<PAGE>
As filed with the Securities and Exchange Commission on August 5, 1996
Registration No. 333-___________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------------------
Rofin-Sinar Technologies Inc.
(Exact name of registrant as specified in its charter)
Delaware 3699 To Be Applied For
(State or other (Primary standard industrial (I.R.S. employer
jurisdiction of classification code number) identification number)
incorporation
or organization)
---------------------------------------
Rofin-Sinar Technologies Inc.
45701 Mast Street
Plymouth, MI 48170
(313) 455-5400
(Address including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------------------------
Derek Heins
Rofin-Sinar Technologies Inc.
45701 Mast Street
Plymouth, MI 48170
(313) 455-5400
(Name, address, including zip code, and telephone number,
including area code, or agent for service for the registrant)
---------------------------------------
Copies to:
FAITH D. GROSSNICKLE PATRICK KENADJIAN
Shearman & Sterling Davis Polk & Wardwell
599 Lexington Avenue 450 Lexington Avenue
New York, New York 10022 New York, New York 10017
(212) 848-4000 (212) 450-4000
---------------------------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================
Number of Proposed Maximum Proposed Maximum
Title of Each Class of Shares to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered/(1)/ Per Share/(2)/ Price/(1)//(2)/ Registration Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $0.01 par value....... 11,500,000 $10.00 $115,000,000 $39,656
============================================================================================================
</TABLE>
(1) Includes 1,500,000 shares to cover over-allotments, if any, pursuant to an
over-allotment option granted to the Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
---------------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+Registration Statement relating to these securities has been filed with the +
+Securities Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the Registration Statement becomes+
+effective. This prospectus shall not constitute an offer to sell or the +
+solicitation of any offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 5, 1996
[Rofin-Sinar logo]
10,000,000 Shares
Common Stock
Of the 10,000,000 shares of Common Stock, par value $0.01, offered hereby,
[____] shares are being offered initially in the United States and Canada (the
"U.S. Offering") by the U.S. Underwriters (the "U.S. Underwriters") and [____]
shares are being offered initially outside the United States and Canada (the
"International Offering" and together with the U.S. Offering, the "Offerings")
by the International Underwriters (together with the U.S. Underwriters, the
"Underwriters"). See "Underwriting." All of the shares offered hereby are
being sold by Rofin-Sinar Technologies Inc. ("Rofin-Sinar" or the "Company").
Prior to the Offerings, there has been no public market for the Common Stock.
It is currently anticipated that the initial public offering price will be
between [____] and [____] per share. See "Underwriting" for information
relating to the factors considered in determining the initial public offering
price.
The Company will use $___ million of the net proceeds of the Offerings to
purchase its assets from Siemens Aktiengesellschaft ("Siemens") and its
indirect wholly owned U.S. subsidiary, Siemens Power Corporation ("SPC"). The
Company will retain $19.2 million of the net proceeds of the Offerings,
together with any net proceeds received by the Company from the sale of shares
pursuant to the Underwriters' over-allotment option, to use for general
corporate purposes, including the repayment of $7 million of indebtedness owed
to Siemens and Siemens Corporation, a wholly owned subsidiary of Siemens
("SC"), and future acquisitions, if any. Application will be made to have the
Common Stock approved for quotation on the Nasdaq National Market under the
symbol "[RSTI]."
For certain factors which should be considered by prospective investors, see
"Risk Factors" commencing on page 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price Discounts and Proceeds to
to Public Commissions(1) Company(2)
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
</TABLE>
(1) The Underwriting Agreement (as defined herein) provides for
indemnification of the several Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses of the Offerings payable by the Company
estimated at $[____].
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 1,500,000 shares of Common Stock solely to cover
over-allotments. If all such shares are purchased, the total Price to
Public, Underwriting Discounts and Commissions, and Proceeds to Company
will be $ , $ and $ ,
respectively. See "Underwriting."
Global Coordinator
Deutsche Morgan Grenfell
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and
subject to the approval of certain legal matters by counsel and certain other
conditions. It is expected that delivery of the shares of Common Stock will
be made in New York, New York against payment therefor on or
about , 1996.
Deutsche Morgan Grenfell
Alex. Brown & Sons
Incorporated
Lehman Brothers
The date of this Prospectus is ________, 1996.
<PAGE>
[Product Photos]
-------------------------
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET,
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED,MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements appearing elsewhere in this Prospectus. Unless the context
otherwise requires, the terms "Company" or "Rofin-Sinar" mean Rofin-Sinar
Technologies Inc. and its combined subsidiaries after giving effect to the
restructuring described below under "Background of the Offerings" and
"Certain Transactions -- Transfer Agreements." Unless otherwise
indicated, the information in this Prospectus assumes that there will be
no exercise of the Underwriters' over-allotment option. All references to
"$" or "dollars" are to United States dollars.
The Company
Rofin-Sinar is a leader in the design, development, engineering,
manufacture and marketing of laser products for cutting, welding and
marking a wide range of industrial materials (collectively, "material
processing applications"). Lasers are a non-contact technology for
material processing which have several advantages that are desirable in
industrial applications. The Company's lasers all deliver a high-quality
beam at guaranteed power outputs and feature compact design, high
processing speed, flexibility, low operating and maintenance costs and
easy integration into the customer's production process. As a
technological leader in both CO\\2\\ and Nd:YAG lasers, the Company is
able to meet a broad range of its customers' material processing
requirements. The Company believes it has a worldwide market share (based
on sales volume) of approximately 20% for laser products used for cutting
and welding applications and that it is among the largest suppliers of
laser products used for marking applications in Europe and the
Asia/Pacific region (other than Japan). Over 80% of the Company's sales
in fiscal 1995 were made to existing customers. The Company has sold more
than 4,000 laser sources since 1975 and currently has over 1,500 active
customers (including multinational companies with multiple facilities
purchasing from the Company). During the 1995 fiscal year and the first
nine months of fiscal 1996, respectively, approximately 73% and 69% of the
Company's revenues were from sales and servicing of laser products for
cutting and welding applications and approximately 27% and 31% were from
sales and servicing of laser products for marking applications.
Through its global manufacturing, distribution and service network,
the Company provides a comprehensive range of laser solutions to three
principal target markets for material processing lasers: the Machine Tool,
Automotive and Semiconductor & Electronics industries. The Company sells
directly to industrial end-users, to original equipment manufacturers
("OEMs"), principally in the Machine Tool industry, who integrate Rofin-
Sinar's laser sources with other system components and to distributors.
Many of Rofin-Sinar's customers are among the largest global participants
in their respective industries, and include Aerospatiale, ASM, BMW,
Boeing, Bosch, Chrysler, Ford, General Motors, Mercedes-Benz, Philips, SGS
Thomson, Siemens, Thyssen, TRW, Volkswagen and Volvo. During fiscal 1995
and the first nine months of fiscal 1996, 34% and 33% of the Company's
sales were in North America, 52% and 46% were in Europe and 14% and 21%
were in the Asia/Pacific region, respectively.
In developing its laser solutions, the Company offers customers its
expertise in: (i) product development and manufacturing (i.e., state-of-
the-art product development and manufacturing services based on over 20
years of laser technology experience and applications know-how); (ii)
application and process development (i.e., developing new laser-based
applications for manufacturing customers and assisting them in
successfully integrating lasers into their production processes); (iii)
system engineering (i.e., advising customers on machine design, including
tooling, automation and controls, for customers in need of "turn-key"
solutions); and (iv) extensive after-sales support for its laser products
(including technical support, field service, maintenance and training
programs and rapid spare parts delivery).
Competitive Advantages
The Company attributes its strong market position and its long-
standing customer relationships to several competitive advantages: (i)
its technological leadership and product innovation; (ii) its
sophisticated application development; (iii) its broad product range;
(iv) its product quality; (v) its comprehensive customer service; (vi) and
its global presence.
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3
<PAGE>
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Business Strategy
The Company's business strategy is to maximize shareholder value by
(i) strengthening its position as a leading supplier to the global market
for cutting and welding applications and (ii) capitalizing on its
leadership position in cutting and welding, its strength in the European
and Asian marking markets and its other significant competitive advantages
to build its share of the U.S. market for marking applications. The
Company believes that the major sources of its growth over the next three
years will be the following:
. Developing new laser products through technological innovation in
response to evolving customer needs for increased output power,
greater penetration and higher processing speeds.
. Focusing on cross-selling to existing customers in target markets,
in particular to the Machine Tool, Automotive and Semiconductor
& Electronics industries.
. Capitalizing on its global presence to attract new customers in the
three principal geographic markets in which its customers
operate (North America, Europe and the Asia/Pacific region).
. Offering customized solutions based on standard laser sources.
Background of the Offerings
Prior to the Offerings, the business of the Company was conducted by
subsidiaries of Siemens, a company organized under the laws of the Federal
Republic of Germany whose principal business is the design, development,
manufacture and marketing of a wide range of electrical and electronics
products and systems. Siemens originally acquired the laser businesses of
Rofin-Sinar in 1987 to obtain access to laser technologies for application
in a number of industrial areas. Since being acquired, however, the
Company has pursued and developed broader goals and capabilities
independent of Siemens. Siemens and the Company have concluded that
Rofin-Sinar will have a better opportunity to achieve its full potential
as an independent entity rather than as part of Siemens.
Siemens has conducted the laser business through its directly and
indirectly wholly owned subsidiaries Rofin Sinar Inc. ("RSI") and Rofin
Sinar Laser GmbH ("RSL"), which in turn owns Rofin-Sinar France S.A.,
Rofin-Sinar Italiana S.r.l. (90.65% owned) and 51% of Rofin-Marubeni Laser
Corporation (collectively, the "Rofin-Sinar Subsidiaries"). Prior to the
Offerings, Rofin-Sinar Technologies Inc. was incorporated under the laws
of Delaware to be a holding company for RSI and RSL upon completion of the
Offerings as described below.
The Company will use $___ million of the net proceeds of the Offerings
(excluding any proceeds received from the exercise by the Underwriters of
their over-allotment option) to purchase the stock of RSL from Siemens and
the stock of RSI from SPC, a wholly owned subsidiary of SC. Because the
purchase price for RSL and RSI is derived from the offering price of the
shares of Common Stock of the Company being sold in the Offerings, it
reflects the factors considered in determining such offering price. Such
offering price was determined through discussions and negotiations among
the Company, Siemens, SPC and the Underwriters. See "Risk Factors --
Proceeds of Offerings Payable to Siemens; Purchase Price and Terms of RSL
and RSI Stock," "Certain Transactions -- Transfer Agreements" and
"Underwriting."
The Company maintains executive offices and manufacturing facilities
at 45701 Mast Street, Plymouth, Michigan 48170, where its telephone number
is (313) 455-5400. The principal executive offices of RSL and its
manufacturing facilities for lasers for cutting and welding applications
are located at Berzeliusstrasse 83, D-22113 Hamburg in the Federal
Republic of Germany, where its telephone number is 49-40-733-630. RSL's
manufacturing facilities for lasers for marking applications are located
at Neufeldstrasse 16/ Gunding, D-85232 Bergkirchen in the Federal Republic
of Germany, where its telephone number is 49-8131-7040.
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4
<PAGE>
- --------------------------------------------------------------------------------
THE OFFERINGS
<TABLE>
<CAPTION>
<S> <C>
Common Stock Offered(1):
U.S. Offering ................. [________] shares
International Offering ........ [________] shares
Total Offerings(1).................. 10,000,000 shares
Common Stock Outstanding after the
Offerings(1)(2) ................... 10,000,000 shares
Use of Proceeds .................... Assuming the Underwriters
do not exercise their
over-allotment option, $___
million of the net proceeds
of the Offerings will be
paid by the Company to
Siemens and SPC as
consideration for the
Company's acquisition of RSL
and RSI. The Company will
retain $19.2 million of the
net proceeds, together with
any net proceeds received
by the Company from the
exercise of the
Underwriters' over-
allotment option, to use for
general corporate purposes,
including repayment of $7
million of indebtedness owed
to Siemens and SC and future
acquisitions, if any. See
"Use of Proceeds."
Proposed Nasdaq National Market
Symbol ............................ "[RSTI]"
Dividend Policy .................... The Company intends to
retain its earnings to fund
development of its business
and does not anticipate
paying cash dividends in
the foreseeable future.
See "Dividend Policy."
</TABLE>
____________
(1) Assumes the Underwriters' over-allotment option for up to 1,500,000
shares of Common Stock is not exercised. See "Underwriting."
(2) Excludes 400,000 shares issuable at the initial public offering price
upon exercise of options to be granted to certain officers and key
employees of the Company and 4,500 shares of restricted stock to be
issued at the initial public offering price to non-employee directors
of the Company pursuant to employee benefit plans at the time of the
Offerings. Such options are exercisable, subject to vesting
requirements, commencing on the first anniversary of the closing of
the Offerings and such shares of restricted stock are transferable,
subject to vesting and forfeiture requirements, commencing on
________, 199_. See "Management -- Equity Incentive Plan" and
"-- Director Compensation."
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5
<PAGE>
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SUMMARY COMBINED FINANCIAL INFORMATION
The Statement of Operations Data for each of the years in the three-
year period ended September 30, 1995 and the Balance Sheet Data as of
September 30, 1994 and 1995 set forth below have been derived from the
Company's combined financial statements included elsewhere in this
Prospectus, which have been audited by KPMG Peat Marwick LLP, the
Company's independent auditors. Net sales for the fiscal years ended
September 30, 1991 and 1992 and Balance Sheet Data as of September 30,
1993 are unaudited and have been derived from the Company's historical
financial records. The Statement of Operations Data for the nine-month
periods ended June 30, 1995 and 1996 and the Balance Sheet Data as of June
30, 1996 and September 30, 1993 are unaudited but, in the opinion of
management, such information reflects all adjustments consisting of only
normal recurring adjustments necessary for a fair presentation of the
financial data for the interim periods. The results for the interim
periods presented are not necessarily indicative of the results for a full
year. These data should be read in conjunction with "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations," the Company's Combined Financial Statements and other
financial information appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Nine months
Years ended September 30, ended June 30,
----------------------------- --------------------
1993 1994 1995 1995 1996
--------- -------- -------- -------- ----------
Statement of Operations (in thousands, except per share data)
Data:
<S> <C> <C> <C> <C> <C>
Net sales(1)............... $ 60,034 $69,217 $92,466 $65,460 $83,372
Cost of goods sold......... 47,745 46,993 57,162 40,475 51,466
Gross profit............... 12,289 22,224 35,304 24,985 31,906
Selling, general, and 21,951 17,059 20,673 14,534 15,221
administrative expenses...
Research and development 10,276 6,834 6,719 5,903 5,850
expenses..................
Income (loss) from (19,938) (1,669) 7,912 4,548 10,835
operations................
Net interest expense....... 1,654 1,308 1,272 947 790
Income (loss) before (21,386) (3,116) 6,265 3,489 10,092
income taxes..............
Income tax expense (1,565) (1,422) 3,052 1,725 4,354
(benefit).................
Net income (loss).......... (19,821) (1,694) 3,213 1,764 5,738
Net income (loss) per
common share.............. [____] [___] [___] [___] [___]
Shares used in computing
loss) per
common share(2)........... [____] [___] [___] [___] [___]
Operating Data:
As percentage of sales:
Gross profit............... 20.5% 32.1% 38.2% 38.2% 38.3%
Selling, general and 36.6 24.6 22.4 22.2 18.3
administrative expenses...
Research and development 17.1 9.9 7.3 9.0 7.0
expenses..................
Income (loss) from (33.2) (2.4) 8.6 6.9 13.0
operations................
Income (loss) before (35.6) (4.5) 6.8 5.3 12.1
income taxes..............
Other Data:
Depreciation and 2,803 2,527 2,364 1,773 1,830
amortization..............
EBITDA(3).................. (17,135) 858 10,276 6,321 12,665
Backlog.................... 12,500 17,000 26,500 26,900 35,900
Sales per employee......... 135 184 227 166 188
</TABLE>
<TABLE>
<CAPTION>
At September 30, At June
---------------------------- ---------------
1993 1994 1995 1996
-------- ------- ------- ---------
Balance Sheet Data: (in thousands)
<S> <C> <C> <C> <C>
Working capital(4)......... $ 7,672 $ 4,927 $14,530 $18,137
Total assets............... 84,580 76,667 90,995 104,509
Line of credit and loans... 22,196 22,380 21,805 25,587
Stockholders' equity....... 35,837 30,583 39,673 40,954
</TABLE>
(1) Net sales for the years ended September 30, 1991 and 1992 were $72,900
and $73,300, respectively.
(2) Net income (loss) per share has been calculated assuming that _____
shares were outstanding for all periods. Such shares represent the
number of shares to be issued pursuant to the Offerings, the proceeds
from which will be used to purchase the shares of RSL and RSI and to
repay $7 million of indebtedness owed to Siemens and SC.
(3) EBITDA means earnings before interest, taxes, depreciation and
amortization, minority interest and miscellaneous expenses. The
Company believes that EBITDA is an important measure of its operating
results. However, EBITDA should not be considered in isolation or as
a substitute for net earnings and other statement of operations data
prepared in accordance with generally accepted accounting principles,
as a measure of the Company's profitability or liquidity.
(4) Working capital is defined as total current assets less total current
liabilities.
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6
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the
following factors should be considered carefully by prospective investors
in evaluating the Company and its business before purchasing shares of
Common Stock offered hereby.
No Prior Operating History as a Stand-Alone Company
Prior to the Offerings, the business of the Company has been
conducted by subsidiaries of Siemens and SPC. Since the acquisition of
Rofin-Sinar by Siemens in 1987, Rofin-Sinar's management has operated the
Company's business with a substantial degree of autonomy from Siemens.
Siemens has made available to the Company working capital financing (which
at June 30, 1996 was $25.9 million) and certain other operational support
such as participation in group insurance coverage. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." Thus, there has been no
financial history of the Company as an independent entity available for a
potential investor to evaluate. In addition, following the Offerings, the
Company will no longer benefit from such working capital financing that
has in the past been made available by Siemens. As a result of certain
administrative costs that it will have as an independent publicly held
company, the Company expects initially to reflect approximately $700,000
per year of additional operating expenses in the aggregate. See "Certain
Transactions." The Company's ability to operate successfully as a stand-
alone publicly held company will require the Company to continue to
improve and integrate the operational, management and financial systems
and controls of its U.S. and European operations and to train, motivate
and manage its employees effectively.
Proceeds of Offerings Payable to Siemens; Purchase Price and Terms of RSL
and RSI Stock
The Company will use $___ million of the net proceeds of the
Offerings (other than proceeds received by the Company from the sale of
shares of Common Stock pursuant to the Underwriters' over-allotment
option) to pay the purchase price for the purchase of the capital stock of
RSL and RSI from Siemens and SPC, respectively. See "Use of Proceeds."
Immediately prior to the closing of the Offerings, Siemens will, and
will cause certain of its subsidiaries to, sell to the Company all of the
outstanding capital stock of RSL and RSI for a purchase price of $__
million. Because the purchase price for RSL and RSI is based on the
offering price of the shares of Common Stock of the Company being sold in
the Offerings, it reflects the factors considered in determining such
offering price. Such offering price was determined through discussions
and negotiations among the Company, Siemens, SPC and the Underwriters. In
the sale and transfer agreements relating to the purchase by the Company
of RSL and RSI, neither Siemens nor SPC has made any representations,
warranties or indemnities with respect to the Company's business.
Accordingly, the Company will have no contractual recourse against Siemens
or SPC, except with respect to income and certain other tax liabilities,
for periods prior to the closing of the Offerings. See "Certain
Transactions -- Transfer Agreements," "-- Tax Allocation and
Indemnification Agreement" and "Underwriting."
Industry Concentration and Cyclicality; Dependence on Sales by Third
Parties
The Company's business is significantly dependent on capital
expenditures by manufacturers in the Machine Tool, Automotive and
Semiconductor & Electronics industries. These industries are cyclical and
have historically experienced periods of oversupply, resulting in
significantly reduced demand for capital equipment, including the products
manufactured and marketed by the Company. For the foreseeable future, the
Company's operations will continue to be dependent on capital expenditures
in these industries which, in turn, are largely dependent on the market
demand for their products. The Company's net sales and results of
operations may be materially adversely affected if downturns or slowdowns
in the Machine Tool, Automotive and Semiconductor & Electronics industries
occur in the future.
The Company's net sales are dependent in part upon the ability of its
OEM customers to develop and sell systems that incorporate the Company's
laser products. Adverse economic conditions, large inventory positions,
limited marketing resources and other factors affecting these OEM
customers could have a substantial impact upon the Company's financial
results. No assurances can be given that the Company's OEM customers will
not
7
<PAGE>
experience financial or other difficulties that could adversely affect
their operations and, in turn, the financial condition or results of
operations of the Company.
Variability and Uncertainty of Quarterly Operating Results
The Company has experienced and expects to continue to experience
some fluctuations in its quarterly results. The Company believes that
fluctuations in quarterly results may cause the market price of its Common
Stock to fluctuate, perhaps substantially. Factors which may have an
influence on the Company's operating results in a particular quarter
include the timing of the receipt of orders from major customers, product
mix, competitive pricing pressures, the relative proportions of domestic
and international sales, the Company's ability to design, manufacture and
introduce new products on a cost-effective and timely basis, the delay
between incurrence of expenses to further develop marketing and service
capabilities and realization of benefits from such improved capabilities,
and the introduction of new products by the Company and its competitors.
In addition, the Company's backlog at any given time is not necessarily
indicative of actual sales for any succeeding period. The Company's sales
will often reflect orders shipped in the same quarter that they are
received. Moreover, customers may cancel or reschedule shipments, and
production difficulties could delay shipments. Accordingly, the
Company's results of operations are subject to significant variability
from quarter to quarter. See "Business -- Order Backlog." The Company's
sales of its laser marking systems may also result in substantial
fluctuations in quarterly results. The Company typically builds its laser
marking systems to customer order and, with respect to special order
systems, can incur significant costs in advance of sales of such special
order systems due to the long sales cycle associated with these systems.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Quarterly Results of Operations" and "Business --
The Company's Laser Products."
Currency Risk
Although the Company reports its results in U.S. dollars,
approximately two-thirds of its sales are denominated in other currencies,
including primarily German marks, as well as French francs, Italian lire
and Japanese yen. Although a predominant portion of the Company's cost of
goods sold, selling, general and administrative expenses and research
development expenses are incurred in German marks, net sales and costs and
related assets and liabilities are generally denominated in the functional
currencies of the operations, thereby serving to reduce the Company's
exposure to exchange gains and losses. Exchange differences upon
translation from each operation's functional currency to U.S. dollars are
accumulated as a separate component of equity. The currency translation
adjustment component of shareholders' equity changed from a $169,000 debit
at September 30, 1993 to a $1.5 million credit at September 30, 1994, from
the $1.5 million credit at September 30, 1994 to a $5.4 million credit at
September 30, 1995 and from the $5.4 million credit at September 30, 1995
to a $2.8 million credit at June 30, 1996. These changes arose primarily
from the strengthening of the German mark against the U.S. dollar during
the fiscal 1994-1995 period and the strengthening of the U.S. dollar
against such foreign currencies in the first nine months of fiscal 1996,
and reflect the fact that a high proportion of the Company's capital is
invested in its German operations, whose functional currency is the German
mark. The strengthening and weakening of the German mark and certain
other functional currencies against the U.S. dollar has had the effect of
increasing and decreasing (as applicable) reported net sales as well as
cost of goods sold and selling, general and administrative expenses
denominated in such foreign currencies when translated into U.S. dollars
as compared to prior periods. See "Risk Factors -- Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview -- Currency Exchange Rates." Although historically
the Company's subsidiaries have not paid dividends, a further area of
currency exposure may in the future be represented by the payment of
dividends, if any, by the Company's operating subsidiaries in their
respective functional currencies.
While the Company has not in the past engaged in hedging
transactions, following the closing of the Offerings, it intends to
implement a policy to hedge up to 50% of its net foreign currency exposure
utilizing forward exchange contracts, forward exchange options and
currency swap contracts. The Company also intends to continue to borrow
in each operating subsidiary's functional currency to reduce exposure to
exchange gains and losses. While the German mark has increased in value
against the U.S. dollar in the period September 30, 1994 to September 30,
1995, this trend has in part reversed itself during the nine-month period
ended June 30, 1996, and there can be no assurance that changes in
currency exchange rates will not have a material adverse effect on the
Company's business, financial condition and results of operations.
8
<PAGE>
Competition
The laser industry is characterized by significant price competition.
The Company's current and proposed laser products and laser marking
products compete with those of several well-established companies, some of
which are larger and have substantially greater financial, managerial and
technical resources, more extensive distribution and service networks and
larger installed customer bases than the Company. The Company believes
that this competition will be particularly intense in the Nd:YAG solid
state laser markets, as many companies have committed significant research
and development resources to pursue opportunities in these markets. There
can be no assurance that the Company will successfully differentiate its
current and proposed products from the products of its competitors or that
the marketplace will consider the Company's products to be superior to
competing products. With respect to the Company's laser marking
products, because many of the components required to develop and produce a
laser-based marking system are commercially available, barriers to entry
into this market are relatively low, and the Company expects new
competitive product entry in this market. To maintain its competitive
position in this market, the Company believes that it will be required to
continue a high level of investment in engineering, research and
development, marketing and customer service and support. There can be no
assurance that the Company will have sufficient resources to continue to
make such investments, that the Company will be able to make the
technological advances necessary to maintain its competitive position, or
that its products will receive market acceptance. See "Business --
Competition."
Risks Relating to Sales Growth in CO\\2\\ and Nd:YAG Lasers
In recent years, the Company has experienced a period of rapid
growth, attributable in large part to the demand for its laser marking
products. If the Company is to maintain or increase the rate of growth of
its laser sales in the near term, such sales will have to come through
increases in market share for the Company's existing products, through the
development of new products or through the Company's acquisition of its
competitors or their products. To date, a substantial portion of the
Company's revenue has been derived from sales of high-powered CO\\2\\
laser sources and, more recently, solid state flash lamp-pumped laser
sources. The Company intends to devote substantial resources to
increasing the output power of its diffusion-cooled CO\\2\\ Slab laser
sources and to developing diode-pumped Nd:YAG solid state laser products
in accordance with market demand. The Company is currently focused on
reducing the manufacturing costs of its diffusion-cooled CO\\2\\ Slab
lasers to achieve more attractive pricing. The Company's diode-pumped
lasers, however, are in an early stage of development and are not expected
to result in marketable products prior to 1998. A large part of the
Company's growth strategy depends upon being able to increase
substantially its market share for laser marking products, particularly in
the United States. If the Company is unable to implement its strategy of
increasing its market share for laser marking products and of expanding
its product range to include higher output power diffusion-cooled CO\\2\\
Slab lasers and diode-pumped Nd:YAG solid state lasers at attractive
prices, it may not be able to achieve its anticipated rate of growth, as a
result of which its business, operating results and financial condition
could be adversely affected. No assurance can be given that the Company
will successfully expand its marking products' market share, increase the
output power of its diffusion-cooled CO\\2\\ Slab laser sources or develop
diode-pumped Nd:YAG solid state laser products, or that any such products
will achieve market acceptance or not be rendered obsolete or
uncompetitive by products of other companies. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and "Business -- Company Strategy" and "-- The Company's Laser Products."
While there are currently no commitments with respect to any future
acquisitions, the Company's business strategy includes the expansion of
its products and services, which may be effected through acquisitions.
The Company from time to time reviews various opportunities to acquire
businesses, technologies or products complementary to the Company's
present business. Although management expects to analyze any such
opportunity carefully before committing the Company's resources, there can
be no assurance that the Company will be able to integrate any acquired
business effectively or that any acquisition will result in long-term
benefits to the Company. See "Business -- Business Strategy."
9
<PAGE>
Dependence on Key Employees
The future success of the Company is dependent, in part, on its
ability to attract and retain certain key personnel. In particular, the
Company's investment in high-power CO\\2\\ and Nd:YAG solid state laser
products is dependent on a limited number of advanced research and
development engineers, many of whom have several years of service with the
Company. The Company may need to hire additional skilled personnel to
commercialize these products and expand all areas of its business to
continue to grow. While the Company believes that its salary and
incentive compensation is competitive, there can be no assurance that the
Company will be able to retain its existing personnel or attract
additional qualified employees in the future. See "Business -- Research
and Development."
Forward-Looking Statements
This Prospectus contains certain forward-looking statements
concerning the Company's operations, economic performance and financial
condition, including, among other things, the Company's growth strategies
for its cutting and welding laser business and laser marking business.
These statements are based on the Company's expectations and are currently
subject to various risks and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of factors,
including those identified under this "Risk Factors" section and elsewhere
in this Prospectus.
Conflicting Patents and Other Intellectual Property Rights
of Third Parties; Potential Infringement Claims
The Company from time to time receives notices from third parties
alleging infringement of such parties' patent or other intellectual
property rights by the Company's products. While such notices are common
in the Company's industry and the Company has in the past been able to
develop non-infringing technology or license necessary patents or
technology on commercially reasonable terms, there can be no assurance
that the Company would in the future prevail in any litigation seeking
damages or expenses from the Company or to enjoin the Company from selling
its products on the basis of such alleged infringement, or that the
Company would be able to develop any non-infringing technology or license
any valid and infringed patents on commercially reasonable terms. In the
event any third party made a valid claim against the Company or its
customers and a license were not made available to the Company on
commercially reasonable terms, the Company would be adversely affected.
In July 1996, the Company received notice of an opposition filed by a
competitor in the European Patent Office ("EPO") which challenges on a
number of grounds one of the two third-party patents licensed by the
Company covering certain aspects of its diffusion-cooled CO\\2\\ Slab
laser. The U.S.-issued counterpart of this patent was previously the
subject of a reexamination proceeding in the U.S. Patent and Trademark
Office ("PTO") at the conclusion of which the patent was upheld. While
the decision of the PTO is not binding on the EPO, based on the outcome of
the U.S. reexamination proceeding and management's review of the arguments
made in the notice of opposition, the Company believes that such notice of
opposition is without substantial merit. The Company intends to defend
the EPO opposition proceeding vigorously.
In July 1996, the Company received a letter from a manufacturer of
sealed-off, RF-excited CO\\2\\ lasers for military and commercial avionics
applications offering a license of its U.S. patents covering such
technology in exchange for a cross-license of the Company's CO\\2\\ Slab
laser technology. Based on its review of the patents held by such
manufacturer, the Company does not believe that its products infringe such
patents, and it intends to defend vigorously any infringement action which
such party may commence against the Company.
From time to time, the Company files notices of opposition to certain
patents on laser technologies held by others, including academic
institutions and competitors of the Company, which the Company believes
could inhibit its ability to develop products in this area. In
particular, the Company has a pending notice of opposition against a
patent held by a competitor which it believes conflicts with a third-party
patent licensed by the Company covering certain aspects of its diffusion-
cooled CO\\2\\ Slab laser. No assurance can be given that the Company
will be able to avoid an action by such competitor or others or not be
forced to initiate its own actions to protect its proprietary position.
10
<PAGE>
Limited Protection of Intellectual Property
The Company's future success depends in part upon its intellectual
property, including trade secrets, know-how and continuing technological
innovation. There can be no assurance that the steps taken by the Company
to protect its intellectual property will be adequate to prevent
misappropriation or that others will not develop competitive technologies
or products. The Company currently holds 32 United States and foreign
patents on its laser sources. There can be no assurance that other
companies are not investigating or developing other technologies that are
similar to the Company's, that any patents will issue from any application
filed by the Company or that, if patents do issue, the claims allowed will
be sufficiently broad to deter or prohibit others from marketing similar
products. In addition, there can be no assurance that any patents issued
to the Company will not be challenged, invalidated or circumvented, or
that the rights thereunder will provide a competitive advantage to the
Company. See "Business -- Intellectual Property."
Future Capital Requirements
The Company is devoting substantial resources to the development of
new products for the high-power CO\\2\\ and solid state laser markets and
the semiconductor equipment market. Although the Company believes that
the existing cash balances, cash flow from operations, available lines of
credit, proceeds retained from the Offerings and any proceeds received by
the Company from the exercise of the U.S. Underwriters' over-allotment
option will be sufficient to meet its capital requirements at least
through fiscal 1997, the Company may be required to seek additional equity
or debt financing to compete in these markets. The timing and amount of
such capital requirements cannot be precisely determined at this time and
will depend on several factors, including demand for the Company's
products and products under development and changes in the Company's three
principal markets. There can be no assurance that such additional
financing will be available when needed, or, if available, will be on
satisfactory terms. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Holding Company Structure Risks
The Company conducts all of its operations through subsidiaries.
Accordingly, the primary internal source of the Company's cash is
dividends and other distributions from its subsidiaries, as well as
intercompany advances. Each of these subsidiaries (other than RSI) was
formed under the laws of, and has its operations in, a country other than
the United States, the jurisdiction of the Company's organization. The
subsidiaries' ability to make distributions to the Company are subject to
their having sufficient funds from their operations legally available for
the payment thereof which are not needed to fund their operations,
obligations or other business plans. The laws under which the Company's
subsidiaries in France and Italy are organized provide generally that
dividends may be declared out of yearly profits subject to the maintenance
of registered capital and required reserves and after the recovery of
accumulated losses. If the Company's subsidiaries are unable to make
distributions to the Company, the Company's growth may be inhibited unless
the Company is able to obtain additional debt or equity financing. The
Company may not be able to obtain debt financing if it cannot compel its
subsidiaries to make distributions to service the debt financing or obtain
upstream guarantees from its subsidiaries with respect to such debt
financing. Because the Company is a stockholder of each of its
subsidiaries, the Company's claims as such will generally rank junior to
all other creditors of and claimants against its subsidiaries. In the
event of a subsidiary's liquidation, there may not be assets sufficient
for the Company to recoup its investment therein.
Risks Associated with International Operations
The Company's products are currently marketed in approximately 25
countries, with Germany, the rest of Europe, the United States and the
Asia/Pacific region being the Company's principal markets. Sales in the
Company's principal markets are subject to risks inherent in international
business activities, including, in particular, general economic conditions
in each such country, overlap of differing tax structures, management of
an organization spread over various jurisdictions, unexpected changes in
regulatory requirements and compliance with a variety of foreign laws and
regulations. Other general risks associated with international operations
include import and export licensing requirements, trade restrictions and
changes in tariff and freight rates. The business and operations of the
Company's principal subsidiary, RSL, are primarily subject to the changing
economic and political conditions prevailing from time to time in Germany.
Although productivity in Germany is generally high, labor costs, corporate
11
<PAGE>
taxes and employee benefit expenses are high and weekly working hours are
shorter in Germany compared to the rest of the European Union, the United
States and Japan.
No Prior Public Market; Potential Volatility of Common Stock Price
Prior to this offering, there has been no public market for the
Company's Common Stock, and there can be no assurance that an active
trading market will develop or be sustained. The initial public offering
price of the Common Stock was negotiated between the Company and the
Representatives of the Underwriters, and may not be indicative of the
market price for the Common Stock after the offering. See "Underwriting"
for information relating to the several factors used in determining the
initial public offering price of the Common Stock. The Company believes
that factors such as quarterly fluctuations in results of operations,
announcements of new products, technologies or customers by the Company or
its competitors and developments with respect to intellectual property,
shortfalls in the Company's operations relative to analysts' expectations,
and other matters may cause the market price of its Common Stock to
fluctuate, perhaps substantially. In addition, in recent years, the stock
market in general, and the shares of technology companies in particular,
have experienced wide price fluctuations. These broad market and industry
fluctuations, particularly in the Semiconductor & Electronics industry,
may adversely affect the market price of the Company's Common Stock.
Dilution
Purchasers of the shares of Common Stock offered hereby will
experience immediate dilution in the net tangible book value per share
from the initial offering price. See "Dilution."
Potential Anti-Takeover Effects of Delaware Law; Possible Issuances of
Preferred Stock
The Company is subject to the provisions of Section 203 of the
Delaware General Corporation Law ("DGCL") prohibiting publicly held
Delaware corporations from engaging in business combinations with certain
stockholders for a specified period of time without the approval of
substantially all of its outstanding voting stock. Such provisions could
delay or impede the removal of incumbent directors and could make more
difficult a merger, tender offer or proxy contest involving the Company,
even if such events could be beneficial, in the short term, to the
interests of the stockholders. The Company's Certificate of Incorporation
and Bylaws contain provisions relating to the limitations of liability and
indemnification of its directors and officers, dividing its Board of
Directors into three classes of directors serving three-year terms and
providing that its stockholders can take action only at a duly called
annual or special meeting of stockholders. These provisions also may have
the effect of deterring hostile takeovers or delaying changes in control
or management of the Company. Additionally, the Company's Board of
Directors intends to adopt a stockholder rights plan prior to the closing
of the Offerings and to issue rights under such plan to all purchasers of
the Common Stock of the Company. In certain circumstances, the fact that
certain corporate devices are in place which inhibit or discourage
takeover attempts could reduce the market value of the Company's Common
Stock. See "Description of Capital Stock -- Certain Provisions of the
Company's Certificate of Incorporation and By-Laws"; "-- Section 203 of
the Delaware General Corporation Law"; and "-- Rights Agreement."
The Board of Directors may issue shares of preferred stock without
stockholder approval on such terms as the Board may determine. The
rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock
that may be issued in the future. Moreover, although the ability to issue
preferred stock may provide flexibility in connection with possible
acquisitions and other corporate purposes, such issuance may make it more
difficult for a third party to acquire, or may discourage a third party
from acquiring, a majority of the voting stock of the Company. The
Company has no current plans to issue any shares of preferred stock. See
"Description of Capital Stock -- Preferred Stock."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock
offered hereby are estimated to be approximately $_____ ($___ if the
Underwriters' overallotment option is exercised in full). Of such net
proceeds received by the Company, $_____ will be paid to Siemens and SPC
as consideration for the acquisition of all the
12
<PAGE>
outstanding stock of RSL and RSI. See "Prospectus Summary -- The Company
-- Background of the Offerings" and "Certain Transactions."
The remainder of the net proceeds of the Offerings ($19.2 million,
together with any net proceeds received by the Company from the exercise
of the Underwriters' over-allotment option) will be used for general
corporate purposes, including repayment of $7 million of indebtedness owed
to Siemens and SC and future acquisitions, if any. Pending such use, such
proceeds will be used to reduce short-term indebtedness or invested in
short-term investments. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Liquidity and Capital
Resources" and "Certain Transactions."
DIVIDEND POLICY
The Company currently intends to retain all of its net earnings after
consummation of the Offerings to fund the development of its business and
does not anticipate paying dividends in the foreseeable future. The
declaration and payment of future dividends by the Company, if any, will
be at the sole discretion of its Board of Directors, and will depend
upon, among other things, the Company's profitability, financial
condition, cash requirements, future prospects, general business
conditions, the terms of any of the Company's debt agreements and other
factors the Company's Board of Directors may in the future consider to be
relevant.
DILUTION
At June 30, 1996, the net tangible book value per share of Common
Stock, on a pro forma basis after giving effect to the use of the proceeds
of the Offerings to purchase the stock of RSL and RSI from Siemens and SPC
and assuming that 10,000,000 shares of Common Stock were issued and
outstanding as of June 30, 1996, was $____ per share. "Net tangible book
value per share" represents total tangible assets minus total liabilities
divided by the total number of shares outstanding on that date. After
giving effect to the sale of shares of Common Stock pursuant to the
Offerings at the initial offering price of $___ per share and the receipt
and application of the proceeds therefrom (net of underwriting discounts
and commissions and estimated offering expenses) as set forth under "Use
of Proceeds," net tangible book value per share at June 30, 1996 would
have been $____, representing an immediate increase of $____ per share to
SPC, the current sole stockholder of the Company, and an immediate
dilution of $____ per share to new investors purchasing at the initial
offering price. Dilution per share represents the difference between the
amount per share paid by new investors purchasing shares of Common Stock
in the Offerings and the net tangible book value per share of Common Stock
immediately after completion of the Offerings. The following table
illustrates such per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Initial public offering price per share(1) ................. $
Net tangible book value per share at
June 30, 1996........................................... $
Net increase in net tangible book value per share
attributable to the Offerings........................... --------
Pro forma net tangible book value per share after
the Offerings........................................... --------
Dilution per share to new investors in the
Offerings(2)............................................ $
========
</TABLE>
- ----------------
(1) Before deduction of underwriting discounts.
(2) Dilution is determined by subtracting pro forma net tangible book
value per share after the Offerings from the amount of cash paid by an
investor for one share of Common Stock.
13
<PAGE>
The following table summarizes, on a pro forma basis as of June 30,
1996, the difference between (i) the number of shares of Common Stock
which the existing stockholder acquired during the past five years or
which it has a right to acquire within 60 days after the date of this
Prospectus; (ii) the number of shares of Common Stock purchased from the
Company by new investors in the Offerings; (iii) the total cash
consideration paid by the existing stockholder and the new investors; and
(iv) the average purchase price per share paid by the existing stockholder
and the new investors (before deducting the underwriting discounts and
commissions and expenses of the Offerings):
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
-------------------- ----------------------- Price
Number Percent Amount Percent Per Share
-------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholder ..... $ % $
New stockholders ......... ------ ------- -------- ------
Total................ % $ 100.0%
====== ======= ======== =====
</TABLE>
14
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization
of the Company (i) as of June 30, 1996, and (ii) as adjusted to reflect
the Offerings and the use of the net proceeds to repay $7 million of
indebtedness owed to Siemens and SPC. See "Use of Proceeds." The
information in the table below is qualified in its entirety by, and should
be read in conjunction with, the Company's Combined Financial Statements
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
June 30, 1996
---------------------
Actual As Adjusted
-------- -----------
(in thousands)
<S> <C> <C>
Advances from Parent.......................... $ 7,000 $ 0
Short-term debt (including lines of credit
and bank loans).............................. 25,587
======= ======
Long-term debt................................ $ 0 $ 0
Stockholders' equity:
Parent's capital............................. 38,177 0
Preferred Stock, par value $0.01 per share,
5 million shares authorized; no shares
issued or outstanding.................... -- --
Common Stock, par value $0.01 per share,
30 million shares authorized; no shares
issued and outstanding as of June 30,
1996; and 10 million shares issued and
outstanding, as adjusted................. -- 100
Paid-in capital.............................. 0
Cumulative foreign currency
translation adjustment................... 2,777 2,777
------- ------
Total stockholders' equity............. 40,954
------- ------
Total capitalization.............. $73,541 $
======= ======
</TABLE>
15
<PAGE>
SELECTED COMBINED FINANCIAL INFORMATION
AND OPERATING DATA
The Statement of Operations Data for each of the years in the three-
year period ended September 30, 1995 and the Balance Sheet Data as of
September 30, 1994 and 1995 set forth below have been derived from the
Company's combined financial statements included elsewhere in this
Prospectus which have been audited by KPMG Peat Marwick LLP, the Company's
independent auditors. Net sales for the fiscal years ended September 30,
1991 and 1992 and Balance Sheet Data as of September 30, 1993 are
unaudited and have been derived from the Company's historical financial
records. The Statement of Operations Data for the nine-month periods
ended June 30, 1995 and 1996 and the Balance Sheet Data as of June 30,
1996 and September 30, 1993 are unaudited but, in the opinion of
management, such information reflects all adjustments, consisting of only
normal recurring adjustments necessary for a fair presentation of the
financial data for the interim periods. The results for the interim
periods presented are not necessarily indicative of the results for the
full year. These data should be read in conjunction with
"Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company's Combined Financial
Statements and other financial information appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Nine months
Years ended September 30, ended June 30,
------------------------------- ------------------
1993 1994 1995 1995 1996
--------- --------- --------- -------- --------
Statement of Operations (in thousands, except per
Data: share data)
<S> <C> <C> <C> <C> <C>
Net sales(1)............... $ 60,034 $69,217 $92,466 $65,460 $83,372
Cost of goods sold......... 47,745 46,993 57,162 40,475 51,466
Gross profit............... 12,289 22,224 35,304 24,985 31,906
Selling, general, and 21,951 17,059 20,673 14,534 15,221
administrative expenses...
Research and development 10,276 6,834 6,719 5,903 5,850
expenses..................
Income (loss) from (19,938) (1,669) 7,912 4,548 10,835
operations................
Net interest expense....... 1,654 1,308 1,272 947 790
Income (loss) before (21,386) (3,116) 6,265 3,489 10,092
income taxes..............
Income tax expense (1,565) (1,422) 3,052 1,725 4,354
(benefit).................
Net income (loss).......... (19,821) (1,694) 3,213 1,764 5,738
Net income (loss) per [_____] [_____] [_____] [_____] [_____]
common share..............
Shares used in computing [_____] [_____] [_____] [_____] [_____]
net income
(loss) per shares(2)....
Operating Data:
As percentage of sales:
Gross profit............... 20.5% 32.1% 38.2% 38.2% 38.3%
Selling, general and 36.6 24.6 22.4 22.2 18.3
administrative expenses...
Research and development 17.1 9.9 7.3 9.0 7.0
expenses..................
Income (loss) from (33.2) (2.4) 8.6 6.9 13.0
operations................
Income (loss) before (35.6) (4.5) 6.8 5.3 12.1
income taxes..............
Other Data:
Depreciation and 2,803 2,527 2,364 1,773 1,830
amortization..............
EBITDA(3).................. (17,135) 858 10,276 6,321 12,665
Backlog.................... 12,500 17,000 26,500 26,900 35,900
Sales per employee......... 135 184 227 166 188
</TABLE>
<TABLE>
<CAPTION>
At September 30, At June 30,
------------------------------ -----------
1993 1994 1995 1996
-------- ------- ------- -------
Balance Sheet Data: (in thousands)
<S> <C> <C> <C> <C>
Working capital(4)......... $ 7,672 $ 4,927 $14,530 $18,137
Total assets............... 84,580 76,667 90,995 104,509
Line of credit and loans... 22,196 22,380 21,805 25,587
Stockholders' equity....... 35,837 30,583 39,673 40,954
</TABLE>
- -----------------
(1) Net sales for the years ended September 30, 1991 and 1992 were $72,900
and $73,300, respectively.
(2) Net income (loss) per share has been calculated assuming that shares were
outstanding for all periods. Such shares represent the number of shares to
be issued pursuant to the Offerings, the proceeds from which will be used to
purchase the shares of RSL and RSI and to repay $7 million of indebtedness
owed to Siemens and SC.
(3) EBITDA means earnings before interest, taxes, depreciation and
amortization, minority interest and miscellaneous expenses. The
Company believes that EBITDA is an important measure of its operating
results. However, EBITDA should not be considered in isolation or as
a substitute for net earnings and other statement of operations data
prepared in accordance with generally accepted accounting principles,
as a measure of the Company's profitability or liquidity.
(4) Working capital is defined as total current assets less total current
liabilities.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
Combined Financial Statements thereto included elsewhere in this
Prospectus.
Overview
Rofin-Sinar is a leader in the design, development, engineering,
manufacture and marketing of laser-based products used for cutting,
welding and marking a wide range of industrial materials. During the 1995
fiscal year and the first nine months of fiscal 1996, respectively,
approximately 73% and 69% of the Company's revenues were from sales and
servicing of laser products for cutting and welding applications and
approximately 27% and 31% were from sales and servicing of laser products
for marking applications.
Restructuring
Through the late 1980's, in anticipation of continued growth in the
Machine Tool industry, the Company added capacity and pursued a strategy
of vertical integration to support projected growth in its business. The
Machine Tool industry experienced a significant downturn during the global
recession in the early 1990's as end-users, particularly in the heavy
manufacturing industries, reduced their investment in new technologies and
postponed modernizing their production facilities in the face of adverse
business conditions. In Germany, for example, the downturn in the Machine
Tool industry resulted in an almost 40% drop in demand. Purchases of
lasers by machine tool manufacturers began to drop significantly and, in
1992, laser manufacturers, including the Company, reduced their prices in
response to reduced market demand. In light of this change in market
conditions, in 1993 the Company undertook a major restructuring program to
reduce its manufacturing costs, fixed costs and overhead and better
position the Company to benefit from improving business conditions.
The Restructuring occurred over a three-year period. In 1993, the
Company reduced its workforce in both the United States and Germany by
approximately 125 employees, closed operations in San Jose, California,
consolidated its U.S. research and development, manufacturing and
marketing activities, reengineered its manufacturing processes and
streamlined its product offering. In addition, the Company refocused its
research and development activities on marketable new products, commenced
a program to outsource non-strategic components, subleased office space to
third parties in Hamburg and broadened the range of laser applications
offered by the Company. In 1994, the Company continued to outsource non-
strategic components and increased use of sub-assembled systems. In 1995,
the Company disposed of its in-house machine shop.
With the improvement of economic conditions in the United States in
1994 and in Europe in 1995, manufacturers of lasers for material
processing have experienced rapid growth, driven primarily by pent-up
demand as industrial end-users worldwide modernize their manufacturing
facilities to reduce production costs and increase efficiency. The
Company experienced significant financial improvement during the 1994 and
1995 fiscal years and the first nine months of fiscal 1996, primarily
reflecting improving economic conditions, the benefits of the
Restructuring undertaken in 1993 and 1994 and the implementation of the
Company's current business strategy. Rofin-Sinar's worldwide sales
increased from $60 million for the fiscal year ended September 30, 1993 to
$92.5 million for the fiscal year ended September 30, 1995, representing a
compounded annual growth rate of approximately 24.1% per annum. This
increase was due principally to growth in sales across the Company's
entire product range and in all three principal geographic markets, with
the strongest growth in sales of the Company's laser marking products,
which increased from $10.1 million to $22.8 million over such three-year
period. Total net sales increased to $83.4 million in the first nine
months of fiscal 1996 (compared to $65.5 million in the comparable prior
period), representing an increase of 27.4% over the prior period. The
growth in the Company's net sales since fiscal 1993 has allowed the
Company to realize improved operating leverage by producing larger unit
volumes over relatively lower costs and by negotiating more favorable
terms for purchases of components and subassemblies. While the Company
expects to continue to see growth in fiscal 1997 and 1998, with the
strongest long-term gains in the Asia/Pacific region principally in laser
cutting and marking applications, there can be no assurance that the
Company's recent rate of growth will be maintained.
17
<PAGE>
The laser industry continues to be characterized by significant price
competition. As part of its ongoing strategy, the Company is continuing
its efforts to contain costs in order to improve its cost structure.
Currency Exchange Rates
The Company's Combined Financial Statements are prepared in U.S.
dollars. Although the Company reports its results in U.S. dollars,
approximately two-thirds of its sales are denominated in other currencies,
including primarily German marks, as well as French francs, Italian lire
and Japanese yen. Net sales and costs and related assets and liabilities
are generally denominated in the functional currencies of the operations,
thereby serving to reduce the Company's exposure to exchange gains and
losses. Exchange differences upon translation from each operation's
functional currency to United States dollars are accumulated as a separate
component of equity. The currency translation adjustment component of
shareholders' equity changed from a $169,000 debit at September 30, 1993
to a $1.5 million credit at September 30, 1994, from the $1.5 million
credit at September 30, 1994 to a $5.4 million credit at September 30,
1995 and from the $5.4 million credit at September 30, 1995 to a $2.8
million credit at June 30, 1996. These changes arose primarily from the
strengthening of the German mark and such other functional currencies
against the U.S. dollar during the fiscal 1994-1995 period and the
strengthening of the U.S. dollar against such foreign currencies during
the first nine months of fiscal 1996, and reflect the fact that a high
proportion of the Company's capital is invested in its German operations,
whose functional currency is the German mark.
The fluctuation of the German mark and the other relevant functional
currencies against the U.S. dollar has had the effect of increasing or
decreasing (as applicable) reported net sales, as well as cost of goods
sold and gross margin and selling, general and administrative expenses,
denominated in such foreign currencies when translated into U.S. dollars
as compared to prior periods. See "Risk Factors-- Currency Risk."
While the Company has not in the past engaged in hedging
transactions, following the closing of the Offerings, it intends to
implement a policy to hedge up to 50% of its net foreign currency exposure
utilizing forward exchange contracts, forward exchange options and
currency swap contracts. The Company also intends to continue to borrow
in each operating subsidiary's functional currency to reduce its exposure
to foreign currency gains and losses. There can be no assurance, however,
that changes in currency exchange rates will not have a material adverse
effect on the Company's business, financial condition and results of
operations.
The following table illustrates the effect of the changes in exchange
rates on the Company's fiscal 1994 and 1995 net sales, gross profit and
income from operations, which have been recalculated to show what such
amounts would have been applying 1993 average exchange rates to 1994
amounts and 1994 average exchange rates to 1995 amounts.
<TABLE>
<CAPTION>
Fiscal
1993 Fiscal 1994 Fiscal 1995
--------- -------------------- ------------------
(in millions)
In 1993 In 1994
Exchange Exchange
Actual Actual Rates Actual Rates
-------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Net sales.................. $ 60.0 $69.2 $69.8 $92.5 $85.4
Gross profit............... 12.3 22.2 22.5 35.3 32.2
Income (loss) from
operations................ (19.8) (1.7) (1.7) 7.9 7.2
</TABLE>
- ---------------------
Between fiscal 1993 and 1994, the German mark weakened against the U.S.
dollar by approximately 1.9%. The impact of this weakening of the German
mark was to decrease net sales and gross profit by $600,000 and $300,000,
respectively, with no impact on loss from operations. Between fiscal 1994
and 1995, the German mark strengthened against the U.S. dollar by
approximately 14%. The impact of this strengthening of the German mark
was to increase net sales, gross profit and income from operations by $7.1
million, $3.1 million and $700,000, respectively. The other factors
affecting these results are discussed below under "--Results of
Operations."
18
<PAGE>
Taxes
Although prior to the Offerings RSI and RSL have filed consolidated
income tax returns with Siemens Corporation ("SC") and Siemens,
respectively, the Company's subsidiaries pay taxes in many jurisdictions
and the provisions for income taxes in the company's Combined Financial
Statements are based on separate local tax computations. On a combined
basis, this practice may result in the Company incurring income tax
expense even though it may not have combined pre-tax income or in paying
taxes in excess of pre-tax income if some of its subsidiaries are not
profitable while others are. See Note 9 of the Notes to the Combined
Financial Statements. In particular, because of the Company's substantial
operations in Germany, the Company historically has had a higher effective
tax rate than many of its competitors who do not have operations in
Germany.
The Company currently generates taxable income, principally in
Germany and the United States. German corporate tax law applies the
imputation system with regard to the taxation of the income of a
corporation (such as RSL) and its stockholders (such as the Company). In
general, retained corporate income is subject to a municipal trade tax
(which for Hamburg and Gunding on a combined basis is 16.7%), which is
deductible for federal corporate income tax purposes, a federal corporate
income tax rate of 45% (50% prior to January 1, 1994) and, effective
January 1, 1995, a surcharge of 7.5% on the federal corporate income tax
amount.
Profits which are distributed by a German corporate taxpayer (such as
RSL) in the form of a dividend are subject to a reduced federal corporate
income tax rate of 30% (36% prior to January 1, 1994) plus the 7.5%
surcharge on the federal corporate income tax amount calculated at the
reduced rate. Dividends paid by RSL to Rofin-Sinar Technologies Inc. will
be subject to withholding tax at a rate of 5% pursuant to the income tax
treaty currently in effect between the United States and Germany.
Although the Company intends to identify and implement strategies to
reduce its effective tax rate, the Company does not expect its effective
tax rates in the future to decrease significantly below its effective tax
rate for the nine months ended June 30, 1996.
Acquisitions
Since its inception in 1975, Rofin-Sinar has made a series of
significant acquisitions and entered into strategic relationships in order
to expand its product offering, enter into new geographic markets and
broaden the range of industrial applications offered to its customer base.
The Company's first significant acquisition was in 1988 when it
acquired Spectra-Physics Corporation's Industrial Laser Division (which at
that time was the U.S. licensee of Rofin-Sinar's fast axial-flow CO\\2\\
laser technology). This acquisition enabled Rofin-Sinar to gain a more
rapid entry into the U.S. market for industrial CO\\2\\ lasers. Later
that year the Company established a presence in the French market through
its acquisition of Optilas Laser Industriel.
The Company's second significant acquisition occurred in 1989 when
the Company acquired Laser-Optronic GmbH, a manufacturer of laser marking
products, from Coherent General Inc. Through this acquisition, the
Company expanded its product offering to include laser marking. In that
same year, the Company took over responsibility for the manufacture and
marketing of Siemens' "Silamatik" line of laser marking products.
While there are currently no commitments with respect to any future
acquisitions, the Company's business strategy includes the expansion of
its products and services, which may be effected through acquisitions.
The Company from time to time reviews various opportunities to acquire
businesses, technologies or products complementary to the Company's
present business.
Results of Operations
For the periods indicated, the following table sets forth the
percentage of net sales represented by the respective line items in the
Company's combined statements of operations and the percentage increase
(decrease) from the previous period's results.
19
<PAGE>
<TABLE>
<CAPTION>
Percentage of Net Sales
------------------------------------------
Nine Months
Fiscal Year Ended Ended
September 30, June 30,
------------------------- -------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales.................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........... 79.5 67.9 61.8 61.8 61.7
Gross profit................. 20.5 32.1 38.2 38.2 38.3
Selling, general and
administrative expenses..... 36.6 24.6 22.4 22.2 18.3
Research and development
expenses.................... 17.1 9.9 7.3 9.0 7.0
Income (loss) from operations (33.2) (2.4) 8.6 6.9 13.0
Income (loss) before income
taxes....................... (35.6) (4.5) 6.8 5.3 12.1
Net income (loss)............ (33.0) (2.4) 3.5 2.7 6.9
</TABLE>
Nine months ended June 30, 1996 compared to nine months ended June 30, 1995
Net Sales. Net sales of $83.4 million for the first nine months of
fiscal 1996 increased by $17.9 million, or 27.4%, over the comparable
prior period. The improvement resulted from net sales increases of $11.8
million, or 26.6%, in Europe and the Asia/Pacific region and $6.1 million,
or 28.9%, in the United States. The growth in Europe and the Asia/Pacific
region resulted from continuing increases in sales volume of the Company's
integrated circuit laser marking application in the Asia/Pacific region,
the introduction of the Company's Slab-Series laser product and the
recovery of the Machine Tool market in Japan. The increase in net sales
in the United States was due principally to increased shipments to the
Machine Tool and Automotive markets, with the largest portion of growth
attributable to increased sales volume of CO\\2\\ lasers for cutting
applications and spare parts and the introduction of the Company's laser
marking products in the United States. The effect of currency translation
on net sales was immaterial.
Cost of Goods Sold. Cost of goods sold of $51.5 million in the first
nine months of fiscal 1996 increased by $11 million, or 27.2%, over the
comparable prior period, and reflected the increase in net sales. As a
percentage of sales, cost of goods sold was unchanged, and reflected the
Company's continuing effort to control manufacturing costs.
Gross Profit. The Company's gross profit of $31.9 million for the
first nine months of fiscal 1996 increased by $6.9 million, or 27.7%, over
the comparable prior period as a result of the increase in net sales in
the first nine months of fiscal 1996 as compared to the comparable prior
period. As a percentage of net sales, gross profit was unchanged from the
comparable prior period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (which include the cost of application
development) of $15.2 million for the first nine months of fiscal 1996
increased by 4.7% over the comparable prior period due to the increase in
net sales. However, as a percentage of net sales, selling, general and
administrative expenses declined from 22.2% in the first nine months of
fiscal 1995 to 18.3% in the comparable period in fiscal 1996, reflecting
the Company's continuing control of these expenses, notwithstanding the
opening of a sales and marketing office in Phoenix, Arizona to develop the
Company's laser marking business in the U.S. market and the establishment
of a service office in Hong Kong to support all product lines in the
Asia/Pacific region.
Research and Development Expenses. Research and development expenses
of $5.9 million (which are incurred primarily in German marks and are net
of government grants) remained virtually unchanged from the first nine
months of fiscal 1995 to the comparable period in fiscal 1996. Research
and development expenses declined as a percentage of sales from 9% in the
first nine months of fiscal 1995 to 7% in the comparable period in fiscal
1996 due to the increase in sales between the two periods.
Income from Operations. The Company's income from operations of
$10.8 million for the first nine months of fiscal 1996 increased by $6.3
million, or 138.2%, over the comparable prior period. As a percentage of
sales, income from operations was 13% in the first nine months of fiscal
1996 as compared to 6.9% in the prior period,
20
<PAGE>
as a result of continued reductions in selling, general and administrative
expenses and research and development expenses as a percentage of net
sales. The effect of currency translation on income from operations was
immaterial.
Income Before Income Taxes. The Company's income before income taxes
of $10.1 million in the first nine months of fiscal 1996 increased by
$6.6 million over the prior period. As a percentage of net sales, income
before income taxes was 12.1% in the first nine months of fiscal 1996, as
compared to 5.3% in the prior period, as a result of the increase in
income from operations and the decrease in interest expense accrued under
the Company's intercompany lines of credit with Siemens and SC and
borrowing facilities utilized by its joint venture subsidiary in Japan due
to lower interest rates.
Income Tax Expense. Income tax expense was $4.4 million in the first
nine months of fiscal 1996 compared to an income tax expense of $1.7
million in the prior period. The effective tax rates for the first nine
months of fiscal 1996 and the comparable prior period were 43.1% and
49.4%, respectively. The effective tax rates were higher than the U.S.
statutory rate of 35% principally as a result of earnings taxed at higher
foreign statutory rates and foreign operating losses for which no benefit
was recognized in the first nine months of fiscal 1995.
Net Income. As a result of the foregoing factors, the Company's net
income of $5.7 million in the first nine months of fiscal 1996 increased
by $4.0 million over the comparable prior period.
Fiscal 1995 Compared to Fiscal 1994
Net Sales. Net sales of $92.5 million for fiscal 1994 increased by
$23.2 million, or 33.6%, over the prior year. The improvement resulted
from net sales increases of $20.6 million, or 51.2%, in Europe and the
Asia/Pacific region and $2.6 million, or 9%, in the United States. The
growth in Europe and the Asia/Pacific region resulted primarily from the
substantial increase in the sales volume of the Company's laser marking
products in the Asia/Pacific region, as well as the strong recovery in
Europe of the Machine Tool and Automotive markets due to pent-up demand,
which resulted in higher volume as well as a shift in product mix toward
higher-margin high-power products. In addition, approximately $7.5
million, or 36.4% of the increase in Europe and the Asia/Pacific region
resulted from currency translation as the German mark strengthened against
the U.S. dollar. The increase in the United States was due principally to
the increased volume of shipments to the improving Machine Tool and
Automotive markets, with the largest portion of growth in sales of CO\\2\\
lasers for cutting applications and related service and spare parts.
Because the recovery in both these markets began in 1994, the percentage
increase in the United States was lower in 1995 compared to 1994.
Cost of Goods Sold. Cost of goods sold of $57.2 million for fiscal
1995 increased by $10.2 million, or 21.6%, over the prior year, but as a
percentage of net sales declined from 67.9% in fiscal 1994 to 61.8% in
fiscal 1995. The decrease in the cost of goods sold as a percentage of
net sales reflected higher capacity utilization in Germany during the
period, as the Company recognized the benefits of the Restructuring
undertaken in Germany in fiscal 1993 and 1994, as well as the outsourcing
of the German subsidiary's machine shop operation. Net sales per employee
increased from $184,000 in fiscal 1994 to $227,000 in fiscal 1995, a
productivity increase of 23%.
Gross Profit. The Company's gross profit of $35.3 million for fiscal
1995 increased by $13.1 million, or 58.9%, over the prior year, as a
result of the increase in net sales in fiscal 1995 as compared to fiscal
1994 and the decrease in cost of goods sold as a percentage of net sales.
As a percentage of net sales, gross profit increased from 32.1% in fiscal
1994 to 38.2% in fiscal 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (which include the costs of application
development) of $20.7 million for fiscal 1995 increased by $3.6 million,
or 21.2%, over fiscal 1994. However, as a percentage of net sales,
selling, general and administrative expenses declined from 24.6% in fiscal
1994 to 22.4% in fiscal 1995 as the Company continued to control these
expenses despite a significant increase in marketing activity in the
Asia/Pacific region related to the Company's laser marking products and
the launch of the Company's HF cross-flow laser in the United States.
Research and Development Expenses. Research and development expenses
of $6.7 million (which are incurred principally in German marks and are
net of government grants) remained essentially unchanged from fiscal 1994
to fiscal 1995, decreasing by only $115,000, or 1.7%. Although research
and development expenses declined
21
<PAGE>
as a percentage of sales from 9.9% in fiscal 1994 to 7.3% in fiscal 1995
due to the increase in sales in fiscal 1995, total research and
development spending rose due to an increase in government grants in
fiscal 1995.
Income (Loss) from Operations. The Company's income from operations
of $7.9 million for fiscal 1995 increased by $9.6 million over fiscal
1994. As a percentage of net sales, income from operations was 8.6% in
fiscal 1995 as compared to (2.4%) in fiscal 1994, as a result of higher
gross margins and the continued reductions in selling, general and
administrative expenses and research and development expenses as a
percentage of net sales. Approximately $700,000, or 7.3%, of the increase
in income from operations resulted from currency translation as the German
mark and other relevant functional currencies strengthened against the
U.S. dollar.
Income (Loss) Before Income Taxes. The Company's income before
income taxes of $6.3 million in fiscal 1995 increased by $9.4 million over
fiscal 1994. As a percentage of net sales, income before income taxes was
6.8% in fiscal 1995, as compared to (4.5%) in fiscal 1994, as a result of
the increase in income from operations, which was offset by a slight
increase in other expense of $200,000 over fiscal 1994.
Income Tax Expense (Benefit). Income tax expense was $3 million in
fiscal 1995 compared to an income tax benefit of ($1.4 million) in fiscal
1994. As a percentage of income (loss) before income taxes, income tax
expense was 48% in fiscal 1995 and income tax benefit was (45%) in fiscal
1994, respectively, and reflected the fact that in fiscal 1995 all of the
Company's operations except its Japanese joint venture reported pre-tax
income. The effective tax rate in fiscal 1995 of 48% was higher than the
U.S. statutory rate of 35% principally as a result of earnings taxed at
higher foreign statutory rates and foreign operating losses for which no
tax benefit was recognized.
Net Income (Loss). As a result of the foregoing factors, the Company
recorded net income of $3.2 million in fiscal 1995 as compared to a net
loss of ($1.7 million) in fiscal 1994.
Fiscal 1994 Compared to Fiscal 1993
Net Sales. Net sales of $69.2 million for fiscal 1994 increased by
$9.2 million, or 15.3%, over the prior year. The improvement resulted
from net sales increases of $3 million, or 8%, in Europe and the
Asia/Pacific region and $6.3 million, or 27.4% percent, in the United
States. The growth in Europe and the Asia/Pacific region resulted
primarily from the introduction of the Company's integrated circuit laser
marker in the Asia/Pacific region and the shift in product mix toward
higher-margin high-power SM-Series lasers. The increase in net sales in
the United States was due principally to the recovery of the Machine Tool
and Automotive markets leading to greater shipments and a shift in the
product mix toward higher margin high-power CO\\2\\ lasers and spare parts
as compared to fiscal 1993 in which the Company received lower margins on
deliveries of lasers to a major OEM customer. The effect of currency
translation on net sales between fiscal 1993 and 1994 was immaterial.
Cost of Goods Sold. Cost of goods sold of $46.9 million for fiscal
1994 decreased slightly by $752,000, or 1.6%, from fiscal 1993 and
declined significantly as a percentage of net sales from 79.5% in fiscal
1993 to 67.9% in fiscal 1994. The substantial decrease in cost of goods
sold was the result of the implementation of the Restructuring in Germany
during the period, which included the reduction of head count by 38
employees, the consolidation of the Company's facilities in Hamburg, the
reorganization of the Company's customer support operation, the sublease
of space in the Hamburg facility to others, as well as the outsourcing of
nonstrategic components and the realization of discounts on volume
purchases. As a result of the foregoing, productivity per employee
increased by 36% (net sales per employee increased from $135,000 in fiscal
1993 to $184,000 in fiscal 1994).
Gross Profit. As a result of the increase in net sales in fiscal
1994 compared to fiscal 1993 and the decrease in cost of goods sold as a
percentage of net sales, gross profit of the Company of $22.2 million for
fiscal 1994 increased by $9.9 million, or 80.8%, over fiscal 1993. As a
percentage of net sales, gross profit increased from 20.5% in fiscal 1993
to 32.1% in fiscal 1994. An increase of $5.5 million in the gross profit
recorded in the United States accounted for approximately 57.3% of the
Company's gross profit increase.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $17.1 million (which include the costs of
application development) in fiscal 1994 decreased by $4.9 million, or
22.3%, from fiscal 1993 and as a percentage of net sales declined from
36.6% in fiscal 1993 to 24.6% in fiscal 1994. The substantial decrease in
selling, general and administrative costs both in dollars and as a
percentage of net sales was primarily
22
<PAGE>
the result of the reduction in administrative personnel of 12 people in
Germany pursuant to the Restructuring, as well as the consolidation of the
Company's facilities in Hamburg and ongoing cost-cutting measures.
Research and Development Expenses. Research and development expenses
of $6.8 million (which are incurred primarily in German marks and are net
of government grants) for fiscal 1994 decreased by $3.4 million, or
33.5%, from fiscal 1993. As a percentage of net sales, research and
development expenses declined from 17.1% in fiscal 1993 to 9.9% in fiscal
1994. The significant decrease in research and development expenses was
primarily attributable to the reduction in research and development
personnel of 16 people in Germany, the slowing of development efforts with
respect to higher-power CO\\2\\ lasers and the receipt of German
governmental research grants.
Loss from Operations. The Company's loss from operations of ($1.7
million) for fiscal 1994 decreased by $18.2 million from ($19.9 million)
in fiscal 1993. The improvement resulted principally from the significant
increase in gross profit and the reductions in selling, general and
administrative expenses and research and development expenses. The
Company's loss from operations in fiscal 1993 was due to the oversized
fixed cost structure growing out of the Company's strategy of vertical
integration in the late 1980's, which led to overcapacity in manufacturing
and multiple research and development projects, as well as the relocation
of the Company's operations in San Jose, California to Plymouth, Michigan.
Loss Before Income Taxes. The Company's loss before income taxes of
($3.1 million) in fiscal 1994 decreased by $18.3 million from a loss
before income taxes of ($21.4 million) in fiscal 1993. As a percentage of
net sales, the loss before income taxes decreased from (35.6%) to (4.5%).
Income Tax Benefit. Income tax benefit was ($1.4 million) in fiscal
1994 compared to an income tax benefit of ($1.6 million) in fiscal 1993.
As a percentage of loss before income taxes, income tax benefit for fiscal
1994 and 1993 was (45.6%) and (7.3%), respectively. The income tax
benefit in fiscal 1994 was higher than it would have been applying the
U.S. statutory rate of 35%, principally as a result of losses incurred in
foreign tax jurisdictions and a change in foreign tax rate. The income
tax benefit in fiscal 1993 was lower than it would have been applying the
U.S. statutory rate, primarily as a result of foreign operating losses for
which no benefit was recognized.
Net Income (Loss). As a result of the foregoing factors, the
Company's net loss of ($1.7 million) in fiscal 1994 decreased by $18.1
million from a net loss of ($19.8 million) in fiscal 1993.
Liquidity and Capital Resources
The Company has historically funded its cash requirements through
cash flow from operations, capital contributions and advances from Siemens
and its affiliates pursuant to intercompany lines of credit, as well as
through borrowings under credit facilities guaranteed by a Siemens
affiliate. At June 30, 1996, the amount outstanding under such
intercompany lines of credit from Siemens and SC was $25.9 million. At
such date, the Company also had borrowings of $6.7 million under an
intercompany loan from a Siemens affiliate in Japan.
Net cash provided (used) by operating activities was ($209,000) and
$2.6 million in the nine months ended June 30, 1996 and 1995 and
($159,000) and $5.9 million for fiscal 1995 and 1994, respectively. Cash
flow from operations in the nine months ended June 30, 1996 decreased
by $2.8 million compared to the comparable prior period despite increased
net income, primarily due to increased receivables and inventories and a
reduction in deferred income taxes, offset by increases in trade payables
and accrued liabilities and pension obligation. Cash flow from operations
in fiscal 1995 decreased $6 million compared to the prior year despite the
improvement in the Company's results of operations, principally as a
result of increased receivables and inventories, offset by increases in
trade payables, deferred income taxes, accrued liabilities and pension
obligation. Cash provided by operations in fiscal 1994 increased $2.3
million in fiscal 1994 compared to the prior year, primarily due to the
reduction in the Company's net loss and improved management of working
capital.
Trade accounts receivable, net of allowances, increased $10.4 million
to $35.6 million at June 30, 1996 from September 30, 1995 and $7.3 million
to $25.1 million at September 30, 1995 from September 30, 1994.
Inventories increased $6 million to $34.1 million at June 30, 1996 from
September 30, 1995 and $7.5 million to $28.2 million at September 30, 1995
from September 30, 1994. The increase in receivables was due primarily to
growth in net sales. A portion of the increase in receivables was
attributable to the increased proportion of sales to customers in Japan,
where payment terms are normally longer. Inventories increased primarily
to support the growth in net sales,
23
<PAGE>
and also included increases in inventory levels related to the
introduction of new products such as the Slab-Series laser (including
units held by the Company in its applications centers and for
demonstration to customers), as well as rescheduling of delivery dates on
sales of laser markers.
Cash used in investing activities was $1.4 million in each of the
nine-month periods ended June 30, 1996 and 1995 and fiscal 1995 and
$251,000 and $806,000 in fiscal 1994 and 1993, respectively. The increase
in cash used for investing activities in periods subsequent to fiscal 1994
was primarily attributable to increased capital expenditures, offset by
sales of equipment. Capital expenditures were $1.4 million in each of
the nine-month periods ended June 30, 1996 and 1995 and $1.9 million,
$452,000 and $1.1 million in fiscal 1995, 1994 and 1993, respectively.
These increases reflect the acquisition of additional manufacturing and
research and development equipment, as well as investment in computers and
telecommunications equipment.
Cash used in financing activities primarily reflects payments made to
Siemens by RSL and funds provided by Siemens to RSL under the Siemens
centralized cash management system. The Company will cease to participate
in such arrangement approximately one week after the completion of the
Offerings. As of June 30, 1996, the Company had borrowings of $6.7
million under an intercompany loan from a Siemens affiliate in Japan. The
Company intends to refinance such borrowings utilizing the Credit Facility
(as defined below) approximately one week after the consummation of the
Offerings.
The Company is currently negotiating a commitment letter for a $25
million revolving loan facility with Deutsche Bank AG, an affiliate of
Deutsche Morgan Grenfell/C. J. Lawrence Inc. ("Deutsche Bank") to support
its working capital needs (the "Credit Facility"). The Company intends to
repay the amounts outstanding under its intercompany lines of credit from
Siemens and SC through borrowings under the Credit Facility approximately
one week after the consummation of the Offerings.
The Company intends to use the net proceeds to it from the Offerings
(after repayment of $7 million of indebtedness owed to Siemens and SPC)
and the Credit Facility, together with cash from operations, to finance
its future operations. The Company believes that its existing cash flow
from operations, together with the Credit Facility, the proceeds realized
from the sale of the shares offered hereby by the Company, will be
sufficient to meet its liquidity and capital requirements at least through
the end of fiscal 1997.
Pension Plan Liabilities
The Company has defined benefit pension plans for substantially all
of its German and U.S. employees. As is the normal practice with German
companies, the German plan is unfunded. At June 30, 1996, the amount of
the accrued pension liability for both the German and U.S. plans was
approximately $3.4 million. The German plan will, consistent with German
practice, continue to be unfunded after the consummation of the Offerings.
See "Management -- Executive Compensation -- Pension Plans -- RSL Pension
Plan" and "-- Siemens Corporation Retirement Plan."
24
<PAGE>
BUSINESS
Company Overview
Rofin-Sinar is a leader in the design, development, engineering,
manufacture and marketing of laser products for cutting, welding and
marking a wide range of industrial materials. Lasers are a non-contact
technology for material processing which have several advantages that are
desirable in industrial applications. The Company's lasers all deliver a
high-quality beam at guaranteed power outputs and feature compact design,
high processing speed, flexibility, low operating and maintenance costs
and easy integration into the customer's production process. As a
technological leader in both CO\\2\\ and Nd:YAG lasers, the Company is
able to meet a broad range of its customers' material processing
requirements. The Company believes it has a worldwide market share (based
on sales volume) of approximately 20% for laser products used for cutting
and welding applications and that it is among the largest suppliers of
laser products used for marking applications in Europe and the
Asia/Pacific region (other than Japan). Over 80% of the Company's sales
in fiscal 1995 were made to existing customers. The Company has sold
more than 4,000 laser sources since 1975 and currently has over 1,500
active customers (including multinational companies with multiple
facilities purchasing from the Company). During the 1995 fiscal year and
the first nine months of fiscal 1996, respectively, approximately 73% and
69% of the Company's revenues were from sales and servicing of laser
products for cutting and welding applications and approximately 27% and
31% were from sales and servicing of laser products for marking
applications.
Through its global manufacturing, distribution and service network,
the Company provides a comprehensive range of laser solutions to three
principal target markets for material processing lasers: the Machine Tool,
Automotive and Semiconductor & Electronics industries. The Company sells
directly to industrial end-users, to OEMs (principally in the Machine Tool
industry) who integrate Rofin-Sinar's laser sources with other system
components and to distributors. Many of Rofin-Sinar's customers are among
the largest global participants in their respective industries, and
include Aerospatiale, ASM, BMW, Boeing, Bosch, Chrysler, Ford, General
Motors, Mercedes-Benz, Philips, SGS Thomson, Siemens, Thyssen, TRW,
Volkswagen and Volvo. During fiscal 1995 and the first nine months of
fiscal 1996, 34% and 33% of the Company's sales were in North America, 52%
and 46% were in Europe and 14% and 21% were in the Asia/Pacific region,
respectively.
In developing its laser solutions, the Company offers customers its
expertise in: (i) product development and manufacturing (i.e., state-of-
the-art product development and manufacturing services based on over 20
years of laser technology experience and applications know-how); (ii)
application and process development (i.e., developing new laser-based
applications for manufacturing customers and assisting them in
successfully integrating lasers into their production processes); (iii)
system engineering (i.e., advising customers on machine design, including
tooling, automation and controls, for customers in need of "turn-key"
solutions); and (iv) extensive after-sales support for its laser products
(including technical support, field service, maintenance and training
programs and rapid spare parts delivery).
Competitive Advantages
The Company attributes its strong market position and its long-
standing customer relationships to several competitive advantages:
Technological Leadership and Product Innovation. Driven by its
customers' manufacturing needs, the Company has developed laser technology
expertise which keeps it at the leading edge of technological development
and product innovation. The Company's laser products feature compact
design, high processing speed, superior reliability and low maintenance
requirements. In the last three years, the Company has introduced five
new CO\\2\\ and Nd:YAG laser products, predominantly in the higher power
range. The Company believes that its advanced fiberoptic technology,
including beam-switching and beam-splitting techniques which permit the
laser beam to be used alternately or simultaneously at different
workstations, is superior in the industry due to its use of low power-loss
fibers and adherence to safety standards.
Sophisticated Application Development. Rofin-Sinar believes its
long-standing customer relationships are built upon the Company's
sophisticated application development. The Company has pioneered many
important new laser applications, including the welding of tailored blanks
(a technique used in car body welding), metal tubes and diamond-tipped saw
blades. The Company has approximately 40 engineers and technical
personnel (including 25
25
<PAGE>
Ph.D.'s) specialized in the core competences of laser beam production,
shaping, delivery and application, as well as power supply, control
interfaces, software programming and systems integration, and it maintains
a substantial and continuously updated applications database. As a
result, the Company is able to offer customers a broad range of material
processing applications based on CO\\2\\ and Nd:YAG laser technology.
During the initial sales process, engineers and other technical experts
from the Company's applications centers work directly with the customer to
develop and customize the optimal solution for the customer's
manufacturing requirements.
Broad Product Range. The Company distinguishes itself from the
majority of its competitors who are specialized in only one of the two
principal laser technologies for material processing by offering its
customers both CO\\2\\ and Nd:YAG laser sources and solutions in a variety
of configurations and options. As a technological leader in both CO\\2\\
lasers and Nd:YAG lasers, the Company is able to meet a broad range of its
customers' material processing requirements, from cutting and welding of
thick metal sheet to micro-cutting and welding of electronic components to
marking of integrated circuits.
Product Quality. Rofin Sinar has established itself as a quality
supplier to its customers. The Company offers "no nonsense"
specifications, guaranteeing such critical parameters as minimum output
power at full power settings under all circumstances. The Company also
provides after-sale parts and service for its products for a period of not
less than 10 years. In addition, the Company shares a common objective
with its customers of pursuing internationally recognized manufacturing
and product quality standards. Consistent with this commitment, the
Company's facility in Hamburg, Germany received ISO 9001 certification in
1995. The Company anticipates that its facilities in Gunding-Munich,
Germany and Plymouth, Michigan will be certified during the 1997 fiscal
year. The Company expects that its U.S. operation will be qualified by
Ford as a Q-1 supplier in fiscal 1997.
Comprehensive Customer Service. The Company is committed to a
superior level of customer service from initial discussions relating to
applications, through final system installation, to after-sale technical
and product support. Following installation, the Company frequently
provides customized training to its customers' personnel and supports its
products with a knowledgeable staff of over 70 field-based and in-house
customer service representatives worldwide. The Company believes that its
customer service support organization is one of the largest among
manufacturers of lasers for material processing applications.
Global Presence. Through its manufacturing capability in the United
States, Germany and Japan and its global distribution and service network,
the Company offers its laser sources and laser marking products in
approximately 25 countries. The Company responds to the global nature of
its customer base as well as the important regional areas in which certain
of its customers operate by following its multinational customers into new
geographic regions where it provides local service and support.
Business Strategy
The Company's business strategy is to maximize shareholder value by
(i) strengthening its position as a leading supplier to the global market
for cutting and welding applications and (ii) capitalizing on its
leadership position in cutting and welding, its strength in the European
and Asian marking markets and its other significant competitive advantages
to build its share of the U.S. market for marking applications. The
Company believes that the major sources of its growth over the next three
years will be the following:
. Developing New Laser Products through Technological Innovation:
Product innovation in response to evolving customer needs for
increased output power, greater penetration and higher
processing speeds is a key component of the Company's strategy.
The Company is currently focusing its research and development
activity on increasing the output power of its CO\\2\\
diffusion-cooled Slab lasers and on developing diode-pumped
solid state lasers. The Company intends to enhance its position
in its existing high-power CO\\2\\ laser market primarily in the
Machine Tool segment by increasing sales of its new Slab lasers
which offer customers significantly greater operating
efficiencies and reduced maintenance costs. The Company's
current focus with respect to this product is on reducing
manufacturing costs to achieve more attractive pricing. The
Company is also actively engaged in the development of diode-
pumped solid state lasers through a joint research program with
the Fraunhofer Institute for Laser Technology, a leading laser
research institute in Germany. The Company's objective is to
develop diode-pumped lasers capable of
26
<PAGE>
performing heavy industrial material processing applications, as
well as marking applications, more rapidly than previously
possible and at reduced operating and maintenance costs.
. Focusing on Cross-Selling to Existing Customers in Target
Markets: The Company intends to continue to focus its sales
and marketing activities on the Machine Tool, Automotive and
Semiconductor & Electronics industries. The Company has
targeted and will continue to target these industries because of
their utilization of advanced manufacturing processes and
continuing investments to improve production efficiency and
because of the Company's significant market presence in these
sectors. In particular, the Company's objectives are (a) cross-
selling marking systems to existing customers for cutting and
welding applications, and (b) selling new applications of
existing laser technologies to existing customers. To exploit
its opportunities for cross-selling, the Company intends to
leverage its installed base of CO\\2\\ and Nd:YAG lasers for
cutting and welding applications to cross-sell its marking
products to these same customers. To exploit its opportunities
to develop new applications for existing laser technologies, the
Company intends, for example, to explore the potential for use
of high-power CO\\2\\ lasers in car body framing in response to
the interest shown by car manufacturers in reducing their
reliance on spot-welding guns. In addition, building on the
success of its laser marking of small integrated circuits, the
Company intends to develop new applications for wafer
processing, micro-welding and micro-soldering. The Company is
also developing a more standardized version of its laser marker
to capture additional market share in Europe through sales to
the low-end marking market.
. Capitalizing on Global Presence to Attract New Customers: The
Company intends to capitalize on its customer base and the
presence of its manufacturing, sales and service operations in
the three principal geographic markets in which its customers
operate (North America, Europe and the Asia/Pacific region) to
increase market share in its existing industrial and geographic
markets. The Company believes its global manufacturing,
distribution and service network allows it to be more responsive
to customers' needs and positions it to expand into additional
promising markets which offer high long-term potential for
growth. The Company believes it can benefit from increasing
capital expenditures in the industrial sectors of such
economies. In particular, the Company has entered into a license
and supply agreement with Nanjing Electric Laser Center ("NELC")
for the manufacture and sale in China of conventional CO\\2\\
lasers.
. Offering Customized Solutions Based on Standard Platform. While
the Company offers a wide range of laser applications and
develops customized solutions for its customers, these
applications and solutions are built on a focused number of
product families comprised of standardized laser sources. For
example, for its OEM customers in the Machine Tool industry, the
Company customizes packaging of the laser source's power supply.
For its marking customers, the Company combines its standard
laser marker with customized parts handling and software. The
Company believes that this product strategy has contributed to
its return to profitability since fiscal 1993 and intends to
continue its initiatives to standardize its core products and
lower its production costs so as to continue to improve its
profitability.
The Industrial Laser Market for Material Processing
The industrial laser market is generally considered to be made up of
laser sources sold for industrial applications including material
processing, medical therapeutic, instrumentation, research,
telecommunications, optical storage, entertainment, image recording,
inspection, measurement and control, bar-code scanning and other end-uses.
According to Laser Report, the global industrial laser market had total
revenues in 1995 of approximately $1.2 billion.
Based on Laser Report, in 1995 the material processing segment of the
industrial laser market, which is the single largest segment of that
market, had total revenues of approximately $450 million. Over the past
25 years, lasers have revolutionized industrial manufacturing and have
been used increasingly to provide reliable, flexible, non-contact compact
and high-speed alternatives to conventional technologies for processing
various kinds of metal and non-metal materials in a broad range of
advanced manufacturing applications.
27
<PAGE>
Current Industry Applications
The industrial laser market for material processing generally
encompasses the use of CO\\2\\ and Nd:YAG laser sources in highly
automated manufacturing or production processes. For further discussion
of the principal laser technologies used for material processing, see "--
Laser Technology." The laser source is typically integrated into a laser
system which includes a power supply, fixed optic (in the case of a
CO\\2\\ laser-based system) or flexible fiberoptic (in the case of a
Nd:YAG laser-based system) beam delivery system, control software,
robotics, machine vision, motion control and parts handling, and typically
comprises 20-50% of a total system's cost. To date, the three principal
categories of industrial users of lasers for material processing have been
the Machine Tool, Automotive (including both automobile manufacturers and
automotive suppliers) and Semiconductor & Electronics industries.
Customers in these markets typically demand high-speed, compact, highly
durable laser sources which have a reliable power output, can be easily
and flexibly integrated into the customer's production process, are easy
to maintain, and are able to withstand the rigors of industrial use, such
as wide extremes of temperature and humidity, dirt, dust, shock and
vibration.
Currently, there are three main material processing applications for
which lasers are used: (i) cutting, (ii) welding and (iii) marking.
Other applications include surface treatment (cladding and alloying),
drilling, soldering, rapid prototyping and laser-assisted machining.
Cutting Applications. Industrial manufacturers have traditionally
--------------------
utilized punch presses (nibbling), dye-cutting and stamping machines and
other conventional machine tools for cutting and shaping metal materials.
Such technologies tend to be economical only when large quantities of the
same item are produced, as their use involves lengthy set-up times. In
addition, because such machine tools come into contact with the material
being worked on, the material often requires additional machining after
cutting has occurred to achieve the desired finish to the cut edge or
surface. Additionally, the continuous contact of the machining head with
the material subjects it to wear and tear requiring ongoing maintenance
and repair. Alternative cutting technologies either result in a wide cut
width and heat-affected zones or are very slow processes despite achieving
excellent edge quality.
By contrast, laser-based cutting technology has several advantages
which are desirable in industrial applications. Laser cutting is fast,
flexible and high-precision, as it can be used to cut complex contours on
flat, tubular and three-dimensional materials (which is difficult if not
impossible to achieve with alternative methods). The laser source can be
easily programmed by a computerized numerical controller ("CNC") and is
able to process many different kinds of materials (steel, aluminum, brass,
copper, wood, glass, ceramics and plastics) at various thicknesses.
Additionally, laser cutting technology is a non-contact, no-wear process
which is easy to integrate into an automated production line. The types
of laser sources most suitable for cutting are high-power CO\\2\\ lasers
and Nd:YAG lasers in the power range from 150 W to 2 kW.
The adoption of just-in-time inventory and manufacturing techniques
has driven the growth of laser-based cutting among industrial
manufacturers. Laser cutting is the ideal tool for just-in-time
production because parts can be cut only when they are needed and then
only in the desired quantities, thereby reducing carrying costs and
inventory obsolescence. Additionally, cutting programs can be altered
quickly with easy off-line programming. Principal Rofin-Sinar customers
for lasers used in cutting applications are OEM's in the Machine Tool
industry who integrate the laser source into their own cutting systems for
sale to industrial end-users. The continuing efforts of all industrial
manufacturers to streamline their production methods, decrease inventory
through the use of just-in-time manufacturing techniques and lower overall
costs are factors which lead the Company to believe that there will be
long-term future market growth for laser systems used for cutting
applications.
Welding Applications. Industrial manufacturers have
--------------------
traditionally utilized plasma arc welding, resistance welding and other
conventional joining technologies for welding metal materials. Compared
to laser welding, these processes result in wider weld cross-sections with
much more heat input into the workpiece. Furthermore, arc welding is
slower than laser welding, and resistance welding requires access to each
part from two sides, has limited contouring capabilities and requires
constant maintenance. Electron beam welding has similar welding
properties to lasers; however, the process requires use of a vacuum
environment.
Compared to conventional welding technologies, laser welding offers
several important advantages which are desirable in industrial
applications. Laser welding is non-contact, easy to automate, provides
high process speed and results in narrow-seamed, high quality welds which
require little, if any, post-processing machining. Because
28
<PAGE>
there is low heat input into the material being processed and therefore
minimal part damage or distortion, parts can be accurately machined before
welding. Additionally, because laser welding is non-contact based, the
process is not subject to tool wear. As with lasers used for cutting
applications, lasers can be used to weld a wide variety of materials of
different thicknesses. The types of laser sources most suitable for
welding are high-power CO\\2\\ lasers and Nd:YAG lasers (for welding of
steel and aluminum with relatively long weld seams) and low-power Nd:YAG
lasers (for spot-welding and short-seam welding).
To date, the principal applications for laser welding have been in
the Automotive industry. Automobile manufacturers and suppliers use
lasers for welding of transmissions, engine components (such as injection
nozzles, valve lifters and gasoline filters), airbags and other
components. A laser welding application which has significant potential
for growth in the Automotive market is the welding of tailored blanks (a
technique pioneered by the Company for welding dissimilar metals of
different thicknesses into one sheet to reduce material cost and car
weight) and more generally car body framing and production. The Company
expects that the demand for improved fuel economy, weight reduction,
improved vehicle safety and increased production line flexibility to
permit rapid model changes will contribute to automotive manufacturers'
and suppliers' demand for lasers.
Marking Applications. With the increasing need for source
--------------------
traceability, component identification and product tracking as a means to
reduce product liability and prevent falsification, industrial
manufacturers increasingly are demanding variable code marking systems
capable of applying serialized alphanumeric, graphic or bar code
identifications directly onto their manufactured components. Industrial
manufacturers have traditionally utilized acid-etching and ink-based
technologies to mark manufactured parts. These technologies require flat,
clean surfaces, are maintenance-intensive and, most importantly, are not
appropriate for serialization. Moreover, their marking is susceptible to
damage by heat or light and is therefore not permanent.
By contrast, laser marking offers several important advantages which
are desirable in industrial applications. Lasers can mark a wide variety
of metal and non-metal (wood, glass, plastics) surfaces at high speed
without contact by changing the surface structure of the material or by
engraving. Laser marking systems are reliable, flexible, high speed,
leave permanent marks and, because they are computer-controlled, can be
easily integrated into the customer's production process. Because laser
marking is contact-free, it does not subject the item being marked to any
mechanical stress. In addition, these systems enable the user to avoid
the mechanical problems associated with ink-based technology (e.g.,
clogging, drying time delay, ink-bottle replacement, etc.) and the waste
disposal issues related to acid-etching.
To date, the principal applications for laser marking have been in
the Automotive and Semiconductor & Electronics industries. In the
Automotive industry, the increasing trends toward component identification
and the production of multiple car models on a single assembly line have
driven the growth of laser marking. A substantial number of automobile
components and subcomponents are currently, or have the potential to be,
marked by lasers. Windshield wiper blades, gears, starter housings,
safety belt buckles, head lights and control buttons are typical examples
of laser marking applications. The Company believes that the potential
for laser marking has not yet been fully realized in the Automotive
industry.
In the Semiconductor & Electronics industry, lasers are used to mark
electrical components such as contactors and relays, and assembled
components such as integrated circuits, printed circuit boards and
keyboards. With the increase in marking speed in the last few years,
laser marking of integrated circuits has decreased in cost, improving the
price/performance characteristics of this technology and therefore
increasingly displacing ink-based and laser mask marking installations.
VLSI Research, Inc. estimates that the market for semiconductors will grow
from $138 billion in 1995 to $254 billion in the year 2000. Other
industry analysts are forecasting growth to annual sales levels as high as
$300 billion by the year 2000. This growth is being fueled by the demand
for products such as computers, cellular phones and multimedia
communications products. It is expected that demand for such products
will continue to fuel growth in capital investment by semiconductor and
electronics manufacturers.
Outlook. Rofin-Sinar expects that industrial end users in each of
-------
its target markets will continue to make capital investments to streamline
their production methods, increase their production line flexibility and
lower their overall costs. The Company believes that the continuation of
this trend, together with its continued focus on developing new
applications for its laser sources and laser marking products, will
provide it with significant opportunities for long-term growth in each of
the Machine Tool, Automotive and Semiconductor & Electronics industries,
despite a recent softening in the Semiconductor & Electronics industry.
For example, the Company
29
<PAGE>
anticipates continued demand for higher-power CO\\2\\ lasers and Nd:YAG
solid state lasers for cutting and welding applications in the Machine
Tool and Automotive industries and believes that its introduction of
CO\\2\\ Slab laser technology will enhance its position in the high-power
CO\\2\\ laser market. In laser marking and related micro-processing
applications, the Company believes that there is significant potential for
additional penetration of the Automotive and Semiconductor & Electronics
industries worldwide, with a particular focus in the United States. In
addition, the Company believes that there is significant demand for a
lower priced, more standardized version of its marking products in Europe.
The Company's Laser Products
The Company currently offers a comprehensive range of state-of-the-
art laser products and related services for three principal material
processing applications: (1) cutting; (2) welding; and (3) marking.
Rather than offering standardized laser systems, the Company works
directly with the customer to develop and customize the optimal solution
for the customer's manufacturing requirements. In developing its laser
solutions, the Company offers customers its expertise in: (i) product
development and manufacturing (i.e., state-of-the-art product development
and manufacturing services based on over 20 years of laser technology
experience and applications know-how); (ii) application and process
development (i.e., developing new laser-based applications for
manufacturing customers and assisting them in successfully integrating
lasers into their production processes); (iii) system engineering (i.e.,
advising customers on machine design, including tooling, automation and
controls, for customers in need of "turn-key" solutions); and (iv)
extensive after-sales support of its laser products (including technical
support, field service, maintenance and training programs and rapid spare
parts delivery). The Company has sold more than 4,000 laser sources since
1975 and currently has over 1,500 active customers (including
multinational companies with multiple facilities purchasing from the
Company).
The following table sets forth the Company's net sales of laser
products used for cutting and welding applications and of laser products
used for marking applications in fiscal year 1995 and the first nine
months of fiscal 1996:
<TABLE>
<CAPTION>
Nine Months
Ended
Product Category* Fiscal 1995 June 30, 1996
----------------- ----------- -------------
<S> <C> <C>
(in thousands)
Lasers for cutting and welding.. $69,442 $57,527
Laser marking products.......... 23,024 25,845
------- -------
$92,466 $83,372
</TABLE>
-------------------
* For each product category, net sales includes sales of services
(including training, maintenance and repair) and spare parts.
Laser Products for Cutting and Welding
The Company believes that it has a worldwide 20% market share for
laser products used for cutting and welding applications. The Company's
addressable market represents approximately 75% of the total market for
industrial material processing. The Company distinguishes itself from the
majority of its competitors who specialize in only one of the two
principal laser technologies for material processing by offering its
customers both CO\\2\\ and Nd:YAG laser sources and solutions in a variety
of configurations and options. As a technological leader in both CO\\2\\
lasers and Nd:YAG lasers, the Company is able to meet a broad range of its
customers' cutting and welding requirements. The laser sources sold by the
Company consist of a laser head (containing the lasing medium, resonator,
source of excitation, resonator mirrors and cooling mechanism), a power
supply and microcontroller (for control and monitoring). For a more
detailed discussion of the components of a laser source, see "-- Laser
Technology." The Company's lasers all deliver a high-quality beam at
guaranteed power outputs and feature compact design, high processing
speed, flexibility, low operating and maintenance costs and easy
integration into the customer's production process. Products are offered
in different configurations and utilizing different design principles
according to the desired application. The Company's engineers and other
technical experts work directly with the customer in the Company's
applications centers to develop and customize the optimal solution for the
customer's manufacturing requirements.
30
<PAGE>
The Company's business strategy for its cutting and welding laser
business is to develop this business at a rate of growth greater than that
of the overall cutting and welding laser market. The Company intends to
implement this strategy by: (i) increasing its market share in its
existing high-power CO\\2\\ laser market through increased sales of its
diffusion-cooled CO\\2\\ Slab lasers and (ii) developing a multi-kilowatt
diode-pumped Nd:YAG solid state laser capable of performing heavy
industrial material processing applications (e.g. car body welding), as
well as marking applications, more rapidly than previously possible and at
reduced operating and maintenance costs. The Company believes that
diffusion-cooled CO\\2\\ Slab lasers and diode-pumped Nd:YAG solid state
lasers will replace existing CO\\2\\ and flash-lamp pumped solid state
laser technologies, respectively, and it intends to remain at the
forefront of technological development and product innovation in order to
capture market share in the cutting and welding laser market.
The Company's family of CO\\2\\ laser products for cutting and
welding and their principal markets and representative applications are
shown in the following table and such products' competitive advantages are
discussed below:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Mode of Price Range Principal
Laser Series Power Range Excitation (per unit) Markets Applications
------------ ----------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C>
RS DC 1.5 kW - 2.5 kW High frequency $130,000- Machine Tool; Cutting;
Slab Series $200,000 Automotive welding
RS HF 4 kW - 6 kW High frequency $280,000- Automotive Welding of
Series $357,000 transmissions,
tailored blanks,
car bodies;
surface
treatment
RS SM 700 W - 2 kW Direct current $100,000- Machine Tool Flat sheet and
Series $145,000 three-dimen-
sional cutting
---------------------------------------------------------------------------------------------
</TABLE>
Rofin Sinar introduced its diffusion-cooled RS DC Slab Series laser
in mid-1995 and has shipped over 80 units since that date. The Company
believes that it is the only laser manufacturer of diffusion-cooled slab-
based lasers in the high-power range. In this laser design, a high
frequency (HF) excited gas discharge occurs between two water-cooled
electrodes which have a large surface area that permits maximum heat
dissipation. The core diffusion-cooled technology is protected by two
patents and the Company has exclusive license rights to this technology on
a worldwide basis for the range above 500 W for material processing
applications. The RS DC Slab Series laser has several competitive
advantages. Among these advantages are its exceptional beam quality and
focusability which permit faster and narrower welds and higher cutting
speeds with minimal heat input in thin materials. Another significant
feature is the Slab Series laser's compact design and lightweight
construction (enabling the laser head to be mounted onto moving laser
systems where flying optic or moving table designs would not be
practical). Finally, because the Slab design eliminates the need for gas
circulation (resulting in reduced maintenance costs), its low gas
consumption contributes to overall lower running costs and allows the
laser gas bottle to be integrated into the laser head, eliminating the
need to install an expensive laser gas supply. The Company's current
focus with respect to its Slab Series lasers is on increasing their power
output and reducing their manufacturing costs in order to achieve more
attractive pricing.
The Company's RS HF Series lasers have established Rofin-Sinar as a
worldwide leader in multi-kilowatt cross-flow CO\\2\\ lasers. These are
CO\\2\\ lasers in which the laser gas flows perpendicularly to the
resonator. The Company believes that the HF Series laser is the smallest
industrial laser in the 4 kW to 6 kW power range. Combining proven cross-
flow design principles with modern high-frequency (HF) discharge
excitation technology, the HF Series laser's fast welding speeds and low
operating costs make it an ideal tool for all welding applications. The
HF Series laser has several features which give it a strong competitive
edge over its competitors across the full range of welding applications.
Its compact design (the laser head and power supply are integrated into
one unit) allows easy integration into automated processing systems on the
factory floor. Because the HF excitation uses proprietary dielectric
coated electrodes, there is no corrosion of the electrodes or
contamination of the laser optics, resulting in significantly longer
service intervals and therefore reduced maintenance costs. Since its
introduction in
31
<PAGE>
fiscal 1995, the Company has shipped over 30 units, predominantly to
customers in the Automotive industry in the United States, where the HF
Series laser has set standards in a significant number of welding
applications, including the welding of transmissions, tailored blanks and
many other car parts and components.
The Company's SM-Series fast axial flow CO\\2\\ laser is used for
both cutting and welding applications. In the fast-axial flow principle,
the gas discharge occurs in a tube in the same direction as the resonator,
through which the laser gas mixture flows at a high speed. The SM-Series
design features a simple resonator structure and a limited number of
optical components which guarantee excellent consistent beam quality and
output stability (which are important for maintaining high cutting and
welding speeds and uniformly high quality cuts and welding seams). This
laser family has a number of proprietary features developed by Rofin-
Sinar, including a highly efficient switch mode power supply and a
patented resonator fold for easy circular polarization, eliminating the
need for two additional external mirrors which would otherwise be
required. The SM laser's high pointing stability and low beam divergence
make it highly suited for integration into production systems having
complex beam delivery paths. Due to the potential to reduce the
manufacturing cost of the Slab lasers, the Company intends over the next
three years to replace the SM-Series product family with the Slab-Series
laser.
The Company's family of Nd:YAG laser products for cutting and welding
and their principal markets and representative applications are shown in
the following table and such products' competitive advantages are
discussed below:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Mode of Price Range Principal
Laser Series Power Range Excitation (per unit) Markets Applications
------------ ----------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C>
RSY 50 W - 1 kW Flash Lamp $55,000- Automotive; Spot- and
P-Series $180,000 Medical device seam-welding;
fine cutting
RSY 1 kW - 2.5 kW Flash Lamp $140,000- Automotive Welding of car
CW-Series $220,000 bodies
---------------------------------------------------------------------------------------------
</TABLE>
The Company's RSY P-Series of pulsed Nd:YAG lasers are designed to
meet the requirements of a wide range of welding and cutting applications.
Their high peak power, flexible fiberoptic beam delivery and the small
focused spot size of the laser beam allow these lasers to be successfully
applied in many cutting and welding applications. The RSY lasers' pulse
shaping capability (achieved through programming of the power supply)
makes these lasers particularly well suited to the processing of
metallurgically difficult materials such as aluminum and its different
alloys. These lasers can be integrated into a wide range of both fixed
optic and fiberoptic beam delivery systems.
Rofin-Sinar's RSY CW-Series of continuous wave Nd:YAG lasers
represent the Company's latest development in high-power industrial Nd:YAG
lasers as they are designed exclusively for use with flexible fiberoptic
beam delivery systems, making them particularly well suited for
integration into complex production systems. The key competitive
advantages of the CW-Series lasers are their pulse shaping capability and
multiple power output configurations. These configurations include
continuous wave and pulsed power ramping modes separately or in
combination with each other, which allows the Company to address a wide
range of customer applications. (Power ramping is particularly suited for
achieving smooth welds and avoiding cracks during the welding process.)
In addition, several features of the CW-Series laser such as the simple
resonator design, easy to access power supply and highly durable ceramic
pumping chambers are designed with a view to long service intervals and
therefore low maintenance costs.
The Company is actively engaged in the development of diode-pumped
solid-state Nd:YAG lasers through a joint research program with the
Fraunhofer Institute for Laser Technology as well as through a second
program sponsored by the Bavarian Government. The Company's objective is
to develop diode-pumped lasers capable of performing heavy industrial
material processing applications (e.g. car body welding), as well as
marking applications, more rapidly than previously possible and at reduced
operating and maintenance costs. Such lasers also have potential for use
in marking applications, where they could be developed in much more
compact systems. See "-- Research and Development."
32
<PAGE>
Laser Marking Products
The Company first entered the laser marking business in 1989 when it
acquired Laser Optronic GmbH from Coherent General Inc. and designed and
introduced the "PowerLine" laser marker. Since fiscal 1991, the Company's
sales of laser markers have grown 700% (increasing from 50 units in fiscal
1991 to 350 units in fiscal 1995). The Company established itself as the
laser marking market leader in Europe (principally in the Automotive and
Semiconductor & Electronics industries) in fiscal 1994 and in the
Asia/Pacific region in fiscal 1995 (principally in the Semiconductor &
Electronics industry). The table below summarizes the breakdown in sales
of laser markers in the Company's three principal geographic markets in
fiscal 1995 and the first nine months of fiscal 1996 (by dollar volume).
<TABLE>
<CAPTION>
Nine Months
Ended
Fiscal 1995 June 30, 1996
----------- -------------
<S> <C> <C>
(in thousands)
Europe:
Germany......... $7,828 $8,270
Rest of Europe.. 8,289 7,237
North America.... 920 1,809
Asia/Pacific..... 5,986 8,529
</TABLE>
The Company's business strategy for its laser marking business is four-
fold: (i) to expand its position in the U.S. laser marking market, with a
particular focus on the Semiconductor & Electronics and Automotive
industries; (ii) to capitalize on its installed base of CO\\2 \\and Nd:YAG
laser customers, primarily in the Automotive industry, to cross-sell its
marking products to these same customers; (iii) to capitalize on the
success of its laser marking of small integrated circuits to develop new
applications for wafer processing, micro-welding and micro-soldering and
(iv) to develop a stand-alone laser marker targeted at the low-end portion
of the laser marking market.
The Company attributes the success of its laser marking products and the
significant growth it has experienced in the laser marking business to a
number of competitive advantages:
. Since Rofin-Sinar builds its own Nd:YAG laser sources and
utilizes its own proprietary Laser Work Bench software, it is
able to tailor its laser marking solutions to the customer's
requirements.
. The Company's know-how with respect to Nd:YAG laser beam power,
mode structure and high frequency switching capability enables
it to ensure optimal marking quality on a wide variety of
different materials from the standpoint of marking contrast and
speed.
. The Company's expertise in the design and manufacture of
fiberoptic beam delivery systems allows it to optimize laser
marking solutions for complex production processes in which the
writing head is located several yards away from the laser head
or the laser beam is multiplexed through beam-switching and -
splitting to multiple workstations, without loss of marking
quality, contrast or speed. Based on its extensive experience
using fiber optics for cutting and welding applications, the
Company has developed a special fiber system to be used for
transferring the beam to the galvo head without losing beam
quality. This allows flexible system solutions and easy laser
integration.
. Rofin-Sinar's laser marking products incorporate high value-
added software consisting of the Company's Laser Work Bench
software and a number of network communications software
protocols that enable its laser marking products to interface
with a customer's host computers. The Laser Bench Software
permits virtually any character (of any size or font) or graphic
to be marked on a variety of materials (including metals,
plastics, ceramics and wood) of different contours. The broad
range of network communications software supported by the
Company, combined with the resources of Rofin-Sinar's in-house
software engineering group, makes Rofin-Sinar an ideal partner
for customers (especially in the Automotive and Semiconductor &
Electronics industries) who have enterprise-wide computer
networks linking production facilities in disparate geographic
locations and who desire customized network interface solutions.
33
<PAGE>
The Company's family of laser marking products and their principal
target markets and representative applications are shown in the table
below:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Mode of Principal
Product Power Range Excitation Price Range Target Markets Applications
------- ----------- ---------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
PowerLine; 25-150 W Flash Lamp $80,000- Semiconductors Marking of
CombiLine $200,000 & Electronics; integrated
Automotive circuits;
component
identification
---------------------------------------------------------------------------------------------
</TABLE>
PowerLine. The Company's standard PowerLine laser marking
product consists of a Nd:YAG laser in the range of 25 to 150W, a galvo-
head, a personal computer with Pentium processor on board and Rofin-
Sinar's proprietary Laser Work Bench software. The modular design of the
PowerLine marker enables customers to order the most suitable
configuration for their production process or system (e.g. OEM customers
may order the laser head and laser supply and laser cooling assembly
plates as subassemblies without the cabinet for easier integration into
the handling system specified by the end user). The PowerLine marker's
Nd:YAG laser incorporates a unique dual lamp ceramic cavity design using
"long-life" lamps (guaranteed to provide 1,200 hours usage) which results
in higher output power (and therefore higher marking speeds), higher
energy efficiency and therefore reduced operating costs, high beam quality
and therefore constant and reliable marking quality, and longer service
intervals. The Company's proprietary Laser Work Bench software provides
operators with a user-friendly desktop publishing environment that allows
them to manipulate fonts, import graphics, preview marking and control all
laser parameters and job programs. Special options and accessories
include, among other things, a double-marking head allowing marking speeds
of up to 600 characters per second in certain applications (marking of
integrated circuits), as well as beam-switching and -splitting options for
marking of products in different locations.
CombiLine. The CombiLine is a complete laser marking system
that the Company introduced in 1994. Built on a modular design, the
CombiLine consists of a PowerLine laser marker that can be combined with a
variety of parts handling systems developed by the Company. The parts
handling options offered by the Company include motor driven positioning
tables, foil handling systems for marking labels, conveyor belts and pick-
and-place systems, allowing the CombiLine to be customized as a turn-key
system according to the customer's specifications. Since its
introduction, the Company has shipped over 60 units of the CombiLine,
principally in Europe.
Development of Stand-Alone Marker and Other New Applications.
To date, the Company has shipped the majority of its laser markers to
large customers in the Automotive and Semiconductor & Electronics
industries. The Company has also targeted the low-end laser marking
market in Europe, which is currently served by a number of smaller
regional competitors. Based on recent market tests in selected European
markets, the Company believes there is demand for a more standardized
stand-alone laser marker. The Company is currently developing a lower-
cost, more standardized version of its PowerLine product with the same
basic software but fewer features and options, which it expects to begin
shipping in the second quarter of fiscal 1997. In addition, the Company
believes that there are several potential marking applications in the
Automotive market which have not yet been fully tapped (e.g. deep marking
of metal components).
Applications Development and System Integration
In addition to manufacturing and selling laser sources for
cutting and welding and laser marking products, the Company also develops
in its applications centers in Hamburg and Gunding-Munich, Germany and
Plymouth, Michigan laser-based solutions for customers seeking
alternatives to conventional manufacturing techniques. The Company
believes that the more than 20 years' laser technology experience and
know-how embodied in the Company's applications groups, developed as a
result of its participation in a broad range of industrial markets,
provide it with a competitive advantage over other laser manufacturers.
Many new applications such as welding of tailored blanks, metal tubes and
diamond-tipped saw blades were pioneered in the Company's applications
centers and have generated multiple laser orders for the Company in later
years.
Consistent with its objective of being a flexible supplier able to
adapt to customers' needs, the Company from time to time acts as a system
integrator at the request of the customer and takes on responsibility to
integrate its laser
34
<PAGE>
sources with other machine components selected by the Company and deliver
a complete laser system to the end-user. Typically this occurs with a
customer that does not have its own in-house engineering resources and
wishes to take advantage of the Company's laser processing expertise and
comprehensive range of services. In such instances, the Company's laser
systems include precision or fiberoptics for beam delivery, robotics, or
parts handling devices and other optical components and control software.
Markets and Customers
Rofin-Sinar's laser products and systems are sold to three principal
industrial markets: the Machine Tool, Automotive and Semiconductor &
Electronics industries. The following table sets forth the distribution of
the Company's total sales in fiscal 1995 and the first nine months of
fiscal 1996 among the Company's principal markets and each market's
primary applications:
<TABLE>
<CAPTION>
Nine Months
Ended Primary
Principal Market Fiscal 1995 June 30, 1996 Applications
----------------------------- ------------ --------------- --------------------
<S> <C> <C> <C>
Machine Tool................. 36% 33% Cutting
Automotive................... 23 24 Welding and
component marking
Semiconductor & Electronics.. 13 17 Marking of
-- -- integrated circuits
72% 74%
</TABLE>
The remaining 28% and 26%, respectively, of sales in fiscal 1995
and the first nine months of fiscal 1996 were attributable to customers in
a wide variety of other industries (including the aerospace and consumer
goods industries, medical device manufacturers, job shops, universities
and institutes). The Company has sold more than 4,000 laser sources since
1975 and currently has over 1,500 active customers (including
multinational companies with multiple facilities purchasing from the
Company).
Many of Rofin-Sinar's customers are among the largest global
participants in their respective industries. Over 80% of Rofin-Sinar's
sales in fiscal 1995 were made to existing customers. It is the Company's
experience that once a customer has successfully integrated a laser system
into its production process, significant opportunities are created for
repeat sales and new applications, from time to time to a different
division or plant of the same customer. The following is a representative
list of OEM customers and end-users of Rofin-Sinar's products and services
worldwide (all of whom have purchased multiple laser sources or laser
marking products from the Company):
<TABLE>
<CAPTION>
Automotive Automotive Semiconductor &
Machine Tool Manufacturers Suppliers Electronics Other
------------ ------------- ---------- --------------- -----
<S> <C> <C> <C> <C>
. Adige Sala . Audi . Autoliv . Amkor . Aerospatiale
. Amada . BMW . Bosch . ASM . Allflex
. Arnold . Chrysler . Hoesch Platinen . Bosch . Boeing
. Balliu . Ford . Morton . Cherry . Braun
. Behrens . General Motors . Stola . Cypress . Caisley
. Cincinnati . Mercedes-Benz . Temic . Mitsumi . Norton
. Daewoo Heavy . Peugeot/Citroen . Thyssen . Philips . Osram
Industries . Renault . TRW . SGS Thomson . Pratt & Whitney
. Lasercomb . Volkswagen . Utilase . Siemens . Quasar
. Nishinbo . Volvo . Witzenmann . Silicon Systems . Rutting
. Prima Industrie . ZF . United Technologies . Schmole
. Salvagnini . Scholler
. Strippit
</TABLE>
The Company's ten largest customers accounted for 31.2%, 34.5% and
29.6% of total sales in fiscal 1994 and 1995 and the first nine months of
fiscal 1996, respectively. Except for one customer which represented
8.6%, 7.6% and 6.0% of total sales in fiscal 1994 and 1995 and the first
nine months of fiscal 1996, respectively, no one customer accounted for
more than 5% of total sales in any of such periods.
35
<PAGE>
The following charts set forth the distribution of Rofin-Sinar's
sales of cutting and welding lasers and laser marking products among the
Company's principal markets in fiscal 1995 and the first nine months of
fiscal 1996:
<TABLE>
<CAPTION>
Nine Months
Ended
Fiscal 1995 June 30, 1996
-------------------------- --------------------------
Principal Market Cutting/Welding Marking Cutting/Welding Marking
---------------- ---------------- -------- ---------------- --------
<S> <C> <C> <C> <C>
Machine Tool................. 50% -- 46% --
Automotive................... 24 20 28 15
Semiconductor & Electronics.. -- 47 -- 58
Other........................ 26 33 26 27
----- ----- ----- -----
Total................... 100.0% 100.0% 100.0% 100.0%
</TABLE>
Sales, Marketing and Distribution
Rofin-Sinar sells its products in approximately 25 countries through
OEMs and to major end-users who have in-house engineering resources
capable of integrating the Company's products into their own production
systems. Laser sources for cutting applications are marketed and sold
principally to OEMs in the Machine Tool industry who sell cutting machines
incorporating the Company's laser products without any substantial
involvement by the Company. Laser sources for welding applications are
marketed and sold both to systems integrators and to end-users. Laser
marking products are marketed and sold principally to OEMs for integration
into their handling systems (mainly for integrated circuit marking
applications). In the case of both welding lasers and laser marking
products, since product samples are required to be run through the OEM's
system, the end-user is significantly involved in the selection of the
laser component and will typically specify that it desires a Rofin-Sinar
device. In such cases, the Company's application engineers work directly
with the end-user to optimize the application's performance and
demonstrate the superiority of the Company's products.
The Company has 27 direct sales engineers operating in 12 countries,
of whom 16 persons are dedicated to marketing of the Company's CO\\2\\ and
Nd:YAG lasers for cutting and welding and 11 persons are dedicated to
marketing of the Company's laser marking products. In addition, Rofin-
Sinar has 12 independent distributors and agents who market the Company's
welding and cutting laser products and laser marking products in
Australia, Brazil, Denmark, Israel, the Philippines, the People's Republic
of China, Portugal, Singapore, South Korea, Spain, Sweden and Taiwan.
The following table sets forth the distribution of the Company's
total sales (including sales delivered through distributors) of cutting
and welding lasers and laser marking products among the three principal
geographic regions during fiscal 1995 and the first nine months of fiscal
1996:
<TABLE>
<CAPTION>
Nine Months
Ended
Fiscal 1995 June 30, 1996
-------------------------- --------------------------
Principal Market Cutting/Welding Marking Cutting/Welding Marking
---------------- ---------------- -------- ---------------- --------
<S> <C> <C> <C> <C>
Europe:
Germany......... 18% 34% 23% 32%
Rest of Europe.. 25 36 17 28
North America..... 48 4 45 7
Asia/Pacific...... 9 26 15 33
----- ----- ----- -----
Total........... 100.0% 100.0% 100.0% 100.0%
</TABLE>
Over the next five years, demand for industrial lasers is expected to
increase in the Asia/Pacific region. The Company believes that the market
with the greatest long-term potential over the next ten to fifteen years
is China, principally due to the expansion of domestic automobile
production in that country. Consistent with this belief, in 1994 the
Company entered into a technology license and supply agreement with NELC
under which NELC manufactures CO\\2\\ laser sources for sale in the
Chinese market.
36
<PAGE>
The Company directs its worldwide sales and marketing of cutting and
welding lasers from its offices in Hamburg, Germany. Worldwide sales and
marketing of laser marking products is directed from the Company's offices
in Gunding-Munich, Germany. U.S. sales of the Company's cutting and
welding laser products are managed out of its Plymouth, Michigan facility.
In 1995, the Company opened a sales office in Phoenix, Arizona in
proximity to major semiconductor manufacturers to support expansion of the
Company's laser marking business in the U.S. market. In Europe, Rofin-
Sinar also maintains sales and service offices in Italy, France, the
United Kingdom and Belgium. A sales office is maintained in California to
cover the Asia/Pacific region (other than Japan); the Company intends to
open a sales office in that region in fiscal 1997. In Japan, the
Company's principal distributor is its joint venture with Marubeni
Corporation and Nippei Toyama Corporation.
Customer Service and Replacement Parts
During fiscal 1995 and the first nine months of fiscal 1996,
approximately 25% of the Company's revenues were generated from sales of
after-sale services and replacement parts for its laser products. The
Company believes that a high level of customer support is necessary to
develop successfully and maintain long term relationships with its OEM and
end-user customers in its laser products and laser marking systems
business. This close relationship is maintained as customer needs change
and evolve. Recognizing the importance of its existing and growing
installed base, the Company follows its customers into new geographic
regions by providing local service and support. Rofin-Sinar has over 90
customer service personnel. The Company's field service and in-house
technical support personnel receive ongoing training with respect to the
Company's laser products, maintenance procedures, laser-operating
techniques and processing technology. Rofin-Sinar believes its worldwide
customer service support organization is one of the largest among
industrial laser and laser-based system manufacturers and provides it with
a significant competitive advantage over many of its competitors. Most of
the Company's distributors also provide customer service and support.
Many of Rofin-Sinar's laser products are operated 24 hours a day in
high speed, quality oriented manufacturing operations. Accordingly, in
fiscal 1994 the Company successfully launched 24 hour, year-round service
support to its U.S. and German customers and 8 hour response time for its
major customers. This support includes field service personnel who reside
in close proximity to the Company's installed base. Rofin-Sinar plans to
adopt similar service support elsewhere. The Company provides customers
with process diagnostic and verification techniques, as well as
specialized training in the operation and maintenance of its systems. The
Company also offers regularly scheduled and intensive training programs
and customized maintenance contracts for its customers.
Of Rofin-Sinar's customer service personnel, approximately 70
employees operate in the field in 40 countries. Field service personnel
are also involved in the installation of the Company's systems.
Rofin-Sinar's approach to the sale of replacement parts is closely
linked to the Company's strategic focus on rapid customer response. The
Company has round-the-clock order entry and provides same or next day
delivery of parts worldwide in order to minimize disruption to a
customer's manufacturing operations. Rofin-Sinar generally agrees to
provide after sale parts and service for 10 years if requested by the
customer. The Company's growing base of installed laser sources and laser
marking products is expected to continue to generate a stable source of
parts and service sales.
Competition
Laser Products for Cutting and Welding
The market for laser products and systems is fragmented, and includes
a large number of competitors, many of which are small or privately owned
or which compete with Rofin-Sinar on a limited geographic, industry-
specific or application-specific basis. The Company also competes in
certain target markets with competitors which are part of large industrial
groups and have access to substantially greater financial and other
resources than the Company. Competition among laser manufacturers
includes attracting and retaining qualified engineering and technical
personnel. The overall competitive position of the Company will depend
upon a number of factors, including the performance and reliability of its
products, the level of customer support and manufacturing quality, the
compatibility of its products with existing laser systems and the
Company's ability to develop successfully for commercial
37
<PAGE>
distribution diode-pumped solid state lasers and participate in the growth
of these emerging technologies, as well as price.
Rofin-Sinar believes it is among the top three suppliers of laser
sources in the worldwide market for cutting and welding applications.
Companies such as Trumpf, Fanuc and PRC (for CO\\2\\ lasers) and Haas and
Lumonics (for Nd:YAG lasers) compete in certain of the markets in which
Rofin-Sinar operates. However, in the Company's opinion, none of these
companies competes in all of the industries, applications and geographic
markets currently served by Rofin-Sinar. Only Trumpf/Haas has a product
range and worldwide presence similar to those of the Company. The Company
believes that it has a strong competitive advantage over such companies
due to its exclusive access (for material applications) to the patented
diffusion-cooling technology incorporated in its CO\\2\\ slab lasers. In
the Company's view, the technology protected by these patents represents a
significant step forward in industrial laser technology for material
processing and an important source of the Company's future growth and
profitability.
Laser Marking Products
Significant competitive factors in the laser marking market include
system performance and flexibility, cost, the size of each manufacturer's
installed base, capability for customer support, and breadth of product
line. Because many of the components required to develop and produce a
laser marker are commercially available, barriers to entry into this
market are low, and the Company expects new competitive product entries
into this market. The Company believes that its PowerLine and CombiLine
laser markers will compete favorably in this market primarily due to the
performance and price characteristics of such products.
The Company's PowerLine and CombiLine marking products compete in the
laser marking market with conventional ink-based and acid-etching
technologies, as well as with laser mask-marking. The Company believes
that its principal competitors in the laser marking market include Baasel,
General Scanning and Excel Technology.
Rofin-Sinar also competes with manufacturers of conventional non-
laser products in applications such as welding, drilling, cutting and
marking. The Company believes that as industries continue to modernize,
seek to reduce production costs and require more precise and flexible
manufacturing, the features of laser-based systems will become more
desirable than systems incorporating conventional manufacturing techniques
and processes. Advances in fiber-optic beam delivery systems,
improvements in reliability and introduction of higher-power CO\\2\\
lasers and diode-pumped lasers capable of performing heavy industrial
material processing applications, as well as marking applications, more
rapidly than previously possible are expected to result in increased
acceptance of laser applications by industrial users.
Manufacturing and Assembly
Rofin-Sinar manufactures and tests its CO\\2\\and Nd:YAG laser
products for cutting and welding at its Hamburg, Germany and Plymouth,
Michigan facilities. The Company's laser marking products are
manufactured and tested at its facilities in Gunding-Munich, Germany. See
"Properties." The Company's joint venture in Japan performs assembly and
testing of SM-Series CO\\2\\ lasers.
Given the competitive nature of the laser business, the Company
focuses substantial efforts on maintaining and enhancing the efficiency
and quality of its manufacturing operations. The Company believes that a
principal reason for its success in the industrial laser market for
materials processing is the high quality of its product engineering and
manufacturing capabilities. The Company utilizes just in time and cell-
based manufacturing techniques to reduce manufacturing cycle times and
inventory levels thus enabling it to offer on-time delivery and high
quality products to its customers.
Rofin-Sinar's in-house manufacturing includes only those
manufacturing operations which are critical to achieve quality standards
or protect intellectual property. These manufacturing activities consist
primarily of product development, testing of components and subassemblies
some of which are supplied from within the Company and others of which are
supplied by third party vendors and then integrated into the Company's
finished products, assembly and final testing of the completed product, as
well as proprietary software design and hardware/software integration. The
Company minimizes the number of suppliers and component types but,
wherever practicable, it has at least two sources of supply for key items.
The Company has a qualifying program for its vendors and generally
38
<PAGE>
seeks to build long-term relationships with such vendors. Roots(R) blowers
(used to accelerate gas flow in its SM-Series fast axial flow CO\\2\\
lasers) are the only component the Company purchases from a single
supplier. The Company has no reason to believe it could not purchase such
component from alternative sources of supply on comparable terms. Rofin-
Sinar is not dependent on any supplier and has not experienced any
difficulty in obtaining necessary materials and components.
Rofin-Sinar is committed to meeting internationally recognized
manufacturing standards. In 1995, the Company's Hamburg facility received
ISO 9001 certification. The Company intends to apply for IS0 9001
certification of all of its manufacturing sites and anticipates obtaining
ISO 9001 certification of its Gunding-Munich facility during fiscal 1997.
The Company expects its U.S. operation to be qualified by Ford as a Q-1
supplier in fiscal 1997.
The Company's production is controlled by production planning
software. By reducing the variety of products and options, designing new
products on a modular concept, reducing the number of vendors and the
depth of production through outsourcing, the Company has been able to
reduce its manufacturing costs significantly over the last three years and
improved its production efficiency.
Research and Development
During fiscal 1993, 1994 and 1995 and the first nine months of fiscal
1996, Rofin-Sinar spent $10.3 million, $6.8 million, $6.7 million and $5.9
million, respectively, on research and development. In addition, the
Company received funding under government grants totaling $448,000,
$611,000, $1.4 million and $476,000 in fiscal 1993, 1994 and 1995 and the
first nine months of fiscal 1995, respectively. The decline in the
Company's expenditures on research and development from fiscal 1993 to
fiscal 1994 is primarily attributable to the refocusing of the Company's
research and development activities on more readily marketable new
products.
Rofin-Sinar's research and development activities are directed at
meeting customers' manufacturing needs and application processes. Core
competences include CO\\2\\ gas lasers and Nd:YAG solid state lasers,
precision optics, electronic power supplies, fiber optics, beam delivery,
control interfaces, software programming and systems integration. The
Company strives for customer-driven development activities and promotes
the use of alliances with key customers and joint development programs in
a wide range of its target markets.
Rofin-Sinar has approximately 56 employees engaged in product
research and development, of whom approximately 40 are professional
engineers or have master's or doctoral degrees (including 25 Ph.D.'s).
The Company's research and development activities are carried out in three
centers in Hamburg and Gunding, Germany and Plymouth, Michigan and are
centrally coordinated and managed. Interaction and communication among
research and development personnel throughout the Company promote a
sharing of their cumulative expertise. Rofin-Sinar maintains close
working relationships with the leading industrial, government and
university research laboratories in Germany, including the Fraunhofer
Institute for Laser Technology in Aachen, the Institute for "Technische
Physik" of the German Space and Aerospace Research Center in Stuttgart,
the Fraunhofer Institute for Material Science in Dresden and the Laser
Center in Hanover, and elsewhere around the world, including the
University of Alberta in Canada. Such relationships include funding of
research, joint development programs, personnel exchange programs and
licensing of patents developed at such institutes. For a discussion of
certain technology transfer agreements between the Company and Siemens,
see "Intellectual Property" and "Related Transactions."
The Company recently agreed in principle on a research program with
the Fraunhofer Institute for Laser Technology to develop a modular 5 kW
diode-pumped Nd:YAG laser. Under this arrangement, the total project
budget to be spent by both parties is approximately $6.5 million. Under
the terms of the collaboration, the Company will be granted access to
technology already developed by the Fraunhofer Institute. The Company
anticipates that the project's development and manufacturing scale-up
efforts will occur over a five-year period. No assurance can be given
that the collaboration with the Fraunhofer Institute will be successful.
Intellectual Property
Rofin-Sinar has intellectual property which includes patents,
proprietary software, technical know-how and expertise, designs, process
techniques and inventions. While policies and procedures are in place to
protect critical intellectual properties, Rofin-Sinar believes that its
success depends to a larger extent on the innovative skills,
39
<PAGE>
know-how, technical competence and abilities of the Company's personnel.
The Company is also an exclusive licensee on a worldwide basis of two
patents covering the diffusion-cooled technology used in its Slab-Series
CO\\2\\ lasers for industrial material processing applications. In the
Company's view, the technology protected by these two patents represents a
significant step forward in industrial laser technology for material
processing and an important source of the Company's future growth and
profitability.
Rofin-Sinar protects its intellectual property in a number of ways
including, in certain circumstances, through patents. The Company has
sought patent protection primarily in Germany and the United States. Some
patents have also been registered in other jurisdictions including Great
Britain, France, Italy and Japan. The Company currently holds 32 separate
patents for inventions relating to lasers, processes and power supplies
which expire from 1997 to 2014. In addition, Rofin-Sinar requires its
employees and certain of its customers, suppliers, distributors, agents
and consultants to enter into confidentiality agreements to further
safeguard the Company's intellectual property.
The Company from time to time receives notices from third parties
alleging infringement of such parties' patent or other intellectual
property rights by the Company's products. While such notices are common
in the Company's industry and the Company has in the past been able to
develop non-infringing technology or license necessary patents or
technology on commercially reasonable terms, there can be no assurance
that the Company would in the future prevail in any litigation seeking
damages or expenses from the Company or to enjoin the Company from selling
its products on the basis of such alleged infringement, or that the
Company would be able to develop any non-infringing technology or license
any valid and infringed patents on commercially reasonable terms. In the
event any third party made a valid claim against the Company or its
customers and a license were not made available to the Company on
commercially reasonable terms, the Company would be adversely affected.
In July 1996, the Company received notice of an opposition filed by a
competitor in the EPO which challenges on a number of grounds one of the
two third-party patents licensed by the Company covering certain aspects
of its diffusion-cooled CO\\2\\ Slab laser. The U.S.-issued counterpart
of this patent was previously the subject of a reexamination proceeding in
the PTO at the conclusion of which the patent was upheld. While the
decision of the PTO is not binding on the EPO, based on the outcome of the
U.S. reexamination proceeding and management's review of the arguments
made in the notice of opposition, the Company believes that such notice of
opposition is without substantial merit. The Company intends to defend
the EPO opposition proceeding vigorously.
In July 1996, the Company received a letter from a manufacturer of
sealed-off, RF-excited CO\\2\\ lasers for military and commercial avionics
applications offering a license of its U.S. patents covering such
technology in exchange for a cross-license of the Company's CO\\2\\ Slab
laser technology. Based on its review of the patents held by such
manufacturer, the Company does not believe that its products infringe such
patents, and it intends to defend vigorously any infringement action which
such party may commence against the Company.
From time to time, the Company files notices of opposition to certain
patents on laser technologies held by others, including academic
institutions and competitors of the Company, which the Company believes
could inhibit its ability to develop products in this area. In
particular, the Company has a pending notice of opposition against a
patent held by a competitor which it believes conflicts with a third-party
patent licensed by the Company covering certain aspects of its diffusion-
cooled CO\\2\\ Slab laser. No assurance can be given that the Company
will be able to avoid an action by such competitor or others or not be
forced to initiate its own actions to protect its proprietary position.
Order Backlog
The Company's order backlog at the end of fiscal 1993, 1994 and 1995
and the first nine months of fiscal 1996 has increased significantly over
the comparable prior period. The Company's order backlog was $12.5
million at the end of fiscal 1993, $17 million at the end of fiscal 1994
and $26.5 million at the end of fiscal 1995 and $35.9 million at the end
of the first nine months of fiscal 1996.
An order is booked by Rofin-Sinar when an unconditional purchase
order has been received where a delivery date has been assigned. Delivery
schedules range from one week to six months, depending on the size,
complexity and availability of the product or system ordered, although
typical delivery dates for laser source products range 8-12 weeks from the
date an order is placed. During fiscal 1996, as the rate of order intake
for laser marking products has increased dramatically, average delivery
dates for such products were for a time extended by approximately four
weeks, but have returned to normal delivery times.
40
<PAGE>
In addition to achieving record sales for the first nine months of
1996, the Company's order backlog at June 30, 1996 of $35.9 million was
the largest quarter-end backlog in Rofin-Sinar's history. This backlog
represents a 35.5% increase over the order backlog at September 30, 1995
and a 111% increase over the order backlog at September 30, 1994. To
reduce its order backlog for laser marking products and satisfy
anticipated future growth in the marking segment of its sales, the Company
has recently expanded its production facility in Gunding-Munich, Germany
and added manufacturing employees which has enabled the Company to
increase its manufacturing capacity by 50%. Except for this expansion in
Gunding-Munich, the Company does not anticipate having to increase
materially the size of its manufacturing facilities to meet sales
expectations through the end of fiscal 1996. However, in the event that
the Company's marketing activities in the United States related to its
laser marking systems result in additional demand for such systems, the
Company will need to add manufacturing capacity in the United States in
fiscal 1997. In addition, in the event that the Company is able to
implement anticipated improvements in the product design and manufacturing
of its diffusion-cooled CO\\2\\ Slab lasers which would enable it to offer
such lasers at more attractive prices, the Company anticipates that it
will need to expand its manufacturing capacity in Europe and in the United
States in fiscal 1997 or 1998 in order to satisfy the resulting increase
in demand for such products. The Company estimates that the total
capital expenditures required to add such manufacturing capacity in the
United States and Europe would be in the range of $500,000 to $750,000.
Currently, Rofin-Sinar does not operate full second shifts at any of its
manufacturing facilities.
Laser Technology
General. The term "laser" is an acronym for "Light Amplification by
Stimulated Emission of Radiation." Lasers were first developed in the
early 1960s in the United States. As illustrated in the diagram below, a
laser consists of an active lasing medium (1) that gives off its own light
(radiation) when excited, an optical resonator with a partially reflective
output mirror at one end (2) a fully reflective rear mirror at the other
(3) that permits the light to bounce back and forth between the mirrors
through the lasing medium, and an external energy source (4) used to
excite the lasing medium. The energy source can be light from special
lamps, light from another laser, an electric current or a chemical
reaction. The lasing medium can be a gas, a liquid, a semiconductor or a
solid. A laser works by causing the energy source to excite (pump) the
lasing medium which converts the energy from the source into an emission
consisting of particles of light (photons) (5). These photons stimulate
the release of more photons, as they are reflected between the two mirrors
which form the resonator. The resulting build-up in the number of photons
is emitted in the form of a laser beam (6) through an output port or
"window." By changing the energy and the lasing medium, different
wavelengths and types of laser light can be produced. The laser produces
light from the lasing medium to achieve the desired intensity, uniformity
and wavelength through a series of reflective mirrors. The heat generated
by the excitation of the lasing medium is dissipated through a cooling
mechanism, which varies according to the type of laser technology.
The principal factors that distinguish different types of lasers and
determine the particular laser suitable for a specific application are
pulse duration, wavelength, output power, spatial coherence and cost per
watt of laser power. Lasers can be used for material processing because
of their excellent focusability. When focused by means of lenses or
mirrors the energy density in the focus spot is so high that metals and
other materials can be melted and vaporized.
[Diagram illustrating principles of operation of a laser]
The first type of industrial laser, the continuous wave CO\\2\\
laser, was first commercialized in the mid-1970s. Successive laser
technologies, such as pulsed CO\\2\\, diffusion-cooled high-power CO\\2\\,
solid-state and diode-pumped technology, have required or will require (as
the case may be) more than a decade between initial development and
industrial commercialization. Although industrial applications for lasers
were developed in the United States in the 1960's and 1970's, beginning in
the late 1980's the focus of laser technology development shifted to
Germany, principally due to the significant level of research and
development activity at government-funded research institutes and
universities. The Company maintains close working relationships with a
number of these important research institutes and universities.
41
<PAGE>
Principal Laser Technologies. The two principal types of laser
technology used for material processing are CO\\2\\ lasers and Nd:YAG
flash-lamp pumped solid state lasers. CO\\2\\ lasers and Nd:YAG flash-
lamp pumped solid state lasers accounted for 40% and 46%, respectively, of
the total industrial laser market for material processing in 1995,
respectively, and are projected to account for 37% and 41%, respectively,
of the total market in 1996. Whereas CO\\2\\ lasers in general have the
advantage of better mode structure (i.e., the shape of the laser beam as
it burns into the material being processed) and lower running costs,
Nd:YAG lasers have the advantage of a shorter wavelength, thereby enabling
the use of more flexible fiberoptic beam delivery systems, which does not
exist for CO\\2\\ lasers (due to the longer wavelength of the light they
emit). Of the other laser types sold in the industrial laser market for
material processing, diode-pumped lasers accounted for 2% of the total
industrial laser market for material processing in 1995 and are projected
to account for 3% of the total market in 1996.
CO\\2\\ lasers, which use CO\\2\\ gas as the lasing medium, are
divided into high-power (above 500 W) and low-power (below 500 W)
applications. There are two methods for CO\\2\\ excitation, radio
frequency ("HF") and direct current ("DC") excitation. Most high power
CO\\2\\ lasers are based on gas flow (i.e., a continuous supply of fresh
laser gas flows through the laser cavity to create the energy necessary
for excitation). Due to their ability to generate comparatively high
levels of continuous wave ("CW") power, CO\\2\\ lasers are a particularly
attractive laser medium for material processing applications. Material
processing applications for CO\\2\\ laser sources vary according to the
power output and configuration of the laser system. The primary
applications for high power CO\\2\\ lasers are cutting and welding of
metal. Low power CO\\2\\ lasers are used principally for marking, cutting
and engraving of non-metal materials. While both low- and high-power
CO\\2\\ lasers are used for cutting, the materials they are used to
process and their physical size can vary significantly.
Nd:YAG lasers currently use flash lamps as the source of excitation
(and are therefore called "flash-lamp pumped"). The lasing medium is a
solid state Nd:YAG crystal rod. The Nd:YAG crystal rod and the flash lamps
are positioned in a cavity, which is either a gold or a ceramic reflector.
The output power is determined by the size of the rod and by the numbers
of cavities within the laser resonator. Typical output powers vary from
50 W to 4000 W. Nd:YAG lasers can be run in either a pulsed or continuous
wave manner. Marking applications generally require higher pulsing
frequencies than can be achieved with pulsed flash lamps. Such frequencies
are achieved by inserting a Q-switch (a fast electro-optical shutter) into
the laser resonator, enabling frequencies to be switched up or down in
multiples of 10 kHz at a time.
Recent development efforts in the area of Nd:YAG lasers have focused
on the use of laser diodes as the means of excitation instead of flash
lamps. Laboratory testing has shown that diode laser excitation can
increase the electrical efficiency of a Nd:YAG laser from approximately 4%
to approximately 15%, making it comparable with the electrical efficiency
of CO\\2\\ laser technology. However, to date, the high costs and short
life of laser diodes have hindered widespread acceptance by industrial
customers of diode-pumped technology in high power lasers. Currently,
diode-pumped solid state lasers are commercially available only at the 10
W level. It is Rofin-Sinar's intention to develop cost effective
solutions for diode-pumped Nd:YAG laser sources in the 100 W range (for
marking) and up to 5 kW range (for cutting and welding). See "-- Business
Strategy"; "-- Research and Development."
42
<PAGE>
Employees
At June 30, 1996, Rofin-Sinar had 443 full time employees, of which
300 were in Germany, 100 were in the United States, 12 in France, 16 in
Italy and 15 in Japan. Of such 443 employees, 149 were engaged in
manufacturing, 82 in sales and marketing, 106 in customer service, 65 in
research and development and 41 in general management, administration and
finance.
While the Company's employees are not covered by collective
bargaining agreements and the Company has never experienced a work
stoppage, slowdown or strike, the Company's employees at its Hamburg and
Gunding-Munich facilities are represented by a seven-person and five-
person works council, respectively, as well as by a four-person central
works council. Matters relating to compensation, benefits and work rules
are negotiated and resolved between management and the works council for
the relevant location. The Company considers its relations with its
employees to be excellent.
Properties
The Company's manufacturing facilities include the following:
<TABLE>
<CAPTION>
Location of Facility Owned or Leased Size (sq. ft.) Primary Activity
-------------------- --------------- -------------- ----------------
<S> <C> <C> <C>
Hamburg, Germany........... Owned 110,840 CO\\2\\ lasers,
Nd:YAG lasers
Gunding-Munich, Germany.... Leased 36,469 Nd:YAG lasers,
laser marking
products
Plymouth, Michigan......... Leased 58,075 CO\\2\\ lasers
Sakai Atsugi-shi, Japan.... Leased 11,100 CO\\2\\ lasers
</TABLE>
The Company's leases of its facilities in Plymouth, Michigan and
Gunding-Munich, Germany expire in 1998 (with renewal options until 2001)
and 2005, respectively. The leases on its Japanese facilities in Atsugi-
shi expire in 1997 (renewable for two years) and in 1998 (renewable for
three years).
The Company maintains sales, administration and research and
development facilities at each of the Hamburg, Gunding-Munich and Plymouth
locations. The Company also maintains sales and service offices worldwide,
all of which are leased.
Except as noted above under "Order Backlog," the Company believes
that its existing facilities are adequate to meet its needs for the next
12 months and that suitable additional or alternative space would be
available, if necessary, in the future on commercially reasonable terms.
The Company expects to make additional capital expenditures to support its
diode-pumped solid state laser development activities and add
manufacturing and testing capacity in North America for selected
components and products, which may also require certain leasehold
improvements in the Company's Plymouth, Michigan facility.
Government Regulation
The majority of the Company's laser products sold in the United
States are classified as Class IV Laser Products under applicable rules
and regulations of the Center for Devices and Radiological Health ("CDRH")
of the U.S. Food and Drug Administration. The same classification system
is applied in the European markets. Safety rules are formulated with DIN
or ISO standards which are internationally harmonized. Such regulations
generally require a self-certification procedure pursuant to which a
manufacturer must file with the CDRH with respect to each product
incorporating a laser device, periodic reporting of sales and purchases
and compliance with product labeling standards. The Company's laser
products for cutting and welding and laser marking products can result in
injury to human tissue if directed at an individual or otherwise misused.
The Company believes that its laser products for cutting and welding and
laser marking products are in substantial compliance with all applicable
laws for the manufacture of laser devices.
43
<PAGE>
MANAGEMENT
Executive Officers, Key Employees and Directors of the Company
The following table sets forth certain information and ages as of
August 1, 1996 regarding each of the Company's executive officers, key
employees and directors:
<TABLE>
<CAPTION>
Name Age Position with the Company
<S> <C> <C>
Peter Wirth................ 49 Chairman of the Board of Directors, Chief
Executive Officer and President
Hinrich Martinen........... 54 Executive Vice President, Research and Development/
Operations, Chief Technical Officer and Director
Gunther Braun.............. 38 Executive Vice President, Finance and Administration,
Chief Financial Officer and Director
Walter Volkmar............. 53 Manager, RSL Marking Division
Joseph Ferrario............ 49 President, RSI
Richard Walker............. 51 Vice President - Sales and Marketing, RSI
</TABLE>
Peter Wirth is Chairman of the Board of Directors, Chief Executive
Officer and President of the Company. He has also served as the General
Manager of RSL since October 1994. From 1991 until October 1994, Dr.
Wirth was President of Rofin-Sinar, Inc. He joined Rofin-Sinar in 1979 as
Sales Manager for Industrial Lasers, and became Director, Sales and
Marketing in 1983. He holds a Master's Degree and a Ph.D in Physics from
the Technical University in Munich, Germany.
Hinrich Martinen is Executive Vice President, Research and
Development/Operations and Chief Technical Officer, as well as a member of
the Board of Directors of the Company. He has held a number of senior R&D
management positions since joining RSL in 1981 and is currently the
Technical Director of RSL. Mr. Martinen holds a Master's Degree in
Physics from the University of Hamburg, Germany.
Gunther Braun is Executive Vice President, Finance and
Administration, and Chief Financial Officer of the Company, as well as a
member of its Board of Directors. Since 1994, he has also been the
Financial Director for Rofin-Sinar Laser GmbH. He joined RSL in 1989 when
RSL acquired Laser Optronic's marking division from Coherent General Inc.
Mr. Braun holds a Business Administration degree from the Fachhochschule
in Regensburg, Germany.
Walter Volkmar has been the Manager of the Marking Division of RSL
since 1994. He joined RSL in 1989 when RSL acquired Laser Optronic's
marking division from Coherent General Inc. Dr. Volkmar holds Master's
Degrees in Mechanical Engineering and Business Administration from the
Technical University in Darmstadt, and a Ph.D. in Economics and Trade from
the University of Parma in Italy.
Joseph Ferrario has been the President of RSI since August 1994,
after joining RSI as General Manager earlier that year. From 1992 to
1994, Mr. Ferrario was an independent business consultant to industrial
companies. From 1981 until 1992, Mr. Ferrario held senior positions in
engineering, research and product development, service, sales and
marketing management with Sciaky Brothers Limited, which produces electron
beam equipment and laser welding systems. Mr. Ferrario holds a B.S. in
Physics from St. Louis University and a Master's Degree in Business
Administration from Northwestern University.
44
<PAGE>
Richard Walker has been the Vice President--Sales and Marketing of
RSI since 1993. Prior to that, he was Vice President--Marketing for
Nd:YAG products. Mr. Walker joined RSI in 1988. Mr. Walker holds a B.S.
from the University of London.
Messrs. Wirth, Martinen, Braun, Volkmar, Ferrario and Walker are
members of the Company's Operating Committee, which is responsible for
establishing and implementing the Company's business strategy.
The Company's Board of Directors intends to nominate and elect three
outside directors prior to the consummation of the Offerings. Upon the
election of such outside directors, the Company's Board of Directors will
be divided into three classes of directors serving staggered three-year
terms. See "Description of Capital Stock -- Certain Provisions of the
Company's Restated Certificate of Incorporation and By-laws."
It is expected that the Company's Board of Directors will establish
an Audit Committee and a Compensation Committee, each consisting of two or
more directors, none of whom will be an officer or employee of the
Company.
The responsibilities of the Audit Committee will be to recommend to
the Board of Directors the independent public accountants to be selected
to conduct the annual audit of the books and records of the Company,
review the proposed scope of such audit and approve the audit fees to be
paid, review the adequacy and effectiveness of the accounting and internal
financial controls of the Company with the independent public accountants
and the Company's financial and accounting staff and review and approve
transactions between the Company and its directors, officers and
affiliates.
The responsibilities of the Compensation Committee will be to provide
a general review of the Company's compensation and benefit plans to ensure
that they meet corporate financial and strategic objectives. The
responsibilities of the Compensation Committee also include administering
the Equity Incentive Plan and the Annual Incentive Plan (both of which are
described below), including selecting the officers and salaried employees
to whom awards will be granted and making such awards.
Director Compensation
Directors who are not currently receiving compensation as officers or
employees of the Company are entitled to an annual cash retainer fee of
$15,000 plus an honorarium of $1,000 and $500 for each board meeting and
committee meeting, respectively, which they attend, plus reimbursement of
expenses. In addition, prior to the consummation of the Offerings, the
Company intends to adopt a non-employee director stock plan (the
"Directors' Plan") pursuant to which each member of the Board of Directors
who is not an employee of the Company and who is elected or continues as a
member of the Board of Directors is entitled to receive an initial grant
of 1,500 shares of restricted stock and thereafter an annual grant of
1,500 shares of restricted stock. The Compensation Committee of the Board
of Directors administers the Directors' Plan.
The maximum number of shares of Common Stock reserved for issuance
under the Directors' Plan is ___ shares (subject to adjustment for certain
events such as stock splits and stock dividends), and the Company intends
to file immediately after the Offerings a registration statement on Form
S-8 under the Securities Act to register the shares of Common Stock
reserved for issuance under the Directors' Plan.
Executive Compensation
The table below shows information concerning cash and noncash
compensation for the Chief Executive Officer and the four most highly
compensated executive officers other than the Chief Executive Officer of
the Company (the "Named Executive Officers") for the fiscal year ended
September 30, 1995.
45
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
---------------------------------------------
Annual Compensation (1)
---------------------------------------------
All Other
Name and Principal Position Salary ($) Bonus($) (2) Compensation($) (3)
----------- ------------ -------------------
<S> <C> <C> <C>
Peter Wirth..................... $231,236 $20,684 --
Chairman, Chief Executive
Officer and President
Hinrich Martinen................ 206,796 20,684 --
Executive Vice President,
Research and Development/
Operations and Chief
Technical Officer
Gunther Braun................... 129,980 13,789 --
Executive Vice President,
Finance and Administration,
and Chief Financial Officer
Walter Volkmar.................. 132,675 20,250 --
Manager, RSL Marking Division
Joseph Ferrario................. 133,900 49,754 5,510
President, RSI
</TABLE>
-----------------------
(1) Amounts paid in German marks have been translated into U.S. dollars
at the weighted average exchange rate for the fiscal year ended
September 30, 1995 (US$1.00 : DM 1.4504).
(2) Includes discretionary bonuses awarded by Siemens (with respect to
Messrs. Wirth, Martinen and Braun), and bonuses awarded pursuant to
the RSL Bonus Plan (as defined below) (with respect to Mr. Volkmar)
and the RSI Incentive Compensation Plan (as defined below) (with
respect to Mr. Ferrario).
(3) With respect to Messrs. Wirth, Martinen, Braun and Volkmar, the
amounts shown represent contributions to a [deferred] pension plan
account in Germany. With respect to Mr. Ferrario, the amount shown
represents RSI's matching contribution on behalf of Mr. Ferrario to
the Siemens Savings Plan.
Pension Plans
RSL Pension Plan
Messrs. Wirth, Martinen, Braun and Volkmar participate in the Rofin-
Sinar Laser GmbH Pension Plan (the "RSL Pension Plan") for RSL executives.
As is the normal practice with German companies, the RSL Pension Plan is
unfunded. According to the provisions of the RSL Pension Plan, a
participant will receive a pension if he (i) is at least 60 years old when
he leaves RSL or he is no longer employed due to a permanent disability
resulting in more than 50% inability to practice his profession and (ii)
has served at least ten years with RSL at the time of separation.
The annual benefits payable under the RSL Pension Plan commencing at
the statutory retirement age of 65 (according to German law) are
calculated based upon the age at which the participant leaves RSL pursuant
to tables attached to the RSL Pension Plan. Book reserves are kept to
record benefit accruals under the RSL Pension Plan. Messrs. Wirth,
Martinen, Braun and Volkmar joined RSL on July 1, 1979, October 1, 1981,
November 1, 1984 and March 1, 1985, respectively. Assuming retirement at
or after age 60, Messrs. Wirth, Martinen, Braun and Volkmar
46
<PAGE>
would receive a monthly pension benefit of $2,765, $2,765, $902 and
$1,289, respectively (at the German mark/U.S. dollar exchange rate in
effect on August 2, 1996).
Siemens Corporation Retirement Plan
RSI is a participating employer in the Siemens Corporation Retirement
Plan, a qualified defined benefit pension plan maintained for U.S.
employees. Under the Siemens Corporation Retirement Plan, employees
receive annual pension benefits equal to the sum of 1.125% of the first
$12,000 of the employee's average final compensation and 1.5% of "average
final compensation" in excess of $12,000, multiplied by the number of
years of service in which the employee was employed by a participating
employer. Average final compensation is based upon the period of four
consecutive plan years out of the last ten full plan years preceding the
employee's retirement which produces the highest amount. Pension benefits
under the Siemens Corporation Retirement Plan are subject to reduction for
benefits payable to the employee under any other tax-qualified defined
benefit pension plan attributable to the same period of service as the
benefits payable under the Siemens Corporation Retirement Plan. Benefits
under the Siemens Corporation Retirement Plan are funded through
contributions by SC to a trust maintained in connection with such plan.
RSI employees who are participants in the Siemens Corporation
Retirement Plan will cease to participate in such plan after a transition
period following the consummation of the Offerings. In connection with
the consummation of the Offerings, SC will transfer an amount required
pursuant to Section 414(l) of the Internal Revenue Code of 1986, as
amended (the "Code") to satisfy the pension obligation relating to the RSI
participants in the Siemens Corporation Retirement Plan to a separate
trust in favor of such participants.
Retirement benefits payable under qualified defined benefit plans are
subject to annual pension limitations imposed under Section 415 of the
Code, for which limitations vary annually. The current Section 415
limitation is $120,000. In addition, Section 401(a)(17) of the Code
specifies a maximum amount of annual compensation, also adjusted annually,
that may be taken into account in computing benefits under a qualified
defined benefit plan. The current Section 401(a)(17) limitation is
$150,000. The Siemens Corporation Pension Preservation Plan, a
nonqualified and unfunded plan in which certain highly compensated
employees of RSI (including Mr. Ferrario) participate, provides benefits
in excess of the applicable Code limitations. Such RSI employees will
cease to participate in the Siemens Corporation Pension Preservation Plan
upon the consummation of the Offerings.
The following table shows the estimated annual pension benefits
provided by the combination of the Siemens Corporation Retirement Plan and
the Siemens Corporation Pension Preservation Plan, based on the
remuneration and years of service classifications indicated:
Pension Plan Table (1)
<TABLE>
<CAPTION>
Years of Service
---------------------------------------------
Remuneration 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$125,000 $27,450 $36,600 $45,750 $ 54,900 $ 64,050
150,000 33,075 44,100 55,125 66,150 77,175
175,000 38,700 51,600 64,500 77,400 90,300
200,000 44,325 59,100 73,875 88,650 103,425
225,000 49,950 66,600 83,250 99,900 116,550
250,000 55,575 74,100 92,625 111,150 129,675
</TABLE>
(1) Annual pension benefits are calculated with respect to remuneration
levels of up to $250,000, which amount is in excess of 120% of the
covered compensation of Mr. Ferrario, the only Named Executive
Officer who participates in either the Siemens Corporation
Retirement Plan or the Siemens Corporation Pension Preservation
Plan.
The amounts shown are on a single life annuity basis and assume
retirement at age 65. As of September 30, 1995, Mr. Ferrario had
one year of benefit service under the Siemens Corporation Retirement
Plan. Mr. Ferrario's covered compensation under the Siemens
Corporation Retirement Plan does not differ by more than 10% from
his annual compensation set forth in the Summary Compensation Table.
47
<PAGE>
Equity Incentive Plan
Prior to the consummation of the Offerings, the Company intends to
adopt the Equity Incentive Plan. The Equity Incentive Plan will be
administered by the Compensation Committee, which will be comprised
exclusively of nonemployee Directors. The Equity Incentive Plan will
provide for the grant of incentive and nonqualified stock options,
restricted stock and performance shares (individually, an "Award" or
collectively, "Awards"). Employees who will be eligible to receive Awards
are officers or certain salaried employees with potential to contribute to
the future success of the Company or its subsidiaries. The Compensation
Committee will have discretion to select the employees to whom Awards will
be granted (from among those eligible), to determine the type, size and
terms and conditions applicable to each Award and the authority to
interpret, construe and implement the provisions of the Equity Incentive
Plan. The Compensation Committee's decisions will be binding on the
Company and employees eligible to participate in the Equity Incentive Plan
and all other persons having any interest in the Equity Incentive Plan.
It is presently anticipated that grants of Awards will be made to the
executive officers and certain other officers of the Company concurrently
with the Offerings as set forth in the Equity Incentive Plan Table below.
<TABLE>
<CAPTION>
Equity Incentive Plan Table
Options
==================
Name and Position No. of Dollar
Options Amount (1)
------- ----------
<S> <C> <C>
Peter Wirth..................................... 42,000
Chairman, Chief Executive
Officer and President
Hinrich Martinen................................ 36,000
Executive Vice President, Research and
Development/Operations and Chief Technical
Officer
Gunther Braun................................... 36,000
Executive Vice President, Finance and
Administration and Chief Financial Officer
Walter Volkmar.................................. 30,000
Manager, RSL Marking Division
Joseph Ferrario................................. 30,000
President, RSI
</TABLE>
__________
(1) Assumes a per share price of [________], the initial public offering
price.
The material terms of the Awards described in the table above are as
follows: The exercise price for all Options granted as of the Effective
Date will be equal to the initial public offering price. All Options
granted as of the closing of the Offerings will vest at the rate of 20%
annually on the first five anniversaries of the closing of the Offerings.
The number of shares that will be available for award under the
Equity Incentive Plan through the fifth anniversary of the closing of the
Offerings is 1,500,000 shares (includes Awards issued effective as of the
closing of the Offerings). Common Stock issued under the Equity Incentive
Plan may be either authorized but unissued shares, treasury shares or any
combination thereof. To the fullest extent permitted under Section 422 of
the Internal
48
<PAGE>
Revenue Code of 1986, as amended (the "Code"), any shares of Common Stock
subject to an Award which lapses, expires or is otherwise terminated
without the issuance of such shares may become available for new Awards.
Set forth below is a description of the types of Awards that may be
granted under the Equity Incentive Plan.
Stock Options
Options (each an "Option") to purchase shares of Common Stock, which
may be nonqualified or incentive stock options, may be granted under the
Equity Incentive Plan at an exercise price (the "Option Price") determined
by the Compensation Committee in its discretion, provided that, with
respect to incentive stock options, the Option Price may be no less than
the fair market value of the underlying Common Stock on the date of grant
(110% of fair market value in the case of an incentive stock option
granted to a ten percent shareholder). Each Option represents the right
to purchase one share of Common Stock at a specified price.
Options will expire not later than ten years after the date on which
they are granted (five years in the case of an incentive stock option
granted to a ten percent shareholder). Options become exercisable at such
times and in such installments as determined by the Compensation Committee
and such exerciseability will generally be based on (i) length of service
or (ii) the attainment of performance goals established by the
Compensation Committee; provided that no Option may be exercised within
the first six months following the date of grant. The Compensation
Committee may also accelerate the period for the exercise of any or all
Options held by an optionee. Payment of the Option Price must be made in
full at the time of exercise in cash, certified or bank check, note or
other instrument acceptable to the Compensation Committee.
Restricted Stock
An Award of restricted stock ("Restricted Stock") is an Award of
Common Stock that is subject to such restrictions as the Compensation
Committee deems appropriate, including forfeiture conditions and
restrictions against transfer for a period specified by the Compensation
Committee. Restricted Stock Awards may be granted under the Equity
Incentive Plan for or without consideration. Restrictions on Restricted
Stock may lapse in installments based on factors selected by the
Compensation Committee. The Compensation Committee, in its sole
discretion, may waive or accelerate the lapsing of restrictions in whole
or in part. Prior to the expiration of the restricted period, except as
otherwise provided by the Compensation Committee, a grantee who has
received a Restricted Stock Award has the rights of a shareholder of the
Company, including the right to vote and to receive cash dividends on the
shares subject to the Award. Stock dividends issued with respect to
shares covered by a Restricted Stock Award will be treated as additional
shares under such Award and will be subject to the same restrictions and
other terms and conditions that apply to the shares with respect to which
such dividends are issued.
Performance Shares
A performance share Award (a "Performance Share") is an Award of a
number of units that represent the right to receive a specified number of
shares of Common Stock upon satisfaction of certain specified performance
criteria, subject to such other terms and conditions as the Compensation
Committee deems appropriate. Performance objectives will be established
before, or as soon as practicable after, the commencement of the
performance period (the "Performance Period") and may be based on net
earnings, operating earnings or income, absolute and/or relative return on
equity or assets, earnings per share, cash flow, pre-tax profits, earnings
growth, revenue growth, comparisons to peer companies, any combination of
the foregoing and/or such other measures, including individual measures of
performance, as the Compensation Committee deems appropriate. Prior to
the end of a Performance Period, the Compensation Committee, in its
discretion and only under conditions that do not affect the deductibility
of compensation attributable to Performance Shares under Section 162(m) of
the Code, may adjust the performance objectives to reflect an event that
may materially affect the performance of the Company, or a subsidiary or a
division of the Company, including, but not limited to, market conditions
or a significant acquisition or disposition of assets or other property by
the Company, or a subsidiary or a division of the Company. The extent to
which a grantee is entitled to payment in settlement of a Performance
Share Award at the end of the Performance Period will be determined by the
Compensation Committee, in its sole discretion, based on whether the
performance criteria have been met.
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Payment in settlement of a Performance Share Award will be made as
soon as practicable following the last day of the Performance Period, or
at such other time as the Compensation Committee may determine, in shares
of Common Stock.
Additional Information
Under the Equity Incentive Plan, if there is any change in the
outstanding shares of Common Stock by reason of any stock dividend,
recapitalization, merger, consolidation, stock split, combination or
exchange of shares or other form of reorganization, or any other change
involving the Common Stock, such proportionate adjustments as may be
necessary (in the form determined by the Compensation Committee) to
reflect such change will be made to prevent dilution or enlargement of the
rights with respect to the aggregate number of shares of Common Stock for
which Awards in respect thereof may be granted under the Equity Incentive
Plan, the number of shares of Common Stock covered by each outstanding
Award, and the price per share in respect thereof. Generally, an
individual's rights under the Equity Incentive Plan may not be assigned or
transferred (except in the event of death).
In the event of a change in control and except as the Compensation
Committee (as constituted immediately prior to such change in control) may
otherwise determine in its sole discretion: (i) all Options then
outstanding will become fully exercisable as of the date of the change in
control, whether or not then exercisable; (ii) all restrictions and
conditions of all Restricted Stock Awards then outstanding will lapse as
of the date of the change in control; and (iii) all Performance Share
Awards will be deemed to have been fully earned as of the date of the
change in control. The above notwithstanding, any Award granted within
six months of a change in control will not be afforded any such
acceleration as to exercise, vesting and payment rights or lapsing as to
conditions or restrictions. For purposes of the Equity Incentive Plan, a
"change in control" shall have occurred when (A) any person (other than
Siemens or any of its affiliates prior to the consummation of the
Offerings, the Company, any subsidiary of the Company, any employee
benefit plan of the Company or of any subsidiary of the Company, or any
person or entity organized, appointed or established by the Company or any
subsidiary of the Company for or pursuant to the terms of any such plans),
alone or together with its affiliates and associates (collectively, an
"Acquiring Person"), shall become the beneficial owner of 20% or more of
the then outstanding shares of Common Stock or the combined voting power
of the Company's then outstanding voting securities (except pursuant to an
offer for all outstanding shares of Common Stock at a price and upon such
terms and conditions as a majority of the Continuing Directors (as defined
below) determine to be in the best interests of the Company and its
shareholders (other than an Acquiring Person on whose behalf the offer is
being made)), or (B) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors and any new director (other than a director who is a
representative or nominee of an Acquiring Person) whose election by the
Board of Directors or nomination for election by the Company's
shareholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously
so approved (collectively, the "Continuing Directors"), no longer
constitute a majority of the Board of Directors. Notwithstanding the
foregoing, prior to the consummation of the Offerings, no change in
control will be deemed to have occurred if Siemens and any of its
affiliates are the beneficial owners of 50% or more of the combined voting
power of the Company's then outstanding voting securities and designees of
Siemens and its affiliates constitute a majority of the Board of
Directors.
The Equity Incentive Plan will remain in effect until terminated by
the Board of Directors and thereafter until all Awards granted thereunder
are satisfied by the issuance of shares of Common Stock or the payment of
cash or otherwise terminated pursuant to the terms of the Equity Incentive
Plan or under any Award agreements. Notwithstanding the foregoing, no
Awards may be granted under the Equity Incentive Plan after the tenth
anniversary of the effective date of the Equity Incentive Plan. The Board
of Directors may at any time terminate, modify or amend the Equity
Incentive Plan; provided, however, that no such amendment, modification or
termination may adversely affect an optionee's or grantee's rights under
any Award theretofore granted under the Equity Incentive Plan, except with
the consent of such optionee or grantee, and no such amendment or
modification will be effective unless and until the same is approved by
the shareholders of the Company when such shareholder approval is required
to comply with applicable law, regulation or stock exchange rule.
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Certain U.S. Federal Income Tax Consequences of Options
Certain of the U.S. federal income tax consequences to optionees and
the Company of Options granted under the Equity Incentive Plan are
generally set forth in the following summary.
An employee to whom an incentive stock option ("QSO") that qualifies
under Section 422 of the Code is granted will not recognize income at the
time of grant or exercise of such Option. No federal income tax deduction
will be allowable to the Company upon the grant or exercise of such QSO.
However, upon the exercise of a QSO, any excess in the fair market price
of the Common Stock over the Option Price constitutes a tax preference
item that may have alternative minimum tax consequences for the employee.
When the employee sells such shares more than one year after the date of
transfer of such shares and more than two years after the date of grant of
such QSO, the employee will normally recognize a long-term capital gain or
loss equal to the difference, if any, between the sale prices of such
shares and the aggregate Option Price. If the employee does not hold such
shares of the required period, when the employee sells such shares, the
employee will generally recognize ordinary compensation income and
possibly capital gain or loss in such amounts as are prescribed by the
Code and the regulations thereunder and the Company will generally be
entitled to a federal income tax deduction in the amount of such ordinary
compensation income.
An employee to whom a nonqualified stock option ("NSO") is granted
will not recognize income at the time of grant of such Option. When such
employee exercises such NSO, the employee will recognize ordinary
compensation income equal to the difference, if any, between the Option
Price paid and the fair market value, as of the date of Option exercise,
of the shares the employee receives. The tax basis of such shares to such
employee will be equal to the Option Price paid plus the amount includible
in the employee's gross income, and the employee's holding period for such
shares will commence on the date on which the employee recognized taxable
income in respect of such shares. Subject to the applicable provisions of
the Code and regulations thereunder, the Company will generally be
entitled to a federal income tax deduction in respect of an NSO in an
amount equal to the ordinary compensation income recognized by the
employee.
Annual Incentive Plan Arrangements
The Company currently has in effect two short-term cash incentive
plans, the RSL Annual Bonus Plan in Germany and the RSI Incentive
Compensation Plan in the United States. The Company intends to replace
such plans with an Annual Incentive Plan as described below. See
"-- Annual Incentive Plan."
RSL Annual Bonus Plan. Approximately 20 key managers in Germany are
eligible for participation in RSL's annual bonus program. This program
provides for annual cash bonus payments based on (i) the operating results
of the respective business unit, and (ii) personal targets established for
each participating manager. Depending on the seniority and the position
held by the respective manager, such bonus payments can account for up to
40% of the salary to be paid. In fiscal 1995, approximately $20,250 was
paid out to Mr. Volkmar pursuant to this plan.
In March 1996, RSL agreed with its central works council with respect
to fiscal 1996 to pay a special bonus to its employees (excluding Messrs.
Wirth, Martinen and Braun) aggregating 7.5% of RSL's income from
operations for such fiscal year as reflected in RSL's statutory accounts,
to be paid in the first quarter of fiscal 1997.
RSI Incentive Compensation Plan. Under the RSI Incentive
Compensation Plan, cash incentive compensation is awarded to all RSI
employees on an annual basis based upon the extent to which RSI's
financial performance (in terms of annual revenue and pre-tax profits)
exceeds certain threshold performance goals. Individual performance is
also considered in determining an employee's incentive compensation. In
fiscal 1995, Mr. Ferrario earned $49,754 under this plan.
Annual Incentive Plan. Prior to the consummation of the Offerings,
the Company intends to adopt the Rofin Sinar Technologies Inc. Annual
Incentive Plan (the "Annual Incentive Plan"), which will be administered
by the Compensation Committee. Employees assigned to certain management
positions will be eligible to participate in the Annual Incentive Plan.
Under the Annual Incentive Plan, annual bonuses will be based upon
the extent to which the Company's financial performance (in terms of net
earnings, operating income, earnings per share, cash flow, absolute and/or
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relative return on equity or assets, pre-tax profits, earnings growth,
revenue growth, comparison to peer companies, any combination of the
foregoing and/or other appropriate measures in such manner as the
Compensation Committee deems appropriate) during the year has met or
exceeded certain performance goals specified by the Compensation
Committee. Some performance goals may include elements that specify
individual achievement objectives directly related to such individual's
areas of responsibility. Performance goals will be determined by the
Compensation Committee prior to the commencement of the applicable plan
year. Under the Annual Incentive Plan, participants will be entitled to
receive an award for any year in an amount ranging from 20% to 45% of such
participant's "base salary." Awards under the Annual Incentive Plan will
be paid 75% in cash and 25% in restricted stock. Payments in Restricted
Stock will be made pursuant to the terms and conditions of the Equity
Incentive Plan.
In the event a participant terminates employment prior to the end of
a year for any reason other than disability, retirement, death or
involuntary layoff, no award under the Incentive Plan will be paid for
such year unless otherwise determined by the Committee in its sole
discretion. If employment terminates by reason of disability, retirement,
death or involuntary layoff (provided that such participant participated
in the Annual Incentive Plan for at least six months), the participant
will be entitled to receive a pro rata award. In the event of a "change
in control" (as defined in the Equity Incentive Plan), the payment of
awards will be accelerated and the amount of such awards will be
calculated as if the applicable performance goals had been met.
The Board of Directors may terminate or amend the Annual Incentive
Plan, in whole or in part, at any time; provided that no such termination
or amendment may impair any rights that may have accrued under such plan.
Because awards under the Annual Incentive Plan are based on the attainment
of specified performance goals, it is not possible to determine the
benefits and amounts that will be received by any individual participant
or group of participants in the future.
Employment Agreements
In August 1994, RSL entered into an employment agreement with Peter
Wirth (the "Wirth Employment Agreement"). Pursuant to the terms of the
Wirth Employment Agreement, Mr. Wirth agreed to serve as RSL's General
Manager. The Wirth Employment Agreement can be terminated either by RSL
or by the executive upon two years' prior notice. Mr. Wirth also agreed
not to compete with RSL throughout the term of his employment with RSL and
not to disclose any confidential information thereafter. In exchange for
his services, RSL agreed to compensate Mr. Wirth with a base salary of
$228,800 per annum (subject to annual adjustment). Mr. Wirth is entitled
to a yearly discretionary bonus determined by the Chairman of the
Shareholder's Advisory Board of RSL. Effective simultaneously with the
closing of the Offerings, the Wirth Employment Agreement will be
terminated and the Company intends to enter into a new employment
agreement with the executive, the terms of which are described below.
In June 1987, RSL entered into an employment agreement with Hinrich
Martinen (the "Martinen Employment Agreement"). Pursuant to the terms of
the Martinen Employment Agreement, Mr. Martinen agreed to serve as RSL's
Technical Director - Research and Development Operations. The "Martinen
Employment Agreement can be terminated either by RSL or by the executive
upon two years' prior notice. Mr. Martinen also agreed not to compete
with RSL throughout the term of his employment, and not to disclose any
confidential information thereafter. In exchange for his services, RSL
agreed to compensate Mr. Martinen with a base salary of $175,770 per annum
(subject to annual adjustment). Mr. Martinen is entitled to a yearly
discretionary bonus determined by the Chairman of the Shareholder's
Advisory Board. Effective simultaneously with the closing of the
Offerings, the Martinen Employment Agreement will be terminated and the
Company intends to enter into a new employment agreement with the
executive, the terms of which are described below.
In January 1994, RSL entered into an employment agreement with
Gunther Braun (the "Braun Employment Agreement"). Pursuant to the terms
of the Braun Employment Agreement, Mr. Braun agreed to serve as RSL's
Financial Director. The Braun Employment Agreement can be terminated
either by RSL or by the executive upon one year's prior notice. Mr. Braun
also agreed not to compete with RSL throughout the term of his employment
with RSL, and for six months thereafter, and to not disclose any
confidential information thereafter. In exchange for his services, RSL
agreed to compensate Mr. Braun with a base salary of $122,615 per annum
(subject to annual adjustment). Mr. Braun is also entitled to a yearly
discretionary bonus determined by the Chairman of the Shareholder's
Advisory Board. Effective simultaneously with the closing of the
Offerings, the Braun Employment
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Agreement will be terminated and the Company intends to enter into a new
employment agreement with the executive, the terms of which are described
below.
Effective simultaneously with the closing of the Offerings, the
Company intends to enter into new employment agreements with Messrs.
Wirth, Martinen and Braun (collectively, the "New Employment Agreements"),
under which the executives will each retain their existing job titles, and
will each be entitled to a base compensation of not less than $245,000,
$213,000 and $154,000, respectively, plus a yearly discretionary bonus
determined by the Compensation Committee. Each New Employment Agreement
will have an indefinite term, subject to earlier termination by either the
Company or the executive upon two years' prior notice; provided that such
notice may not be given by either the Company or the executive prior to
the second anniversary of the closing of the Offerings. In accordance
with the New Employment Agreements, each executive will agree (i) not to
disclose or exploit any of the Company's Confidential Information (as
defined therein), (ii) to assign to the Company all inventions or
improvements made by the executive in the course of his employment with
the Company, and (iii) not to compete with the Company for a six month
period after the completion of his term of employment with the Company.
OWNERSHIP OF COMMON STOCK
Rofin-Sinar Technologies Inc. was incorporated prior to the Offerings
as a holding company for RSL and RSI. Prior to the closing of the
Offerings, SPC will hold all of the outstanding stock of Rofin-Sinar
Technologies Inc. Contemporaneously with the consummation of the
Offerings, the Company will repurchase the one share of Common Stock held
by SPC for $1,000. Immediately after the closing of the Offerings, all of
the shares of Rofin-Sinar Technologies Inc.'s outstanding Common Stock
will be held by persons who have purchased Common Stock in the Offerings.
CERTAIN TRANSACTIONS
Prior to the Offerings, the business of the Company was conducted by
subsidiaries of Siemens, which is a company organized under the laws of
the Federal Republic of Germany whose principal business is the design,
development, manufacture and marketing of a wide range of electrical and
electronics products and systems. Siemens originally acquired the laser
businesses of Rofin-Sinar in 1987 to obtain access to laser technologies
for application in a number of industrial areas. Since being acquired,
however, the Company has been allowed to pursue broader goals and to
develop capabilities independent of Siemens. Siemens and the Company have
concluded that Rofin-Sinar will have a better opportunity to achieve its
full potential as an independent entity rather than as a part of Siemens.
In connection with the Offerings, Siemens and certain of its subsidiaries
will enter into the following agreements with respect to the transfer of
the laser business of Siemens to the Company. The transfers contemplated
by such agreements will be consummated immediately prior to the closing of
the Offerings.
Transfer Agreements
The Company, Siemens and SPC will, prior to the closing of the
Offerings, enter into certain sale and transfer agreements (collectively,
the "Transfer Agreements") pursuant to which, immediately prior to the
closing of the Offerings, the Company will purchase all of the outstanding
capital stock of RSL from Siemens and all of the outstanding capital stock
of RSI from SPC for an aggregate purchase price of $__ million. Because
the purchase price for RSL and RSI is based on the offering price of the
shares of Common Stock of the Company being sold in the Offerings, it
reflects the factors considered in determining such offering price. Such
offering price was determined through discussions and negotiations among
the Company, Siemens, SPC and the Underwriters. See "Underwriting."
The Transfer Agreements will govern the allocation of liabilities and
obligations of the respective businesses of the Company, Siemens and their
respective subsidiaries. Pursuant to the Transfer Agreements, the Company
and Siemens will each be responsible for all claims and liabilities
relating to its own business and the businesses of its respective
subsidiaries (whether or not such claims and liabilities are asserted, or
arise from activities occurring, prior
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to the closing of the Offerings), except as provided in the Transfer
Agreements and the Tax Allocation and Indemnification Agreement (as
defined below), and will each indemnify the other against such claims and
liabilities.
Pursuant to the Transfer Agreements, the Company and Siemens have
each agreed to indemnify each other and their respective affiliates for
certain liabilities that may arise after the offering date (which is
defined to be the date of closing of the Offerings). The Company will
indemnify Siemens and its affiliates for any claims or liabilities arising
out of (i) the ownership or operation by the Company of its business,
properties or assets after the completion of the Offerings, (ii) any
breach or inaccuracy in any of the representations or warranties of the
Company contained in the Transfer Agreements or the Underwriting Agreement
(as defined herein), (iii) any failure by the Company to perform any of
its obligations, covenants or agreements contained in or contemplated by
the Transfer Agreements or (iv) any misrepresentations or omissions
relating to the Company in the Registration Statement of which this
Prospectus forms a part. In addition, the Company irrevocably and
unconditionally waives any right against Siemens or any of its
subsidiaries for any reimbursement or funding of any losses incurred by
RSL pursuant to a profit and loss transfer arrangement between RSL and
Siemens which has been terminated.
Siemens will indemnify the Company and its affiliates for (i) any
breach or inaccuracy in any of the representations or warranties relating
to Siemens contained in the Transfer Agreements or the Underwriting
Agreement, (ii) any failure by Siemens to perform any of its obligations,
covenants or agreements contained in the Transfer Agreements and (iii) for
all German and certain other taxes imposed upon RSL for tax periods prior
to the consummation of the Offerings. In addition, Siemens acknowledges
that RSL's financial results (Ergebnis) for fiscal 1996 will be due to the
--------
Company, notwithstanding the provisions of the profit and loss arrangement
described in the preceding paragraph. Siemens and the Company have also
agreed that the Company will bear a pro rata portion (based on the
proportion that $13 million bears to the total gross proceeds of the
Offerings assuming no exercise of the Underwriters' over-allotment option)
of the expenses of the Offerings, including underwriting discounts and
commissions, all legal, financial advisory, accounting and auditing fees
and expenses, all SEC, NASD and other filing fees and expenses, and
certain other fees and expenses incurred in connection with the Offerings.
The Transfer Agreements also provide that Siemens and its
subsidiaries, subject to certain exceptions, will not engage in the
design, development, engineering, manufacture and marketing of laser
products for material processing applications for a period of four years
after the closing of the Offerings.
Tax Allocation and Indemnification Agreement
For United States federal income tax reporting purposes, for periods
prior to the date of consummation of the Offerings, the Company and RSI
will, until the date of the Offerings, file a consolidated federal income
tax return with other members of the affiliated group of corporations of
which Siemens Corporation ("SC"), the parent company of SPC, is the common
parent (the "SC Group"). Under United States Federal income tax law, each
corporation in a consolidated group is liable for all taxes of the
consolidated group. In the event that SC and other members of the SC
Group do not discharge the tax obligations for Federal income tax periods
of the SC Group which end with the tax period which includes the date of
consummation of the Offerings, the Company and RSI could be required under
law to satisfy such obligations. The Company believes that it is not
reasonably likely that the Company will incur any material liability for
tax obligations of the SC Group for income prior to the date of
consummation of the Offerings in excess of the tax obligations imposed on
the income of the Company and RSI prior to such date.
The Company, RSI, SC and SPC will enter into a Tax Allocation and
Indemnification Agreement (the "TAIA") to reflect the fact that the
Company and RSI will no longer be a part of the SC Group because of the
consummation of the Offerings. Pursuant to the TAIA, the SC Group will
bear the economic burden of all income taxes imposed on the income of any
member of the SC Group, including the Company and RSI, with respect to a
tax period prior to the date of consummation of the Offerings. SC will
indemnify the Company and RSI for (i) all such income taxes and (ii) any
reduction in the deferred tax asset of RSI attributable to its net
operating loss carryforwards, which reduction results from an adjustment
to taxable income for a period prior to the date of consummation of the
Offerings. The TAIA also contains provisions for the disposition of
audits and contests regarding tax items relating to RSI during the period
it was a member of the SC Group.
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Intercompany Transactions
In the ordinary course of business, the Company and its subsidiaries
and Siemens or affiliates of Siemens have from time to time entered into
various business transactions and agreements, and the Company and its
subsidiaries and Siemens or such affiliates of Siemens may enter into
additional transactions and agreements from time to time in the future.
See Note 10 of the Notes to the Combined Financial Statements.
The Company and its subsidiaries have provided certain products
(primarily laser markers) and related services to Siemens and its
affiliates. Revenue from such transactions amounted to $1.6 million, $2.9
million and $1.2 million for the fiscal years ended September 30, 1993,
1994 and 1995, and $3.5 million for the nine-month period ended June 30,
1996, respectively. In addition, the Company and its subsidiaries have
from time to time purchased certain products (primarily electrical
components, subassemblies and computers used in the Company's products)
from Siemens and its affiliates. Such purchases totalled approximately
$2.2 million, $2.7 million and $2.4 million for the fiscal years ended
September 30, 1993, 1994 and 1995 and $4.1 million for the nine-month
period ended June 30, 1996, respectively. The Company expects to continue
to engage in transactions involving products and services with Siemens and
its affiliates following the Offerings on generally the same basis as it
would engage in transactions with any other unaffiliated third party. In
addition, the Company and Siemens intend to continue their cooperative
relationship for the development of certain advanced industrial laser
technologies.
The Company also had sales to one of its joint venture partners in
Japan amounting to $255,000 in 1993, $1.3 million in 1994, $2.2 million in
1995 and $1.6 million for the nine-month period ended June 30, 1996,
respectively.
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock, par value $0.01 per share, and 5,000,000 shares of
preferred stock, par value $0.01 per share (the "Preferred Stock"). The
following summary description of the capital stock of the Company does not
purport to be complete and is subject to the detailed provisions of, and
qualified in its entirety by reference to, the Certificate of
Incorporation and By-laws, copies of which have been filed as exhibits to
the Registration Statement of which this Prospectus is a part, and to the
applicable provisions of the DGCL.
Common Stock
Upon completion of the Offerings, the Company will have 10,000,000
shares of Common Stock outstanding (assuming no exercise of the
Underwriters' over-allotment option and excluding 400,000 shares issuable
at the initial public offering price upon exercise of options to be
granted to certain officers of the Company and 4,500 shares of restricted
stock issued at the initial public offering price to non-employee
directors of the Company pursuant to employee benefit plans at the time of
the Offerings).
The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders.
Subject to the rights of any holders of Preferred Stock, holders of Common
Stock are entitled to receive ratably such dividends as may be declared by
the Board of Directors out of funds legally available. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in the
distribution of all assets remaining after payment of liabilities, subject
to the rights of any holders of Preferred Stock. The holders of Common
Stock have no preemptive rights to subscribe for additional shares of the
Company and no right to convert their Common Stock into any other
securities. In addition, there are no redemption or sinking fund
provisions available to the Common Stock. All of the outstanding shares
of Common Stock are, and the Common Stock offered hereby will be, fully
paid and nonassessable.
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Preferred Stock
The Board of Directors of the Company is authorized, without further
shareholder action, to divide any or all shares of authorized Preferred
Stock into one or more series and to fix and determine the designations,
preferences and relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereon, of any series so
established, including voting powers, dividend rights, liquidation
preferences, redemption rights and conversion or exchange privileges. The
issuance of Preferred Stock could adversely affect the voting power of
holders of Common Stock and could have the effect of delaying, deferring
or impeding a change in control of the Company. As of the date of this
Prospectus, the Board of Directors of the Company has not authorized any
series of Preferred Stock and there are no plans, agreements or
understandings for the issuance of any shares of Preferred Stock.
Certain Provisions of the Company's Certificate of Incorporation and By-
laws
Shareholders' rights and related matters are governed by the DGCL,
the Certificate of Incorporation and By-laws. Certain provisions of the
Certificate of Incorporation and By-laws, which are summarized below, may
have the effect, either alone or in combination with each other and the
ability of the Board of Directors to issue preferred stock without further
stockholder approval, of discouraging or making more difficult a tender
offer or takeover attempt that is opposed by the Company's Board of
Directors but that a shareholder might consider to be in its best
interest. Such provisions may also adversely affect prevailing market
prices for the Common Stock. See "Risk Factors -- Potential Anti-Takeover
Effects of Delaware Law; Possible Issuances of Preferred Stock." The
Company believes that such provisions are necessary to enable the Company
to develop its business in a manner that will foster its long-term growth
without disruption caused by the threat of a takeover not deemed by the
Board of Directors to be in the best interests of the Company and its
stockholders. For purposes of this description, the term "Rofin-Sinar" or
the "Company" refers only to Rofin-Sinar Technologies Inc., and excludes
its subsidiaries.
Classified Board of Directors and Related Provisions. The
Certificate of Incorporation provides that the Board of Directors shall be
classified with approximately one-third of the Board of Directors elected
each year. The By-laws provide that the Board of Directors will consist
of not less than three nor more than ten directors, with the exact number
of directors initially to be equal to six and thereafter to be fixed from
time to time by a majority of the total number of directors which the
Company would have if there were no vacancies. See "Management --
Executive Officers, Key Employees and Directors." The directors shall be
divided into three classes, designated Class I, Class II and Class III.
Each class shall consist, as nearly as may be possible, of one-third of
the total number of directors constituting the entire Board of Directors.
The initial division of the Board of Directors into classes shall be made
by the decision of a majority of the entire Board of Directors. The term
of the initial Class I directors shall terminate on the date of the 1997
annual meeting of stockholders; the terms of the Initial Class II
directors shall terminate on the date of the 1998 annual meeting of
stockholders; and the term of the initial Class III directors shall
terminate on the date of the 1999 annual meeting of stockholders. At each
annual meeting of stockholders beginning in 1997, successor to the class
of directors whose term expires at that annual meeting shall be elected
for a three-year term. In addition, subject to certain limited
exceptions, if the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting from
an increase in such class shall hold office for a term that shall coincide
with the remaining term of that class, but in no case will a decrease in
the number of directors shorten the term of any incumbent director.
Subject to the rights of holders of any outstanding preferred stock issued
by the Company, vacancies on the Board of Directors may be filled only by
the Board of Directors or the shareholders acting at an annual meeting.
The Certificate of Incorporation also provides that, subject to the
rights of holders of any preferred stock then outstanding and any
requirements of law, directors may be removed only for cause by the
affirmative vote of the holders of at least 80% of the outstanding shares
of the Company then entitled to vote generally in the election of
directors, voting as a single voting group.
Action by Written Consent; Special Meeting. The Certificate of
Incorporation and By-laws provide that an action may be taken by written
consent in lieu of a meeting of shareholders only with the consent of the
holders of 100% of the outstanding shares of the Company. The Certificate
of Incorporation and By-laws provide that special meetings of shareholders
may only be called by the Chairman of the Board or a majority of the Board
of Directors.
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Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The Certificate of Incorporation and By-laws establish
advance notice procedures with regard to shareholder proposals and the
nomination, other than by or at the direction of the Board of Directors or
a committee thereof, of candidates for election as directors. These
procedures provide that the notice of shareholder proposals and
shareholder nominations for the election of directors at an annual meeting
must be in writing and received by the Secretary of the Company not less
than 60 days nor more than 90 days prior to the anniversary date of the
previous year's annual meeting or, if the date of the annual meeting is
not within 30 days of the anniversary date of the previous year's annual
meeting, not later than the close of business on the tenth day following
the day on which notice of the date of such meeting was mailed or public
disclosure of the date of the meeting of shareholders was made, whichever
first occurs. The notice of shareholder nominations must set forth
certain information with respect to the shareholder giving the notice and
with respect to each nominee.
Indemnification. The Certificate of Incorporation and By-laws
provide that the Company shall advance expenses to and indemnify each
director and officer of the Company to the fullest extent permitted by
law.
Amendments. Shareholders may adopt, alter, amend or repeal
provisions of the By-laws only by vote of the holders of 80% or more of
the outstanding Common Stock and any other voting securities. In
addition, the affirmative vote of the holders of 80% or more of the
outstanding Common Stock and any other voting securities is required to
amend certain provisions of the Certificate of Incorporation, including
the provisions referred to above relating to the classification of the
Company's Board of Directors, filling vacancies on the Board of Directors,
removal of directors only for cause, prohibiting shareholder action by
written consent, prohibiting the calling of special meetings by
shareholders and approval of amendments to the By-laws.
Limitations on Directors' Liability
The Company's Certificate of Incorporation provides that no director
of the Company shall be liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law,
(iii) in respect of certain unlawful dividend payments or stock
redemptions or repurchases pursuant to Section 174 of the DGCL or (iv) for
any transaction from which the director derived an improper personal
benefit. The effect of these provisions is to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on
behalf of the Company) to recover monetary damages against a director for
breach of fiduciary duty as a director (including breaches resulting from
grossly negligent behavior), except in the situations described above.
These provisions will not limit the liability of directors under federal
securities laws.
Section 203 of Delaware General Corporation Law
Section 203 of the DGCL prohibits certain transactions between a
Delaware corporation and an "interested stockholder," which is defined as
a person who, together with any affiliates or associates of such person,
beneficially owns, directly or indirectly, 15% or more of the outstanding
voting shares of a Delaware corporation. This provision prohibits certain
business combinations (defined broadly to include mergers, consolidations,
sales or other dispositions of assets having an aggregate value in excess
of 10% of the consolidated assets of the corporation, and certain
transactions that would increase the interested stockholder's
proportionate share ownership in the corporation) between an interested
stockholder and a corporation for a period of three years after the date
the interested stockholder becomes an interested stockholder, unless (i)
the business combination is approved by the corporation's board of
directors prior to the date the interested stockholder becomes an
interested stockholder, (ii) the interested stockholder acquired at least
85% of the voting stock of the corporation (other than stock held by
directors who are also officers or by certain employee stock plans) in the
transaction in which it becomes an interested stockholder or (iii) the
business combination is approved by a majority of the board of directors
and by the affirmative vote of 66 2/3% of the outstanding voting stock
that is not owned by the interested stockholder.
Rights Agreement
The Company intends to enter into a Rights Agreement between the
Company and ____________, as Rights Agent, immediately prior to the
Closing of the Offerings. Pursuant to the Rights Agreement, a right (a
"Right") to purchase one share of Common Stock at a price of $__ (the
"Purchase Price"), exercisable only in certain
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circumstances, will be issued along with each share of Common Stock
offered hereby. A Right will also be issued along with each other share
of Common Stock issued by the Company until the earliest of the
Distribution Date (as defined below), the redemption of the Rights or the
Expiration Date (as defined below). Rights may also be issued with
respect to shares of Common Stock issued after the Distribution Date in
certain circumstances.
Until the earlier of (i) such time as the Company learns that a
person or group (including any affiliate or associate of such person or
group) has acquired, or has obtained the right to acquire, beneficial
ownership of 20% or more of the outstanding Common Stock (such person or
group, subject to certain exceptions, being an "Acquiring Person") and
(ii) such date, if any, as may be designated by the Board of Directors
following the commencement of, or first public disclosure of an intent to
commence, a tender or exchange offer for outstanding Common Stock which
could result in the offeror becoming the beneficial owner of 20% or more
of the outstanding Common Stock (the earlier of such dates, subject to
certain exceptions, being the "Distribution Date"), the Rights will be
evidenced by the certificates for the Common Stock registered in the names
of the holders thereof (which certificates for Common Stock will also be
deemed to be Right Certificates, as defined below) and not by separate
Right Certificates. Therefore, until the Distribution Date, the Rights
will be transferred with and only with the Common Stock.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed
to holders of record of the Common Stock as of the close of business on
the Distribution Date (and to each initial record holder of certain Common
Stock originally issued after the Distribution Date), and such separate
Right Certificates alone will thereafter evidence the Rights.
The Rights are not exercisable until the Distribution Date and will
expire on the tenth anniversary of the closing of the Offerings (the
"Expiration Date") unless earlier redeemed or canceled by the Company as
described below.
The number of shares of Common Stock or other securities issuable
upon exercise of a Right, the Purchase Price, the Redemption Price (as
defined below) and the number of Rights associated with each outstanding
share of Common Stock are all subject to adjustment by the Board of
Directors in the event of any change in the Common Stock, whether by
reason of stock dividends, stock splits, recapitalization, mergers,
consolidations, combinations or exchanges of securities, other similar
changes in capitalization, or any distribution or issuance of cash,
assets, evidences of indebtedness or subscription rights, options or
warrants to holders of Common Stock (other than the Rights or regular
quarterly cash dividends), or otherwise.
In the event a person becomes an Acquiring Person, the Rights will
entitle each holder of a Right (other than those held by an Acquiring
Person (or any affiliate or associate of such Acquiring Person)) to
purchase, for the Purchase Price, that number of shares of Common Stock
equivalent to the number of shares of Common Stock which at the time of
the transaction would have a market value of twice the Purchase Price.
Any Rights that are at any time beneficially owned by an Acquiring Person
(or any affiliate or associate of an Acquiring Person) will be null and
void and nontransferable and any holder of any such Right (including any
purported transferee or subsequent holder) will be unable to exercise or
transfer any such Right.
After there is an Acquiring Person, the Board of Directors may elect
to exchange each Right (other than Rights that have become null and void
and nontransferable as described above) for consideration per Right
consisting of one-half of the securities that would be issuable at such
time upon the exercise of one Right pursuant to the terms of the Rights
Agreement, and without payment of the Purchase Price.
In the event the Company is acquired in a merger by, or other
business combination with, or 50% or more of its assets or assets
representing 50% or more of its earning power are sold, leased, exchanged
or otherwise transferred (in one or more transactions) to, a publicly
traded corporation, each Right will entitle its holder (subject to the
next paragraph) to purchase, for the Purchase Price, that number of common
shares of such corporation which at the time of the transaction would have
a market value of twice the Purchase Price. In the event the Company is
acquired in a merger by, or other business combination with, or 50% or
more of its assets or assets representing 50% or more of the earning power
of the Company are sold, leased, exchanged or otherwise transferred (in
one or more transactions) to, an entity that is not a publicly traded
corporation, each Right will entitle its holder (subject to the next
paragraph) to purchase, for the Purchase Price, at such holder's option,
(i) that number of shares of such entity (or, at such holder's option, of
the surviving corporation in such acquisition, which could be the Company)
which
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at the time of the transaction would have a book value of twice the
Purchase Price or (ii) if such entity has an affiliate which has publicly
traded common shares, that number of common shares of such affiliate which
at the time of the transaction would have a market value of twice the
Purchase Price.
At any time prior to the earlier of (i) such time as a person becomes
an Acquiring Person and (ii) the Expiration Date, the Board of Directors
may redeem the Rights in whole, but not in part, at a price (in cash or
Common Stock or other securities of the Company deemed by the Board of
Directors to be at least equivalent in value) of $.01 per Right, subject
to adjustment as provided in the Rights Agreement (the "Redemption
Price"); provided that, for the 120-day period after any date of a change
(resulting from a proxy or consent solicitation) in a majority of the
Board in office at the commencement of such solicitation, the Rights may
only be redeemed if (A) there are directors then in office who were in
office at the commencement of such solicitation and (B) the Board, with
the concurrence of a majority of such directors then in office, determines
that such redemption is, in its judgment, in the best interests of the
Company and its stockholders. Immediately upon the action of the Board of
Directors electing to redeem the Rights, the Company will make an
announcement thereof, and, upon such election, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be
to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
At any time prior to the Distribution Date, the Company may, without
the approval of any holder of the Rights, supplement or amend any
provision of the Rights Agreement (including the date on which the
Distribution Date would occur or the time during which the Rights may be
redeemed), except that no supplement or amendment shall be made which
reduces the Redemption Price (other than pursuant to certain adjustments
therein), provides for an earlier Expiration Date or makes certain changes
to the definition of Acquiring Person. However, for the 120-day period
after any date of a change (resulting from a proxy or consent
solicitation) in a majority of the Board of Directors in office at the
commencement of such solicitation, the Rights Agreement may be
supplemented or amended only if (A) there are directors then in office who
were in office at the commencement of such solicitation and (B) the Board
of Directors, with the concurrence of a majority of such directors then in
office, determines that such supplement or amendment is, in their
judgment, in the best interests of the Company and its stockholders.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the
Company without conditioning the offer on substantially all the Rights
being acquired. The Rights will not interfere with any merger or other
business combination approved by the Board since the Board of Directors
may, at its option, at any time prior to any person becoming an Acquiring
Person, redeem all but not less than all of the then outstanding Rights at
a redemption price of $.01 per Right (subject to adjustment).
Reference is hereby made to the Rights Agreement to be entered into
between the Company and the Rights Agent specifying the terms of the
Rights, which includes as Exhibit A the form of Rights Certificate, and
this description is qualified in its entirety by reference to the terms
and conditions thereof.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is Harris Trust
and Savings Bank.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have 10,000,000
shares of Common Stock outstanding (assuming no exercise of any options
granted by the Company or the Underwriters' overallotment option and
excluding any shares of restricted stock issued to non-employee directors
of the Company). All shares sold in the Offerings will be freely
tradeable without restriction or further registration under the Securities
Act, except for any shares purchased by "affiliates" (as defined in the
Securities Act) of the Company, which will be subject to the resale
limitations of Rule 144 under the Securities Act ("Rule 144").
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Generally, Rule 144 provides that a person who has owned "restricted"
shares of Common Stock for at least two years, is entitled to sell on the
open market in broker's transactions within any three-month period a
number of shares that does not exceed the greater of (i) one percent of
the then outstanding shares of Common Stock and (ii) the average weekly
trading volume in the Common Stock on the open market during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject
to certain restrictions relating to manner of sale and the availability of
current public information about the Company. As defined in Rule 144, an
"affiliate" of an issuer is a person that directly or indirectly controls,
or is controlled by, or is under the common control with, such issuer.
Each of the Company, its directors and officers have agreed not to
directly or indirectly offer for sale, pledge to sell, file a registration
statement relating to, announce the intention to sell, issue (in the case
of the Company), contract to sell or otherwise dispose of any Common
Stock, with certain limited exceptions, for a period of 180 days after the
date of this Prospectus without the prior written consent of the
Representatives of the Underwriters.
The Company intends to file a registration statement under the
Securities Act to register all shares of Common Stock issuable under the
Equity Incentive Plan. See "Management -- Equity Incentive Plan." This
registration statement is expected to be filed as soon as practicable
following the consummation of the Offerings and will become effective
immediately upon filing. Shares covered by this registration statement as
to which an Equity Incentive Plan participant's rights have fully vested
and been exercised will be eligible for sale in the public market after
the effective date of such registration.
Prior to the Offerings, there has been no public market for the
Common Stock and there can be no assurance that a regular trading market
will develop or be sustained after the Offerings. The initial public
offering price will be determined through negotiations between the Company
and the Underwriters based on factors described under the caption
"Underwriting" and may not be indicative of the market price after the
Offerings. See "Underwriting."
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain United States
federal tax considerations applicable to the ownership and disposition of
Common Stock by "Non-U.S. Holders." In general, a "Non-U.S. Holder" is a
beneficial owner of Common Stock other than: (i) a citizen or resident of
the United States, (ii) a corporation or partnership created or organized
in the United States or under the laws of the United States or of any
state or (iii) an estate or trust, the income of which is includible in
gross income for United States federal income tax purposes regardless of
its source. The term "Non-U.S. Holder" does not include individuals who
were United States citizens within the ten-year period immediately
preceding the date of this Prospectus and whose loss of United States
citizenship had as one of its principal purposes the avoidance of United
States taxes. This discussion is based on current law, which is subject
to change and is for general information only. There are a number of
proposed changes to existing law that would affect the taxation of income
earned by foreign trusts and their beneficiaries and the taxation of
citizens or residents of the U.S. who abandon their U.S. citizenship or
residence. It is not clear whether these proposals will ultimately be
enacted, but holders should consult with their tax advisors concerning the
possible effect of such proposed legislation. This discussion does not
address aspects of United States federal taxation other than income and
estate taxation and does not address all aspects of income and estate
taxation, nor does it consider any specific facts or circumstances that
may apply to a particular Non-U.S. Holder.
Proposed United States Treasury Regulations were issued on April 15,
1996 (the "Proposed Regulations") which, if adopted, would affect the
United States taxation of dividends paid to a Non-U.S. Holder on Common
Stock. The Proposed Regulations are generally proposed to be effective
with respect to dividends paid after December 31, 1997, subject to certain
transition rules. The discussion below is not intended to be a complete
discussion of the provisions of the Proposed Regulations, and prospective
investors are urged to consult their tax advisors with respect to the
effect the Proposed Regulations would have if adopted.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES
INCOME AND OTHER TAX CONSEQUENCES OF HOLDING AND DISPOSING OF SHARES OF
COMMON STOCK.
Dividends
The Company does not anticipate paying cash dividends on the Common
Stock in the foreseeable future. The Company may in the future consider
paying cash dividends on the Common Stock. However, the Board of
Directors of the Company has made no decision with respect to the payment
of any such dividends, including the timing and amount of any such
dividend. See "Dividend Policy." If dividends are paid on the Common
Stock, these payments will be treated as a dividend for United States
federal income tax purposes to the extent of the Company's current or
accumulated earnings and profits for such tax purposes. The portion of a
payment that exceeds such earnings and profits will be treated as a return
of capital to the extent of each Non-U.S. Holder's tax basis in the Common
Stock. The portion of a payment that exceeds such earnings and profits
and tax basis will be treated as a gain from the sale or other disposition
of the Common Stock to the extent of such excess, with the tax
consequences described below under "-- Sale of Common Stock."
In general, any dividends (i.e., distributions to the extent of
current or accumulated earnings and profits for United Sates federal
income tax purposes) paid to a Non-U.S. Holder of Common Stock will be
subject to United States withholding tax at a 30% rate (or a lower rate
prescribed by an applicable tax treaty) unless the dividends are either
(i) effectively connected with a trade or business carried on by the Non-
U.S. Holder within the United States or (ii) if certain income tax
treaties apply, attributable to a permanent establishment in the United
States maintained by the Non-U.S. Holder. For purposes of determining
whether tax is to be withheld at a 30% rate or at a lower rate as
prescribed by an applicable tax treaty, the Company ordinarily will
presume that dividends paid to an address in a foreign country are paid to
a resident of such country absent knowledge that such presumption is not
warranted. Under the Proposed Regulations, to obtain a reduced rate of
withholding under a treaty, a Non-U.S. Holder would generally be required
to provide an Internal Revenue Service Form W-8 certifying such Non-U.S.
Holder's entitlement to benefits under a treaty. The Proposed Regulations
would also provide special rules to determine
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whether, for purposes of determining the applicability of a tax treaty,
dividends paid to a Non-U.S. Holder that is an entity should be treated as
paid to the entity or to those holding an interest in that entity.
Dividends effectively connected with such a United States trade or
business or attributable to such United States permanent establishment
generally will not be subject to withholding tax (if the Non-U.S. Holder
files certain forms, including IRS Form 4224, with the payor of the
dividend) and generally will be subject to United States federal tax on a
net income basis, in the same manner as if the Non-U.S. Holder were a
resident of the United States. In the case of a Non-U.S. Holder that is a
corporation, dividend income so connected or attributable may also be
subject to the branch profits tax (which is generally imposed on a foreign
corporation on the repatriation from the United States of its effectively
connected earnings and profits subject to certain adjustments) at a 30%
rate (or a lower rate prescribed by an applicable income tax treaty).
A Non-U.S. Holder that is eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts currently withheld by filing an appropriate
claim for refund with the IRS.
Sale of Common Stock
In general, a Non-U.S. Holder will not be subject to United States
federal income tax on any gain recognized upon the disposition of Common
Stock unless: (i) the gain is effectively connected with a trade or
business carried on by the Non-U.S. Holder within the United States or,
alternatively, if certain tax treaties apply, attributable to a permanent
establishment in the United States maintained by the Non-U.S. Holder (and
in either such case, the branch profits tax may also apply if the Non-U.S.
Holder is a corporation), (ii) in the case of a Non-U.S. Holder who is a
nonresident alien individual and holds Common Stock as a capital asset,
such individual is present in the United States for 183 days or more in
the taxable year of disposition, and either (a) such individual has a "tax
home" (as defined for United States federal income tax purposes) in the
United States or (b) the gain is attributable to an office or other fixed
place of business maintained by such individual in the United States,
(iii) the Non-U.S. Holder is subject to tax pursuant to the provisions of
the United States tax law applicable to certain United States expatriates
or (iv) the Company is or has been a United States real property holding
corporation for United States federal income tax purposes (which the
Company does not believe that it is or is likely to become) at any time
within the shorter of the five-year period preceding such disposition or
such Non-U.S. Holder's holding period.
Estate Tax
Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as defined for United States federal estate tax
purposes) of the United States at the time of death will be includible in
the individual's gross estate for United States federal estate tax
purposes unless an applicable estate tax treaty provides otherwise, and
therefore may be subject to United States federal estate tax.
Backup Withholding, Information Reporting and Other Reporting Requirements
The Company must report annually to the IRS and to each Non-U.S.
Holder the amount of dividends paid to, and the tax withheld with respect
to, each Non-U.S. Holder. These reporting requirements apply regardless
of whether withholding was reduced or eliminated by an applicable tax
treaty. Copies of this information also may be made available under the
provisions of a specific treaty or agreement with the tax authorities in
the country in which the Non-U.S. Holder resides or is established.
Under current rules, United States backup withholding (which
generally is imposed at the rate of 31% on certain payments to persons
that fail to furnish the information required under the United States
information reporting requirements) and information reporting generally
will not apply to (i) dividends paid on Common Stock to a Non-U.S. Holder
that is subject to withholding at the 30% rate (or that is subject to
withholding at a reduced rate under an applicable treaty), (ii) under
current law, dividends paid to a Non-U.S. Holder at an address outside of
the United States or (iii) persons who otherwise establish an exemption
from backup withholding. However, under the proposed regulations, in the
case of dividends paid after December 31, 1997 (December 31, 1999 in the
case of dividends paid to accounts in existence on or before the date that
is 60 days after the Proposed Regulations are published as final
regulations), a Non-U.S. Holder generally would be subject to backup
withholding at a 31% rate, unless certain
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certification procedures (or, in the case of payments made outside the
United States with respect to an offshore account, certain documentary
evidence procedures) are complied with, directly or through an
intermediary.
The payment of proceeds from the disposition of Common Stock to or
through a United States office of a broker will be subject to information
reporting and United States backup withholding unless the owner, under
penalties of perjury, certifies among other things, its status as a Non-
U.S. Holder, or otherwise establishes an exemption. The payment of
proceeds from the disposition of Common Stock to or through a non-U.S.
office of a non-U.S. broker generally will not be subject to backup
withholding and information reporting, except as noted below. In the case
of proceeds from the disposition of Common Stock paid to or through a non-
United States office of a broker that is: (i) a United States person,
(ii) a "controlled foreign corporation" for United States federal income
tax purposes or (iii) a foreign person 50% or more of whose gross income
for a specified three-year period is effectively connected with a United
States trade or business, (a) backup withholding will not apply unless
such broker has actual knowledge that the owner is not a Non-U.S. Holder
and (b) information reporting will apply unless the broker has documentary
evidence in its files that the owner is a Non-U.S. Holder (and the broker
has no actual knowledge to the contrary). The Proposed Regulations would,
if adopted, alter the foregoing rules in certain respects. Among other
things, the Proposed Regulations would provide certain presumptions under
which a Non-U.S. Holder would be subject to backup withholding and
information reporting unless the Company receives certification from the
holder of non-U.S. status.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules from a payment to a Non-U.S.
Holder will be refunded or credited against the Non-U.S. Holder's United
States federal income tax liability, if any, provided that the required
information is furnished to the IRS.
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UNDERWRITING
The U.S. Underwriters named below, for whom Deutsche Morgan
Grenfell/C. J. Lawrence Inc., Alex. Brown & Sons Incorporated and Lehman
Brothers are acting as representatives (the "U.S. Representatives"), and
the International Underwriters named below, for whom Morgan Grenfell &
Co., Limited, Alex. Brown & Sons Limited and Lehman Brothers International
(Europe) are acting as representatives (the "International
Representatives") have severally agreed, subject to the terms and
conditions contained in the Underwriting Agreement (the form of which is
filed as an exhibit to the Company's Registration Statement, of which this
Prospectus is a part), to purchase from the Company the respective number
of shares of Common Stock indicated below opposite their respective names.
The Underwriters are committed to purchase all of the shares, if they
purchase any.
<TABLE>
<CAPTION>
U.S. Underwriters Number of Shares
----------------- ----------------
<S> <C>
Deutsche Morgan Grenfell/C. J. Lawrence Inc.............
Alex. Brown & Sons Incorporated.........................
Lehman Brothers Inc.....................................
----------------
Subtotal................................................
----------------
International Underwriters
--------------------------
Morgan Grenfell & Co., Limited..........................
Alex. Brown & Sons Limited..............................
Lehman Brothers International (Europe)..................
----------------
Subtotal................................................
----------------
Total...................................................
================
</TABLE>
Deutsche Morgan Grenfell/C. J. Lawrence Inc. is acting as Global
Coordinator of the Offerings.
The Underwriting Agreement provides that the obligations of the
several Underwriters thereunder are subject to approval of certain legal
matters by counsel and to various other conditions.
The U.S. Underwriters and the International Underwriters have entered
into an Intersyndicate Agreement (the "Intersyndicate Agreement") that
provides for the coordination of their activities. Pursuant to the
Intersyndicate Agreement, sales may be made between the U.S. Underwriters
and the International Underwriters of such number of shares of Common
Stock as may be mutually agreed. The price of any shares of Common Stock
so sold shall be the public offering price, less an amount not greater
than the selling concession.
Under the terms of the Intersyndicate Agreement, the International
Underwriters and any dealer to whom they sell shares of Common Stock will
not offer to sell or sell shares of Common Stock to persons who are United
States persons or to persons they believe intend to resell to persons who
are United States persons, and the U.S. Underwriters and any dealer to
whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to any non-United States person or to persons they
believe intend to resell to non-United States persons, except, in each
case, for transactions pursuant to such agreement. As used herein,
"United States person" means any national or resident of the United States
or any corporation, pension, profit-sharing or other trust or other entity
organized under the laws of the United States or of any political
subdivision thereof (other than a branch located outside of the United
States of any United States person) and includes any United States branch
of a person
64
<PAGE>
who is otherwise not a United States person and "United States" means the
United States of America, its territories, its possessions and all areas
subject to its jurisdiction.
The Underwriters propose to offer the Common Stock to the public on
the terms set forth on the cover page of this Prospectus. The Price to
Public and Underwriting Discount will be identical in the U.S. and
International Offerings. The U.S. Underwriters may allow to selected
dealers (who may include the Underwriters) a concession of not more than
$________ per share. Such selected dealers may reallow a concession of
not more than $_______ to certain other dealers. After the public
offering, the price and concessions and re-allowances to dealers and other
selling terms may be changed by the Underwriters. The Common Stock is
offered subject to receipt and acceptance by the Underwriters, and to
certain other conditions, including the right to reject orders in whole or
in part. The Underwriters do not intend to sell any of the shares of
Common Stock offered hereby to accounts over which they exercise
discretionary authority.
The Company has granted an option to the Underwriters to purchase up
to a maximum of 1,500,000 additional shares of Common Stock to cover over-
allotments, if any, at the public offering price, less the underwriting
discount set forth on the cover page of this Prospectus. Such option may
be exercised at any time until 30 days after the date of the Underwriting
Agreement. To the extent the Underwriters exercise this option, each
of the Underwriters will be committed, subject to certain conditions, to
purchase such additional shares in approximately the same proportion as
set forth in the above table. The Underwriters may purchase such shares
only to cover over-allotments made in connection with the Offering.
Pursuant to the Intersyndicate Agreement, each International
Underwriter has represented and agreed that it has not offered or sold,
and has agreed not to offer or sell, any shares of Common Stock, directly
or indirectly, in Canada in contravention of the securities laws of Canada
or any province or territory thereof and has represented that any offer of
shares of Common Stock in Canada will be made only pursuant to an
exemption from the requirement to file a prospectus in the province or
territory of Canada in which such offer is made. Each International
Underwriter has further agreed to send to any dealer who purchases from it
any shares of Common Stock a notice stating in substance that, by
purchasing such shares such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, directly or indirectly, any
of such shares in Canada or to, or for the benefit of, any resident of
Canada in contravention of the securities laws of Canada or any province
or territory thereof and that any offer of shares of Common Stock in
Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such
offer is made, and that such dealer will deliver to any other dealer to
whom it sells any of such shares of Common Stock a notice to the foregoing
effect.
Pursuant to the Intersyndicate Agreement, each International
Underwriter has represented and agreed that (i) it has not offered or sold
and will not offer or sell any shares of Common Stock offered hereby to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments
(as principal or agent) for the purpose of their business or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers
of Securities Regulations 1995 (the "Regulations"), (ii) it has complied
and will comply with all applicable provisions of the Financial Services
Act 1986 and the Regulations with respect to anything done by it in
relation to the shares of Common Stock offered hereby in, from or
otherwise involving the United Kingdom, and (iii) it has only issued or
passed on and will only issue or pass on to any person in the United
Kingdom any document received by it in connection with the issue of the
shares of Common Stock offered hereby if that person is a kind described
in Article 11 (3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom such
document may otherwise lawfully be issued or passed on.
Pursuant to the Intersyndicate Agreement, each International
Underwriter has represented and agreed that it has not offered or sold,
and will not offer or sell, directly or indirectly, in Japan or to or for
the account of any resident thereof, any shares of Common Stock acquired
in connection with this offering, except for offers or sales to Japanese
International Underwriters or dealers and except pursuant to any exemption
from the regulation requirement of the Securities and Exchange Law of
Japan. Each International Underwriter has further agreed to send to any
dealer who purchases from it any of such shares of Common Stock a notice
stating in substance that such dealer may not offer or sell any of such
shares, directly or indirectly, in Japan or to or for the account of any
resident thereof, except pursuant to any exemption from the registration
requirement of the Securities and Exchange Law of Japan, and that such
dealer will send to any other dealer to whom it sells any shares a notice
to the foregoing effect.
65
<PAGE>
The Underwriting Agreement provides for indemnification of the
several Underwriters against certain liabilities including civil
liabilities under the Securities Act of 1933, as amended, or contribution
to payments the Underwriters may be required to make in respect thereof.
In connection with the Offering, the Company and each of the
Company's directors and executive officers have agreed, with certain
exceptions, not to offer, sell or otherwise dispose of any shares of
Common Stock for a period of 180 days after the first date on which shares
of Common Stock are offered hereby to the public, without the prior
written consent of Deutsche Morgan Grenfell/C. J. Lawrence Inc.
The Company has reserved approximately ___ shares of Common Stock,
representing __ % of the shares of Common Stock to be sold in the
Offering, for sale to certain of its employees at the public offering
price set forth on the cover page hereof. If such shares are not sold to
employees of the Company, they will be sold to the public.
Prior to the Offerings, there has been no public market for the
Common Stock. The initial public offering price for the Common Stock has
been determined by negotiations between Siemens, the Company and the U.S.
Representatives. Among the factors considered in determining the initial
public offering price were the market values and price/earnings multiples
of publicly traded common stock of certain other companies, the sales,
earnings and cash flow history and trends of the Company, the experience
of the Company's management and the position of the Company in its
industry and its prospects. Additionally, consideration was given to the
general status of the securities markets, the market conditions for new
offerings of securities, the demand for the Common Stock and for similar
securities of comparable companies and other relevant factors.
The Company is currently negotiating a loan facility with Deutsche
Bank AG, an affiliate of Deutsche Morgan Grenfell/C. J. Lawrence Inc. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources."
66
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Shearman & Sterling, New York, New York.
Certain legal matters in connection with the Offerings will be passed upon
for the Underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
The financial statements of the Company as of September 30, 1994 and
1995 and for each of the fiscal years in the three-year period ended
September 30, 1995 have been included in this Prospectus and elsewhere in
this Registration Statement in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, included herein,
and upon the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission") in Washington, D.C. a Registration Statement (which
term shall encompass any amendment thereto) on Form S-1 under the
Securities Act, with respect to the shares of Common Stock offered by this
Prospectus. This Prospectus does not contain all the information set
forth in the Registration Statement and the exhibits and schedules
thereto, to which reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to summarize the material terms of such documents, but are not
necessarily complete. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the
matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
Upon completion of the Offerings, the Company will be subject to
the informational requirements of the Exchange Act, and in accordance
therewith will file reports and other information with the Commission.
The Registration Statement and the exhibits and schedules thereto, as well
as all such reports and other information filed with the Commission, may
be inspected at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and are also available for inspection and copying
at prescribed rates at the regional offices of the Commission located at
500 West Madison Street, Chicago, Illinois 60661, and Seven World Trade
Center, 13th Floor, New York, New York 10048, and at the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549.
67
<PAGE>
GLOSSARY OF SELECTED TECHNICAL TERMS
<TABLE>
<CAPTION>
<S> <C>
beam-switching/beam Techniques used in laser beam delivery systems
splitting which permit the laser beam to be used alternately
or simultaneously at different workstations.
CO\\2\\ lasers Lasers in which the lasing medium is carbon
dioxide. CO\\2\\ lasers used today for material
processing usually are based either on cross-flow
or axial flow designs.
CO\\2\\ Slab lasers CO\\2\\ lasers in which a HF discharge takes place
between water-cooled copper electrodes which have
a large surface allowing maximum heat dissipation
(known as "diffusion cooling") and achieving high
power density.
cross-flow CO\\2\\ lasers CO\\2\\ lasers in which the laser gas flows
perpendicularly to the resonator axis.
diffusion-cooling See definition of Slab lasers.
technology
diode-pumped solid state Nd:YAG lasers in which the source of excitation is
lasers a laser diode instead of a flash lamp.
electrical efficiency The ratio of output light energy to input
electrical energy.
fast axial-flow CO\\2\\ CO\\2\\ lasers in which the laser gas discharge
lasers occurs in a tube, through which the laser gas
mixture flows at a high speed, ensuring that heat
is effectively removed.
flash lamp-pumped solid Nd:YAG lasers in which the source of excitation is
state lasers a krypton flash lamp or krypton arc lamp.
galvo-head A moving mirror system used in a laser marker to
deflect the Nd:YAG laser beam during the vector
marking process.
Nd:YAG lasers Lasers in which the lasing medium is neodymium
located in a solid crystal made up of
yttrium-aluminum-garnet, usually rod-shaped.
optical resonator The part of laser in which the excited emission of
photons bounces back and forth through the lasing
medium.
photons Particles of light.
Q-switch A fast electro-optical shutter inserted into the
laser resonator, enabling frequencies to be
switched at multiples of 10kHz.
spatial coherence One of the chief characteristics of a laser beam:
light in which the light waves are all moving
along together in unison.
tailored blank welding A welding technique pioneered by the Company for
welding dissimilar metals of different thicknesses
into one sheet.
</TABLE>
68
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
INDEX TO COMBINED FINANCIAL STATEMENTS
Audited Combined Financial Statements:
Independent Auditors' Report.......................................... F-2
Combined Balance Sheets as of September 30, 1994 and 1995............. F-3
Combined Statements of Operations for the fiscal years ended
September 30, 1993, 1994 and 1995.................................. F-4
Combined Statements of Stockholders' Equity for the fiscal years
ended September 30, 1993, 1994 and 1995............................ F-5
Combined Statements of Cash Flows for the fiscal years ended
September 30, 1993, 1994 and 1995.................................. F-6
Notes to Combined Financial Statements................................ F-7
Unaudited Combined Financial Statements:
Combined Balance Sheet as of June 30, 1996............................ F-17
Combined Statements of Operations for the nine-month periods ended
June 30, 1995 and 1996............................................. F-18
Combined Statement of Stockholders' Equity for the nine-month period
ended June 30, 1996................................................ F-19
Combined Statements of Cash Flows for the nine-month periods ended
June 30, 1995 and 1996............................................. F-20
Notes to Combined Financial Statements................................ F-21
F-1
<PAGE>
Independent Auditors' Report
----------------------------
The Shareholders of Rofin-Sinar
Technologies Inc. and Affiliates:
We have audited the accompanying combined balance sheets of Rofin-Sinar
Technologies Inc. and Affiliates as of September 30, 1994 and 1995, and
the related combined statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended September
30, 1995. These combined financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of Rofin-
Sinar Technologies Inc. and Affiliates as of September 30, 1994 and 1995,
and the results of their operations and their cash flows for each of the
years in the three-year period ended September 30, 1995, in conformity
with generally accepted accounting principles.
Detroit, Michigan
July 19, 1996
F-2
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Combined Balance Sheets
September 30, 1994 and 1995
(dollars in thousands)
<TABLE>
<CAPTION>
Assets 1994 1995
- ------ --------- --------
<S> <C> <C>
Current assets:
Cash $ 839 691
Trade accounts receivable 18,858 26,404
Less allowance for doubtful accounts (1,005) (1,252)
-------- -------
Trade accounts receivable, net 17,853 25,152
Other accounts receivable 851 1,264
Inventories (note 2) 20,634 28,169
Prepaid expenses 158 184
Deferred income tax assets - current (note 9) 7,864 6,614
-------- -------
Total current assets 48,199 62,074
Property and equipment, at cost (note 3) 38,148 41,352
Less accumulated depreciation (12,113) (14,237)
-------- -------
Property and equipment, net 26,035 27,115
Deferred income tax assets - noncurrent (note 9) 1,745 1,574
Other assets 688 232
-------- -------
Total assets $ 76,667 90,995
======== =======
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Line of credit (note 6) $ 18,900 18,900
Bank loans (note 5) 3,480 2,905
Advances from Parent (note 6) 7,000 7,000
Accounts payable, trade 3,808 5,640
Accrued liabilities (note 4) 10,084 11,496
Deferred income tax liability - current (note 9) -- 1,603
-------- -------
Total current liabilities 43,272 47,544
Pension obligations (note 8) 2,840 3,762
Minority interests (28) 16
-------- -------
Total liabilities 46,084 51,322
Stockholders' equity:
Parent's capital 29,114 34,224
Cumulative foreign currency translation adjustment 1,469 5,449
-------- -------
Total stockholders' equity 30,583 39,673
-------- -------
Total liabilities and stockholders' equity $ 76,667 90,995
======== =======
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Combined Statements of Operations
Years ended September 30, 1993, 1994, and 1995
(dollars in thousands)
<TABLE>
<CAPTION>
1993 1994 1995
--------- ------- ------
<S> <C> <C> <C>
Net sales $ 60,034 69,217 92,466
Cost of goods sold 47,745 46,993 57,162
-------- ------ ------
Gross profit 12,289 22,224 35,304
Selling, general, and administrative expenses 21,951 17,059 20,673
Research and development expenses 10,276 6,834 6,719
-------- ------ ------
Income (loss) from operations (19,938) (1,669) 7,912
Other expense (income):
Interest expense, net (notes 5 and 6) 1,654 1,308 1,272
Minority interest (720) 5 9
Miscellaneous 514 134 366
-------- ------ ------
Total other expense, net 1,448 1,447 1,647
-------- ------ ------
Income (loss) before income taxes (21,386) (3,116) 6,265
Income tax expense (benefit) (note 9) (1,565) (1,422) 3,052
-------- ------ ------
Net income (loss) $(19,821) (1,694) 3,213
======== ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Combined Statements of Stockholders' Equity
Years ended September 30, 1993, 1994, and 1995
(dollars in thousands)
<TABLE>
<CAPTION>
Cumulative
Foreign
Currency Total
Parent's Translation Stockholders'
Capital Adjustment Equity
--------- ------------ --------------
<S> <C> <C> <C>
Balances at September 30, 1992 $ 59,574 2,885 62,459
Foreign currency translation -- (3,054) (3,054)
adjustment
Capital distributions to Parent (3,747) -- (3,747)
Net loss (19,821) -- (19,821)
-------- ------ -------
Balances at September 30, 1993 36,006 (169) 35,837
Foreign currency translation -- 1,638 1,638
adjustment
Capital distributions to Parent (5,198) -- (5,198)
Net loss (1,694) -- (1,694)
-------- ------ -------
Balances at September 30, 1994 29,114 1,469 30,583
Foreign currency translation -- 3,980 3,980
adjustment
Capital contributions from Parent 1,897 -- 1,897
Net income 3,213 -- 3,213
-------- ------ -------
Balances at September 30, 1995 $ 34,224 5,449 39,673
======== ====== =======
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Combined Statements of Cash Flows
Years ended September 30, 1993, 1994, and 1995
(dollars in thousands)
<TABLE>
<CAPTION>
1993 1994 1995
--------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(19,821) (1,694) 3,213
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 2,803 2,527 2,364
Loss on disposal of property and equipment 244 32 214
Deferred income taxes (1,565) (1,328) 2,476
Minority interest in losses of subsidiary (720) 5 9
Change in operating assets and liabilities:
Trade accounts receivable 13,959 3,969 (6,683)
Other accounts receivable 4,812 (5) (184)
Inventories 6,881 3,846 (6,204)
Prepaid expenses and other 312 60 235
Accounts payable, trade (3,377) (1,961) 2,782
Accrued liabilities and pension obligation 85 414 1,619
-------- ------ ------
Net cash provided (used) by operating activities 3,613 5,865 (159)
-------- ------ ------
Cash flows from investing activities:
Additions to furniture and equipment (1,086) (452) (1,936)
Proceeds from sale of furniture and equipment 280 201 515
Investment in subsidiary -- -- 19
-------- ------ ------
Net cash used by investing activities (806) (251) (1,402)
-------- ------ ------
Cash flows from financing activities:
Increase (decrease) in parent capital (3,747) (5,198) 1,897
Repayments to bank -- (79) (515)
-------- ------ ------
Net cash provided (used) by financing activities (3,747) (5,277) 1,382
-------- ------ ------
Effect of foreign currency translation on cash 144 (88) 31
-------- ------ ------
Net increase (decrease) in cash (796) 249 (148)
Cash at beginning of period 1,386 590 839
-------- ------ ------
Cash at end of period $ 590 839 691
======== ====== ======
Cash paid during the period for interest $ 131 125 139
======== ====== ======
Cash paid (received) during the period for income taxes $ -- -- --
======== ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-6
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements
September 30, 1993, 1994, and 1995
(dollars in thousands)
(1) Summary of Accounting Policies
------------------------------
(a) Description of the Company and Business
---------------------------------------
The accompanying financial statements present the historical
financial information of the industrial laser businesses of
Siemens AG (Siemens or Parent), representing the combined
operations of Rofin-Sinar, Inc. (a United States company), and
Rofin-Sinar Laser GmbH (a Federal Republic of Germany limited
liability company), each of which is owned either directly or
indirectly by Siemens. Rofin-Sinar Laser GmbH includes the
consolidated accounts of its 99.97 percent-owned subsidiary,
Rofin-Sinar France S.A.; its 90.65 percent (83.5 percent in 1993
and 1994)-owned subsidiary, Rofin-Sinar Italiana S.r.L.; and its
51 percent-owned subsidiary, Rofin Marubeni Laser Corporation (a
Japanese entity). Because Rofin-Sinar, Inc. and Rofin-Sinar
Laser GmbH are each directly or indirectly wholly owned by a
common parent, the accompanying financial statements are
presented as combined rather than consolidated. All significant
intercompany balances and transactions have been eliminated in
combination.
Immediately prior to the closing of a public offering (the
"Offering") of common stock of Rofin-Sinar Technologies, Inc., a
newly formed holding company indirectly owned by Siemens AG, the
business operations of the Rofin-Sinar Inc. and Rofin-Sinar
Laser GmbH (Rofin Sinar Group), including all assets and
liabilities, will be sold to Rofin-Sinar Technologies Inc.
(reorganization). A portion of the proceeds from the public
offering will be used to purchase all outstanding stock of
Rofin-Sinar Group from Siemens AG and its subsidiaries. The
reorganization will constitute a combination of entities under
common control and, for financial statement purposes, will be
accounted for by combining the historical accounts of Rofin-
Sinar Group and Rofin-Sinar Technologies Inc. (Rofin-Sinar or
Company), in a manner similar to pooling-of-interests
accounting.
The primary business of Rofin-Sinar is to develop, manufacture,
and market industrial lasers and supplies used for material
processing applications. The majority of the Company's
customers are in the machine tool, automotive, semiconductor,
and electronics industries and are located in the United States,
Europe, and Asia. Rofin-Sinar generates approximately 75
percent of its revenues from the sale and installation of new
lasers and approximately 25 percent from aftermarket support for
the Company's existing laser products.
The combined financial statements are derived from the
historical financial statements of Rofin-Sinar Group.
Management believes the accompanying statements of operations
include a reasonable allocation of all expenses the Company will
incur as an independent company.
(b) Inventories
-----------
Inventories are stated at the lower of cost or market after
provisions for excess and obsolete inventory salable at prices
below cost. Costs are determined using the first in, first out
and weighted average cost methods.
F-7
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements, Continued
(dollars in thousands)
(c) Property and Equipment
----------------------
Property and equipment are recorded at cost and depreciated over
their useful lives, except for leasehold improvements, which are
amortized over the lesser of their useful lives or the term of
the lease. The methods of depreciation are straight line for
financial reporting purposes and accelerated for income tax
purposes. Depreciable lives for financial reporting purposes
are as follows:
<TABLE>
<CAPTION>
Useful
Lives
-----
<S> <C>
Buildings 40 years
Machinery and equipment 3-10 years
Furniture and fixtures 3-10 years
Computers and software 3-4 years
Leasehold improvements 5-15 years
</TABLE>
(d) Revenue Recognition
-------------------
Revenues are recognized when a laser product is shipped or
services are performed.
(e) Income Taxes
------------
Income taxes are accounted for following Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes
(Statement 109). Under the asset and liability method of
Statement 109, deferred income taxes are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred taxes of a change in tax
rates is recognized in income in the period that includes the
enactment date.
The Company's results have been included in the consolidated
federal income tax return of Siemens Corporation in the U.S.
and, for periods prior to October 1, 1995, Siemens AG in
Germany. For periods from and after October 1, 1995, the
Company will file a separate tax return in Germany. For
purposes of these financial statements, income taxes are
computed on a separate tax return basis.
(f) Accounting for Warranties
-------------------------
The Company issues a standard warranty of one year for parts and
labor on lasers that are sold. However, extended warranties for
up to two years on parts and one year on labor are negotiated on
a contract-by-contract basis. The Company provides for
estimated warranty costs as products are shipped.
F-8
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements, Continued
(dollars in thousands)
(g) Foreign Currency Translation
----------------------------
In accordance with Statement of Financial Accounting Standards
No. 52, Foreign Currency Translation, the assets and liabilities
of the Company's operations outside the United States are
translated into U.S. dollars at exchange rates in effect on the
balance sheet date, and revenues and expenses are translated
using a weighted average exchange rate during the period. Gains
or losses resulting from translating foreign currency financial
statements are recorded in a separate component of shareholders'
equity. Gains or losses resulting from foreign currency
transactions are included in net income.
(h) Research and Development Expenses
---------------------------------
Research and development costs are expensed when incurred and
are net of government grants of $448, $611 and $1,400 received
for the years ended September 30, 1993, 1994, and 1995,
respectively. The Company has no future obligations under such
grants.
(i) Financial Instruments
---------------------
Financial instruments of the Company, consisting principally of
cash, accounts receivable, accounts payable, and bank loans, are
recorded at amounts which approximate estimated fair value. The
estimated fair value amounts are determined by the Company using
available market information and available valuation
methodologies.
(j) Use of Estimates
----------------
Management of the Company makes a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent liabilities to prepare these
financial statements in conformity with generally accepted
accounting principles. Actual results could differ from these
estimates.
(2) Inventories
-----------
Inventories are summarized as follows:
<TABLE>
<CAPTION>
September 30,
-------------------------
1994 1995
---- ----
<S> <C> <C>
Finished goods $ 5,502 8,243
Work in progress 4,824 5,595
Raw materials and supplies 5,401 7,337
Demo inventory 1,998 2,754
Service parts 2,909 4,240
------- ------
Total inventories $ 20,634 28,169
======= ======
</TABLE>
F-9
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements, Continued
(dollars in thousands)
(3) Property and Equipment
----------------------
Property and equipment include the
following:
<TABLE>
<CAPTION>
September 30,
-----------------------
1994 1995
---- ----
<S> <C> <C>
Buildings $ 24,166 26,159
Technical machinery and equipment 4,635 5,491
Furniture and fixtures 5,822 5,907
Computers and software 2,619 2,828
Leasehold improvements 906 967
------- ------
$ 38,148 41,352
======= ======
</TABLE>
(4) Accrued Liabilities
-------------------
At September 30, 1994 and 1995, accrued liabilities are comprised of
the following:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Employee compensation $ 3,646 4,256
Warranty reserves 2,375 4,020
Customer deposits 509 395
Other 3,554 2,825
------- ------
$ 10,084 11,496
======= ======
</TABLE>
(5) Bank Loans
----------
The Company's Japanese subsidiary has loans with Bank of Yokohama and
Sakura Bank totalling $3,480 and $2,905 at September 30, 1994 and
1995, respectively. The floating interest rates to the banks ranged
from 4.0 percent to 4.75 percent in 1993, 3.4 percent to 4.4 percent
in 1994, and 1.6 percent to 2.6 percent in 1995. Such loans are
guaranteed by Siemens affiliates.
(6) Line of Credit
--------------
These financial statements assume intercompany borrowings from the
Parent of $18,900 for all periods. Interest expense has been
calculated at floating market rates for each of the periods
presented, which was 8.8 percent, 6.7 percent, and 6.2 percent for
the years ended September 30, 1993, 1994, and 1995, respectively.
In addition, these financial statements assume non-interest bearing
advances from Siemens AG of $7,000 for all periods presented which
will be repaid by the Company from the proceeds of the Offering.
(7) Lease Commitments
-----------------
The Company leases operating facilities and equipment under operating
leases which expire at various dates through 2001. The lease
agreements require payment of real estate taxes, insurance, and
maintenance expenses by the Company.
F-10
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements, Continued
(dollars in thousands)
(7) Lease Commitments (continued)
-----------------
Future minimum lease payments under noncancelable operating leases as
of September 30, 1995, are:
<TABLE>
<CAPTION>
Year Ending September 30, Total
------------------------- -----
<S> <C>
1996 $1,130
1997 928
1998 538
1999 248
2000 185
2001 and thereafter 45
</TABLE>
Rent expense charged to operations for the years ended September 30,
1993, 1994, and 1995, approximates $1,335, $1,306, and $1,300,
respectively.
(8) Employee Benefit Plans
----------------------
Substantially all of the Company's U.S. and German employees
participate in defined benefit pension plans. The Company's U.S.
plan began in fiscal 1995.
The following table sets forth the funded status of the plans at
September 30, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested employees $ 810 1,363
Nonvested employees 1,010 1,709
------ -----
Accumulated benefit obligation 1,820 3,072
Effects of assumed future compensation increase 357 880
------ -----
Projected benefit obligation 2,177 3,952
Plan assets -- --
------ -----
Projected benefit obligation in excess of 2,177 3,952
plan assets
Unrecognized net gain 663 465
Unrecognized prior service cost -- (655)
------ -----
Accrued Pension Cost $ 2,840 3,762
====== =====
</TABLE>
F-11
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements, Continued
(dollars in thousands)
(8) Employee Benefit Plans (continued)
----------------------
<TABLE>
<CAPTION>
The pension costs of the following components for the years ended
September 30, 1993, 1994, and 1995:
1993 1994 1995
----- ---- ----
<S> <C> <C> <C>
Service cost $ 199 203 391
Interest on projected benefit
obligations 141 144 229
Amortization of unrecognized prior
service cost -- -- 63
Amortization of unrecognized gain -- (2) (32)
----- ---- ----
Net pension cost $ 340 345 651
===== ==== ====
</TABLE>
Pensions generally provide benefits based on years of service. A
discount rate for the U.S. of 7.5 percent (7.0 percent for foreign
plan) as of September 30, 1993 and 1995, and 8.0 percent (7.5 percent
for foreign plan) as of September 30, 1994, is assumed. Increases in
future compensation levels for the plan are projected at 5 percent.
Prior service costs and actuarial gains and losses are generally
amortized over the average remaining service period of active
employees.
The Company has a 401(k) profit-sharing plan for the benefit of all
eligible U.S. employees, as defined by the plan. Participating
employees may contribute up to 16 percent of their qualified annual
compensation. The Company matches 50 percent of the first 6 percent
of the employees' compensation contributed as a salary deferral.
Company contributions for the years ended September 30, 1993, 1994,
and 1995, are $103, $95, and, $115, respectively.
(9) Income Taxes
------------
Income (loss) before income taxes is attributable to the following
geographic regions for the years ended September 30, 1993, 1994, and
1995:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
United States $ (4,598) 1,315 649
Germany (15,257) (3,845) 5,631
France 21 140 289
Italy (250) 93 193
Japan (1,302) (819) (497)
------- ----- -----
$ (21,386) (3,116) 6,265
======= ===== =====
</TABLE>
F-12
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements, Continued
(dollars in thousands)
(9) Income Taxes (continued)
------------
The provision for income tax expense (benefit) is comprised of the
following amounts:
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Current:
United States $ -- -- --
Foreign -- (94) 576
----- ----- -----
Total current -- (94) 576
Deferred:
United States (1,565) 465 249
Foreign -- (1,793) 2,227
----- ----- -----
Total deferred (1,565) (1,328) 2,476
----- ----- -----
Total income tax expense $ (1,565) (1,422) 3,052
(benefit) ===== ===== =====
</TABLE>
Statutory tax rates in the U.S., Italy, France, and Japan approximate
35 percent, 52 percent, 37 percent (33 percent in 1993 and 1994), and
52 percent, respectively, for all periods presented.
German corporate tax law applies the imputation system with regard to
the taxation of the income of a corporation (such as Rofin-Sinar
Laser GmbH (RSL)) and its stockholders (such as Rofin-Sinar
Technologies Inc. (RST)). In general, retained corporate income is
subject to a municipal trade tax (which for Hamburg and Gunding on a
combined basis is 16.7%), which is deductible for federal corporate
income tax purposes, a federal corporate income tax rate of 45% (50%
prior to January 1, 1994) and, effective January 1, 1995, a surcharge
of 7.5% on the federal corporate income tax amount.
Profits which are distributed by a German corporate taxpayer (such as
RSL) in the form of a dividend are subject to a reduced federal
corporate income tax rate of 30% (36% prior to January 1, 1994) plus
the 7.5% surcharge on the federal corporate income tax amount
calculated at the reduced rate. Dividends paid by RSL to RST are
subject to a withholding tax at a rate of 5% pursuant to the income
tax treaty currently in effect between the United States and Germany.
Tax expense and deferred taxes have been recorded at rates assuming
all earnings of RSL will be dividended to RST.
F-13
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements, Continued
(dollars in thousands)
(9) Income Taxes (continued)
------------
The difference between actual income tax expense and the amount
computed by applying the U.S. federal income tax rate of 35 percent
is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense (benefit) $(7,485) (1,060) 2,353
Foreign operating loss for which no benefit is
recognized 8,378 421 257
Difference between U.S. and foreign statutory
rates (2,233) (387) 446
Change in foreign tax rate (19) (365) 147
Other (206) (31) (151)
--- -- ---
Actual tax expense (benefit) $(1,565) (1,422) 3,052
===== ===== =====
</TABLE>
The tax effects of temporary differences that give rise to the net
deferred tax assets are as follows:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Foreign:
German reorganization benefits $ 3,708 3,621
Net operating loss carryforwards 4,155 2,157
Other, net 234 283
------- ------
8,097 6,061
United States:
Bad debt allowance 105 105
Accrued liabilities 573 980
Inventory 1,058 1,300
Net operating loss carryforward 5,257 4,340
Other 42 60
------- ------
Gross deferred tax assets 15,132 12,846
Less: Valuation allowance 2,192 2,028
------- ------
Net deferred tax assets 12,940 10,818
</TABLE>
F-14
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements, Continued
(dollars in thousands)
(9) Income Taxes (continued)
------------
<TABLE>
<CAPTION>
Deferred tax liabilities:
Foreign:
<S> <C> <C>
Depreciation (2,227) (2,501)
Inventory (435) (916)
Bad debt allowance (87) (297)
Accrued liabilities (582) (519)
------- ------
(3,331) (4,233)
------- ------
Net deferred income tax assets $ 9,609 6,585
======= ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. Based
upon the level of historical taxable income and projections for
future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely than not
that the Company will realize the benefits of these deductible
differences, net of the existing valuation allowances at September
30, 1995.
At September 30, 1995, the Company has U.S. federal net operating
loss carryforwards available of $12,400, which expire in 2002, and
Japanese net operating loss carryforwards of $3,900, which expire in
2000. Upon the consummation of the Offerings, the utilization by the
Company of its U.S. net operating loss carry forwards will be subject
to limitation under Section 382 of the Internal Revenue Code of 1986,
as amended.
Pursuant to tax arrangements between the Company and Siemens in
Germany, certain prior period net operating losses of the Company in
Germany have been used by Siemens and are not available to the
Company to reduce future income tax liabilities in Germany.
(10) Related Party Transactions
--------------------------
The Company purchases certain goods and services from Siemens AG and
its affiliates. The amount of such purchases, which are primarily
raw material inventories, is $2,204, $2,704 and $2,445 for the years
ended September 30, 1993, 1994, and 1995, respectively. The Company
also recorded sales to Siemens AG and its affiliates totaling $1,598,
$2,890 and $1,241 for the years ended September 30, 1993, 1994, and
1995, respectively.
The Company also had sales to one of its joint venture partners in
Japan amounting to $255 in 1993, $1,323 in 1994, and $2,172 in 1995.
F-15
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements, Continued
(dollars in thousands)
(11) Geographic Information
----------------------
Assets, revenues and income (loss) before taxes, by geographic
region, at September 1994 and 1995 and for the years ended September
30, 1993, 1994, and 1995, are summarized below:
<TABLE>
<CAPTION>
1994 1995
---- ----
Assets
------
<S> <C> <C>
United States $ 21,692 28,129
Germany 52,129 59,678
Other 7,990 9,524
Intercompany eliminations (5,144) (6,336)
--------- ---------
Total $ 76,667 90,995
========= =========
</TABLE>
<TABLE>
<CAPTION>
Total Business Intersegment Revenue External Revenues
----------------------------- -------------------------------- -------------------------
1993 1994 1995 1993 1994 1995 1993 1994 1995
---- ---- ---- ---- ---- ---- ---- ---- ----
Revenues
- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 25,371 30,627 35,189 2,636 1,668 3,595 22,735 28,959 31,594
Germany 42,490 44,479 70,020 13,881 12,884 21,419 28,609 31,595 48,601
Other 9,889 8,936 12,534 1,199 273 263 8,690 8,663 12,271
Intercompany eliminations (17,716) (14,825) (25,277) (17,716) (14,825) (25,277) -- -- --
-------- ------- ------- ------ ------ ------ ------ ------ -------
Total $ 60,034 69,217 92,466 -- -- -- 60,034 69,217 92,466
======== ======= ======= ====== ====== ====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
Income (Loss) Before Taxes
- --------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
United States $ (4,598) 1,315 649
Germany (15,257) (3,845) 5,631
Other (1,531) (586) (15)
-------- ------ -----
Total $(21,386) (3,116) 6,265
========= ====== =====
</TABLE>
F-16
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Combined Balance Sheet (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Assets June 30, 1996
------ -------------
<S> <C>
Current assets:
Cash $ 1,260
Trade accounts receivable 36,696
Allowance for doubtful accounts (1,120)
--------
Trade accounts receivable, net 35,576
Other accounts receivable 1,419
Inventories (note 2) 34,142
Prepaid expenses 183
Deferred income tax assets - current 5,721
--------
Total current assets 78,301
Property and equipment, at cost 40,217
Less accumulated depreciation (15,241)
--------
Property and equipment, net 24,976
Deferred income tax assets - noncurrent 1,085
Other assets 147
--------
Total assets $104,509
========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Line of credit (note 4) $ 18,900
Loan from affiliate (note 4) 6,687
Advances from parent (note 4) 7,000
Accounts payable, trade 5,819
Income taxes payable 4,177
Accrued liabilities (note 3) 16,442
Deferred income tax liability - current 1,139
--------
Total current liabilities 60,164
Pension obligations 3,369
Minority interests 22
--------
Total liabilities 63,555
Stockholders' equity:
Parent's capital 38,177
Cumulative foreign currency translation adjustment 2,777
--------
Total stockholders' equity 40,954
--------
Total liabilities and stockholders' equity $104,509
========
</TABLE>
See accompanying notes to combined financial statements.
F-17
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Combined Statements of Operations (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
---------------------------
1995 1996
---- ----
<S> <C> <C>
Net sales $65,460 $83,372
Cost of goods sold 40,475 51,466
------- -------
Gross profit 24,985 31,906
Selling, general, and administrative expenses 14,534 15,221
Research and development expenses 5,903 5,850
------- -------
Income from operations 4,548 10,835
Other expense (income):
Interest expense, net (note 4) 947 790
Minority interest 2 6
Miscellaneous 110 (53)
------- -------
Total other expense 1,059 743
------- -------
Income before income taxes 3,489 10,092
Income tax expense 1,725 4,354
------- -------
Net income $ 1,764 $ 5,738
======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-18
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Combined Statements of Stockholders' Equity
(dollars in thousands)
<TABLE>
<CAPTION>
Cumulative
Foreign
Currency Total
Parent's Translation Stockholders'
Capital Adjustment Equity
------- ---------- ------
<S> <C> <C> <C>
Balances at September 30, 1995 $34,224 5,449 39,673
Foreign currency translation -- (2,672) (2,672)
adjustment
Capital distributions to Parent (1,785) -- (1,785)
Net income 5,738 -- 5,738
------- ------ ------
Balances at June 30, 1996 $38,177 2,777 40,954
======= ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-19
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Combined Statements of Cash Flows (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine months ended June 30,
--------------------------
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $1,764 $5,738
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 1,773 1,830
Loss on disposal of property and equipment 369 19
Deferred income taxes 2,787 1,245
Minority interest in losses of subsidiary 2 6
Change in operating assets and liabilities:
Trade accounts receivable (7,349) (11,933)
Other accounts receivable (146) (354)
Inventories (3,548) (6,097)
Prepaid expenses and other 62 56
Accounts payable, trade 7,384 263
Income taxes payable -- 4,382
Accrued liabilities and pension obligation (494) 4,636
--- -----
Net cash provided (used) by operating 2,604 (209)
activities ----- ---
Cash flows from investing activities:
Additions to furniture and equipment (1,448) (1,393)
Proceeds from sale of furniture and equipment 100 --
Investment in subsidiary (18) --
-- -----
Net cash used by investing activities (1,366) (1,393)
----- -----
Cash flows from financing activities:
Decrease in parent capital (1,293) (1,785)
Borrowings from affiliate -- 6,921
Repayments to bank (94) (2,905)
-- -----
Net cash provided (used) by financing (1,387) 2,231
activities ----- -----
Effect of foreign currency translation on cash 87 (60)
-- --
Net increase (decrease) in cash and cash (62) 569
equivalents
Cash at beginning of period 839 691
--- ---
Cash at end of period $777 $1,260
=== =====
Cash paid during the period for interest $60 $90
--- ---
Cash paid (received) during the period for
income taxes $ -- $ --
===== =====
</TABLE>
See accompanying notes to combined financial statements.
F-20
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements (Unaudited)
(dollars in thousands)
(1) Basis of Presentation
---------------------
The accompanying unaudited combined financial statements have been
prepared by management and in the opinion of management, contain all
adjustments, consisting of normal recurring adjustments, necessary
to present fairly the financial position of the Company as of June
30, 1996, and the results of its operations and cash flows for each
of the nine months ended June 30, 1995 and 1996. Results for interim
periods are not necessarily indicative of those to be expected for
the year.
The accompanying unaudited financial statements do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. The
accompanying unaudited financial statements should be read in
conjunction with the more detailed audited financial statements and
footnotes included in the Registration Statement.
(2) Inventories
-----------
Inventories are summarized as follows at June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Finished goods $ 6,699
Work in process 7,535
Raw materials and supplies 10,094
Demo inventory 4,609
Service parts 5,205
-------
Total inventories $34,142
=======
</TABLE>
(3) Accrued Liabilities
-------------------
At June 30, 1996, accrued liabilities are comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
Employee compensation $ 5,910
Warranty reserves 4,561
Customer deposits 1,868
Other 4,103
--------
$ 16,442
========
</TABLE>
(4) Debt
----
These financial statements assume interest bearing intercompany
borrowings from Siemens AG in both the United States and Germany
totaling $18,900. Interest expense has been calculated at floating
market rates for each of the periods presented, which was 6.2 percent
and 4.9 percent at June 30, 1995 and 1996, respectively. The Company
is negotiating a bank commitment to refinance these borrowings
approximately one week after the consummation of the Offering.
F-21
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Notes to Combined Financial Statements (Unaudited)
(dollars in thousands)
(4) Debt (continued)
----
In addition, these financial statements assume non-interest bearing
advances from Siemens AG of $7,000. This amount will be repaid from
proceeds upon the closing of the common stock offering.
The Company's Japanese subsidiary has loans with an affiliate of
Siemens totaling $6,687 at June 30, 1996. The Company has paid
interest at a floating market rate which was 2 percent at June 30,
1996.
(5) Subsequent Event
----------------
The Company intends to file a Registration Statement with the
Securities and Exchange Commission relating to the issuance and
registration of 10,000,000 shares of common stock (before the
exercise of the underwriters' over-allotment option).
F-22
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or any of the Underwriters. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the shares of Common Stock to which it relates or
an offer to, or a solicitation of, any person in any jurisdiction where such an
offer or solicitation would be unlawful. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that the information contained herein is correct as of any time
subsequent to the date hereof.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Prospectus Summary ....................................................... 3
Risk Factors ............................................................. 7
Use of Proceeds .......................................................... 12
Dividend Policy .......................................................... 13
Capitalization ........................................................... 15
Selected Combined Financial Information
and Operating Data ..................................................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................................................. 17
Business ................................................................. 25
Management ............................................................... 44
Ownership of Common Stock ................................................ 53
Certain Transactions ..................................................... 53
Description of Capital Stock ............................................. 55
Shares Eligible for Future Sale .......................................... 59
Certain United States Federal Tax
Considerations for Non-U.S. Holders of
Common Stock ........................................................... 61
Underwriting ............................................................. 64
Legal Matters ............................................................ 67
Experts .................................................................. 67
Additional Information ................................................... 67
Glossary of Selected Technical Terms ..................................... 68
Index to Financial Statements ............................................ F-1
</TABLE>
Until _____, 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Stock, whether or not participating in this
distribution, may be required to deliver a Prospectus. This is in addition to
the obligations of dealers to deliver a Prospectus when acting as Underwriters
and with respect to their unsold allotments or subscriptions.
[ROFIN-SINAR LOGO APPEARS HERE]
10,000,000 Shares
Common Stock
Deutsche Morgan Grenfell
Alex. Brown & Sons
Incorporated
Lehman Brothers
Prospectus
, 1996
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table shows the expenses, other than underwriting
discounts and commissions, to be incurred in connection with the sale and
distribution of the securities being registered. Except for the SEC
registration fee, the NASD filing fee and the Nasdaq National Market
quotation fee, all of the following amounts are estimates.
<TABLE>
<CAPTION>
Amount
to Be Paid
----------
<S> <C>
SEC Registration Fee $39,656
NASD Filing Fee 12,000
Nasdaq National Market Quotation Fee *
Blue Sky Fees and Expenses 20,000
Legal Fees and Expenses *
Accounting Fees and Expenses *
Printing Expenses *
Miscellaneous Expenses *
------------
Total $ *
============
The Company will bear a pro rata portion of the foregoing expenses
equal to the proportion between $13 million and the total gross proceeds
from the Offerings.
</TABLE>
_________________
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides, in
summary, that directors and officers of Delaware corporations are
entitled, under certain circumstances, to be indemnified against all
expenses and liabilities (including attorney's fees) incurred by them as a
result of suits brought against them in their capacity as a director or
officer, if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the Company,
and, with respect to any criminal action or proceeding, if they had no
reasonable cause to believe their conduct was unlawful; provided that no
indemnification may be made against expenses in respect of any claim,
issue or matter as to which they shall have been adjudged to be liable to
the Company, unless and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
case, they are fairly and reasonably entitled to indemnification for such
expenses which the court shall deem proper. Any such indemnification may
be made by the Company only as authorized in each specific case upon a
determination by the shareholders or disinterested directors that
indemnification is proper because the indemnitee has met the applicable
standard of conduct. The Certificate of Incorporation of the Company
permits indemnification of its directors and officers to the maximum
extent permitted by Delaware law, as the same may be amended from time to
time.
The Company has in effect a directors and officers liability
insurance policy indemnifying the directors and officers of the Company
for certain liabilities incurred by them, including liabilities under the
Securities Act. The Company pays the entire premium of this policy.
II-1
<PAGE>
The Company's Certificate of Incorporation contains a provision that
eliminates the personal liability of directors of the Company for monetary
damages for certain breaches of fiduciary duty, as permitted by Section
102(b)(7) of the Delaware General Corporation Law.
Pursuant to the Underwriting Agreement between the Company and the
Underwriters included as Exhibit 1 to this Registration Statement, the
officers and directors of the Company are indemnified by the Underwriters
against certain civil liabilities under the Securities Act.
Item 15. Recent Sales of Unregistered Securities.
Other than one share issued to Siemens Power Corporation upon the
Registrant's incorporation, no securities of the Registrant have been
issued or sold by the Registrant in the last three years.
Item 16. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
(a) Exhibits:
Page
----
<S> <C>
1.1 -- Form of Underwriting Agreement*
3.1 -- Form of Restated Certificate of Incorporation of the
Company*
3.2 -- By-laws of the Company*
4.1 -- Specimen Certificate of Common Stock*
5.1 -- Opinion of Shearman & Sterling as to the validity of
Common Stock*
10.1 -- Sale and Transfer Agreement, dated as of _____ __, 1996,
between Siemens Aktiengesellschaft and Rofin-Sinar
Technologies Inc.*
10.2 -- Sale and Transfer Agreement, dated as of ______ __,
1996, by and among Siemens Power Corporation and
Rofin-Sinar Technologies Inc.*
10.3 -- Tax Allocation and Indemnification Agreement, dated as
of __________ __, 1996 among Rofin-Sinar Technologies
Inc., Rofin-Sinar Inc. and Siemens Power Corporation*
10.4 -- Joint Venture Agreement, dated as of May 27, 1992, by
and among Rofin Sinar Laser GmbH, Marubeni
Corporation and Nippei Toyama Corporation
10.5 -- Cooperation Agreement, dated as of May 27, 1992, among
Nippei Toyama Corporation, Rofin-Sinar Laser GmbH and
Marubeni Corporation
10.6 -- Cooperation Agreement, dated as of May 27, 1992, among
Rofin Sinar Laser GmbH, Marubeni Corporation and
Nippei Toyama Corporation
10.7 -- Inheritable Building Right (Erbbaurecht), dated as of
March 1, 1990, between Rofin Sinar Laser
GmbH and Lohss GmbH (in German, English summary
provided)
10.8 -- Lease Agreement, dated August 10, 1990, between Josef
and Maria Kranz and Rofin Sinar Laser GmbH (in
German, English summary provided)
10.9 -- Lease Agreement, dated June 14, 1989, between DR
Group and Rofin-Sinar Incorporated (Mast Street property)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
10.10 -- Lease Agreement, dated March 25, 1993, between DR
Group and Rofin-Sinar Incorporated (Plymouth Oaks
Drive property)
10.11 -- Rofin-Sinar Laser GmbH Pension Plan (in German, English
summary provided)*
21.1 -- List of Subsidiaries of the Registrant
23.1 -- Consent of KPMG Peat Marwick LLP
24.1 -- Power of Attorney is contained on page II-5 of this
Registration Statement
27.1 -- Financial Data Schedule for fiscal year ended September
30, 1995
27.2 -- Financial Data Schedule for nine months ended June 30,
1996
-------------------------------
</TABLE>
*To be filed by amendment.
(b) Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
All other supplementary schedules relating to the registrant are
omitted because they are not required or because the required information,
where material, is contained in the Consolidated Financial Statements or
Notes thereto.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, as amended (the "Act"), the information omitted
from the form the prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described above under Item 14
"Indemnification of Directors and Officers," or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of a Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of their counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction
II-3
<PAGE>
the question whether such indemnification is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The Registrant hereby further undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as
required by the Underwriters to permit prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on August 2, 1996.
Rofin-Sinar Technologies Inc.
By: /s/ Peter Wirth
----------------------------------
Peter Wirth
Chairman of the Board of Directors,
Chief Executive Officer and President
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Rofin-Sinar
Technologies Inc., hereby severally constitute and appoint Peter Wirth and
Gunther Braun, and each of them singly, our true and lawful attorneys or
attorney to execute in our names, in the capacities indicated below, any
and all amendments to this Registration Statement on Form S-1, and all
instruments necessary or incidental in connection therewith, and to file
the same with the Securities and Exchange Commission. Each of said
attorneys shall have power to act hereunder with or without any other of
said attorneys, and shall have full power of substitution and
resubstitution. Each of said attorneys shall have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as duly and to all intents and
purposes as each of the undersigned might or could do in person, and each
of the undersigned hereby ratifies and approves the acts of said attorneys
and each of them.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and as of the 2 day of August, 1996.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Peter Wirth Chairman of the Board of August 2, 1996
- -------------------- Directors, Chief Executive Officer
Peter Wirth and President
/s/ Hinrich Martinen Executive Vice President, August 2, 1996
- -------------------- Research and
Hinrich Martinen Development/Operations, Chief
Technical Officer and Director
/s/ Gunther Braun Executive Vice President, Finance August 2, 1996
- --------------------- and Administration, Chief
Gunther Braun Financial Officer and Director
</TABLE>
II-5
<PAGE>
SCHEDULE II
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
Valuation and Qualifying Accounts
Years ended September 30, 1993, 1994, and 1995
(thousands of dollars)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Balance at Charged to costs Balance at
Description beginning of period and expenses Deductions end of period
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
September 30, 1993 1,035 1,513 (553) 1,995
September 30, 1994 1,995 831 (1,821) 1,005
September 30, 1995 1,005 1,549 (1,302) 1,252
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<C> <S> <C>
1.1 -- Form of Underwriting Agreement*
3.1 -- Form of Restated Certificate of Incorporation of the
Company*
3.2 -- By-laws of the Company*
4.1 -- Specimen Certificate of Common Stock*
5.1 -- Opinion of Shearman & Sterling as to the validity of
Common Stock*
10.1 -- Sale and Transfer Agreement, dated as of _____ __, 1996,
between Siemens Aktiengesellschaft and Rofin-Sinar
Technologies Inc.*
10.2 -- Sale and Transfer Agreement, dated as of ______ __,
1996, by and among Siemens Power Corporation and
Rofin-Sinar Technologies Inc.*
10.3 -- Tax Allocation and Indemnification Agreement, dated
as of ________ __, 1996, among Rofin-Sinar Technologies
Inc., Rofin-Sinar Inc. and Siemens Power Corporation*
10.4 -- Joint Venture Agreement, dated as of May 27, 1992, by
and among Rofin Sinar Laser GmbH, Marubeni
Corporation and Nippei Toyama Corporation
10.5 -- Cooperation Agreement, dated as of May 27, 1992, among
Nippei Toyama Corporation, Rofin-Sinar Laser GmbH and
Marubeni Corporation
10.6 -- Cooperation Agreement, dated as of May 27, 1992, among
Rofin Sinar Laser GmbH, Marubeni Corporation and
Nippei Toyama Corporation
10.7 -- Inheritable Building Right (Erbbaurecht), dated as of
March 1, 1990, between Rofin Sinar Laser
GmbH and Lohss GmbH (in German, English summary
provided)
10.8 -- Lease Agreement, dated August 10, 1990, between Josef
and Maria Kranz and Rofin Sinar Laser GmbH (in
German, English summary provided)
10.9 -- Lease Agreement, dated June 14, 1989, between DR
Group and Rofin-Sinar Incorporated (Mast Street property)
10.10 -- Lease Agreement, dated March 25, 1993, between DR
Group and Rofin-Sinar Incorporated (Plymouth Oaks
Drive property)
10.11 -- Rofin-Sinar Laser GmbH Pension Plan (in German, English
summary provided)*
21.1 -- List of Subsidiaries of the Registrant
23.1 -- Consent of KPMG Peat Marwick LLP
24.1 -- Power of Attorney is contained on page 11-5 of this
Registration Statement
27.1 -- Financial Data Schedule for fiscal year ended September
30, 1995
27.2 -- Financial Data Schedule for nine months ended June 30,
1996
</TABLE>
- ---------------------------------
*To be filed by amendment.
<PAGE>
EXHIBIT 10.4
JOINT VENTURE AGREEMENT
-----------------------
THIS AGREEMENT entered into this 27th day of May 1992, by and among Rofin Sinar
Laser GmbH, a corporation duly organized and existing under the laws of the
Federal Republic of Germany, with its principal office at Berzeliusstrasse 87,
Postfach 740360, 2000 Hamburg 74, Billbrookdeich 186, the Federal Republic of
Germany (hereinafter called "RSL"), Marubeni Corporation, a corporation duly
organized and existing under the laws of Japan, with its principal office at 4 -
2, Ohtemachi 1-chome, Chiyoda-ku, Tokyo, Japan (hereinafter called "MARUBENI"),
and Nippei Toyama Corporation, a corporation duly organized and existing under
the laws of Japan, with its principal office at World Trade Center, 33rd Floor,
2-4-1, Hamamatsucho, Minato-ku, Tokyo, Japan (hereinafter called "NTC"),
WITNESSETH:
WHEREAS, RSL is engaged in, among other things, the business of development,
manufacturing and sale of laser systems and related products;
WHEREAS, MARUBENI is engaged in, among other things, the business of promoting
the sale and distribution of various goods throughout the world;
<PAGE>
WHEREAS, NTC is engaged in, among other things, the business of development and
research of application of various engineering and technical matters;
WHEREAS, RSL, MARUBENI and Nippei Toyama institute, an AFFILIATE of NTC, entered
into a Joint Venture Agreement dated August 20, 1985 (hereinafter called the
"Original Joint Venture Agreement") pursuant to which they established a new
company in Japan called "Marubeni Rofin Laser Kabushiki Kaisha" in Japanese and
"Rofin Marubeni Laser Corporation" in English (hereinafter called the "Company")
for the principal purpose of manufacturing and selling power supplies for a
certain C02 Laser;
WHEREAS, the parties have agreed to change their shareholding ratio in the
Company; and
WHEREAS, the parties have also agreed that the activities of the Company will be
expanded to include the manufacture and sale of other equipment such as laser
heads.
NOW, THEREFORE, for and in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby set forth their agreement as
follows:
SECTION 1. DEFINITIONS
- -----------------------
When used in this Agreement, each of the terms set forth in this SECTION 1 shall
have the respective meaning indicated:
2
<PAGE>
1.1 "EFFECTIVE DATE"
----------------
The date on which the last of the approvals provided for in SECTION 13
hereof has been obtained or, as the case may be, the period for comment by
the relevant governmental authority has expired, but in any event not
earlier than October 1, 1992.
1.2 "ASSOCIATED AGREEMENTS"
-----------------------
The agreements relating to this Agreement and set forth in SECTION 3 hereof
which previously have been entered into or which are to be entered into
hereafter between the Company and the respective party to this Agreement.
1.3 "SHARES"
--------
Those shares of par value common voting stock which were issued by the
Company to the parties hereto in exchange for their respective
contributions made pursuant to the Original Joint Venture Agreement and
which are to be made pursuant to SECTION 2 hereof, as well as any
additional shares of par value common voting stock of the Company which may
be issued from time to time.
1.4 "PRODUCTS"
----------
Lasers for industrial applications.
3
<PAGE>
1.5 "AFFILIATE"
-----------
Any corporation, other juridical entity, partnership or other business
enterprise which qualifies under any of the following:
(1) Which owns or controls, directly or indirectly, fifty percent (50%) or
more of the voting rights with respect to the election of directors of
any party hereto;
(2) Of which fifty percent (50%) or more of the voting rights with
respect to the election of directors is owned or controlled, directly
or indirectly, by any party hereto; or
(3) Of which fifty percent (50%) or more of the voting rights with respect
to the election of directors is owned or controlled, directly or
indirectly, by any corporation, other juridical entity, partnership or
other business enterprise qualifying under either item (1) or (2)
above.
SECTION 2. RESTRUCTURING OF THE COMPANY
- ----------------------------------------
2.1 Authorized Capital and Paid-In Capital of the Company
-----------------------------------------------------
At the time of the organization and registration of the Company, the
Company had an initial authorized capital of fifty million Yen
((Yen)50,000,000) and a total paid-in capital of fifty million Yen
((Yen)50,000,000). Such capital shall be increased as follows:
4
<PAGE>
The Company shall have an authorized capital of two hundred million Yen
((Yen)200,000,000) and a total paid-in capital of two hundred million Yen
((Yen)200,000,000).
2.2 Capital Contributions by MARUBENI, RSL and NTC of Initial Authorized
--------------------------------------------------------------------
Capital
-------
Of the initial paid-in capital of the Company, MARUBENI has contributed in
cash the sum of twenty five million five hundred thousand Yen
((Yen)25,500,000) in exchange for the issuance by the Company of five
hundred ten (510) SHARES of the Company having a par value of fifty
thousand Yen ((Yen)50,000) per SHARE. RSL has contributed in cash the sum
of fifteen million Yen ((Yen)I5,000,000) in exchange for the issuance by
the Company of three hundred (300) SHARES of the Company having a par value
of fifty thousand Yen ((Yen)50,000) per SHARE. NTC has contributed in cash
the sum of nine million five hundred thousand Yen ((Yen)9,500,000) in
exchange for the issuance by the Company of one hundred ninety (190) SHARES
of the Company having a par value of fifty thousand Yen ((Yen)50,000) per
SHARE.
2.3 Capital Increase
----------------
As soon as practically possible after the EFFECTIVE DATE, the parties
hereto shall cause an extra-ordinary meeting of the shareholders of the
Company to be held. At such meeting each party hereto undertakes to vote
its SHARES so as to increase the Company's authorized capital by one
hundred fifty million Yen
5
<PAGE>
((Yen)150,000,000) to hundred million Yen ((Yen)200,000,000).
Such increased capital shall be subscribed to by the parties hereto (and
each SHARE shall be fully paid up in cash) in the following manner.
RSL shall contribute the sum of one hundred two million Yen
((Yen)102,000,000) in exchange for the issuance by the Company of two
thousand forty (2,040) SHARES of the Company having a par value of fifty
thousand Yen ((Yen)50,000) per SHARE. MARUBENI shall contribute the sum of
seventy four million Yen ((Yen)74,000,000) in exchange for the issuance by
the Company of one thousand four hundred eighty (1,480) SHARES of the
Company having a par value of fifty thousand Yen ((Yen)50,000) per SHARE.
NTC shall contribute the sum of twenty four million Yen ((Yen)24,000,000)
in exchange for the issuance by the Company of four hundred eighty (480)
SHARES of the Company having a par value of fifty thousand Yen
((Yen)50,000) per SHARE.
After the parties' aforementioned contributions, the parties' respective
shareholding ratio in the Company shall be as follows:
RSL - fifty one percent (51%);
MARUBENI - thirty seven percent (37%); and
NTC - twelve percent (12%).
6
<PAGE>
2.4 Change of the Company's Name
----------------------------
At the extra-ordinary meeting of shareholders referred to in Paragraph 2.1
above, each party hereto also undertakes to vote its SHARES to change the
Company's name (as set forth in Paragraph 1.1 of the original Joint Venture
Agreement) so that henceforth the Company's name in Japanese and English
shall be "Rofin Marubeni Laser Kabushiki Kaisha" and "Rofin Marubeni Laser
Corporation", respectively.
2.5 Amendment of the Company's Articles of Incorporation
At the extra-ordinary meeting of shareholders referred to in Paragraph 2.1
above, each party hereto also undertakes to vote its SHARES to amend the
Company's articles of incorporation to conform to that attached hereto as
Exhibit 1. Said amended articles of incorporation shall be filed (and any
necessary related procedures shall be taken) by the Company with the
relevant Japanese governmental authorities.
2.6 Organizational Costs
--------------------
All costs and expenses of the registration of the capital increase and the
amendment of the Company's article of incorporation shall, to the extent
permitted by applicable law, be borne by the Company. Expenses incurred by
each party hereto up to the time of execution of this Agreement, including
travel expenses and legal fees, shall be borne by the party so incurring
such expenses.
7
<PAGE>
SECTION 3. ASSOCIATED AGREEMENTS
- ----------------------------------
3.1 On or before the EFFECTIVE DATE, the following agreements shall be entered
into between the relevant parties substantially in the forms annexed
hereto:
(1) Distributorship Agreement between RSL and the Company (Exhibit II).
(2) Local Distributorship Agreement between MARUBENI and the Company
(Exhibit III), which, when entered into, shall supersede the Sole
Distributorship Agreement between the Company and MARUBENI dated
September 1, 1985;
(3) Real Property Lease Agreement between RSL and the Company (Exhibit
IV);
(4) Building and Equipment Purchase Agreement between RSL and the
Company (Exhibit V); and
(5) Application Laboratory Purchase/Lease Agreement between MARUBENI and
the Company (Exhibit VI).
3.2 The following already existing agreements shall be amended in the forms
annexed hereto:
(6) License Agreement between RSL and the Company (Exhibit VII) together
with the amendment; and
(7) Plant and Equipment Lease Agreement between Nippei Toyama Institute,
NTC and the Company which shall expire on December 31st, 1994.
8
<PAGE>
SECTION 4. MANAGEMENT OF THE COMPANY
- -------------------------------------
4.1 The Board of Directors of the Company
-------------------------------------
Except as otherwise required by mandatory provisions of law or provided for
in the articles of incorporation of the Company, responsibility for the
management, direction and control of the Company shall be vested in the
board of directors of the Company. The articles of incorporation of the
Company shall provide for the election of seven (7) directors of the
Company.
4.2 Election of Directors
---------------------
The directors of the Company shall be elected at a general meeting of
shareholders. It is understood and agreed by the parties hereto that four
(4) of the directors of the Company shall be individuals nominated by RSL,
two (2) of the directors shall be individuals nominated by MARUBENI and one
(1) of the directors shall be an individual nominated by NTC. The right to
so nominate includes the right to replace the nominated individual.
4.3 Meetings of the Board of Directors of the Company
--------------------------------------------------
Meetings of the board off directors of the Company shall be convened and
conducted at regular intervals during each fiscal year of the Company.
Meetings of the board of directors shall be called by the President of the
Company.
9
<PAGE>
4.4 Matters to be Submitted to a General Shareholders Meeting
---------------------------------------------------------
The parties hereto shall cause the directors of the Company nominated by
them in accordance with Paragraph 4.2 hereof to submit the following
matters to a general meeting of shareholders for approval by an affirmative
vote of seventy-five percent (75%) of the shareholders present in person or
by proxy:
(1) Amendment of the articles of incorporation of the Company;
(2) Plan of assignment or sale etc. of an important part of the assets of
the Company, including its good will;
(3) All major new contracts or modifications of contracts to which the
Company and any of the parties hereto is a party;
(4) Approval of the Company's financial statements, i.e. , balance sheets
and profit and loss statements, and annual forecasts; and
(5) Any increase in the authorized capital of the Company or other capital
increase.
4.5 Representative Director
-----------------------
The Company shall have one (1) representative director, who shall be
elected by the board of directors of the Company from among the members of
the board nominated by RSL.
10
<PAGE>
4.6 Remuneration of the Directors of the Company
--------------------------------------------
The remuneration of the directors of the Company shall be determined by a
resolution of the general meeting of shareholders.
4.7 President
---------
The Company shall have a President who shall be the representative director
elected in accordance with Paragraph 4.5 hereof. The President shall serve
as the chief executive officer of the Company and, subject to the authority
of the board of directors, shall carry out the daily business of the
Company and shall preside at meetings of the board of directors.
4.8 Statutory Auditors
------------------
The Company shall have two (2) statutory auditors (Kansayaku), one of whom
shall be nominated by RSL and the other of whom shall be nominated by
MARUBENI and both of whom shall be elected at a general meeting of
shareholders.
4.9 Cooperation in Election of Directors, Representative Director and Statutory
---------------------------------------------------------------------------
Auditors
--------
Each party hereto hereby covenants and agrees to vote its SHARES of the
Company, and to cause the directors of the Company nominated by it to cast
their votes, so as to appoint as directors, representative director and
statutory auditors of the Company, as the case may be, individuals who
qualify under the foregoing
11
<PAGE>
provisions of this SECTION 4. In the event of the death, incapacity,
resignation or other removal of a director, representative director or
statutory auditor prior to the end of his term of office, each party hereto
agrees to vote its SHARES of the Company, or to cause the directors of the
Company nominated by it to cast their votes, so as to appoint as his
replacement a nominee who qualifies under the said foregoing provisions of
this SECTION 4.
4.10 Fiscal Year and Books of Account
--------------------------------
4.10.1 Fiscal Year
-----------
The accounting period of the Company shall commence on October 1
of each year and end on September 30 of the following year.
Accordingly, the current accounting period of the Company shall
end on September 30, 1992.
4.10.2 Books of Account
------ ----------------
The Company shall keep accurate books of account and financial and
related records in accordance with generally accepted Japanese
accounting practices, standards and procedures as prescribed by
the firm of certified public accountants to be designated pursuant
to Paragraph 4.11 hereof.
12
<PAGE>
4.11 Certified Public Accountants
----------------------------
At the end of each accounting period of the Company, the books of account
and records of the Company shall be audited, at the expense of the Company,
by a firm of certified public accountants licensed to practice in Japan,
and mutually acceptable to the parties hereto. Such firm of certified
public accountants shall prepare and supply to each party hereto certified
financial reports consisting of a balance sheet and profit and loss
statement suitable for use by each of the parties hereto in connection with
its financial and tax reports.
4.12 Additional Audits
-----------------
Any party hereto may request that an additional audit be performed by an
accountant of its choice who must be certified in Japan. The cost of the
additional audit will be borne by the party requesting the audit.
4.13 Reporting and Inspection of the Company's Records
-------------------------------------------------
Promptly after the close of each semi-annual period, the Company shall,
submit to each party hereto in the Japanese and English languages the
unaudited balance sheet and profit and loss statement of the Company in
respect of such semi-annual period. Further, the Company shall make
available at its principal place of business during normal business hours
to each party hereto and/or to its designated representative(s), its
13
<PAGE>
books of account and records for perusal and copying, if and when any party
hereto shall so request.
SECTION 5. BUSINESS AND OPERATIONS OF THE COMPANY
- -------------------------------------------------
5.1 Corporate Purposes of the Company
---------------------------------
The corporate purposes of the Company shall be to carry out the business
listed in Article 2 (Corporate Purposes) of its articles of incorporation.
5.2 Sale of the PRODUCTS by the Company and MARUBENI
------------------------------------------------
(1) The Company shall sell the PRODUCTS manufactured by RSL in the
territory defined in the Distributorship Agreement referred to in
Paragraph 3.1(1) hereof and the PRODUCTS to be manufactured by the
Company in the territory defined in the License Agreement referred to
Paragraph 3.2(6) hereof.
(2) MARUBENI will be appointed by the Company as its exclusive local
distributor in Japan for the sale of the PRODUCTS pursuant to the
Local Distributorship Agreement referred to in Paragraph 3.1(2)
hereof.
5.3 Manufacture of the PRODUCTS by the Company
------------------------------------------
The Company's manufacture of the PRODUCTS will be based on a license to use
the technology of RSL granted to the Company pursuant to the License
Agreement referred to in Paragraph 3.2(6) hereof.
14
<PAGE>
The Company shall be responsible for making any necessary modifications to
the PRODUCTS in order for them to meet the applicable Japanese standards
and the requirements of the Japanese market. Such modifications shall be
done after consulting with and obtaining the agreement of RSL.
5.4 RSL's Responsibilities to the Company
-------------------------------------
All technological aspects of manufacture of the PRODUCTS by the Company
shall be solely the responsibility of RSL, except for the quality of the
manufacturing process and after-sales services to be provided with respect
to the PRODUCTS, which shall be solely the responsibility of the Company.
In furtherance of the above, RSL shall, pursuant to the License Agreement
referred to in Paragraph 3.2(6) hereof, provide the Company with any and
all information, know-how and technical assistance (whether presently owned
or hereafter acquired) required or useful in order for the Company to
manufacture and sell the PRODUCTS and provide aftersales services.
Furthermore, RSL's obligations set forth above shall continue even if RSL
ceases to be a shareholder of the Company, if RSL does not terminate the
License Agreement, notwithstanding it no longer being a shareholder of the
Company.
15
<PAGE>
5.5 Plant and Equipment of the Company
----------------------------------
The Company shall perform its business for the time being on the basis of
the existing Plant and Equipment Lease Agreement referred to in Paragraph
3.2(7) hereof between Nippei Toyama Institute: NTC and the Company, which
shall terminate on December 31, 1994. After such date the Company shall
move to a new manufacturing facility to be purchased from RSL according to
the Building and Equipment Purchase Agreement referred to in Paragraph
3.1(4) hereof. The necessary real property for such manufacturing facility
shall be leased by RSL to the Company pursuant to the Real Property Lease
Agreement referred to in Paragraph 3.1(3) hereof.
5.6 After-Sales Services
--------------------
The Company shall provide after-sale services to RSL's OEM customers in
Japan and other territories as or to be agreed between RSL and the Company
whenever possible and RSL shall provide after-sales services to MARUBENI's
customers for the PRODUCTS worldwide whenever possible, in each case on
terms and conditions to be agreed by the relevant parties at the time of
each such provision.
16
<PAGE>
5. 7 Transfer of Personnel
---------------------
(1) On October 1, 1992 certain of MARUBENI's and NTC's personnel will be
dispatched to the Company, provided that they consent to such
dispatch, on a "Shukkoh" basis, i.e., said personnel shall work for
the Company while retaining their status as employees of MARUBENI or
NTC, as the case may be, as well as their membership in said party's
workers' union.
(2) The terms and conditions for such "Shukkoh" shall be as per the
"Shukkoh" Agreement attached hereto as Exhibit VIII in both English
and Japanese.
(3) On October 1, 1992 certain of RSL's personnel will be dispatched to
the Company. The terms and conditions of such dispatch shall be as
per the Agreement attached hereto as Exhibit IX in both German and
English.
SECTION 6. WORKING CAPITAL
- ---------- ---------------
The Company shall obtain its necessary working capital over and above its share
capital by commercial borrowings in Japan. If, as a condition to granting any
such loan, the lender requires a guarantee, unless otherwise agreed, RSL shall
provide the guarantee.
17
<PAGE>
SECTION 7. PRE-EMPTIVE RIGHTS; TRANSFER OF SHARES
- ---------------------------------------------------
7.1 Exclusion of transfer of SHARES
-------------------------------
In no event will any party hereto sell or assign any of the SHARES of the
Company held by it at any time within three (3) years from the EFFECTIVE
DATE, except as otherwise specifically permitted herein.
7.2 Pre-emptive Rights
------------------
Each party hereto, as a shareholder of the Company, shall have a pre-
emptive right to acquire its pro rata share of any additional SHARES which
the Company may issue in the future. It is expressly understood and agreed
that the failure of RSL to exercise its preemptive rights and to subscribe
to its portion of such additional SHARES, as aforesaid, for the reason that
any requisite validation, license or approval as may be required by
Japanese laws and regulations then in effect cannot be obtained therefor in
form and substance satisfactory to RSL, shall not be considered or deemed a
waiver by RSL of such pre-emptive rights or an election by RSL not to so
subscribe, and the rights of MARUBENI and NTC to subscribe to any portion
whatsoever of such additional SHARES shall be conditional upon RSL's
obtaining such validation, license or approval.
18
<PAGE>
7.3 General Restriction on Transfers, etc.
--------------------------------------
Except as otherwise expressly provided for in this SECTION 7, Paragraph
11.8 and the proviso of Paragraph 14.2 hereof, each party hereto mutually
covenants and agrees not to sell, assign or in any manner transfer any
title or rights to, or otherwise encumber, any of the SHARES of the Company
held by it, or pre-emptive rights to subscribe to additional SHARES
allotted to it, respectively, or to take any action leading to or likely to
result in any of the foregoing, but this shall not be construed as
prohibiting a general charge or pledge created upon the whole or the major
portion of the assets of any party hereto.
7.4 Right of First Refusal
----------------------
After expiration of the three (3) year period as per Paragraph 7.1, each
party hereto hereby extends to each of the other parties a right of first
refusal to purchase the SHARES of the Company held by it in the proportion
that the SHARES held by each such other party bears to the total
outstanding SHARES held by both of such other parties. Accordingly, if at
any time any party hereto desires to transfer all or any portion of the
SHARES of the Company held by it, such party shall inform the other two
parties in writing of the name of the third party to whom it intends to
sell such SHARES and the price per SHARE and other terms and conditions of
such proposed sale and first offer
19
<PAGE>
to sell said SHARES to the other two parties at the same price per SHARE
and on the same terms and conditions. Further, any such first offer shall
state that the offer being made shall remain effective until whichever of
the following events shall first occur:
(1) Dispatch by the party to whom such offer is made of a written notice
of rejection of the first offer so extended; or
(2) The lapse of ninety (90) days after the date of receipt of such first
offer by the party to whom such offer is made.
If the terms and conditions proposed by the offeror are not agreeable to
any party hereto to whom such offer is made, such parties shall negotiate
in good faith during the effective period of such first offer in an attempt
to reach agreement. Acceptance of any such first offer which has been made
pursuant to this Paragraph 7.4 shall be effective upon dispatch by the
party to whom such offer has been made of written notice of acceptance
thereof by registered airmail, postage prepaid, if such dispatch occurs
within ninety (90) days after the date of receipt of such offer.
7.5 Failure or Refusal to Accept First Offer
----------------------------------------
If, after a first offer has been extended pursuant to Paragraph 7.4 hereof,
any offeree shall reject or fail to accept the offer for all or any portion
of the SHARES of the Company so offered to it within ninety
20
<PAGE>
(90) days after the date of receipt by it of such offer, the offeror shall
have the right, for a period of one hundred twenty (120) days, to offer
such SHARES or the remaining portion thereof, as the case may be, to any
third party at the same or a higher purchase price per SHARE and on the
same or less favorable terms and conditions as were offered to the other
two parties hereto, provided that any transfer of SHARES of the Company to
a third party pursuant to this Paragraph 7.5 shall be conditioned upon the
full and unconditional assumption by such third party transferee in writing
of all of the obligations of the transferor provided for in this Agreement.
If the transferring party wishes to sell the SHARES at a lower price and/or
on more favorable terms and conditions than were offered to the other two
parties hereto, before selling such SHARES or any of them the transferring
party shall again offer such SHARES to the other two parties hereto in
accordance with the provisions of Paragraph 7.4 hereof.
7.6 General Requirement of Governmental Authorization
--------------------------------------------------
Prior to effectuation of any transfer of the SHARES of the Company pursuant
to the foregoing provisions of this SECTION 7 all or any of the parties
her--to shall make an application for and obtain such governmental
validations, authorizations, licenses or other approvals as shall be
necessary for or in connection
21
<PAGE>
with any such transfer as aforesaid or acts or transactions relating
thereto.
7.7 Effect of Failure to Obtain Requisite Governmental Authorizations
-------------------------------------------------------------------
The failure to obtain any governmental validation, authorization, license
or other approval for which an application must be made pursuant to
Paragraph 7.6 hereof shall in no event be interpreted to give the offeror
the right to offer the SHARES in question to a third party, or otherwise to
permit the offeror to sell, assign, pledge or in any other manner transfer
title in, or rights to, such SHARES.
7.8 Limitation of Obligations upon Sale of SHARES
----------------------------------------------
If any party hereto sells or otherwise disposes of all of its SHARES of the
Company in accordance with the provisions of this SECTION 7, the
obligations and liabilities of such party under this Agreement shall
terminate except as otherwise expressly provided herein.
SECTION 8.- Additional Undertakings and Covenants
- --------------------------------------------------
8.1 Performance of this Agreement and ASSOCIATED AGREEMENTS
-------------------------------------------------------
Each party hereto shall do or cause to be done any and all acts and things
necessary or desirable for implementation of its undertakings set forth
herein, including but not limited to casting its votes as a
22
<PAGE>
shareholder of the Company and causing the director(s) of the Company
nominated by it to implement such undertakings.
8.2 Execution of this Agreement by the Company
------------------------------------------
The parties hereto shall cause the Company, immediately after the EFFECTIVE
DATE, to execute this Agreement and to abide fully by the terms and
conditions hereof.
SECTION 9. PAYMENTS AND TAXES
- ------------------------------
9.1 Manner and Place of Payment
---------------------------
Any and all payments to be made to RSL by the Company in consequence of or
in connection with the acts or transactions contemplated by this Agreement,
including but not limited to dividends, royalties, reimbursable expenses
and repatriated capital, shall be made, except as otherwise provided
herein, in Japanese Yen or in German Deutsche Marks at a bank or such other
address in Japan or the Federal Republic of Germany, as the case may be, as
may be designated in writing by RSL from time to time.
9.2 Withholding Taxes
-----------------
Any sum required under Japanese income tax laws to be withheld by the
Company for the account of RSL from payments due RSL shall be withheld and
shall be promptly paid by the Company to the appropriate tax
23
<PAGE>
authorities. The Company shall furnish RSL with official tax receipts or
other appropriate evidence issued by the Japanese tax authorities.
SECTION 10. CONFIDENTIALITY OF INFORMATION
- -------------------------------------------
10.1 Duty of Secrecy and Confidentiality
-----------------------------------
Except to the extent that disclosure may be permitted by any ASSOCIATED
AGREEMENT,each party hereto agrees to keep strictly secret and confidential
all information obtained from any other party hereto or the Company which
is designated as confidential by such other party or the Company, as the
case may be. To that end, all records, copies, reproductions, reprints and
translations of such information shall be plainly marked to indicate the
secret and confidential nature thereof and to prevent unauthorized use or
reproduction thereof.
10.2 Restriction on Use
------------------
Each party hereto agrees that it shall not use any confidential information
obtained from any other party hereto or from the Company for any purpose
whatsoever except as is expressly provided for herein or in the relevant
ASSOCIATED AGREEMENT, and shall return all documents embodying confidential
information (and copies thereof) received from any other party hereto to
such party upon termination of this Agreement.
24
<PAGE>
10.3 Limitations and Survival of Obligations
---------------------------------------
The obligations undertaken by each party hereto pursuant to this SECTION 10
shall not apply to any information obtained from any other party hereto or
from the Company (i) which is or becomes generally available to the public,
(ii) is obtained independently from another source, other than in
consequence of the willful or negligent act or omission of any party hereto
or the Company or any of its employees or (iii) which is, at the time of
disclosure, in the possession of the party to which such information is
furnished, as evidenced by its written records. The obligations, as so
limited, set forth in this SECTION 10 shall survive termination of this
Agreement and shall remain in effect and be binding on the parties hereto
for a period of four (4) years after the termination of this Agreement.
Should any party hereto be obligated to a third party to keep certain
information confidential beyond that period, the obligation of the party
hereto to which such information is furnished to maintain the secrecy of
such information shall continue until the party so obligated to a third
party is released by the said third party.
25
<PAGE>
SECTION 11. TERM AND TERMINATION
- ---------------------------------
11.1 Term
----
This Agreement shall become effective as of the EFFECTIVE DATE and shall
continue in full force and effect indefinitely thereafter until the Company
is dissolved or otherwise ceases to exist as a separate entity, unless
sooner terminated pursuant to the following provisions of this SECTION 11.
11.2 Bankruptcy, Etc, of a Party or the Company
------------------------------------------
Any party hereto may terminate this Agreement by written notice to the
other parties hereto in the event that any other party hereto or the
Company shall:
(1) be declared insolvent or bankrupt or make an assignment or other
arrangement for the benefit of its creditors;
(2) have all or any substantial portion of its capital stock or assets
expropriated by any government; or
(3) be dissolved or liquidated, except in consequence of a merger,
amalgamation or other corporate reorganization to which it may be a
party.
In case any party hereto is involved in any of the events set forth in
items (1) through (3) of this Paragraph 11.2, such party shall be obligated
to notify the other parties hereto of the occurrence of such event.
26
<PAGE>
11.3 Breach
------
In the event of a material breach of this Agreement by any party hereto,
any other party hereto not in breach shall be entitled to terminate this
Agreement by written notice to the other parties hereto if, within thirty
(30) days after written notice is given by such party not in breach setting
forth the nature of such breach, the breach as aforesaid shall not have
been corrected.
11.4 Termination of License Agreement or local Distributorship Agreement
-------------------------------------------------------------------
In the event of termination of the License Agreement referred to in
Paragraph 3.2(6), any party may terminate this Agreement by written notice
to other parties and in the event of termination of the Local
Distributorship Agreement referred to in Paragraph 3.1(2), MARUBENI may
terminate this Agreement by written notice to RSL and NTC; provided,
however, that in either case said termination shall not be effective until
a period of one hundred and twenty (120) days shall have elapsed from the
date of dispatch of said notice, and during said one hundred and twenty
(120) day period the parties shall negotiate in good faith in an attempt to
reach mutual agreement on a method to avoid such termination.
27
<PAGE>
11.5 Rights of the Parties Hereto upon Termination
---------------------------------------------
In the event that any party hereto elects to terminate this Agreement
pursuant to Paragraphs 11.2, 11.3 or 11.4 hereof, the other parties shall
have the right, by timely written notice to such terminating party, to
purchase such terminating party's SHARES pursuant to Paragraph 11.8 hereof.
11.6 Dissolution or Liquidation
--------------------------
In the event that the Company is dissolved or liquidated and any amount
owed by the Company, whether to a third party or to any party hereto,
remains unsettled by the Company, and any party hereto is secondarily
liable for such obligation owed by the Company, then the parties hereto
shall, unless otherwise agreed, share such unsettled obligation in
proportion to their respective shareholding ratio in the Company at the
time of the Company's dissolution or liquidation, as the case may be;
provided, however, that in any event MARUBENI's and NTC's liability under
this Paragraph 11.6 shall be limited to fifty percent (50%) of their
then share capital in the Company.
11.7 Deadlock
--------
In the event that a difference of opinion arises among the parties hereto
in respect of any major matter relating to the operation of the Company,
and the parties, after good faith negotiation, are unable to
28
<PAGE>
resolve the difference of Opinion within a Period of one hundred and twenty
(120) days, and irreparable injury to the Company shall thereby be caused
or threatened, then any party hereto shall have the right and option to
elect to terminate this Agreement, which election may be exercised by
written notice to the other parties. The said notice shall specifically
state the circumstances by which the party giving the notice believes
irreparable injury to the Company will be caused or threatened. Upon
exercise of the said election, the parties shall co-operate in effectuation
of the dissolution and liquidation of the Company under Japanese law,
except when a purchase of such party's SHARES is effected pursuant to
Paragraph 11.8 hereof.
11.8 Request for Purchase of SHARES
------------------------------
In the event that any party hereto elects to terminate this Agreement
pursuant to Paragraph 11.1, 11.2, 11.3, 11.4 or 11.7 hereof, any other
party(ies) shall have the right to purchase such terminating party's SHARES
at the fair market value of the SHARES, as determined by the firm of
certified public accountants referred to in Paragraph 4.11; provided,
however, that in no event shall the price for the SHARES purchased from the
terminating party by the other parties be less than the par value of such
SHARES.
29
<PAGE>
11.9 Survival of Rights, Duties and Obligations
------------------------------------------
Termination of this Agreement for any cause shall not release any party
hereto from any liability which at the time of termination has already
accrued to any other party hereto or which thereafter may accrue in
respect of any act committed or omission to act prior to such termination,
nor shall any such termination hereof affect in any way the survival of
any right, duty or obligation of any party hereto which is expressly
stated elsewhere in this Agreement to survive termination hereof.
11.10 Change of the Company's Name
----------------------------
In the event of the sale by MARUBENI or RSL of all of its SHARES in the
Company pursuant to SECTION 7 or Paragraph 11.8 hereof, such selling party
shall have the right to require that the Company delete the word
"MARUBENI" or "ROFIN", a the case may be, from the Company's name, and the
remaining shareholders shall cause the Company to take the necessary steps
to change its name in accordance with the foregoing. Further, in the event
that RSL ceases to be an AFFILIATE of Siemens Aktiengesellschaft while RSL
is a shareholder of the Company, or in the, event that RSL assigns its
SHARES to an AFFILIATE or any corporation acquiring all or substantially
all of its assets or any surviving or newly formed corporation pursuant to
the proviso of Paragraph 14.2 hereof and such
30
<PAGE>
AFFILIATE or acquiring, surviving or newly formed corporation is not an
AFFILIATE of Siemens Aktiengesellschaft, MARUBENI shall have the right to
require that the Company delete the word "MARUBENI" from the Company's
name, and all the shareholders shall cause the Company to take the
necessary steps to change its name so as to delete "MARUBENI" therefrom.
SECTION 12. INTERPRETATION
- ---------------------------
12.1 Applicable Law
--------------
The validity, construction and performance of this Agreement shall be
governed by and interpreted in , accordance with the laws of Japan.
12.2 Governing Language
------------------
(1) This Agreement is executed in the English language.
(2) The governing language with regard to any written communication
between the parties and with regard to any oral communication between
the parties (including meetings of the shareholders and the board of
directors) shall be English.
(3) In addition to the Company's obligation to provide access to the
parties hereto and/or their designated representatives to its books
and records pursuant to Paragraph 4.13 hereof, any party hereto may,
at its own cost, have any of
31
<PAGE>
such documents translated from Japanese into another language for
its own records.
12.3 Arbitration
-----------
(1) All disputes arising out of or in connection with this Agreement,
including any question regarding its existence, validity or
termination, shall be settled by an amicable effort of the
respective parties to this Agreement. An attempt to arrive at a
settlement shall be deemed to have failed as soon as one of the
parties to this Agreement so notifies the other parties in writing.
(2) If an attempt at settlement has failed, the dispute shall be finally
settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by three arbitrators appointed in
accordance with said Rules.
(3) The place of the arbitration shall be Hamburg if such notice is
given by MARUBENI and/or NTC and Tokyo if such notice is given by
RSL. The procedural law of the place of arbitration shall apply
where the arbitration rules are silent.
(4) The language of the arbitration shall be English.
12.4 Effect of Headings
------------------
The headings to SECTIONS and Paragraphs of this Agreement, excepting those
in SECTION 1 hereof, are to
32
<PAGE>
facilitate reference only, do not form a part of this Agreement and shall
not in any way affect the interpretation hereof.
12.5 Modification, Etc. of Agreement
-------------------------------
This Agreement embodies the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes and cancels any and
all prior understandings or agreements, verbal or otherwise, in relation
hereto, which may exist among the parties hereto, including, but not
limited to, the Original Joint Venture Agreement. No oral explanation or
oral information by any party hereto shall alter the meaning or
interpretation of this Agreement. No amendment or change hereof or
addition hereto shall be effective or binding on any party hereto unless
reduced to writing and executed by the respective, duly authorized
representatives of each party hereto.
12.6 Non-wavier
----------
No waiver, express or implied, by any party hereto of any right hereunder
or of any failure to perform or breach hereof by any other party hereto
shall constitute or be deemed a waiver of any other right hereunder or of
any other failure to perform or breach hereof by such other party, whether
of a similar or dissimilar nature thereto.
33
<PAGE>
SECTION 13. GOVERNMENTAL AND OTHER APPROVALS
- ---------------------------------------------
The parties hereto shall apply for and cause the Company to apply for, as the
case may be, all governmental approvals as well as the approvals of their
respective board and shareholders meetings, and RSL shall apply for the approval
of the Central Managing Board of Siemens Aktiengesellschaft, necessary for the
effectiveness of this Agreement and its Exhibits. The parties shall notify each
other upon receipt of the aforementioned approvals.
SECTION 14. MISCELLANEOUS
- --------------------------
14.1 Non-Competition
---------------
During the term of this Agreement,
(1) RSL shall not grant a license to any party other than the Company to
manufacture and sell the PRODUCTS, or any product similar thereto or
competitive therewith, in Japan; and
(2) No party hereto, and none of its AFFILIATES, shall manufacture, sell
or otherwise be interested in any products similar to or competitive
with the PRODUCTS in Japan unless otherwise agreed.
14.2 Assignment
----------
This Agreement, and all rights and obligations hereunder, are personal as
to the parties hereto and shall not be assigned by any party hereto to any
third
34
<PAGE>
party without the prior written consent thereto by the other parties
hereto; provided, however, that any party hereto may assign this
Agreement, without such prior consent of the other parties hereto, in
connection with a transfer of all of its SHARES of the Company in
accordance with SECTION 7 or Paragraph 11.8 hereof or to an AFFILIATE, or
an assignment to any corporation acquiring all or substantially all of its
assets or any surviving or newly formed corporation in connection with a
merger or amalgamation involving such assigning party, subject to a prior
undertaking in writing by the assignee assuming all of the obligations and
duties of the assigning party under this Agreement and further subject to
the issuance of any governmental validations, authorizations, licenses or
rulings then required under applicable law in connection with such
assignment.
14.3 Force Majeure
-------------
No party hereto shall be liable to any other party hereto for any loss,
injury, delay, damages or other casualty suffered or incurred by such
other party due to strikes, riots, storms, fires, explosions, acts of God,
war, action of any government or any other cause similar thereto which is
beyond the reasonable control of the former, and any failure or delay by
any party hereto in performance of any of its obligations under this
Agreement due to one or more of the foregoing
35
<PAGE>
causes shall not be considered a breach of this Agreement for purposes of
Paragraph 11.3 hereof.
14.4 Partial Ineffectiveness
-----------------------
In the event that any provision herein shall be held to be invalid or
unenforceable, the remaining provisions herein shall not be affected
thereby. Should an individual provision of this Agreement be or become
ineffective for reasons beyond the parties' control the parties shall
attempt to arrive amicably at a new provision with a favourable economic
effect corresponding to the ineffective provision it is replacing.
14.5 Notices
-------
Except as otherwise provided in this Agreement, all notices required or
permitted to be given hereunder shall be in writing in the English
language and shall be valid and sufficient if sent by telex, telefax or by
registered airmail letter, postage prepaid, deposited in any post office
in the Federal Republic of Germany or in Japan, a the case may be, as
follows:
36
<PAGE>
If to RSL:
Rofin Sinar Laser GmbH
Berzeliusstrasse 87
Postfach 740360
2000 Hamburg 74
Billbrookdeich 186
The Federal Republic of Germany
Attention: S. Simonsson
Telex No.: 214511
Telefax No.: 73363138
If to MARUBENI:
Marubeni Corporation
4-2, Ohtemachi 1-chome
Chiyoda-ku, Tokyo
Japan
Attention: Y. Emori
Telex No.: J22326
Telefax No.: 03-3283-7426
If to NTC:
Nippei Toyama Corporation
World Trade Center, 33rd Floor
2-4-1, Hamamatsucho
Minato-ku, Tokyo
Japan
Attention: S. Takuma
Telefax No.: 03-3435-4712
Any party hereto may change its address by a notice given to the other parties
hereto in the manner set forth above. Such notice shall be deemed to have been
given upon dispatch thereof in the manner herein prescribed.
37
<PAGE>
14.6 Effects of Change of Law
------------------------
Should any party hereto be prevented from exercising its right to purchase
another party's SHARES as provided in SECTIONS 7.5, 7.6 and 11.8 hereof)
due to a change in the laws in force in Japan or due to compliance with
any order of the governmental authorities in Japan or the Federal Republic
of Germany, such party shall be entitled to assign, with the prior written
consent of the other parties, which consent shall not be unreasonably
withheld, its right to purchase said SHARES to a third party to whom the
respective change in law or respective order is not applicable.
38
<PAGE>
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives on the day and year first set forth
above.
ATTEST: Rofin Sinar Laser GmbH
By: /s/
- ----------------------------- -----------------------------
ATTEST: Marubeni Corporation
/s/ By: /s/
- ----------------------------- -----------------------------
ATTEST: Nippei Toyama Corporation
/s/ By: /s/
- ----------------------------- -----------------------------
39
<PAGE>
Agreeing to the terms and conditions contained in the foregoing Agreement, Rofin
Marubeni Laser Kabushiki Kaisha hereby covenants and agrees to be bound by all
the applicable terms and conditions of said Agreement, including SECTION 10
thereof.
Rofin Marubeni Laser
Kabushiki Kaisha
By: /s/
-----------------------------
Representative Director
Dated: May 27, 1992
40
<PAGE>
EXHIBIT 10.5
COOPERATION AGREEMENT
---------------------
In addition to the Joint Venture Agreement among
Nippei Toyama Corporation (NTC)
Rofin-Sinar Laser GmbH (RSL) and
Marubeni Corporation (MC)
regarding Rofin-Marubeni Laser Corporation, NTC and RSL have
entered into this COOPERATION AGREEMENT.
1. Strategic Partnership
---------------------
NTC, as a laser system manufacturer and RSL, as a laser source manufacturer
have agreed to form a strategic partnership with the objective to assist
each other where possible in maximizing their market shares in the Japanese
market. NTC is RSL's most favoured OEM customer in Japan, and RSL is NTC's
most favoured supplier of laser sources.
2. Product Development
-------------------
RSL and NTC will inform each other regularly about their respective laser
source and laser systems development programmes. In the definition phase of
a laser development programme, RSL will ask NTC for their requirements as
they relate to NTC's system development programmes. In the implementation
phase RSL will keep NTC informed about progress and time schedule.
1
<PAGE>
NTC will inform RSL about scope and objective of their systems development
programmes and define, as early as possible, their required laser source
specifications. RSL and NTC agree not to develop products which will
compete with the other party's products. In this regard, the competing
products mean the processing machine system for NTC and the CO2 laser
source for RSL.
3. Market Support
--------------
Market information will be exchanged regularly between the two parties.
RSL will give to NTC service support and a reasonable amount of sales
support in markets outside Japan. However, it is understood that RSL needs
to maintain a neutral position towards its different OEM customers.
4. Laser Supply
------------
RSL will be NTC's first source and most favoured supplier of lasers. PSL
understands that NTC from time to time may have to integrate laser sources
from RSL's competitors. It is the intention of NTC to take at least 2/3 of
their total need for CO2-lasers from the Rofin-Sinar Group, including
Rofin-Marubeni Laser Corporation, provided the technical level and the
business conditions such as price, delivery time, maintenance and services
of RSL lasers satisfy NTC's need.
2
<PAGE>
NTC will make its best efforts to communicate these needs to Rofin-Sinar in
a timely manner, and Rofin-Sinar will make its best efforts to fulfill
them. NTC understands that RSL will supply lasers to NTC's competitors.
However, RSL will offer their products to NTC at most favourable and best
conditions.
5. Meetings
--------
Both parties agree to arrange meetings regularly and at least once a year
to discuss all issues defined in this cooperation agreement.
Participants at these meetings will be, among others, the companies'
technical and marketing executives.
6. Confidentiality
---------------
Both parties agree to keep existence and content of this Agreement strictly
confidential.
7. Term of Agreement
-----------------
This Agreement is valid for an initial period of five (5) years, after
which it can be terminated with 1 year notice. If this agreement is
terminated pursuant to this clause, then RSL and NTC reserve the right to
re-negotiate the Joint Venture Agreement Section 14, paragraph 14.1
Nippei Toyama Corporation Rofin Sinar Laser GmbH
/s/ /s/
- --------------------------- -------------------------
Dated: May 27, 1992
- --------------------
3
<PAGE>
EXHIBIT 10.6
COOPERATION AGREEMENT
---------------------
In connection with the Joint Venture Agreement among
Rofin-Sinar Laser GmbH (RSL),
Marubeni Corporation (MC) and
Nippei Toyama Corporation (NTC)
regarding Rofin-Marubeni Laser Corporation (RML), RSL and MC agree as follows:
1. Export of PRODUCTS Manufactured by RML under Licence
----------------------------------------------------
(1) If, notwithstanding the terms of the Licence Agreement between RSL and
RML dated September 6, 1985, RSL agrees that RML may export the
PRODUCTS manufactured by RML under licence from RSL to any countries
outside Japan, RSL shall cause RML to nominate MC as RML's exclusive
export agent for such exports.
(2) MC shall cooperate with the local agents appointed by RSL (or one of
its affiliates) in Asian countries and shall respect the rights
and duties they have assumed under their agreements with RSL and/or
its affiliates.
2. Local Distribution of PRODUCTS Manufactured by RML under Licence
-----------------------------------------------------------------
RSL shall cause RML to agree to, and MC accepts, the following conditions:
<PAGE>
(1) MC shall continue to have the right to act as RML's sales agent for
the PRODUCTS vis-a-vis existing OEM customers (namely, Nippei Toyama
Corporation, Shinmeiwa Industry and Shibuya), in which case MC will
purchase the PRODUCTS from RML and sell same to said OEM customers
after adding its mark-up of three percent (3%) to the sales price (not
including finance cost) for three (3) years (on an order placement
date basis) after the restructuring of RML is completed or receipt of
the first order from an OEM customer whichever is later. MC's mark-up
shall be reduced to two percent (2%) for the next two (2) years and
thereafter, to one percent (1%) for as long as the local
distributtorship agreement between RML and MC remains in effect.
(2) MC shall also be entitled to act as the sales agent for the PRODUCTS
vis-a-vis new OEM customers; provided, however. that RML reserves the
right to directly negotiate and contract with such customers. RML
shall notify MC in advance of which cases it will directly contract
with the customer and which cases MC may intervene in.
In the case where RML directly contracts with the customer, RML shall
pay MC a commission as compensation for the services rendered by MC in
connection therewith.
2
<PAGE>
The commission amount shall be two percent (2%) of the sales price for
five (5) years (on an order placement date basis) after receipt of the
first OEM order and one half of one percent (0.5%) thereafter for as
long as the Local Distributorship Agreement between RML and MC remains
in effect.
(3) If the Local Distributorship Agreement is cancelled by RML before
September 30, 1997, RML shall nevertheless continue to pay
commissions to MC calculated as if the Agreement had remained in
effect until September 30, 1997.
(4) When MC purchases the PRODUCTS for resale to non-OEM customers RML
shall offer to MC prices equivalent to the prices offered to the
most favoured OEM customers.
3
<PAGE>
3. Import of Sub-Assemblies for Manufacturing of PRODUCTS under Licence
--------------------------------------------------------------------
IF RML requires imported sub-assemblies (such as laser heads) in order for
it to manufacture the LICENCED PRODUCTS, RML shall purchase said components
through MC.
The terms and conditions of each such purchase of said imported components
shall be separately agreed by MC, RSL and RML.
4. Import of RSL PRODUCTS
-----------------------
(1) Unless both parties expressly agree otherwise, MC shall be exclusively
responsible for sales promotion for the PRODUCTS and contracts for the
sale thereof in Japan and RML shall be responsible for application
development, technical assistance, installation and after-sales
services for the PRODUCTS.
(2) Payments and freight for the IMPORTED PRODUCTS purchased by MC under
individual purchase contracts entered into between RSL and the RML
from time to time shall be arranged by MC in accordance with the terms
and conditions agreed in the relevant individual contract.
4
<PAGE>
5. General
-------
(1) RSL, RML and MC shall agree on a specific strategy in order to
increase OEM sales of the PRODUCTS in Japan whenever needed and also
shall avoid any sales activities which would put them in competition
with each other.
(2) RSL shall ensure that its back-up capability in terms of the supply of
materials, information, technical assistance, etc. required by MC in
connection with its activity as the local distributor and the export
agent for the PRODUCTS is not hindered due to any change in connection
with RML's restructuring.
RSL also acknowledges and endorses RML's obligations and duties set
forth in the Local Distributorship Agreement entered into between RML
and MC on even date herewith.
3) If and when RSL decides to introduce now products developed by it into
the Japanese market, RSL and RML shall first discuss with MC the
possibility of the parties collaborating in connection therewith and
RSL shall give MC priority in handling such new products.
5
<PAGE>
(4) The terms and conditions of MC's activities in exporting the
LICENCED PRODUCTS from Japan and importing the IMPORTED PRODUCTS
into Japan will be competitive.
6
<PAGE>
6. Non-Competition
---------------
The parties confirm their understanding with respect to Paragraph 14.1 of
the Joint Venture Agreement as follows.
MC will not handle in Japan products competing with the PRODUCTS or
incorporating lasers competing with the PRODUCTS, unless specifically
agreed upon by RML and RSL.
In cases, where the PRODUCTS are not suitable e.g. technical prospects,
prices and other commercial conditions are not competitive RML's and RSL's
Agreement will not unreasonably be withheld. RSL will react within one
week to the request of MC. If, after such agreement has been given,
RML/RSL introduce suitable products, then MC will cease handling such
competing products.
Rofin-Sinar Laser GmbH Marubeni Corporation
/s/__________________ /s/_____________________
7
<PAGE>
Summary: Hereditary building right
A contract dated March 1, 1990, between Lohss GmbH (grantor) and Rofin-
Sinar (grantee) relating to the granting of a Erbbaurecht (hereditary building
right) in the property in Hamburg. [The Erbbaurecht is an encumbrance upon real
property consisting of a transferable and heritable right to build or develop
the land above or below the surface. When the hereditrary building right
expires, ownership of the construction passes automatically to the owner of the
land. The holder of the hereditary building right is entitled to compensation.]
The grantee is entitled to use the property without limitations, including
the right to use, modify and dismantle the buildings and facilities, and to
erect no buildings within the limitations of applicable building law. The
Erbbaurecht has a term of 99 years. It may be transferred or encumbered without
the consent of the grantor.
As consideration for the Erbbaurecht, the grantee pays a one-time amount of
DM 17,743,074. In addition, the grantee assumes all running costs, but is not
obliged to provide insurance. Upon termination of the Erbbaurecht, the grantor
will pay to the grantee an amount equalling to the market value of all
buildings.
The grantor will indemnify and hold harmless the grantee, without
limitation in time, against any claims from public entities as well as other
persons resulting from the environmental pollution situated on the property at
the time of granting of the Erbbaurecht. In particular, such indemnification
covers any necessary environmental clean-up measures with regard to such
environmental pollution. However, the grantee to undertake at its own cost
certain clean-up measures specified in the contract.
The grantee grants the grantor a right of preemption regarding the sale of
the Erbbaurecht. The grantor undertakes (in form of a purchase agreement under
a condition precedent) to sell the property upon request by the grantee to the
grantee or a person named by the grantee. In case of exercise of such option by
the grantee, the purchase price will amount to DM 200,000 within the first 10
years, DM 300,000 within 10-30 years, DM 500,000 within 30-50 years, DM 700,000
within 50-70 years, DM 900,000 within 70-90 years, and DM 1,000,000 within 90-99
years after the entering of the Erbbaurecht in the land register.
<PAGE>
NOTAR
Dr. MANFRAD ASAM
RESIDENZSTRASSE 25-26/II . MUNCHEN 2
TELEFON (089) 22 51 91
ROFIN-SINAR Laser GmbH
Berzeliusstrasse 87
2000 Hamburg 74
<PAGE>
URNr. A 0576 / 1990
Erbbaurechtsvertrag
- -------------------
Heute, den ersten Marz
neunzehnhundertneunzig
1.3.1990
erschienen vor mir,
Dr. Manfred A s a m ,
Notar mit dem Amtssitz in Munchen, an der Geschaftsstelle in 8000 Munchen 2,
Residenzstrasse 25-26 II:
1) Herr Dr. Peter Helmut W i r t h ,
geboren am 31. Dezember 1946,
Diplom-Physiker,
geschaftsansassig in
2000 Hamburg 74, Berzeliusstrasse 87,
ausgewiesen durch seinen Personalausweis,
nach seiner Erklarung hier handelnd nicht im eigenen Namen, sondern fur die
ROFIN-SINAR Laser GmbH
mit dem Sitz in Hamburg
(Anschrift: 2000 Hamburg 74, Berzeliusstrasse 87)
als deren gemeinschaftlich vertretungsberechtigter Geschaftsfuhrer mit
Ermachtigung durch den weiteren gemeinschaftlich vertretungsberechtigten
Geschaftsfuhrer, Herrn Johann Gorgmaier, welche mir in Urschrift vorgelegt
wurde und dieser Urkunde in beglaubigter Abschrift beigeheftet ist.
Hierzu bescheinige ich, Notar, aufgrund Einsicht in den beglaubigten
Handelsregisterauszug des Amtsgerichts Hamburg vom 23. Februar 1990, HRB
18044, dass dort die Firma Rofin-Sinar Laser GmbH eingetragen ist und die
Herren Dr. Peter Helmut Wirth und Johann Gorgmaier als Geschaftsfuhrer
gemeinschaftlich zu deren Vertretung berechtigt sind.
<PAGE>
2) Herrn Eberhard L o h s s ,
geboren am 12. Februar 1922,
Kaufmann in
2055 Aumuhle, Alte Hege 5,
mir, Notar, personlich bekannt,
nach seiner Erklarung hier handelnd
a) im eigenen Namen
b) fur die
L o h s s GmbH
mit dem Sitz in Glinde
(Zuschriften: 2056 Glinde, Otto-Hahn-Strasse 5),
wozu ich, Notar, aufgrund Einsicht in einen beglaubigten
Handelsregisterauszug des Amtsgerichts Reinbek, HRB 1958 vom 2.
Februar 1990, bescheinige, dass die vorgenannte Gesellschaft dort
eingetragen sowie Herr Eberhard Lohss als Geschaftsfuhrer zu deren
Einzelvertretung berechtigt und von den Beschrankungen des (S) 181 BGB
befreit ist;
c) fur
aa) Frau Ilse L o h s s,
geboren am 2. Mai 1920,
Hausfrau in
2055 Aumuhle, Alte Hege 5,
nach Angabe ledig,
bb) Herrn Florian L o h s s,
geboren am 4. Januar 1959,
Student in 3300 Braunschweig, Adolfstrasse 59,
nach Angabe im gesetzlichen Guterstand lebend,
<PAGE>
cc) Herrn Christoph L o h s s,
geboren am 27. Juni 1961
Student in
2055 Aumuhle, Alte Hege 9,
nach Angabe ledig;
dd) Herrn Martin L o h s s,
geboren am 14. Juli 1996,
Student in
2055 Aumuhle, Alte Hege 5,
nach Angabe ledig;
ee) Herrn Oswin L o h s s,
geboren am 11. Juni 1969,
Zivildienstleistender in
2055 Aumuhle, Alte Hege 5,
nach Angabe ledig;
ff) Herrn Roland L o h s s,
geboren am 29. Oktober 1963,
Student in
1000 Berlin 30, Rosenheimer Strasse 28,
nach Angabe im gesetzlichen Guterstand lebend,
gg) Frau Cordula L o h s s,
geborene Willecke,
geboren am 5. August 1938,
Hausfrau in
2055 Aumuhle, Alte Hege 5,
nach Angabe in Gutertrennung lebend,
als Gesellschafter burgerlichen Rechts aufgrund der mir in Urschrift
bzw. Ausfertigung vorgelegter und dieser Urkunde in beglaubigter
Abschrift beigehefteten Vollmachten.
<PAGE>
3) Frau Edith Juliana B e c k e r,
geborene Kehnel,
geboren am 25. Juli 1931,
Kauffrau in
7507 Pfinztal, Jahlingersstrase 59-61,
nach Angabe verwitwet und nicht in fortgesetzter Gutergemeinschaft lebend,
mir, Notar, personlich bekannt;
4) Frau Ursula B e c k e r - K o h m,
geborene Becker,
geboren am 18. Marz 1955,
Betriebswirt (FH) in
7505 Ettlingen 5 -Bruchhausen-,
Linhardterstrasse 24,
nach Angabe im gesetzlichen Guterstand lebend,
mir, Notar, personlich bekannt;
5) Frau Jutta B e c k e r,
geboren am 2. September 1956,
Diplom-Kauffrau in
7507 Pfinztal, Johlingerstrasse 59-61,
nach Angabe ledig,
mir, Notar, personlich bekannt;
6) Frau Karin B e c k e r,
geboren am 25. September 1959,
med.-techn. Assistentin in
6000 Frankfurt, Konigslacherstrasse 38,
nach Angabe ledig,
mir, Notar, personlich bekannt;
<PAGE>
Auf Ansuchen der Erschienenen beurkunde ich, nachdem ich mir am 18. Januar 1990
Kenntnis vom Grundbuchstand verschafft hatte, ihren bei gleichzeitiger
Anwesenheit vor mir abgegebenen Erklarungen ensprechend folgendes:
I.
Grundbuchstand, Vertragsgegenstand
----------------------------------
1) im Grundbuch des Amtsgerichts Hamburg von
B i l l b r o o k
Band 10 Blatt 364
ist die Verkehrsbetriebe Hamburg-Holstein Aktiengesellschaft u.a. als
Eigentumerin des folgenden Grundstucks der Gemarkung Billbrook eingetragen:
Flurstuck 126 Moorfleeterstrasse,
Bahngelandezu 0,3965 ha
Das Grundstuck ist in Abteilung II und III des Grundbuches unbelastet.
2) Im Grundbuch des Amtsgerichts Hamburg von
B i l l b r o o k
Band 21 Blatt 682
ist Frau Edith Juliana Becker, geborene Kehnel, als Eigentumerin des
folgenden Grundstucks der Gemarkung Billbrook eingetragen:
Flurstuck 603 Gebaude- und Freiflache,
Berzeliusstrase 63zu 0,5754 ha.
<PAGE>
Das Grundstuck ist in Abteilung II unbelastet und in Abteilung III belastet
mit einer Briefgrundschuld zu DM 500.000,-- fur die Volksbank Durlach eGmbH
Karlsruhe-Durlach und mit drei weiteren Briefgrundschulden zu DM 250.000,--
, DM 200.000,-- und DM 100.000,-- ebenfalls fur die Volksbank Durlach sowie
einer Briefgrundschuld zu DM 150.000,-- fur die Eigentumerin Edith Juliana
Becker, geborene Kehnel.
3) Im Grundbuch des Amtsgerichts Hamburg von
B i l l b r o o k
Band 20 Blatt 651
ist Frau Cordula Lohss, geborene Willecke, als Eigentumerin des folgenden
Grundstucks der Gemarkung Billbrook eingetragen:
Flurstuck 1210 Berzeliusstrase 87,
Gebaude- und Freiflache zuzu 0,1409 ha.
Das Grundstuck ist in Abteilung II unbelastet und in Abteilung III belastet
mit einer Buchgrundschuld zu DM 1.550.000,-- fur die Hamburger Landesbank
mit dem Sitz in Hamburg und DM 1.500.000,-- fur die Deutsche Bank AG mit
dem Sitz in Hamburg.
4) Im Grundbuch des Amtsgerichts Hamburg von
B i l l b r o o k
Bank 15 Blatt 500 bzw. Band 21 Blatt 680
sind Herr Eberhard Lohss und Frau Ilse Luise Melitta Lohss als Eigentumer
in BGB-Gesellschaft der folgenden Grundstucke der Gemarkung Billbrook
eingetragen:
a) Flurstuck 1209 Berzeliusstrase 83, 85, 89, Gebaude- und Freiflache,
Gewerbezu 1,4621 ha.
<PAGE>
Belastungen
Abteilung II:
-------------
Leitungsrecht nebst Baubeschrankung fur die Hamburger Wasserwerke;
Abteilung III:
--------------
Briefgrundschulden zu DM 500.000,--, DM 500.000,--, DM 200.000,--, DM
500.000,--, DM 500.000,--, DM 350.000,--, DM 500.000,--, DM 500.000,--
, DM 500.000,--, DM500.000,--, DM 400.000,--, DM 500.000,-- und
DM 495.000,--, jeweils fur die Deutsche Bank Aktiengesellschaft in
Hamburg (Hauptsitz Frankfurt/Main).
b) Flurstuck 1089, Billbrookdeich 186,
1136, Gebaude- und Frei-
1137 flache, Gewerbe,
Freiflachezu 1,1064 ha;
dieses Grundstuck ist in Abteilung II belastet mit
aa) einem Forderbrunnenanlagenrecht samt Nebenrechten,
bb) einem Leitungsrecht nebst Baubeschrankung
und in Abteilung III belastet mit den gleichen Briefgrundschulden wie
vorstehend Flurstuck 1209, und zwar in Gesamthaft.
II.
Vorbemerkung
------------
1) Mit Urkunde des Notars Vollert Hemsen vom 6. Februar 1990, URNr. 201/1990,
hat die Firma Lohss GmbH mit dem Sitz in Glinde der Verkehrsbetriebe
Hamburg-Holstein Aktiengesellschaft ein Kaufangebot fur den Ankauf einer
Teilflache von ca. 1.000 qm aus dem in Ziffer I.1) bezeichneten Grundstuck,
Flurstuck 126, gemacht.
<PAGE>
Dieses Angebot hat die Verkehrsbetriebe Hamburg-Holstein Aktiengesellschaft
mit Urkunde des Notars Dr. Friedrich Wessendorff vom 15. Februar 1990,
URNr. 336/1990 angenommen.
Die derzeit noch fehlenden Vollzugsvoraussetzungen wurden mit den
Beteiligten erortert. Der erforderliche Antrag auf Vermessung wurde bereits
durch den Architekten Winkelmann fur den Kaufer beim Vermessungsamt Hamburg
gestellt.
2) Mit Urkunde des amtierenden Notars vom heutigen Tage, URNr. A 574/1990, hat
Frau Edith Juliana Becker, geborene Kehnel, einzelne Miteigentumsanteile an
dem vorstehend unter Ziffer I.2) bezeichneten Grundstuck Flurstuck 603 im
Wege der gemischten Schenkung auf ihre Tochter, Frau Ursula Becker-Kohm,
Frau Jutta Becker und Frau Karin Becker ubertragen. Mit anschliesender
Urkunde haben die Erwerber und Frau Becker das vorbezeichnete Grundstsuck
an die Firma Lohss GmbH mit dem Sitz in Glinde verkauft und aufgelassen.
Die derzeit noch fehlenden Vollzugsvoraussetzungen wurden auch hier mit den
Beteiligten erortert.
3) Mit weiteren Urkunden des amtierenden Notars vom heutigen Tage hat eine
BGB-Gesellschaft, bestehend aus Herrn Eberhard und Frau IIse Lohss, in die
zwischenzeitlich auch die Herren Florian, Christoph, Roland, Martin und
Oswin Lohss aufgenommen worden sind - wozu enstprechende
Grundbuchberichtigung bereits beantragt wurde - die unter Ziff.I.4) a)
(hieraus Teilflache) und b) bezeichneten Grundstucke und hat eine weitere
BGB-Gesellschaft, bestehend aus Frau Cordula Lohss und den Herren Florian,
Christoph, Roland, Martin und Oswin Lohss das vorstehend unter Ziff. I.3)
<PAGE>
bezeichnete, an sie mit Urk.Nr. 1951/1989 des Notars Dr. Volker Hemsen in
Glinde seitens der eingetragenen Eigentumerin aufgelassene Grundstuck
FiSt.1210 an die Firma Lohss GmbH verkauft und aufgelassen. Die BGB-
Gesellschafter sind selbst noch nicht im Grundbuch als Rechtsinhaber zur
gesamten Hand eingetragen, jedoch liegen die ihrem Erwerb zugrundeliegenden
Urkunden bereits dem Grundbuchamt vor. Auch die zu den Kaufvertragen
derzeit noch fehlenden Vollzugsvoraussetzungen wurden mit den Beteiligten
ausfuhrlich erortert.
III.
Erbbaurechtsbestellung
----------------------
Die Lohss GmbH mit dem Sitz in Glinde
- - nachstehend "der Grundstuckseigentumer" genannt -
raumt hierdurch der
ROFIN-SINAR Laser GmbH mit dem Sitz in Hamburg
- - nachstehend "der Erbbauberechtigte" genannt -
an den Flurstucken 1089, 1136, 1137, 1210, 603 (jeweils ganz) und an jeweils
erst geometrisch zu vermessenden, den Vertragsteilen in der Natur jedoch nach
Lage und Umfang genau bekannten Teilflachen von ca. 11.061 qm aus Flurstuck 1209
und ca. 1.000 qm aus Flurstuck 126, welche beide im beiliegenden und einen
Bestandteil dieser Urkunde bildenden Lageplan (Anlage Ia) rot schraffiert
eingezeichnet sind, vorbehaltlich der amtlichen Vermessung ein
G e s a m t e r b b a u r e c h t
<PAGE>
gemas der Verordnung uber das Erbbaurecht vom 15. Januar 1919 -
Reichsgesetzblatt 1919 S. 7 -(Erbbaurechtsverordnung) ein, und zwar nach den
folgenden Bestimmungen der (S)(S) 1 bis 6, die Inhalt des Erbbaurechts im Sinne
von (S) 2 ErbbRVO sind.
Der vorgenannte Grundbesitz wird im folgenden auch kurz als "Erbbaugrundbesitz"
bezeichnet.
Der Antrag auf Vermessung wurde durch den Architekten Winkelmann fur den
Grundstuckseigentumer bereits gestellt.
(S) 1
Vertragszweck, Bauvorhaben, Instandhaltung
------------------------------------------
1) a) Der Erbbauberechtigte ist berechtigt, samtliche auf dem vorstehend
bezeichneten Erbbaugrundbesitz derzeit bestehenden Gebaudlichkeiten,
deren geografische Lage nebst genauer Beschreibung der Art der
Gebaudlichkeiten aus dem weiterhin, beigefugten Lageplan (Anlage Ib)
und der Anlage II ersichtlich ist, im Rahmen des Erbbaurechts
umfassend zu nutzen und im Rahmen der nachstehenden Bebauungsart ohne
besondere Genehmigung der Grundstuckseigentumer Gebaude- oder
Ausenanlagen abzubrechen oder wesentlich zu verandern.
b) Der Erbbauberechtigte ist weiterhin berechtigt, nicht jedoch
verpflichtet, auf dem Erbbaugrundbesitz mehrere betriebliche
-------
Fertigungs- und Lagegebaude mit Buro- und ahnlichen Raumen auf eigene
Kosten zu errichten. Die Errichtung hat in Ubereinstimmung mit einem
noch zu erstellenden Bebauungsplan bzw. sonstiger konkreter Weisungen
der Bau- und/oder Umweltbehorde der Freien und Hansestadt Hamburg zu
erfolgen.
<PAGE>
2) Das Erbbaurecht erstreckt sich auf die fur die Erbbaurechtsbauwerke nicht
erforderlichen Teile des Erbbaugrundbesitzes, sofern die
Erbbaurechtsbauwerke wirtschaftlich die Hauptsache bleiben.
Der jeweilige Erbbauberechtigte kann diese Teile des Erbbaugrundbesitzes im
Rahmen des Erbbaurechtsvertrages in jeder fur ihn vorteilhaften Weise
nutzen und benutzen, insbesondere fur Zufahrten und Zuwege, zum Einstellen
von Kraftfahrzeugen, fur Lagerplatze und Hofraumzwecke, soweit baurechtlich
zulassig.
(S) 2
Zeitdauer
---------
Das Erbbaurecht endet durch Zeitablauf nach 99 Jahren ab seiner Eintragung im
Grundbuch.
(S) 3
Zustimmung
----------
Zu einer Verausserung oder Belastung des Erbbaurechts bedarf es keiner
Zustimmung des Grundstuckseigentumers.
<PAGE>
(S) 4
Lastentragung
-------------
Der jeweilige Erbbauberechtigte hat wahrend der gesamten Dauer des Erbbaurechts
alle offentlichen Lasten und Abgaben der Erbbaugrundstucke und des Erbbaurechts
zu tragen; das gleiche gilt fur solche privatrechtlichen Lasten und Abgaben des
Erbbaugrundbesitzes und des Erbbaurechts, die offentlichen Lasten ihrer Natur
gleichstehen. Der Erbbauberechtigte hat danach fur den Erbbaugrundbesitz und das
Erbbaurecht insbesondere zu tragen:
a) die Grundsteuer,
b) die Strasenreinigungs- und Mullabfuhrkosten sowie Kaminkehrergebuhren,
c) all Erschliesungsbeitrage im Sinne des (S) 127 Abs. 2 Baugesetzbuch und
Anliegerbeitrage, einschliesslich Kostenerstattungsanspruche nach
bestehenden Kommunalabgabegesetzen bzw. Satzungen der Freien und Hansestadt
Hamburg sowie ahnliche offentliche Lasten fur Masnahmen, die der
Erschliessung des Erbbaugrundbesitzes und der darauf zu errichtenden
Erbbaurechtsbauwerke dienen; Beitragsbescheide, die auf der Grundlage von
zum heutigen Zeitpunkt bereits erstellten Erschliesungsanlagen des
Erbbaugrundbesitzes und der darauf zu errichtenden Erbbaurechtsbauwerke
ergehen, sind jedoch von dem jeweils betroffenen Grundstuckseigentumer zu
tragen;
d) die Lasten aus der Reinigungs- und Sicherungspflicht nach Masgabe der
jeweils gultigen stadtischen Verordnung hinsichtlich der vor dem
Erbbaugrundbesitz liegenden Strasen und Wege;
e) die Kosten fur Wasser-, Gas- und Stromverbrauch.
<PAGE>
(S) 5
Versicherungen
--------------
Es wird ausdrucklich vereinbart, das der Erbbauberechtigte nicht verpflichtet
ist, Versicherungsvertrage fur die Dauer des Erbbaurechts abzuschliesen oder
aufrecht zu erhalten.
(S) 6
Entschadigung bei Erloschen des Erbbaurechts durch Zeitablauf
-------------------------------------------------------------
1) Bei Beendigung des Erbbaurechts durch Zeitablauf hat der
Grundstuckseigentumer dem Erbbauberechtigten den dann geltenden
Verkehrswert aller zum Erbbaurecht gehorender Bauwerke zu verguten, die in
sein Eigentum ubergehen. Bei der Bewertung sind die vom Erbbauberechtigten
aufgewendeten Erschliessungskosten mitzuberucksichtigen.
2) Kommt es uber die Hohe der Entschadigungssumme zwischen den Beteiligten zu
keiner Einigung, so sind beide Vertragsteile verpflichtet, der
Handelskammer Hamburg den Auftrag zu erteilen, bei zwei Sachverstandigen
fur die Beurteilung von Grundstuckspreisen fur gewerbliche Objekte zwei
Sachverstandigengutachten zu Handen der Vertragsparteien in Auftrag zu
geben. Die Vertragsparteien sollen sich nach Vorliegen der Gutachten
bemuhen, auf ihrer Basis eine Einigung uber die Entschadigungssumme zu
erzielen. Kommt eine Einigung uber die Entschadigungssumme nicht zustande,
so verpflichten sich die Vertragsbeteiligten die Han-
<PAGE>
delskammer Hamburg zu beauftragen, einen Obergutachter zu bestimmen, der
auf der Grundlage der beiden Sachverstandigengutachten die
Entschadigungssumme fur die Parteien verbindlich ermitteln soll. Der
Obergutachter darf bei der Festsetzung der Entschadigungssumme die
Festsetzungen der beiden vorliegenden Gutachten weder nach oben
uberschreiten noch nach unten unterschreiten. Die vom Obergutachter
festgesetzte Entschadigungssumme ist fur beide Vertragsteile verbindlich.
Die Kosten der Gutachten tragen die Vertragsteile je zur Halfte. Die
Entschadigungssumme ist innerhalb von sechs Monaten nach dem Erloschen des
Erbbaurechts zu bezahlen und seit dem Tag des Erloschens mit 3% uber dem
jeweiligen Bundesbankdiskontsatz zu verzinsen.
IV.
Ausgleichszahlung
-----------------
1) Als Gegenleistung fur die Einraumung des vertragsgegenstandlichen
Erbbaurechts hat der Erbbauberechtigte keinen fortlaufenden Erbbauzins,
sondern eine einmalige Entschadigung zu zahlen. Diese betragt fur alle
uberlassenen Grundstucke, unabhangig vom Ergebnis der amtlichen Vermessung
als Festpreis netto DM 15.410.000,-- (i.W. Deutsche Mark funfzehn Millionen
vierhundertzehntausend), wovon ein Teilbetrag von DM 2.550.000,-- (i.W.
Deutsche Mark zwei Millionen funfhundertfunfzigtausend) auf den Grund und
Boden und ein Teilbetrag von DM 12.860.000,- (i.W. Deutsche Mark zwolf
Millionen achthundertsechzigtausend) auf die Gebaude entfallt.
<PAGE>
Der Erbbauberechtigte ist Unternehmer im Sinne des Umsatzsteuergesetzes und
erwirbt das Erbbaurecht fur sein Unternehmen. Der Grundstuckseigentumer hat
fur gegenwartigen Vertrag von der Moglichkeit einer Option nach (S) 9 UStG
Gebrauch gemacht, so dass auf die Entschadigung Umsatzsteuer anfallt. Der
Erbbauberechtigte verpflichtet sich daher, zusatzlich zur vereinbarten
Entschadigung an den Grundstuckseigentumer die anfallende Umsatzsteuer zu
entrichten. Die Bemessungsgrundlage hierfur ergibt sich aus der
Entschadigung zuzuglich halftiger Grunderwerbsteuer. Unter
Berucksichtigung des Urteils des BFH vom 10. Juli 1980 (Bundessteuerblatt
II 1980 S. 620) erhoht sich die Entschadigung danach wie folgt:
<TABLE>
<S> <C>
Nettoentgeld DM 15.410.000,--
+ halftige Grunderwerbsteuer DM 154.100,--
-----------------
USt-Bemessungsgrundlage DM 15.564.100,--
hieraus 14% MWSt DM 2.178.974,--
-----------------
Bruttoentschadigung DM 17.743.074,--
</TABLE>
2) Fur die einzelnen Grundstucke werden dabei folgende Werte
(Nettoentschadigungsanteile) angesetzt:
a) Fur die Teilflache aus Flurstuck 126 ein Betrag von DM 110.000,--;
b) Fur Flurstuck 603 ("Becker") ein Betrag von DM 2.800.000,--;
c) Fur Flurstuck 1210 (GBR "Cordula Lohss") ein Betrag von DM 5.800.000,
--;
d) Fur die Flurstucke 1209 (Teilflache), 1089, 1136, 1137 (GBR "Eberhard
Lohss") ein Betrag von DM 6.700.000,--.
<PAGE>
3) Hinsichtlich der Falligkeit der Abfindungsleistung nehmen die Vertragsteile
auf die dieser Urkunde als Bestandteil beigefugte Anlage III Bezug.
4) Die unter Ziffer 1) vereinbarte Entschadigung ist ab Falligkeit bis zum
Zahlungseingang (Wertstellung) auf dem jeweiligen Empfangerkonto laut
Anlage III mit 10% p.a. zu verzinsen, wobei die Zinsen jeweils sofort zur
Zahlung fallig sind.
5) Wegen der vorstehend eingegangenen Verpflichtung zur Zahlung einer
einmaligen Entschadigung samt Zinsen unterwirft sich der Erbbauberechtigte
der sofortigen Zwangsvollstreckung aus dieser Urkunde in sein Vermogen
gegenuber dem jeweiligen Anspruchsberechtigten.
V.
Vereinbarung auserhalb des gesetzlich moglichen
------------------------------------------------
dinglichen Erbbaurechtsinhalts
------------------------------
Zwischen dem Grundstuckseigentumer und dem Erbbauberechtigten wird hierdurch
weiterhin folgendes vereinbart
1) Ubergang von Besitz, Nutzen und Lasten
--------------------------------------
Die Besitzubergabe zur Ausubung des Erbbaurechts erfolgt mit vollstandiger
Zahlung der in Abschnitt IV. vereinbarten Entschadigung.
<PAGE>
Grundsteuern und sonstige offentliche Abgaben (Kanal-, Strassenreinigung-,
Mullabfuhr- und Schornsteinfegergebuhren), ferner etwaige Strassenbau- und
sonstige Anliegerkosten tragt der Erbbauberechtigte ab diesem Tag der
Besitzubergabe. Er tragt auch die Kosten des Wasser- und Stromverbrauchs,
soweit diese Kosten die zur Errichtung kommenden Baulichkeiten und Anlagen
betreffen, ab diesem Zeitpunkt.
Mit dem Tag der Besitzubergabe enden die bestehenden Mietvertrage mit dem
Erbbauberechtigten, nicht dagegen die Mietvertrage mit den Fremdmietern,
die dem Erbbauberrechtigten bekannt sind und von ihm ubernommen werden.
2) Gewahrleistung
--------------
a) Der Zustand der Erbbaugrundstucke ist dem Erbbauberechtigten bekannt.
Der Grundstuckseigentumer ubernimmt keine Gewahr fur die endgultige
Grosse und die Verwertbarkeit des Erbbaugrundbesitzes, insbesondere
nicht fur dessen Bebaubarkeit. Der Grundstuckseigentumer weist den
Erbbauberechtigten darauf hin, dass nach einem vorliegenden
Sachverstandigengutachten des Gutachters Bodo Fischer, Umweltberatung,
Hermannsstrase 40-46, 2000 Hamburg 1, vom 12. Dezember 1988 und vom
10. Februar 1989 betreffend die Belastung der Erbbaugrundstucke mit
wasser- und umweltgefahrdenden Stoffen - sogenannte "Altlasten" -
derzeit ein Sanierungsbedarf besteht. Die Beteiligten verzichten
ausdrucklich auf eine Beifugung der vorgenannten Gutachten als Anlage
zur notariellen Urkunde. Die Beteiligten kommen uberein, dass das
gesamte Risiko einer etwaigen Altlastensanierung allein von dem
Grundstuckseigentumer zu tragen ist. Sollte somit der
Erbbauberechtigte fur die Altlasten (z.B. als Zustandsstorer)
verantwortlich gemacht werden, so verpflich-
<PAGE>
tet sich der Grundstuckseigentumer, ihn von allen gegen ihn
gerichteten Anspruchen offentlich-rechtlicher Rechtstrager oder
privater Personen in vollem Umfang freizustellen. Ausdrucklich wird
vereinbart, dass diese Freistellungsverpflichtung nicht durch die
kurze Verjahrung der Sachmangelgewahrleistung (S)(S) 459 ff, 477 BGB
in irgendeiner Form eingeschrankt wird, sondern zeitlich unbegrenzt
gilt. Die Freistellungsverpflichtung bezieht sich insbesondere
auf jegliche Art von Sanierungsmasnahmen, die aufgrund der heute
bereits vorhandenen Bodenverunreinigungen durch wasser- und
umweltgefahrdende Stoffe wie etwa Schwermetalle, Ol, sonstige
chemische Stoffe und dergleichen anfallen, ebenso fur etwaige andere
im Boden bereits heute vorhandene Kontaminationen und sonstige
gefahrliche Gegenstande.
Der Grundstuckseigentumer versichert, das ihm verborgene wesentliche
Sachmangel, insbesondere weitere - in den vorgelegten Gutachten nicht
aufgefuhrte - sogenannte "Altlasten" nicht bekannt sind. Der Notar hat
darauf hingewiesen, das ihn insoweit eine Aufklarungspflicht gegenuber
dem Erbbauberechtigten trifft. Der Notar hat den Erbbauberechtigten
darauf hingewiesen, das er trotz der vereinbarten
Freistellungsverpflichtung fur sogenannte Altlasten als Zustandsstorer
im Ausenverhaltnis verantwortlich gemacht werden kann. Ausgenommen von
der Freistellungsverpflichtung soll nur ein Sanierungsbedarf sein, der
aufgrund von Handlungen des Erbbauberechtigten (insbesondere
Baumasnahmen auf dem Erbbaugrundstuck) entsteht oder aufgrund
schuldhafter Eingriffe Dritter nach Besitzeinweisung des
Erbbauberechtigten, soweit sich aus der folgenden Regelung nichts
anderes ergibt. Der Erbbauberechtigte verpflichtet sich, folgende
<PAGE>
Sanierungsmasnahmen auf eigene Rechnung entsprechend den Vorgaben im
Schreiben der Hamburger Umweltbehorde vom 06.02.1989 und des
Gutachtens Fischer durchzufuhren:
- Samtliche Grundstucke sind zu versiegeln, um das Eindringen von
Oberflachenwasser in den Untergrund zu verhindern.
- Es sind geregelte Grunzonen anzubringen, die das Eindringen von
Wasser in den vorhandenen Stauwasserkorper gelenkt ermoglichen.
- Ein Bodenaushub ist im Zuge der Sanierungen soweit wie moglich zu
vermeiden, sollte er unumganglich sein, kann dieser auf dem
Grundstuck verbleiben, mus aber in den Bereich der zu
versiegelnden Flachen verbracht werden.
- Samtliche Sanierungsmasnahmen mussen aufgrund der bestehenden
Gesetzeslage in enger Zusammenarbeit mit den Behorden vorgenommen
und abgestimmt werden.
- Durch ein geeignetes Drainagensystem mus die Stauwasserfuhrung so
gelenkt werden, das eine Abfuhrung des Stauwassers ermoglicht
wird. Die Entsorgung des Sickerwassers kann nach dem Stand der
Kenntnisse zur Zeit der Gutachterstellung uber die offentliche
Kanalisation erfolgen.
- Uberschreiten die selastungen des Sickerwassers die
Einleitungswerte der Sielrichtlinien, mus eine Wasseraufbereitung
bis zur Erreichung des Grenzwertes gemas des Standes der Technik
erfolgen. Die Kosten sind abhangig von der Wassermenge, den
Belastungen und dem zu diesem Zeitpunkt zu erreichenden
Reinheitsgrad. Zwar sind
<PAGE>
die Kosten fur die Entsorgung der dann anfallenden Schlamme
derzeit nicht kalkulierbar, es besteht jedoch unter den
Vertragsteilen Einigkeit daruber, das samtliche damit im
Zusammenhang stehenden Kosten vom Erbbauberechtigten zu tragen
sind.
- Anforderungen der Umweltbehorde in Hamburg in vergleichbaren
Fallen haben deutlich gemacht, das als Sanierungsmasnahme eine
Schutzpfahlgrundung notwendig wird, um eine Kontamination des
Grundwassers durch Drainagenwirkung zu verhindern. Die daraus
entstehenden Kosten sind derzeit nicht absehbar.
- Der Erbbauberechtigte ist verpflichtet, samtliche vorstehenden
Massnahmen entsprechend der vorlaufigen Genehmigung der
Umweltbehorde vom 9. Februar 1989 abzustimmen und vorzunehmen.
Das Risiko fur weitere Sanierungsmassnahmen, die notwendig werden
sollten, obwohl sich der Erbbauberechtigte an alle Auflagen und
Masnahmen des Gutachtens Fischer und des Schreibens der Umweltbehorde
vom 9. Februar 1989 gehalten hat, tragt auch hinsichtlich der Kosten
der Grundstuckseigentumer.
Fur sogenannte "Altlasten" ist der Grundstuckseigentumer in der
vorbezeichneten Form und in
<PAGE>
dem vorbezeichneten Umfang gewahrleistungspflichtig, im ubrigen wird
jede Gewahrleistung fur etwaige Sachmangel ausgeschlossen.
b) Der Grundstuckeigentumer verpflichtet sich, zum Zweck der Verschaffung
der ersten Rangstelle fur das einzutragende Erbbaurecht auf eigene
Kosten dafur zu sorgen, dass die eingetragenen Grundpfandrechte zur
Loschung gelangen und in Abteilung II des Gundbuches eingetragene
Belastungen hinter das hier bestellte Erbbaurecht im Rang
zurucktreten, soweit keine Freigabe zu erlangen ist.
Zum Zweck der Rangbeschaffung fur das Erbbaurecht hat der
Erbbauberechtigte gleichzeitig am Erbbaurecht selbst die
zurucktretenden Rechte inhaltsgleich neu zu bestellen, und zwar in
ihrem bisherigen Rangverhaltnis zueinander, soweit bislang ein
Rangverhaltnis nicht bestanden hat, gleichrangig an erster Rangstelle.
Im ubrigen gewahrleistet der Grundstuckseigentumer die Freiheit des
Erbbaurechts von allen Belastungen in Abteilung II und III des
Grundbuches mit Ausnahme der unter Mitwirkung des Erbbauberechtigten
selbst zur Eintragung kommenden Rechte.
3) Verpflichtung zur Bestellung von Dienstbarkeiten
------------------------------------------------
Der Grundstuckseigentumer und der Erbbauberechtigte verpflichten sich
bereits hierdurch gegenseitig, auf Verlangen der Freien und Hansestadt
Hamburg zur Sicherung von Geh-, Fahrt-und Leitungsrechten aller Art
zugunsten der Freien und Hansestadt Hamburg sowohl am Erbbaugrundbesitz als
auch am Erbbaurecht einerseits sowie andererseits wechselseitig fur den
jeweiligen Grundstuckseigentumer bzw. fur den jeweiligen Erbbauberechtigten
Dienstbarkeiten zu bestellen
<PAGE>
soweit die Bestellung derartiger Dienstbarkeiten im Zuge des
Genehmigungsverfahrens fur weitere auf dem Erbbaugrundbesitz beabsichtigte
Bauvorhaben des Erbbauberechtigten gefordert wird.
Dabei sind die Rechte zu Lasten des Erbbaugrundstucks und zugunsten des
jeweiligen Eigentumers des Erbbaugrundstucks aufschiebend bedingt auf das
Erloschen des vertragsgegenstandlichen Erbbaurechts einzuraumen.
Die vorgenannte Verpflichtung gilt in gleicher Weise auch fur die
Bereitstellung von Seiten des Erbbauberechtigten gegenuber der Freien und
Hansestadt Hamburg etwa nachzuweisenden Kfz-Stellplatzen auf dafur
geeigneten Flachen des Erbbaugrundstucks und fur erforderliche
Abstandsflachendienstbarkeiten oder andere nicht wertmindernde
Dienstbarkeiten, die von der Freien und Hansestadt Hamburg im Zuge des
Baugenehmigungsverfahrens etwa verlangt werden sollten.
VI.
Allgemeine Bestimmungen
------------------------
1) Rechtsnachfolge
---------------
Jeder Vertragsteil verpflichtet sich, die in diesem Erbbaurechtsvertrag
ubernommenen Verpflichtungen, soweit sie nicht ohnehin kraft Gesetzes als
Inhalt des Erbbaurechts auf Sonderrechtsnachfolger
<PAGE>
ubergehen, den jeweiligen Sonderrechtsnachfolgern mit der Massgabe
aufzuerlegen, dass auch diese wiederum verpflichtet sind, ihre jeweiligen
Sonderrechtsnachfolger in gleicher Weise zu binden.
2) Teilunwirksamkeit, Notarermachtigung
------------------------------------
a) Sollten einzelne Bestimmungen dieses Erbbaurechtsvertrages unwirksam
sein oder werden, so bleibt der Vertrag im ubrigen gleichwohl gultig.
Der Grundstuckseigentumer und der Erbbauberechtigte sind in einem
derartigen Fall verpflichtet, die ungultige Bestimmung durch eine
wirksame Regelung so zu erganzen bzw. zu ersetzen, dass der mit der
ungultigen Bestimmung beabsichtigte wirtschaftliche Zweck moglichst
gleichkommend verwirklicht wird.
Entsprechendes gilt, wenn sich im Vertrag eine erganzungsbedurftige
Lucke ergeben sollte.
b) Bestimmungen dieses Erbbaurechtsvertrages, die nicht (dinglicher)
Inhalt eines Erbbaurechts sein konnen, sollen als schuldrechtliche
Verpflichtungen gleichwohl aufrechterhalten bleiben. Jeder
Vertragsteil verpflichtet sich, die sich fur ihn aus derartigen
Vereinbarungen ergebenden Verpflichtungen seinen samtlichen
Rechtsnachfolgern gemass 1) mit Weitergabeverpflichtung aufzuerlegen.
<PAGE>
Der beurkundende Notar wird gleichzeitig allseits ermachtigt und
beauftragt, erforderlichenfalls gegenuber dem Grundbuchamt derartige
Bestimmungen zu bezeichnen und von den zu stellenden
Eintragungsantragen auszunehmen.
Er wird daruberhinaus allgemein beauftragt und ermachtigt, alle zur
Durchfuhrung dieses Vertrages erforderlichen behordlichen
Genehmigungen und Bescheinigungen -insbesondere die Genehmigungen nach
(S) 19 Baugesetzbuch und sonstigen landesrechtlichen Vorschriften -
einzuholen und entgegenzunehmen, wie uber seine gesetzliche Vollmacht
hinaus Antrage auch getrennt zu stellen und zuruckzunehmen sowie den
Inhalt der Urkunde erforderlichenfalls grundbuchmasigen Erfordernissen
anzupassen.
VII.
Vormerkung, Verpflichtung zur Einigung, Grundbucherklarungen
------------------------------------------------------------
1) Zur Sicherung des Anspruchs des Erbbauberechtigten auf Verschaffung des
Erbbaurechts bewilligen der "Grundstuckseigentumer" (Lohss GmbH) und alle
an dieser Beurkundung mitwirkenden jeweiligen Voreigentumer und
b e a n t r a g t
der Erbbauberechtigte die Eintragung entsprechender Vormerkungen gemass (S)
883 BGB an allen zum Erbbaugrundbesitz gehorenden Grundstucken bzw.
Stammgrundstucken; Teilvollzug ist zulassig.
<PAGE>
Um eine sofortige Eintragung der Vormerkung am Erbbaugrundbesitz zu
erreichen, treten samtliche Erschienenen im Wege des Schuldbeitritts der
vom Grundstuckseigentumer ubernommenen Verpflichtung zur Verschaffung des
Erbbaurechts - nicht jedoch den schuldrechtlichen Verpflichtungen aus
Abschnitt V. dieser Urkunde - gegenuber dem Erbbauberechtigten bei und
bewilligen ihrerseits die Eintragung der Vormerkungen an den Grundstucken,
bezuglich derer sie jeweils als Eigentumer eingetragen sind.
2) Die Vertragsteile verpflichten sich, in der Nachtragsurkunde betreffend die
Messungsanerkennung nach vollstandiger Zahlung der in der Anlage III
bezeichneten Abfindungsleistungen neben der Erklarung der Einigung uber das
Enstehen des Erbbaurechts am Erbbaugrundbesitz zur Eintragung in das
Grundbuch zu bewilligen und zu beantragen:
a) Am Erbbaugrundbesitz
(1) Das Erbbaurecht an ausschliessend erster Rangstelle;
(2) im Rang danach die derzeit bereits eingetragenen und im Rang
ausweichenden Dienstbarkeiten;
(3) die Vormerkung gemass (S) 883 BGB aus der
Ankaufsrechtsvereinbarung in Absatz XII. dieser Urkunde;
b) Am Erbbaurecht
Hieran zu bestellende, gemass Abschnitt I. derzeit am
Erbbaugrundbesitz eingetragene Dienstbarkeiten.
3) Vollzugsnachricht wird fur die Beteiligten und den Notar an den Notar
erbeten; Teilvollzug der Urkunde ist moglich.
<PAGE>
4) Die Beteiligten stimmen allen zur Beschaffung des Erstrangs erforderlichen
Loschungen und Ranganderungen zu und beantragen den Vollzug im Grundbuch,
auch am ganzen belasteten Grundbesitz.
VIII.
Kosten und Ausfertigungen
-------------------------
1) Die Kosten dieser Urkunde, des grundbuchamtlichen Vollzuges einschliesslich
der Kosten erforderlicher Genehmigungen und Bescheinigungen, der
Rangbeschaffung fur das Erbbaurecht einschliesslich der Kosten fur die
Neubestellung zurucktretender Rechte am Erbbaugrundbesitz sowie die
anfallende Grunderwerbsteuer hat der Erbbauberechtigte zu tragen.
Der Erbbauberechtigte verpflichtet sich zudem, dem Grundstuckseigentumer
samtliche anfallenden Grunderwerbsteuern aus den vier vorangegangenen
Kaufvertragen (vgl. Ziffer II.1) bis 3) zum Zeitpunkt der Falligkeit der
Entschadigung gemass Anlage III zu erstatten sowie samtliche aufgrund
dieser Kaufvertrage entstandenen Notar- und Grundbuchkosten mit Ausnahme
der Kosten der Lastenfreistellung.
Im Innenverhaltnis wird weiter vereinbart, dass der Teil der aufgrund
gegenwartigen Vertrages geschuldeten Grunderwerbsteuer, der durch die
Mehrwertsteuerausweisung zusatzlich entsteht und mit etwa DM 50.000,--
beziffert wird, vom Grundstuckseigentumer getragen werden muss.
<PAGE>
2) Von dieser Urkunde erhalten
jeder Vertragsteil (nach Grundbuchvollzug) eine Ausfertigung sowie vorab je
zwei beglaubigte Abschriften,
das Amtsgericht Hamburg -Grundbuchamt- eine Ausfertigung,
die Freie und Hansestadt Hamburg im Verfahren nach (S) 19 BauGB und
sonstigen
landesrechtlichen Vorschriften eine beglaubigte Abschrift, das Finanzamt
Hamburg fur Grundbesitz und Verkehrssteuern -Grunderwerbsteuerstelle - eine
einfache Abschrift,
desgleichen das Vermessungsamt Hamburg.
Die Kanzlei Westphal & Voges, Esplanade 41, 2000 Hamburg 36, und Herr
Anton Haffner, Steuerberater, Allmendstrasse 10, 7505 Ettlingen, erhalten
eine beglaubigte Abschrift.
IX.
Hinweise
--------
Die Vertragsschliessenden anerkennen, durch den amtierenden Notar insbesondere
hingewiesen worden zu sein auf
1) den Zeitpunkt und die Voraussetzungen fur die Entstehung des Erbbaurechts,
hierunter die Erfordernisse der Beschaffung der ausschliessend ersten
Rangstelle, der Erteilung der steuerlichen Unbedenklichkeitsbescheinigung,
der bodenverkehrsrechtlichen Genehmigungen sowie der Beurkundung der
Messungsanerkennung und Einigung nach Vorliegen des Ergebnisses der
amtlichen Vermessung;
<PAGE>
2) die Notwendigkeit der Beurkundung aller getroffenen Vereinbarungen und die
moglichen Rechtsfolgen eines Verstosses hiergegen, wozu allseits versichert
wird, dass Nebenabreden nicht getroffen worden sind;
3) die Haftung aller Vertragsteile fur die anfallenden Kosten und
Grunderwerbsteuer.
X.
Teilvollzug
-----------
Teilvollzug der Erbbaurechtsbestellung als solcher hinsichtlich der nicht zu
vermessenden Grundstucksflachen wird von den Beteiligten ausdrucklich nicht
gewunscht.
XI.
Vorkaufsrecht
-------------
Der Erbbauberechtigte raumt dem Grundstuckseigentumer ein schuldrechtliches
Vorkaufsrecht fur alle Falle eines Verkaufs des Erbbaurechts ein.
Fur das Vorkaufsrecht gelten die gesetzlichen Bestimmungen.
Eine dingliche Absicherung wird von den Beteiligten nicht gewunscht.
XII.
Ankaufsrecht
------------
Der Grundstuckseigentumer ist verpflichtet, das Grundstuck auf Verlangen des
Erbbauberechtigten auf diesen oder auf einen von ihm zu benennenden Dritten zu
ubertragen (Ankaufsrecht). Fur die Ausubung dieses hierdurch in der Rechtsform
des aufschiebend bedingt abgeschlossenen Kaufvertrages begrundeten Ankaufsrechts
gelten folgende Bedingungen bzw. folgender Vertragsinhalt, erganzend die
gesetzlichen Vorschriften:
<PAGE>
Das Ankaufsrecht kann jederzeit vom Erbbauberechtigten ausgeubt werden und wird
fur die gesamte Laufzeit des Erbbaurechts eingeraumt.
Der Kaufvertrag kommt mit Zugang der Ausubungserklarung beim
Grundstuckseigentumer zustande.
Als Kaufpreis fur die Grundstucke wird folgendes festgelegt:
Erfolgt die Ausubung des Ankaufsrechts innerhalb von zehn Jahren ab Eintragung
des Erbbaurechts im Grundbuch gerechnet, so betragt der Kaufpreis DM 200.000,--
(i.W. Deutsche Mark zweihunderttausend), nach 10 Jahren bis 30 Jahren DM
300.000,-- (i.W. Deutsche Mark dreihunderttausend), nach 30 Jahren bis 50 Jahren
DM 500.000,-- (i.W. Deutsche Mark funfhunderttausend), nach 50 Jahren bis 70
Jahren DM 700.000,-- (i.W. Deutsche Mark siebenhunderttausend), nach 70 Jahren
bis 90 Jahren DM 900.000,-- (i.W. Deutsche Mark neunhunderttausend) und danach
bis zum Ablauf des Erbbaurechts DM 1.000.000,-- (i.W. Deutsche Mark eine
Million).
Eine Wertsicherungsklausel soll ausdrucklich nicht vereinbart werden.
Der Kaufpreis ist jeweils Zug um Zug gegen Erklarung der dinglichen Einigung
("Auflassung") und Aushandigung der zur etwaigen Lastenfreistellung
erforderlichen Unterlagen in grundbuchtauglicher Form zu bezahlen. Der
Erbbauberechtigte oder der von ihm zu benennende Dritte hat Belastungen des
Grundbesitzes nur insoweit zu ubernehmen, als dies in Anrechnung auf den
Kaufpreis ausdrucklich gewunscht wird.
<PAGE>
Die Ubergabe der Grundstucke und die Ubernahme der Nutzen und Lasten sowie der
Gefahren und Haftungen aller Art erfolgen zum Zeitpunkt der Ausubung des
Ankaufsrechts; die Ubernahme des Grundbesitzes erfolgt in dem Zustand, in dem er
sich am Tag der notariellen Beurkundung der dinglichen Einigung befindet.
Mangelrugen jeder Art sind ausgeschlossen.
Samtliche im Zusammenhang mit der Ausubung dieses Ankaufsrechts entstehenden
Kosten, insbesondere auch eventuell anfallende Grunderwerbsteuern hat der
Erbbauberechtigte bzw. der von ihm als Erwerber zu benennende Dritte zu tragen.
Der Erbbauberechtigte nimmt die Einraumung dieses Ankaufsrechts hiermit
ausdrucklich an.
Zur Sicherung des Anspruchs auf Ubereignung aus diesem aufschiebend bedingt
abgeschlossenen Kaufvertrag wird die Eintragung einer Vormerkung gemass (S) 883
BGB an allen Erbbaugrundstucken vom Grundstuckseigentumer bewilligt und vom
Erbbauberechtigten
b e a n t r a g t.
XIII.
Rucktrittsrecht
---------------
Sollten die Voraussetzungen fur den Eintritt der Falligkeit fur die vereinbarte
Entschadigung bis zum 30. November 1990 nicht eingetreten sein, kann der
Erbbauberechtigte durch schriftliche Erklarung gegenuber dem
Grundstuckseigentumer von vorstehendem Erbbaurechtsvertrag zurucktreten. Alle
durch diesen Vertrag und seine Ruckabwicklung veranlassten sowie in diesem
Vertrag vom Erbbauberechtigten ubernommenen Kosten gehen in diesem Fall zu
Lasten des Grundstuckseigentumers.
<PAGE>
Fur den Fall des Rucktritts werden die Parteien sich bemuhen, andere
vertragliche Regelungen zu treffen, die dem Erbbauberechtigten eine langfristige
Nutzung der in diesem Vertrag genannten Grundstucke und Gebaude und eine
zusatzliche Bebauung ermoglichen.
XIV.
Guterrechtliche Versicherung
----------------------------
Der Erschienene zu 2) versichert hiermit sowohl zu diesem Erbbaurechtsvertrag
als auch zu den diesamtlichen Kaufvertragen vom heutigen Tage, URNrn. A 571 und
A 572, dass seine im gesetzlichen Guterstand lebenden Sohne, die Herren Florian
und Roland Lohss, im Rahmen dieser Vertrage nicht uber ihr gesamtes oder
wesentliches Vermogen im Sinne des (S) 1365 BGB verfugen und somit eine
Zustimmung des jeweiligen Ehegatten nicht erforderlich ist.
Vorgelesen vom Notar samt Anlagen II und III, nach Vorlage und Durchsicht
der beigefugten
Planunterlagen von den Beteiligten genehmigt und eigenhandig
unterschrieben:
/S/Peter Wirth /S/Eberhard Lohss
/S/Edith Juliana Becker
/S/Ursula Becker-Kohm
/S/Karin Becker /S/Jutta Becker
[stamp of the notary] /S/Asam, notary
<PAGE>
EXHIBIT 10.8
Summary: Lease Agreement Gunding
A lease agreement dated August 10, 1990, between Josef and Maria Kranz
(lessor) and Laser-Optronic GmbH (lessee) relating to the property and buildings
in Gunding, Neufeldstrasse 16, Germany, as amended by the 1st Amendment dated
October 23, 1995.
The agreed monthly rent amounts to DM 39,082.50 plus VAT.
The lease has a minimum term until October 31, 2005, subject to prior
termination by the lessee (at the earliest as of October 31, 2000) with a notice
period of one year. It is automatically extended for further periods of one
year each, unless terminated by either party with a notice period of two years.
The lessee has the right to sublease with the prior written consent of the
lessor which may only be withheld if the sublease would result in a business or
personal disadvantage to the lessor.
MIETVERTRAG
-----------
zwischen: Herrn Josef Kranz/Frau Maria Kranz
Hauptstrasse 12
8066 Gunding
- - nachstehend "Vermieter" genannt-
und Laser-Optronic GmbH
Neufeldstrasse 16
8066 Gunding
- - nachstehend "Mieterin" genannt -
(S) 1 - Mietobjekt
- ------- ----------
1. Der Vermieter ist Eigentumer des bebauten Grundstuckes in 8066 Gunding,
Neufeldstrasse 16 im Lageplan (Anlage 1) gelb gekennzeichnet.
2. Der Vermieter vermietet an die Mieterin des Abs. (1) aufgefuhrte Grundstuck
nebst des darauf errichteten Gebaudes (gemass Anlage 2). Im einzelnen:
= ca. 1770 m/2/
- nachstehend "Mietflache" genannt -
Die vermieteten Baulichkeiten und Freiflachen sind auf dem beigefugten
Lageplan (Anlage 1) eingezeichnet. Dieser Plan ist Bestandteil des
Mietvertrages.
3 . Die Verkehrssicherung fur das gemietete Grundstuck und Gebaudee ist
ausschliesslich Sache der Mieterin.
4. Die Mieterin wird nach Fertigstellung die Mietsache abnehmen und in einem
getrennten Protokoll bestatigen. Die von der Mieterin in Abstimmung mit dem
Vermieter vorgenommenen Umbauten einschliesslich aller Einbauten und
Anpassungen ergeben sich aus dem von der Mieterin gefuhrten
Anlagenverzeichnis, in welches der Vermieter berechtigt ist, Einsicht zu
nehmen und sich davon Abschriften oder Ablichtungen anzufertigen.
5. Die Mieterin hat das Recht, das Objekt mit Firmen- und Werbeschildern sowie
Leuchtschriften auszustatten, soweit davon nicht Interessen des Vermieters
oder anderer Mieter beruhrt werden. Die gegebenenfalls dafur
<PAGE>
erforderlichen behordlichen Genehmigungen werden von der Mieterin
eingeholt. Die Rechte des Vermieters, ebenfalls Werbeschilder u.a.
anzubringen, sind dadurch nicht beruhrt, solange weitere Mieter oder der
Eigentumer das Grundstuck auch nutzen.
(S) 2 - Vertragszweck
- ------- -------------
1. Die Mietflachen werden von der Mieterin fur ihren Fertigungsbetrieb und als
Buroraume genutzt. Eine andere Nutzung bedarf der schriftlichen Zustimmung
des Vermieters. Diese kann nur aus wichtigem Grund verweigert werden.
2. Der Mieterin ist es gestattet, die Mietflachen zu gleichen Zwecken auch
durch das Haus Siemens und verbundene Gesellschaften mitbenutzen zu lassen.
(S) 3 - Mietzeit
- ------- --------
1. Das Mietverhaltnis beginnt am 01.06.1990 und lauft ab diesem Zeitpunkt,
vorbehaltlich der Regelung in Satz 2, fest bis zum 31.05.2000. Die Mieterin
kann das Mietverhaltnis vorzeitig erstmals zum 31.05.1995 mit einer Frist
von einem Jahr kundigen, hat jedoch fur einen Nachmieter zu sorgen. In
diesem Falle sind die speziellen Einbauten, sofern nicht vom Nachmieter
ubernommen, in Hohe des Restwertes (Basis DM 500.000) von der Mieterin zu
ubernehmen.
2. Nach Ablauf der Festmietdauer von 10 Jahre verlangert sich das
Mietverhaltnis um weitere Festlaufzeiten von jeweils 1 Jahr, sofern das
Mietverhaltnis nicht von einer der beiden Seiten mit einer Frist von zwei
Jahren zum Ablauf der jeweiligen Festlaufzeit gekundigt worden ist.
3. Die Kundigung hat schriftlich zu erfolgen und ist mittels eingeschriebenen
Briefes zu ubersenden.
(S) 4 - Untervermietung
- ------- ---------------
Die Mieterin hat das Recht, die Mietflache ganz oder teilweise
unterzuvermieten. Dazu bedarf es der schriftlichen Zustimmung des
Vermieters, die aber nur dann verweigert werden kann, wenn dem Vermieter
geschaftliche oder personliche Nachteile entstehen konnten.
<PAGE>
(S) 5 - Mietzins
- ------- --------
1. Der Mietzins betragt fur die in (S) 1 Abs. (2) aufgefuhrten Mietfachen
sowie die mitvermieteten Einrichtungen monatlich DM 12,50 pro m/2/.
Insgesamt ergibt sich ein Mietzins von monatlich ca. DM 22.125,-- zuzuglich
der jeweiligen gesetzlichen Mehrwertsteuer.
Der Mietzins ist im voraus, spatestens bis zum dritten Werktag eines
Monats, an den Vermieter zu entrichten.
2. Die Mieterin wird eine Konzernburgschaft der Siemens AG in Hohe von drei
Monatsmieten dem Vermieter aushandigen.
3. Der Mietzins ist auf der Grundlage der derzeitigen Lebenshaltungskosten
vereinbart; er soll wertgesichert sein. Andert sich kunftig der vom
Statistischen Bundesamt in Wiesbaden ermittelte Preisindex fur die
Lebenshaltung aller privaten Haushalte, so erhoht oder vermindert sich im
gleichen Verhaltnis die Hohe des monatlichen Mietzinses.
Eine Anderung bleibt ausser Betracht, wenn sie vor dem 31.10.1989 erfolgt
oder, wenn sich der Index um weniger als 10 Punkte andert. Der erhohte oder
ermassigte Mietzins, ist erstmals in dem Monat zu bezahlen, in dem sich der
Index gegenuber dem zum 31.10.1989 festgestellten Index um 10 Punkte erhot
oder ermassigt hat. Nach Anpassung des Mietzinses auf Crund der
vorstehenden Wertsicherungsklausel ist der Mietzins jeweils erneut bei
einer Anderung des Index um 10 Punkte nach oben oder nach unten anzupassen.
Eine Anderung des Mietzinses tritt jedoch dann nicht ein, wenn die Erhohung
oder Verminderung auf Grund des genannten Vergleichsmassstabes weniger als
10 Punkte des zuletzt massgeblichen Index aussmachen wurde.
Basisjahr ist das Jahr 1989 = 100.
Keine Erhohung vor dem 31.05.1994.
Die Vertragsparteien verpflichten sich, bei der Einholung der fur die
Rechtswirksamkeit der vorstehenden Anpassungsklausel erforderlichen
Genehmigung der Landeszentralbank mitzuwirken.
<PAGE>
4. Die Mieterin ubernimmt die zu entrichtenden Nebenkosten wie folgt:
Die Mieterin hat die fur das Mietobiekt anfallenden Betriebs- und
Wartungskosten fur die Sammelheizung und Warmwasserversorgung zu bezahlen.
Die Mieterin hat weiter zu erstatten die Kosten fur Wasser, Abwasser,
Mullabfuhr, Kaminkehrer, Strassenreinigung, Reinigung der Hofflachen,
Gartenpflege sowie die Grundsteuer, Betriebs- und Wartungskosten fur Aufzug
(inkl. TUV), Kosten der Gewasserschadenshaftpficht, die Kosten der
Haftpflichtversicherung. Stromkosten werden von der Mieterin direkt an den
Stromgeber entrichtet. Zusatzlich samtliche Gebaudeversicherungen.
(S) 6 - Heizung
- ------- -------
1. Das Mietobjekt ist vom Vermieter mit einer Heizungsanlage ausgestattet.
2. Die Heizanlage muss so ausgelegt sein, dass in den Raumen der Mietobjekte
eine Mindesttemperatur entsprechend der jeweils gultigen Arbeitsstatten-
Verordnung gewahrleistet ist. Vermieter und Mieter stellen einvernehmlich
fest, dass die Heizungsanlage bei Ubergabe der Mietraume den
Heizungsanforderungen der Arbeitsstatten-Verordnung genugt. Sollten ohne
Anderung der Arbeitsstatten-Verordnung die Heizungsanforderungen steigen,
so wird der Vermieter auf Kosten der Mieterin fur eine Anderung der
Heizanlage sorgen.
(S) 7 - Schonheitsreparaturen und Instandhaltung
- ------- -----------------------------------------
1. Die wahrend der Vertragsdauer anfallenden Schonheitsreparaturen tragt die
Mieterin.
2. Die bauliche Instandhaltung des Mietobjektes ist Angelegenheit des
Vermieters. Reparaturen bis DM 1.000,-- im Einzelfall, sowie bis insgesamt
DM 20.000,-- jahrlich sind Sache des Vermieters.
3. Die Mieterin hat fur Beschadigungen der Mietsache aufzukommen, ausgenommen
Schaden durch hohere Gewalt.
4. Schaden an den Mietobjekten mussen von der Mieterin, sobald sie bekannt
sind, unverzuglich dem Vermieter angezeigt werden.
5. Vor Beendigang des Mietverhaltnisses wird die Mieterin das Innere des
Mietobjektes in einen Zustand bringen, der unter Berucksichtigung der
ublichen Abnutzung dem
<PAGE>
Zustand bei Beginn des Mietverhaltnisses entspricht. Die Vereinbarung des
(S) 8 ist zu beachten.
(S) 8 - Um- und Einbauten
- ------- -----------------
1. Die Mieterin ist berechtigt, das Mietobjekt mit eigenen Einbauten zu
versehen und entsprechend ihren geschaftlichen Belangen auch bauliche
Veranderungen vorzunehmen, insbesondere leicht zu entfernende Zwischenwande
zu ziehen sowie elektrische und sonstige Installationen nach
Zweckmassigkeit zu verandern.
Daruber hinausgehende bauliche Massnahmen, insbesondere Um- und Einbauten,
bedurfen der vorherigen schriftlichen Zustimmung des Vermieters, die nur
aus wichtigem Grund verweigert werden darf. Grundsatzlih hat der Mieter vor
Beendigung des Mietverhaltnisses den ursprunglichen Zustand auf seine
Kosten wiederherzustellen.
2. Einrichtungen bzw. Einbauten, die die Mieterin eingebracht bzw. vorgenommen
hat, mu sie vor Beendigung des Mietvertragsverhaltnisses wegnehmen, es sei
denn, dass der Vermieter bereit ist, diese Gegenstande zum Zeitwert zu
ubernehmen. Letzteres gilt nicht, wenn die Mieterin an der Wegnahme ein
berechtigtes Interesse hat.
3. Der Vermieter darf bauliche Veranderungen die zur Erhaltung der Mietsache
oder zur Abwendung drohender Gefahren notwendig werden, auch ohne die
Zustimmung der Mieterin vornehmen. Bauliche Veranderungen, die in diesem
Sinne zwar nicht notwendig, aber doch zweckmassig sind, durfen nur dann
ohne Zustimmung der Mieterin vorgenommen werden, wenn sie diese nur
unwesentlich beeintrachtigen.
(S) 9 - Betreten der Mietsache durch den Vermieter
- ------- ------------------------------------------
Der Vermieter darf nach Anzeige wahrend der ublichen Geschaftszeit die
Mietflachen selbst oder durch Beauftragte, Kauf- oder Mietinteressenten
besichtigen. Dies gilt auch, wenn die Durchfuhrung falliger
Instandhaltungsarbeiten dies erfordert, ebenso bei drohender Gefahr.
<PAGE>
(S) 10 - Unwirksamkeit vertraglicher Bestimmungen
- -------- ----------------------------------------
Sollten eine oder mehrere Bestimmungen dieses Vertrages unwirksam sein oder
werden, so wird dadurch die Wirksamkeit der ubrigen Bestimmungen nicht
beruhrt. Die Parteien werden eine unwirksame Bestimmung durch eine wirksame
unverzuglich ersetzen, die den wirtschaftlichen Gehalt der unwirksamen
Bestimmung moglichst nahekommend verwirklicht.
(S) 11 - Vertragsanderungen
- -------- ------------------
Anderungen dieses Vertrages bedurfen der Schriftform; sie sind wie der
Hauptvertrag zu unterzeichnen und werden als Nachtrag laufend numeriert dem
Hauptvertrag angefugt.
(S) 12 - Gerichtsstand
- -------- -------------
Gerichtsstand ist Dachau.
(S) 3 - Sonstiges
- ------- ---------
Bestandteil dieses Mietvertrags ist Anlage 3, Tekturgenehmigung, Schreiben
vom 06.03.990 Landratsamt Dachau.
Gunding, 10.08.1990 Gunding, 10.08.1990
.../S/Josef Kranz...../S/M. Kranz... .../S/Braun.../S/...
Vermieter Mieterin
<PAGE>
1. NACHTRAG ZUM MIETVERTRAG
---------------------------
vom 10.08.1990
--------------
zwischen: Herrn Josef Kranz/Frau Maria Kranz
Hauptstrasse 12
85232 Bergkirchen/Gunding
- - nachstehend "Vermieter" genannt -
und Rofin-Sinar GmbH
Neufeldstrasse 16
85232 Bergkirchen/Gunding
nachstehend "Mieterin" genannt -
Folgende Paragraphen erganzen sich wie folgt:
(S) 1 - Mietobjekt
- ------- ----------
1. Der Vermieter vermietet an die Mieterin das zusatzlich zu errichtende
Gebaude (gemass Anlage 1), das ausschliesslich zu gewerblichen Zwecken
genutzt werden darf:
EG: 395 m/2/
OG: 395 m/2/
DG: 335 m/2/
--- --------
Gesamt: 1.125 m/2/
- nachstehend "Mietflache" genannt -
(S) 3 - Mietzeit
- ------- --------
1. Das Mietverhaltnis beginnt mit Bezugsfertigkeit, voraussichtlich am
01.11.1995 und lauft ab diesem Zeitpunkt, vorbehaltlich der Regelung im
Satz 2, fest bis zum 31.10.2005. Die Mieterin kann das Mietverhaltnis
vorzeitig erstmals zum 31.10.2000 mit einer Frist von einem Jahr kundigen.
<PAGE>
Diese Fristen gelten auch fur das im Mietvertrag vom 10.08.1990 bezeichnete
Objekt.
(S) 5 - Mietzins
- ------- --------
1. Der Mietzins betragt fur die im (S) 1 Punkt 2 des Hauptvertrages
aufgefuhrten Mietflachen sowie die mitvermieteten Einrichtungen ab
01.10.1995 monatlich DM 13,50 pro m/2/. Insgesamt ergibt sich eine Mietzins
von monatlich DM 23.895,-- zuzuglich gesetzlicher Mehrwertsteuer.
Fur das zusatzlich zu errichtende Gebaude betragt der Mietzins ebenso DM
13,50 pro m/2/, voraussichtlich DM 15.187,50 monatlich, zuzuglich
gesetzlicher Mehrwertsteuer.
voraussichtich DM 15.187,50 monatich, zuzuglich gesetzlicher
Mehrwertsteuer.
(S) 7 - Schonheitsreparaturen und Instandhaltung
- ------- ----------------------------------------
Punkt 2 Reparaturen erhoht sich im Einzelfall auf DM 1.500,--.
Alle anderen Paragraphen des Hauptmietvertrages bleiben unverandert.
Gunding, 23.10.1995 Gunding, 23.10.1995
.../S/Josef Kranz...../S/M. Kranz... .../S/Braun.../S/...
Vermieter Mieterin
<PAGE>
THIS LEASE made this 14 day of June, 1989 by and between D R GROUP, a
Michigan Co-Partnership, whose address is 27300 W. 11 Mile Road, Ste. 806,
Southfield, Michigan 48034, the Lessor, hereinafter designated as the Landlord,
and ROFIN-SINAR INCORPORATED, a Delaware corporation, whose address is 3333
North First Street, San Jose, CA 95134-1995, the Lessee, hereinafter designated
as the Tenant.
ARTICLE I
DESCRIPTION
-----------
WITNESSETH: The Landlord, in consideration of the rents to be paid and the
covenants and agreements to be performed by the Tenant, does hereby lease unto
the Tenant the following described premises situated in the City of Livonia,
County of Wayne, State of Michigan, to wit: a light industrial building
containing approximately 23,500 square feet, more commonly known as 45701 Mast
Street. See attached Plans and Specs.
ARTICLE II
COMPLETION OF BUILDING
----------------------
Section 1. The building and demised premises shall be constructed
---------
substantially in accordance with Plans and Specifications set forth in Exhibit
"B", attached hereto and made a part hereof. It is understood and agreed by
Tenant that any minor changes from any plans or specifications during
construction of the building or demised premises shall not relieve Tenant of its
obligations under this Lease Agreement. Improvements to the building and
demised premises shall be constructed in accordance with Exhibits "C" and "D"
attached hereto and made a part hereof by Landlord, at Tenant's expense, and
shall be constructed in a good and workmanlike manner using only new, quality
material. Landlord's construction work shall be pursuant to applicable
ordinances, statutes, regulations and laws.
Section 2. Landlord agrees to make every reasonable effort to ensure the
---------
building is completed, as hereinafter defined, on or before August 15, 1989 or
earlier if accepted by Tenant. If the building is not completed on or before
August 15, 1989, for reasons other than unforeseen labor and/or materials
shortages, general strike or act of God, Tenant may, at its option, and as its
sole remedy, by written notice to Landlord on or before August 1, 1990, cancel
this Lease Agreement in its entirety, provided that the building is not
completed prior to the giving of said notice. For purposes of this Agreement,
the building shall be deemed completed when the City of Livonia issues a final
Certificate of Occupancy, or a temporary permit authorizing occupancy if weather
prevents issuance of final Certificate of Occupancy, and all facilities
necessary to Tenant's occupancy and use of the demised premises have been
substantially completed, including access to and throughout the premises,
toilet, heating, ventilating, air-conditioning, water, plumbing, lighting and
electrical power
<PAGE>
2
and other utility facilities are installed in good operating order and the work
remaining to be done is of such a nature as to not materially interfere with the
Tenant's use of the premises and ten (10) days written notice of the completion
of the demised premises shall have been given by Landlord to Tenant. Occupancy
of said premises by Tenant shall be construed as acceptable and acknowledgment
that the demised premises has been completed and in the condition called for,
except for punch list items. Notwithstanding the terms of this paragraph to the
contrary, Tenant shall have the right to use the building to store its equipment
prior to August 1, 1989, provided, however, that said storage shall not
interfere with Landlord's construction of improvements as called for under
Exhibit "C" attached hereto and made a part hereof. Further, prior to storing
anything in the demised premises, Tenant shall provide Landlord with
certificates of insurance as required under Article V of this Lease Agreement.
Such storage shall not, however, be deemed taking occupancy for payment of rent
under Article III.
Section 3. During the course of construction, Tenant, its employees,
---------
agents and contractors may enter upon the premises at all reasonable times for
the purpose of inspection, and as soon possible after such construction has
advanced to the point where Tenant's contractors can conveniently and without
unreasonable interference with Landlord's contractor enter into the premises to
construct and install Tenant's improvements, fixtures and other equipment and
with Landlord's consent, which shall not be unreasonably withheld or delayed,
may enter upon the premises for the purpose of installing improvements,
fixtures, and other equipment upon condition that Tenant, its employees, agents
and contractors will not unreasonably interfere with Landlord's employees,
agents or contractors, in the pursuit of Landlord's construction. Landlord
shall have no responsibility or liability whatsoever for any loss of or damage
to any fixtures or other equipment installed or left upon the demised premises
by Tenant.
Section 4. Landlord shall remove all tools, scaffolding, unused or
---------
discarded building materials, waste and rubbish of any sort, in, on or about the
premises prior to the commencement date of this Lease.
ARTICLE III
RENT AND TERMS
--------------
Section 1. This Lease shall commence on the date the building shall be
---------
completed in accordance with Section 2 of Article II hereof, and notice of such
completion has been given in accordance with Section 2 of Article II, and shall
continue until the first day of the month following the date of completion of
the building, plus a period of four (4) years after the first day of such month.
<PAGE>
3
Section 2. Tenant shall pay to Landlord as rent for said leased premises
---------
the sum of THREE HUNDRED SEVENTY SIX THOUSAND THIRTY TWO AND 00/100
($376,032.00) Dollars, payable monthly as hereinafter provided. Should the term
of this Lease commence on a day other than the first day of a calendar month,
then the rental for such month shall be pro-rated on a daily basis based upon a
thirty (30) day calendar month. Should any lease year contain less than twelve
(12) calendar months, said annual rental shall be appropriately pro-rated. In
addition to the daily rental, the Tenant shall pay at the time of execution of
this Lease the first full months's rent of SEVEN THOUSAND EIGHT HUNDRED THIRTY
FOUR AND 00/100 ($7,834.00) Dollars, receipt of which is hereby acknowledged.
In the event that Tenant takes occupancy prior to August 1, 1989, rent shall
commence from the date of occupancy. The rent under this Article III shall
commence from the date of occupancy. In the event that Tenant does not pay,
when due and payable, or within seven (7) days thereafter, any rent or any
additional rent, not timely paid shall bear interest in accordance with Article
XXXVI until paid. Rent is payable at 27300 W. 11 Mile Road, Suite 806,
Southfield, Michigan 48034, or at such other place as Landlord may give written
notice to Tenant.
Section 3. The Tenant hereby hires the said premises for the said term as
---------
above mentioned and covenants well and truly to pay, or cause to be paid unto
the Landlord at the dates and times above mentioned, the rent above reserved.
Landlord waives any Landlord's liens now and hereafter provided by law.
ARTICLE IV
TAXES
-----
Section 1. Tenant shall pay, as additional rent, to Landlord during the
---------
term of this Lease all taxes and assessments which may be levied or assessed by
any lawful authority, for each calendar year during the term hereof, against the
land, building or improvements comprising the leased premises. (Such taxes and
assessments being hereinafter called "Taxes"). Should the State of Michigan or
any political subdivision thereof or any governmental authority having
jurisdiction thereover, now or hereafter impose a tax and/or assessment of any
kind or nature upon, against or with respect to the rentals payable by Tenant to
Landlord or any income of Landlord derived from the leased premises or with
respect to Landlord's or the individuals or entities which form the Landlord
herein, ownership of the land and building or buildings comprising the leased
premises, as a substitution for all or any part of the taxes and assessments
levied or assessed against such land and such building or buildings, or in
addition thereto, such tax and/or assessment shall be deemed to constitute a tax
and/or assessment against such land and such building or buildings for the
purpose of this paragraph and Tenant shall be obligated to pay it as provided
herein. In addition, should any governmental authority having jurisdiction
thereover impose a tax or surcharge of any kind or nature upon, against or with
respect to
<PAGE>
4
the parking areas or the number of parking spaces comprising the leased
premises, such tax or surcharge shall likewise be deemed a constituted tax
and/or assessment against such land and such building or buildings for the
purpose of this paragraph and Tenant shall be obligated to pay such tax provided
herein. Landlord represents that, to the best of its knowledge, no new tax of a
nature not presently in effect or new assessments will be imposed on the demised
premises. In the event an assessment is imposed as a lump sum, Tenant shall be
obligated to pay said assessment based on the number of years left of the lease
term or any option term. By way of illustration but not limitation: $1,000.00
assessment, five (5) years left on the lease term ($1,000.00 / 5 = $200.00 per
year - $1,000.00/5 = $200.00).
Section 2. At the option of Landlord, Tenant shall pay all taxes within
---------
ten (10) days of presenting the tax bill, or the taxes shall be paid in monthly
installments on or before the first day of each calendar month, in advance, in
an amount estimated by Landlord. Upon receipt of all tax bills and assessment
bills attributable to any calendar year during the term hereof, Landlord shall
furnish Tenant with a written statement of the actual amount of Tenant's share
of the premises taxes of such calendar year. In the event the total amount of
monthly installments paid by Tenant pursuant to this Article does not equal the
sum due from Tenant as shown on such statement, then Tenant shall pay to
Landlord the deficiency within ten (10) days after demand therefor by Landlord;
or Landlord shall credit such excess to the next installment of rent due from
Tenant, as the case may be. A copy of a tax bill or assessment bill submitted
by Landlord to Tenant shall at all times be sufficient evidence of the amount of
taxes against the property to which such bill relates. Prior to, or at the
commencement of the term of this Lease and from time to time thereafter
throughout the term hereof, Landlord shall notify Tenant in writing of
Landlord's estimate of Tenant's monthly installments due hereunder. Landlord's
and Tenant's obligation under this Lease shall survive the expiration of this
Lease.
Section 3. Notwithstanding anything in this Article to the contrary, all
---------
reasonable costs and expenses incurred by Landlord during negotiations for or
contests of the amount of taxes shall be included within the term "Taxes". In
the event a refund is obtained, Landlord shall credit a portion thereof to the
next installment of rent due from Tenant, such portion to be based upon the
percentage of the original taxes paid by Tenant from which the refund was
derived.
Section 4. Tenant, at all times shall be responsible for and shall pay,
---------
before delinquent, all taxes levied, assessed or unpaid on any leasehold
interest, any right of occupancy, any investment of Tenant in the premises, or
any personal property of any kind owned, installed or used by Tenant including
Tenant's leasehold improvements or on Tenant's right to occupy the premises.
<PAGE>
5
Section 5. Tenant shall, in addition to the foregoing, pay any new tax of
---------
a nature not presently in effect but which may hereafter be levied, assessed, or
imposed upon the Landlord or the demised premises, if such tax shall be based on
or arise out of the ownership, use or operation of the leased premises. For the
purpose of computing Tenant's liability for such new type of tax, the leased
premises shall be deemed the only property of Landlord.
Section 6. Tenant agrees to cooperate with Landlord to obtain a tax
---------
abatement for said demised premises.
Excluded under this Article IV shall be any income tax or inheritance tax
of Landlord.
ARTICLE V
INSURANCE AND INDEMNITY
-----------------------
Section 1. Tenant, at its own expense, shall maintain for the mutual
---------
benefit of Landlord and Tenant, insurance of the following character:
A. Comprehensive general liability insurance against claims for
bodily injury, personal injury, death or property damage occurring on, at
or about the demised premises, such insurance to afford protection for
Landlord and such other parties as Landlord shall then designate, of not
less than Two Million and no/100 ($2,000,000.00) Dollars, with respect to
bodily injury, personal injury or death to any one person, not less than
Two Million and no/100 ($2,000,000.00) Dollars, with respect to any one
accident or occurrence and not less than One Million and no/100
($1,000,000.00) Dollars, with respect to property damage. Policies for
such insurance shall be for the mutual benefit of Landlord, Tenant and such
other parties as Landlord may designate, all of whom shall be deemed as
insureds.
B. Workman's compensation covering all persons employed in connection
with any work done on or about the demised premises with respect to which
claims for death or bodily injury shall be asserted against Landlord,
Tenant or the demised premises.
C. Rent interruption insurance in amounts equal to Tenant's total
rental obligation for twelve (12) full months under this Lease, plus the
total of the estimated cost to Tenant of taxes, assessments, insurance
premiums and common ares charges.
D. Fire and extended coverage in the standard fire extended coverage
and the special extended coverage endorsements providing all risk insurance
in an amount
<PAGE>
6
equal to full replacement value of the building and all improvements, using
not less than ONE MILLION TWO HUNDRED SEVENTY FIVE THOUSAND ($1,275,000.00)
Dollars as the Landlord's current estimate of the replacement value. Said
estimate shall be revised at the expiration of the initial term of the
insurance policy and shall be revised by the Landlord at each renewal of
said policy.
E. The Tenant shall also be responsible for all glass damage on or
within the premises, but is not required to obtain plate glass insurance.
F. Landlord, along with any desired mortgagee if required, are to be
added as insureds, loss payees or additional insureds, as appropriate under
the policies.
Section 2. All insurance policies required under this Article V shall
---------
be issued by companies of recognized financial standing, rated at least A + AAA
by Best's Insurance Guide and duly licensed to do business under the laws of the
State of Michigan. Every policy which Tenant is obligated to carry under the
provisions of this Section shall contain an agreement by the insurer that it
will not cancel or materially modify such policy except after twenty (20) days
prior written notice to Landlord. Tenant shall deliver to Landlord, upon
delivery of its occupancy of the demised premises, certificates of the insurers,
evidencing all of the insurance which is required to be maintained by Tenant
hereunder, and Tenant shall, within thirty (30) days prior to the expiration of
any such insurance deliver other original or duplicate policies or other
certificates or binders of the insurers evidencing the renewal or issuance of
such insurance. If Tenant fails to effect, maintain or renew any insurance
provided for in this Section, or to pay the premium therefor, or to deliver to
Landlord any of such policies or certificates, then in any of said events,
Landlord, at its option, but without obligation so to do, may upon five (5) days
notice to Tenant, procure such insurance. Any sums expended by Landlord to
procure such insurance shall be additional rent hereunder and shall be repaid by
Tenant within five (5) days following the date on which expenditures shall be
made by Landlord.
Section 3. Such insurance may be by so-called "blanket" policy
---------
coverage, provided, however, that such "blanket" policy coverage allocates a
satisfactory amount of insurance to the demised premises, that this amount is
not subject to deduction because of co-insurance, and that adjustment in payment
of the insurance so allocated will be in the amounts specified in the Lease.
Further, said blanket coverage shall not be subject to invalidation as to the
demised premises because of any act or omission by the Tenant.
Section 4. Except for the negligence of Landlord Tenant covenants to
---------
indemnify Landlord, and save it harmless from and against any and all claims,
actions, damages, liability and expense, including attorney fees, in connection
with loss of life, personal injury and/or damage to property arising from or out
of any occurrence in, upon or
<PAGE>
7
at the leased premises or the occupancy or use by Tenant of the leased premises
or any part thereof, arising from or out of Tenant's failure to comply with any
provisions of this Lease or occasioned wholly or in part by any act or omission
of Tenant, its agents, contractors, employees, servants, customers or licensees.
For the purpose hereof, the leased premises shall include service areas
adjoining the same, including the parking areas, and the loading platform areas.
In case Landlord shall, without fault on its part, be made a party to any
litigation commenced by or against Tenant, then Tenant shall protect and hold it
harmless and shall pay all reasonable costs, expenses and reasonable attorney
fees incurred or paid by Landlord in connection with such litigation. Tenant
shall also pay all reasonable costs, expenses and reasonable attorney fees that
may be incurred in enforcing the Tenant's covenants and agreements in this
Lease.
ARTICLE VI
PAYMENT BY LANDLORD
-------------------
If the Tenant shall default in any payment or expenditure other than
rent required to be paid or expended by the Tenant under the terms hereof, the
Landlord may at its option make such payment or expenditure on behalf of Tenant,
in which event the amount thereof shall be payable as rental to the Landlord by
the Tenant on the next ensuing rent day, together with interest at thirteen
(13%) percent per annum from the date of such payment or expenditure by the
Landlord and on default in such payment the Landlord shall have the same
remedies as on default in payment of rent.
ARTICLE VII
ASSIGNMENT
----------
Section 1. Tenant agrees not to assign or in any manner transfer this
---------
Lease or any estate or interest therein, and not to lease or sublet the leased
premises or any part or parts thereof or any right or privilege appurtenant
thereto, and not to allow anyone to conduct business at, upon or from the leased
premises or to come in, by, through or under it, in all cases either by
voluntary or involuntary act of Tenant or by operation of law or otherwise, or a
merger with Tenant or to a purchaser of substantially all of the assets of
Tenant, without the written consent of Landlord which consent shall not
unreasonably be withheld. The sale, issuance or transfer of any voting stock of
Tenant or Tenant's Guarantor, if any, which results in a change in the voting
control of Tenant, or Tenant's Guarantor, if any, shall be deemed to be an
assignment of this Lease within the meaning of this Article. Any such
prohibited act by Tenant (or any attempt at same) either voluntarily or
involuntarily or by operation of law or otherwise, shall at Landlord's option,
terminate this Lease and any such purported act shall be null and void.
Notwithstanding the terms of this paragraph to the contrary, in the event of an
assignment or subletting by Tenant, Tenant
<PAGE>
8
shall not be relieved of any of its obligations under the terms of this Lease.
Further, any increase in the rent under Article III of this Lease, due to any
assignment under this Article VII, shall be divided fifty-fifty (50-50) between
Landlord and Tenant. Payment of Landlord's fifty (50%) percent shall be paid
monthly with the rent as called for under Article III.
Landlord agrees that in the event Tenant contracts with Landlord to
build a new building or to lease a new building to it, this Lease will be
terminated as of the date that Tenant takes occupancy and pays rent for the new
building.
ARTICLE VIII
ALTERATIONS
-----------
Section 1. Tenant shall not make or cause to be made any alterations,
---------
additions or improvements to the leased premises without the prior written
approval of Landlord which shall not be unreasonably withheld or delayed.
Tenant shall present to Landlord plans and specifications for such work at the
time approval is sought. Notwithstanding this paragraph to the contrary, Tenant
shall have the right to make alterations up to $3,000.00 per year without
approval of Landlord.
Section 2. All alterations, additions and improvements made by Tenant
---------
shall be deemed to have attached to the leasehold and to have become the
property of Landlord upon such attachment; upon expiration of this Lease or any
renewal term thereof, Tenant shall not remove any of such alterations, additions
and improvements, except that Tenant may remove control panels (but not standard
building control panels) manufacturing and testing equipment, material handling,
storage equipment and office furniture systems and components, whether installed
before or during occupancy by Tenant or by Landlord for Tenant and trade
fixtures. It is understood that Tenant shall not have this right of removal
unless all rents and other charges due hereunder are paid in full and Tenant is
not otherwise in default under the terms of this Lease.
Landlord may designate by written notice to Tenant that alterations,
improvements and additions, installed in accordance with this Article VIII,
shall be removed by Tenant at the expiration or termination of this Lease, shall
promptly remove the same and repair any damages to the leased premises caused by
such removal or shall reimburse Landlord for the costs of repairing such damage.
Further, Tenant agrees repair any damages to the leased premises caused by
removal of any other alterations, additions and improvements. Said
reimbursement to Landlord under this Section 2 shall be made by Tenant to
Landlord within ten (10) days after receipt of invoice from Landlord.
<PAGE>
9
ARTICLE IX
EMINENT DOMAIN
--------------
If the whole or more than fifty (50%) percent of the leased premises
shall be taken by any public authority under the power of eminent domain or sold
to public authority under threat or in lieu of such a taking, then the term of
this Lease shall cease on the part so taken, as of the day possession shall be
taken by such public authority, and the rent shall be paid up to that date.
Landlord or Tenant may, by written notice to the other, within thirty (30) days
from the date possession is taken by public authority, terminate this Lease. In
the event that neither Landlord or Tenant terminates this Lease, all of the
terms herein provided shall continue in effect, except that as of the date
possession is taken by public authority, the rent and other charges payable by
Tenant to Landlord shall be reduced in proportion to the floor areas of the
leased premises taken and Landlord shall, at its expense, make all necessary
repairs or alterations to the basic building, so as to constitute the remaining
leased premises a complete architectural unit, and Tenant, at Tenant's sole
cost, shall similarly act with respect to Tenant's improvements, trade fixtures,
furnishings and equipment. All damages awarded for such taking under the power
of eminent domain or sale under threat or in lieu of such taking, whether for
the whole or a part of the leased premises, shall belong to and be the property
of Landlord, irrespective of whether such damages shall be awarded as
compensation for diminution in value to the leasehold or to the fee of the
leased premises, and Tenant shall have no claim against either Landlord or the
condemning authority with respect thereto; provided, however, that Landlord
shall not be entitled to any award specifically designated as compensation for,
depreciation to, or cost of removal or location of Tenant's stock and fixtures.
Tenant shall be entitled to its unamortized costs for improvements.
ARTICLE X
MAINTENANCE AND REPAIRS
-----------------------
Section 1. Landlord shall, at its own expense, make all necessary
---------
repairs to the roof, outer walls, structural members or framing, footings and
foundation of the premises which repairs are occasioned by structural defects.
Tenant shall, at its expense, take care of the remainder of the demised premises
both inside and out and keep the same and all parts thereof, by way of
illustration, but not limitation, landscaping and parking areas, together with
any and all alterations, additions and improvements therein or thereto, in good
order and condition, suffering no waste or injury, and shall promptly make all
needed repairs and replacements, in and to any building or structure or
equipment now or hereafter erected upon the demised premises, including vaults,
sidewalks, water, sewer and gas connections, pipes and mains, and all other
fixtures, machinery and equipment now or hereafter belonging to or connected
with said premises or used in their operation. Landlord shall assign to Tenant
the benefit of all warranties on any said items purchased by Landlord as part of
the premise
<PAGE>
10
construction under Exhibit "C", including labor, workmanship and/or materials.
Landlord shall negotiate in good faith the most advantageous warranties and for
the right to assign them. Notwithstanding the foregoing, Landlord shall, at
Tenant's option, process such claims on Tenant's behalf. All such repairs and
replacements shall be of good workmanlike quality and new material sufficient
for the proper maintenance and operation of the demised premises. The Tenant
shall not allow the accumulation of waste or refuse matter, not permit anything
to be done upon the demised premises which would invalidate or prevent the
procurement of any insurance policies which may at any time be required pursuant
to the provisions of Article V hereof. The Tenant shall not obstruct or permit
the obstruction of the street or sidewalk and shall keep the sidewalk and curb
adjoining the demised premises clean and free of snow and ice.
Section 2. The Tenant shall at its own expense under penalty of
---------
forfeiture and damages promptly comply with all lawful laws, orders, regulations
or ordinances of all municipal, County and State authorities affecting the
premises hereby leased and the cleanliness, safety, occupation and use of same,
provided, however, that Landlord shall be solely responsible for rectifying
breaches or violations arising out of its construction of the premises including
the improvements constructed or to be constructed by Landlord prior to August 1,
1989.
Section 3. The Landlord shall have the right to enter upon the leased
---------
premises at all reasonably hours or at least one (1) days notice for the purpose
of inspecting the same. If the Landlord reasonably deems any repairs necessary,
he may demand that the Tenant make the same and if the Tenant refuses or
neglects forthwith to commence such repairs and complete the same with
reasonable dispatch, the Landlord may make or cause to be made such repairs and
shall not be responsible to the Tenant for any loss or damage that may accrue to
its stock or business by reason thereof, and if the Landlord makes or causes to
be made such repairs, the Tenant agrees that it will within twenty (20) days pay
to the Landlord the cost thereof within ten (10) days after receipt by Tenant of
invoice from Landlord, with interest at thirteen (13%) percent per annum, and if
it shall make default in such payment, the Landlord shall have the remedies
provided in Paragraph 6 hereof.
Section 4. The Landlord reserves the right of free access at all
---------
times to the roof of said leased premises. The Tenant shall not erect any
structures for storage or any aerial, or use the roof for any purpose without
the consent in writing of the Landlord, which consent shall not be unreasonably
withheld with respect to aerials, provided, however, that Tenant shall submit a
detailed plan to Landlord specifically identifying the type of aerial and nature
of work to be done by Tenant. Tenant shall be responsible for any damage,
repair or replacement caused by construction of any aerial under this Section.
In the event that Tenant does not repair or replace said damage in a timely
manner, Landlord shall have the right to do so and Tenant agrees to pay Tenant
the costs and expenses for same to Landlord within ten (10) days after receipt
of invoice from Landlord.
<PAGE>
11
Landlord agrees to be responsible for repairs and replacement to the
roof for the first four (4) years of this Lease. Tenant, beginning with the
fifth (5th) year, agrees to pay a pro-rata share of the roof repairs and
replacement based on a fifteen (15) year life of the roof.
ARTICLE XI
RIGHT TO ERECT SIGNS
--------------------
Tenant is hereby granted the right to erect signs on the exterior of
the building which shall be constructed in conformity with all requirements of
local law and shall be subject to the prior written approval of Landlord, which
approval will not be unreasonably withheld. Tenant agrees to hold Landlord
harmless form any liability arising out of or in connection with the erection or
maintenance of such signs.
Landlord covenants that it will not and will not allow any other
Tenant to erect signs on the face or sides of the building in which the demised
premises are located.
ARTICLE XII
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
-----------------------------------------
Landlord may, without notice, if in the opinion of Landlord an
emergency exists, perform any covenant or condition of this Lease for the
Tenant's account and at the Tenant's expense, in the event that the Tenant shall
default in the performance of any such covenant or condition. Tenant shall
reimburse Landlord for all reasonable costs and expenses of Landlord, including
reasonable attorney fees, thereby incurred within ten (10) days after receipt by
Tenant from Landlord of a statement setting forth the amount of such costs and
expenses. The failure by Tenant to so reimburse Landlord within such ten (10)
day period shall constitute a default by Tenant under this Lease and shall carry
with it the same consequences as failure to pay any installment of rental.
Landlord's rights and remedies pursuant to this Article shall be an addition to
any and all other rights and remedies provided under this Lease or at law and
shall survive the termination of this Lease.
ARTICLE XIII
DEFAULT
-------
Section 1. If any one or more of the following events (herein
---------
sometimes called "events of default") shall happen:
<PAGE>
12
A. If default shall be made in the due and punctual payment of any
rent, or in the payment of any other sums of money required to be paid by
Tenant under this Lease or any part thereof, when and as the same shall
become due and payable, and such default shall continue for a period of
seven (7) days after written notice from Landlord to Tenant specifying the
items in default; or
B. In the event Tenant shall be in default in the performance of any
other covenants, terms, conditions, provisions, rules and regulations of
this Lease excepting those items listed in the above Section (A) and if
such default is not cured within twenty (20) days after written notice
thereof given by the Landlord, excepting such defaults that cannot be cured
completely within such twenty (20) day period, provided that the Tenant
shall within such twenty (20) day period, promptly commence and proceed
with reasonable diligence and in good faith to remedy such default;
then and in any such event Landlord at any time thereafter may give written
notice to Tenant specifying such event of default or events of default and
stating that this Lease and the term hereby demised shall expire and terminate
on the date specified in such notice, unless remedied pursuant to A and B
hereinabove, which shall be at least seven (7) days after the giving of such
notice, and upon the date specified in such notice this Lease and the term
hereby demised and all rights of Tenant under this Lease, including any renewal
privileges, whether or not exercised, shall expire and terminate, unless said
event or events of default have been remedied pursuant to A and B hereinabove.
Section 2. Upon any such expiration or termination of this Lease,
---------
Tenant shall quit and peacefully surrender the demised premises to Landlord, and
Landlord, upon or at any such expiration or termination, may without further
notice, enter upon and re-enter the demised premises and possess and repossess
itself thereof, by summary proceedings, ejectment, and may dispossess Tenant and
remove Tenant and all other persons and property from the demised premises and
may have, hold and enjoy the demised premises and the right to receive all
rental of and from the same. In the event that the Landlord shall, during the
period covered by this Lease, obtain possession of said premises by re-entry,
summary proceedings, or otherwise, the Tenant hereby agrees to pay the Landlord
the reasonable expense incurred in obtaining possession of said premises and
also all reasonable expenses and commissions which may be paid in and about the
letting of the same.
Section 3. If this Lease shall terminate pursuant to this Article, or
---------
by summary proceedings or otherwise, or if the demised premises or any part
thereof shall be abandoned by Tenant, or shall become vacant during the term
hereof, Landlord may in its own name, but as agent for Tenant if this lease not
be terminated, or if this lease be terminated, in its own behalf, relet the
demised premises or any part thereof, or said premises, with additional premises
for such term or terms, (which may be greater or less than the period which
would otherwise have constituted the balance of the term of the Lease)
<PAGE>
13
and on such conditions (which may include concessions or free rent and
alterations of the demised premises) as Landlord, in its reasonable discretion
based on market condition and the advice of commercial experienced broker, may
determine and may collect and receive the rents therefor. Landlord shall in no
way be responsible or liable for any failure to relet the demised premises or
any part thereof, or of any failure to collect any rent due upon such reletting,
provided, however, that Tenant shall not be liable for the remaining rent under
this Lease or for any damages unless either (i) Landlord takes reasonable steps
to mitigate its damages or (ii) Landlord does not unreasonably withhold its
consent to any proposed assignment or sublease so as to enable Tenant mitigate
its damages.
Section 4. No such expiration or termination of this Lease, or
---------
summary proceedings, abandonment or vacancy shall relieve Tenant of its
liability and obligation under this Lease, whether or not the demised premises
shall be relet, provided, however, that Tenant shall not be liable for the
remaining rent under this Lease or for any damages unless either (i) Landlord
takes reasonable steps to mitigate its damages or (ii) Landlord does not
unreasonably withhold its consent to any proposed assignment or sublease so as
to enable Tenant mitigate its damages. In any such event Tenant shall pay
Landlord the rent and all other charges required to be paid by Tenant up to the
time of such event. Thereafter:
A. 1. Tenant, until the end of the term of this Lease, or what would
have been such term in the absence of any such event, shall be liable to
Landlord as damages for Tenant's default, the equivalent of the amount of
the rent and other charges which would be payable under this Lease by
Tenant if this Lease were still in effect, less the net proceeds of any
reletting effected pursuant to the provisions above, after deducting all
Landlord's expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage and management commissions,
operating expenses, legal expenses, reasonable attorneys' fees, alteration
costs, and expenses of preparation for such reletting.
2. Tenant shall pay such current damages (herein called "deficiency")
to Landlord monthly on the days on which the net rent would have been
payable under this Lease if this Lease were still in effect, and Landlord
shall be entitled to recover from Tenant each monthly deficiency as the
same shall arise.
3. At any time after the expiration or termination of this Lease
pursuant to this Article, in lieu of collecting any further monthly
deficiencies as aforesaid, Landlord shall be entitled to recover from
Tenant, and Tenant shall pay to Landlord, on demand, as damages, in
addition to the damages provided for in Section 8, damages computed in the
manner set forth in this Section B, minus any such monthly deficiencies
previously recovered from Tenant.
<PAGE>
14
B. 1. In the case of any breach of this Lease mentioned in Sections 6
and 7, Landlord shall immediately and ipso facto, without notice or other
action by Landlord, become entitled to recover from Tenant, as damages for
such breach, in addition to any damages becoming due under Sections 6 and
7, an amount equal to the difference between the rent and other charges
reserved in this Lease from the date of such breach to the date of the
expiration of the original term demised and the then fair and reasonable
rental value of the premises for the same period. Said damages shall
become due and payable to Landlord immediately upon such breach of this
Lease and without regard to whether this Lease be terminated or not, and if
this Lease be terminated without regard to the manner in which it is
terminated. In the computation of such damages, the difference between any
installment of rent thereafter becoming due and the fair and reasonable
rental value of the premises for the period for which such installment was
payable shall be discounted to the date of such breach at the rate of not
more than six (6%) percent per annum.
2. If and so long as the term of this Lease shall continue, the rent
reserved herein for the unexpired term of the Lease after a breach
mentioned in Sections 6 and 7, shall be reduced by the amount of such
liquidated damages together with interest thereon at an implied rate of six
(6%) percent per annum as may be paid to Landlord, such reduction being
applied proportionately to each installment of rent thereafter becoming
due. During the continuance of the Lease after such a breach and until
such damages are paid to Landlord, the whole amount of each installment of
rent herein reserved shall be due and payable at the time herein specified
and if, by reason of the subsequent payment of liquidated damages, and the
resulting reduction in rental, Landlord shall have received a sum in excess
of all installments, as so reduced, becoming due after the breach and
before the collection of such damages, such excess shall be refunded upon
the receipt of such liquidated damages.
Section 5. If the demised premises or any part thereof be relet by
---------
Landlord for the unexpired term of this Lease or any part thereof, before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rent reserved upon such reletting shall be considered as
part of the evidence of the fair and reasonable rental value for the part or the
whole of the premises so relet during the term of the reletting. Nothing herein
contained shall limit or prejudice the right of Landlord to obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when and governing the
proceeding in which, such damages are to be proved, whether or not such amount
be greater, equal to, or less than the amount of the difference referred to
above.
Section 6. If this Lease be terminated by summary proceedings or
---------
otherwise, or if the premises are abandoned or become vacant, and whether or not
the premises be relet, Landlord shall be entitled to recover from Tenant, and
Tenant shall pay to Landlord, in
<PAGE>
15
addition to any damages becoming due under this Article, the following: an
amount equal to all reasonable expenses, if any, including reasonable counsel
fees, incurred by Landlord in recovering possession of the demised premises, and
all reasonable costs and charges for the care of said premises while vacant,
which damages shall be due and payable by Tenant to Landlord at such time as
such expenses are incurred by Landlord.
Section 7. If this Lease be terminated in any manner whatsoever, or
---------
if there be any breach of this Lease specified in Sections 6 and 7, then and in
either of such events, Tenant covenants and agrees, any other covenant in this
Lease notwithstanding:
A. That the premises shall be in the same condition as that in which
Tenant has agreed to surrender them to Landlord at the expiration of the
term hereof.
B. That Tenant, on or before the occurrence of any such event shall
perform any covenant contained in this Lease for the making of any
improvement, alteration or betterment to the premises, or for restoring or
rebuilding any part thereof; and
C. That, for the breach of any covenant above stated in this Section
7, Landlord shall be entitled to recover and Tenant shall pay, ipso facto,
without notice or other action by Landlord, the then cost of performing
such covenant, less interest thereon at the rate of six (6%) percent per
annum for the period between the occurrence of any such event and the time
when any such work or act, the cost of which is computed, should have been
performed under the other provisions of this Lease had such event not
occurred.
Section 8. No failure by Landlord to insist upon the strict
---------
performance of any agreement, term, covenant, or condition hereof or to exercise
any right or remedy consequent upon a breach thereof, and no acceptance of full
or partial rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of such agreement, term, covenant or condition. No
agreement, term, covenant or condition hereof to be performed or complied with
by Tenant and no breach shall affect or alter this Lease, but each and every
agreement, term, covenant and condition hereof shall continue in full force and
effect with respect to any other then existing or subsequent breach thereof. No
covenant or term hereunder shall be deemed "uncurable" provided it is cured in
accordance with the terms of this Article XIII.
Section 9. In the event of any breach by Tenant of any of the
---------
agreements, terms, covenants or conditions contained in this Lease, Landlord
shall be entitled to enjoin such breach or threatened breach and shall have the
right to invoke any right and remedy allowed at law or in equity or by statute
or otherwise as though re-entry, summary proceedings and other remedies were not
provided for in this Lease.
<PAGE>
16
Section 10. Each right and remedy provided for in this Lease shall be
----------
cumulative and shall be in addition to every other right or remedy provided for
in this Lease or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by Landlord or Tenant
of any one or more of the rights or remedies provided for in this Lease or now
or hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the party in question of any or
all other rights or remedies provided for in this Lease or now or hereafter
existing at law or in equity or by statute or otherwise.
ARTICLE XIV
BANKRUPTCY OR INSOLVENCY
------------------------
Section 1. Tenant's interest not transferable. Neither Tenant's
---------
interest in this Lease, nor any estate hereby created in Tenant nor any interest
herein or therein, shall pass to any trustee or receiver or assignee for the
benefit of creditors or otherwise by operation of law except as may specifically
be provided pursuant to the Bankruptcy Code.
Section 2. Termination. In the event the interest or estate created
---------
in Tenant hereby shall be taken in execution or by other process of law, or if
Tenant's Guarantor, if any, or his executors, administrators, or assigns, if
any, shall be adjudicated insolvent or bankrupt pursuant to the provisions of
any State Act or the Bankruptcy Code or if Tenant is adjudicated insolvent by a
Court of competent jurisdiction other than the United States Bankruptcy Court,
or if a receiver or trustee of the property of Tenant or Tenant's Guarantor, if
any shall be appointed by reason of the insolvency or inability of Tenant or
Tenant's Guarantor, if any, to pay its debts, or if any assignment shall be made
of the property of Tenant or Tenant's Guarantor, if any, for the benefit of
creditors, then and in any such events, this Lease and all rights of Tenant
hereunder shall automatically cease and terminate with the same force and effect
as though the date of such event were the date originally set forth herein and
fixed for the expiration of the term, and Tenant shall vacate and surrender the
leased premises but shall remain liable as herein provided.
Section 3. Tenant's obligation to avoid Creditors' proceedings.
---------
Tenant or Tenant's Guarantor shall not cause or give cause for the appointment
of a trustee or receiver of the assets of Tenant or Tenant's Guarantor, if any,
and shall not make any assignment for the benefit of creditors or become or be
adjudicated insolvent. The allowance of any petition under any insolvency law
except under the Bankruptcy Code or the appointment of a trustee or receiver of
Tenant or Tenant's Guarantor, if any, or of the assets of either of them, shall
be conclusive evidence that Tenant caused, or gave cause therefor, unless such
allowance of the petition or the appointment of a trustee or receiver, is
vacated within thirty (30) days after such allowance or appointment. Any act
described in this paragraph shall be deemed a material breach of Tenant's
obligations hereunder, and this Lease shall thereupon
<PAGE>
17
automatically terminate. Landlord does in addition, reserve any and all other
remedies provided in this Lease or in law.
Section 4. Rights and obligations under the Bankruptcy Code:
---------
A. Upon the filing of a petition by or against Tenant under the
Bankruptcy Code, Tenant, as debtor and as debtor in possession, and any
trustee who may be appointed agree as follows:
1. To perform each and every obligation of Tenant under this
Lease including, but not limited to, the manner of "operations" as
provided in this Lease until such time as this Lease is either
rejected or assumed by order of the United States Bankruptcy Court.
2. To pay monthly in advance on the first day of each month as
reasonable compensation for use and occupancy of the leased premises
an amount equal to all rent and other charges otherwise due pursuant
to this Lease.
3. To reject or assume this Lease within sixty (60) days of the
filing of such petition under Chapter 7 of the Bankruptcy Code or
within one hundred twenty (120) days of the filing of a petition under
any other Chapter.
4. To give Landlord the notice required by law of any proceeding
relating to any assumption of this Lease.
5. To give the notice required by law of any abandonment of the
leased premises; any such abandonment to be deemed a rejection of this
Lease.
6. To do all other things of benefit to Landlord otherwise
required under the Bankruptcy Code, unless such things are not
required except upon request of Landlord following such petition, in
which event Landlord must first request them.
B. No default of this Lease by Tenant, either prior to or subsequent
to the filing of such a petition, shall be deemed to have been waived
unless expressly done so in writing by Landlord.
C. Included within and in addition to any other conditions or
obligations imposed upon Tenant or its successor in the event of assumption
and/or assignment are the following:
<PAGE>
18
1. The cure of any monetary defaults and the reimbursement of
pecuniary loss within not more than thirty (30) days of assumption
and/or assignment;
2. The use of the leased premises as set forth in this Lease.
3. If required by the Bankruptcy Code, the prior written consent
of any mortgagee to which this Lease has been assigned as collateral
security.
ARTICLE XV
RIGHT TO MORTGAGE
-----------------
ARTICLE XVI
NON-LIABILITY
-------------
Section 1. As a consideration for making of this Lease, the Landlord
---------
shall not be liable for any failure of public or private utility services to the
premises, nor for injury or damage which may be sustained to person or property
by the Tenant or any other person caused by or resulting from steam,
electricity, gas, water, rain, ice, or snow which may leak or flow from or into
any part of said building or from the breakage, leakage, obstruction or other
defect of the pipes, wiring, appliances, plumbing or lighting fixtures of the
same, the condition of said premises or any part thereof, or through the
elevator, if any, or from the street or subsurface, or from any other source or
cause whatsoever, nor for interference with light or other incorporeal
hereditaments, provided such interference is caused by anybody other than the
Landlord, or caused by operations by or for the City in construction of any
public or quasi-public work, neither shall the Landlord be liable for any defect
in the building, latent or otherwise, except as otherwise provided herein.
Section 2. The Tenant further acknowledges that it has examined the
---------
said leased premises prior to the making of this lease, and knows the condition
thereof, and that no representations as to the condition or state of repairs
thereof have been made by the Landlord or its agent, which are not herein
expressed, and the Tenant hereby accepts the leased premises in their present
condition at the date of the execution of this Lease, subject to construction to
be done by Landlord under Article II, Exhibit "C", Work Letter Punch List.
Section 3. The Landlord shall not be responsible or liable to the
---------
Tenant for any loss or damage that may be occasioned by or through the acts or
omissions of persons occupying adjoining premises or any part of the premises
adjacent to or connected with the premises hereby leased or any part of the
building of which the leased premises are a part or
<PAGE>
19
for any loss or damage resulting to the Tenant or his property from bursting,
stoppage or leaking of water, gas, sewer or steam pipes.
ARTICLE XVII
USE AND OCCUPANCY
-----------------
It is understood and agreed between the parties hereto that said
premises during the continuance of this Lease shall be used and occupied for
office, warehouse, distribution, customer demonstration, product and process
development and assembly of electrical and/or mechanical equipment and for no
other purpose or purposes without the written consent of the Landlord, and that
the Tenant will not use the premises for any purpose in violation of any law,
municipal ordinance or regulation and that on any breach of this agreement, the
Landlord may at its option terminate this Lease forthwith and re-enter and
repossess the leased premises by any summary proceeding.
ARTICLE XVIII
DAMAGE AND DESTRUCTION
----------------------
Section 1. If the building is damaged by fire or any other cause, the
---------
following provisions of this Article shall apply:
A. If the damage is to such extent that the cost of restoration, as
reasonably estimated by Landlord, will equal or exceed thirty (30%) percent
of the replacement value of the building (exclusive of foundations) in its
condition just prior to the occurrence of the damage, Landlord may, not
later than the sixtieth (60th) day following the damage, give Tenant a
written notice stating that it elects to terminate this Lease. If such
notice shall be given:
1. This Lease shall terminate on the thirtieth (30th) day after
the giving of said notice.
2. Tenant shall surrender possession of the premises within a
reasonable time thereafter.
3. The rent and additional rent shall be apportioned as of the
date of such surrender and any rent paid for any period beyond said
date shall be repaid to Tenant.
B. If the cost of restoration, as reasonably estimated by Landlord,
shall amount to less than thirty (30%) percent of said replacement value of
the building, or
<PAGE>
20
if despite the cost Landlord does not elect to terminate this Lease,
Landlord shall restore the building and the premises with reasonable
promptness, subject to delays beyond Landlord's control and delays in the
making of insurance adjustments by Landlord, and Tenant shall not have the
right to terminate this Lease. Notwithstanding this paragraph B. to the
contrary, Tenant shall have the right to terminate this Lease if repairs
are not completed by Landlord within six (6) months after said damage or
destruction under this Article XVIII.
Landlord need not restore fixtures, improvements or other property of
Tenant.
Section 2. In any case in which the use of the premises is affected
---------
by any damage to the building, there shall be either an abatement or an
equitable reduction in rent depending on the period for which the extent to
which the premises are not reasonably usable for the purposes for which they are
leased hereunder, but this provision shall not relieve any insurance company of
the obligation to pay such rent. The words "restoration" and "restore" as used
in this Article shall include repairs. If the damage results from the fault of
Tenant, or Tenant's agents, servants, visitors or licensees, Tenant shall not be
entitled to any abatement or reduction of rent, except to the extent, if any,
that Landlord receives the proceeds of rent insurance in lieu of such rent.
Section 3. In the event of any loss or damage to the building, the
---------
premises and/or any contents, each party shall look first to any insurance in
its favor before making any claim against the other party; and to the extent
possible without additional cost, each party shall obtain, for each policy of
such insurance, provisions permitting waiver of any claim against the other
party for loss or damage within the scope of insurance, and each party, to such
extent permitted, for itself and its insurers waives all such insured claims
against the other party (its agents, employees and guests).
ARTICLE XIX
NOTICES
-------
All notices required herein shall be given in writing by certified or
registered mail, return receipt requested, if addressed to Landlord, at the
place where the rent reserved herein is payable and if addressed to Tenant as
follows:
Rofin Sinar Inc.
3333 North First Street
San Jose, CA 95134-1995
or mailed to such other addresses as the parties respectively may designate by
notice given in like manner.
<PAGE>
21
ARTICLE XX
HEADINGS AND SECTION NUMBERS
----------------------------
The headings, section numbers and article numbers appearing in this
Lease are inserted only as a matter of convenience and in no way define, limit,
or construe, or describe the scope of intent of such sections or articles of
this Lease nor in any way affect this Lease.
ARTICLE XXI
UTILITIES
---------
The Tenant shall pay, as and when the same shall become due and
payable, all water and sewer rents, rates, charges, assessments and other
utilities supplied the leased property.
ARTICLE XXII
ADDITIONAL RULES
----------------
The Landlord may, from time to time, make such reasonable rules and
regulations as in the Landlord's judgment may be necessary or advisable for the
safety, care and cleanliness of the premises, the cleanliness of the building in
which the same are located, the common areas and other tenants occupying said
adjoining buildings and for the preservation of good order in said building and
adjoining buildings and the use and occupancy of the demised premises shall be
conditioned upon observance of the compliance with such rules and regulations.
The violation of any such rules shall entitle Landlord to damages only and shall
not result in termination or forfeiture of this Lease, provided, however, said
violation of such rules does not result in material damage or reduction in the
valuation of the building and demised premises.
ARTICLE XXIII
ADDITIONAL DOCUMENTS
--------------------
The parties hereto, upon request, agree to execute any additional
documents reasonably required to carry out the intent and provisions of this
Lease.
<PAGE>
22
ARTICLE XXIV
LIGHT AND AIR
-------------
If at any time any windows of the demised premises are temporarily
closed, darkened or bricked-up for any reason whatsoever including, but not
limited to, Landlord's own acts, Landlord shall not be liable for any damage
Tenant may sustain thereby and Tenant shall not be entitled to any compensation
therefor nor abatement of rent, nor shall the same release Tenant from its
obligations hereunder nor constitute an eviction.
ARTICLE XXV
WAIVER OF RIGHTS AND REDEMPTION
-------------------------------
ARTICLE XXVI
WAIVER
------
The failure of the Landlord to insist, in any one or more instances
upon a strict performance of any of the covenants of this Lease, or to exercise
any option herein contained, shall not be construed as a waiver or a
relinquishment for the future of such covenant or option, but the same shall
continue and remain in full force and effect. The receipt by the Landlord of
rent, with knowledge of the breach of any covenant hereof, shall not be deemed a
waiver of such breach and no waiver by the Landlord of any provision hereof
shall be deemed to have been made unless expressed in writing and signed by the
Landlord.
ARTICLE XXVII
NO PARTNERSHIP
--------------
Nothing contained herein shall be deemed or construed by the parties
hereto, nor by any third party, as creating the relationship of principal and
agent or of partnership or of joint venture between the parties hereto, it being
understood and agreed that neither the method of computation of rent, nor any
other provision contained herein, nor any acts of the parties herein, shall be
deemed to create any relationship between the parties hereto other than the
relationship of Landlord and Tenant.
<PAGE>
23
ARTICLE XXVIII
PARTIAL INVALIDITY
------------------
If any term, covenant or condition of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term,
covenant or condition to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this Lease shall be valid and be enforced to the
fullest extent permitted by Law.
ARTICLE XXIX
LIENS
-----
The Tenant shall have no power to do any act or make any contract
which may create or be the foundation for any lien, mortgage or other
encumbrance upon the estate of the Landlord or of any interest of the Landlord
in the demised premises, or upon or in the building or buildings or improvements
thereon or hereafter erected or placed hereon, it being agreed that should the
Tenant cause any improvements, alterations or repairs to be made to the demised
premises, or material furnished or labor performed therein, or thereon, neither
the Landlord nor the demised premises nor any improvements shall under any
circumstances be liable for the payment of any expenses incurred or for the
value of any work done or material furnished to the demised premises or any part
thereof; but all such improvements, alterations, repairs, materials and labor
shall be done at the Tenant's expense and the Tenant shall be solely and wholly
responsible to contractors, laborers and materialmen, furnishing labor and
material to said premises and building or buildings and improvements or any part
thereof and all such laborers, materialmen and contractors are hereby charged
with notice that they must look solely and wholly to the Tenant and the Tenant's
interest in the premises, to secure the payment of any bills for work done and
materials furnished.
In the event a mechanic's lien shall be filed against the demised
premises or Tenant's interest therein as the result of the work undertaken by
Tenant to ready the demised premises for the opening of Tenant's business or as
a result of any repairs or alterations made by Tenant, Tenant shall, within ten
(10) days after receiving notice of such lien, discharge such lien either by
payment of the indebtedness due the mechanic's lien claimant or by filing a bond
(as provided by statute) as security therefor. In the event Tenant shall fail
to discharge such lien, Landlord shall, among its remedies, have the right to
procure such discharge by filing such bond and Tenant shall pay the cost of such
bond to Landlord as additional rent upon the first day that rent shall be due
thereafter.
<PAGE>
24
ARTICLE XXX
ENTIRE AGREEMENT
----------------
This Lease and the Exhibits, Riders and/or Addenda, if any, attached
and signed by the parties, set forth the entire agreement between the parties.
Any prior conversations or writings are merged herein and extinguished. No
subsequent amendment to this Lease shall be binding upon Landlord or Tenant
unless reduced to writing and signed. If any provisions contained in a Rider or
addenda is inconsistent with a provision of this Lease, the provisions contained
in said rider or addenda shall supersede the Lease provision.
ARTICLE XXXI
INTERPRETATION AND USE OF PRONOUNS
----------------------------------
Nothing contained herein shall be deemed or construed by the parties
hereto, nor by any third party, as creating the relationship of principal and
agent or of partnership or of joint venture between the parties hereto, it being
understood and agreed that neither the method of computation of rent, nor any
other provision contained herein, nor any acts of the parties herein, shall be
deemed to create any relationship between the parties hereto other than the
relationship of Landlord and Tenant. Wherever herein the singular number is
used, the same shall include the plural, the masculine gender shall include the
feminine and neuter genders and the neuter gender shall include the feminine and
masculine genders.
ARTICLE XXXII
COMPLIANCE WITH LAWS
--------------------
Tenant covenants and warrants that during the term of this Lease or
any extension thereof, Tenant, at its expense and under penalty of forfeiture
and damages, has complied and will continue to comply with all statutes,
ordinances, rules, order, regulations and/or requirements of all county,
municipal, state, federal and other applicable governmental authorities now in
force or which may hereinafter be in force as pertains to the conduct of
Tenant's business. Tenant agrees to indemnify, save and hold Landlord harmless
from any fines or penalties assessed against the demised premises for a
violation of any statutes, ordinances, rules, orders, regulations and/or
requirements of all county, municipal, state, federal and other governmental
authorities as a result of Tenant's improper, unusual or unlawful manner of
using the demised premises for the conduct of Tenant's business.
<PAGE>
25
ARTICLE XXXIII
CONSTRUCTION AND INTERPRETATION
-------------------------------
This Lease shall be construed and interpreted in accordance with the
laws of the State of Michigan.
ARTICLE XXXIV
RENT TO BE NET TO LANDLORD
--------------------------
It is the intention of the parties that the rent payable hereunder
shall be net to Landlord, so that this Lease shall yield to Landlord the net
annual rent specified herein during the term of this Lease, and that all costs,
expenses and obligations of every kind or nature whatsoever relating to the
demised premises including, but not limited to all charges made against the
leased premises for gas, water, heat and electricity during the continuance of
this lease shall be paid as the same shall become due by Tenant except for those
costs, expenses and obligations specifically designated as those of Landlord.
Notwithstanding the terms of this Article XXXIV to the contrary, any additional
costs or expenses which Tenant is not obligated to pay as normal costs and
expenses under the terms of this Lease, shall be prorated over the balance of
the Lease term or any option term. By way of illustration but not limitation:
$1,000.00 assessment, five (5) years left on the Lease term ($1,000.00 / 5 =
$200.00 per year - $1,000.00/5 = $200.00).
ARTICLE XXXV
DELAYS
------
Section 1. In the event that either party hereto shall be delayed or
---------
hindered in or prevented from the performance of any act required hereunder by
reason of strikes, lockouts, labor troubles, inability to procure materials,
failure of power, restrictive governmental laws or regulations, riots,
insurrection, war or other reason of a like nature not the fault of the party
delayed in performing work or doing acts required under the terms of this Lease,
then performance of such act shall be excused for the period of the delay and
the period for the performance of any such act shall be extended for a period
equivalent to the period of such delay. The party entitled to such extension
hereunder shall give written notice as soon as possible to the other party
hereto of its claim of right to such extension and the reason(s) therefor. The
provisions of this Paragraph shall not operate to excuse Tenant from prompt
payment of rent, or any other payments required by the terms of this Lease.
Section 2. It is understood that if the Tenant shall be unable to
---------
enter into and occupy the premises hereby leased at the time above provided, by
reason of the said premises not being ready for occupancy, or by reason of the
holding over of any previous occupant of
<PAGE>
26
said premises, or as a result of any cause or reason beyond the direct control
of the Landlord, the Landlord shall not be liable in damages to the Tenant
therefor, but during the period the Tenant shall be unable to occupy said
premises as hereinbefore provided, the rental therefor shall be abated and the
Landlord is to be the sole judge as to when the premises are ready for
occupancy.
ARTICLE XXXVI
INTEREST ON PAST DUE OBLIGATIONS
--------------------------------
Any amount due from Tenant to Landlord hereunder which is not paid
when due shall bear interest at thirteen (13%) percent per annum from the date
due until paid, unless otherwise specifically provided herein, but the payment
of such interest shall not excuse or cure any default by Tenant under this
Lease.
ARTICLE XXXVII
LIABILITY OF LANDLORD
---------------------
If Landlord shall fail to perform any covenant, term or condition of
this Lease upon Landlord's part to be performed, and if as a consequence of such
default Tenant shall recover a money judgment against Landlord, such judgment
shall be satisfied only out of the proceeds of sale received upon execution of
such judgment and levied thereon against the right, title and interest of
Landlord in the demised premises and out of rents or other income from such
property receivable by Landlord, or out of the consideration received by
Landlord from the sale or other disposition of all or any part of Landlord's
right, title and interest in the demised premises. Neither Landlord nor any of
the partners comprising the partnership which is the Landlord herein shall be
liable for any deficiency. Notwithstanding the terms of this Article XXXVII to
the contrary, Tenant may offset against rent and other charges hereunder, under
this Article for any deficiency not satisfied by the equity in the property
after final judgment is obtained by Tenant after all appeals have been exhausted
by either Landlord or Tenant.
ARTICLE XXXVIII
RE-RENTING
----------
The Tenant hereby agrees that for a period commencing ninety (90) days
prior to the termination of this Lease, the Landlord may show the premises to
prospective Tenants.
<PAGE>
27
ARTICLE XXXIX
QUIET ENJOYMENT
---------------
The Landlord covenants that the said Tenant, on payment of all the
aforesaid installments and performing all the covenants aforesaid, shall and may
peacefully and quietly have, hold and enjoy the said demised premises for the
term aforesaid.
ARTICLE XL
HOLDING OVER
------------
Any holding over after the expiration of the term hereof with the
consent of Landlord, shall be construed to be a tenancy from month-to-month at
one hundred twenty five (125%) percent of the last month's rental together with
an amount estimated by Landlord for the monthly additional charges payable
pursuant to this Lease, and shall otherwise be on the same terms and conditions
as herein specified so far as applicable. Any holding over without Landlord's
consent shall entitle Landlord to re-enter the leased premises pursuant to
Article XIII, Section 2 of this Lease.
ARTICLE XLI
SUCCESSORS
----------
All rights and liabilities herein given to, or imposed upon, the
respective parties hereto shall extend to and bind the several respective heirs,
executors, administrators, successors and assigns of the said parties; and if
there shall be more than one Tenant, they shall all be bound jointly and
severally by the terms, covenants and agreements herein. No rights, however,
shall inure to the benefit of any assignee of Tenant unless the assignment to
such assignee is permitted by or has been approved by the Landlord in writing as
provided in Article VII.
ARTICLE XLII
FURNISHING OF FINANCIAL STATEMENTS
----------------------------------
Upon Landlord's written request, Tenant shall promptly furnish
Landlord, from time to time, with financial statements reflecting Tenant's
current financial condition, and written evidence of ownership of controlling
stock interest if Tenant is a corporation. Notwithstanding the terms of this
Article XLII to the contrary, Tenant shall not be required to provide financial
statements more than annually.
<PAGE>
28
ARTICLE XLIII
ACCORD AND SATISFACTION
-----------------------
Payment by Tenant or receipt by Landlord of a lesser amount than the
rent or other charges herein stipulated shall be deemed to be on account of the
earliest due stipulated rent or other charges, and no endorsement or statement
on any check or any letter accompanying any check payment as rent or other
charges shall be deemed an accord and satisfaction and Landlord shall accept
such check or payment without prejudice to Landlord's right to recover the
balance of such rent or other charges or pursue any other remedy in this Lease
to the Tenant.
ARTICLE XLIV
EXECUTION OF LEASE; NO OPTION
-----------------------------
The submission of this Lease to Tenant shall be for examination
purposes only, and does not and shall not constitute a reservation of or option
for Tenant to lease, or otherwise create any interest by Tenant in, the leased
premises. Execution of this Lease by Tenant and returned to Landlord shall not
be binding upon Landlord, notwithstanding any time interval, until Landlord has
in fact executed and delivered this Lease to the Tenant.
ARTICLE XLV
RECORDING
---------
Landlord agrees to prepare a Memorandum of Lease, submit for approval
to Tenant and upon Tenant's approval, record same on Tenant's behalf.
ARTICLE XLVI
WAIVER OF COUNTERCLAIMS
-----------------------
In the event Landlord commences any proceedings for nonpayment of rent
or as a result of the holding over of Tenant after the expiration of the term of
this Lease, Tenant will not interpose any counter-claim of whatsoever nature or
description in any such proceedings, which shall not be construed as a waiver of
Tenant's right to assert such claims in any separate action or actions brought
by Tenant.
<PAGE>
29
ARTICLE XLVII
ESTOPPEL STATEMENT
------------------
Tenant agrees within ten (10) days after request therefor by Landlord,
to execute in recordable form and deliver to Landlord a statement, in writing,
certifying (a) that this Lease is in full force and effect; (b) date of
commencement of the term of this Lease; (c) that rent is paid currently without
any off-set or defense thereto; (d) the amount of rent, if any, paid in advance;
(e) whether this Lease has been modified and, if so, identifying the
modifications; and (f) that there are no uncured defaults by Landlord or stating
those claimed by Tenant, provided that, in fact, such facts are accurate and
ascertainable.
ARTICLE XLVIII
ATTORNMENT
----------
In the event any proceedings are brought for the foreclosure of, or in
the event of a conveyance by deed in lieu of foreclosure of, or in the event of
exercise of the power of sale under any mortgage and/or deed of trust made by
Landlord covering the leased premises, or in the event Landlord sells, conveys
or otherwise transfers its interest in the demised premises or any portion
thereof containing the demised premises, this Lease shall remain in full force
and effect and Tenant hereby attorns to and covenants and agrees to execute an
instrument in writing reasonably satisfactory to the new owner whereby Tenant
attorns to, such successor in interest and recognizes such successor as the
Landlord under this Lease, provided, however, that Tenant is not in default
under the terms of this Lease, and any mortgagee or financial institution agrees
to recognize Tenant's Lease. Payment by or performance of this Lease by any
person, firm or corporation claiming an interest in this Lease or the leased
premises by, through or under the Tenant without Landlord's consent in writing
shall not constitute an attornment or create any interest in this Lease or the
leased premises.
ARTICLE XLIX
SUBORDINATION
-------------
Tenant agrees that this Lease shall, at the request of the Landlord,
be subordinate to any first mortgage on deeds of trust that may hereafter be
placed upon said premises and to any and all advances to be made thereunder, and
to the interest thereon, and all renewals, replacements and extensions thereof,
provided the mortgagee or trustee named in said mortgages or trust deeds shall
agree to recognize the Lease of said Tenant in the event of foreclosure if
Tenant is not in default. Tenant also agrees that any mortgagee or trustee may
elect to have this Lease a prior lien to its mortgage or deed of trust, and in
the event of such election and upon notification by such mortgagee or trustee to
Tenant to that
<PAGE>
30
effect, this Lease shall be deemed prior in lien to the said mortgage or deed of
trust, whether this Lease is dated prior to or subsequent to the date of said
mortgage or deed of trust. Tenant agrees upon request of Landlord, any
mortgagee or any trustee, it shall execute whatever instruments may be required
to carry out the intent of this Article.
ARTICLE L
REMEDIES
--------
Failure of the Tenant to execute any of the above instruments within
forty five (45) days upon written request so to do by Landlord shall constitute
a breach of this Lease and the Landlord may, at its option, cancel this Lease
and terminate the Tenant's interest therein. Further, Tenant hereby irrevocably
appoints Landlord as attorney-in-fact for the Tenant with full power and
authority to execute and deliver in the name of the Tenant any such instruments,
provided, however, that Landlord may only exercise its appointment as attorney-
in-fact under this Article in the event of sale or financing of the above
building and demised premises and only for an estoppel and/or subordination
document. Further, provided that the terms of this Lease are not materially
changed.
Notwithstanding the terms of this Article to the contrary, Landlord
will not exercise its power of attorney under this Article until the forty-five
(45) days has elapsed.
ARTICLE LI
EXECUTION OF LEASE
------------------
If either party hereto is a partnership, limited partnership,
corporation or other joint venture or association, the individual(s) executing
this Lease on behalf of such entity warrant and represent that such entity is
validly organized and existing and authorized to do business under the laws of
the State of Michigan, that the form of entity is as set forth in the
introductory paragraph of this Lease and the acknowledgments at the end of this
Lease, that the entity has full power and lawful authority to enter into this
Lease in the manner and form herein set forth, and that the execution of this
Lease by such individual(s) is proper and sufficient to legally bind such entity
in accordance with the terms and conditions hereof. If Tenant consists of more
than one person or entity, then the obligations imposed on Tenant shall be joint
and several. Tenant agrees that at the time of execution of this Lease that it
will provide Landlord with a Certificate of Good Standing and a resolution of
its Board of Directors authorizing execution of this Lease and the party who is
executing on behalf of the Tenant.
<PAGE>
31
ARTICLE LII
LANDLORD'S LIEN
---------------
ARTICLE LIII
PLANS AND SPECIFICATIONS
------------------------
The completion of the facility shall be done in accordance with the
attached specification sheet marked as Exhibit "B" and building plans marked as
Exhibit "A" attached hereto and made a part hereof.
ARTICLE LIV
WARRANTIES
----------
Landlord hereby extends to Tenant on the entire facility from date of
occupancy by Tenant a one (1) year building warranty on the entire facility and
furthermore, Landlord shall extend any and all warranties given to Landlord by
the manufacturers.
ARTICLE LV
LARGER FACILITY REQUIREMENTS
----------------------------
It is understood and agreed that if Tenant requires a larger facility
during the term of this Lease and Landlord has an existing building on the
market or coming available that meets Tenant's requirements, or if Landlord can
obtain a parcel of land and construct a facility pursuant to Tenant's
specifications, Landlord agrees to first negotiate a new lease covering the
larger facility under terms and conditions acceptable to both parties, and after
the terms have been agreed upon and the facility is ready for occupancy, then
Landlord will immediately cancel this existing Lease and the new Lease shall be
in full force and effect.
ARTICLE LVI
TAX ABATEMENT
-------------
Tenant agrees to fully cooperate with Landlord in the event that
Landlord shall seek a tax abatement for the property leased hereunder.
<PAGE>
32
ARTICLE LVII
------------
Facility shall be completed in accordance with the attached Plans
marked Exhibit "A" and attached Specifications Sheet marked Exhibit "B".
ARTICLE LVIII
ENVIRONMENTAL
-------------
Section 1. Prior to occupancy by Tenant, Landlord, at Landlord's
---------
expense, shall obtain a report from a reputable environmental consultant of
Landlord's choice and reasonably acceptable to Tenant, to determine if the
leased property has been or presently is contaminated by hazardous materials or
has been used for the handling, storage, transportation or disposal of hazardous
or toxic materials. Copy of said report shall be attached hereto and made a
part of this Lease Agreement as Exhibit "D".
Section 2. On termination of the Lease or any option period, Tenant
---------
shall obtain, at Tenant's expense, a report from a reputable environmental
consultant of Tenant's choice and reasonably acceptable to Landlord, to
determine if the leased property has been or presently is contaminated by
hazardous materials or has been used for the handling, storage, transportation
or disposal of hazardous or toxic materials.
Section 3. The results of the reports under Sections 1 and 2
---------
hereinabove, shall be in writing and shall be promptly submitted either by
Landlord or Tenant to the other, as the case may be.
Section 4. Prior to Tenant's occupancy, Landlord agrees, at its
---------
expense, to undertake to clean up and remove any hazardous or toxic materials
indicated in the environmental report under Section 1 hereinabove, which may be
required by any governmental authority.
Section 5. Tenant agrees that any change in the hazardous or toxic
---------
materials contaminating the property between the reports of Landlord and Tenant
shall be the sole obligation and liability of Tenant to clean up and remove at
its expense; unless Tenant proves that Landlord or adjacent property is
responsible for contamination. The obligation under this Section shall be
absolute. The burden of proving a third party defense to Tenant's obligations
and liabilities under this Article shall be borne by Tenant.
Section 6. For purposes of this Lease Agreement, a "Hazardous
---------
Material" and "Hazardous Materials" shall mean and include urea formaldehyde,
petroleum, asbestos, polychlorinated biphenyls and any material, substance or
waste which is now defined or listed as a "hazardous substance", "hazardous
material", "hazardous waste", "extremely
<PAGE>
33
hazardous waste", "restricted hazardous waste", "toxic waste", "toxic material",
"toxic substance" or "economic poison" in any federal, state or local law,
ordinance, regulation, publication or order or is now listed or defined as
"hazardous" or "extremely hazardous" in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et
--
seq., or in any successor statutes or provisions, in the Hazardous Materials
- ---
Transportation Act, 49 U.S.C. Section 1801, et seq., or in any successor
-- ---
statutes or provisions, in the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., or in any successor statutes or provisions, in the Clean
-- ---
Water Act, 33 U.S.C. Section 1251 et seq., or in any successor statutes or
-- ---
provisions.
Section 7. Landlord and Tenant's obligations under this Article shall
---------
arise upon the discovery of the presence of any hazardous substance, whether or
not the Environmental Protection Agency or any other federal agency or any state
or local environmental agency has taken or threatened any action in connection
with the presence of any hazardous substances.
Section 8. Landlord agrees to indemnify, defend, and hold Tenant
---------
harmless from and against any and all claims, loss, damages, costs and expenses
arising out of or in any way relating to the existence, at any time, prior to
occupancy of Tenant of any hazardous or toxic materials in, on, under, at or
used on the property leased hereunder.
Section 9. Tenant covenants that it shall indemnify, defend and hold
---------
Landlord harmless from and against any and all claims, loss, damages, costs and
expenses arising out of or in any way relating to the existence, at any time,
after its occupancy of the leased premises of any hazardous or toxic materials;
provided, however, that if the environmental report listed in Section 2 shows no
contamination, the burden of proof shall be on Landlord to show that Tenant,
nevertheless, caused such contamination.
Section 10. Notwithstanding anything in this Lease to the contrary,
----------
the undertakings of both Landlord and Tenant under this Article shall survive
the expiration or termination of the Lease Agreement or any option regardless of
the means of such expiration or termination.
ARTICLE LIX
OPTION
------
Provided Tenant is not in default of any of the terms of this Lease,
Landlord grants to Tenant three (3) one (1) year options to extend the Lease on
the following rental terms:
<PAGE>
34
<TABLE>
<CAPTION>
Option Year Monthly Rental
------------- --------------
<S> <C>
1 $8,700.00
2 8,900.00
3 9,300.00
</TABLE>
Said option shall be exercised by Tenant in writing, of Tenant's
intention to do so, given to Landlord at least six (6) months prior to the
expiration of the term of this Lease or any option period.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals the day and year first above written.
LANDLORD:
D R GROUP, a Michigan Co-Partnership
BY:
- ----------------------------- ----------------------------------
BY:
- ----------------------------- ----------------------------------
TENANT:
ROFIN-SINAR INCORPORATED, a Delaware
corporation
BY:
- ----------------------------- ----------------------------------
BY:
- ----------------------------- ----------------------------------
<PAGE>
1
EXHIBIT 10.10
THIS LEASE made this ___ day of _________, 1993 by and between D R Group,
a Michigan Co-Partnership, whose address is 27300 W. 11 Mile Road, Ste. 806
Southfield, Michigan 48034, the Lessor, hereinafter
designated as the Landlord, and ROFIN-SINAR INCORPORATED, a Delaware
corporation, whose address is 45701 Mast Street, Plymouth, Michigan 48170, the
Lessee, hereinafter designated as the Tenant.
ARTICLE I
DESCRIPTION
-----------
WITNESSETH: The Landlord, in consideration of the rents to be paid and the
covenants and agreements to be performed by the Tenant, does hereby lease unto
the Tenant the following described premises situated in the City of Plymouth,
County of Wayne, State of Michigan, to wit: a light industrial building
containing approximately 34,575 square feet, more commonly known as 44064
PLYMOUTH OAKS DR. See attached Plans and Specs.
ARTICLE II
COMPLETION OF BUILDING
----------------------
Section 1. The building and demised premises shall be constructed
substantially in accordance with Plans and Specifications set forth in Exhibit
"A&B", attached hereto and made a part hereof. It is understood and agreed by
Tenant that any minor changes from any plans or specifications during
construction of the building or demised premises shall not relieve Tenant of its
obligations under this Lease Agreement. Improvements to the building and
demised premises shall be constructed in accordance with Exhibits "A" and "B",
to be attached at a later date, and shall be constructed in a good and
workmanlike manner using only new quality material. Landlord's construction
work shall be pursuant to applicable ordinances, statutes, regulations and laws
and shall be performed in a good and workmanlike manner.
Tenant shall have the right to request change orders. The cost of such
change orders to the Tenant shall be the actual out-of-pocket cost to Landlord.
To the extent the change orders are requested by Tenant, the cost of same shall
be paid by Tenant upon presentation of invoices and completion of the work in
the change orders. In addition, any material changes to the plans and
specifications must be approved by Tenant in writing prior to making any such
changes.
To the best of Landlord's knowledge, Tenant's use and occupancy under
Article XVII is in compliance with all applicable zoning ordinances, parking
requirements and covenants and restrictions.
<PAGE>
2
Section 2. Landlord agrees to make every reasonable effort to ensure the
building is completed, as hereinafter defined, on or before 120 days from the
date this Lease Agreement is executed by such parties, or earlier if accepted by
Tenant. If the building is not completed on or before 120 days from the date
this Lease Agreement is executed by such parties, or earlier if accepted by
Tenant, for reasons other than unforeseen labor and/or materials shortages,
general strikes or acts of God, anything which is beyond the control of
Landlord, any material or information which is to be supplied by Tenant, if
Landlord is working diligently to complete the building, delays due to Tenant's
permit requirements, and/or delays due to Tenant not approving environmental
report.
In the event Tenant's requirements for permits or other items cannot be
satisfied within forty five (45) days, Landlord shall have the right to
terminate this Lease Agreement upon seven (7) day written notice to Tenant and
this Lease shall become null and void and neither Landlord nor Tenant shall have
any further legal obligation or responsibilities to the other. Tenant may, at
its option, and as its sole remedy, by written notice to Landlord on or before
150 days, cancel this Lease Agreement in its entirety, provided that the
building is not completed prior to the giving of said notice. For purposes of
this agreement, the building shall be deemed completed when the City of Plymouth
issues a final Certificate of Occupancy, or a temporary permit authorizing
occupancy if weather prevents issuance of final Certificate of Occupancy, and
all facilities necessary to Tenant's occupancy use of the demised premises have
been substantially completed, including access to and throughout the premises,
toilet, heating, ventilating, air-conditioning, water, plumbing, lighting and
electrical power and other utility facilities are installed in good operating
order and the work remaining to be done is of such a nature as to not materially
interfere with the Tenant's use of the premises and ten (10) days written notice
of the completion of the demised premises shall have been given by Landlord to
Tenant. Occupancy of said premises by Tenant shall be construed as acceptance
and acknowledgement that the demised premises has been completed and in the
condition called for except for punch list items.
Landlord warrants and guarantees all work and material furnished by or on
behalf of Landlord, including without limitation, the construction of the
building against material defects in materials and workmanship, or either, that
appear within a period of one (1) year from the date of issuance of the
Temporary Certificate of Occupancy. All material defects in workmanship and
materials or either appearing or occurring during such one (1) year period shall
be corrected to conform with the plans and specifications in accordance with
Landlord's obligation thereunder at Landlord's cost and expense. This warranty
and guarantee is conditioned upon Tenant's maintaining, caring for and
protecting the leased premises. Landlord does not warrant or guarantee against
damage and destruction, including without limitation, that caused by misuse,
except as caused by Landlord, its contractors, subcontractors, agents,
employees, representatives or affiliates, actions or inactions.
<PAGE>
3
Section 3. During the course of construction, Tenant, its employees,
agents and contractors may enter upon the premises at all reasonable times for
the purpose of inspection, and as soon as possible after such construction has
advanced to the point where Tenant's contractors can conveniently and without
unreasonable interference with Landlord's contractor enter into the premises to
construct and install Tenant's improvements, fixtures and other equipment and
with Landlord's consent, which shall not be unreasonably withheld or delayed,
may enter upon the premises for the purpose of installing improvements,
fixtures, and other equipment upon condition that Tenant, its employees, agents
and contractors will not unreasonably interfere with Landlord's employees,
agents or contractors, in the pursuit of Landlord's construction. Landlord
shall have no responsibility or liability whatsoever for any loss of or damage
to any fixtures or other equipment installed or left upon the demised premises
by Tenant.
Section 4. Landlord shall remove all tools, scaffolding, unused or
discarded building materials, waste and rubbish of any sort, in, on or about the
premises prior to the commencement date of this Lease.
Section 5. Landlord represents and warrants that it is the owner of the
property being leased hereunder and has authority to enter into this Lease and
has received no written notice that it is in default or breach of any covenants,
charges, or encumbrances affecting the property.
ARTICLE III
RENT AND TERMS
--------------
Section 1. This Lease shall commence on the date the building shall be
completed in accordance with Section 2 of Article II hereof, and notice of such
completion has been given in accordance with Section 2 of Article II, and shall
continue until, the first day of the month following the date of completion of
the building, plus a period of five (5) years after the first day of such month.
Section 2. Tenant shall pay to Landlord as rent for the term hereunder for
said leased premises the sum of EIGHT HUNDRED NINETY THOUSAND THREE HUNDRED SIX
AND 25/100 ($890,306.25) Dollars, payable monthly as hereinafter provided.
Should the term of this Lease commence on a day other than the first day of a
calendar month, the rental for such month shall be pro-rated on a daily basis
based upon a thirty (30) day calendar month. Should any lease year contain less
than twelve (12) calendar months, said annual rental shall be appropriately pro-
rated. In addition to the daily rental, the Tenant shall pay at the time of
execution of this Lease the first full month's rent of FOURTEEN THOUSAND EIGHT
HUNDRED THIRTY EIGHT AND 44/100 ($14,838.44) Dollars, receipt of which is hereby
acknowledged. In the event that Tenant takes occupancy
<PAGE>
4
prior to sixty (60) days from the date Lease Agreement is executed by both
parties rent shall commence from the date of occupancy. The rent under this
Article III shall commence from the date of occupancy.
In the event that Tenant does not pay, when due and payable, or within
seven (7) days thereafter, any rent or any additional rent, not timely paid
shall bear interest in accordance with Article XXXVI until paid. Rent is
payable at 27300 W. 11 Mile Road, Suite 806, Southfield, Michigan 48034, or at
such other place as Landlord may give written notice to Tenant.
Section 3. The Tenant hereby hires the said premises for the said term as
above mentioned and covenants well and truly to pay, or cause to be paid unto
the Landlord at the dates and times above mentioned, the rent above reserved.
Landlord waives any Landlord's liens now or hereafter provided by law.
In the event that the building is not ready for occupancy in accordance
with Article II, Section 2., within the one hundred twenty (120) day period
described therein unless extended under Article II, Section 2., Landlord shall
incur a penalty of $495.00 per day for each day that Tenant is unable to occupy
the premises after said one hundred twenty (120) day period unless extended
under Article II, Section 2. Said penalty of $495.00 per day shall be an offset
against rent due Landlord from the date of occupancy and there shall be no
requirement of cash payment by Landlord to Tenant.
ARTICLE IV
TAXES
-----
Section 1. Tenant shall pay, as additional rent, to Landlord during the
term of this Lease all taxes and assessments which may be levied or assessed by
any lawful authority, for each calendar year during the term hereof, against the
land, building or improvements comprising the leased premises. (Such taxes and
assessments being hereinafter called "Taxes".) Should the State of Michigan or
any political subdivision thereof or any governmental authority having
jurisdiction thereover, now or hereafter impose a tax and/or assessment of any
kind or nature upon, against or with respect to the rentals payable by Tenant to
Landlord or any income of Landlord derived from the leased entities which form
the Landlord herein, ownership of the land and building or buildings comprising
the leased premises, as a substitution for all or any part of the taxes and
assessments levied or assessed against such land and such buildings, or in
addition thereto, such tax and/or assessment shall be deemed to constitute a tax
and/or assessment against such land and such building or buildings for the
purpose of this paragraph and Tenant shall be obligated to pay it as provided
herein. In addition, should any governmental authority having jurisdiction
thereover impose a tax or surcharge of any kind or nature upon, against or with
respect to
<PAGE>
5
the parking areas on the number of parking spaces comprising the leased
premises, such tax or surcharge shall likewise be deemed a constituted tax
and/or assessment against such land and such building or buildings for the
purpose of this paragraph and Tenant shall be obligated to pay such tax provided
herein. Landlord represents that, to the best of its knowledge, no new tax of a
nature presently in effect or new assessments will be imposed on the demised
premises. In the event an assessment is imposed as a lump sum, Tenant shall be
obligated to pay said assessment based on the number of years left of the lease
term or any option term. By way of illustration but not limitation: $1,000.00
assessment, five (5) years left on the lease term ($1,000.00/5 = $200.00 per
year - $1,000.00/5 = $200.00)
Section 2. At the option of Landlord, Tenant shall pay all taxes within
ten (10) days of presenting the tax bill, or the taxes shall be paid in monthly
installments on or before the first day of each calendar month, in advance, in
an amount estimated by Landlord. Upon receipt of all tax bills and assessment
bills attributable to any calendar year during the term hereof, Landlord shall
furnish Tenant, within thirty (30) days after receipt thereof, with a written
statement of the actual amount of Tenant's share of the premises taxes of such
calendar year. In the event the total amount of monthly installments paid by
Tenant pursuant to this Article does not equal the sum due from Tenant as shown
on such statement, then Tenant shall pay to Landlord the deficiency within ten
(10) days after demand therefor by Landlord; or Landlord shall credit such
excess to the next installment of rent due from Tenant, as the case may be. A
copy of a tax bill or assessment bill submitted by Landlord to Tenant shall at
all times be sufficient evidence of the amount of taxes against the property to
which such bill relates. Prior to, or at the commencement of the term of this
Lease and from time to time thereafter throughout the term hereof, Landlord
shall notify Tenant in writing of Landlord's estimate of Tenant's monthly
installments due hereunder. Landlord's and Tenant's obligation under this Lease
shall survive the expiration of this Lease.
Section 3. Notwithstanding anything in this Article to the contrary, all
reasonable costs and expenses incurred by Landlord during negotiations for or
contests of the amount of taxes shall be included within the term "Taxes". In
the event a refund is obtained, Landlord shall credit a portion thereof to the
next installment of rent due from Tenant, such portion to be based upon the
percentage of the original taxes paid by Tenant from which the refund was
derived.
During the term hereunder, Tenant shall have the right, at its sole cost
and expense, to undertake real estate tax appeals and shall escrow the taxes in
question, during the appeal. Landlord agrees to cooperate with Tenant, if
requested by Tenant. Tenant shall pay all of Landlord's reasonable attorney
fees and out-of-pocket expenses incurred by Landlord in connection with such
cooperation, within ten (10) days after receipt of an invoice from Landlord.
<PAGE>
6
In the event that Tenant obtains a reduction or refund in any such taxes,
such refund shall be credited by Landlord to Tenant's obligations in the manner
provided in the second sentence of Section 3 of this Article IV, provided,
however, if such refund is paid directly to Tenant, Tenant shall have the right
to retain such refund but in such event such refund shall not be credited to any
payment owed by Tenant to Landlord under this Lease.
Section 4. Tenant, at all times shall be responsible for and shall pay,
before delinquent, all taxes levied, assessed or unpaid on any leasehold
interest, any right of occupancy, any investment of Tenant in the premises, or
any personal property of any kind owned, installed or used by Tenant including
Tenant's leasehold improvements or on Tenant's right to occupy the premises.
Section 5. Tenant shall, in addition to the foregoing, pay any new tax of
a nature not presently in effect but which may be hereafter be levied, assessed,
or imposed upon the Landlord or the demised premises, if such tax shall be based
on or arise out of the ownership, use or operation of the leased premises. For
the purpose of computing Tenant's liability for such new type of tax, the leased
premises shall be deemed the only property of Landlord. Landlord shall provide
Tenant with sufficient time within which to pay the tax bills, at least thirty
(30) days prior to the date that payment is required to be made shall be deemed
sufficient notice.
Section 6. Tenant is entering into this Lease subject to and contingent
upon it and/or the property receiving a tax abatement from the City of Plymouth.
In the event that Tenant has not received said abatement, Tenant shall have the
right to terminate this Lease upon seven (7) days written notice to Landlord.
Tenant shall immediately upon execution of this Lease seek such abatement and
pursue it in good faith and with due diligence and Landlord shall cooperate with
Tenant in connection therewith provided however, that Tenant agrees to pay to
Landlord reasonable costs and attorney fees for such cooperation.
ARTICLE V
INSURANCE AND INDEMNITY
-----------------------
Section 1. Tenant, at its own expense, shall maintain for the mutual
benefit of Landlord and Tenant, insurance of the following character:
A. Comprehensive general liability insurance against claims for
bodily injury, personal injury, death or property damage
occurring on, at or about the demised premises, such insurance to
afford protection for Landlord and such other parties as Landlord
shall then designate, of not less than Two Million and no/100
($2,000,000.00) Dollars, with respect to any one accident or
occurrence and not less than One Million
<PAGE>
7
and no/100 ($1,000,000.00) Dollars, with respect to property
damage. Policies for such insurance shall be for the mutual
benefit of Landlord, Tenant and such other parties as Landlord
may designate, all of whom shall be deemed as insureds.
B. Workman's Compensation covering all persons employed in
connection with any work done or about the demised premiss with
respect to which claims for death or bodily injury shall be
asserted against Landlord, Tenant or the demised premises.
C. Rent interruption insurance in amounts equal to Tenant's total
rental obligation for twelve (12) full months under this Lease,
plus the total of the estimated cost to Tenant of taxes,
assessments, insurance premiums and common area charges.
D. Fire and extended coverage in the standard fire extended coverage
and the special extended coverage endorsements providing all risk
insurance in an amount equal to full replacement value of the
building and all improvements, using not less than ONE MILLION
NINE HUNDRED ONE THOUSAND SIX HUNDRED TWENTY FIVE AND 00/100
($1,901,625.00) DOLLARS as the Landlord's current estimate of the
replacement value. Said estimate shall be revised at the
expiration of the initial term of the insurance policy and shall
be revised by the Landlord at each renewal of said policy.
E. The Tenant shall also be responsible for all glass damage on or
within the premises, but is not required to obtain plate glass
insurance.
F. Landlord, along with any desired mortgagee if required, are to be
added as insureds under the policies.
Section 2. All insurance policies required under this Article V shall
be issued by companies of recognized financial standing, rated at least A + AAA
by Best's Insurance Guide and duly licensed to do business under the laws of the
State of Michigan. Every policy which Tenant is obligated to carry under the
provisions of this Section shall contain an agreement by the insurer that it
will not cancel or materially modify such policy except after twenty (20) days
prior written notice to Landlord. Tenant shall deliver to Landlord, upon
delivery of its occupancy of the demised premises, certificates of the insurers,
evidencing all of the insurance which is required to be maintained by Tenant
hereunder, and Tenant shall, within thirty (30) days prior to the expiration of
any such insurance delivery other original or duplicate policies or other
certificates or binders of the insurers evidencing the renewal or issuance of
such insurance. If Tenant fails to effect,
<PAGE>
8
maintain or renew any insurance provided for in this Section, or to pay the
premium therefor, or to deliver to Landlord any of such policies or
certificates, then in any of said events, Landlord, at its option, but without
obligations so to do, may upon five (5) days notice to Tenant, procure such
insurance. Any sums expended by Landlord to procure such insurance shall be
additional rent hereunder and shall be repaid by Tenant within five (5) days
following the date on which expenditures shall be made by Landlord.
Section 3. Such insurance may be by so-called "blanket" policy
coverage, provided, however, that such "blanket" policy coverage allocates a
satisfactory amount of insurance to the demised premises, that this amount is
not subject to deduction because of co-insurance, and that adjustment in payment
of the insurance so allocated will be in the amounts specified in the Lease.
Further, said blanket coverage shall not be subject to invalidation as to the
demised premises because of any act or omission by the Tenant.
Section 4. Except for the negligence of Landlord or in the event it
is covered by insurance, Tenant covenants to indemnify Landlord, and save it
harmless from and against any and all claims, actions, damages, liability and
expense, including reasonable attorney fees, in connection with loss of life,
personal injury and/or damage to property arising from or out of any occurrence
in, upon or at the leased premises or the occupancy or use by Tenant of the
leased premises or any part thereof, arising from or out of Tenant's failure to
comply with any provisions of this Lease or occasioned wholly or in part by any
act or omission of Tenant, its agents, contractors, employees, servants,
customers or licensees. For the purposes hereof, the leased premises shall
include service areas adjoining the same, including the parking areas, and the
loading platform areas. In case Landlord shall, without fault on its part, be
made a party to any litigation commenced by or against Tenant, then Tenant shall
protect and hold it harmless and shall pay all reasonable costs, expenses and
reasonable attorney fees incurred or paid by Landlord in connection with such
litigation. Tenant shall also pay all reasonable costs, expenses and reasonable
attorney fees that may be incurred in enforcing the Tenant's covenants and
agreements in this Lease.
Except for the negligence of Tenant or in the event it is covered by
insurance, Landlord covenants to indemnify Tenant, and save it harmless from and
against any and all claims, actions, damages, liability and expense, including
reasonable attorney fees, in connection with loss of life, personal injury
and/or damage to property arising from or out of any occurrence in, upon or at
the leased premises or the occupancy, ownership or use by Landlord of the leased
premises or any part thereof, arising from or out of Landlord's failure to
comply with any provisions of this Lease or occasioned wholly or in part by any
act or omission of Landlord, its agents, contractors, employees, servants,
customers or licensees. For the purpose hereof, the leased premises shall
include service areas adjoining the same, including the parking areas, and the
loading platform areas. In case Tenant shall, without fault on its part, be
made a party to any litigation commenced by or against Landlord, then Landlord
shall protect and hold it harmless and shall pay all reasonable costs, expenses
and
<PAGE>
9
reasonable attorney fees incurred or paid by Tenant in connection with such
litigation. Landlord shall also pay all reasonable costs, expenses and
reasonable attorney fees that may be incurred in enforcing the Landlord's
covenants and agreements in this Lease.
ARTICLE VI
PAYMENT BY LANDLORD
-------------------
If the Tenant shall default in any payment or expenditure other than
rent required to be paid or expended by the Tenant under the terms hereof, the
Landlord may at its option make such payment or expenditure on behalf of Tenant
in which event the amount thereof shall be payable as rental to the Landlord by
the Tenant on the next ensuing rent day, together with interest at ten (10%)
percent per annum from the date of such payment or expenditure by the Landlord
and on default in such payment the Landlord shall have the same remedies as on
default in payment of rent.
ARTICLE VII
ASSIGNMENT
----------
Section 1. Tenant agrees not to assign or in any manner transfer this
Lease or any estate or interest therein, and not to lease or sublet the leased
premises or any part or parts thereof or any right or privileges appurtenant
thereto, and not to allow anyone to conduct business at, upon or from the leased
premises or to come in, by, through or under it, in all cases either by
voluntary or involuntary act of Tenant or by operation of law or otherwise, or a
merger with Tenant or to a purchaser of substantially all of the assets of
Tenant, without the written consent of Landlord which consent shall not be
unreasonably withheld. The sale, issuance or transfer of any voting stock of
Tenant or Tenant's Guarantor, if any, which results in a change in the voting
control of Tenant, or Tenant's Guarantor, if any, shall be deemed to be an
assignment of this Lease within this meaning of this Article. Any such
prohibited act by Tenant [for any attempt at same] either voluntarily or
involuntarily or by operation of law or otherwise, shall at Landlord's option,
terminate this Lease and any such purported act shall be null and void.
Notwithstanding the terms of this Article VII to the contrary, Tenant shall have
the right to assign or sublet the premises to any affiliated entity or
subsidiary of Tenant or any affiliate of Tenant, without the consent of
Landlord. Furthermore, provided there is no event of default by Tenant, Tenant
shall have the right to assign the lease in the event of the sale of its stock,
assets or corporate reorganization, whether or not to an affiliated or
subsidiary entity, provided, that Tenant is not released from amy liability or
obligations under the terms of this Lease and that the use and occupancy is in
accordance with Article XVII.
<PAGE>
10
Notwithstanding the terms of this paragraph to the contrary, in the
event of an assignment or subletting by Tenant, Tenant shall not be relieved of
any of its obligations under the terms of this Lease. Further, any increase in
the rent under Article III of this Lease, due to any assignment under this
Article VII, shall be divided fifty-fifty (50-50) between Landlord and Tenant
except that Tenant shall not be required to divide the increase in rent with
Landlord in the event that such assignment or sublet is with any affiliated
entity or subsidiary of Tenant.
Landlord agrees that in the event Tenant contracts with Landlord to
build a new building to it, this Lease will be terminated as of the date that
Tenant takes occupancy and pays rent for the new building.
ARTICLE VIII
ALTERATIONS
-----------
Section 1. Tenant shall not make or cause to be made any alterations,
additions or improvements to the leased premises without the prior written
approval of Landlord, which shall not be unreasonably withheld or delayed.
Tenant shall present to Landlord plans and specifications for such work at the
time approval is sought.
Notwithstanding this paragraph to the contrary, Tenant shall have the
right to make nonstructural alterations and mechanical up to $15,000 per
alteration without approval of Landlord, provided, however, that all such
alterations shall be made in compliance with all laws, federal, state, local and
municipal and with the requirement that Tenant notify Landlord of such
alterations and submit a final plan to Landlord. There shall be an aggregate
cap over the lease term of $150,00 before Tenant is required to obtain
Landlord's written consent.
Section 2. All alterations, additions and improvements made by Tenant
shall be deemed to have attached to the leasehold and to have become the
property of Landlord upon such attachment; upon expiration of this Lease or any
renewal term thereof, Tenant shall not remove any of such alterations, additions
and improvements, except that Tenant may remove control panels (but not standard
building control panels) manufacturing and testing equipment, material handling,
storage equipment and office furniture systems and components, whether installed
before or during occupancy by Tenant or by Landlord for Tenant.
It is understood that Tenant shall not have this right of removal
unless all rents and other charges due hereunder are paid in full and Tenant is
not otherwise in default under the terms of this Lease.
<PAGE>
11
Landlord may designate by written notice to Tenant that alterations,
improvements and additions, installed in accordance with this Article VIII,
shall be removed by Tenant at the expiration or termination of this Lease, in
such event Tenant shall promptly remove the same and repair any damages to the
leased premises caused by such removal or shall reimburse Landlord for the costs
of repairing such damage. Further, Tenant agrees to repair any damages to the
leased premises caused by Tenant, or its employees, agents or representatives,
in the removal of any other alterations, additions and improvement. Said
reimbursement to Landlord under this Section 2 shall be made by Tenant to
Landlord within ten (10) days after receipt of invoice from Landlord.
Tenant agrees to repair any damages to the leased premises caused by
the removal of the installation of fixtures items because of any alterations
made by Tenant to the condition that existed prior to the installation of
fixtures. In the event that Tenant shall fail to make such repair, Tenant
agrees to reimburse Landlord for such repairs within ten (10) days after receipt
of invoice from Landlord.
Notwithstanding the terms of this Article VII to the contrary, Tenant
shall have the right to assign or sublet the premises to any affiliated entity
or subsidiary of Tenant or any affiliate of Tenant, without the consent of
Landlord. Furthermore, provided there is o event of default by Tenant, Tenant
shall have the right to assign the lease in the e vent of the sale of its stock,
assets or corporate reorganization, whether or not to an affiliated or
subsidiary entity, provided, that Tenant is not released from amy liability or
obligations under the terms of this Lease and that the use and occupancy is in
accordance with Article XVII.
Notwithstanding the terms of this paragraph to the contrary, in the
event of an assignment or subletting by Tenant, Tenant shall not be relieved of
any of its obligations under the terms of this Lease. Further, any increase in
the rent under Article III of this Lease, due to any assignment under this
Article VII, shall be divided fifty-fifty (50-50) between Landlord and Tenant
except that Tenant shall not be required to divide the increase in rent with
Landlord in the event that such assignment or sublet is with any affiliated
entity or subsidiary of Tenant.
Landlord agrees that in the event Tenant contracts with Landlord to
build a new building to it, this Lease will be terminated as of the date that
Tenant takes occupancy and pays rent for the new building.
<PAGE>
12
ARTICLE IX
EMINENT DOMAIN
--------------
If the whole or more than fifty (50%) percent of the leased premises
shall be taken by any public authority under the power of eminent domain or sold
to public authority under threat or in lieu of such a taking, then the term of
this Lease shall cease on the part so taken, as of the day possession shall be
taken by such public authority, and the rent shall be paid up to that date.
Landlord or Tenant may, by written notice to the other, within thirty (30) days
from the date possession is taken by public authority, terminate this Lease. In
the event that neither Landlord or Tenant terminates this Lease, all of the
terms herein provided shall continue in effect, except that as of the date
possession is taken by public authority, the rent and other charges payable by
Tenant to Landlord shall be reduced in proportion to the floor area of the
leased premises taken and Landlord shall, at its expense, make all necessary
repairs or alterations to the basic building, so as to constitute the remaining
leased premises a complete architectural unit, and Tenant, at Tenant's sole
cost, shall similarly act with respect to Tenant's improvements, trade fixtures,
furnishings and equipment. All damages awarded for such taking under the power
of eminent domain or sale under threat or in lieu of such taking, whether for
the whole or a part of the leased premises, shall belong to and be the property
of Landlord, irrespective of whether such damages shall be awarded as
compensation for diminution in value to the leasehold or to the fee of the
leased premises, and Tenant shall have no claim against either Landlord or the
condemning authority with respect thereto; provided, however, that Landlord
shall not be entitled to any award specifically designated as compensation for,
depreciation to, or cost of removal or location of Tenant's stock and fixtures.
Tenant shall be entitled to its unamortized costs for Improvements.
ARTICLE X
MAINTENANCE AND REPAIRS
-----------------------
Section 1. Landlord shall, at its own expense, make all necessary
repairs to the roof, outer walls, structural members or framing, footings and
foundation of the premises which repairs are occasioned by structural defects.
Tenant shall, at its expense, take care of the remainder of the demised premises
both inside and out and keep the same and all parts thereof, by way of
illustration, but not limitation, landscaping and parking areas, together with
any and all alterations, additions and improvements therein or thereto, in good
order and condition, suffering no waste or injury, and shall promptly make all
needed repairs and replacements, in and to any building or structure or
equipment now or hereafter erected upon the demised premises, connections, pipes
and mains, and all other fixtures, machinery and equipment now or hereafter
belonging to or connected with said premises or used in their operation. All
such repairs and replacements shall be of good workmanlike quality and material
sufficient for the proper maintenance and operation of the demised premises.
The
<PAGE>
13
Tenant shall not allow the accumulation of waste or refuse matter, not permit
anything to be done upon the demised premises which would invalidate or prevent
the procurement of any insurance policies which may at any time be required
pursuant to the provisions of Article V hereof. The Tenant shall not obstruct
or permit the obstruction of the street or sidewalk, except for safety reasons
or unless otherwise required by law or order, provided however, said obstruction
shall not be made if it is in violation of any federal, state or local
ordinance, statute or law and shall keep the sidewalk and curb adjoining the
demised premises clean and free of snow and ice.
Section 2. The Tenant shall at its own expense under penalty of
forfeiture and damages promptly comply with all lawful laws, orders, regulations
or ordinances of all federal, municipal, County and State authorities affecting
the premises hereby leased and the cleanliness, safety, occupation and use of
same, provided, however, that Landlord shall be solely responsible for
rectifying breaches or violations arising out of its construction of the
premises including improvements constructed or to be constructed.
Notwithstanding the terms of this ARTICLE X, Section 2 to the
contrary, Tenant's obligations under this Section 2 shall be as follows:
(a) 100% for compliance required because of Tenant's use and
occupancy in accordance Article XVII.
(b) The amortized costs of Landlord over the term of the lease for
any compliance required of Landlord.
By way of illustration but not limitation, 5 year lease, with 2 years
left, Tenant's obligations 2/5's of cost.
Notwithstanding anything to the contrary contained herein, if any
agency, division or department of any governmental entity with the appropriate
jurisdiction over the leased premises determines that the leased premises is
unsafe or is not in compliance with the laws and/or regulations controlling same
or orders requires any alteration, upon and/or reconstruction of same, the party
responsible for such compliance shall be (i) the Landlord if the law or
regulation in question is one of general application (by way of example only the
Americans with Disabilities Act of 1990) or (ii) the Tenant if the law or
regulation is not one of general application but is invoked or enforced because
of Tenant's use and/or occupancy of the leased premises.
Section 3. The Landlord shall have the right to enter upon the leased
premises at all reasonable hours on at least one (1) day's notice for the
purpose of inspecting the same. If the Landlord reasonably deems any repairs
necessary he may demand that the Tenant make the same and if the Tenant refuses
or neglects forthwith to commence such
<PAGE>
14
repairs, the Tenant agrees that it will within twenty (20) days pay the Landlord
the cost thereof after receipt by Tenant of invoice from Landlord, with interest
at thirteen (13%) percent per annum, and if it shall make default in such
payment, the Landlord shall have the remedies provided in Paragraph 6 hereof.
Section 4. The Landlord reserves the right of free access at all
times to the roof of said leased premises. The Tenant shall not erect any
structures for storage or any aerial, or use the roof for any purposes without
the consent in writing of the Landlord.
Notwithstanding the terms of this ARTICLE X, Section 2 to the
contrary, Tenant's obligations under this Section 2 shall be as follows:
(a) 100% for compliance required because of Tenant's use and
occupancy in accordance Article XVII.
(b) The amortized costs of Landlord over the term of the lease for
any compliance required of Landlord.
By way of illustration but not limitation, 5 year lease, with 2 years
left, Tenant's obligations 2/5's of cost.
Notwithstanding anything to the contrary contained herein, if any
agency, division or department of any governmental entity with the appropriate
jurisdiction over the leased premises determines that the leased premises is
unsafe or is not in compliance with the laws and/or regulations controlling same
or orders requires any alteration, upon and/or reconstruction of same, the party
responsible for such compliance shall be (i) the Landlord if the law or
regulation in question is one of general application (by way of example only the
Americans with Disabilities Act of 1990) or (ii) the Tenant if the law or
regulation is not one of general application but is invoked or enforced because
of Tenant's use and/or occupancy of the leased premises.
ARTICLE XI
RIGHT TO ERECT SIGNS
--------------------
Tenant is hereby granted the right to erect signs on the exterior of
the building which shall be constructed in conformity with all requirements of
local law and shall be subject to the prior written approval of Landlord, which
approval will not be unreasonably withheld. Tenant agrees to hold Landlord
harmless from any liability arising out of or in connection with the erection or
maintenance of such signs.
<PAGE>
15
Landlord covenants that it will not and will not allow any other
Tenant to erect signs on the face or sides of the building in which the demised
premises are located.
ARTICLE XII
LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
-----------------------------------------
Landlord may, without notice, if in the opinion of Landlord an
emergency exists, perform any covenant or condition of this Lease for the
Tenant's account and at the Tenant's expense, in the event that the Tenant shall
default in the performance of any such covenant or condition. Tenant shall
reimburse Landlord for all reasonable costs and expenses of Landlord, including
reasonable attorney fees, thereby incurred within ten (10) days after receipt by
Tenant from Landlord of a statement setting forth the amount of such costs and
expenses. The failure by Tenant to so reimburse Landlord within such ten (10)
day period shall constitute a default by Tenant under this Lease and shall carry
with it the same consequences as failure to pay any installment of rental.
Landlord's rights and remedies pursuant to this Article shall be an addition to
any and al other rights and remedies provided under this Lease or at law and
shall survive the termination of this Lease.
ARTICLE XIII
DEFAULT
-------
Section 1. If any one or more of the following events (herein
sometimes called "events of default") shall happen:
A. If default shall be made in the due and punctual payment of any
rent, or in the payment of any other sums of money required to be
paid by Tenant under this Lease or any part thereof, when and as
the same shall become due and payable, and such default shall
continue for a period of seven (7) days after written notice from
Landlord to Tenant specifying the items in default; or
B. In the event Tenant shall be in default in the performance of any
other covenants, terms, conditions, provisions, rules and
regulations of this Lease expecting those items listed in the
above Section (A) and if such default is not cured within twenty
(20) days after written notice thereof given by the Landlord,
excepting such defaults that cannot be cured completely within
such twenty (20) day period, provided that the Tenant shall
within such twenty (20) day period, promptly commence and proceed
with reasonable diligence and in good faith to remedy such
default;
<PAGE>
16
then and in any such event Landlord at any time thereafter may give written
notice to Tenant specifying such event of default or events of default and
stating that this Lease and the term hereby demised shall expire and terminate
on the date specified in such notice, unless remedied pursuant to A and B
hereinabove which shall be at least seven (7) days after the giving of such
notice, and upon the date specified in such notice this Lease and the term
hereby demised and all rights of Tenant under this Lease, including any renewal
privileges, whether or not exercised, shall expire and terminate unless said
event or events of default have been remedies pursuant to A and B hereinabove,
and Tenant shall remain liable as hereinafter provided.
Section 2. Upon any such expiration or termination of this Lease,
Tenant shall quit and peacefully surrender the demised premises to Landlord, and
Landlord, upon or at any such expiration or termination, may without further
notice, enter upon and re-enter the demised premises and possess and repossess
itself thereof, by summary proceedings or ejectment and may dispossess Tenant
and remove Tenant and all other persons and property from the demised premises
and may have, hold and enjoy the demised premises and the right to receive all
rental of and from the same. In the event that the Landlord shall, during the
period covered by this Lease, obtain possession of said premises by re-entry,
summary proceedings, or otherwise, the Tenant hereby agrees to pay the Landlord
the reasonable expense incurred in obtaining possession of said premises and
also all reasonable expenses and commissions which may be paid in and about the
letting of the same.
Section 3. If this lease shall terminate pursuant to this Article, or
by summary proceedings or otherwise, or if the demised premises or any part
thereof shall be abandoned by Tenant, or shall become vacant during the term
hereof, Landlord may in its own name, but as agent for Tenant if this lease not
be terminated, or if this lease be terminated, in its own behalf, relet the
demised premises or any part thereof, or said premises, with additional premises
for such term or terms, (which may be greater or less than the period which
would otherwise have constituted the balance of the term of this Lease) and on
such conditions (which may include concessions or free rent and alterations of
the demised premises) as Landlord, in its reasonable discretion, based on market
condition and the advice of a commercial experienced broker, may determine and
may collect and receive the rents therefor. Landlord shall in no way be
responsible or liable for any failure to relet the demised premises or any part
thereof, or of any failure to collect any rent due upon such reletting,
provided, however, that Tenant shall not be liable for the remaining rent under
this Lease or from any damages unless either (i) Landlord takes reasonable steps
to mitigate its damages or (ii) Landlord does not unreasonably withhold its
consent to any proposed assignments or sublease so as to enable Tenant to
mitigate its damages.
Notwithstanding the terms of this Section 3 to the contrary, Tenant's
obligation under this Section shall be limited to the amount of rent and
brokerage commission attributable to the balance of the lease term and 50% of
any and all other reasonable costs
<PAGE>
17
incurred by Landlord that are customary for buildings, similar to the leased
premises in the cities of Livonia and Plymouth, Michigan.
Section 4. No such expiration or termination of this Lease, or
summary proceedings, abandonment or vacancy shall relieve Tenant of its
liability and obligation under this Lease, whether or not the demised premises
shall be relet, provided, however, that Tenant shall not be liable for the
remaining rent under this Lease or from any damages unless either (i) Landlord
takes reasonable steps to mitigate its damages or (ii) Landlord does not
unreasonably withhold its consent to any proposed assignments or sublease so as
to enable Tenant to mitigate its damages.
Notwithstanding the terms of this Section 3 to the contrary, Tenant's
obligation under this Section shall be limited to the amount of rent and
brokerage commission attributable to the balance of the lease term and 50% of
any and all other reasonable costs incurred by Landlord that are customary for
buildings, similar to the leased premises in the cities of Livonia and Plymouth,
Michigan. In any such event Tenant shall pay Landlord the rent and all other
charges required to be paid by Tenant up to the time of such event. Thereafter:
A. 1. Tenant, until the end of the term of this Lease, or what
would have been such term in the absence of any such event, shall
be liable to Landlord as damages for Tenant's default, the
equivalent of the amount of the rent and other charges which
would be payable under this Lease by Tenant if this Lease were
still in effect, less the net proceeds of any reletting effected
pursuant to the provisions above, after deducting all Landlord's
expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage and management
commissions, operating expenses, legal expenses, reasonable
attorneys' fees, alteration costs and expenses of preparation for
such reletting.
2. Tenant shall pay such current damages (herein called
"deficiency") to Landlord monthly on the days on which the net
rent would have been payable under this Lease if this Lease were
still in effect, and Landlord shall be entitled to recover from
Tenant each monthly deficiency as the same shall arise.
3. At any time after the expiration or termination of this
Lease pursuant to this article, in lieu of collecting any further
monthly deficiencies as aforesaid, Landlord shall be entitled to
recover from Tenant, and Tenant shall pay to Landlord, on demand,
as damages, in addition to the damages provided for in Section 8,
damages computed
<PAGE>
18
in the manner set forth in this Section B, minus any such monthly
deficiencies previously recovered from Tenant.
B. 1. In case of any breach of this Lease mentioned in Sections 6
and 7, Landlord shall immediately and ipso facto, without notice
or other action by Landlord, become entitled to recover from
Tenant, as damages for such breach, in addition to any damages
becoming due under Sections 6 and 7, an amount equal to the
difference between the rent and other charges reserved in this
Lease from the date of such breach to the date of the expiration
of the original term demised and the then fair and reasonable
rental value of the premises for the same period. Said damages
shall become due and payable to Landlord immediately upon such
breach of this Lease and without regard to whether this Lease be
terminated or not, and if this Lease be terminated without regard
to the manner in which it is terminated. In the computation of
such damages, the difference between any installment of rent
thereafter becoming due and the fair and reasonable rental value
of the premises for the period for which such installment was
payable shall be discounted to the date of such breach at the
rate of not more than six (6%) percent per annum.
2. If and so long as the term of this Lease shall continue, the
rent reserved herein for the unexpired term of the Lease after a
breach mentioned in Sections 6 and 7, shall be reduced by the
amount of such liquidated damages together with interest thereon
at an implied rate of six (6%) per annum as may be paid to
Landlord, such reduction being applied proportionately to each
installment of rent thereafter becoming due. During the
continuance of the Lease after such a breach and until such
damages are paid to Landlord, the whole amount of each
installment of rent herein reserved shall be due and payable at
the time herein specified and if, by reason of the subsequent
payment of liquidated damages, and the resulting reduction in
rental, Landlord shall have received a sum in excess of all
installments, as so reduced, becoming due after the breach and
before the collection of such damages, such excess shall be
refunded upon the receipt of such liquidated damages.
Section 5. If the demised premises or any part thereof be relet by
Landlord for the unexpired term of this Lease or any part thereof, before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rental reserved upon such reletting shall be considered
as part of the evidence of the fair and reasonable rental value for the part or
the whole of the premises so relet during the term of the reletting.
<PAGE>
19
Nothing herein contained shall limit or prejudice the right of Landlord to
obtain as liquidated damages by reason of such termination, an amount equal to
the maximum allowed by an statute or rule of law in effect at the time when and
governing the proceeding in which, such damages are to be proved, whether or not
such amount be greater, equal to, or less than the amount of the difference
referred to above.
Section 6. If this Lease be terminated by summary proceedings or
otherwise, or if the premises are abandoned or become vacant, and whether or not
the premises be relet, Landlord shall be entitled to recover from Tenant, and
Tenant shall pay to Landlord, in addition to any damages becoming due under this
Article, the following: an amount equal to all reasonable expenses, if any,
including reasonable counsel fees, incurred by Landlord in recovering possession
of the demised premises, and all reasonable costs and charges for the care of
said premises while vacant, which damages shall be due and payable by Tenant to
Landlord at such time as such expenses are incurred by Landlord.
Section 7. If this Lease be terminated in any manner whatsoever, or
if there be any breach of this Lease specified in Sections 6 and 7, then and in
either of such events, Tenant covenants and agrees, any other covenant in this
Lease notwithstanding:
A. That the premises shall be in the same condition as that in which
Tenant has agreed to surrender them to Landlord at the expiration
of the term hereof.
B. That Tenant, on or before the occurrence of any such event shall
perform any covenant contained in this Lease for the making of
any improvement, alteration or betterment to the premises, or for
restoring or rebuilding any part thereof; and
C. That, for the breach of any covenant above stated in this Section
7, Landlord shall be entitled to recover and Tenant shall pay,
ipso facto, without notice or other action by Landlord, the then
cost of performing such covenant, less interest thereon at the
rate of six (6%) percent per annum for the period between the
occurrence of any such event and the time when any such work or
act, the cost of which is computed, should have been performed
under the other provisions of this Lease had such event not
occurred.
Section 8. No failure by Landlord to insist upon the strict
performance of any agreement, term, covenant, or condition hereof or to exercise
any right or remedy consequent upon a breach thereof, and no acceptance of full
or partial rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of such agreement, term, covenant or condition. No
agreement, term, covenant or condition hereof
<PAGE>
20
to be performed for complied with by Tenant and no breach shall affect or alter
this Lease, but each and every agreement, term, covenant and condition hereof
shall continue in full force and effect with respect to any other then existing
or subsequent breach thereof. No covenant or term hereunder shall be deemed
"incurable" provided it is currently in accordance with the terms of this
Article XIII.
Section 9. In the event of any breach by Tenant of any of the
agreements, terms, covenants, or conditions contained in this Lease, Landlord
shall be entitled to enjoin such breach or threatened breach and shall have the
right to invoke any rights and remedy allowed at law or in equity or by statute
or otherwise as though re-entry, summary proceedings and other remedies were not
provided for in this Lease.
Section 10. Each right and remedy provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided for
in this Lease or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by Landlord or Tenant
of any one or more of the rights or remedies provided for in this Lease or now
or hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the party in question of any or
all other rights or remedies provided for in this Lease or now or hereafter
existing at law or in equity or by statute or otherwise.
ARTICLE XIV
BANKRUPTCY OR INSOLVENCY
------------------------
Section 1. Tenant's interest not transferable. Neither Tenant's
----------------------------------
interest in this Lease, nor any estate hereby created in Tenant nor any interest
herein or therein, shall pass to any trustee or receiver or assignee for the
benefit of creditors or otherwise by operation of law except as may specifically
be provided pursuant to the Bankruptcy Code.
Section 2. Termination. In the event the interest or estate created
-----------
in Tenant hereby shall be taken in execution or by other process of law, or if
Tenant's Guarantor, if any, or his executors, administrators, or assigns, if
any, shall be adjudicated insolvent or bankrupt pursuant to the provisions of
any State Act or the Bankruptcy Code or if Tenant is adjudicated insolvent by a
Court of competent jurisdiction other than the United States Bankruptcy Court,
or if a receiver or trustee of the property of Tenant or Tenant's Guarantor, if
any shall be appointed by reason of the insolvency or inability of Tenant or
Tenant's Guarantor, if any, to pay its debts, or if any assignment shall be made
of the property of Tenant or Tenant's Guarantor, if any, for the benefit of
creditors, then and in any such events, this Lease and all rights of Tenant
hereunder shall automatically cease and terminate with the same force and effect
as though the date of such event were the date
<PAGE>
21
originally set forth herein and fixed for the expiration of the term, and Tenant
shall vacate and surrender the leased premises but shall remain liable as herein
provided.
Section 3. Tenant's obligation to avoid Creditors' proceedings.
---------------------------------------------------
Tenant or Tenant's Guarantor shall not cause or give cause for the appointment
of a trustee or receiver of the assets of Tenant or Tenant's Guarantor, if any,
and shall not make any assignment for the benefit of creditors or become or be
adjudicated insolvent. The allowance of any petition under any insolvency law
except under the Bankruptcy Code or the appointment of a trustee or receiver of
Tenant or Tenant's Guarantor, if any, or of the assets of either of them, shall
be conclusive evidence that Tenant caused, or gave cause therefor, unless such
allowance of the petition or the appointment of a trustee or receiver, is
vacated within thirty (30) days after such allowance or appointment. Any act
described in this paragraph shall be deemed a material breach of Tenant's
obligations hereunder, and this Lease shall thereupon automatically terminate.
Landlord does in addition, reserve any and all other remedies provided in this
Lease or in law.
Section 4. Rights and obligations under the Bankruptcy Code:
------------------------------------------------
A. Upon the filing of a petition by or against Tenant under the
Bankruptcy Code, Tenant, as debtor and as debtor in possession,
and any trustee who may be appointed agree as follows:
1. To perform each and every obligation of Tenant under this
Lease including, but not limited to, the manner of "operations"
as provided in this Lease until such time as this Lease is
either rejected or assumed by order of the United States
Bankruptcy Court.
2. To pay monthly in advance on the first day of each month
as reasonable compensation for use and occupancy of the leased
premises an amount equal to all rent and other charges
otherwise due pursuant to this Lease.
3. To reject or assume this Lease within sixty (60) days of
the filing of such petition under Chapter 7 of the Bankruptcy
Code or within one hundred twenty (120) days of the filing of a
petition under any other Chapter.
4. To give Landlord the notice required by law of any
proceeding relating to any assumption of this Lease.
<PAGE>
22
5. To give the notice required by law of any abandonment of
the leased premises; any such abandonment to be deemed a
rejection of this Lease.
6. To do all other things of benefit to Landlord otherwise
required under the Bankruptcy Code, unless such things are not
required except upon request of Landlord following such
petition, in which event Landlord must first request them.
B. No default of this Lease by Tenant, either prior to or
subsequent to the filing of such a petition, shall be deemed to
have been waived unless expressly done so in writing by
Landlord.
C. Included within and in addition to any other conditions or
obligations imposed upon Tenant or its successor in the event
of assumption and/or assignment are the following:
1. The cure of any monetary defaults and the reimbursement of
pecuniary loss within not more than thirty (30) days of
assumption and/or assignment;
2. The use of the leased premises as set forth in this Lease.
3. If required by the Bankruptcy Code, the prior written
consent of any mortgagee to which this Lease has been assigned
as collateral security.
ARTICLE XV
RIGHT TO MORTGAGE
-----------------
ARTICLE XVI
NON-LIABILITY
-------------
Section 1. As a consideration for making of this Lease, the Landlord
shall not be liable for any failure of public or private utility services to the
premises, nor for injury or damage which may be sustained to person or property
by the Tenant or any other person caused by or resulting from steam,
electricity, gas, water, rain, ice, or snow which may leak or flow from or into
any part of said building or from the breakage, leakage, obstruction or other
defect of the pipes, wiring, appliances, plumbing or lighting fixtures of the
same, the condition of said premises or any part thereof, or through the
elevator, if any,
<PAGE>
23
or from the street or subsurface, or from any other source or cause whatsoever,
nor for interference with light or other incorporeal hereditaments, provided
such interference is caused by anybody other than the Landlord, or caused by
operations by or for the City in the construction of any public or quasi-public
work, neither shall the Landlord be liable for any defect in the building,
latent or otherwise, except as otherwise provided herein.
Section 2. The Tenant further acknowledges that it has examined the
said leased premises prior to the making of this lease, and knows the condition
thereof, and that no representations as to the condition or state of repairs
thereof have been made by the Landlord or its agent, which are not herein
expressed, and the Tenant hereby accepts the leased premises in their present
condition at the date of the execution of this Lease, subject to construction to
be done by Landlord under Article II, Exhibits "A" & "B".
Section 3. The Landlord shall not be responsible or liable to the
Tenant for any loss or damage that may be occasioned by or through the acts or
omissions of persons occupying adjoining premises or any part of the premises
adjacent to or connected with the premises hereby leased or any part of the
building of which the leased premises are a part or for any loss or damage
resulting to the Tenant or his property from bursting, stoppage or leaking of
water, gas, sewer or steam pipes.
Section 4. Landlord represents and warrants that all electricity,
telephones, water and sewer and other utilities necessary for the operation of
Tenant as contemplated in its plans and specifications, are available to the
leased premises and can be brought into the leased premises and connected
thereto.
ARTICLE XVII
USE AND OCCUPANCY
-----------------
It is understood and agreed between the parties hereto that said
premises during the continuance of this Lease shall be used and occupied for
manufacturing, office, warehouse, distribution, customer demonstration, product
and process development and assembly of electrical and/or mechanical equipment,
and for no other purpose or purposes without the written consent of the
Landlord, and that the Tenant will not use the premises for any purpose in
violation of any law, municipal ordinance or regulation and that on any breach
of this agreement, the Landlord may at its option terminate this Lease forthwith
and re-enter and repossess the leased premises by any summary proceeding.
<PAGE>
24
ARTICLE XVIII
DAMAGE AND DESTRUCTION
----------------------
Section 1. If the building is damaged by fire or any other cause,
the following provisions of this Article shall apply:
A. If the damage is to such extent that the cost of restoration, as
reasonably estimated by Landlord, will equal to exceed thirty
(30%) percent of the replacement value of the building (exclusive
of foundations) in its condition just prior to the occurrence of
the damage, Landlord may, no later than the sixtieth (60th) day
following the damage, give Tenant a written notice stating that
it elects to terminate this Lease. If such notice shall be
given:
1. This Lease shall terminate on the thirtieth (30th) day
after the giving of said notice.
2. Tenant shall surrender possession of the premises within a
reasonable time thereafter.
3. The rent and additional rent shall be apportioned as of
the date of such surrender and any rent paid for any period
beyond said date shall be repaid to Tenant.
B. If the cost of restoration, as reasonably estimated by Landlord,
shall amount to less than thirty (30%) percent of said
replacement value of the building, or if despite the cost
Landlord does not elect to terminate this Lease, Landlord shall
restore the building and the premises with reasonable promptness,
subject to delays beyond Landlord's control and delays in the
making of insurance adjustments by Landlord, and Tenant shall not
have the right to terminate this Lease. Notwithstanding this
Paragraph B to the contrary, Tenant shall have the right to
terminate this Lease if repairs are not or cannot be completed by
Landlord within 150 days after said damage or destruction under
this Article XVI.
Landlord need not restore fixtures, improvements or other
property of Tenant.
C. Tenant shall have the right to terminate this Lease in the event
that restoration is not made within 150 days after the date of
damage or destruction. Such termination shall become effective
within thirty (30) days after the receipt of said notice by
Landlord.
<PAGE>
25
Section 2. In any case in which the use of the premises is affected
by any damage to the building, there shall be either an abatement or an
equitable reduction in rent depending on the period for which the extent to
which the premises are not reasonably usable for the purposes for which they are
leased hereunder, but this provision shall not relieve any insurance company of
the obligation to pay such rent. The words "restoration" and "restore" as used
in this Article shall include repairs. If the damage results from the fault of
Tenant, or Tenant's agents, servants, visitors or licensees, Tenant shall not be
entitled to any abatement or reduction of rent, except to the extent, if any,
that Landlord receives the proceeds of rent insurance in lieu of such rent.
Section 3. In the event of any loss or damage to the building, the
premises and/or any contents, each party shall look first to any insurance in
its favor before making any claim against the other party; and to the extent
possible without additional cost, each party shall obtain, for each policy of
such insurance, provisions permitting waiver of any claim against the other
party for loss or damage within the scope of the insurance, and each party, to
such extent permitted, for itself and its insurers waives all such insured
claims against the other party (its agents, employees and guests).
ARTICLE XIX
NOTICES
-------
All notices required herein shall be given in writing by certified or
registered mail, return receipt requested, if addressed to Landlord, at the
place where the rent reserved herein is payable and if addressed to Tenant as
follows:
ROFIN-SINAR INC.
45701 MAST STREET
PLYMOUTH, MICHIGAN 48170
or mailed to such other addresses as the parties respectively may designate by
notice given in like manner.
ARTICLE XX
HEADINGS AND SECTION NUMBERS
----------------------------
The headings, section numbers and article numbers appearing in this
Lease are inserted only as a matter of convenience and in no way define, limit,
or construe, or describe the scope of intent of such sections or articles of
this Lease nor in any way affect this Lease.
<PAGE>
26
ARTICLE XXI
UTILITIES
---------
The Tenant shall pay, as and when the same shall become due and
payable, all water and sewer rents, rates, charges, assessments and other
utilities supplied the leased property.
ARTICLE XXII
ADDITIONAL RULES
----------------
The Landlord may, from time to time, make such reasonable rules and
regulations as in the Landlord's judgment may be necessary or advisable for the
safety, care and cleanliness of the premises, the cleanliness of the building in
which the same are located, the common areas and other tenants occupying said
adjoining buildings and for the preservation of good order in said building and
adjoining buildings and the use and occupancy of the demised premises shall be
conditioned upon observance of the compliance with such rules and regulations.
The violation of any such rules shall entitle Landlord to damages only and shall
not result in termination or forfeiture of this Lease, provided, however, said
violation of such rules does not result in material damage or reduction in the
valuation of the building and demised premises.
ARTICLE XXIII
ADDITIONAL DOCUMENTS
--------------------
The parties hereto, upon request, agree to execute any additional
documents reasonably required to carry out the intent and provisions of this
Lease.
ARTICLE XXIV
LIGHT AND AIR
-------------
If at any time any windows of the demised premises are temporarily
closed, darkened or bricked-up for any reason whatsoever, including, but not
limited to, Landlord's own acts, Landlord shall not be liable for any damage
Tenant may sustain thereby and Tenant shall not be entitled to any compensation
therefor nor abatement of rent, nor shall the same release Tenant from its
obligations hereunder nor constitute an eviction.
ARTICLE XXV
WAIVER OF RIGHTS AND REDEMPTION
-------------------------------
<PAGE>
27
ARTICLE XVI
WAIVER
------
The failure of the Landlord to insist, in any one or more instances
upon a strict performance of any of the covenants of this Lease, or to exercise
any option herein contained, shall not be construed as a waiver or a
relinquishment for the future of such covenant or option, but the same shall
continue and remain in full force and effect. The receipt by the Landlord of
rent, with knowledge of the breach of any covenant hereof, shall not be deemed a
waiver of such breach and no waiver by the Landlord of any provision hereof
shall be deemed to have been made unless expressed in writing and signed by the
Landlord.
ARTICLE XXVII
NO PARTNERSHIP
--------------
Nothing contained herein shall be deemed or construed by the parties
hereto, nor by any third party, as creating the relationship of principal and
agent or of partnership or of joint venture between the parties hereto, it being
understood and agreed that neither the method of computation of rent, nor any
other provision contained herein, nor any acts of the parties herein, shall be
deemed to create any relationship between the parties hereto other than the
relationship of Landlord and Tenant.
ARTICLE XXVIII
PARTIAL INVALIDITY
------------------
If any term, covenant or condition of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term,
covenant or condition to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
ARTICLE XXIX
LIENS
-----
The Tenant shall have no power to do any act or make any contract
which may create or be the foundation for any lien, mortgage or other
encumbrance upon the estate of the Landlord or of any interest of the Landlord
in the demised premises, or upon or in the
<PAGE>
28
building or buildings or improvements thereon or hereafter erected or placed
hereon, it being agreed that should the Tenant cause any improvements,
alterations or repairs to be made on the demised premises, or material furnished
or labor performed therein, or thereon, neither the Landlord nor the demised
premises nor any improvements shall under any circumstances be liable for the
payment of any expenses incurred or for the value of any work done or material
furnished to the demised premises or any part thereof; but all such
improvements, alterations, repairs, materials and labor shall be done at the
Tenant's expense and the Tenant shall be solely and wholly responsible to
contractors, laborers and materialmen, furnishing labor and material to said
premises and building or buildings and improvements or any part thereof and all
such laborers, materialmen and contractors are hereby charged with notice that
they must look solely and wholly to the Tenant and the Tenant's interest in the
premises, to secure the payment of any bills for work done and materials
furnished.
In the event a mechanic's lien shall be filed against the demised
premises or Tenant's interest therein as the result of the work undertaken by
Tenant to ready the demised premises for the opening of Tenant's business or as
a result of any repairs or alterations made by Tenant, Tenant shall, within
thirty (30) days after receiving notice of such lien, discharge such lien either
by payment of the indebtedness due to the mechanic's lien claimant or by filing
a bond (as provided by statute) as security therefor. In the event Tenant shall
fail to discharge such lien, Landlord shall, among its remedies, have the right
to procure such discharge by filing such bond and Tenant shall pay the cost of
such bond to Landlord as additional rent upon the first day that rent shall be
due thereafter.
ARTICLE XXX
ENTIRE AGREEMENT
----------------
This Lease and the Exhibits, Rider and/or Addenda, if any, attached
and signed by the parties, set forth the entire agreement between the parties.
Any prior conversations or writings are merged herein and extinguished. No
subsequent amendment to this Lease shall be binding upon Landlord or Tenant
unless reduced to writing and signed. If any provisions contained in a Rider or
addenda is inconsistent with a provision of this Lease, the provisions contained
in said rider or addenda shall supersede the Lease provision.
ARTICLE XXXI
INTERPRETATION AND USE OF PRONOUNS
----------------------------------
Nothing contained herein shall be deemed or construed by the parties
hereto, nor by any third party, as creating the relationship of principal and
agent or of partnership or of joint venture between the parties hereto, it being
understood and agreed that neither the method of computation of rent, nor any
other provision contained herein, nor any acts of the
<PAGE>
29
parties herein, shall be deemed to create any relationship between the parties
hereto other than the relationship of Landlord and Tenant. Whenever herein the
singular number is used, the same shall include the plural, the masculine gender
shall include the feminine and neuter genders and the neuter gender shall
include the feminine and masculine genders.
ARTICLE XXXII
COMPLIANCE WITH LAWS
--------------------
Tenant covenants and warrants that during the term of this Lease or
any extension thereof, Tenant, at its expense and under penalty of forfeiture
and damages, has complied and will continue to comply with all statutes,
ordinances, rules, orders, regulations and/or requirements of all county,
municipal, state, federal and other applicable governmental authorities now in
force or which may hereinafter be in force as pertains to the conduct of
Tenant's business. Tenant agrees to indemnify, save and hold Landlord harmless
from any fines or penalties assessed against the demised premises for a
violation of any statutes, ordinances, rules, orders, regulations and/or
requirements of all county, municipal, state, federal and other governmental
authorities as a result of Tenant's improper, unusual or unlawful manner of
using the demised premises for the conduct of Tenant's business.
Notwithstanding the terms of this Article XXIX to the contrary,
Tenant's obligation under this Section 2 shall be as follows:
(a) 100% for compliance required because of Tenant's use and
occupancy in accordance with Article XVII.
(b) The amortized cost of Landlord over the term of the Lease for any
compliance required of Landlord.
By way of illustration but not limitation, 5-year lease, with 2 years
left, Tenant's obligation 2/5's of cost.
Notwithstanding anything to the contrary contained herein, if any
agency, division or department of any governmental entity with the appropriate
jurisdiction over the leased premises determines that the leased premises is
unsafe or is not in compliance with the laws and/or regulations controlling same
or orders requires any alteration, upon and/or reconstruction of same, the party
responsible for such compliance shall be (i) the Landlord if the law or
regulation in question is one of general application (by way of example only the
Americans with Disabilities Act of 1990) or (ii) the Tenant if the law or
regulation is not one of general application but is invoked or enforced because
of Tenant's use and occupancy of the leased premises.
<PAGE>
30
ARTICLE XXXIII
CONSTRUCTION AND INTERPRETATION
-------------------------------
This Lease shall be construed and interpreted in accordance with the
laws of the State of Michigan.
ARTICLE XXXIV
RENT TO BE NET TO LANDLORD
--------------------------
It is the intention of the parties that the rent payable hereunder
shall be net to Landlord, so that this Lease shall yield to Landlord the net
annual rent specified herein during the term of this Lease, and that all costs,
expenses and obligations of every kind or nature whatsoever relating to the
demised premises including, but not limited to, all charges made against the
leased premises for gas, water, heat and electricity during the continuance of
this lease shall be paid as the same shall become due by Tenant except for those
costs, expenses and obligations specifically designated as those of Landlord.
Notwithstanding the terms of this Article XXXIV to the contrary, any additional
costs or expenses which Tenant is not obligated to pay as normal costs and
expenses under the terms of this Lease, shall be prorated over the balance of
the Lease term or any option term. By way of illustration but not limitation:
$1,000.00 assessment, five (5) years left on the Lease term ($1,000.00/5 =
$200.00 per year - $1,000.00/5 = $200.00).
ARTICLE XXXV
DELAYS
------
Section 1. In the event that either party hereto shall be delayed or
hindered in or prevented from the performance of any act required hereunder by
reason of strikes, lockouts, labor troubles, inability to procure materials,
failure of power, restrictive governmental laws or regulations, riots,
insurrection, war or other reason of a like nature not the fault of the party
delayed in performing work or doing acts required under the terms of this Lease,
then performance of such act shall be excused for the period as of the delay and
the period for the performance of any such act shall be extended for a period
equivalent to the period of such delay. The party entitled to such extension
hereunder shall give written notice as soon as possible to the other party
hereto of its claim of right to such extension and the reason(s) therefore. The
provisions of this Paragraph shall not operate to excuse Tenant from prompt
payment of rent, or any other payments required by the terms of this Lease.
Section 2. It is understood that if the Tenant shall be unable to
enter into and occupy the premises hereby leased at the time above provided, by
reason of the said premises not being ready for occupancy, or by reason of the
holding over of any previous
<PAGE>
31
occupant of said premises, or as a result of any cause or reason beyond the
direct control of the Landlord, the Landlord shall not be liable in damages to
the Tenant therefor, but during the period the Tenant shall be unable to occupy
said premises as hereinbefore provided, the rental therefor shall be abated and
the Landlord is to be the sole judge as to when the premises are ready for
occupancy.
ARTICLE XXXVI
INTEREST ON PAST DUE OBLIGATIONS
--------------------------------
Any amount due from Tenant to Landlord hereunder which is not paid
when due shall bear interest at ten (10%) percent per annum from the date due
until paid, unless otherwise specifically provided herein, but the payment of
such interest shall not excuse or cure any default by Tenant under this Lease.
ARTICLE XXXVII
LIABILITY OF LANDLORD
---------------------
If Landlord shall fail to perform any covenant, term or condition of
this Lease upon Landlord's part to be performed, and if as a consequence of such
default Tenant shall recover a money judgment against Landlord, such judgment
shall be satisfied only out of the proceeds of sale received upon execution of
such judgment and levied thereon against the right, title and interest of
Landlord in the demised premises and out of rents or other income from such
property receivable by Landlord, or out of the consideration received by
Landlord from the sale or other disposition of all or any part of Landlord's
right, title and interest in the demised premises. Neither Landlord nor any of
the partners comprising the partnership which is the Landlord herein shall be
liable for any deficiency. Notwithstanding the terms of this Article XXXVII to
the contrary, Tenant may offset against rent and other charges hereunder, under
this Article for any deficiency not satisfied by the equity in the property
after final judgment is obtained by Tenant after all appeals have been exhausted
by either Landlord or Tenant.
ARTICLE XXXVIII
RE-RENTING
----------
The Tenant hereby agrees that for a period commencing ninety (90) days
prior to the termination of this Lease, the Landlord may show the premises to
prospective Tenants.
<PAGE>
32
ARTICLE XXXIX
QUIET ENJOYMENT
---------------
The Landlord covenants that the said Tenant, on payment of all the
aforesaid installments and performing all the covenants aforesaid, shall and may
peacefully and quietly have, hold and enjoy the said demised premises for the
term aforesaid.
ARTICLE XXXX
HOLDING OVER
------------
Any holding over after the expiration of the term hereof with the
consent of Landlord, shall be construed to be a tenancy from month-to-month at
one hundred twenty five (125%) percent of the last month's rental together with
an amount estimated by Landlord for the monthly additional charges payable
pursuant to this Lease, and shall otherwise be on the same terms and conditions
as herein specified so far as applicable. Any holding over without Landlord's
consent shall entitle Landlord to re-enter the leased premises pursuant to
Article XIII, Section 2 of this Lease.
ARTICLE XXXXI
SUCCESSORS
----------
All rights and liabilities herein given to, or imposed upon, the
respective parties hereto shall extend to and bind the several respective heirs,
executors, administrators, successors and assigns of the said parties; and if
there shall be more than one Tenant, they shall all be bound jointly and
severally by the terms, covenants and agreements herein. No rights, however,
shall inure to the benefit of any assignee of Tenant unless the assignment to
such assignee is permitted or has been approved by Landlord in writing as
provided in Article VII.
ARTICLE XXXXII
FURNISHING OF FINANCIAL STATEMENTS
----------------------------------
Upon Landlord's written request, Tenant shall promptly furnish
Landlord, from time to time, with financial statements reflecting Tenant's
current financial condition, and written evidence of ownership of controlling
stock interest if Tenant is a corporation. Notwithstanding the terms of this
Article XXXXII to the contrary, Tenant shall not be required to provide
financial statements more than annually and only to Landlord's lending
institutions, if required by such institutions, or in the event of sale, but
only to an entity that is not involved either directly or indirectly in any
business of Tenant or any affiliate or
<PAGE>
33
subsidiary of Tenant, but only if such financial statements are, in fact
available, it being understood and agreed that Tenant shall not be required to
produce or compile any additional statements. Further, such financial
statements required shall be the most current ones available to Tenant.
ARTICLE XXXXIII
ACCORD AND SATISFACTION
-----------------------
Payment by Tenant or receipt by Landlord of a lesser amount than the
rent or other charges herein stipulated shall be deemed to be an account of the
earliest due stipulated rent or other charges, and no endorsement or statement
on any check or any letter accompanying any check payment as rent or other
charges shall be deemed an accord and satisfaction and Landlord shall accept
such check or payment without prejudice to Landlord's right to recover the
balance of such rent or other charges or pursue any other remedy in this Lease
to the Tenant.
ARTICLE XXXXIV
EXECUTION OF LEASE; NO OPTION
-----------------------------
The submission of this Lease to Tenant shall be for examination
purposes only, and does not and shall not constitute a reservation of or option
for Tenant to lease, or otherwise create any interest by Tenant in, the leased
premises. Execution of this Lease by Tenant and returned to Landlord shall not
be binding upon Landlord, notwithstanding any time interval, until Landlord has
in fact executed and delivered this Lease to the Tenant.
ARTICLE XXXXV
RECORDING
---------
Landlord agrees to prepare a Memorandum of Lease, submit for approval
to Tenant and upon Tenant's approval, record same on Tenant's behalf.
ARTICLE XXXXVI
WAIVER OF COUNTERCLAIMS
-----------------------
In the event Landlord commences any proceedings for nonpayment of rent
or as a result of the holding over of Tenant after the expiration of the term of
this Lease, Tenant will not interpose any counter-claim of whatsoever nature or
description in any such proceedings, which shall not be construed as a waiver of
Tenant's right to assert such claims
<PAGE>
34
in any separate action or actions brought by Tenant, provided, however, Tenant
shall have the right to institute separate actions against Landlord and raise
any and all claims which Tenant so desires.
ARTICLE XXXXVII
ESTOPPEL STATEMENT
------------------
Tenant agrees within ten (10) days after request therefor by Landlord,
to execute in recordable form and deliver to Landlord a statement, in writing,
certifying (a) that this Lease is in full force and effect; (b) date of
commencement of the term of this Lease; (c) that rent is paid currently without
any offset or defense thereto except as otherwise permitted herein; (d) the
amount of rent, if any, paid in advance; (e) whether this Lease has been
modified and, if so, identifying the modifications; and (f) that there are no
uncured defaults by Landlord or stating those claimed by Tenant, provided that,
in fact, such facts are accurate and ascertainable.
ARTICLE XXXXVIII
ATTORNMENT
----------
In the event any proceedings are brought for the foreclosure of, or in
the event of a conveyance by deed in lieu of foreclosure of, or in the event of
exercise of the power of sale under any mortgage and/or deed of trust made by
Landlord covering the leased premises, or in the event Landlord sells, conveys
or otherwise transfers its interest in the demised premises or any portion
thereof containing the demised premises, this Lease shall remain in full force
and effect and any successor in interest to Landlord shall not disturb Tenant's
rights hereunder, provided, however, Tenant is not in default under the terms of
this Lease Agreement and Tenant hereby attorns to and covenants and agrees to
execute an instrument in writing reasonably satisfactory to the new owner
whereby Tenant attorns to, such successor in interest and recognizes such
successor as the Landlord under this Lease, provided, however, that Tenant is
not in default under the terms of this Lease, and any mortgagee or financial
institution agrees to recognize Tenant's Lease. Payment by or performance of
this Lease by any person, firm or corporation claiming an interest in this Lease
or the leased premises by, through or under the Tenant without Landlord's
consent in writing shall not constitute an attornment or create any interest in
this Lease or the leased premises.
<PAGE>
35
ARTICLE XXXXIV
SUBORDINATION
-------------
Tenant agrees that this Lease shall, at the request of the Landlord,
be subordinate to any first mortgage on deeds of trust that may hereafter be
placed upon said premises and to any and all advances to be made thereunder, and
to the interest thereon, and all renewals, replacements and extensions thereof,
provided the mortgagee or trustee named in said mortgages or trust deeds shall
agree to recognize the Lease of said Tenant in the event of foreclosure if
Tenant is not in default. Tenant also agrees that any mortgagee or trustee may
elect to have this Lease a prior lien to its mortgage or deed of trust, and in
the event of such election and upon notification by such mortgageee or trustee
to Tenant to that effect, this Lease shall be deemed prior in lien to the said
mortgage or deed of trust, whether this Lease is dated prior to or subsequent to
the date of said mortgage or deed of trust. Tenant agrees upon request of
Landlord, any mortgagee or any trustee, it shall execute whatever instruments
may be required to carry out the intent of this Article.
ARTICLE XXXXX
REMEDIES
--------
Failure of the Tenant to execute any of the above instruments within
forty five (45) days upon written request so to do by Landlord shall constitute
a breach of this Lease and the Landlord may, at its option, cancel this Lease
and terminate the Tenant's interest therein. Further, Tenant hereby irrevocably
appoints Landlord as attorney-in-fact for the Tenant with full power and
authority to execute and deliver in the name of the Tenant any such instruments,
provided, however, that Landlord may only exercise its appointment as attorney-
in-fact under this Article in the event of sale or financing of the above
building and demised premises and only for an estoppel and/or subordination
document. Further, provided that the terms of this Lease are not materially
changed.
Notwithstanding the terms of this Article to the contrary, Landlord
will not exercise its power of attorney under this Article until the forty five
(45) days has elapsed.
ARTICLE XXXXXI
EXECUTION OF LEASE
------------------
If either party hereto is a partnership, limited partnership,
corporation or other joint venture or association, the individual(s) executing
this Lease on behalf of such entity warrant and represent that such entity is
validly organized and existing and authorized to do business under the laws of
the State of Michigan, that the form of entity is as set forth in the
introductory paragraph of this Lease and the acknowledgements at the end of this
Lease, that
<PAGE>
36
the entity has full power and lawful authority to enter into this Lease in the
manner and form herein set forth, and that the execution of this Lease by such
individual(s) is proper and sufficient to legally bind such entity in accordance
with the terms and conditions hereof. If Tenant consists of more than one
person or entity, then the obligations imposed on Tenant shall be joint and
several. Tenant agrees that at the time of execution of this Lease that it will
provide Landlord with a resolution of its Board of Directors authorizing
execution of this Lease and the party who is executing on behalf of the Tenant.
ARTICLE XXXXXII
LANDLORD'S LIEN
---------------
ARTICLE XXXXXIII
PLANS AND SPECIFICATIONS
------------------------
The completion of the facility shall be done in accordance with the
attached specification sheet marked as Exhibit "B" and building plans market as
Exhibit "A" attached hereto and made a part hereof.
ARTICLE XXXXXIV
WARRANTIES
----------
Landlord hereby extends to Tenant on the entire facility from date of
occupancy by Tenant a one (1) year building warranty on the entire facility and
furthermore, Landlord shall extend any and all warranties given to Landlord by
the manufacturers.
ARTICLE XXXXXV
LARGER FACILITY REQUIREMENTS
----------------------------
It is understood and agreed that if Tenant requires a larger facility
during the term of this Lease and Landlord has an existing building on the
market or coming available that meets Tenant's requirements, or if Landlord can
obtain a parcel of land and construct a facility pursuant to Tenant's
specifications, Landlord agrees to first negotiate a new lease covering the
larger facility under terms and conditions acceptable to both parties, and after
the terms have been agreed upon and the facility is ready for occupancy, then
Landlord will immediately cancel this existing Lease and the new Lease shall be
in full force and effect.
<PAGE>
37
ARTICLE XXXXXVI
TAX ABATEMENT
-------------
Tenant agrees to fully cooperate with Landlord in the event that
Landlord shall seek a tax abatement for the property leased hereunder.
ARTICLE XXXXXVII
----------------
Facility shall be completed in accordance with the attached Plans
marked Exhibit "A" and attached Specifications Sheet market Exhibit "B".
ARTICLE XXXXXVIII
ENVIRONMENTAL
-------------
Section 1. Prior to occupancy by Tenant, Tenant, at Tenant's expense,
shall obtain a report from a reputable environmental consultant of Landlord's
choice and reasonably acceptable to Tenant, to determine if the leased property
has been or presently is contaminated by hazardous materials or has been used
for the handling, storage, transportation or disposal of hazardous or toxic
materials. Copy of said report shall be attached hereto and made a part of this
Lease Agreement as Exhibit "C". Tenant shall have fourteen (14) days from the
date of execution of this Lease Agreement to complete its report, otherwise it
shall be deemed waived and occupancy shall begin after said fourteen (14) day
period.
Section 2. On termination of the Lease or any option period, Landlord
shall obtain, at Landlord's expense, a report from a reputable environmental
consultant of Tenant's choice and reasonably acceptable to Landlord, to
determine if the leased property has been or presently is contaminated by
hazardous materials or has been used for the handling, storage, transportation
or disposal of hazardous or toxic materials.
Section 3. The results of the reports under Sections 1 and 2
hereinabove, shall be in writing and shall be promptly submitted either by
Landlord or Tenant to the other, as the case may be.
Section 4. Prior to Tenant's occupancy, Landlord agrees, at its
expense, to undertake to clean up and remove any hazardous or toxic materials
indicated in the environmental report under Section 1 hereinabove, which may be
required by any governmental authority and to use its best efforts not to
interfere with Tenant's use and occupancy of the leased premises. Landlord
shall notify Tenant in writing as to its plan of cleanup and removal. In the
event Landlord shall decide not to undertake a cleanup under
<PAGE>
38
this Section 4, for whatever reason, Landlord shall have the right to terminate
this Lease by written notice to Tenant and all obligations and responsibilities
of Landlord under this Lease shall thereupon be of no further legal or binding
effect.
Section 5. Tenant agrees that any change in the hazardous or toxic
materials contaminating the property between the reports of Landlord and Tenant
shall be the sole obligation and liability of Tenant to clean up and remove at
its expense; unless Tenant proves that Landlord or adjacent property is
responsible for contamination. The obligation under this Section shall be
absolute. The burden of proving a third party defense to Tenant's obligations
and liabilities under this Article shall be borne by Tenant. Notwithstanding
the terms of this Section 5 to the contrary, Tenant agrees to indemnify, defend
and hold Landlord harmless from and against any and all claims, losses, damages,
costs and expenses (including reasonable attorney fees) arising out of or in any
way relating to hazardous or toxic materials in, on, under, at or used on the
leased premises caused by Tenant or its suppliers, contractors, subcontractors,
customers, business invitees, agents or anyone acting for or on behalf of
Tenant.
Section 6. For purposes of this Lease Agreement, a "Hazardous
Material" and "Hazardous Materials" shall mean and include urea formaldehyde,
petroleum, asbestos, polychlorinated biphenyls and any material, substance or
waste which is now or hereafter defined or listed as a "hazardous substance",
"hazardous material", "hazardous waste", "extremely hazardous waste",
"restricted hazardous waste", "toxic waste", "toxic material", "toxic substance"
or "economic poison" in any federal, state or local law, ordinance, regulation,
publication or order or is now or hereafter listed or defined as "hazardous" or
"extremely hazardous" in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601, et seq., or in any successor
-- ---
statutes or provisions, in the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., or in any successor statutes or provisions, in the
-- ---
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or in
-- ---
any successor statutes or provisions, in the Clean Water Act, 33 U.S.C. Section
1251 et seq., or in any successor statutes or provisions.
-- ---
Section 7. Landlord and Tenant's obligations under this Article shall
arise upon the discovery of the presence of any hazardous substance, whether or
not the Environmental Protection Agency or any other federal agency or any state
or local environmental agency has taken or threatened any action in connection
with the presence of any hazardous substances.
Section 8. Landlord agrees to indemnify, defend and hold Tenant
harmless from and against any and all claims, losses, damages, costs and
expenses arising out of or in any way relating to the existence, at any time,
either prior to, during or after the occupancy of Tenant of the leased premises
of any hazardous or toxic materials in, on, under, at or used on the leased
premises hereunder (unless caused by Tenant or its suppliers, contractors,
<PAGE>
39
subcontractors, customers, business invitees, agents or anyone acting for or on
behalf of Tenant); provided, however, that with respect to those hazardous or
toxic materials that are brought on to the leased premises by third-parties and
which are visible or patently obvious in the ordinary course of the use and
occupancy of the leased premises by Tenant, Landlord's indemnification
obligations hereunder with respect to such visible and patently obvious
hazardous or toxic materials shall only arise upon Tenant's discovery of such
visible or patently obvious hazardous or toxic materials, promptly notifying
Landlord, either orally (to be confirmed in writing) or in writing, of the
presence of such hazardous or toxic materials; provided, further, that in
connection therewith, Tenant shall take reasonable precautions to attempt to
prevent such visible and patently obvious dumping or placing of hazardous toxic
materials by such third parties from occurring again.
Section 9. In connection with Landlord's obligations hereunder, upon
any such notification and/or the discovery by Landlord of any such hazardous or
toxic materials requiring the indemnification by Landlord, Landlord shall notify
Tenant as to its plan of clean-up and removal and Landlord and Tenant shall
mutually cooperate with each other as to any such clean-up and removal plan so
that Landlord does not materially interfere with the business operations of
Tenant and the use and occupancy by Tenant of the leased premises.
ARTICLE XXXXXIX
OPTIONS
-------
Provided Tenant is not in default of any of the terms of this Lease,
Landlord grants to Tenant three (3) one (1) year options to extend the Lease on
the following rental terms:
<TABLE>
<CAPTION>
OPTION YEAR ANNUAL RENTAL MONTHLY RENTAL
----------- ------------- --------------
<S> <C> <C>
1 $196,040.25 $16,336.69
2 $200,189.25 $16,682.44
3 $$204,684.00 $17,057.00
</TABLE>
<PAGE>
40
Said option shall be exercised by Tenant in writing, of Tenant's
intention to do so, given to Landlord at least six (6) months prior to the
expiration of the term of this Lease or any option period.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals the day and year first above written.
LANDLORD:
D/R GROUP, a Michigan
Co-Partnership
BY:
- ------------------------- --------------------
TENANT:
ROFIN-SINAR INCORPORATED, a
Delaware Corporation
BY:
- ------------------------- --------------------
<PAGE>
List of Subsidiaries of Rofin-Sinar Technologies Inc.
Rofin Sinar Inc.
Rofin Sinar Laser GmbH
Rofin-Sinar France S.A.
Rofin-Sinar Italiana S.r.l.
Rofin-Marubeni Laser Corporation
<PAGE>
EXHIBIT 23.1
The Shareholders of
Rofin-Sinar Technologies Inc. and Affiliates
We consent to the use of our report, dated July 19, 1996, included in the
Registration Statement of Rofin-Sinar Technologies, Inc. and Affiliates on Form
S-1 and to the reference to our firm under the heading "Experts" in the related
prospectus.
Detroit, Michigan
August 2, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
FINANCIAL STATEMENTS OF ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES FOR THE
YEAR ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 691
<SECURITIES> 0
<RECEIVABLES> 26,404
<ALLOWANCES> (1,252)
<INVENTORY> 28,169
<CURRENT-ASSETS> 62,074
<PP&E> 41,352
<DEPRECIATION> (14,237)
<TOTAL-ASSETS> 90,995
<CURRENT-LIABILITIES> 47,544
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,673
<TOTAL-LIABILITY-AND-EQUITY> 90,995
<SALES> 92,466
<TOTAL-REVENUES> 92,466
<CGS> 57,162
<TOTAL-COSTS> 84,554
<OTHER-EXPENSES> 1,647
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,272
<INCOME-PRETAX> 6,265
<INCOME-TAX> 3,052
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,213
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
FINANCIAL STATEMENTS OF ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES FOR THE
NINE MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,260
<SECURITIES> 0
<RECEIVABLES> 36,696
<ALLOWANCES> (1,120)
<INVENTORY> 34,142
<CURRENT-ASSETS> 78,301
<PP&E> 40,217
<DEPRECIATION> (15,241)
<TOTAL-ASSETS> 104,509
<CURRENT-LIABILITIES> 60,164
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,954
<TOTAL-LIABILITY-AND-EQUITY> 104,509
<SALES> 83,372
<TOTAL-REVENUES> 83,372
<CGS> 51,466
<TOTAL-COSTS> 72,537
<OTHER-EXPENSES> 743
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 790
<INCOME-PRETAX> 10,092
<INCOME-TAX> 4,354
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,738
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
