q1 2009 earning report of btu international, inc

BTU INTERNATIONAL INC

FORM 10-Q(Quarterly Report)

Filed 05/08/09 for the Period Ending 03/29/09

Address 23 ESQUIRE ROAD

NORTH BILLERICA, MA 01862Telephone 5086674111

CIK 0000840883Symbol BTUI

SIC Code 3559 - Special Industry Machinery, Not Elsewhere ClassifiedIndustry Semiconductors

Sector TechnologyFiscal Year 12/31

http://www.edgar-online.com© Copyright 2009, EDGAR Online, Inc. All Rights Reserved.

Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 29, 2009

OR

For the transition period from to

Commission File Number 000-17297

BTU INTERNATIONAL, INC. (Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code: (978) 667-4111

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No �

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files.) Yes � No � (Registrant is not subject to the requirements of Rule 405 of Regulation S-T at this time)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes � No

Indicate the number of shares outstanding of the Registrant’s Common Stock, par value $.01 per share, as of the latest practicable date: As of May 6, 2009: 9,189,324 shares.

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

� � � � TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

DELAWARE 04-2781248 (State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification Number)

23 Esquire Road, North Billerica, Massachusetts 01862-2596

(Address of principal executive offices) (Zip Code)

Large Accelerated Filer � Accelerated Filer

Non-Accelerated Filer � Smaller Reporting Company �

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BTU INTERNATIONAL, INC.

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PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited)

Unaudited Condensed Consolidated Balance Sheets 1 Unaudited Condensed Consolidated Statements of Operations 2 Unaudited Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive Loss 3 Unaudited Condensed Consolidated Statements of Cash Flows 4-5 Notes to Unaudited Condensed Consolidated Financial Statements 6-11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 12-15

Item 3. Quantitative and Qualitative Disclosures About Market Risk 15

Item 4. Controls and Procedures 15-16

PART II. OTHER INFORMATION

Item 1A. Risk Factors 16

Item 6. Exhibits 16

Signatures 17 EX-31.1 Section 302 Certification of C.E.O.

EX-31.2 Section 302 Certification of C.F.O.

EX-32.1 Section 906 Certification of C.E.O.

EX-32.2 Section 906 Certification of C.F.O.

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BTU INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data) (unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1

March 29,

2009

December 31,

2008

Assets

Current assets

Cash and cash equivalents $ 26,637 $ 27,464 Accounts receivable, net 12,262 15,450 Inventories, net 16,866 19,044 Other current assets 802 909

Total current assets 56,567 62,867

Property, plant and equipment, net 6,519 6,886

Other assets, net 1,490 1,562

Total assets $ 64,576 $ 71,315

Liabilities and stockholders’ equity

Current liabilities

Current portion of long-term debt $ 294 $ 290 Accounts payable 3,791 5,058 Other current liabilities 6,891 7,399

Total current liabilities 10,976 12,747

Long-term debt, less current portion 8,916 8,988

Total liabilities 19,892 21,735

Commitments and contingencies

Stockholders’ equity

Preferred stock, $1.00 par value - 5,000,000 shares authorized; no shares issued or outstanding — — Common stock, $0.01 par value - 25,000,000 shares authorized; 10,557,291 shares issued and 9,199,056

shares outstanding at March 29, 2009 and 10,557,291 shares issued and 9,353,187 shares outstanding at December 31, 2008 105 105

Additional paid in capital 45,760 45,458 Retained earnings 2,164 6,718 Treasury stock, at cost, 1,358,235 shares at March 29, 2009 and 1,204,104 shares at December 31, 2008 (4,959 ) (4,391 ) Accumulated other comprehensive income 1,614 1,690

Total stockholders’ equity 44,684 49,580

Total liabilities and stockholders' equity $ 64,576 $ 71,315

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BTU INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data) (unaudited)


2

Three Months Ended March 29, 2009 March 30, 2008 Net sales $ 9,806 $ 16,619 Costs of goods sold 8,367 9,996

Gross profit 1,439 6,623

Operating expenses:

Selling, general and administrative 3,930 4,912 Research, development and engineering 1,977 1,603

Operating income (loss) (4,468 ) 108

Interest income 82 100 Interest expense (155 ) (180 ) Foreign exchange gain/(loss) (59 ) 124 Other income 29 —

Income (loss) before provision for income taxes (4,571 ) 152

Provision (benefit) for income taxes (17 ) 53

Net income (loss) $ (4,554 ) $ 99

Income (loss) per share:

Basic $ (0.49 ) $ 0.01 Diluted $ (0.49 ) $ 0.01

Weighted average number of shares outstanding:

Basic shares 9,284,318 9,355,316 Effect of dilutive options — 164,350

Diluted shares 9,284,318 9,519,666

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BTU INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 29, 2009 (in thousands) (unaudited)


3

Common Stock

Additional

Paid-In Retained Treasury Stock

Accumulated Other

Comprehensive # of shares $ Capital Earnings # of shares $ Income Total

Balance at December 31, 2008 10,557 $ 105 $ 45,458 $ 6,718 1,204 $ (4,391 ) $ 1,690 $ 49,580

Net loss — — — (4,554 ) — — — (4,554 )

Exercise of stock options — — — — — — — —

Purchase of treasury stock — — — — 154 (568 ) — (568 )

Issuance of common stock — — — — — — — —

Stock-based compensation — — 302 — — — — 302

Translation adjustment — — — — — — (76 ) (76 )

Balance at March 29, 2009 10,557 $ 105 $ 45,760 $ 2,164 1,358 $ (4,959 ) $ 1,614 $ 44,684

Three Months Ended

March 29, 2009

Comprehensive loss is calculated as follows:

Net loss $ (4,554 )

Other comprehensive loss:

Foreign currency translation adjustment (76 )

Comprehensive loss $ (4,630 )

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BTU INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 29, 2009 AND MARCH 30, 2008 (in thousands) (unaudited)


4

March 29,

2009

March 30,

2008

Cash flows from operating activities:

Net income (loss) $ (4,554 ) $ 99 Adjustments to reconcile net cash provided by (used in) operating activities:

Depreciation and amortization 631 428 Provision for bad debts 20 24 Provision (recovery) for inventory obsolescense 847 (97 ) Stock-based compensation 302 230 Gain on foreign currency hedge — (364 ) Net change in operating assets and liabilities:

Accounts receivable 3,151 (1,431 ) Inventories 1,318 32 Other current assets 52 — Customer deposits 106 136 Other assets (5 ) (31 ) Accounts payable (1,273 ) 996 Accrued expenses (606 ) 1,463

Net cash provided by (used in) operating activities (11 ) 1,485

Cash flows from (used in) investing activities:

Purchases of property, plant and equipment (135 ) (374 ) Settlement of forward currency contract — 60

Net cash used in investing activities (135 ) (314 )

Cash flows from (used in) financing activities:

Principal payments under loan and capital lease agreements (68 ) (64 ) Purchase of treasury stock (568 ) Proceeds from the exercise of stock options — 21

Net cash used in financing activities (636 ) (43 )

Effects of exchange rates on cash (45 ) 480

Net increase (decrease) in cash and cash equivalents (827 ) 1,608 Cash and cash equivalents, beginning of period 27,464 25,065

Cash and cash equivalents, end of period $ 26,637 $ 26,673

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BTU INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) FOR THE THREE MONTHS ENDED MARCH 29, 2009 AND MARCH 30, 2008

(in thousands) (unaudited)


5

March 29,

2009

March 30,

2008

Supplemental disclosures of cash flow information:

Cash paid during the periods for:

Interest $ 110 $ 76 Income taxes 57 17

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BTU INTERNATIONAL, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) Basis of Presentation

The condensed consolidated balance sheet, financial information and related disclosures as of and for the year ended December 31, 2008 have been derived from our consolidated financial statements, which have been audited as of that date. The condensed consolidated balance sheet as of March 29, 2009 and the related condensed consolidated statements of operations, cash flows, stockholders’ equity and comprehensive loss for the three months ended March 29, 2009 are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. Interim results are not necessarily indicative of results for any other period or for the full year. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the footnotes contained in the Company’s consolidated financial statements as of and for the year ended December 31, 2008, together with the auditors’ report, included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission.

(2) Summary of Significant Accounting Policies

The accounting policies underlying the accompanying unaudited condensed consolidated financial statements are those set forth in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 as filed with the Securities and Exchange Commission.

(3) Inventories, net

(4) Debt

Long-Term Debt at March 29, 2009 and December 31, 2008 consisted of:

On March 30, 2006, the Company entered into a new mortgage note that is secured by our real property in Billerica, MA, in the amount of $10 million. The mortgage note requires monthly payments of $76,280, which includes interest calculated at the rate of 6.84% per annum. This mortgage note payable has a balloon payment of $6.8 million due and payable at maturity on December 23, 2015.

6

March 29,

2009

December 31,

2008

(in thousands) Raw materials and manufactured components $ 8,974 $ 8,961 Work-in-process 5,556 7,021 Finished goods 2,336 3,062

$ 16,866 $ 19,044

March 29,

2009

December 31,

2008

(in thousands) Mortgage note payable, interest rate of 6.84% $ 9,210 $ 9,277 Capital lease obligations, interest rate of 6.75% — 1

9,210 9,278 Less - current maturities 294 290

$ 8,916 $ 8,988

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(unaudited) On March 1, 2007, the Company entered into an amended revolving loan agreement with a bank that allows for unsecured aggregate borrowings, including letters of credit, up to a maximum of $15 million against a borrowing base of accounts receivable, inventory and fixed assets. The Company may elect to borrow at interest rates related to the bank’s prime rate or LIBOR. This loan agreement extends to December 31, 2010. At March 29, 2009, there were no borrowings outstanding under the loan agreement.

This loan agreement is subject to maintaining certain financial covenants. Due to the recorded losses in Q4 2008 and Q1 2009, the Company is not in compliance with the required rolling four quarters minimum debt coverage ratio in the loan agreement. Given the uncertainty surrounding the timing of an economic recovery from the global recession, the Company has suspended negotiations with the bank until a return to profitability is at hand. At such time, the Company will work with the bank to obtain a waiver which may require modifications, agreeable to both parties, to the provisions of the existing loan agreement. There is no current debt outstanding against this line.

(5) Earnings Per Share (EPS)

Basic EPS is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common and dilutive potential common shares outstanding during the period, using the treasury stock method. The number of common shares underlying options that were not included in the determination of diluted EPS, because their effect would be anti-dilutive, was 880,361 and 658,445 for the three months ended March 29, 2009 and March 30, 2008, respectively.

(6) Accounting for Stock-Based Compensation

The Company’s stock option compensation expense was $298,445 and $230,000 for the three months ended March 29, 2009 and March 30, 2008, respectively. These amounts do not include expense related to restricted stock awards.

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model. This model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life and expected volatility in the market value of the underlying common stock. The Company is also required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Historical data was used to estimate pre-vesting forfeitures and record stock-based compensation expense only for those awards that are expected to vest. Accordingly, awards ultimately expected to vest have been reduced by annualized estimated forfeitures of 20% for the periods ended March 29, 2009 and March 30, 2008. We used the following assumptions for options issued in the following periods:

Expected volatilities are based on the historical volatility of the Company’s common stock. The Company had significant historical data to help evaluate the expected lives of options in developing its assumption. The risk-free interest rate is based upon quoted market yields for United States Treasury debt securities. The expected dividend yield is based upon the Company’s history of having never issued a dividend and management’s current expectation of future action surrounding dividends.

7

Calculation of Fair Value - Assumptions Used: Three months ended 29-Mar-09 30-Mar-08

Expected Volatility 67.01 % 63.82% Expected Life 4.75 4.50 - 4.75 Risk-Free Interest Rate 2.14 % 2.08% to 2.62% Expected Dividend Yield None None

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(unaudited) The following table summarizes the stock option activity during the three months ended March 29, 2009:

The weighted-average grant-date fair values of options granted during the three-month periods ended March 29, 2009 and March 30, 2008 were $9.17 and $5.32, respectively. The fair values of options exercised during the three-month periods ended March 29, 2009 and March 30, 2008 were $0 and $10,011, respectively.

As of March 29, 2009, there was $2,830,273 of total unrecognized compensation cost related to non-vested options granted under all of the Company’s option plans. That cost is expected to be recognized over a weighted average period of 2.8 years. The total fair value of shares vested during the three-month period ended March 29, 2009 was $121,510.

(7) Revenue Recognition

For the three months ended March 29, 2009, there was $1,051,287 of revenue recognized using the percentage of completion method. For the three months ended March 30, 2008, there was $1,371,024 of revenue recognized using the percentage of completion method. Please see note 1 in the notes to the Company’s audited financial statement included in the Company’s annual report on Form 10-K filed March 16, 2009 with Securities and Exchange Commission.

(8) Fair Value Disclosures

On January 1, 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements for Financial Assets and Liabilities”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

8

Shares

Weighted-

Average Exercise

Price

Average Remaining Contractual

Term

Aggregate

Intrinsic Value

Options

Outstanding at December 31, 2008 1,069,535 $ 9.17

Granted 3,760 $ 9.97

Exercised 0 $ —

Forfeited (11,000 ) $ 10.08

Outstanding at March 29, 2009 1,062,295 $ 9.17 4.82 $ 63,998 Exercisable at March 29, 2009 365,185 $ 7.53 3.17 $ 63,998

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(unaudited) SFAS No. 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

At March 29, 2009, the Company had no financial assets that required valuation under SFAS No. 157.

(9) Product Warranty Costs

The Company provides standard warranty coverage for parts and labor for 12 months and special extended material-only coverage on certain other products. The Company estimates and records an accrual for anticipated warranty claims based on revenue. The accrual for warranty covers the estimated costs of material, labor and travel. Actual warranty claims incurred are charged to the accrual. Factors that affect the Company’s product warranty liability include the number of installed units, the anticipated cost of warranty repairs and historical and anticipated rates of warranty claims.

The following table reflects changes in the Company’s accrued warranty account during the three months ended March 29, 2009 (in thousands):

9

Three Months Ended

March 29, 2009

Beginning balance, December 31, 2008 $ 683 Plus: accruals related to new sales 125 Less: warranty claims incurred and reserve adjustment (438 )

Ending balance, March 29, 2009 $ 370

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(unaudited) (10) Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS 141R). SFAS 141R will significantly change the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, in-process research and development, and restructuring costs. In addition, under SFAS 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income taxes. SFAS 141R is effective for fiscal years beginning after December 15, 2008, which is the Company’s fiscal year beginning January 1, 2009, and will impact the accounting for any business combinations entered into after the effective date. The adoption of this Standard has not had a significant impact on the Company’s financial statements.

In April 2008, the FASB issued Staff Position No. FAS 142-3, or FSP FAS 142-3, “Determination of the Useful Life of Intangible Assets”, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets”. FSP FAS 142-3 allows an entity to use its own historical experience in renewing or extending similar arrangements, adjusted for specified entity-specific factors, in developing assumptions about renewal or extension used to determine the useful life of a recognized intangible asset and will be effective for fiscal years and interim periods beginning after December 15, 2008. Additional disclosures are required to enable financial statement users to assess the extent to which the expected future cash flows associated with the asset are affected by the entity’s intent and/or ability to renew or extend the arrangement. The guidance for determining the useful life of a recognized intangible asset is to be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements are to be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. Management will comply with disclosure requirements subsequent to the effective date of the standard as applicable.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”) which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. On February 12, 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 157-2, Effective Date of SFAS No. 157. The FSP amends SFAS 157, to delay the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually) to fiscal years beginning after November 15, 2008. The adoption of SFAS 157 for non financial assets and liabilities did not have a significant impact on our financial statements.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin (ARB) No. 51,” which changes the accounting and reporting for minority interests. Minority interests will be re-characterized as non-controlling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the non-controlling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 will apply prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. SFAS No. 160 is effective for periods beginning on or after December 15, 2008 and will impact the accounting for non-controlling interests after the effective date, to the extent the company enters into an acquisition with a non-controlling interest the non-controlling interest. The adoption of this Standard did not have an impact on the Company’s financial statements.

10

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(unaudited)

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133” (SFAS 161). SFAS 161 will require companies to disclose their objectives and strategies for using derivative instruments, whether or not their derivatives are designated as hedging instruments. The new pronouncement requires disclosure of the fair value of derivative instruments by primary underlying risk exposures (e.g., interest rate, credit, foreign exchange rate, combination of interest rate and foreign exchange rate, or overall price). It also requires detailed disclosures about the income statement impact of derivative instruments by designation as fair-value hedges, cash-flow hedges, or hedges of the foreign-currency exposure of a net investment in a foreign operation. SFAS 161 will also require disclosure of information that will enable financial statement users to understand the level of derivative activity entered into by a company. The principles of SFAS 161 are applied on a prospective basis and are effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early application is encouraged. For the Company, SFAS 161 became effective at the beginning of the 2009 fiscal year. The adoption of this Standard did not have a material affect on the Company’s disclosures as the Company did not have any derivative instruments at March 29, 2009.

Segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company operates as a single business segment called thermal processing capital equipment.

The thermal processing capital equipment segment consists of the designing, manufacturing, selling and servicing of thermal processing equipment and related process controls for use in the electronics, energy generation and other industries. This business segment includes the supply of equipment used in a number of process steps to produce electronic devices such as: solder reflow systems used for surface mount applications in printed circuit board assembly; integrated circuit packaging and sealing; and processing multi-chip modules. In addition, the thermal process equipment is used in several process steps for alternative energy generation such as: metallization and diffusion of photovoltaic solar cells; sintering nuclear fuel for commercial power generation; and the doping and firing of solid oxide fuel cells. The business segment’s customers are multi-national electronics manufacturers and electronic manufacturing service providers, as well as manufacturers of fuel and components used to generate energy.

Tangible Long-lived assets by geographic location are as follows (in thousands):

11

(11) Segment Reporting

March 29,

2009

December 31,

2008

United States $ 5,813 $ 6,132 Asia Pacific 706 754

$ 6,519 $ 6,886

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OVERVIEW

BTU International, founded in 1950 and headquartered in Billerica, Massachusetts, is a supplier of advanced thermal processing equipment to the energy generation market and electronics manufacturing market. We manufacture reflow furnaces for printed circuit board assembly as well as semiconductor wafer-level and die-level packaging equipment. In addition, we participate in the fast growing alternative energy market for which we provide thermal process equipment for the manufacturing of solar cells, fuel cells and nuclear fuels.

Our customers in the energy generation market use our thermal systems to process silicon, ceramics and metal alloys which are used in solar cell, fuel cell and nuclear fuel manufacturing applications. Our customers require high throughput, high yield and highly reliable thermal processing systems with tightly controlled temperature and atmospheric parameters. Our convection solder reflow systems are used to attach electronic components to the printed circuit boards, primarily in the advanced high-density surface mount segments of this market. In the semiconductor market, we participate in both wafer level and die level packaging, where our thermal processing systems are used to connect and seal integrated circuits into a package.

The Company has been affected negatively by the global economic downturn. In our electronics market products, there has been a significant reduction in demand. As for our alternative energy market, we have seen steady growth, but not enough to offset the decline in our electronics market products.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, selected items in our statements of operations expressed as a percentage of net sales.

Net Sales The net sales decreased by 41% or $6.8 million in Q1 2009 versus Q1 2008. The reduction from $16.6 million to $9.8 million was due to an approximately 80% reduction in sales of the Company’s electronic market products resulting from the macro global economic slowdown. This decrease was partially offset by continuing increased sales of for our expanding product offerings designed for the alternative energy market, which increased nearly 50% in Q1 2009 compared to the same period in 2008.

12

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Three Months Ended March 29, 2009 March 30, 2008 ($ in thousands) % of

net sales % of

net sales

Net sales $ 9,806 100.0 % $ 16,619 100.0 % Cost of goods sold 8,367 85.3 % 9,996 60.1 %

Gross profit 1,439 14.7 % 6,623 39.9 %

Selling, general and administrative expenses 3,930 40.1 % 4,912 29.6 % Research, development and engineering expenses 1,977 20.2 % 1,603 9.6 %

Operating income (loss) (4,468 ) (45.6 )% 108 0.6 %

Income (Loss) before provision (benefit) for income taxes (4,571 ) (46.6 )% 152 0.9 %

Net income (loss) $ (4,554 ) (46.4 )% $ 99 0.6 %

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The following table sets forth, for the periods indicated, revenues from sales into select geographies data (in thousands) expressed in dollars and as a percentage of total revenue. The values shown represent the amount sold into each of the listed geographical areas.

In the first quarter of 2009 as compared to the same period in 2008, total revenue decreased in each of the Company’s three largest geographical markets. This result is indicative of the global nature of the economic downturn. The Q1 year to year increase in revenue for the Other Americas’ region represented one high value system shipment.

Gross Profit . The severe reduction in Q1 2009’s gross profit percentage to 14.7 from 39.9 in Q1 2008 was the result of several major factors. The deepening global recession extended and increased the reduced demand for the Company’s electronic market products. This had a twofold impact on the Q1 2009 gross margin percentage. The Company’s production facilities both in the United States and China were operating well below capacity which resulted in under-absorption of factory costs of approximately one million dollars. Also, with the extended recession to date and the expectation of a slow economic recovery, the Company, primarily for its electronic products inventory, increased inventory reserves by approximately $1 million . One additional factor suppressing the gross margin percentage in Q1 2009 was the first time assembly and shipment of both new thin film and silicon solar systems.

Selling, General and Administrative (SG&A). SG&A expenses decreased by nearly $1 million or 20% from $4.9 million in Q1 2008 to $3.9 million in Q1 2009. More than half of this Q1 2009 decrease occurred in commission expense as the result of decreased revenue and a shift in product mix. The other significant reduction, also related to the reduced Q1 2009 revenue level, was for service and warranty costs, in particular a reduction in the Company’s warranty provision. Also, the Company took several cost reduction actions during the first quarter.

Research, Development and Engineering.(RD&E) In the first quarter of 2009, the Company increased its spending on RD&E as compared to the same period in 2008 by $374,000 or 23.3% primarily due to development efforts towards new products for the alternative energy market.

Operating Income (Loss). As a result of the worldwide economic downturn the Company reported a 41% decrease in revenue in Q1 2009 versus Q1 2008 due to a sharp decline in our electronics business, The impact of this revenue decrease and its associated effect on gross margins resulted in an operating loss of $4.6 million.

13

Three Months Ended March 29, 2009 March 30, 2008

$ % of

revenues $ % of

revenues

United States $ 1,938 19.8 % $ 4,044 24.3 % Europe, Near East 2,315 23.6 % 3,496 21.0 % Asia Pacific 4,642 47.3 % 8,572 51.6 % Other Americas 911 9.3 % 507 3.1 %

Total Revenue $ 9,806 $ 16,619

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Foreign Exchange (loss). The foreign exchange loss in Q1 2009 was $59,000 as compared to $100,000 in Q1 2008. The Company’s primary exposure to foreign exchange losses result from U.S. dollar denominated balance sheet accounts recorded at the Company’s China operations.

Income Taxes . In the first quarter of 2009 , we determined the effective income tax rate for each corporate entity and applied this rate to the year-to-date profits before income tax for each of our forecasted total year profitable corporations to determine our estimated consolidated annual effective income tax rate. In addition, we calculated the estimated withholding tax on royalty and other taxable corporate services charged in the first quarter of 2009 to our China operations. The sum of the income taxes (benefits) and the withholding taxes were recorded as our tax provision (benefit).

The net result of the Q1 2009 tax provisions, tax benefits and China withholding tax was a benefit of $17,000.

The significant fluctuations in the Company’s quarterly tax rate, as a percent of consolidated pre-tax income or loss, are the result of the varying ratio of the consolidated pre-tax profit or loss by corporate tax entity to the consolidated tax provision. A significant portion of the consolidated tax provision is China withholding taxes, which are not related to pre-tax income. The China withholding taxes primarily result from corporate royalty charges based on our China subsidiary net sales.

The Company has federal and state net operating loss carry forwards of approximately $10 million against which it has recorded a full valuation allowance because of uncertainty surrounding realization. Our statutory federal income tax rate is 34.0%.

LIQUIDITY AND CAPITAL RESOURCES

As of March 29, 2009, the Company had $26.6 million in cash and cash equivalents, a decrease of $0.8 million versus $27.5 million at the end of 2008.

During the first quarter of 2009, despite the $4.6 million net loss, the cash flow from operating activities remained the same. This resulted from positive cash flow from reductions in accounts receivable of $3.2 million, decrease in inventory of $1.3 million and other non-cash operating charges. $600,000 of cash was used to purchase treasury stock during the first quarter.

On March 1, 2007, the Company entered into an amended revolving loan agreement with a bank that allows for unsecured aggregate borrowings, including letters of credit, up to a maximum of $15 million against a borrowing base of accounts receivable, inventory and fixed assets. The Company may elect to borrow at interest rates related to the bank’s prime rate or LIBOR. This loan agreement extends to December 31, 2010. At March 29, 2009, there were no borrowings outstanding under the loan agreement.

This loan agreement is subject to maintaining certain financial covenants. Due to the recorded losses in Q4 2008 and Q1 2009, the Company is not in compliance with the required rolling four quarters minimum debt coverage ratio in the loan agreement. Given the uncertainty surrounding the timing of an economic recovery from the global recession, the Company has suspended negotiations with the bank until a return to profitability is at hand. At such time, the Company will work with the bank to receive a waiver which may require modifications, agreeable to both parties, to the provisions of the existing loan agreement. There is no current debt outstanding against this line.

On March 30, 2006, the Company entered into a mortgage note that is secured by its real property in Billerica, MA. The amount of the mortgage note executed was $10 million. The mortgage note requires monthly payments of $76,280, which includes interest calculated at the rate of 6.84% per annum. This mortgage note payable has a balloon payment of $6.8 million due and payable at maturity on December 23, 2015. The mortgage note had an outstanding balance at March 29, 2009 of approximately $9.2 million.

As of March 29, 2009, the Company has no material commitments relating to capital expenditures.

The Company’s business forecasts project that our cash position and cash flow will be sufficient to meet our corporate, operating and capital requirements through 2009.

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OTHER MATTERS

Given that the Company invoices the vast majority of its sales in U.S. dollars, that the Company has a substantial manufacturing presence in China and that sales into China are primarily in U.S. dollars, should the U.S. dollar decline in relation to the Chinese RMB, the Company’s financial results will be adversely affected.

In the first quarter of 2009, inflation had no material impact on our business and financial results.

FORWARD LOOKING STATEMENTS

This Report, other than historical financial information, includes forward-looking statements that involve known and unknown risks and uncertainties, including quarterly fluctuations in results. In particular, our forecast of the sufficiency of capital resources through 2010 is a forward-looking statement. Such statements are made pursuant to the “safe harbor” provisions under the securities laws, and are based on the assumptions and expectations of the Company’s management at the time such statements are made. Important factors that could cause actual results to differ include the cyclicality of our business; our shift of manufacturing to China; a failure to maintain cost reductions; risks related to sales to the energy generation market; a failure to increase sales across our industries; a failure to effectively develop and market our products; changes in the economic, political, legal and business environments in the countries in which we operate; a failure of our business systems; the time and costs related to complying with the requirements of the Sarbanes-Oxley Act; and the loss of key personnel. Actual results may vary materially. Accordingly, you should not place undue reliance on any forward-looking statements. Unless otherwise required by law, the Company disclaims any obligation to revise or update such forward-looking statements in order to reflect future events or developments.

We are exposed to market risk from changes in interest rates primarily through our revolving loan agreement. As of March 29, 2009, we had no debt outstanding under our revolving loan agreement.

A significant percentage of our consolidated revenues are derived from foreign sources. Accordingly, our financial results are impacted by changes in foreign currency exchange rates with respect to the U.S. dollar.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As described under “Management’s Annual Report on Internal Control over Financial Reporting in the company’s Form 10-K filed with the Securities and Exchange Commission on March 16, 2009 ” material weaknesses were identified in our internal control over financial reporting related to the Company having an insufficient number of accounting personnel with an appropriate level of accounting knowledge and experience to prepare its financial statements in a timely and accurate manner, and the Company’s review of intercompany account reconciliations and of intercompany inventory receipts and coding of related invoices to the appropriate intercompany payable accounts was ineffective.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 4. CONTROLS AND PROCEDURES

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The Company’s Management carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of March 29, 2009, pursuant to the evaluation of these controls and procedures required by Rule 13a-15 of the Securities Exchange Act of 1934.

Based upon that evaluation, Management concluded based on the aforementioned material weaknesses as of the end of the period covered by the 2008 Annual Report on Form 10-K and at the period ended March 29, 2009 that our disclosure controls and procedures did not operate effectively to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Notwithstanding the ineffectiveness of our disclosure controls and procedures, we believe the consolidated financial statements present fairly, in all material respects, our financial position or results of operations, and cash flows as of March 29, 2009 and March 30, 2008 and for the three months ended March 29, 2009 and March 30, 2008.

2. Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 29, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3. Management’s remediation initiatives.

Our remediation initiatives summarized below are intended to address our material weaknesses in internal control over financial reporting.

Throughout our remediation process, we continue to rely on extensive, temporary manual procedures and other measures as needed to assist us with meeting the objectives otherwise fulfilled by effective internal control over financial reporting.

PART II. OTHER INFORMATION

Risk factors are disclosed in the Company’s 2008 Annual Report on Form 10-K. During the quarter ended March 29, 2009, there were no material changes to the risk factors for the business.

(a) Exhibits

Exhibit 10.1 - Offer Letter John J. McCaffrey Jr. Exhibit 10.2 - Retention Agreement John J. McCaffrey Jr. Exhibit 10.3 - Amended Retention Agreement Thomas P. Kealy Exhibit 10.4 - Offer Letter Peter J. Tallian Exhibit 10.5 - Retention Agreement Peter J. Tallian Exhibit 31.1 - Section 302 Certification Exhibit 31.2 - Section 302 Certification Exhibit 32.1 - Section 906 Certification Exhibit 32.2 - Section 906 Certification

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• We will continue to enhance our resources and underlying systems utilization in the area of financial reporting to improve the effectiveness and timeliness of the close process.

• We will transfer process oversight of the intercompany account reconciliation from the business unit to an independent corporate function. Further, we will enhance our controls over the matching of intercompany receipts with intercompany shipment data.

Item 1A. RISK FACTORS

Item 6. EXHIBITS

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

17

BTU INTERNATIONAL, INC.

DATE: May 8, 2009 BY: /s/ Paul J. van der Wansem Paul J. van der Wansem President, Chief Executive Officer (principal executive officer) and Chairman of the Board of Directors

DATE: May 8, 2009 BY: /s/ Peter J. Tallian Peter J. Tallian Chief Financial Officer and Principal Accounting Officer (principal financial and accounting officer)

Exhibit 10.1

January 11, 2008

John J. McCaffrey, Jr.

Dear Jack:

Based upon our conversation on Tuesday, January 8 th , I am pleased to send you a revised offer letter. As discussed, we offer you employment as Vice President of Engineering – Alternative Energy with a start date of February 18, 2008. We have furthermore an understanding that before your start date you will make yourself available for up to 8 working days to meet at BTU in preparation of your coming-on-board. You will receive a salary of $7,307.69/ bi-weekly (If annualized, the total would be $190,000). This position is exempt reporting to me.

As an employee of BTU International, you will be eligible to participate in our benefits program, including medical, dental, life and accident insurance coverage, 401k plan, and paid holidays and vacation time. You will begin accrual at four weeks of vacation annually. A Summary of Benefits is enclosed and more details will be provided during your orientation to the company.

During employment, you will be considered annually for a bonus of 30% (100% of goal achievement) with a maximum up to 60% of your base salary. Bonus awards will be determined by the Board of Directors, based on performance of the Company against goals established annually by the Board of Directors.

This offer is contingent upon successful completion of all hiring steps and receipt of required documents. Please review carefully the additional NEW HIRE INFORMATION and enclosures included as a part of this letter. Page 1

• Additional compensation:

• As a sign-on benefit you will receive 30,000 options of BTU stock as outlined in the stock option certificate and pending approval by

the Board of Directors at their next meeting. These options will be priced at the close of the market on your start date, provided prior Board Approval has been obtained, and vest in four equal parts over four years, expire in seven.

01-11-2008 Offer Letter to Jack McCaffrey My team and I look forward to working with you and feel that you will have much to offer BTU. We are a highly committed team dedicated to excellence. We feel this is an exciting environment with significant opportunities in which to work and hope that you will accept the position as outlined.

BTU International

Sincerely,

/s/ Paul van der Wansem Paul van der Wansem Chairman and CEO

01-11-2008 Offer Letter to Jack McCaffrey ADDITIONAL NEW HIRE INFORMATION

Enclosures

The forms necessary for the next steps in the hiring and payroll processes are included with this offer letter. These include a current Summary of Benefits, tax forms and any additional forms or materials pertinent to your position.

Drug Screen

BTU International maintains a drug-free workplace, and, as part of this commitment, requires the satisfactory (negative) results of a drug screen test as a condition of employment for all employees. You must call and make an appointment at one of the locations on the sheet.

Verification of Eligibility to Work in the US

In accordance with the Immigration Reform and Control Act of 1986 (IRCA), you will be required to complete, within 3 days after your employment begins with BTU, an Employment Eligibility Verification I-9 form and provide documents identifying your right to lawfully work in the United States.

Conflict of Interest & Confidentiality

Please understand that any employment by you outside of BTU International conflicting or competing with BTU International is prohibited. Business related information obtained during your employment must naturally be kept confidential during and following your employment. As a condition of employment, you will be required to sign the enclosed BTU International Code of Conduct and BTU Employee Agreement.

Acceptance of this Offer

The terms and conditions of this offer represent our understanding of the full and total agreement between yourself and BTU International relating to your employment. This offer is not a contract of employment. The Company maintains an “Employment at Will” policy and as such, your employment is for no definite period of time, and you or the Company may terminate your employment relationship with or without notice at any time and for any or no reason or cause. The Company is not bound to follow any policy, procedure, or process in connection with employee discipline, employment termination or otherwise.

BTU International

01-11-2008 Offer Letter to Jack McCaffrey Please complete the enclosed forms and return them along with all pages of one copy of your signed acceptance letter to the Human Resources Department. This offer is valid until January 16, 2008. By signing below you verify that there are no restrictions, contractual or otherwise, that might prohibit your employment with BTU.

I, John J. McCaffrey, Jr., accept this offer and terms of employment. My intended start date is the 18 th of February, 2008.

BTU International

Signature /s/ John J. McCaffrey, Jr. Date: 16 JAN 08

Exhibit 10.2

February 18, 2008

John J. McCaffrey, Jr. Vice President BTU International, Inc. 23 Esquire Rd. North Billerica, MA 01862

Dear Jack:

BTU International, Inc. (the “Company”) wants to encourage you to become an employee of the company and values your association with us as an executive officer. To that end, the Company is offering you the assurance of severance pay, as described below, in the event that your employment is terminated in specific circumstances. Therefore, the purpose of this letter is to confirm the agreement between you and the Company on the following terms:

1. Severance Benefits.

a. In the event that the Company terminates your employment other than for Cause (as defined below in Section 2(b)): (i) the Company will continue to pay you your base salary, at the rate in effect on the date of termination, until the earlier of (A) the conclusion of a period equal to six months plus one month for each year of service, up to a maximum of twelve months, or (B) the date you commence employment that provides you with substantially equivalent base salary and bonus opportunity to the last position you held at the Company (the “Severance Pay Period”); (ii) for the duration of the Severance Pay Period, subject to any employee contribution applicable to active employees, the Company shall continue to contribute to the premium cost of your participation and that of your eligible dependents in the Company’s group medical and dental plans, provided that you and your dependents are entitled to continue such participation under applicable law and plan terms; and (iii) provided you work through at least April 1 of the year in which termination occurs, at the time bonuses are payable to executives of the Company generally for the year in which termination occurs (but in no event later than two and one-half months following the close of the fiscal year for which the bonus was earned), the Company will pay you a pro-rata portion of the bonus to which you would have been entitled had your employment continued through the end of the year, in its discretion (if any), such pro rata portion to be based upon the number of days you worked prior to termination divided by 233 (the “Pro Rata Bonus”); provided, however, that no payments will be made by the Company

John J. McCaffrey, Jr. - 2 - February 18, 2008

pursuant to this Section 1(a) until after the effective date of the Release of Claims described below. Salary continuation payments to which you may be entitled hereunder shall be payable in accordance with the Company’s standard payroll practices and shall commence on the next regular Company payday for executives that is at least 5 business days following the later of the effective date of the Release of Claims or the date the Release of Claims, signed by you, is received by the Company, but with the first payment being retroactive to the date following the date of termination.

b. In the event that within one year of a Change in Control (as defined below in Section 2(c)) the Company terminates your employment other than for Cause or you terminate your employment for Good Reason (as defined below in Section 2(d)), by providing notice to the Company of the condition giving rise to the Good Reason no later than thirty (30) days following the occurrence of the condition, giving the Company thirty (30) days to remedy the condition, and by terminating employment for Good Reason within thirty (30) days thereafter if the Company fails to remedy the condition, then: within ten (10) days following the effective date of the Release of Claims described below, the Company will provide you with one lump-sum payment in the amount representing: (i) twelve (12) months of your base salary at the rate in effect on the date of termination; plus (ii) provided you work through at least April 1 in the year in which termination occurs, the Pro Rata Bonus, which shall be calculated as if you and the Company met but did not exceed the performance targets for the year in which termination occurs, and shall be based upon the number of days you worked prior to termination divided by 233. For the avoidance of doubt, (Y) if the Company terminates your employment other than for Cause within one year of a Change in Control, payments to you pursuant to this Section 1(b) shall be in lieu of, and not in addition to, payments pursuant to Section 1(a) hereof, and (Z) no payments will be made by the Company pursuant to this Section 1(b) until after the effective date of the Release of Claims described below.

c. In the event that a Change of Control (as defined below in Section 2(c)) occurs, and (i) you remain employed by the Company on the date that is six (6) months following the consummation of the Change of Control (the “Eligibility Date”), or (ii) the Company terminates your employment other than for Cause following the Change of Control but prior to the Eligibility Date, the Company will provide you, within ten (10) days following the Eligibility Date or the effective date of the Release of Claims, as applicable, with either (A) a lump-sum cash payment in the amount equal to the value of 7,000 shares of the Company’s common stock, such value to be determined as of the date the Change of Control is consummated, or (B) at the Company’s option, if following the Change of Control the Company is the surviving corporation, 7,000 shares


of the Company’s common stock (the “Retention Bonus”). For the avoidance of doubt, if you terminate your employment for any reason prior to the Eligibility Date, or if the Company terminates your employment for Cause prior to the Eligibility Date, you will not be eligible for the Retention Bonus or any portion thereof.

d. In the event your employment is terminated in accordance with Section 1(a) or 1(b) above, and during your employment part of your compensation was earned on a commission basis: (i) the Company will pay you, at the time such commissions otherwise would have been paid to you had you remained an active employee of the Company, all commission payments that had become due and payable to you prior to the date of termination but that had not yet been paid to you; and (ii) the Company will pay you, in one lump-sum payment within ten (10) days following the effective date of the Release of Claims described below, an amount representing fifty percent (50%) of the total commissions that were paid to you for the calendar year prior to the year in which termination occurs.

e. Notwithstanding anything to the contrary in this Agreement, if at the time of your separation from service you are a “specified employee”, as hereinafter defined, no payment shall be made to you before the date which is six months after you separate from service (within the meaning of 409A), except to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasury regulations 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in 1.409A-1(b)(9)(iii), benefits which qualify as excepted welfare benefits pursuant to Treasury regulations 1.409A-1(a)(5), or other amounts or benefits that are not subject to the requirements of Section 409A). For purposes of this Section, “separation from service” shall be determined in a manner consistent with subsection (a)(2)(A)(i) of Section 409A and the term “specified employee” shall mean an individual determined by the Company to be a specified employee as defined in subsection (a)(2)(B)(i) of Section 409A.

2. Definitions. For the purposes of this Agreement, the following definitions shall apply:

a. “Affiliates” means all persons and entities directly or indirectly controlling, controlled by or under common control with the

Company, where control may be by either management authority or equity interest.

b. “Cause” means (i) your material failure to perform (other than by reason of disability) or material negligence in the performance of your duties and responsibilities for the Company or any of its Affiliates; (ii) commission by you of fraud, embezzlement or theft with respect to the Company or its Affiliates; or (iii) commission by you of any felony or any other crime involving dishonesty or moral turpitude.


c. “Change of Control” means (i) any entity or “group” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”)), other than the Company or any of its Affiliates or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or one of its Affiliates, becomes a beneficial owner (within the meaning of Rule 13d-3 as promulgated under the Exchange Act), directly or indirectly, in one or a series of transactions, of securities representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities; (ii) any merger or consolidation involving the Company (other than a merger of a subsidiary with the Company); or (iii) any sale or other disposition by the Company of all or substantially all of the assets of the Company other than to one or more of the Company’s Affiliates or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates.

d. “Good Reason” means, without your consent, the occurrence of one or more of the following events: (i) the material reduction of your base salary by the Company without your consent (other than a reduction applicable to all Company managerial employees); (ii) the material diminution in the scope of your duties, responsibilities or authority by the Company; or (iii) the material failure by the Company to comply with any of the material provisions of this Agreement.

3. Release of Claims. In order to be eligible to receive any of the severance pay and benefits under Section 1(a), 1(b), 1(c)(ii) and 1(d)(ii) of this Agreement, you must execute a timely and valid release of claims in favor of the Company, in the form attached hereto as Exhibit 1, and you must not revoke the release of claims (the “Release of Claims”). The Release of Claims shall be delivered to you not later than ten (10) business days following the date of termination, and you shall be required to execute it, if at all, not later than the date determined by the Company to be the last day of the period it must provide to you by law to consider the Release of Claims.

4. Confidentiality and Restricted Activities.

a. You acknowledge that the Company and its Affiliates continually develop Confidential Information, that you may develop Confidential Information for the Company or its Affiliates and that you may learn of Confidential Information during the course of employment. You will comply with the policies and procedures of the Company and its Affiliates for protecting Confidential Information and shall not disclose to any Person or use, other than as required by applicable law or for the


proper performance of your duties and responsibilities to the Company and its Affiliates, any Confidential Information obtained by you incident to your employment or other association with the Company or any of its Affiliates. You understand that this restriction shall continue to apply after your employment terminates, regardless of the reason for such termination.

b. You acknowledge that in your employment with the Company you will have access to confidential information of the Company and its Affiliates which, if disclosed, would assist in competition against them and that you will also generate goodwill for the Company and its Affiliates in the course of your employment. Therefore, you agree that the following restrictions on your activities during and after your employment with the Company are necessary to protect the goodwill, confidential information and other legitimate interests of the Company and its Affiliates:

i. While you are employed by the Company and for the period of twelve (12) months after your employment terminates, you shall not, directly or indirectly, own, manage, operate, control or participate in any manner in the ownership, management, operation or control of, or be connected as an officer, employee, partner, director, principal, consultant, agent or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, any business, venture or activity which competes with any Business of the Company or its Affiliates, in the United States or any other geographic area where such Business is being conducted or actively being planned to be conducted at or prior to the last day of your employment. For the purposes of this Section 4, the Business of the Company and its Affiliates shall include all Products and your undertaking shall encompass all items, products and services that may be used in substitution for Products. Notwithstanding the foregoing, ownership of not more than five percent of any class of equity security of any publicly held corporation shall not, of itself, constitute a violation of this Section 4.

ii. You agree that while you are employed by the Company and during the two years after your employment terminates, you will not hire or attempt to hire any employee of the Company or any of its Affiliates, assist in such hiring by any Person, encourage any such employee to terminate his or her relationship with the Company or any of its Affiliates, or solicit or encourage any customer or vendor of the Company or any of its Affiliates to terminate or diminish its relationship with them, or, in the case of a customer, to conduct with any Person any business or activity which such customer conducts or could conduct with the Company or any of its Affiliates.


c. In signing this Agreement, you give the Company assurance that you have carefully read and considered all the terms and conditions of this Agreement, including the restraints imposed on you under this Section 4. You agree without reservation that these restraints are necessary for the reasonable and proper protection of the Company and its Affiliates and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area. You further agree that, were you to breach any of the covenants contained in this Section 4, the damage to the Company and its Affiliates would be irreparable. You therefore agree that the Company, in addition to any other remedies available to it, shall be entitled to preliminary and permanent injunctive relief against any breach or threatened breach by you of any of those covenants, without having to post bond. You and the Company further agree that, in the event that any provision of this Section 4 is determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, that provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law.

5. Payment Schedule and Withholding. Payments by the Company under this agreement shall be reduced by all taxes and other amounts which the Company is required to withhold under applicable law.

6. Not a Contract of Employment. This agreement is not a contract of employment for a definite term and does not otherwise restrict your right, or that of the Company, to terminate your employment, with or without notice or cause.

7. Miscellaneous.

a. This is the entire agreement between you and the Company, and replaces all prior communications, agreements and understandings, written or oral, with respect to termination of your employment and all related matters (provided that all standard form of Company confidentiality, assignment of invention and similar agreements that you have signed shall continue to be in full force and effect). No modification or amendment of this Agreement shall be valid unless in writing and signed by you and a duly authorized representative of the Company. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

This is a Massachusetts contract and shall be governed and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to the conflict of laws principles thereof.

If the terms of this Agreement are acceptable to you, please sign, date and return it to me. At the time you sign and return it, this Agreement will take effect as a legally binding agreement between you and the Company on the basis set forth above. The enclosed copy of this Agreement, which you should also sign and date, is for your records.


b. Neither you nor the Company may make any assignment of this Agreement or any interest in it, by operation of law or otherwise, without the prior written consent of the other; provided, however, that in the event that the Company shall hereafter affect a reorganization, consolidate with, or merge into any entity or transfer all or substantially all of its properties or assets to any entity, the Company may (and will use its reasonable efforts to) assign its rights and obligations under this Agreement to such entity. This Agreement shall inure to the benefit of and be binding upon you and the Company, and each of our representative successors, executors, administrators, heirs and permitted assigns.

Sincerely,

BTU International, Inc.

By: /s/ Paul van der Wansem Paul van der Wansem Chief Executive Officer

Accepted and agreed:

/s/ John J. McCaffrey, Jr. Date: 2/28/08

Exhibit 1

RELEASE OF CLAIMS

FOR AND IN CONSIDERATION OF the benefits to be provided me in connection with the termination of my employment, as set forth in the letter agreement between me and BTU International, Inc. (the “Company”) dated as of (the “Agreement”), which are conditioned on my signing this Release of Claims and to which I am not otherwise entitled, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, I, on my own behalf and on behalf of my heirs, executors, administrators, beneficiaries, representatives and assigns, and all others connected with me, hereby release and forever discharge the Company, its subsidiaries and other affiliates and all of their respective past, present and future officers, directors, trustees, shareholders, employees, agents, general and limited partners, members, managers, joint venturers, representatives, successors and assigns, and all others connected with any of them, both individually and in their official capacities, from any and all causes of action, rights and claims of any type or description, known or unknown, which I have had in the past, now have, or might now have, through the date of my signing of this Release of Claims, in any way resulting from, arising out of or connected with my employment by the Company or any of its subsidiaries or other affiliates or the termination of that employment or pursuant to any federal, state or local law, regulation or other requirement (including without limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the fair employment practices laws of the state or states in which I have been employed by the Company or any of the subsidiaries or other affiliates, each as amended from time to time).

Excluded from the scope of this Release of Claims is any right of indemnification or contribution that I have pursuant to the Articles of Incorporation or By-Laws of the Company or any of its subsidiaries or other affiliates.

In signing this Release of Claims, I acknowledge my understanding that I may not sign it prior to the termination of my employment, but that I may consider the terms of this Release of Claims for up to twenty-one (21) days (or such longer period as the Company may specify) from the later of the date my employment with the Company terminates or the date I receive this Release of Claims. I also acknowledge that I am advised by the Company and its subsidiaries and other affiliates to seek the advice of an attorney prior to signing this Release of Claims; that I have had sufficient time to consider this Release of Claims and to consult with an attorney, if I wished to do so, or to consult with any other person of my choosing before signing; and that I am signing this Release of Claims voluntarily and with a full understanding of its terms.

John J. McCaffrey, Jr. - 8 -

I further acknowledge that, in signing this Release of Claims, I have not relied on any promises or representations, express or implied, that are not set forth expressly in the Agreement. I understand that I may revoke this Release of Claims at any time within seven (7) days of the date of my signing by written notice to the Chief Executive Officer of the Company and that this Release of Claims will take effect only upon the expiration of such seven-day revocation period and only if I have not timely revoked it.

Intending to be legally bound, I have signed this Release of Claims under seal as of the date written below.

John J. McCaffrey, Jr. - 9 -

Signature:

Name (please print):

Date Signed:

Exhibit 10.3

August 27, 2008

Mr. Thomas P. Kealy Vice President, Corporate Controller and Chief Accounting Officer BTU International, Inc. 23 Esquire Rd. North Billerica, MA 01862

Dear Tom:

This letter amends the agreement between BTU International, Inc. (the “Company”) and you dated November 29, 2005 (the “Severance Agreement”). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and you agree as follows:

1. Section 1(a) of the Severance Agreement is hereby amended by adding at the end thereof the following:

Notwithstanding the foregoing, (y) in the event that the Company terminates your employment other than for Cause during the CFO Transition Period (as defined below in Section 2(e)), the Severance Pay Period under clause (i) and (ii) of this Section 1(a) shall be defined as the earlier of (A) the conclusion of a period equal to twenty-four months, or (B) the date you commence employment that provides you with substantially equivalent base salary and bonus opportunity to the last position you held at the Company, and (z) in the event the Company terminates your employment other than for Cause during the Extended Transition Period (as defined below in Section 2(f)), the Severance Pay Period under clause (i) and (ii) of this Section 1(a) shall be defined as the earlier of (A) the conclusion of a period equal to twenty-four months minus the number of days that have elapsed since the final day of the CFO Transition Period (which period shall be no less than twelve months), or (B) the date you commence employment that provides you with substantially equivalent base salary and bonus opportunity to the last position you held at the Company.

2. Section 1(b) of the Severance Agreement is hereby amended by deleting the second to last sentence and replacing it with the following:

For the avoidance of doubt, if the Company terminates your employment other than for Cause within one year of a Change in Control, payments to you pursuant to this Section 1(b) shall be in lieu of, and not in addition to, payments pursuant to Section 1(a) hereof.

3. Section 2 of the Severance Agreement is hereby amended by adding as a new Section 2(e) and a new Section 2(f) the following:

2(e) “CFO Transition Period” means the period beginning on the date hereof and concluding on the later of (i) December 31, 2009 or (ii) the date that is twelve months following the date when the next individual to hold the position of Chief Financial Officer of the Company begins his or her employment with the Company.

2(f) “Extended Transition Period” means the twelve-month period beginning on the day immediately following the final day of the CFO Transition Period.

4. Section 5 of the Severance Agreement is hereby amended by adding at the end thereof the following:

Notwithstanding the foregoing, all payments to which you may be entitled under clause (i) of Section 1(a) shall in no event be paid later than by December 31 of the second calendar year following the calendar year in which involuntary separation from service occurs, and any Pro Rata Bonus to which you may be entitled under this agreement shall be paid no later than by March 15 of the calendar year following the calendar year in which involuntary separation from service occurs.

5. Section 6 of the Severance Agreement is hereby amended by adding at the end thereof the following:

Notwithstanding the foregoing, during the CFO Transition Period and Extended Transition Period you agree to provide the Company with 60 days’ written notice prior to terminating your employment with the Company. The Company may elect to waive this period of notice, or any portion thereof, and, if the Company so elects, the Company will pay you your base salary for the notice period (or for any remaining portion of the period).

Except as expressly modified herein, the Severance Agreement, and all of its terms and provisions, shall remain unchanged and in full force and effect. This Amendment may be executed in one or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

[REST OF PAGE INTENTIONALLY LEFT BLANK]

If the foregoing is acceptable to you, please sign this letter in the space provided and return it to me. We will provide a countersigned copy for your records.

Sincerely,




/s/ Thomas P. Kealy Thomas P. Kealy

Date: Aug. 27, 2008

Exhibit 10.4

March 20, 2009

Peter J. Tallian

Dear Peter:

I am pleased to extend our offer of employment to you as Chief Financial Officer with a projected start date of April 6, 2009. You will receive a starting salary of $8,461.54/bi-weekly (if annualized, the total would be $220,000). This position is exempt, reporting to me.

As an employee of BTU International, you will be eligible to participate in our benefits programs; we currently offer medical, dental, life and accident insurance coverage, a 401k plan, and paid holidays and vacation time. You will begin accrual of vacation time at four weeks of vacation annually. A Summary of Benefits is enclosed and more details will be provided during your orientation to the company. In the event of a conflict, the terms of BTU’s benefits set forth in the Employee Policies and/or other plan documents shall govern. BTU, of course, may amend, terminate, or enhance the benefits provided to you and our other employees from time to time as it deems appropriate.

If you accept BTU’s offer of employment, you will be eligible for the following additional compensation:

Page 1 of 3

• During employment, you will eligible annually for a bonus of 25% of your base salary (for 100% of goal achievement) up to a maximum of 50% of your base salary (for goal achievement exceeding 100%). For 2009, the company will guarantee a minimum 10% pro-rated bonus payout. Bonus awards will be determined by the Board of Directors, in its discretion, based on performance of the Company against goals established annually by the Board of Directors.

• As a sign-on benefit you will receive an option to purchase 20,000 shares of BTU stock as outlined in the stock option certificate and pending approval by the Board of Directors at their next meeting. These options will be priced at the close of the market on your start date, provided prior Board Approval has been obtained, vest in four equal parts over four years, and expire in seven years. The grant of options will be made under the BTU International, Inc., 2003 Equity Incentive Plan and the option shall be governed by the terms of that Option Plan, the stock option certificate and applicable law.

• As discussed, we anticipate that at some time you will be able to move to our area. In the meantime, we will subsidize your temporary

housing in the amount of up to $1,750/month for nine months.

This offer, including the Retention Agreement, is contingent upon successful completion of all hiring steps and receipt of satisfactory documents concerning employment eligibility. Your employment is also contingent upon BTU’s completion of a satisfactory investigation of your background. You agree to release BTU, its employees and agents, and any individuals who may provide BTU with information regarding your background from any liability in connection with this background check. Please review carefully the Additional New Hire Information and enclosures included as a part of this offer letter.

This offer letter (including the enclosed Additional New Hire Information and Retention Agreement) contains our entire understanding regarding the terms and conditions of your employment and supersedes any prior statements regarding your employment made to you at any time by any representative of BTU. Your employment with BTU will be at-will, and this letter, BTU practice, and any other oral or written policies or statements of BTU or its agents shall not create an employment contract, guarantee a definite term of employment, or otherwise modify in any way the agreement and understanding that employment with BTU is at-will. No representative of BTU, except BTU’s CEO in a writing signed by the CEO and you, has any authority to enter into any agreement contrary to the foregoing.

This offer is valid until March 21, 2009. Please complete and return one copy of this offer letter signed by you to the Human Resources Department at BTU International, Inc., 23 Esquire Road, North Billerica, MA 01862, or by confidential fax (978) 670-2613. By signing below you verify that there are no restrictions, contractual or otherwise, that might prohibit your employment with BTU.

My team and I look forward to working with you and feel that you will have much to offer BTU. We are a highly committed team dedicated to excellence. We feel this is an exciting environment with significant opportunities in which to work and hope that you will accept the position as outlined.

• You will receive a $10,000 sign-on bonus, payable upon completion of the first 90 days.

• Your performance and compensation will be formally reviewed by me and the Compensation Committee of the Board of Directors

in December, 2009.

• We are pleased to offer you the benefits described in the attached Retention Agreement (“Attachment 1”), including the assurance

of severance pay in the event that your employment is terminated in specific circumstances.

Sincerely,

/s/ Paul J. van der Wansem Paul J. van der Wansem Chairman and CEO

Page 2 of 3

I, Peter Tallian, accept this offer and terms of employment as set forth in this offer letter including the Additional New Hire Information. My intended start date is: 4-6-09

Signature /s/ Peter Tallian Date: 3-21-09 Peter Tallian

Enclosures: Retention Agreement Benefit Summary 2009 Employment Eligibility Verification (1-9) Drug Test Information FCRA Disclosure to Applicant

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Exhibit 10.5

March 20, 2009

Peter J. Tallian

RETENTION AGREEMENT

Dear Peter:

BTU International, Inc. (the “Company”) wants to encourage you to become an employee of the Company and values your association with us as an executive officer. To that end, the Company is offering you the assurance of severance pay, as described below, in the event that your employment is terminated in specific circumstances. Therefore, the purpose of this letter is to confirm the agreement between you and the Company on the following terms:

1. Severance Benefits.

a. In the event that the Company terminates your employment other than for Cause (as defined below in Section 2(b)): (i) the Company will continue to pay you your base salary, at the rate in effect on the date of termination, until the earlier of (A) the conclusion of a period equal to six (6) months plus one (1) month for each year of completed service, up to a maximum of twelve (12) months, or (B) the date you commence employment that provides you with substantially equivalent base salary and bonus opportunity to the last position you held at the Company (the “Severance Pay Period”); (ii) for the duration of the Severance Pay Period, subject to any employee contribution applicable to active employees, the Company shall continue to contribute to the premium cost of your participation and that of your eligible dependents in the Company’s group medical and dental plans, provided that you and your dependents are entitled to continue such participation under applicable law and plan terms; and (iii) provided you have worked for at least three (3) months during the year in which termination occurs, at the time bonuses are payable to executives of the Company generally for the year in which termination occurs (but in no event later than two and one-half months following the close of the fiscal year for which the bonus was earned), the Company will pay you, in its discretion, a pro-rata portion of the bonus (if any) to which you would have been entitled had your employment continued through the end of the year, such pro rata portion to be based upon the number of days you worked prior to termination divided by 233 (the “Pro Rata Bonus”); provided, however, that no payments will be made by the Company pursuant to this Section 1(a) until after the effective date of the Release of Claims described below. Salary continuation payments to which you may be entitled hereunder shall be

Peter J. Tallian - 2 - March 20, 2009

payable in accordance with the Company’s standard payroll practices and shall commence on the next regular Company payday for executives that is at least 5 business days following the later of the effective date of the Release of Claims or the date the Release of Claims, signed by you, is received by the Company, but with the first payment being retroactive to the date following the date of termination.

b. In the event that within one year of a Change in Control (as defined below in Section 2(c)) the Company terminates your employment other than for Cause or you terminate your employment for Good Reason (as defined below in Section 2(d)), by providing notice to the Company of the condition giving rise to the Good Reason no later than thirty (30) days following the occurrence of the condition, giving the Company thirty (30) days to remedy the condition, and by terminating employment for Good Reason within thirty (30) days thereafter if the Company fails to remedy the condition, then: within ten (10) days following the effective date of the Release of Claims described below, the Company will provide you with one lump-sum payment in the amount representing: (i) six (6) months plus two (2) months for each year of service completed, up to a maximum of twelve (12) months, of your base salary at the rate in effect on the date of termination; plus (ii) provided you have worked at least three (3) months during the year in which termination occurs, the Pro Rata Bonus, which shall be calculated as if you and the Company met but did not exceed the performance targets for the year in which termination occurs, and shall be based upon the number of days you worked prior to termination divided by 233. For the avoidance of doubt, (Y) if the Company terminates your employment other than for Cause within one year of a Change in Control, payments to you pursuant to this Section 1(b) shall be in lieu of, and not in addition to, payments pursuant to Section 1(a) hereof, and (Z) no payments will be made by the Company pursuant to this Section 1(b) until after the effective date of the Release of Claims described below.

c. In the event that a Change of Control (as defined below in Section 2(c)) occurs, and (i) you remain employed by the Company on the date that is six (6) months following the consummation of the Change of Control (the “Eligibility Date”), or (ii) the Company terminates your employment other than for Cause following the Change of Control but prior to the Eligibility Date, the Company will provide you, within ten (10) days following the Eligibility Date or the effective date of the Release of Claims, as applicable, with either (A) a lump-sum cash payment in the amount equal to the value of 7,000 shares of the Company’s common stock, such value to be determined as of the date the Change of Control is consummated, or (B) at the Company’s option, if following the Change of Control the Company is the surviving corporation, 7,000 shares of the Company’s common stock (the “Retention Bonus”). For the avoidance of doubt, if you terminate your employment


for any reason prior to the Eligibility Date, or if the Company terminates your employment for Cause prior to the Eligibility Date, you will not be eligible for the Retention Bonus or any portion thereof. For the avoidance of doubt, the Retention Bonus shall be in addition to any amounts due under Section 1(a) or (b).

d. In the event your employment is terminated in accordance with Section 1(a) or 1(b) above, and during your employment part of your compensation was earned on a commission basis: (i) the Company will pay you, at the time such commissions otherwise would have been paid to you had you remained an active employee of the Company, all commission payments that had become due and payable to you prior to the date of termination but that had not yet been paid to you; and (ii) the Company will pay you, in one lump-sum payment within ten (10) days following the effective date of the Release of Claims described below, an amount representing fifty percent (50%) of the total commissions that were paid to you for the calendar year prior to the year in which termination occurs.

e. Notwithstanding anything to the contrary in this Agreement, if at the time of your separation from service you are a “specified employee”, as hereinafter defined, no payment shall be made to you before the date which is six months after you separate from service ((within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended)), except to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasury regulations 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in l.409A-1(b)(9)(iii), benefits which qualify as excepted welfare benefits pursuant to Treasury regulations 1.409A-1(a)(5), or other amounts or benefits that are not subject to the requirements of Section 409A). For purposes of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance issued thereunder (“Section 409A”), all references to termination of employment or similar terms, when used in a context that bears on the payment or timing of payment of any amounts or benefits that could constitute “nonqualified deferred compensation” within the meaning of Section 409A, shall be construed to require a “separation from service” (as defined in Section 1.409A-1(h) of the Treasury regulations), and the Company may, but need not, elect in writing, subject to the applicable limitations under Section 409A, any of the special elective rules prescribed in Section 1.409A-1(h) of the Treasury Regulations for purposes of determining whether a “separation from service” has occurred, which election shall be deemed part of this Agreement. In addition, each payment made under this Agreement shall be treated as a separate payment, and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. For purposes of this Section, the term “specified employee” shall mean an individual determined by the Company to be a specified employee as defined in subsection (a)(2)(B)(i) of Section 409A.


2. Definitions. For the purposes of this Agreement, the following definitions shall apply:

a. “Affiliates” means all persons and entities directly or indirectly controlling, controlled by or under common control with the

Company, where control may be by either management authority or equity interest.

b. “Cause” means (i) your material failure to perform (other than by reason of disability) or material negligence in the performance of your duties and responsibilities for the Company or any of its Affiliates; (ii) commission by you of fraud, embezzlement or theft with respect to the Company or its Affiliates; or (iii) commission by you of any felony or any other crime involving dishonesty or moral turpitude. A termination for Cause shall be communicated by a written notice to you, which notice shall set forth the specific facts and circumstances claimed to provide a basis for termination of your employment for Cause and provide a period of 30 days to cure such failure of performance (if capable of cure); provided, that the Company will not have to provide more than one notice and opportunity to cure with respect to any multiple, repeated, related or substantially similar events or circumstances.

c. “Change of Control” means (i) any entity or “group” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 as amended (tile “Exchange Act”)), other than the Company or any of its Affiliates or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or one of its Affiliates, becomes a beneficial owner (within the meaning of Rule 13d-3 as promulgated under the Exchange Act), directly or indirectly, in one or a series of transactions, of securities representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities; (H) any merger or consolidation involving the Company (other than a merger of a subsidiary with the Company); or (iii) any sale or other disposition by the Company of all or substantially all of the assets of the Company other than to one or more of the Company’s Affiliates or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates.

d. “Good Reason” means, without your consent, the occurrence of one or more of the following events: (i) the material reduction of your base salary by the Company without your consent (other than a reduction applicable to all Company managerial employees); (H) the material diminution in the scope of your duties, responsibilities or authority by the Company; or (iii) the material failure by the Company to comply with any of the material provisions of this Agreement.


e. “Products” means all products planned, researched, developed, manufactured, sold, licensed, leased or otherwise distributed or put

into use by the Company or any of its Affiliates, together with all services provided or planned by the Company or any of its Affiliates, during your employment.

3. Release of Claims. In order to be eligible to receive any of the severance pay and benefits under Section 1(a), 1(b), 1(c)(ii) and 1(d)(ii) of this Agreement, you must execute a timely and valid release of claims in favor of the Company, in the form attached hereto as Exhibit 1, and you must not revoke the release of claims (the “Release of Claims”). The Release of Claims shall be delivered to you not later than ten (10) business days following the date of termination, and you shall be required to execute it, if at all, not later than the date determined by the Company to be the last day of the period it must provide to you by law to consider the Release of Claims.

4. Confidentiality and Restricted Activities.

a. You acknowledge that the Company and its Affiliates continually develop Confidential Information, that you may develop Confidential Information for the Company or its Affiliates and that you may learn of Confidential Information during the course of employment. You will comply with the policies and procedures of the Company and its Affiliates for protecting Confidential Information and shall not disclose to any person or entity or use, other than as required by applicable law or for the proper performance of your duties and responsibilities to the Company and its Affiliates, any Confidential Information obtained by you incident to your employment or other association with the Company or any of its Affiliates. You understand that this restriction shall continue to apply after your employment terminates, regardless of the reason for such termination.

b. You acknowledge that in your employment with the Company you will have access to confidential information of the Company and its Affiliates which, if disclosed, would assist in competition against them and that you will also generate goodwill for the Company and its Affiliates in the course of your employment. Therefore, you agree that the following restrictions on your activities during and after your employment with the Company are necessary to protect the goodwill, confidential information and other legitimate interests of the Company and its Affiliates:

i. While you are employed by the Company and for the period of twelve (12) months after your employment terminates, you shall not, directly or indirectly, own, manage, operate, control or participate in any manner in the ownership, management, operation or control of, or be connected as an officer, employee, partner, director, principal, consultant, agent or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, any business, venture or activity which competes with any Business of the Company or its Affiliates, in the United States or any other geographic area where such Business is being conducted or actively being planned to be conducted at or prior to the last day of your employment. For the purposes of this Section 4, the Business of the Company and its Affiliates shall include all Products and your undertaking shall encompass all items, products and services that may be used in substitution for Products. Notwithstanding the foregoing, ownership of not more than five percent of any class of equity security of any publicly held corporation shall not, of itself, constitute a violation of this Section 4.


ii. You agree that while you are employed by the Company and during the two years after your employment terminates, you will not hire or attempt to hire any employee of the Company or any of its Affiliates, assist in such hiring by any Person, encourage any such employee to terminate his or her relationship with the Company or any of its Affiliates, or solicit or encourage any customer or vendor of the Company or any of its Affiliates to terminate or diminish its relationship with them, or, in the case of a customer, to conduct with any Person any business or activity which such customer conducts or could conduct with the Company or any of its Affiliates.

c. In signing this Agreement, you give the Company assurance that you have carefully read and considered all the terms and conditions of this Agreement, including the restraints imposed on you under this Section 4. You agree without reservation that these restraints are necessary for the reasonable and proper protection of the Company and its Affiliates and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area. You further agree that, were you to breach any of the covenants contained in this Section 4, the damage to the Company and its Affiliates would be irreparable. You therefore agree that the Company, in addition to any other remedies available to it, shall be entitled to preliminary and permanent injunctive relief against any breach or threatened breach by you of any of those covenants, without having to post bond, together with an award of reasonable attorneys’ fees incurred in securing such relief. You and the Company further agree that, in the event that any provision of this Section 4 is determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, that provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law.


5. Payment Schedule and Withholding. Payments by the Company under this agreement shall be reduced by all taxes and other amounts which the Company is required to withhold under applicable law.

6. Not a Contract of Employment. This agreement is not a contract of employment for a definite term and does not otherwise restrict your right, or that of the Company, to terminate your employment, with or without notice or cause. Notwithstanding the foregoing, you agree to provide the Company with 30 days’ written notice prior to terminating your employment with the Company. The Company may elect to waive this period of notice, or any portion thereof, and, if the Company so elects, the Company will pay you your base salary for the notice period (or for any remaining portion of the notice period).

7. Miscellaneous.

a. This is the entire agreement between you and the Company, and replaces all prior communications, agreements and understandings, written or oral, with respect to termination of your employment and all related matters (provided that all standard form of Company confidentiality, assignment of invention and similar agreements that you have signed shall continue to be in fill force and effect). No modification or amendment of this Agreement shall be valid unless in writing and signed by you and a duly authorized representative of the Company. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. This is a Massachusetts contract and shall be governed and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to the conflict of laws principles thereof.

b. Neither you nor the Company may make any assignment of this Agreement or any interest in it, by operation of law or otherwise, without the prior written consent of the other; provided, however, that in the event that the Company shall hereafter affect a reorganization, consolidate with, or merge into any entity or transfer all or substantially all of its properties or assets to any entity, the Company may (and will use its reasonable efforts to) assign its rights and obligations under this Agreement to such entity, and, if the Company does assign its rights and obligations under

If the terms of this Agreement are acceptable to you, please sign, date and return it to me no later than March 21, 2009. At the time you sign and return it, this Agreement will take effect as a legally binding agreement between you and the Company on the basis set forth above. The enclosed copy of this Agreement, which you should also sign and date, is for your records.


this Agreement, the entity shall be bound by the terms of this Agreement. This Agreement shall inure to the benefit of and be binding upon you and the Company, and each of our representative successors, executors, administrators, heirs and permitted assigns.

Sincerely,




/s/ Peter J. Tallian

Date: 3/21/09

Exhibit 1

RELEASE OF CLAIMS

FOR AND IN CONSIDERATION OF the benefits to be provided me in connection with the termination of my employment, as set forth in the letter agreement between me and BTU International, Inc. (the “Company”) dated as of March 20, 2009 (the “Agreement”), which are conditioned on my signing this Release of Claims and to which I am not otherwise entitled, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, I, on my own behalf and on behalf of my heirs, executors, administrators, beneficiaries, representatives and assigns, and all others connected with me, hereby release and forever discharge the Company, its subsidiaries and other affiliates and all of their respective past, present and future officers, directors, trustees, shareholders, employees, employee benefit plans, agents, general and limited partners, members, managers, joint venturers, representatives, successors and assigns, and all others connected with any of them, both individually and in their official capacities, from any and all causes of action, rights and claims of any type or description, known or unknown, which I have had in the past, now have, or might now have, through the date of my signing of this Release of Claims, in any way resulting from, arising out of or connected with my employment by the Company or any of its subsidiaries or other affiliates or the termination of that employment or pursuant to any federal, state or local law, regulation or other requirement (including without limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the fair employment practices laws of the state or states in which I have been employed by the Company or any of the subsidiaries or other affiliates, each as amended from time to time).

Excluded from the scope of this Release of Claims are: (i) any right of indemnification or contribution and/or payment of attorneys’ fees and expenses (if any) that I have pursuant to the Articles of Incorporation, By-Laws, or other organizational documents of the Company or any of its subsidiaries or other affiliates, under any written indemnification agreement I have entered into with the Company, or under applicable law; (ii) my right to seek unemployment compensation benefits and/or any other benefits that cannot by law be waived and/or released; (iii) my right with respect to equity-based awards previously granted by the Company or its affiliates to me to the extent I retain any such right in accordance with the applicable terms of such awards subsequent to the termination of my employment; (iv); any rights I may have to insurance coverage in accordance with applicable insurance plans and/or contracts for any covered losses, damages or expenses that I may in the future incur with respect to my service as an employee, or officer of the Company or any of its subsidiaries or affiliates; (v) any rights to continued medical or dental coverage that I may have under COBRA (or similar applicable state law); (vi) my rights to the severance and other benefits payable under this Agreement in accordance with the terms of this Agreement; and (vii) any rights to payment of vested benefits that I may have under a retirement or other benefit plan sponsored or maintained by the Company, or its subsidiaries or its affiliates. Further, I do not waive any claims that may arise after the date of this Release of Claims.

In signing this Release of Claims, I acknowledge my understanding that I may not sign it prior to the termination of my employment, but that I may consider the terms of this Release of Claims for up to twenty-one (21) days (or such longer period as the Company may specify) from the later of the date my employment with the Company terminates or the date I receive this Release of Claims. I also acknowledge that I am advised by the Company and its subsidiaries and other affiliates to seek the advice of an attorney prior to signing this Release of Claims; that I have had sufficient time to consider this Release of Claims and to consult with an attorney, if I wished to do so, or to consult with any other person of my choosing before signing; and that I am signing this Release of Claims voluntarily and with a full understanding of its terms.

I further acknowledge that, in signing this Release of Claims, I have not relied on any promises or representations, express or implied, that are not set forth expressly in the Agreement. I understand that I may revoke this Release of Claims at any time within seven (7) days of the date of my signing by written notice to the Chief Executive Officer of the Company and that this Release of Claims will take effect only upon the expiration of such seven-day revocation period and only if I have not timely revoked it.

Intending to be legally bound, I have signed this Release of Claims under seal as of the date written below.

Signature:

Name (please print):

Date Signed:

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul J. van der Wansem, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BTU International, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2009

/s/ Paul J. van der Wansem Paul J. van der Wansem President, Chief Executive Officer and Chairman of the Board of Directors (principal executive officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter J. Tallian, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BTU International, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2009

/s/ Peter J. Tallian Peter J. Tallian Chief Financial Officer and Principal Accounting Officer (principal financial and accounting officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as President and Chief Executive Officer of BTU International, Inc. (the “Company”), does hereby certify that to his knowledge:

Dated: May 8, 2009

1. the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 29, 2009 (the “Report”) fully complies with

the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of

the Company for the periods covered by the Report.

/s/ Paul J. van der Wansem Paul J. van der Wansem President, Chief Executive Officer and Chairman of the Board of Directors (principal executive officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Financial Officer and Principal Accounting Officer of BTU International, Inc. (the “Company”), does hereby certify that to his knowledge:

Dated: May 8, 2009

1. the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 29, 2009 (the “Report”) fully complies with

the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of

the Company for the periods covered by the Report.

/s/ Peter J. Tallian Peter J. Tallian Chief Financial Officer and Principal Accounting Officer (principal financial and accounting officer)

q1 2009 earning report of btu international, inc

Economy & Finance

number of shares

total current assets

total assets

total stockholders equity

total current liabilities10

assets current assetscash

securities exchange

current liabilities6