company provided the same are
not illegal, unethical or inconsistent with the position of Chief Financial
Officer/Senior Vice President of a corporation and the failure to correct such
refusal and perform such duties or responsibilities within a reasonable period
of time (but in any event no less than seven (7) calendar days after written
notice of such failure); (c) conviction of a felony or misdemeanor involving
moral turpitude; (d) willful or prolonged absence from work not excused by a
bona fide medical disability as reasonably determined by a qualified physician
mutually acceptable to both you and the Company or other good cause as
reasonably determined by the Board of Directors; and (e) falseness of any
warranty or representation by you herein or the breach of your obligations under
this Agreement to the material detriment of the Company.
2.4 In the event of the Involuntary Termination (as hereinafter
defined) of your employment with the Company at any time, the Company hereby
agrees to provide you with Severance Benefits as defined in Section 6 of Exhibit
-------
A hereto. In this regard, the phrase "Involuntary Termination" shall mean (a)
- - -
any termination of your employment by the Company other than for "cause," as
defined in Section 2.3 or (b) any notice by the Company not to renew this
Agreement pursuant to Section 2.1.
2.5 You shall have the right to terminate this Agreement upon not
less than thirty (30) days prior written notice to the Company.
3. Compensation. You shall receive the compensation and benefits set
------------
forth on Exhibit A ("Compensation") for all services to be rendered by you
---------
hereunder and for your transfer of property rights pursuant to an agreement
relating to proprietary information and inventions of even date herewith
attached hereto as Exhibit C between you and the Company (the "Proprietary
Information and Inventions Agreement").
A-2
<PAGE>
4. Other Activities During Employment.
----------------------------------
4.1 Except for any outside employments and directorships currently
held by you as listed on Exhibit B, and/or except with the prior written consent
---------
of the President, you will not during the term of this Agreement undertake or
engage in any other employment, occupation or business enterprise other than one
in which you are an inactive investor.
4.2 You hereby agree that, except as disclosed on Exhibit B hereto,
---------
during your employment hereunder, you will not, directly or indirectly, engage
(a) individually, (b) as an officer, (c) as a director, (d) as an employee, (e)
as a consultant, (f) as an advisor, (g) as an agent (whether a salesperson or
otherwise), (h) as a broker, or (i) as a partner, coventurer, stockholder or
other proprietor owning directly or indirectly more than two percent (2%)
interest, in any firm, corporation, partnership, trust, association, or other
organization which is engaged in the research, development, production,
manufacture or marketing of equipment or processes in direct competition with
the Company or any other line of business engaged in or under demonstrable
development by the Company (such firm, corporation, partnership, trust,
association, or other organization being hereinafter referred to as a
"Prohibited Enterprise"). Except as may be shown on Exhibit B, you hereby
---------
represent that you are not engaged in any of the foregoing capacities (a)
through (i) in any Prohibited Enterprise.
5. Former Employers.
----------------
5.1 You represent and warrant that your employment by the Company
will not conflict with and will not be constrained by any prior or current
employment, consulting agreement or relationship whether oral or written. You
represent and warrant that you do not possess confidential information arising
out of any such employment, consulting agreement or relationship which, in your
best judgment, would be utilized in connection with your employment by the
Company in the absence of Section 5.2.
5.2 If, in spite of the second sentence of Section 5.1, you should
find that confidential information belonging to any other person or entity might
be usable in connection with the Company's business, you will not intentionally
disclose to the Company or use on behalf of the Company any confidential
information belonging to any of your former employers; but during your
employment by the Company you will use in the performance of your duties all
information which is generally known and used by persons with training and
experience comparable to your own all information which is common knowledge in
the industry or otherwise legally in the public domain.
6. Proprietary Information and Inventions. You agree to execute, deliver
--------------------------------------
and be bound by the provisions of the Proprietary Information and Inventions
Agreement.
7. Remedies. Your obligations under the Proprietary Information and
--------
Inventions
A-3
<PAGE>
Agreement and the provisions of Sections 4, 6, and 8 of this Agreement (as
modified by Section 9, if applicable) shall survive the expiration or
termination of your employment (whether through your resignation or otherwise)
with the Company. You acknowledge that a remedy at law for any breach or
threatened breach by you of the provisions of the Proprietary Information and
Inventions Agreement would be inadequate and you therefore agree that the
Company shall be entitled to such injunctive or other equitable relief in case
of any such breach or threatened breach.
8. Assignment. This Agreement and the rights and obligations of the
----------
parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger or consolidation and any
assignee of all or substantially all of its business and properties, but, except
as to any such successor or assignee of the Company, neither this Agreement nor
any rights or benefits hereunder may be assigned by the Company or by you,
except by operation of law. The Company's obligations and those of any
successors or assignees of the Company under this Agreement, including but not
limited to the severance provisions and other compensation and benefits due to
you pursuant to Exhibit A hereto, will be a condition of and are to remain those
---------
of any successor or assignee.
9. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any one
--------------
or more of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. MOREOVER, IT IS THE
INTENT OF THE PARTIES THAT in case any one or more of the provisions contained
in this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provision shall be
construed by limiting and reducing it as determined by a court of competent
jurisdiction, so as to be enforceable to the extent compatible with applicable
law.
10. Notices. Any notice which the Company is required to or may desire to
-------
give you shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to you at your address of record with the
Company, or at such other place as you may from time to time designate in
writing. Any notice which you are required or may desire to give to the Company
hereunder shall be given by personal delivery or by registered or certified
mail, return receipt requested, addressed to the Company at its principal
office, or at such other office as the Company may from time to time designate
in writing. The date of personal delivery or the date of mailing any notice
under this Section 10 shall be deemed to be the date of delivery thereof.
11. Waivers. If either party should waive any breach of any provision of
-------
this Agreement, such party shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
A-4
<PAGE>
12. Complete Agreement; Amendments. The foregoing including Exhibits A,
------------------------------
B, C, D and E hereto, is the entire agreement of the parties with respect to the
subject matter hereof, superseding any previous oral or written communications,
representations, understandings, or agreements with the Company or any officer
or representative thereof. Any amendment to this Agreement or waiver by the
Company of any right hereunder shall be effective only if evidenced by a written
instrument executed by the parties hereto, upon authorization of the Company's
Board of Directors.
13. Headings. The headings of the Sections hereof are inserted for
--------
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning of this Agreement.
14. Counterparts. This Agreement may be signed in two counterparts, each
------------
of which shall be deemed an original and both of which shall together constitute
one agreement.
15. Governing Law; Venue. This Agreement shall be governed by and
--------------------
construed under Massachusetts law.
16. Advice of Separate Counsel. You acknowledge that you have been advised
--------------------------
to review this Agreement with your own legal counsel and other advisors of your
choosing and that prior to entering into this Agreement, you have had the
opportunity to review this Agreement with your attorney and other advisors and
have not asked (or relied upon) Mintz, Levin, Cohn., Ferris, Glovsky and Pope,
P.C. to represent you in this matter.
If you are in agreement with the foregoing, please sign your name below and
also at the bottom of the Proprietary Information and Inventions Agreement and
Stock Option Grant Letter, whereupon this Agreement shall become binding in
accordance with its terms. Please then return this Agreement to the Company.
(You may retain for your records the accompanying counterpart of this Agreement
enclosed herewith).
Very truly yours,
ACCEPTED AND AGREED: APPLIED SCIENCE AND
TECHNOLOGY, INC.
/s/ William S. Hurley By: /s/ Richard S. Post
- - ------------------------------ ---------------------------------
William S. Hurley Dr. Richard S. Post, President
A-5
<PAGE>
EXHIBIT A
---------
EMPLOYMENT TERM, COMPENSATION AND BENEFITS
OF WILLIAM S. HURLEY
1. Term. The term of the Agreement to which this Exhibit A is attached
----
and made a part shall be for a period from the date of this Agreement through
November 11, 2000.
2. Compensation.
------------
(a) Base Salary. Your base salary ("Base Salary") shall be $6,730.76
-----------
payable on a bi-weekly basis ($175,000.00 on an annualized basis) through
September 30, 2000, payable in accordance with the Company's payroll policies.
Commencing October 1, 2000 your base salary shall be established by the Board of
Director's Compensation Committee.
(b) Bonuses. The Company shall establish appropriate incentive
-------
compensation plans ("Bonuses") for you for each fiscal year that you are
employed hereunder, commencing with Fiscal 2000 which commences on June 27,
1999, under which you shall be entitled to a prorated bonus of up to 30% of your
then current Base Salary based on the Company attaining certain financial and
other results and also based upon individual goals to be established for you. (A
minimum of one half of your full FY'00 bonus will be guaranteed, provided your
employment with the company continues through August 2000.) Such Bonuses shall
be properly approved by the Board of Directors or the Compensation Committee of
the Board of Directors.
3. Vacation, Insurance and Benefits; Expenses. You shall be entitled to
------------------------------------------
all legal holidays recognized by the Company, and 13 days paid vacation per
annum. Any unused vacation may be accrued or used in accordance with Company
policy. You shall be eligible for participation in any health, dental, and other
group insurance plans which may be established and maintained by the Company for
all full-time employees or which the Company is required to maintain by law. You
shall also be entitled to participate in any employee benefit programs which the
Company's Board of Directors may establish for Company employees generally,
including, but not limited to, bonuses and stock purchase or option plans. You
will be eligible to participate in the Company's 401(k) Plan. The Company shall
reimburse you for all usual and ordinary business expenses incurred by you in
the scope of your employment hereunder in accordance with the Company's expense
reimbursement policy.
4. Initial Stock Options. You shall be entitled to receive stock options
---------------------
to purchase up to an aggregate of 40,000 shares of common stock of the Company.
Such options shall be priced on the closing price of the Company's Common Stock
as reported by NASDAQ on the date you commence employment with the Company and
shall vest as follows: the stock options have a four year vesting period, with
20% vesting after six months, 20% vesting after one year, 20% at the end of two
years, 20% at the end of three years, and full vesting at the end of four
A-6
<PAGE>
years in four equal annual installments on the anniversary date of such grant. A
copy of the forms of option grant letter is attached hereto as Exhibits D and E.
----------------
Notwithstanding the foregoing, in the event of a Change of Control (as defined
in Section 7 herein), an additional 20% of such option shall vest upon the
Change of Control (but in any event not to exceed 100% of the original option
grant).
5. Subsequent Stock Options. You shall be entitled to an additional
------------------------
25,000 stock options over the next year (at the start of Fiscal Year 2001),
subject to Board of Directors or the Compensation Committee of the Board of
Directors' approval, provided your employment with ASTeX continues to be active
at that time.
6. Severance Benefits.
------------------
(a) When provided for in this Agreement, you shall be entitled to
"Severance Benefits." When used in this Agreement, the term "Severance Benefits"
shall mean a total amount equal to one hundred percent (100%) of your then
current Base Salary if you are involuntarily terminated for any reason other
than for cause, for a period not to exceed six (6) months or up until when you
start another full time position if it is prior to six months from your
termination date. The Severance Benefits shall be paid via check to you in six
(6) equal monthly installments commencing within ten (10) days after the date of
your termination of employment with the Company.
(b) In addition, the term "Severance Benefits" shall include the
continuation for you and your family, during the Severance Period, as defined
below, of all of the other benefits which are provided or available to you on
the last day of your actual service with the Company. For purposes of this
Agreement, the term "Severance Period" means the period of six (6) months
beginning on the Date of Termination.
(c) The Severance Benefits referred to above will be in addition to,
and not in substitution for, any accrued and unpaid salary, vacation, pension or
other similar retirement benefits, and unreimbursed expenses to which you may be
otherwise entitled.
7. Change in Control.
-----------------
(a) For purposes of this Agreement, "Change in Control" means and
shall be deemed to occur if any of the following occurs: (i) the acquisition by
an individual, entity or group, as defined in Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of
beneficial ownership, as defined in Rule 13d-3 promulgated under the Exchange
Act, of 50% or more of either (A) the outstanding shares of common stock, $.01
par value per share, of the Company (the "Common Stock"), or (B) the combined
voting power of the voting securities of the Company entitled to vote generally
in the election of directors (the "Voting Securities"); or (ii) individuals who,
on November 21, 1997, constituted the Board of Directors of the Company (the
"Incumbent Board") cease for any reason to
A-7
<PAGE>
constitute at least a majority of the Board of Directors of the Company;
provided, however, that any individual becoming a director subsequent to
- - -------- -------
November 21, 1997, whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then serving and comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents; or (iii)
approval by the Board of Directors or the shareholders of the Company of a (A)
tender offer to acquire any of the Common Stock or voting securities, (B)
reorganization, (C) merger or (D) consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all of the
individuals and entities who were the beneficial owners, immediately prior to
such reorganization, merger or consolidation, of the Common Stock and voting
securities beneficially own, directly or indirectly, immediately after such
reorganization, merger or consolidation, more than 80% of the then outstanding
common stock and voting securities (entitled to vote generally in the election
of directors) of the Company resulting from such reorganization, merger or
consolidation in substantially the same proportions as their respective
ownership, immediately prior to such reorganization, merger or consolidation, of
the Common Stock and the voting securities; or (iv) Approval by the Board of
Directors or the shareholders of the Company of (A) a complete or substantial
liquidation or dissolution of the Company, or (B) the sale or other disposition
of all or substantially all of the assets of the Company, excluding a
reorganization of the Corporation under the corporate laws of Delaware.
(b) In the event of your actual termination of employment
contemporaneous with or following a Change in Control, except (x) because of
your death, (y) by the Company for Cause or Disability (as hereinafter defined)
or (z) by you other than for Good Reason (as hereinafter defined): (i) you shall
be entitled to receive, in lieu of the sums described in Section 6, an amount
equal to 100% of the Severance Benefits due and determined as if payable under
Section 6 above, for each full year or portion thereof you have been employed by
the Company, up to a maximum of 100% of the Severance Benefits mentioned in
Section 6 above, to be paid in accordance with the terms of this Agreement; and
(ii) the following additional provisions shall apply (which provisions shall
supersede any other provisions of the Agreement, including but not limited to
Section 2 of the Agreement, to the extent such provisions are inconsistent with
the following provisions):
(1) Disability. For purposes of this Section 7(b), termination
----------
by the Company of your employment based on "Disability" shall mean termination
because of your absence from your duties with the Company on a full time basis
for one hundred eighty (180) consecutive days as a result of your incapacity due
to physical or mental illness, unless within thirty (30) days after Notice of
Termination (as hereinafter defined) is given to you following such absence, you
shall have returned to the full time performance of your duties.
(2) Good Reason. Termination by you of your employment for "Good
-----------
A-8
<PAGE>
Reason" shall mean termination based on:
(A) a reduction by the Company (within two years following
the Change of Control) in your Base Salary as in effect immediately prior to the
Change in Control, other than a reduction in salaries generally for officers of
the Company;
(3) Notice of Termination. Any purported termination by the
---------------------
Company or by you following a Change in Control shall be communicated by written
notice to the other party hereto which indicates the specific termination
provision in this Agreement relied upon (the "Notice of Termination").
(4) Date of Termination. "Date of Termination" following a
-------------------
Change in Control shall mean (A) if your employment is to be terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that
you shall not have returned to the performance of your duties on a full-time
basis during such thirty (30) day period), (B) if your employment is to be
terminated by the Company for any reason other than death or Disability or by
you pursuant to Sections 7(b)(2)(F) or 7(b)(6) hereof or for any other Good
Reason, the date specified in the Notice of Termination, or (C) if your
employment is terminated on account of your death, the day after your death.
(5) Compensation Upon Termination or During Disability; Other
---------------------------------------------------------
Agreements.
- - ----------
(A) During any period following a Change in Control of the
Company that you fail to perform your duties as a result of incapacity due to
physical or mental illness, you shall continue to receive your Base Salary at
the rate then in effect and any benefits or awards under any Plan shall continue
to accrue during such period, to the extent not inconsistent with such Plans,
until and unless your employment is terminated pursuant to and in accordance
with this Section 7(b). Thereafter, your benefits shall be determined in
accordance with the Plans then in effect.
(B) If your employment is terminated for Cause following a
Change in Control of the Company, the Company shall pay to you your Base Salary
through the Date of Termination at the rate in effect just prior to the time a
Notice of Termination is given plus any benefits or awards (including both the
cash and stock components) which pursuant to the terms of any Plans have been
earned or become payable, but which have not yet been paid to you. Thereupon,
the Company shall have no further obligations to you under this Agreement.
(6) Successors, Binding Agreement.
-----------------------------
(A) The Company will seek, by written request at least five
(5) business days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person, by agreement in form and substance satisfactory
to you, assent to the fulfillment of the Company's obligations under this
Agreement. Failure of such Person to furnish such assent
A-9
<PAGE>
by the later of (i) three (3) business days prior to the time such Person
becomes a Successor or (ii) two (2) business days after such Person receives a
written request to so assent shall constitute Good Reason for termination by you
of your employment if a Change in Control of the Company occurs or has occurred.
For purposes of Section 7, "Successor" shall mean any person that succeeds to,
or has the practical ability to control, the Company's business directly, by
merger or consolidation, or indirectly, by purchase of the Company's securities
eligible to vote for the election of directors, or otherwise.
(B) This Agreement shall inure to the benefit of and be
enforceable by your personal legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if no such designee exists, to your estate.
(C) For purposes of Section 7, the "Company" shall include
any subsidiaries of the Company and any corporation or other entity which is the
surviving or continuing entity in respect of any merger, consolidation or form
of business combination in which the Company ceases to exist; provided, however,
for purposes of determining whether a Change in Control has occurred herein, the
term "Company" shall refer to Applied Science and Technology, Inc. or its
Successor(s).
(7) Fees and Expenses; Mitigation.
-----------------------------
(A) The Company shall reimburse you, on a current basis,
for all reasonable legal fees and related expenses incurred by you in connection
with the Agreement following a Change in Control of the Company, including
without limitation, (i) all such fees and expenses, if any, incurred in
contesting or disputing any termination of your employment or (ii) your seeking
to obtain or enforce any right or benefit provided by this Agreement, in each
case, regardless of whether or not your claim is upheld by a court of competent
jurisdiction; provided, however, you shall be required to repay any such amounts
to the Company to the extent that a court issues a final and non-appealable
order setting forth the determination that the position taken by you was
frivolous or advanced by you in bad faith.
(B) You shall not be required to mitigate the amount of any
payment the Company becomes obligated to make to you in connection with this
Agreement, by seeking other employment or otherwise.
(8) Taxes. All payments to be made to you under this Agreement
-----
will be subject to required withholding of federal, state and local income and
employment taxes.
(c) Notwithstanding any other provision of this Agreement, in the
event that any payment or benefit received or to be received by you as a result
of or in connection with a
A-10
<PAGE>
Change in Control, whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company (all such payment and benefits
being hereinafter called the "Total Payments") would subject you to the excise
tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), then, to the extent necessary to eliminate any
such imposition of the Excise Tax (after taking into account any reduction in
the Total Payments in accordance with the provisions of any other plan,
arrangement or agreement, if any), (a) any non-cash severance payments otherwise
payable to you shall first be reduced (if necessary, to zero), and (b) any cash
severance payment otherwise payable to you shall next be reduced. For purposes
of the immediately preceding sentence, (i) no portion of the Total Payments the
receipt or enjoyment of which you shall have effectively waived in writing shall
be taken into account, (ii) no portion of the Total Payment shall be taken into
account which in the opinion of nationally-recognized certified public
accountants (in each case as mutually selected by you and the Company) does not
constitute a "parachute payment" within the meaning of Section 280G of the Code,
including, without limitation, by reason of Section 280G(b)(2) or (b)(4)(A) of
the Code, (iii) any payments to you shall be reduced only to the extent
necessary so that the Total Payments [other than those referred to in clauses
(i) and (ii)] in their entirety constitute reasonable compensation for services
actually rendered within the meaning of Section 280G(4)(B) of the Code or are
otherwise not subject to disallowance as deductions, in the opinion of the tax
counsel or the accountants referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by such accountants in accordance with the
requirements of section 280G(d)(3) and (4) of the Code (and such determination
shall be reviewed by such tax counsel).
[THIS SPACE INTENTIONALLY LEFT BLANK]
A-11
<PAGE>
EXHIBIT B
---------
OUTSIDE EMPLOYMENTS AND DIRECTORSHIPS OF
WILLIAM S. HURLEY
Director - The L.S. Starrett Company, Athol, MA 01331-1915
B-1
<PAGE>
EXHIBIT C
---------
--------------------------------------------------
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
--------------------------------------------------
To: Applied Science and Technology, Inc.
35 Cabot Road
Woburn, Massachusetts 01801
As of November 11, 1999
The undersigned, in consideration of and as a condition of my employment or
continued employment by you and/or by companies which you own, control, or are
affiliated with or their successors in business (collectively, the "Company"),
hereby agrees as follows:
1. Confidentiality. I agree to keep confidential, except as the Company
---------------
may otherwise consent in writing, and, except for the Company's benefit, not to
disclose or make any use of at any time either during or subsequent to my
employment, any Inventions (as hereinafter defined), trade secrets, confidential
information, knowledge, data or other information of the Company relating to
products, processes, know-how, designs, formulas, test data, customer lists,
business plans, marketing plans and strategies, pricing strategies, or other
subject matter pertaining to any business of the Company or any of its
affiliates, which I may produce, obtain, or otherwise acquire during the course
of my employment, except as herein provided. I further agree not to deliver,
reproduce or in any way allow any such trade secrets, confidential information,
knowledge, data or other information, or any documentation relating thereto, to
be delivered to or used by any third parties without specific direction or
consent of a duly authorized representative of the Company.
2. Conflicting Employment; Return of Confidential Material. I agree that
-------------------------------------------------------
during my employment with the Company I will not engage in any other employment,
occupation, consulting or other activity relating to the business in which the
Company is now or may hereafter become engaged, or which would otherwise
conflict with my obligations to the Company. In the event my employment with the
Company terminates for any reason whatsoever, I agree to promptly surrender and
deliver to the Company all records, materials, equipment, drawings, documents
and data of which I may obtain or produce during the course of my employment,
and I will not take with me any description containing or pertaining to any
confidential information, knowledge or data of the Company which I may produce
or obtain during the course of my employment.
3. Assignment of Inventions.
------------------------
3.1 I hereby acknowledge and agree that the Company is the owner of
all
C-1
<PAGE>
Inventions. In order to protect the Company's rights to such Inventions, by
executing this Agreement I hereby irrevocably assign to the Company all my
right, title and interest in and to all Inventions to the Company.
3.2 For purposes of this Agreement, "Inventions" shall mean all
discoveries, processes, designs, technologies, devices, or improvements in any
of the foregoing or other ideas, whether or not patentable and whether or not
reduced to practice, made or conceived by me (whether solely or jointly with
others) during the period of my employment with the Company which relate in any
manner to the actual or demonstrably anticipated business, work, or research and
development of the Company, or result from or are suggested by any task assigned
to me or any work performed by me for or on behalf of the Company.
3.3 Any discovery, process, design, technology, device, or
improvement in any of the foregoing or other ideas, whether or not patentable
and whether or not reduced to practice, made or conceived by me (whether solely
or jointly with others) which I develop entirely on my own time not using any of
the Company's equipment, supplies, facilities, or trade secret information
("Personal Invention") is excluded from this Agreement provided such Personal
Invention (a) does not relate to the actual or demonstrably anticipated
business, research and development of the Company, and (b) does not result,
directly or indirectly, from any work performed by me for the Company.
4. Disclosure of Inventions. I agree that in connection with any
------------------------
Invention, I will promptly disclose such Invention to my immediate superior at
the Company in order to permit the Company to enforce its property rights to
such Invention in accordance with this Agreement. My disclosure shall be
received in confidence by the Company.
5. Patents and Copyrights; Execution of Documents.
----------------------------------------------
5.1 Upon request, I agree to assist the Company or its nominee (at
its expense) during and at any time subsequent to my employment in every
reasonable way to obtain for its own benefit patents and copyrights for
Inventions in any and all countries. Such patents and copyrights shall be and
remain the sole and exclusive property of the Company or its nominee. I agree to
perform such lawful acts as the Company deems to be necessary to allow it to
exercise all right, title and interest in and to such patents and copyrights.
5.2 In connection with this Agreement, I agree to execute,
acknowledge and deliver to the Company or its nominee upon request and at its
expense all documents, including assignments of title, patent or copyright
applications, assignments of such applications, assignments of patents or
copyrights upon issuance, as the Company may determine necessary or desirable to
protect the Company's or its nominee's interest in Inventions, and/or to use in
obtaining patents or copyrights in any and all countries and to vest title
thereto in the Company or its nominee to any of the foregoing.
C-2
<PAGE>
6. Maintenance of Records. I agree to keep and maintain adequate and
----------------------
current written records of all Inventions made by me (in the form of notes,
sketches, drawings and other records as may be specified by the Company), which
records shall be available to and remain the sole property of the Company at all
times.
7. Prior Inventions. It is understood that all Personal Inventions, if
----------------
any, whether patented or unpatented, which I made prior to my employment by the
Company, are excluded from this Agreement. To preclude any possible uncertainty,
I have set forth on Schedule A attached hereto a complete list of all of my
prior Personal Inventions, including numbers of all patents and patent
applications and a brief description of all unpatented Personal Inventions which
are not the property of a previous employer. I represent and covenant that the
list is complete and that, if no items are on the list, I have no such prior
Personal Inventions. I agree to notify the Company in writing before I make any
disclosure or perform any work on behalf of the Company which appears to
threaten or conflict with proprietary rights I claim in any Personal Invention.
In the event of my failure to give such notice, I agree that I will make no
claim against the Company with respect to any such Personal Invention.
8. Other Obligations. I acknowledge that the Company from time to time
-----------------
may have agreements with other persons or with the U.S. Government or agencies
thereof, which impose obligations or restrictions on the Company regarding
Inventions made during the course of work thereunder or regarding the
confidential nature of such work. I agree to be bound by all such obligations
and restrictions and to take all action necessary to discharge the Company's
obligations.
9. Trade Secrets of Others. I represent that my performance of all the
-----------------------
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep confidential proprietary information, knowledge or
data acquired by me in confidence or in trust prior to my employment with the
Company, and I will not disclose to the Company, or induce the Company to use,
any confidential or proprietary information or material belonging to any
previous employer or others. I agree not to enter into any agreement either
written or oral in conflict herewith.
10. Modification. I agree that any subsequent change or changes in my
------------
employment duties, salary or compensation or, if applicable, in any Employment
Agreement between the Company and me, shall not affect the validity or scope of
this Agreement.
11. Successors and Assigns. This Agreement shall be binding upon my heirs,
----------------------
executors, administrators or other legal representatives and is for the benefit
of the Company, its successors and assigns.
12. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any one
--------------
or more of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such
C-3
<PAGE>
invalid, illegal or unenforceable provision had never been contained herein.
MOREOVER, IT IS THE INTENT OF THE PARTIES THAT in case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, such
provision shall be construed by limiting and reducing it in accordance with a
judgment of a court of competent jurisdiction, so as to be enforceable to the
extent compatible with applicable law.
13. Waivers. If either party should waive any breach of any provision of
-------
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
14. Complete Agreement, Amendments. I acknowledge receipt of this
------------------------------
Agreement, and agree that with respect to the subject matter thereof the
provisions of this Key Employee Agreement of which this Exhibit C is one part,
is my entire agreement with the Company, superseding any previous oral or
written communications, representations, understandings, or agreements with the
Company or any officer or representative thereof. Any amendment to this
Agreement or waiver by either party of any right hereunder shall be effective
only if evidenced by a written instrument executed by the parties hereto, and,
in the case of the Company, upon written authorization of the Company's Board of
Directors.
15. Headings. The headings of the sections hereof are inserted for
--------
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
16. Counterparts. This Agreement may be signed in two counterparts, each
------------
of which shall be deemed an original and both of which shall together constitute
one agreement.
17. Governing Law. This Agreement shall be governed by and construed
-------------
under Massachusetts law.
C-4
<PAGE>
18. Employment Status. Nothing in this Agreement shall affect in any
-----------------
manner whatsoever the right or power of the Company to terminate the employment
of the Employee.
EMPLOYEE
/s/ William S. Hurley
------------------------------
William S. Hurley
Accepted and Agreed:
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ Richard S. Post
-----------------------------------
Dr. Richard S. Post, President
C-5
<PAGE>
SCHEDULE A
----------
LIST OF PRIOR INVENTIONS
OF
WILLIAM S. HURLEY
Identifying Number or
Title Date Brief Description
- - ----- ---- -------------------------
None
C-6
<PAGE>
EXHIBIT D-1 (Incentive Stock Option)
------------------------------------
APPLIED SCIENCE AND TECHNOLOGY, INC.
35 Cabot Road
Woburn, Massachusetts 01801
Effective: November 11, 1999
William S. Hurley
23 Overlook Drive
Westboro, MA 01581
Dear Bill:
I am pleased to advise you that APPLIED SCIENCE AND TECHNOLOGY, INC. (the
"Company") has, pursuant to its 1993 Stock Option Plan (the "1993 Plan"),
awarded you an incentive stock option to purchase [Note: The total grant of
40,000 shares will be divided between incentive stock options and non-qualified
options. The incentive stock options will equal (a) the number of option shares
not to exceed $100,000 in value based on exercise price vesting in any single
calendar year, multiplied by (b) five (the five calendar years over which the
option vests). The remaining options will be issued under a non-qualified stock
option - see attached] shares of the Common Stock, $.01 par value per share, of
the Company at an exercise price of $ per share, for a total exercise price of
$. The Company is making this offer to "share the business" with valued
- - -
employees such as yourself. We hope that by owning a piece of the Company you
will continue your efforts towards helping the Company grow and succeed.
The following terms and conditions are applicable with respect to this
option, and your signature below shall constitute your acknowledgment and
acceptance of same:
(a) This option shall not be transferable under any circumstances except
by operation of law. During your lifetime, this option is only
exercisable by you, and after your death, is only exercisable by your
estate.
(b) The price at which this option may be exercised shall be $ per share,
-
for a total exercise price of $.
-
(c) This option is exercisable commencing six months from your hire date
and at any time hereafter through [five years from today's grant
date], subject to the following terms:
<PAGE>
(1) In the event of termination of your employment with the Company
(or a parent or subsidiary of the Company) for any reason other
than death or disability as defined in Internal Revenue Code
Section 22(e)(3), as amended (the "Code"), all unexercised
options shall terminate immediately.
(2) In the event of termination of your employment as a result of
your death, the outstanding options exercisable by you at the
date of your death may be exercised by your estate until one (1)
year from the date of your death, but in any event no later than
November 11, 2004.
(3) In the event of termination of your employment as a result of
your disability, as above defined, or in the event of a
disability that lasts for more than ninety (90) days, all
outstanding options exercisable by you at the date of such
termination shall terminate one (1) year from the date your
employment terminates, but in any event no later than [option
termination date].
(4) Notwithstanding anything herein to the contrary, the maximum
extent to which this option may be exercised is as follows:
Dates Up to
----- -----
After six (6) months of employment 20%
After one (1) year of employment 40%
After two (2) years of employment 60%
After three (3) years of employment 80%
After four (4) years of employment 100%
(d) This option may not be exercised as to less than one hundred (100)
shares at any one time unless it is being exercised in full and the
balance of the shares subject to this option is less than one hundred
(100).
(e) The shares of Common Stock underlying this option and the exercise
price therefore shall be appropriately adjusted from time to time for
stock splits, reverse splits, stock dividends and reclassifications of
shares.
(f) In the event of a sale or acquisition of substantially all of the
stock or assets of the Company, the Company shall give at least thirty
(30) days' notice of such an event to you and you may exercise up to
100% of the vested portion of this option; if you do not exercise the
option within thirty (30) days of such notice, all unexercised
portions of this option shall terminate and be of no further force or
<PAGE>
effect. Notwithstanding the foregoing, additional shares underlying
this option grant may vest in accordance with the provisions of
Exhibit A of your Employment Agreement of even date with the Company.
This opportunity to purchase stock in the Company is being offered because
of the Company's desire to reward continuing loyal service. Exercising options
may not be a prudent business decision for some employees. Therefore, we urge
you to review this opportunity carefully and make a decision to exercise options
only if your personal financial situation makes this a wise choice.
When you wish to exercise this stock option, please refer to the provisions
of this letter and then correspond in writing with the Secretary of the Company.
Further, please indicate your acknowledgment and acceptance of this option by
signing the enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ John M. Tarrh
--------------------------------
John M. Tarrh
Chief Financial Officer/Senior Vice President
ACKNOWLEDGMENT AND ACCEPTANCE:
/s/ William S. Hurley
- - ---------------------------------
William S. Hurley
<PAGE>
EXHIBIT E (Non-Qualified Option)
--------------------------------
APPLIED SCIENCE AND TECHNOLOGY, INC.
35 Cabot Road
Woburn, Massachusetts 01801
Effective: November 11, 1999
William S. Hurley
23 Overlook Drive
Westboro, MA 01581
Dear Bill:
I am pleased to advise you that APPLIED SCIENCE AND TECHNOLOGY, INC. (the
"Company") has, pursuant to its 1993 Stock Option Plan (the "1993 Plan"),
awarded you a non-qualified stock option to purchase [Note: Remainder of 40,000
option grant not qualifying for incentive stock option treatment] shares of the
Common Stock, $.01 par value per share, of the Company at an exercise price of $
-
per share, for a total exercise price of $. The Company is making this offer to
-
"share the business" with valued employees such as yourself. We hope that by
owning a piece of the Company you will continue your efforts towards helping the
Company grow and succeed.
The following terms and conditions are applicable with respect to this
option, and your signature below shall constitute your acknowledgment and
acceptance of same:
(a) This option shall not be transferable under any circumstances except
by operation of law. During your lifetime, this option is only
exercisable by you, and after your death, is only exercisable by your
estate.
(b) The price at which this option may be exercised shall be $ per share,
--
for a total exercise price of $.
-
(c) This option is exercisable commencing six months from your hire date
and at any time hereafter through [five years from today's grant
date], subject to the following terms:
(1) In the event of termination of your employment with the Company
(or a parent or subsidiary of the Company) for any reason other
than death or disability as defined in Internal Revenue Code
Section 22(e)(3), as
<PAGE>
amended (the "Code"), all unexercised options shall terminate
immediately.
(2) In the event of termination of your employment as a result of
your death, the outstanding options exercisable by you at the
date of your death may be exercised by your estate until one (1)
year from the date of your death, but in any event no later than
November 11, 2004.
(3) In the event of termination of your employment as a result of
your disability, as above defined, or in the event of a
disability that lasts for more than ninety (90) days, all
outstanding options exercisable by you at the date of such
termination shall terminate one (1) year from the date your
employment terminates, but in any event no later than [option
termination date].
(4) Notwithstanding anything herein to the contrary, the maximum
extent to which this option may be exercised is as follows:
Dates Up to
----- -----
After six (6) months of employment 20%
After one (1) year of employment 40%
After two (2) years of employment 60%
After three (3) years of employment 80%
After four (4) years of employment 100%
(d) This option may not be exercised as to less than one hundred (100)
shares at any one time unless it is being exercised in full and the
balance of the shares subject to this option is less than one hundred
(100).
(e) The shares of Common Stock underlying this option and the exercise
price therefore shall be appropriately adjusted from time to time for
stock splits, reverse splits, stock dividends and reclassifications of
shares.
(f) In the event of a sale or acquisition of substantially all of the
stock or assets of the Company, the Company shall give at least thirty
(30) days' notice of such an event to you and you may exercise up to
100% of the vested portion of this option; if you do not exercise the
option within thirty (30) days of such notice, all unexercised
portions of this option shall terminate and be of no further force or
effect. Notwithstanding the foregoing, additional shares underlying
this option grant may vest in accordance with the provisions of
Exhibit A of your Employment Agreement of even date with the Company.
<PAGE>
This opportunity to purchase stock in the Company is being offered because
of the Company's desire to reward continuing loyal service. Exercising options
may not be a prudent business decision for some employees. Therefore, we urge
you to review this opportunity carefully and make a decision to exercise options
only if your personal financial situation makes this a wise choice.
When you wish to exercise this stock option, please refer to the provisions
of this letter and then correspond in writing with the Secretary of the Company.
Further, please indicate your acknowledgment and acceptance of this option by
signing the enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ John M. Tarrh
------------------------------------
John M. Tarrh, Chief Financial
Officer/Senior Vice President
ACKNOWLEDGMENT AND ACCEPTANCE:
/s/ William S. Hurley
- - ---------------------
William S. Hurley
<PAGE>
EXHIBIT 10.2
-------------------------------------
KEY EMPLOYEE AGREEMENT
-------------------------------------
As of February 1, 2000
To: Jack J. Schuss
8 Cedar Street
Newton, MA 02459
The undersigned, Applied Science and Technology, Inc., a Delaware
corporation, as well as its successors and assigns (hereinafter collectively
referred to as the "Company"), hereby agree with you as follows:
1. Position and Responsibilities.
-----------------------------
1.1 You shall serve as Vice President, Engineering (or in such other
capacity as shall be designated by the President or Board of Directors and
reasonably acceptable to you). You will, to the best of your ability, devote
your full time and best efforts to the performance of your duties hereunder and
the business and affairs of the Company and perform such duties as may be
assigned to you by or on authority of the Company's President from time to time
and the duties customarily associated with such capacity from time to time and
at such place or places as the Company shall designate are appropriate and
necessary in connection with such employment.
1.2 You will duly, punctually and faithfully perform and observe any
and all rules and regulations which the Company may now or shall hereafter
establish governing the conduct of its business.
1.3 You will report directly to the Company's President and will be
based out of the Company's Woburn office.
2. Term of Employment.
------------------
2.1 The initial term of this Agreement shall be for the period set
forth on Exhibit A annexed hereto commencing with the date hereof. Thereafter,
---------
this Agreement shall be automatically renewed for successive periods of one
year, unless you or the Company shall give the other party not less than thirty
(30) days written notice of non-renewal. Your employment with the Company may
be terminated as provided in Section 2.2.
A-1
<PAGE>
2.2 The Company shall have the right, upon written notice to you, to
terminate your employment:
(a) immediately at any time for "Cause" (as defined herein
subject to your right of cure and right to dispute as provided in Section
2.3 herein); or
(b) at any time, without "Cause," provided that the Company
shall be obligated to pay to you the Severance Benefits set forth in
Section 6, Exhibit A, plus any sums then due to you, including those
---------
expenses as are provided for in Section 4 of Exhibit A, less (i) applicable
---------
taxes and other required withholdings, and (ii) any amounts you may owe to
the Company. Payments under this Section 2.2 (b) shall not be due or
payable if you are terminated at any time for "Cause" or if you voluntarily
resign from your employment.
2.3 For purposes of Section 2.2, the term "Cause" shall mean (a)
gross negligence or willful misconduct in the performance of assigned duties;
(b) material and repetitive refusal to perform or discharge the duties or
responsibilities assigned by the President of the Company provided the same are
not illegal, unethical or inconsistent with the position of Vice President,
Engineering, of a corporation and the failure to correct such refusal and
perform such duties or responsibilities within a reasonable period of time (but
in any event no less than seven (7) calendar days after written notice of such
failure); (c) conviction of a felony or misdemeanor involving moral turpitude;
(d) willful or prolonged absence from work not excused by a bona fide medical
disability as reasonably determined by a qualified physician mutually acceptable
to both you and the Company or other good cause as reasonably determined by the
Board of Directors; and (e) falseness of any warranty or representation by you
herein or the breach of your obligations under this Agreement to the material
detriment of the Company.
2.4 In the event of the Involuntary Termination (as hereinafter
defined) of your employment with the Company at any time, the Company hereby
agrees to provide you with Severance Benefits as defined in Section 6 of Exhibit
-------
A hereto. In this regard, the phrase "Involuntary Termination" shall mean (a)
- - -
any termination of your employment by the Company other than for "cause," as
defined in Section 2.3 or (b) any notice by the Company not to renew this
Agreement pursuant to Section 2.1.
2.5 You shall have the right to terminate this Agreement upon not
less than thirty (30) days prior written notice to the Company.
3. Compensation. You shall receive the compensation and benefits set
------------
forth on Exhibit A ("Compensation") for all services to be rendered by you
---------
hereunder and for your transfer of property rights pursuant to an agreement
relating to proprietary information and inventions of even date herewith
attached hereto as Exhibit C between you and the Company (the "Proprietary
Information and Inventions Agreement").
4. Other Activities During Employment.
----------------------------------
A-2
<PAGE>
4.1 Except for any outside employments and directorships currently
held by you as listed on Exhibit B, and/or except with the prior written consent
---------
of the Company's Senior Vice President and Chief Operating Officer, you will not
during the term of this Agreement undertake or engage in any other employment,
occupation or business enterprise other than one in which you are an inactive
investor.
4.2 You hereby agree that, except as disclosed on Exhibit B hereto,
---------
during your employment hereunder, you will not, directly or indirectly, engage
(a) individually, (b) as an officer, (c) as a director, (d) as an employee, (e)
as a consultant, (f) as an advisor, (g) as an agent (whether a salesperson or
otherwise), (h) as a broker, or (i) as a partner, coventurer, stockholder or
other proprietor owning directly or indirectly more than two percent (2%)
interest, in any firm, corporation, partnership, trust, association, or other
organization which is engaged in the research, development, production,
manufacture or marketing of equipment or processes in direct competition with
the Company or any other line of business engaged in or under demonstrable
development by the Company (such firm, corporation, partnership, trust,
association, or other organization being hereinafter referred to as a
"Prohibited Enterprise"). Except as may be shown on Exhibit B, you hereby
---------
represent that you are not engaged in any of the foregoing capacities (a)
through (i) in any Prohibited Enterprise.
5. Former Employers.
----------------
5.1 You represent and warrant that your employment by the Company
will not conflict with and will not be constrained by any prior or current
employment, consulting agreement or relationship whether oral or written. You
represent and warrant that you do not possess confidential information arising
out of any such employment, consulting agreement or relationship which, in your
best judgment, would be utilized in connection with your employment by the
Company in the absence of Section 5.2.
5.2 If, in spite of the second sentence of Section 5.1, you should
find that confidential information belonging to any other person or entity might
be usable in connection with the Company's business, you will not intentionally
disclose to the Company or use on behalf of the Company any confidential
information belonging to any of your former employers; but during your
employment by the Company you will use in the performance of your duties all
information which is generally known and used by persons with training and
experience comparable to your own all information which is common knowledge in
the industry or otherwise legally in the public domain.
6. Proprietary Information and Inventions. You agree to execute, deliver
--------------------------------------
and be bound by the provisions of the Proprietary Information and Inventions
Agreement.
7. Remedies. Your obligations under the Proprietary Information and
--------
Inventions Agreement and the provisions of Sections 4, 6, and 8 of this
Agreement (as modified by Section
A-3
<PAGE>
9, if applicable) shall survive the expiration or termination of your employment
(whether through your resignation or otherwise) with the Company. You
acknowledge that a remedy at law for any breach or threatened breach by you of
the provisions of the Proprietary Information and Inventions Agreement would be
inadequate and you therefore agree that the Company shall be entitled to such
injunctive or other equitable relief in case of any such breach or threatened
breach.
8. Assignment. This Agreement and the rights and obligations of the
----------
parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger or consolidation and any
assignee of all or substantially all of its business and properties, but, except
as to any such successor or assignee of the Company, neither this Agreement nor
any rights or benefits hereunder may be assigned by the Company or by you,
except by operation of law. The Company's obligations and those of any
successors or assignees of the Company under this Agreement, including but not
limited to the severance provisions and other compensation and benefits due to
you pursuant to Exhibit A hereto, will be a condition of and are to remain those
---------
of any successor or assignee.
9. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any one
--------------
or more of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. MOREOVER, IT IS THE
INTENT OF THE PARTIES THAT in case any one or more of the provisions contained
in this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provision shall be
construed by limiting and reducing it as determined by a court of competent
jurisdiction, so as to be enforceable to the extent compatible with applicable
law.
10. Notices. Any notice which the Company is required to or may desire to
-------
give you shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to you at your address of record with the
Company, or at such other place as you may from time to time designate in
writing. Any notice which you are required or may desire to give to the Company
hereunder shall be given by personal delivery or by registered or certified
mail, return receipt requested, addressed to the Company at its principal
office, or at such other office as the Company may from time to time designate
in writing. The date of personal delivery or the date of mailing any notice
under this Section 10 shall be deemed to be the date of delivery thereof.
11. Waivers. If either party should waive any breach of any provision of
-------
this Agreement, such party shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
12. Complete Agreement; Amendments. The foregoing including Exhibits A,
------------------------------
B, C,
A-4
<PAGE>
D and E hereto, is the entire agreement of the parties with respect to the
subject matter hereof, superseding any previous oral or written communications,
representations, understandings, or agreements with the Company or any officer
or representative thereof. Any amendment to this Agreement or waiver by the
Company of any right hereunder shall be effective only if evidenced by a written
instrument executed by the parties hereto, upon authorization of the Company's
Board of Directors.
13. Headings. The headings of the Sections hereof are inserted for
--------
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning of this Agreement.
14. Counterparts. This Agreement may be signed in two counterparts, each
------------
of which shall be deemed an original and both of which shall together constitute
one agreement.
15. Governing Law; Venue. This Agreement shall be governed by and
--------------------
construed under Massachusetts law.
16. Advice of Separate Counsel. You acknowledge that you have been
--------------------------
advised to review this Agreement with your own legal counsel and other advisors
of your choosing and that prior to entering into this Agreement, you have had
the opportunity to review this Agreement with your attorney and other advisors
and have not asked (or relied upon) Mintz, Levin, Cohn., Ferris, Glovsky and
Pope, P.C. to represent you in this matter.
If you are in agreement with the foregoing, please sign your name below and
also at the bottom of the Proprietary Information and Inventions Agreement and
Stock Option Grant Letter, whereupon this Agreement shall become binding in
accordance with its terms. Please then return this Agreement to the Company.
(You may retain for your records the accompanying counterpart of this Agreement
enclosed herewith).
ACCEPTED AND AGREED: APPLIED SCIENCE AND
TECHNOLOGY, INC.
/s/ Jack J. Schuss By: /s/ Richard S. Post
- - ----------------------------- ------------------------------
Jack J. Schuss Dr. Richard S. Post, President
A-5
<PAGE>
EXHIBIT A
---------
EMPLOYMENT TERM, COMPENSATION AND BENEFITS
OF JACK J. SCHUSS
1. Term. The term of the Agreement to which this Exhibit A is attached
----
and made a part shall be for a period from the date of this Agreement through
February 1, 2001.
2. Compensation.
------------
(a) Base Salary. Your base salary ("Base Salary") shall be $6,730.76
-----------
payable on a bi-weekly basis ($175,000 on an annualized basis) through September
30, 2000, payable in accordance with the Company's payroll policies. Commencing
October 1, 2000 your base salary shall be established by the Board of Director's
Compensation Committee.
(b) Bonuses. The Company shall establish appropriate incentive
-------
compensation plans ("Bonuses") for you for each fiscal year that you are
employed hereunder, commencing with Fiscal 2000 which commences on June 27,
1999, under which you shall be entitled to a prorated bonus of up to 30% of your
then current Base Salary based on the Company attaining certain financial and
other results and also based upon individual goals to be established for you.
Such Bonuses shall be properly approved by the Board of Directors or the
Compensation Committee of the Board of Directors.
3. Vacation, Insurance and Benefits; Expenses. You shall be entitled to
------------------------------------------
all legal holidays recognized by the Company, and 15 days paid vacation per
annum. Any unused vacation may be accrued or used in accordance with Company
policy. You shall be eligible for participation in any health, dental, and
other group insurance plans which may be established and maintained by the
Company for all full-time employees or which the Company is required to maintain
by law. You shall also be entitled to participate in any employee benefit
programs which the Company's Board of Directors may establish for Company
employees generally, including, but not limited to, bonuses and stock purchase
or option plans. You will be eligible to participate in the Company's 401(k)
Plan. The Company shall reimburse you for all usual and ordinary business
expenses incurred by you in the scope of your employment hereunder in accordance
with the Company's expense reimbursement policy.
4. Initial Stock Options. You shall be entitled to receive stock options
---------------------
to purchase up to an aggregate of 30,000 shares of common stock of the Company.
Such options shall be priced on the closing price of the Company's Common Stock
as reported by NASDAQ on the date you commence employment with the Company and
shall vest as follows: the stock options have a four year vesting period, with
20% vesting after six months, 20% vesting after one year, 20% at the end of two
years, 20% at the end of three years, and full vesting at the end of four years
in four equal annual installments on the anniversary date of such grant. A copy
of the
A-6
<PAGE>
forms of option grant letter is attached hereto as Exhibits D and E.
----------------
Notwithstanding the foregoing, in the event of a Change of Control (as defined
in Section 7 herein), an additional 20% of such option shall vest upon the
Change of Control (but in any event not to exceed 100% of the original option
grant).
5. Subsequent Stock Options. You shall be entitled to additional stock
------------------------
options as determined by the compensation committee of ASTeX's Board of
Director's in its sole discretion. An additional 10,000 options may be granted
based on a performance review on or about October 1, 2000. An additional 10,000
options may be granted based on a second review on or about October 1, 2001.
6. Severance Benefits.
------------------
(a) When provided for in this Agreement, you shall be entitled to
"Severance Benefits." When used in this Agreement, the term "Severance
Benefits" shall mean a total amount equal to one hundred percent (100%) of your
then current Base Salary if you are involuntarily terminated for any reason
other than for cause, for a period not to exceed six (6) months or up until when
you start another full time position if it is prior to six months from your
termination date. The Severance Benefits shall be paid via check to you in six
(6) equal monthly installments commencing within ten (10) days after the date of
your termination of employment with the Company.
(b) In addition, the term "Severance Benefits" shall include the
continuation for you and your family, during the Severance Period, as defined
below, of all of the other benefits which are provided or available to you on
the last day of your actual service with the Company. For purposes of this
Agreement, the term "Severance Period" means the period of six (6) months
beginning on the Date of Termination.
(c) The Severance Benefits referred to above will be in addition to,
and not in substitution for, any accrued and unpaid salary, vacation, pension or
other similar retirement benefits, and unreimbursed expenses to which you may be
otherwise entitled.
7. Change in Control.
-----------------
(a) For purposes of this Agreement, "Change in Control" means and
shall be deemed to occur if any of the following occurs: (i) the acquisition by
an individual, entity or group, as defined in Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of
beneficial ownership, as defined in Rule 13d-3 promulgated under the Exchange
Act, of 50% or more of either (A) the outstanding shares of common stock, $.01
par value per share, of the Company (the "Common Stock"), or (B) the combined
voting power of the voting securities of the Company entitled to vote generally
in the election of directors (the "Voting Securities"); or (ii) individuals who,
on November 21, 1997, constituted the Board of Directors of the Company (the
"Incumbent Board") cease for any reason to
A-7
<PAGE>
constitute at least a majority of the Board of Directors of the Company;
provided, however, that any individual becoming a director subsequent to
- - -------- -------
November 21, 1997, whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then serving and comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents; or (iii)
approval by the Board of Directors or the shareholders of the Company of a (A)
tender offer to acquire any of the Common Stock or voting securities, (B)
reorganization, (C) merger or (D) consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all of the
individuals and entities who were the beneficial owners, immediately prior to
such reorganization, merger or consolidation, of the Common Stock and voting
securities beneficially own, directly or indirectly, immediately after such
reorganization, merger or consolidation, more than 80% of the then outstanding
common stock and voting securities (entitled to vote generally in the election
of directors) of the Company resulting from such reorganization, merger or
consolidation in substantially the same proportions as their respective
ownership, immediately prior to such reorganization, merger or consolidation, of
the Common Stock and the voting securities; or (iv) Approval by the Board of
Directors or the shareholders of the Company of (A) a complete or substantial
liquidation or dissolution of the Company, or (B) the sale or other disposition
of all or substantially all of the assets of the Company, excluding a
reorganization of the Corporation under the corporate laws of Delaware.
(b) In the event of your actual termination of employment
contemporaneous with or following a Change in Control, except (x) because of
your death, (y) by the Company for Cause or Disability (as hereinafter defined)
or (z) by you other than for Good Reason (as hereinafter defined): (i) you shall
be entitled to receive, in lieu of the sums described in Section 6, an amount
equal to 100% of the Severance Benefits due and determined as if payable under
Section 6 above, for each full year or portion thereof you have been employed by
the Company, up to a maximum of 100% of the Severance Benefits mentioned in
Section 6 above, to be paid in accordance with the terms of this Agreement; and
(ii) the following additional provisions shall apply (which provisions shall
supersede any other provisions of the Agreement, including but not limited to
Section 2 of the Agreement, to the extent such provisions are inconsistent with
the following provisions):
(1) Disability. For purposes of this Section 7(b), termination
----------
by the Company of your employment based on "Disability" shall mean termination
because of your absence from your duties with the Company on a full time basis
for one hundred eighty (180) consecutive days as a result of your incapacity due
to physical or mental illness, unless within thirty (30) days after Notice of
Termination (as hereinafter defined) is given to you following such absence, you
shall have returned to the full time performance of your duties.
(2) Good Reason. Termination by you of your employment for "Good
-----------
A-8
<PAGE>
Reason" shall mean termination based on:
(A) a reduction by the Company (within two years following
the Change of Control) in your Base Salary as in effect immediately prior to the
Change in Control, other than a reduction in salaries generally for officers of
the Company;
(3) Notice of Termination. Any purported termination by the
---------------------
Company or by you following a Change in Control shall be communicated by written
notice to the other party hereto which indicates the specific termination
provision in this Agreement relied upon (the "Notice of Termination").
(4) Date of Termination. "Date of Termination" following a
-------------------
Change in Control shall mean (A) if your employment is to be terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that
you shall not have returned to the performance of your duties on a full-time
basis during such thirty (30) day period), (B) if your employment is to be
terminated by the Company for any reason other than death or Disability or by
you pursuant to Sections 7(b)(2)(F) or 7(b)(6) hereof or for any other Good
Reason, the date specified in the Notice of Termination, or (C) if your
employment is terminated on account of your death, the day after your death.
(5) Compensation Upon Termination or During Disability; Other
---------------------------------------------------------
Agreements.
- - ----------
(A) During any period following a Change in Control of the
Company that you fail to perform your duties as a result of incapacity due to
physical or mental illness, you shall continue to receive your Base Salary at
the rate then in effect and any benefits or awards under any Plan shall continue
to accrue during such period, to the extent not inconsistent with such Plans,
until and unless your employment is terminated pursuant to and in accordance
with this Section 7(b). Thereafter, your benefits shall be determined in
accordance with the Plans then in effect.
(B) If your employment is terminated for Cause following a
Change in Control of the Company, the Company shall pay to you your Base Salary
through the Date of Termination at the rate in effect just prior to the time a
Notice of Termination is given plus any benefits or awards (including both the
cash and stock components) which pursuant to the terms of any Plans have been
earned or become payable, but which have not yet been paid to you. Thereupon,
the Company shall have no further obligations to you under this Agreement.
(6) Successors, Binding Agreement.
-----------------------------
(A) The Company will seek, by written request at least five
(5) business days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person, by agreement in form and substance satisfactory
to you, assent to the fulfillment of the Company's obligations under this
Agreement. Failure of such Person to furnish such assent
A-9
<PAGE>
by the later of (i) three (3) business days prior to the time such Person
becomes a Successor or (ii) two (2) business days after such Person receives a
written request to so assent shall constitute Good Reason for termination by you
of your employment if a Change in Control of the Company occurs or has occurred.
For purposes of Section 7, "Successor" shall mean any person that succeeds to,
or has the practical ability to control, the Company's business directly, by
merger or consolidation, or indirectly, by purchase of the Company's securities
eligible to vote for the election of directors, or otherwise.
(B) This Agreement shall inure to the benefit of and be
enforceable by your personal legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if no such designee exists, to your estate.
(C) For purposes of Section 7, the "Company" shall include
any subsidiaries of the Company and any corporation or other entity which is the
surviving or continuing entity in respect of any merger, consolidation or form
of business combination in which the Company ceases to exist; provided, however,
for purposes of determining whether a Change in Control has occurred herein, the
term "Company" shall refer to Applied Science and Technology, Inc. or its
Successor(s).
(7) Fees and Expenses; Mitigation.
-----------------------------
(A) The Company shall reimburse you, on a current basis,
for all reasonable legal fees and related expenses incurred by you in connection
with the Agreement following a Change in Control of the Company, including
without limitation, (i) all such fees and expenses, if any, incurred in
contesting or disputing any termination of your employment or (ii) your seeking
to obtain or enforce any right or benefit provided by this Agreement, in each
case, regardless of whether or not your claim is upheld by a court of competent
jurisdiction; provided, however, you shall be required to repay any such amounts
to the Company to the extent that a court issues a final and non-appealable
order setting forth the determination that the position taken by you was
frivolous or advanced by you in bad faith.
(B) You shall not be required to mitigate the amount of any
payment the Company becomes obligated to make to you in connection with this
Agreement, by seeking other employment or otherwise.
(8) Taxes. All payments to be made to you under this Agreement
-----
will be subject to required withholding of federal, state and local income and
employment taxes.
(c) Notwithstanding any other provision of this Agreement, in the
event that any payment or benefit received or to be received by you as a result
of or in connection with a
A-10
<PAGE>
Change in Control, whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company (all such payment and benefits
being hereinafter called the "Total Payments") would subject you to the excise
tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), then, to the extent necessary to eliminate any
such imposition of the Excise Tax (after taking into account any reduction in
the Total Payments in accordance with the provisions of any other plan,
arrangement or agreement, if any), (a) any non-cash severance payments otherwise
payable to you shall first be reduced (if necessary, to zero), and (b) any cash
severance payment otherwise payable to you shall next be reduced. For purposes
of the immediately preceding sentence, (i) no portion of the Total Payments the
receipt or enjoyment of which you shall have effectively waived in writing shall
be taken into account, (ii) no portion of the Total Payment shall be taken into
account which in the opinion of nationally-recognized certified public
accountants (in each case as mutually selected by you and the Company) does not
constitute a "parachute payment" within the meaning of Section 280G of the Code,
including, without limitation, by reason of Section 280G(b)(2) or (b)(4)(A) of
the Code, (iii) any payments to you shall be reduced only to the extent
necessary so that the Total Payments [other than those referred to in clauses
(i) and (ii)] in their entirety constitute reasonable compensation for services
actually rendered within the meaning of Section 280G(4)(B) of the Code or are
otherwise not subject to disallowance as deductions, in the opinion of the tax
counsel or the accountants referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by such accountants in accordance with the
requirements of section 280G(d)(3) and (4) of the Code (and such determination
shall be reviewed by such tax counsel).
[THIS SPACE INTENTIONALLY LEFT BLANK]
A-11
<PAGE>
EXHIBIT B
---------
OUTSIDE EMPLOYMENTS AND DIRECTORSHIPS OF
JACK J. SCHUSS
B-1
<PAGE>
EXHIBIT C
---------
--------------------------------------------------
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
--------------------------------------------------
To: Applied Science and Technology, Inc.
35 Cabot Road
Woburn, Massachusetts 01801
As of February 1, 2000
The undersigned, in consideration of and as a condition of my employment or
continued employment by you and/or by companies which you own, control, or are
affiliated with or their successors in business (collectively, the "Company"),
hereby agrees as follows:
1. Confidentiality. I agree to keep confidential, except as the Company
---------------
may otherwise consent in writing, and, except for the Company's benefit, not to
disclose or make any use of at any time either during or subsequent to my
employment, any Inventions (as hereinafter defined), trade secrets, confidential
information, knowledge, data or other information of the Company relating to
products, processes, know-how, designs, formulas, test data, customer lists,
business plans, marketing plans and strategies, pricing strategies, or other
subject matter pertaining to any business of the Company or any of its
affiliates, which I may produce, obtain, or otherwise acquire during the course
of my employment, except as herein provided. I further agree not to deliver,
reproduce or in any way allow any such trade secrets, confidential information,
knowledge, data or other information, or any documentation relating thereto, to
be delivered to or used by any third parties without specific direction or
consent of a duly authorized representative of the Company.
2. Conflicting Employment; Return of Confidential Material. I agree that
-------------------------------------------------------
during my employment with the Company I will not engage in any other employment,
occupation, consulting or other activity relating to the business in which the
Company is now or may hereafter become engaged, or which would otherwise
conflict with my obligations to the Company. In the event my employment with
the Company terminates for any reason whatsoever, I agree to promptly surrender
and deliver to the Company all records, materials, equipment, drawings,
documents and data of which I may obtain or produce during the course of my
employment, and I will not take with me any description containing or pertaining
to any confidential information, knowledge or data of the Company which I may
produce or obtain during the course of my employment.
3. Assignment of Inventions.
------------------------
3.1 I hereby acknowledge and agree that the Company is the owner of
all
C-1
<PAGE>
Inventions. In order to protect the Company's rights to such Inventions, by
executing this Agreement I hereby irrevocably assign to the Company all my
right, title and interest in and to all Inventions to the Company.
3.2 For purposes of this Agreement, "Inventions" shall mean all
discoveries, processes, designs, technologies, devices, or improvements in any
of the foregoing or other ideas, whether or not patentable and whether or not
reduced to practice, made or conceived by me (whether solely or jointly with
others) during the period of my employment with the Company which relate in any
manner to the actual or demonstrably anticipated business, work, or research and
development of the Company, or result from or are suggested by any task assigned
to me or any work performed by me for or on behalf of the Company.
3.3 Any discovery, process, design, technology, device, or
improvement in any of the foregoing or other ideas, whether or not patentable
and whether or not reduced to practice, made or conceived by me (whether solely
or jointly with others) which I develop entirely on my own time not using any of
the Company's equipment, supplies, facilities, or trade secret information
("Personal Invention") is excluded from this Agreement provided such Personal
Invention (a) does not relate to the actual or demonstrably anticipated
business, research and development of the Company, and (b) does not result,
directly or indirectly, from any work performed by me for the Company.
4. Disclosure of Inventions. I agree that in connection with any
------------------------
Invention, I will promptly disclose such Invention to my immediate superior at
the Company in order to permit the Company to enforce its property rights to
such Invention in accordance with this Agreement. My disclosure shall be
received in confidence by the Company.
5. Patents and Copyrights; Execution of Documents.
----------------------------------------------
5.1 Upon request, I agree to assist the Company or its nominee (at
its expense) during and at any time subsequent to my employment in every
reasonable way to obtain for its own benefit patents and copyrights for
Inventions in any and all countries. Such patents and copyrights shall be and
remain the sole and exclusive property of the Company or its nominee. I agree
to perform such lawful acts as the Company deems to be necessary to allow it to
exercise all right, title and interest in and to such patents and copyrights.
5.2 In connection with this Agreement, I agree to execute,
acknowledge and deliver to the Company or its nominee upon request and at its
expense all documents, including assignments of title, patent or copyright
applications, assignments of such applications, assignments of patents or
copyrights upon issuance, as the Company may determine necessary or desirable to
protect the Company's or its nominee's interest in Inventions, and/or to use in
obtaining patents or copyrights in any and all countries and to vest title
thereto in the Company or its nominee to any of the foregoing.
C-2
<PAGE>
6. Maintenance of Records. I agree to keep and maintain adequate and
----------------------
current written records of all Inventions made by me (in the form of notes,
sketches, drawings and other records as may be specified by the Company), which
records shall be available to and remain the sole property of the Company at all
times.
7. Prior Inventions. It is understood that all Personal Inventions, if
----------------
any, whether patented or unpatented, which I made prior to my employment by the
Company, are excluded from this Agreement. To preclude any possible
uncertainty, I have set forth on Schedule A attached hereto a complete list of
all of my prior Personal Inventions, including numbers of all patents and patent
applications and a brief description of all unpatented Personal Inventions which
are not the property of a previous employer. I represent and covenant that the
list is complete and that, if no items are on the list, I have no such prior
Personal Inventions. I agree to notify the Company in writing before I make any
disclosure or perform any work on behalf of the Company which appears to
threaten or conflict with proprietary rights I claim in any Personal Invention.
In the event of my failure to give such notice, I agree that I will make no
claim against the Company with respect to any such Personal Invention.
8. Other Obligations. I acknowledge that the Company from time to time
-----------------
may have agreements with other persons or with the U.S. Government or agencies
thereof, which impose obligations or restrictions on the Company regarding
Inventions made during the course of work thereunder or regarding the
confidential nature of such work. I agree to be bound by all such obligations
and restrictions and to take all action necessary to discharge the Company's
obligations.
9. Trade Secrets of Others. I represent that my performance of all the
-----------------------
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep confidential proprietary information, knowledge or
data acquired by me in confidence or in trust prior to my employment with the
Company, and I will not disclose to the Company, or induce the Company to use,
any confidential or proprietary information or material belonging to any
previous employer or others. I agree not to enter into any agreement either
written or oral in conflict herewith.
10. Modification. I agree that any subsequent change or changes in my
------------
employment duties, salary or compensation or, if applicable, in any Employment
Agreement between the Company and me, shall not affect the validity or scope of
this Agreement.
11. Successors and Assigns. This Agreement shall be binding upon my
----------------------
heirs, executors, administrators or other legal representatives and is for the
benefit of the Company, its successors and assigns.
12. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any one
--------------
or more of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such
C-3
<PAGE>
invalid, illegal or unenforceable provision had never been contained herein.
MOREOVER, IT IS THE INTENT OF THE PARTIES THAT in case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, such
provision shall be construed by limiting and reducing it in accordance with a
judgment of a court of competent jurisdiction, so as to be enforceable to the
extent compatible with applicable law.
13. Waivers. If either party should waive any breach of any provision of
-------
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
14. Complete Agreement, Amendments. I acknowledge receipt of this
------------------------------
Agreement, and agree that with respect to the subject matter thereof the
provisions of this Key Employee Agreement of which this Exhibit C is one part,
is my entire agreement with the Company, superseding any previous oral or
written communications, representations, understandings, or agreements with the
Company or any officer or representative thereof. Any amendment to this
Agreement or waiver by either party of any right hereunder shall be effective
only if evidenced by a written instrument executed by the parties hereto, and,
in the case of the Company, upon written authorization of the Company's Board of
Directors.
15. Headings. The headings of the sections hereof are inserted for
--------
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
16. Counterparts. This Agreement may be signed in two counterparts, each
------------
of which shall be deemed an original and both of which shall together constitute
one agreement.
17. Governing Law. This Agreement shall be governed by and construed
-------------
under Massachusetts law.
C-4
<PAGE>
18. Employment Status. Nothing in this Agreement shall affect in any
-----------------
manner whatsoever the right or power of the Company to terminate the employment
of the Employee.
EMPLOYEE
/s/ Jack J. Schuss
-----------------------------------
Jack J. Schuss
Accepted and Agreed:
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ Richard S. Post
---------------------------------
Dr. Richard S. Post, President
C-5
<PAGE>
SCHEDULE A
----------
LIST OF PRIOR INVENTIONS
OF
JACK J. SCHUSS
Identifying Number or
Title Date Brief Description
- - ----- ---- -------------------------
Antenna for high 11/24/1999
data rate wireless
access
Inventions or patents disclosed to Raytheon Company on or before 1/31/2000
C-6
<PAGE>
EXHIBIT D-1 (Incentive Stock Option)
------------------------------------
APPLIED SCIENCE AND TECHNOLOGY, INC.
35 Cabot Road
Woburn, Massachusetts 01801
Effective: February 1, 2000
Jack J. Schuss
8 Cedar Street
Newton, MA 02459
Dear Jack:
I am pleased to advise you that APPLIED SCIENCE AND TECHNOLOGY, INC. (the
"Company") has, pursuant to its 1993 Stock Option Plan (the "1993 Plan"),
awarded you an incentive stock option to purchase [Note: The total grant of
30,000 shares will be divided between incentive stock options and non-qualified
options. The incentive stock options will equal (a) the number of option shares
not to exceed $100,000 in value based on exercise price vesting in any single
calendar year, multiplied by (b) five (the five calendar years over which the
option vests). The remaining options will be issued under a non-qualified stock
option - see attached] shares of the Common Stock, $.01 par value per share, of
the Company at an exercise price of $ 30.375 per share, for a total exercise
price of $911,250.00. The Company is making this offer to "share the business"
with valued employees such as yourself. We hope that by owning a piece of the
Company you will continue your efforts towards helping the Company grow and
succeed.
The following terms and conditions are applicable with respect to this
option, and your signature below shall constitute your acknowledgment and
acceptance of same:
(a) This option shall not be transferable under any circumstances except
by operation of law. During your lifetime, this option is only
exercisable by you, and after your death, is only exercisable by your
estate.
(b) The price at which this option may be exercised shall be $30.375 per
share, for a total exercise price of $911,250.00.
(c) This option is exercisable commencing six months from your hire date
and at any time hereafter through February 1, 2005, subject to the
following terms:
<PAGE>
(1) In the event of termination of your employment with the Company
(or a parent or subsidiary of the Company) for any reason other
than death or disability as defined in Internal Revenue Code
Section 22(e)(3), as amended (the "Code"), all unexercised
options shall terminate immediately.
(2) In the event of termination of your employment as a result of
your death, the outstanding options exercisable by you at the
date of your death may be exercised by your estate until one (1)
year from the date of your death, but in any event no later than
February 1, 2005.
(3) In the event of termination of your employment as a result of
your disability, as above defined, or in the event of a
disability that lasts for more than ninety (90) days, all
outstanding options exercisable by you at the date of such
termination shall terminate one (1) year from the date your
employment terminates, but in any event no later than
February 1, 2005.
(4) Notwithstanding anything herein to the contrary, the maximum
extent to which this option may be exercised is as follows:
Dates Up to
----- -----
After six (6) months of employment 20%
After one (1) year of employment 40%
After two (2) years of employment 60%
After three (3) years of employment 80%
After four (4) years of employment 100%
(d) This option may not be exercised as to less than one hundred (100)
shares at any one time unless it is being exercised in full and the
balance of the shares subject to this option is less than one hundred
(100).
(e) The shares of Common Stock underlying this option and the exercise
price therefore shall be appropriately adjusted from time to time for
stock splits, reverse splits, stock dividends and reclassifications of
shares.
(f) In the event of a sale or acquisition of substantially all of the
stock or assets of the Company, the Company shall give at least thirty
(30) days' notice of such an event to you and you may exercise up to
100% of the vested portion of this option; if you do not exercise the
option within thirty (30) days of such notice, all unexercised
portions of this option shall terminate and be of no further force or
<PAGE>
effect. Notwithstanding the foregoing, additional shares underlying
this option grant may vest in accordance with the provisions of
Exhibit A of your Employment Agreement of even date with the Company.
This opportunity to purchase stock in the Company is being offered because
of the Company's desire to reward continuing loyal service. Exercising options
may not be a prudent business decision for some employees. Therefore, we urge
you to review this opportunity carefully and make a decision to exercise options
only if your personal financial situation makes this a wise choice.
When you wish to exercise this stock option, please refer to the provisions
of this letter and then correspond in writing with the Secretary of the Company.
Further, please indicate your acknowledgment and acceptance of this option by
signing the enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ John M. Tarrh
---------------------------------------
John M. Tarrh, Senior Vice President
ACKNOWLEDGMENT AND ACCEPTANCE:
/s/ Jack J. Schuss
- - -------------------------------
Jack J. Schuss
<PAGE>
EXHIBIT E (Non-Qualified Option)
--------------------------------
APPLIED SCIENCE AND TECHNOLOGY, INC.
35 Cabot Road
Woburn, Massachusetts 01801
Effective: February 1, 2000
Jack J. Schuss
8 Cedar Street
Newton, MA 02459
Dear Jack:
I am pleased to advise you that APPLIED SCIENCE AND TECHNOLOGY, INC. (the
"Company") has, pursuant to its 1993 Stock Option Plan (the "1993 Plan"),
awarded you a non-qualified stock option to purchase [Note: Remainder of 30,000
option grant not qualifying for incentive stock option treatment] shares of the
Common Stock, $.01 par value per share, of the Company at an exercise price of
$30.375 per share, for a total exercise price of $911,250.00. The Company is
making this offer to "share the business" with valued employees such as
yourself. We hope that by owning a piece of the Company you will continue your
efforts towards helping the Company grow and succeed.
The following terms and conditions are applicable with respect to this
option, and your signature below shall constitute your acknowledgment and
acceptance of same:
(a) This option shall not be transferable under any circumstances except
by operation of law. During your lifetime, this option is only
exercisable by you, and after your death, is only exercisable by your
estate.
(b) The price at which this option may be exercised shall be $30.375 per
share, for a total exercise price of $911,250.00.
(c) This option is exercisable commencing six months from your hire date
and at any time hereafter through February 1, 2005, subject to the
following terms:
(1) In the event of termination of your employment with the Company
(or a parent or subsidiary of the Company) for any reason other
than death or disability as defined in Internal Revenue Code
Section 22(e)(3), as amended (the "Code"), all unexercised
options shall terminate
<PAGE>
immediately.
(2) In the event of termination of your employment as a result of
your death, the outstanding options exercisable by you at the
date of your death may be exercised by your estate until one (1)
year from the date of your death, but in any event no later than
February 1, 2005.
(3) In the event of termination of your employment as a result of
your disability, as above defined, or in the event of a
disability that lasts for more than ninety (90) days, all
outstanding options exercisable by you at the date of such
termination shall terminate one (1) year from the date your
employment terminates, but in any event no later than
February 1, 2005.
(4) Notwithstanding anything herein to the contrary, the maximum
extent to which this option may be exercised is as follows:
Dates Up to
----- -----
After six (6) months of employment 20%
After one (1) year of employment 40%
After two (2) years of employment 60%
After three (3) years of employment 80%
After four (4) years of employment 100%
(d) This option may not be exercised as to less than one hundred (100)
shares at any one time unless it is being exercised in full and the
balance of the shares subject to this option is less than one hundred
(100).
(e) The shares of Common Stock underlying this option and the exercise
price therefore shall be appropriately adjusted from time to time for
stock splits, reverse splits, stock dividends and reclassifications of
shares.
(f) In the event of a sale or acquisition of substantially all of the
stock or assets of the Company, the Company shall give at least thirty
(30) days' notice of such an event to you and you may exercise up to
100% of the vested portion of this option; if you do not exercise the
option within thirty (30) days of such notice, all unexercised
portions of this option shall terminate and be of no further force or
effect. Notwithstanding the foregoing, additional shares underlying
this option grant may vest in accordance with the provisions of
Exhibit A of your Employment Agreement of even date with the Company.
<PAGE>
This opportunity to purchase stock in the Company is being offered because
of the Company's desire to reward continuing loyal service. Exercising options
may not be a prudent business decision for some employees. Therefore, we urge
you to review this opportunity carefully and make a decision to exercise options
only if your personal financial situation makes this a wise choice.
When you wish to exercise this stock option, please refer to the provisions
of this letter and then correspond in writing with the Secretary of the Company.
Further, please indicate your acknowledgment and acceptance of this option by
signing the enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ John M. Tarrh
------------------------------------
John M. Tarrh, Senior Vice President
ACKNOWLEDGMENT AND ACCEPTANCE:
/s/ Jack J. Schuss
- - -------------------------------
Jack J. Schuss
<PAGE>
EXHIBIT 10.3
--------------------------------------
KEY EMPLOYEE AGREEMENT
--------------------------------------
As of January 4, 2000
To: John Edward Ross
2183 Shadow Ridge Way
San Jose, CA 95138
The undersigned, Applied Science and Technology, Inc., a Delaware
corporation, as well as its successors and assigns (hereinafter collectively
referred to as the "Company"), hereby agree with you as follows:
1. Position and Responsibilities.
-----------------------------
1.1 You shall serve as Vice President (or in such other capacity as
shall be designated by the President or Board of Directors and reasonably
acceptable to you). You will, to the best of your ability, devote your full time
and best efforts to the performance of your duties hereunder and the business
and affairs of the Company and perform such duties as may be assigned to you by
or on authority of the Company's President from time to time and the duties
customarily associated with such capacity from time to time and at such place or
places as the Company shall designate are appropriate and necessary in
connection with such employment.
1.2 You will duly, punctually and faithfully perform and observe any
and all rules and regulations which the Company may now or shall hereafter
establish governing the conduct of its business.
1.3 You will report directly to the Company's President/Chief
Executive Officer and will be based out of the Company's Woburn office.
2. Term of Employment.
------------------
2.1 The initial term of this Agreement shall be for the period set
forth on Exhibit A annexed hereto commencing with the date hereof. Thereafter,
---------
this Agreement shall be automatically renewed for successive periods of one
year, unless you or the Company shall give the other party not less than thirty
(30) days written notice of non-renewal. Your employment with the Company may
be terminated as provided in Section 2.2.
A-1
<PAGE>
2.2 The Company shall have the right, upon written notice to you, to
terminate your employment:
(a) immediately at any time for "Cause" (as defined herein
subject to your right of cure and right to dispute as provided in Section
2.3 herein); or
(b) at any time, without "Cause," provided that the Company
shall be obligated to pay to you the Severance Benefits set forth in
Section 6, Exhibit A, plus any sums then due to you, including those
---------
expenses as are provided for in Section 4 of Exhibit A, less (i) applicable
---------
taxes and other required withholdings, and (ii) any amounts you may owe to
the Company. Payments under this Section 2.2 (b) shall not be due or
payable if you are terminated at any time for "Cause" or if you voluntarily
resign from your employment.
2.3 For purposes of Section 2.2, the term "Cause" shall mean (a)
gross negligence or willful misconduct in the performance of assigned duties;
(b) material and repetitive refusal to perform or discharge the duties or
responsibilities assigned by the President of the Company provided the same are
not illegal, unethical or inconsistent with the position of Vice President, of a
corporation and the failure to correct such refusal and perform such duties or
responsibilities within a reasonable period of time (but in any event no less
than seven (7) calendar days after written notice of such failure); (c)
conviction of a felony or misdemeanor involving moral turpitude; (d) willful or
prolonged absence from work not excused by a bona fide medical disability as
reasonably determined by a qualified physician mutually acceptable to both you
and the Company or other good cause as reasonably determined by the Board of
Directors; and (e) falseness of any warranty or representation by you herein or
the breach of your obligations under this Agreement to the material detriment of
the Company.
2.4 In the event of the Involuntary Termination (as hereinafter
defined) of your employment with the Company at any time, the Company hereby
agrees to provide you with Severance Benefits as defined in Section 6 of Exhibit
-------
A hereto. In this regard, the phrase "Involuntary Termination" shall mean (a)
- - -
any termination of your employment by the Company other than for "cause," as
defined in Section 2.3 or (b) any notice by the Company not to renew this
Agreement pursuant to Section 2.1.
2.5 You shall have the right to terminate this Agreement upon not
less than thirty (30) days prior written notice to the Company.
3. Compensation. You shall receive the compensation and benefits set
------------
forth on Exhibit A ("Compensation") for all services to be rendered by you
---------
hereunder and for your transfer of property rights pursuant to an agreement
relating to proprietary information and inventions of even date herewith
attached hereto as Exhibit C between you and the Company (the "Proprietary
Information and Inventions Agreement").
4. Other Activities During Employment.
----------------------------------
A-2
<PAGE>
4.1 Except for any outside employments and directorships currently
held by you as listed on Exhibit B, and/or except with the prior written consent
---------
of the Company's President/Chief Executive Officer, you will not during the term
of this Agreement undertake or engage in any other employment, occupation or
business enterprise other than one in which you are an inactive investor.
4.2 You hereby agree that, except as disclosed on Exhibit B hereto,
---------
during your employment hereunder, you will not, directly or indirectly, engage
(a) individually, (b) as an officer, (c) as a director, (d) as an employee, (e)
as a consultant, (f) as an advisor, (g) as an agent (whether a salesperson or
otherwise), (h) as a broker, or (i) as a partner, coventurer, stockholder or
other proprietor owning directly or indirectly more than two percent (2%)
interest, in any firm, corporation, partnership, trust, association, or other
organization which is engaged in the research, development, production,
manufacture or marketing of equipment or processes in direct competition with
the Company or any other line of business engaged in or under demonstrable
development by the Company (such firm, corporation, partnership, trust,
association, or other organization being hereinafter referred to as a
"Prohibited Enterprise"). Except as may be shown on Exhibit B, you hereby
---------
represent that you are not engaged in any of the foregoing capacities (a)
through (i) in any Prohibited Enterprise.
5. Former Employers.
----------------
5.1 You represent and warrant that your employment by the Company
will not conflict with and will not be constrained by any prior or current
employment, consulting agreement or relationship whether oral or written. You
represent and warrant that you do not possess confidential information arising
out of any such employment, consulting agreement or relationship which, in your
best judgment, would be utilized in connection with your employment by the
Company in the absence of Section 5.2.
5.2 If, in spite of the second sentence of Section 5.1, you should
find that confidential information belonging to any other person or entity might
be usable in connection with the Company's business, you will not intentionally
disclose to the Company or use on behalf of the Company any confidential
information belonging to any of your former employers; but during your
employment by the Company you will use in the performance of your duties all
information which is generally known and used by persons with training and
experience comparable to your own all information which is common knowledge in
the industry or otherwise legally in the public domain.
6. Proprietary Information and Inventions. You agree to execute, deliver
--------------------------------------
and be bound by the provisions of the Proprietary Information and Inventions
Agreement.
7. Remedies. Your obligations under the Proprietary Information and
--------
Inventions Agreement and the provisions of Sections 4, 6, and 8 of this
Agreement (as modified by Section
A-3
<PAGE>
9, if applicable) shall survive the expiration or termination of your employment
(whether through your resignation or otherwise) with the Company. You
acknowledge that a remedy at law for any breach or threatened breach by you of
the provisions of the Proprietary Information and Inventions Agreement would be
inadequate and you therefore agree that the Company shall be entitled to such
injunctive or other equitable relief in case of any such breach or threatened
breach.
8. Assignment. This Agreement and the rights and obligations of the
----------
parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger or consolidation and any
assignee of all or substantially all of its business and properties, but, except
as to any such successor or assignee of the Company, neither this Agreement nor
any rights or benefits hereunder may be assigned by the Company or by you,
except by operation of law. The Company's obligations and those of any
successors or assignees of the Company under this Agreement, including but not
limited to the severance provisions and other compensation and benefits due to
you pursuant to Exhibit A hereto, will be a condition of and are to remain those
---------
of any successor or assignee.
9. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any one
--------------
or more of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. MOREOVER, IT IS THE
INTENT OF THE PARTIES THAT in case any one or more of the provisions contained
in this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provision shall be
construed by limiting and reducing it as determined by a court of competent
jurisdiction, so as to be enforceable to the extent compatible with applicable
law.
10. Notices. Any notice which the Company is required to or may desire to
-------
give you shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to you at your address of record with the
Company, or at such other place as you may from time to time designate in
writing. Any notice which you are required or may desire to give to the Company
hereunder shall be given by personal delivery or by registered or certified
mail, return receipt requested, addressed to the Company at its principal
office, or at such other office as the Company may from time to time designate
in writing. The date of personal delivery or the date of mailing any notice
under this Section 10 shall be deemed to be the date of delivery thereof.
11. Waivers. If either party should waive any breach of any provision of
-------
this Agreement, such party shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
12. Complete Agreement; Amendments. The foregoing including Exhibits A,
------------------------------
B, C,
A-4
<PAGE>
D and E hereto, is the entire agreement of the parties with respect to the
subject matter hereof, superseding any previous oral or written communications,
representations, understandings, or agreements with the Company or any officer
or representative thereof. Any amendment to this Agreement or waiver by the
Company of any right hereunder shall be effective only if evidenced by a written
instrument executed by the parties hereto, upon authorization of the Company's
Board of Directors.
13. Headings. The headings of the Sections hereof are inserted for
--------
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning of this Agreement.
14. Counterparts. This Agreement may be signed in two counterparts, each
------------
of which shall be deemed an original and both of which shall together constitute
one agreement.
15. Governing Law; Venue. This Agreement shall be governed by and
--------------------
construed under Massachusetts law.
16. Advice of Separate Counsel. You acknowledge that you have been
--------------------------
advised to review this Agreement with your own legal counsel and other advisors
of your choosing and that prior to entering into this Agreement, you have had
the opportunity to review this Agreement with your attorney and other advisors
and have not asked (or relied upon) Mintz, Levin, Cohn., Ferris, Glovsky and
Pope, P.C. to represent you in this matter.
If you are in agreement with the foregoing, please sign your name below and
also at the bottom of the Proprietary Information and Inventions Agreement and
Stock Option Grant Letter, whereupon this Agreement shall become binding in
accordance with its terms. Please then return this Agreement to the Company.
(You may retain for your records the accompanying counterpart of this Agreement
enclosed herewith).
ACCEPTED AND AGREED: APPLIED SCIENCE AND
TECHNOLOGY, INC.
/s/ John Edward Ross By: /s/ Richard S. Post
- - --------------------------------- -----------------------------------
John Edward Ross Dr. Richard S. Post, President
A-5
<PAGE>
EXHIBIT A
---------
EMPLOYMENT TERM, COMPENSATION AND BENEFITS
OF JOHN EDWARD ROSS
1. Term. The term of the Agreement to which this Exhibit A is attached
----
and made a part shall be for a period from the date of this Agreement through
January 4, 2001.
2. Compensation.
------------
(a) Base Salary. Your base salary ("Base Salary") shall be $7307.69
-----------
payable on a bi-weekly basis ($190,000 on an annualized basis) through January
4, 2001, payable in accordance with the Company's payroll policies. Commencing
October 1, 2001 your base salary shall be established by the Board of Director's
Compensation Committee.
(b) Bonuses. The Company shall establish appropriate incentive
-------
compensation plans ("Bonuses") for you for each fiscal year that you are
employed hereunder, commencing with Fiscal 2000 which commences on June 27,
1999, under which you shall be entitled to a prorated bonus of up to 40% of your
then current Base Salary based on the Company attaining certain financial and
other results and also based upon individual goals to be established for you.
50% of your FY'00 bonus is guaranteed provided employment with ASTeX continues
through the end of the fiscal year. Such Bonuses shall be properly approved by
the Board of Directors or the Compensation Committee of the Board of Directors.
3. Vacation, Insurance and Benefits; Expenses. You shall be entitled to
------------------------------------------
all legal holidays recognized by the Company, and 15 days paid vacation per
annum. Any unused vacation may be accrued or used in accordance with Company
policy. You shall be eligible for participation in any health, dental, and other
group insurance plans which may be established and maintained by the Company for
all full-time employees or which the Company is required to maintain by law.
You shall also be entitled to participate in any employee benefit programs which
the Company's Board of Directors may establish for Company employees generally,
including, but not limited to, bonuses and stock purchase or option plans. You
will be eligible to participate in the Company's 401(k) Plan. The Company shall
reimburse you for all usual and ordinary business expenses incurred by you in
the scope of your employment hereunder in accordance with the Company's expense
reimbursement policy.
4. Initial Stock Options. You shall be entitled to receive stock options
---------------------
to purchase up to an aggregate of 45,000 shares of common stock of the Company.
Such options shall be priced on the closing price of the Company's Common Stock
as reported by NASDAQ on the date you commence employment with the Company and
shall vest as follows: the stock options have a four year vesting period, with
20% vesting after six months, 20% vesting after one year, 20% at the end of two
years, 20% at the end of three years, and full vesting at the end of four
A-6
<PAGE>
years in four equal annual installments on the anniversary date of such grant. A
copy of the forms of option grant letter is attached hereto as Exhibits D and E.
----------------
Notwithstanding the foregoing, in the event of a Change of Control (as defined
in Section 7 herein), an additional 20% of such option shall vest upon the
Change of Control (but in any event not to exceed 100% of the original option
grant).
5. Subsequent Stock Options. You shall be entitled to additional stock
------------------------
options as outlined in your offer letter and determined by the compensation
committee of ASTeX's Board of Director's in its sole discretion.
6. Severance Benefits.
------------------
(a) When provided for in this Agreement, you shall be entitled to
"Severance Benefits." When used in this Agreement, the term "Severance
Benefits" shall mean a total amount equal to one hundred percent (100%) of your
then current Base Salary if you are involuntarily terminated for any reason
other than for cause, for a period not to exceed six (6) months or up until when
you start another full time position if it is prior to six months from your
termination date. The Severance Benefits shall be paid via check to you in six
(6) equal monthly installments commencing within ten (10) days after the date of
your termination of employment with the Company.
(b) In addition, the term "Severance Benefits" shall include the
continuation for you and your family, during the Severance Period, as defined
below, of all of the other benefits which are provided or available to you on
the last day of your actual service with the Company. For purposes of this
Agreement, the term "Severance Period" means the period of six (6) months
beginning on the Date of Termination.
(c) The Severance Benefits referred to above will be in addition to,
and not in substitution for, any accrued and unpaid salary, vacation, pension or
other similar retirement benefits, and unreimbursed expenses to which you may be
otherwise entitled.
7. Change in Control.
-----------------
(a) For purposes of this Agreement, "Change in Control" means and
shall be deemed to occur if any of the following occurs: (i) the acquisition by
an individual, entity or group, as defined in Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of
beneficial ownership, as defined in Rule 13d-3 promulgated under the Exchange
Act, of 50% or more of either (A) the outstanding shares of common stock, $.01
par value per share, of the Company (the "Common Stock"), or (B) the combined
voting power of the voting securities of the Company entitled to vote generally
in the election of directors (the "Voting Securities"); or (ii) individuals who,
on November 21, 1997, constituted the Board of Directors of the Company (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board of Directors of the Company; provided, however, that
-------- -------
A-7
<PAGE>
any individual becoming a director subsequent to November 21, 1997, whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then serving and comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents; or (iii) approval by the Board of Directors
or the shareholders of the Company of a (A) tender offer to acquire any of the
Common Stock or voting securities, (B) reorganization, (C) merger or (D)
consolidation, other than a reorganization, merger or consolidation with respect
to which all or substantially all of the individuals and entities who were the
beneficial owners, immediately prior to such reorganization, merger or
consolidation, of the Common Stock and voting securities beneficially own,
directly or indirectly, immediately after such reorganization, merger or
consolidation, more than 80% of the then outstanding common stock and voting
securities (entitled to vote generally in the election of directors) of the
Company resulting from such reorganization, merger or consolidation in
substantially the same proportions as their respective ownership, immediately
prior to such reorganization, merger or consolidation, of the Common Stock and
the voting securities; or (iv) Approval by the Board of Directors or the
shareholders of the Company of (A) a complete or substantial liquidation or
dissolution of the Company, or (B) the sale or other disposition of all or
substantially all of the assets of the Company, excluding a reorganization of
the Corporation under the corporate laws of Delaware.
(b) In the event of your actual termination of employment
contemporaneous with or following a Change in Control, except (x) because of
your death, (y) by the Company for Cause or Disability (as hereinafter defined)
or (z) by you other than for Good Reason (as hereinafter defined): (i) you shall
be entitled to receive, in lieu of the sums described in Section 6, an amount
equal to 100% of the Severance Benefits due and determined as if payable under
Section 6 above, for each full year or portion thereof you have been employed by
the Company, up to a maximum of 100% of the Severance Benefits mentioned in
Section 6 above, to be paid in accordance with the terms of this Agreement; and
(ii) the following additional provisions shall apply (which provisions shall
supersede any other provisions of the Agreement, including but not limited to
Section 2 of the Agreement, to the extent such provisions are inconsistent with
the following provisions):
(1) Disability. For purposes of this Section 7(b),
----------
termination by the Company of your employment based on "Disability" shall mean
termination because of your absence from your duties with the Company on a full
time basis for one hundred eighty (180) consecutive days as a result of your
incapacity due to physical or mental illness, unless within thirty (30) days
after Notice of Termination (as hereinafter defined) is given to you following
such absence, you shall have returned to the full time performance of your
duties.
(2) Good Reason. Termination by you of your employment for "Good
-----------
Reason" shall mean termination based on:
A-8
<PAGE>
(A) a reduction by the Company (within two years following
the Change of Control) in your Base Salary as in effect immediately prior to the
Change in Control, other than a reduction in salaries generally for officers of
the Company;
(3) Notice of Termination. Any purported termination by the
---------------------
Company or by you following a Change in Control shall be communicated by written
notice to the other party hereto which indicates the specific termination
provision in this Agreement relied upon (the "Notice of Termination").
(4) Date of Termination. "Date of Termination" following a
-------------------
Change in Control shall mean (A) if your employment is to be terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that
you shall not have returned to the performance of your duties on a full-time
basis during such thirty (30) day period), (B) if your employment is to be
terminated by the Company for any reason other than death or Disability or by
you pursuant to Sections 7(b)(2)(F) or 7(b)(6) hereof or for any other Good
Reason, the date specified in the Notice of Termination, or (C) if your
employment is terminated on account of your death, the day after your death.
(5) Compensation Upon Termination or During Disability; Other
---------------------------------------------------------
Agreements.
- - ----------
(A) During any period following a Change in Control of the
Company that you fail to perform your duties as a result of incapacity due to
physical or mental illness, you shall continue to receive your Base Salary at
the rate then in effect and any benefits or awards under any Plan shall continue
to accrue during such period, to the extent not inconsistent with such Plans,
until and unless your employment is terminated pursuant to and in accordance
with this Section 7(b). Thereafter, your benefits shall be determined in
accordance with the Plans then in effect.
(B) If your employment is terminated for Cause following a
Change in Control of the Company, the Company shall pay to you your Base Salary
through the Date of Termination at the rate in effect just prior to the time a
Notice of Termination is given plus any benefits or awards (including both the
cash and stock components) which pursuant to the terms of any Plans have been
earned or become payable, but which have not yet been paid to you. Thereupon,
the Company shall have no further obligations to you under this Agreement.
(6) Successors, Binding Agreement.
-----------------------------
(A) The Company will seek, by written request at least five
(5) business days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person, by agreement in form and substance satisfactory
to you, assent to the fulfillment of the Company's obligations under this
Agreement. Failure of such Person to furnish such assent by the later of (i)
three (3) business days prior to the time such Person becomes a Successor or
A-9
<PAGE>
(ii) two (2) business days after such Person receives a written request to so
assent shall constitute Good Reason for termination by you of your employment if
a Change in Control of the Company occurs or has occurred. For purposes of
Section 7, "Successor" shall mean any person that succeeds to, or has the
practical ability to control, the Company's business directly, by merger or
consolidation, or indirectly, by purchase of the Company's securities eligible
to vote for the election of directors, or otherwise.
(B) This Agreement shall inure to the benefit of and be
enforceable by your personal legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if no such designee exists, to your estate.
(C) For purposes of Section 7, the "Company" shall include
any subsidiaries of the Company and any corporation or other entity which is the
surviving or continuing entity in respect of any merger, consolidation or form
of business combination in which the Company ceases to exist; provided, however,
for purposes of determining whether a Change in Control has occurred herein, the
term "Company" shall refer to Applied Science and Technology, Inc. or its
Successor(s).
(7) Fees and Expenses; Mitigation.
-----------------------------
(A) The Company shall reimburse you, on a current basis,
for all reasonable legal fees and related expenses incurred by you in connection
with the Agreement following a Change in Control of the Company, including
without limitation, (i) all such fees and expenses, if any, incurred in
contesting or disputing any termination of your employment or (ii) your seeking
to obtain or enforce any right or benefit provided by this Agreement, in each
case, regardless of whether or not your claim is upheld by a court of competent
jurisdiction; provided, however, you shall be required to repay any such amounts
to the Company to the extent that a court issues a final and non-appealable
order setting forth the determination that the position taken by you was
frivolous or advanced by you in bad faith.
(B) You shall not be required to mitigate the amount of any
payment the Company becomes obligated to make to you in connection with this
Agreement, by seeking other employment or otherwise.
(8) Taxes. All payments to be made to you under this Agreement
-----
will be subject to required withholding of federal, state and local income and
employment taxes.
(c) Notwithstanding any other provision of this Agreement, in the
event that any payment or benefit received or to be received by you as a result
of or in connection with a Change in Control, whether pursuant to the terms of
this Agreement or any other plan,
A-10
<PAGE>
arrangement or agreement with the Company (all such payment and benefits being
hereinafter called the "Total Payments") would subject you to the excise tax
(the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), then, to the extent necessary to eliminate any
such imposition of the Excise Tax (after taking into account any reduction in
the Total Payments in accordance with the provisions of any other plan,
arrangement or agreement, if any), (a) any non-cash severance payments otherwise
payable to you shall first be reduced (if necessary, to zero), and (b) any cash
severance payment otherwise payable to you shall next be reduced. For purposes
of the immediately preceding sentence, (i) no portion of the Total Payments the
receipt or enjoyment of which you shall have effectively waived in writing shall
be taken into account, (ii) no portion of the Total Payment shall be taken into
account which in the opinion of nationally-recognized certified public
accountants (in each case as mutually selected by you and the Company) does not
constitute a "parachute payment" within the meaning of Section 280G of the Code,
including, without limitation, by reason of Section 280G(b)(2) or (b)(4)(A) of
the Code, (iii) any payments to you shall be reduced only to the extent
necessary so that the Total Payments [other than those referred to in clauses
(i) and (ii)] in their entirety constitute reasonable compensation for services
actually rendered within the meaning of Section 280G(4)(B) of the Code or are
otherwise not subject to disallowance as deductions, in the opinion of the tax
counsel or the accountants referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by such accountants in accordance with the
requirements of section 280G(d)(3) and (4) of the Code (and such determination
shall be reviewed by such tax counsel).
[THIS SPACE INTENTIONALLY LEFT BLANK]
A-11
<PAGE>
EXHIBIT B
---------
OUTSIDE EMPLOYMENTS AND DIRECTORSHIPS OF
JOHN EDWARD ROSS
Director for Life Quality Products (Business Provides Bottled Water for cancer
Patients)
B-1
<PAGE>
EXHIBIT C
---------
------------------------------------------------
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
------------------------------------------------
To: Applied Science and Technology, Inc.
35 Cabot Road
Woburn, Massachusetts 01801
As of January 4, 2000
The undersigned, in consideration of and as a condition of my employment or
continued employment by you and/or by companies which you own, control, or are
affiliated with or their successors in business (collectively, the "Company"),
hereby agrees as follows:
1. Confidentiality. I agree to keep confidential, except as the Company
---------------
may otherwise consent in writing, and, except for the Company's benefit, not to
disclose or make any use of at any time either during or subsequent to my
employment, any Inventions (as hereinafter defined), trade secrets, confidential
information, knowledge, data or other information of the Company relating to
products, processes, know-how, designs, formulas, test data, customer lists,
business plans, marketing plans and strategies, pricing strategies, or other
subject matter pertaining to any business of the Company or any of its
affiliates, which I may produce, obtain, or otherwise acquire during the course
of my employment, except as herein provided. I further agree not to deliver,
reproduce or in any way allow any such trade secrets, confidential information,
knowledge, data or other information, or any documentation relating thereto, to
be delivered to or used by any third parties without specific direction or
consent of a duly authorized representative of the Company.
2. Conflicting Employment; Return of Confidential Material. I agree that
-------------------------------------------------------
during my employment with the Company I will not engage in any other employment,
occupation, consulting or other activity relating to the business in which the
Company is now or may hereafter become engaged, or which would otherwise
conflict with my obligations to the Company. In the event my employment with
the Company terminates for any reason whatsoever, I agree to promptly surrender
and deliver to the Company all records, materials, equipment, drawings,
documents and data of which I may obtain or produce during the course of my
employment, and I will not take with me any description containing or pertaining
to any confidential information, knowledge or data of the Company which I may
produce or obtain during the course of my employment.
3. Assignment of Inventions.
------------------------
3.1 I hereby acknowledge and agree that the Company is the owner of
all
C-1
<PAGE>
Inventions. In order to protect the Company's rights to such Inventions, by
executing this Agreement I hereby irrevocably assign to the Company all my
right, title and interest in and to all Inventions to the Company.
3.2 For purposes of this Agreement, "Inventions" shall mean all
discoveries, processes, designs, technologies, devices, or improvements in any
of the foregoing or other ideas, whether or not patentable and whether or not
reduced to practice, made or conceived by me (whether solely or jointly with
others) during the period of my employment with the Company which relate in any
manner to the actual or demonstrably anticipated business, work, or research and
development of the Company, or result from or are suggested by any task assigned
to me or any work performed by me for or on behalf of the Company.
3.3 Any discovery, process, design, technology, device, or
improvement in any of the foregoing or other ideas, whether or not patentable
and whether or not reduced to practice, made or conceived by me (whether solely
or jointly with others) which I develop entirely on my own time not using any of
the Company's equipment, supplies, facilities, or trade secret information
("Personal Invention") is excluded from this Agreement provided such Personal
Invention (a) does not relate to the actual or demonstrably anticipated
business, research and development of the Company, and (b) does not result,
directly or indirectly, from any work performed by me for the Company.
4. Disclosure of Inventions. I agree that in connection with any
------------------------
Invention, I will promptly disclose such Invention to my immediate superior at
the Company in order to permit the Company to enforce its property rights to
such Invention in accordance with this Agreement. My disclosure shall be
received in confidence by the Company.
5. Patents and Copyrights; Execution of Documents.
----------------------------------------------
5.1 Upon request, I agree to assist the Company or its nominee (at
its expense) during and at any time subsequent to my employment in every
reasonable way to obtain for its own benefit patents and copyrights for
Inventions in any and all countries. Such patents and copyrights shall be and
remain the sole and exclusive property of the Company or its nominee. I agree
to perform such lawful acts as the Company deems to be necessary to allow it to
exercise all right, title and interest in and to such patents and copyrights.
5.2 In connection with this Agreement, I agree to execute,
acknowledge and deliver to the Company or its nominee upon request and at its
expense all documents, including assignments of title, patent or copyright
applications, assignments of such applications, assignments of patents or
copyrights upon issuance, as the Company may determine necessary or desirable to
protect the Company's or its nominee's interest in Inventions, and/or to use in
obtaining patents or copyrights in any and all countries and to vest title
thereto in the Company or its nominee to any of the foregoing.
C-2
<PAGE>
6. Maintenance of Records. I agree to keep and maintain adequate and
----------------------
current written records of all Inventions made by me (in the form of notes,
sketches, drawings and other records as may be specified by the Company), which
records shall be available to and remain the sole property of the Company at all
times.
7. Prior Inventions. It is understood that all Personal Inventions, if
----------------
any, whether patented or unpatented, which I made prior to my employment by the
Company, are excluded from this Agreement. To preclude any possible
uncertainty, I have set forth on Schedule A attached hereto a complete list of
all of my prior Personal Inventions, including numbers of all patents and patent
applications and a brief description of all unpatented Personal Inventions which
are not the property of a previous employer. I represent and covenant that the
list is complete and that, if no items are on the list, I have no such prior
Personal Inventions. I agree to notify the Company in writing before I make any
disclosure or perform any work on behalf of the Company which appears to
threaten or conflict with proprietary rights I claim in any Personal Invention.
In the event of my failure to give such notice, I agree that I will make no
claim against the Company with respect to any such Personal Invention.
8. Other Obligations. I acknowledge that the Company from time to time
-----------------
may have agreements with other persons or with the U.S. Government or agencies
thereof, which impose obligations or restrictions on the Company regarding
Inventions made during the course of work thereunder or regarding the
confidential nature of such work. I agree to be bound by all such obligations
and restrictions and to take all action necessary to discharge the Company's
obligations.
9. Trade Secrets of Others. I represent that my performance of all the
-----------------------
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep confidential proprietary information, knowledge or
data acquired by me in confidence or in trust prior to my employment with the
Company, and I will not disclose to the Company, or induce the Company to use,
any confidential or proprietary information or material belonging to any
previous employer or others. I agree not to enter into any agreement either
written or oral in conflict herewith.
10. Modification. I agree that any subsequent change or changes in my
------------
employment duties, salary or compensation or, if applicable, in any Employment
Agreement between the Company and me, shall not affect the validity or scope of
this Agreement.
11. Successors and Assigns. This Agreement shall be binding upon my
----------------------
heirs, executors, administrators or other legal representatives and is for the
benefit of the Company, its successors and assigns.
12. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any one
--------------
or more of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such
C-3
<PAGE>
invalid, illegal or unenforceable provision had never been contained herein.
MOREOVER, IT IS THE INTENT OF THE PARTIES THAT in case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, such
provision shall be construed by limiting and reducing it in accordance with a
judgment of a court of competent jurisdiction, so as to be enforceable to the
extent compatible with applicable law.
13. Waivers. If either party should waive any breach of any provision of
-------
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
14. Complete Agreement, Amendments. I acknowledge receipt of this
------------------------------
Agreement, and agree that with respect to the subject matter thereof the
provisions of this Key Employee Agreement of which this Exhibit C is one part,
is my entire agreement with the Company, superseding any previous oral or
written communications, representations, understandings, or agreements with the
Company or any officer or representative thereof. Any amendment to this
Agreement or waiver by either party of any right hereunder shall be effective
only if evidenced by a written instrument executed by the parties hereto, and,
in the case of the Company, upon written authorization of the Company's Board of
Directors.
15. Headings. The headings of the sections hereof are inserted for
--------
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
16. Counterparts. This Agreement may be signed in two counterparts, each
------------
of which shall be deemed an original and both of which shall together constitute
one agreement.
17. Governing Law. This Agreement shall be governed by and construed
-------------
under Massachusetts law.
C-4
<PAGE>
18. Employment Status. Nothing in this Agreement shall affect in any
-----------------
manner whatsoever the right or power of the Company to terminate the employment
of the Employee.
EMPLOYEE
/s/ John Edward Ross
-------------------------------
John Edward Ross
Accepted and Agreed:
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ Richard S. Post
---------------------------------
Dr. Richard S. Post, President
C-5
<PAGE>
SCHEDULE A
----------
LIST OF PRIOR INVENTIONS
OF
JOHN EDWARD ROSS
Identifying Number or
Title Date Brief Description
- - ----- ---- -------------------------
C-6
<PAGE>
EXHIBIT D-1 (Incentive Stock Option)
------------------------------------
APPLIED SCIENCE AND TECHNOLOGY, INC.
35 Cabot Road
Woburn, Massachusetts 01801
Effective: January 4, 2000
John Edward Ross
Dear John:
I am pleased to advise you that APPLIED SCIENCE AND TECHNOLOGY, INC. (the
"Company") has, pursuant to its 1993 Stock Option Plan (the "1993 Plan"),
awarded you an incentive stock option to purchase [Note: The total grant of
45,000 shares will be divided between incentive stock options and non-qualified
options. The incentive stock options will equal (a) the number of option shares
not to exceed $100,000 in value based on exercise price vesting in any single
calendar year, multiplied by (b) five (the five calendar years over which the
option vests). The remaining options will be issued under a non-qualified stock
option - see attached] shares of the Common Stock, $.01 par value per share, of
the Company at an exercise price of $31.9375 per share, for a total exercise
price of $1,437,187.50. The Company is making this offer to "share the
-------------
business" with valued employees such as yourself. We hope that by owning a
piece of the Company you will continue your efforts towards helping the Company
grow and succeed.
The following terms and conditions are applicable with respect to this
option, and your signature below shall constitute your acknowledgment and
acceptance of same:
(a) This option shall not be transferable under any circumstances except
by operation of law. During your lifetime, this option is only
exercisable by you, and after your death, is only exercisable by your
estate.
(b) The price at which this option may be exercised shall be $31.9375 per
--------
share, for a total exercise price of $1,437,187.50.
-------------
(c) This option is exercisable commencing six months from your hire date
and at any time hereafter through January 4, 2005, subject to the
following terms:
(1) In the event of termination of your employment with the Company
(or a parent or subsidiary of the Company) for any reason other
than death or
<PAGE>
disability as defined in Internal Revenue Code Section 22(e)(3),
as amended (the "Code"), all unexercised options shall terminate
immediately.
(2) In the event of termination of your employment as a result of
your death, the outstanding options exercisable by you at the
date of your death may be exercised by your estate until one (1)
year from the date of your death, but in any event no later than
January 4, 2005.
(3) In the event of termination of your employment as a result of
your disability, as above defined, or in the event of a
disability that lasts for more than ninety (90) days, all
outstanding options exercisable by you at the date of such
termination shall terminate one (1) year from the date your
employment terminates, but in any event no later than January 4,
2005.
(4) Notwithstanding anything herein to the contrary, the maximum
extent to which this option may be exercised is as follows:
Dates Up to
----- -----
After six (6) months of employment 20%
After one (1) year of employment 40%
After two (2) years of employment 60%
After three (3) years of employment 80%
After four (4) years of employment 100%
(d) This option may not be exercised as to less than one hundred (100)
shares at any one time unless it is being exercised in full and the
balance of the shares subject to this option is less than one hundred
(100).
(e) The shares of Common Stock underlying this option and the exercise
price therefore shall be appropriately adjusted from time to time for
stock splits, reverse splits, stock dividends and reclassifications of
shares.
(f) In the event of a sale or acquisition of substantially all of the
stock or assets of the Company, the Company shall give at least thirty
(30) days' notice of such an event to you and you may exercise up to
100% of the vested portion of this option; if you do not exercise the
option within thirty (30) days of such notice, all unexercised
portions of this option shall terminate and be of no further force or
effect. Notwithstanding the foregoing, additional shares underlying
this option
<PAGE>
grant may vest in accordance with the provisions of Exhibit A of your
Employment Agreement of even date with the Company.
This opportunity to purchase stock in the Company is being offered because
of the Company's desire to reward continuing loyal service. Exercising options
may not be a prudent business decision for some employees. Therefore, we urge
you to review this opportunity carefully and make a decision to exercise options
only if your personal financial situation makes this a wise choice.
When you wish to exercise this stock option, please refer to the provisions
of this letter and then correspond in writing with the Secretary of the Company.
Further, please indicate your acknowledgment and acceptance of this option by
signing the enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ William S. Hurley
--------------------------------------------
William S. Hurley, Senior Vice President
ACKNOWLEDGMENT AND ACCEPTANCE:
/s/ John Edward Ross
- - --------------------------------
John Edward Ross
EXHIBIT E (Non-Qualified Option)
--------------------------------
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
35 Cabot Road
Woburn, Massachusetts 01801
Effective: January 4, 2000
John Edward Ross
Dear John:
I am pleased to advise you that APPLIED SCIENCE AND TECHNOLOGY, INC. (the
"Company") has, pursuant to its 1993 Stock Option Plan (the "1993 Plan"),
awarded you a non-qualified stock option to purchase [Note: Remainder of 45,000
option grant not qualifying for incentive stock option treatment] shares of the
Common Stock, $.01 par value per share, of the Company at an exercise price of
$31.9375 per share, for a total exercise price of $1,437,187.50. The Company is
- - -------- -------------
making this offer to "share the business" with valued employees such as
yourself. We hope that by owning a piece of the Company you will continue your
efforts towards helping the Company grow and succeed.
The following terms and conditions are applicable with respect to this
option, and your signature below shall constitute your acknowledgment and
acceptance of same:
(a) This option shall not be transferable under any circumstances except
by operation of law. During your lifetime, this option is only
exercisable by you, and after your death, is only exercisable by your
estate.
(b) The price at which this option may be exercised shall be $31.9375 per
--------
share, for a total exercise price of $1,437,187.50.
-------------
(c) This option is exercisable commencing six months from your hire date
and at any time hereafter through January 4, 2005 subject to the
following terms:
(1) In the event of termination of your employment with the Company
(or a parent or subsidiary of the Company) for any reason other
than death or disability as defined in Internal Revenue Code
Section 22(e)(3), as amended (the "Code"), all unexercised
options shall terminate immediately.
(2) In the event of termination of your employment as a result of
your death,
<PAGE>
the outstanding options exercisable by you at the date of your
death may be exercised by your estate until one (1) year from the
date of your death, but in any event no later than [option
termination date].
(3) In the event of termination of your employment as a result of
your disability, as above defined, or in the event of a
disability that lasts for more than ninety (90) days, all
outstanding options exercisable by you at the date of such
termination shall terminate one (1) year from the date your
employment terminates, but in any event no later than January 4,
2005.
(4) Notwithstanding anything herein to the contrary, the maximum
extent to which this option may be exercised is as follows:
Dates Up to
----- -----
After six (6) months of employment 20%
After one (1) year of employment 40%
After two (2) years of employment 60%
After three (3) years of employment 80%
After four (4) years of employment 100%
(d) This option may not be exercised as to less than one hundred (100)
shares at any one time unless it is being exercised in full and the
balance of the shares subject to this option is less than one hundred
(100).
(e) The shares of Common Stock underlying this option and the exercise
price therefore shall be appropriately adjusted from time to time for
stock splits, reverse splits, stock dividends and reclassifications of
shares.
(f) In the event of a sale or acquisition of substantially all of the
stock or assets of the Company, the Company shall give at least thirty
(30) days' notice of such an event to you and you may exercise up to
100% of the vested portion of this option; if you do not exercise the
option within thirty (30) days of such notice, all unexercised
portions of this option shall terminate and be of no further force or
effect. Notwithstanding the foregoing, additional shares underlying
this option grant may vest in accordance with the provisions of
Exhibit A of your Employment Agreement of even date with the Company.
This opportunity to purchase stock in the Company is being offered because
of the Company's desire to reward continuing loyal service. Exercising options
may not be a prudent business decision for some employees. Therefore, we urge
you to review this opportunity
<PAGE>
carefully and make a decision to exercise options only if your personal
financial situation makes this a wise choice.
When you wish to exercise this stock option, please refer to the provisions
of this letter and then correspond in writing with the Secretary of the Company.
Further, please indicate your acknowledgment and acceptance of this option by
signing the enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ William S. Hurley
-------------------------------------------
William S. Hurley, Senior Vice President
ACKNOWLEDGMENT AND ACCEPTANCE:
/s/ John Edward Ross
- - ----------------------------------
John Edward Ross
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-START> JUN-27-1999
<PERIOD-END> DEC-25-1999
<CASH> 17,628
<SECURITIES> 4,988
<RECEIVABLES> 22,680
<ALLOWANCES> (714)
<INVENTORY> 16,290
<CURRENT-ASSETS> 63,873
<PP&E> 19,505
<DEPRECIATION> (9,408)
<TOTAL-ASSETS> 91,183
<CURRENT-LIABILITIES> 15,997
<BONDS> 0
0
0
<COMMON> 116
<OTHER-SE> 75,070
<TOTAL-LIABILITY-AND-EQUITY> 91,183
<SALES> 61,636
<TOTAL-REVENUES> 61,668
<CGS> 37,504
<TOTAL-COSTS> 37,507
<OTHER-EXPENSES> 15,868
<LOSS-PROVISION> 21
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,034
<INCOME-TAX> 3,242
<INCOME-CONTINUING> 5,792
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,792
<EPS-BASIC> 0.50
<EPS-DILUTED> 0.48
</TABLE>
