UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] Annual Report Pursuant to
Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the Year Ended December 31, 1999 Commission File Number 0-6866
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
HELIX TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2423640
(State of incorporation) (IRS Employer Identification No.)
Mansfield Corporate Center, Nine Hampshire Street,
Mansfield, Massachusetts 02048-9171
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (508) 337-5111
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$1 Par Value
----------------
(Title of Class)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the registrant's common stock held by
nonaffiliates of the registrant as of March 14, 2000, (computed by reference to
the quoted selling prices of such stock in the over-the-counter market), was
$1,604,742,626.
The number of shares outstanding of the registrant's Common Stock, $1 Par Value,
as of March 14, 2000, was 22,598,704.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Proxy Statement for the registrant's 2000 Annual Meeting
of Stockholders to be filed with the SEC in March 2000 are incorporated by
reference into Part III, Items 10-12.
<PAGE>
HELIX TECHNOLOGY CORPORATION 10-K Annual Report
Commission File No. 0-6866 For the Year Ended
December 31, 1999
PART I
Item 1. Business
General HELIX TECHNOLOGY CORPORATION (the "Company" or "Helix"), a
Delaware corporation organized in 1967, provides critical enabling vacuum system
technology to a broad range of electronic component manufacturers, principally
for the production of semiconductors, data storage and flat panel displays.
The Company's On-Board technology is a comprehensive package of hardware and
software that can integrate both Helix and non-Helix vacuum products. (On-Board
is a registered trademark of Helix Technology Corporation.) These systems
provide original equipment manufacturers the flexibility to rapidly implement a
full range of process-driven solutions and end-user performance-enhancing
process controls, advanced diagnostics and communications capabilities to
increase system uptime and to lower the cost of ownership.
The Company's On-Board Cryopump product continues to be the industry standard
high-vacuum pump for both the PVD (Physical Vapor Deposition or "sputtering")
and ion implantation markets. Its On-Board Waterpumps, On-Board Turbopumps and
On-Board TurboPlus give the Company products to support the CVD (Chemical Vapor
Deposition) and etch processes.
The Company's STABIL-ION and CONVECTRON vacuum measurement systems are
considered industry standards and are used in the PVD, ion implantation, CVD and
etch processes. (STABIL-ION and CONVECTRON are registered trademarks of Helix
Technology Corporation.) The Company's vacuum gauging products are also
integrated into analytical instruments, primarily mass spectrometers.
The Company maintains Customer Support Centers strategically located throughout
the world to provide replacement parts, overhaul, repair and upgrade services.
The Company's unique GUTS (Guaranteed Up-Time Support) rapid response system,
which has been the industry benchmark since 1985, is designed to assure that
users of the Company's products have direct, twenty-four-hour-a-day access to
the resources of the Customer Support Centers. (GUTS is a registered trademark
of Helix Technology Corporation.)
In 1999, the Company introduced GOLDLink Support, its remote Global On-Line
Diagnostic service, and deployed it at several semiconductor fabrication
facilities in the United States and Europe. Beginning in 2000, the Company
expects to significantly expand this internet-based service to fabrication
facilities throughout the world. (GOLDLink is a registered service mark of Helix
Technology Corporation.)
When fully implemented, the Company expects that GOLDLink Support will enable
it to remotely monitor and control Helix and third-party vacuum system
components, at semiconductor fabrication facilities anywhere in the world, and
develop information that can be used to proactively maximize customers' vacuum
system uptime.
- 2 -
<PAGE>
PART I
Item 1. Business (continued)
The Company encounters competition in both domestic and foreign markets for its
products. Competition comes from smaller firms and from larger firms which have
greater total resources than the Company. Customer service, product quality,
performance and price are all factors in selling the Company's products.
The Company's business is, generally, not dependent on the availability of raw
materials or components from any single source. Certain components, however, may
be available from only one or two qualified sources. The Company's policy is to
develop alternative sources for components and, where possible, to avoid using
scarce raw materials in its products.
The Company's business has been cyclical because of its dependence upon the
semiconductor industry that has historically been highly cyclical.
The Company holds many U.S. and foreign patents in the fields of vacuum pumping,
gauging and cryogenics that it believes are significant to its operations. These
patents expire at various years through 2019. No patents which the Company
considers significant expire during the next five years. The Company has a
number of trademarks that it considers important to its business. These
trademarks are protected by registration in the United States and other
countries in which the Company's products are marketed.
The Company and Ulvac Corporation of Chigasaki, Japan, operate a joint venture,
Ulvac Cryogenics, Inc. ("UCI") formed in 1981, which manufactures and sells
cryogenic vacuum pumps, principally to Ulvac Corporation. Each company owns 50%
of UCI and made initial cash investments of approximately $100,000, with no
subsequent cash investments. The joint venture arrangement includes a license
and technology agreement from the Company and a management and consultation
agreement from Ulvac Corporation. The Company and Ulvac Corporation essentially
share control of the joint venture.
On May 7, 1998, the Company acquired Granville-Phillips Company ("GPC"). GPC is
a world leader in the development and manufacture of instrumentation for vacuum
measurement and control used principally in the semiconductor, flat panel
display and data storage manufacturing processes.
Backlog - The backlog of orders believed to be firm was approximately
$13.8 million at December 31, 1999, compared to $4.8 million at December 31,
1998. The Company expects to recognize revenues from essentially all of the
December 31, 1999, backlog during 2000.
Research and Development - The Company expended $9,916,000 in 1999 on
research and development efforts compared to $10,106,000 and $11,540,000 in 1998
and 1997, respectively. These expenditures reflect development activities
relating to product enhancements and new products for commercial applications.
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<PAGE>
PART I
Item 1. Business (continued)
Employment - Total employment in the Company at the end of 1999 was 649
compared with 457 and 606 at the end of 1998 and 1997, respectively. This
includes 90 temporary employees at the end of 1999 compared to eight and 65 in
1998 and 1997, respectively.
Environmental Affairs - Compliance with federal, state and local
provisions relating to environmental quality has not had, and is not expected to
have, a material impact upon capital expenditures, earnings or the competitive
position of the Company.
Financial Information about One Reportable Segment and Major
Customers - The Company's one reportable segment is cryogenic and vacuum
equipment. The Company's largest customer is Applied Materials, the world's
largest manufacturer of semiconductor capital equipment, representing 29%, 20%
and 30% of net sales for 1999, 1998 and 1997, respectively. Information
concerning the Company's segment information and different geographical areas is
included in Note F of Notes to Consolidated Financial Statements included
elsewhere in this report.
Item 2. Properties
The Company occupies approximately 297,400 square feet worldwide, as described
in the table below.
Size Lease
Location (Sq. Ft.) Expires Functions
-------- --------- ------- ---------
Massachusetts 155,000 2006 Corporate headquarters, engineering,
63,000 2004 manufacturing, sales and
marketing and administration
Colorado 22,000 2000 Engineering, manufacturing, and
9,000 2001 sales and marketing
California 11,000 2000 Sales office, customer support and
repair depot
Texas 12,000 2000 Sales office and customer support
Arizona 1,300 2000 Sales office and customer support
Scotland 5,300 2020 Sales office and customer support
Germany 2,500 2000 Sales office and customer support
France 6,400 2000 Sales office, customer support and
repair depot
Japan 9,900 2000 Sales office, customer support and
repair depot
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<PAGE>
PART I
Item 2. Properties (continued)
During 2000, the Company will consolidate its Colorado operations into a new
60,000 square foot leased facility. In anticipation of this consolidation, the
Company sold its Colorado facility in December 1999, recognizing a $1.4 million
gain, and entered into a lease with the new owner to facilitate the transition
into the new facility.
The Company has also signed a lease for a 7,500 square foot sales and service
facility in Taiwan that will be occupied during 2000.
With these additions during 2000, the Company believes it has adequate
facilities to meet its currently anticipated requirements and that suitable
additional or substitute facilities will be available as required. The lease on
the Mansfield, Massachusetts, facility provides for renewal options for up to
fifteen additional years.
Item 3. Legal Proceedings
In the normal course of business, the Company is subject to various legal
proceedings and claims. The Company believes that the ultimate outcome of these
matters will not have a material effect on its financial statements.
The Company is a defendant in an action brought in 1998 in the Massachusetts
Superior Court by Raytheon Company which alleges that between 1992 and 1994 the
Company sold Raytheon defective components used in missile guidance systems
manufactured by Raytheon. The Company has not been in the business of selling
these components since 1994.
The Company has denied all claims asserted against it by Raytheon and has
succeeded in having certain claims dismissed. The action is in the discovery and
motion phase. The Company believes that it has meritorious defenses and that,
although the ultimate outcome of the matters cannot be predicted with certainty,
the disposition of the matters should not have a material effect on the
financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1999, no matters were submitted to a vote
of security holders through the solicitation of proxies or otherwise.
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<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
The Company's common stock is traded on the Nasdaq Stock Market (Nasdaq symbol
HELX). At December 31, 1999, there were 22,375,631 shares of common stock
outstanding and approximately 740 common stockholders of record.
Price Range of Common Stock and Cash Dividend Per Common Share
The price range and cash dividend per common share of the Company's common stock
by quarter are:
First Second Third Fourth
1999 Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------
Stock price
High $24.00 $24.00 $35.06 $49.50
Low $12.88 $15.13 $21.00 $32.44
Cash dividends per share $ 0.12 $ 0.12 $ 0.12 $ 0.12
First Second Third Fourth
1998 Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------
Stock price
High $25.13 $20.63 $15.50 $14.00
Low $17.75 $14.75 $ 9.25 $ 6.81
Cash dividends per share (1) $ 0.21 $ 0.21 $ 0.21 $ 0.12
(1) In the first quarter of 1998, cash dividends per share are based on shares
outstanding at that time and therefore do not reflect the 2,383,000 shares
issued as part of the acquisition of Granville Phillips Company.
The Board of Directors declared a quarterly cash dividend of $0.12 per common
share payable on March 15, 2000, to common stockholders of record at the close
of business on March 7, 2000.
Item 6. Selected Consolidated Financial Data
The following table summarizes certain selected consolidated financial data,
which should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's consolidated
financial statements and related notes included elsewhere herein. In connection
with the acquisition of Granville-Phillips Company in 1998, accounted for as a
pooling of interests, all prior-period financial data has been restated to
include the impact of the combination.
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<PAGE>
PART II
Item 6. Selected Consolidated Financial Data (continued)
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------------------
(in thousands except per share data) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $139,389 $95,345 $157,076 $151,665 $145,370
Net income (loss) (1) $ 15,864 $(1,920) $ 25,544 $ 25,126 $ 24,694
Basic net income (loss)
per share (2) $ 0.71 $ (0.09) $ 1.15 $ 1.15 $ 1.14
Diluted net income (loss)
per share (2) $ 0.70 $ (0.09) $ 1.14 $ 1.14 $ 1.12
Cash dividends per share (1) (2) (3) $ 0.48 $ 0.75 $ 0.735 $ 0.65 $ 0.29
Total assets $ 93,655 $75,652 $ 96,219 $ 83,005 $ 79,509
Basic shares (2) 22,336 22,262 22,151 21,788 21,592
Diluted shares (2) 22,623 22,262 22,353 22,096 22,124
(1) Net income for the year ended December 31, 1999, reflects the gain on sale
of the Company's Colorado facility of $1,397,000. Net loss for the year
ended December 31, 1998, reflects merger and other special charges of
$3,546,000 related to the acquisition of Granville-Phillips Company and
restructuring and other special charges of $2,500,000 related to work force
reductions, exit costs for a leased facility and impairment of certain
assets. (See Notes H and I of Notes to Consolidated Financial Statements.)
(2) All share and per share data reflect a two-for-one common stock split
effective November 1997.
(3) Cash dividends per share declared in periods prior to the acquisition of
Granville-Phillips Company are based on shares outstanding at that time and
therefore do not reflect the 2,383,000 shares issued as part of the
acquisition.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The discussion in this item and elsewhere in this report contains
forward-looking statements involving risks and uncertainties that could cause
actual results to differ materially from those expressed in the forward-looking
statements. These risks and uncertainties include those described under "Certain
Factors That May Affect Future Results" below.
On May 7, 1998, the Company acquired Granville-Phillips Company ("GPC"). GPC is
a world leader in the development and manufacture of instrumentation for vacuum
measurement and control used principally in the semiconductor, flat panel
display and data storage manufacturing processes. The transaction was accounted
for as a pooling of interests; and accordingly, the financial results of the
Company for all periods presented include the financial position, results of
operations, stockholders' equity and cash flows of GPC.
- 7 -
<PAGE>
PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations - 1999 Compared with 1998
Throughout 1999, the global semiconductor capital equipment industry experienced
a rapid recovery from the significant worldwide downturn that occurred in 1998.
Because of this positive industry trend, net sales for 1999 were $139.4 million
compared to $95.3 million in 1998, an increase of $44.1 million or 46.2%.
Total gross profit as a percentage of net sales was 44.4% for 1999, compared to
39.8% for the prior year. The improvement in gross margin was primarily
attributable to increased production volume and the related decrease in
manufacturing unit costs.
Selling, general and administrative expenses increased in 1999 to $32.0 million
from $26.6 million in the prior year. The increase in spending is primarily
attributable to expenditures to support increased sales activities worldwide,
including expansion of the Company's sales and service location in Japan, and
the final year of expense related to a stock-based variable compensation plan.
Research and development expenses for 1999 were $9.9 million or 7.1% of net
sales, compared to $10.1 million or 10.6% of net sales for 1998. As the Company
entered 1999, its research and development spending focused on long-term
strategic initiatives. As industry conditions improved during the year, the
Company increased its spending to also include projects that meet near-term
customer requirements. The Company expects to spend approximately $13.0 million
to $14.0 million on research and development in 2000.
In 1998, the Company eliminated non-strategic spending while redirecting
resources to the Company's global customer support structure and other strategic
initiatives and took a charge of $2.5 million. These changes made available
approximately $5.0 million, which was redirected to the above-mentioned
operations in 1999. At October 1, 1999, the restructuring accrual was fully
utilized.
Royalty and equity income from the Company's joint venture in Japan increased by
$0.5 million in 1999 due to the turnaround in the Japanese semiconductor capital
equipment market.
Interest and other income for 1999 was $0.9 million compared with $1.2 million
for 1998, reflecting lower cash, cash equivalent and investment balances during
the year.
During 2000, the Company will consolidate its Colorado operations into a new
60,000 square foot leased facility. In anticipation of this consolidation, the
Company sold its Colorado facility in December 1999, recognizing a $1.4 million
gain, and entered into a lease with the new owner to facilitate the transition
into the new facility.
The Company recorded an income tax provision of $7.8 million for 1999 compared
to an income tax benefit of $0.7 million for the previous year. The 1999
provision of 33% is less than the federal statutory rate of 35% because the
Company benefited from research and development and other tax credits. In 1998,
the Company had an operating loss before taxes due to merger, restructuring and
special charges; and the Company benefited from research and development and
other tax credits.
- 8 -
<PAGE>
PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations - 1998 Compared with 1997
Net sales for 1998 were $95.3 million compared to $157.1 million in 1997, a
decrease of $61.8 million. This decline was attributable to the excess capacity
in the worldwide semiconductor industry, combined with the economic slump in the
Pacific Rim.
Total gross profit as a percentage of net sales was 39.8% for 1998, compared to
48.2% for the prior year. The reduction in gross margin was caused by the
substantial decline in production volume and the related increase in excess
capacity and manufacturing unit costs.
Research and development expenses for 1998 were $10.1 million or 10.6% of net
sales, compared to $11.5 million or 7.3% of net sales for 1997. As industry
conditions worsened during the year, the Company delayed certain expenditures on
projects it believed were not critical during the downturn. Despite the decline
in the semiconductor capital equipment business environment and the continued
weakness of the Asian markets, the Company continued to fund its long-term
strategic development programs in 1998 in order to position the Company for
growth as economics improved in the worldwide semiconductor industry.
Selling, general and administrative expenses decreased in 1998 to $26.6 million
from $30.9 million in the prior year. This reduction in spending was primarily
attributable to a decrease in variable compensation, lower sales commission
expense and a reduction in advertising and promotional expenditures, which was
partially offset by expenses associated with the opening of the Company's sales
office in Japan.
During 1998, the Company incurred certain special charges. In the second
quarter, the Company acquired GPC in a transaction accounted for as a pooling of
interests. Direct acquisition costs, including professional fees and
compensation expense for various incentive plans for certain GPC employees,
amounted to $3.5 million and were charged against results of operations. During
the third quarter, the Company restructured its domestic operations to eliminate
non-strategic spending, while redirecting resources to the Company's global
customer support structure and other strategic initiatives and took a charge of
$2.5 million. The restructuring included provisions for termination benefits of
$1.3 million paid to approximately 80 personnel, $1.0 million relating to the
closing of a leased facility and $0.2 million for the impairment of certain
assets. Approximately $0.7 million of the charge was non-cash, relating to the
write-off of certain leasehold improvements in the closed facility and the
impairment of the assets. The Company expected these changes would provide
approximately $5.0 million of annual cost savings in 1999. At December 31, 1998,
$0.9 million of restructuring and special charges remained in other accrued
expenses.
As a result of the decline in net sales and the special charges recorded during
1998, the Company experienced an operating loss of $4.8 million or 5.0% of net
sales, compared to an operating profit of $33.3 million or 21.2% of net sales
for the prior year.
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<PAGE>
PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations - 1998 Compared with 1997 (continued)
Royalty and equity income from the Company's joint venture in Japan decreased by
$0.8 million in 1998 due to the downturn in the Japanese semiconductor capital
equipment market.
Interest and other income for 1998 was $1.2 million compared with $1.8 million
for 1997, reflecting lower cash, cash equivalent and investment balances during
the year.
The Company recorded an income tax benefit of $0.7 million for 1998 compared to
a tax provision of $11.3 million for the previous year. In 1998, the Company had
an operating loss before taxes due to merger, restructuring and special charges.
The Company benefited from research and development and other tax credits. The
1997 provision of 30.6% is less than the federal statutory rate of 35% because
Granville-Phillips Company was an S-Corporation prior to the acquisition and,
therefore, not subject to federal income tax.
Liquidity and Capital Resources
Net cash provided by operating activities was $12.4 million in 1999. The Company
invested $4.6 million, primarily in machinery and equipment, during 1999. The
increase of approximately $2.0 million from 1998 was principally due to spending
on information systems for its Japanese operation and Year 2000 remediation
efforts.
The Company's normal annual capital needs are approximately $4.0 million to $5.0
million. However, in 2000 the Company has four major initiatives that will
result in capital spending of approximately $10.0 million. These initiatives
are: consolidation of its Colorado operations into a new 60,000 square foot
leased facility, the first phase of a new corporate information system, its
GOLDLink global support operations center and the opening of a sales and service
location in Taiwan.
Cash dividends paid to stockholders during 1999 were $10.7 million compared to
$16.1 million for 1998. In October 1998, the Company's Board of Directors
reduced the quarterly dividend from $0.21 per common share to $0.12 per common
share.
The Company manages its foreign exchange rate risk arising from intercompany
foreign currency denominated transactions through the use of foreign currency
forward contracts. The gains and losses on these transactions are not material.
The Company believes that existing cash, cash equivalents, investment balances
and anticipated cash flow from operations will be adequate to fund operations
for the foreseeable future.
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<PAGE>
PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Legal Proceedings
In the normal course of business, the Company is subject to various legal
proceedings and claims. The Company is a defendant in an action brought by
Raytheon Company claiming damages from the sale of allegedly defective
components by the Company to Raytheon, which the Company no longer sells. The
Company believes that it has meritorious defenses to the claims and that,
although the outcome of the action cannot be predicted with certainty, the
disposition of the claim should not have a material effect on the financial
position of the Company.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities " This statement establishes accounting and
reporting standards for derivative instruments, including some derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The Company will adopt SFAS 133 in
2001, in accordance with SFAS 137, which deferred the effective date of SFAS
133. The adoption of this standard in 2001 is not expected to have a material
impact on the Company's consolidated financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." SAB
101 summarizes the staff's view in applying generally accepted accounting
principles to selected revenue recognition issues. The application of the
guidance in SAB 101 will be required in the Company's first quarter of 2000. The
Company has evaluated the application of SAB 101 and determined that it will
have no impact.
Certain Factors That May Affect Future Results
From time to time, information provided by the Company, statements made by its
employees or information included in its filings with the Securities and
Exchange Commission may contain statements that are "forward-looking statements"
involving risks and uncertainties. In particular, statements in "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
relating to the Company's shipment levels, profitability, business and industry
outlook and sufficiency of capital to meet working capital and capital
expenditure requirements may be forward-looking statements. The words "expect,"
"anticipate," "plan," "believe," "seek," "estimate" and similar expressions are
intended to identify such forward-looking statements. Such statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that could cause the Company's future results to differ materially
from those expressed in any forward-looking statements made by or on behalf of
the Company. Many such factors are beyond the Company's ability to control or
predict. Readers are accordingly cautioned not to place undue reliance on
forward-looking statements. The Company disclaims any intent or obligation to
update publicly any forward-looking statements, whether in
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<PAGE>
PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Certain Factors That May Affect Future Results (continued)
response to new information or future events or otherwise. Important factors
that may cause the Company's actual results to differ materially from such
forward-looking statements include, but are not limited to, the factors
discussed below.
The Company's business depends in large part upon the capital expenditures of
semiconductor manufacturers, which, in turn, depend on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. The semiconductor industry is highly cyclical and has
historically experienced periodic downturns, which generally have had a severe
effect on the semiconductor industry's demand for capital equipment and have
adversely affected the Company's results of operations. There can be no
assurance that developments in the semiconductor industry or the semiconductor
equipment industry will occur at the rate or in the manner expected by the
Company.
In addition to the cyclical nature, risks and uncertainties of the semiconductor
industry, the Company faces the following risks and uncertainties among others:
the need to continuously develop, manufacture and gain customers' acceptance of
new products and product enhancements; dependence on a limited number of
customers and concentration of sales to one or a few customers; the Company's
ability to attract and retain certain key personnel; the ability of the Company
to protect its technology assets by obtaining and enforcing patents; and
dependence on sole and limited source suppliers for certain components and
subassemblies included in the Company's products and systems. As a result of the
foregoing and other factors, the Company may experience material fluctuations in
its future operating results on a quarterly or annual basis which could
materially affect its business, financial position, results of operations and
stock price.
Year 2000
The Year 2000 problem refers to the potential for information systems to be
unable to correctly recognize and process calendar dates and date-sensitive
information involving dates on or after January 1, 2000. In 1997, the Company
began to address its Year 2000 risk within four categories: 1) internal business
software, 2) internal systems (hardware and software, exclusive of business
software), 3) external suppliers of goods and services, and 4) the Company's
products. The Company has not experienced any material Year 2000 problems to
date in any of these categories but will continue monitoring its Year 2000 risk
on an ongoing basis.
The Company's total cost associated with addressing the Year 2000 problem was
approximately $1.0 million. Of the total cost, approximately $0.8 million
relates to new systems and has been capitalized.
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<PAGE>
PART II
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
Foreign Currency and Exchange Rate Risk
A portion of the Company's business is conducted outside the United States
through its foreign subsidiaries. The foreign subsidiaries maintain their
accounting records in their local currencies. Consequently, period-to-period
comparability of results of operations is affected by fluctuations in exchange
rates. To reduce the risks associated with foreign currency rate fluctuations,
the Company has entered into forward exchange contracts on a continuing basis to
hedge the currency exposures. Gains and losses on forward exchange contracts
qualifying for hedge accounting were immaterial for years presented and were
classified in cost of sales. The Company plans to continue to use forward
exchange contracts to mitigate the impact of exchange rate fluctuations. The
notional amount of the Company's outstanding foreign currency contracts at
December 31, 1999, was $4,027,000. The potential fair value loss for a
hypothetical 10% adverse change in forward currency exchange rates at December
31, 1999, would be $451,600. The potential loss was estimated calculating the
fair value of the forward exchange contracts at December 31, 1999, and comparing
that with the value calculated using the hypothetical forward currency exchange
rates.
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<PAGE>
PART II
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
SCHEDULES COVERED BY THE REPORT OF
INDEPENDENT ACCOUNTANTS
Page(s)
Report of Independent Accountants..........................................23
Consolidated Financial Statements of Helix Technology Corporation
Consolidated Balance Sheets as of December 31, 1999 and 1998........24
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997................................25
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1999, 1998 and 1997............26
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997..........................27
Notes to Consolidated Financial Statements..............................28-42
Report of Independent Accountants..........................................43
Quarterly Results (Unaudited)..............................................44
Financial Statement Schedule for the Years Ended December 31, 1999,
1998 and 1997
II. Valuation and Qualifying Accounts..........................45
Schedules other than those listed above have been omitted since they are either
inapplicable or not required.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Company did not change accountants or file a Form 8-K reporting a
disagreement on an accounting principle, practice or financial statement
disclosure during the two-year period ended December 31, 1999.
- 14 -
<PAGE>
PART III
Item 10. Directors and Executive Officers of The Registrant
Officers are elected annually by the Board and serve at the discretion of the
Board. Set forth below is information regarding the current Executive Officers
of the Company who are not Directors of the Company.
Mr. Robert E. Anastasi is 53 and has served the Company as Senior Vice President
since July 1997 and prior to that as Vice President since June 1991.
Mr. Michael El-Hillow is 48 and has served the Company as Senior Vice President
and Chief Financial Officer since July 1997 and prior to that as Vice President
and Chief Financial Officer since April 1997. He was Vice President and Chief
Financial Officer of A.T. Cross Company from January 1991 until April 1997.
Mr. Christopher Moody is 44 and has served the Company as Senior Vice President
since August 1997. He was Vice President of Japan Sales at KLA-Tencor
Corporation from April 1996 until August 1997 and Director of Sales for KLA
Instruments Wafer Inspection Division from January 1995 until April 1996. He
served as National Sales Manager at Eaton Corporation, Semiconductor Equipment
Division, from 1993 until January 1995.
Additional information required by this item is incorporated herein by reference
to the registrant's proxy statement for its 2000 Annual Meeting of Stockholders
which will be filed with the SEC in March 2000, pursuant to Regulation 14A.
Item 11. Executive Compensation
Information required by this item is incorporated herein by reference to the
registrant's proxy statement for its 2000 Annual Meeting of Stockholders that
will be filed with the SEC in March 2000, pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this item is incorporated herein by reference to the
registrant's proxy statement for its 2000 Annual Meeting of Stockholders that
will be filed with the SEC in March 2000, pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions
There were no related-party transactions.
- 15 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Page Number(s) or
Incorporation by
Description Reference to
(a) Financial Statements, Schedules & Exhibits:
(1), (2) The Consolidated Financial Statements
and required schedules are indexed
under Item 8. 14
(3) Exhibits required by Item 601 of SEC
Regulation S-K. (Exhibit numbers refer
to exhibit number on Table I.)
2.1 Agreement and Plan of Merger dated as Exhibit 2.1 to the
of April 16, 1998, among Helix Company's Form 8-K
Technology Corporation, Helix filed May 15, 1998.
Acquisition Corporation, Granville-
Phillips Company and certain
principal stockholders of Granville-
Phillips Company.
2.2 Escrow Agreement dated May 7, 1998. Exhibit 2.3 to the
Company's Form 8-K
filed May 15, 1998.
3. Restated Certificate of Incorporation, Exhibit 3 to the
as amended on May 7, 1987, and Company's Form 10-Q
May 18, 1988. for the Quarter Ended
September 30, 1988.
By-laws, as amended on December 10, Exhibit (3)-3 to the
1986, and December 9, 1987. Company's Form 10-K
for the Year Ended
December 31, 1987.
4A. Description of Common Stock Exhibit 3 to the
Company's Form
10-Q for the
Quarter Ended
September 30, 1988.
- 16 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
Page Number(s) or
Incorporation by
Description Reference to
4B. Description of Preferred Stock Exhibit 3 to the
Company's Form
10-Q for the
Quarter Ended
September 30, 1988.
10. Material Contracts:
(1) Basic agreement between the Company Exhibit 10.13 to
and Ulvac Corporation dated a Registration
August 17, 1981. Statement on Form
S-2, Registration
No. 2-84880.
(2) Lease agreement dated July 24, 47-49
1984, as amended July 26, 1999,
between Long Gate LLC as Lessor
and the Company as Lessee.
(3) Lease agreement dated May 23, Exhibit 10-(14) to the
1991, between Mansfield Corporate Company's Form 10-K
Center Limited Partnership as for the Year Ended
Lessor and the Company as Lessee. December 31, 1991.
(4) Lease agreement dated May 21, Exhibit 10-(4) to the
1996, between LakeCenter Plaza, Company's Form 10-K
Ltd., LLLP as Lessor and the for the Year Ended
Company as Lessee. December 31, 1998.
(5) Lease agreement dated August 7, Exhibit 10-(5) to the
1998, between Mitsubishi Jisho Company's Form 10-K
Co., Ltd. as Lessor and the for the Year Ended
Company as Lessee. December 31, 1998.
- 17 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
Page Number(s) or
Incorporation by
Description Reference to
Management Compensation Plans, Contracts and Arrangements:
(6) Lease agreement dated May 14, 50-91
1999, between MUM IV, LLC as
Lessor and the Company as Lessee.
(7) The Company's 1996 Equity Incentive Exhibit A to the
Plan. Company's Proxy
Statement for its
1996 Annual Meeting
of Stockholders held
on April 24, 1996.
(8) The Company's 1996 Stock Option Exhibit B to the
Plan for Non-Employee Directors. Company's Proxy
Statement for its
1996 Annual Meeting
of Stockholders held
on April 24, 1996.
(9) The Company's informal incentive Exhibit 10.9 to a
bonus plan. Registration
Statement on Form
S-2, Registration
No. 2-84880.
(10) Employment agreement dated Exhibit 10-(1) to the
February 11, 1999, between the Company's Form 10-Q
Company and Robert J. Lepofsky. for the Quarter Ended
April 2, 1999.
- 18 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
Page Number(s) or
Incorporation by
Description Reference to
(11) The Company's Supplemental Key Exhibit 14-(14) to
Executive Retirement Plan the Company's Form
effective February 13, 1992. 10-K for the Year
Ended December 31,
1992.
(12) Employment Agreement dated July 18, Exhibit 10-(13) to
1997, between the Company and the Company's Form
Robert E. Anastasi. 10-K for the Year
Ended December 31,
1997.
(13) Employment Agreement dated July 18, Exhibit 10-(14) to
1997, between the Company and the Company's Form
Michael El-Hillow. 10-K for the Year
Ended December 31,
1997.
(14) Employment Agreement dated Exhibit 10-(15) to
August 18, 1997, between the the Company's Form
Company and Christopher Moody. 10-K for the Year
Ended December 31,
1997.
(15) The Company's Supplemental Benefit 92-93
Plan effective April 1, 1999.
- 19 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
Page Number(s) or
Incorporation by
Description Reference to
21. Subsidiaries of the Registrant. 94
23. Consent of Independent Accountants. 95
27.1 Financial Data Schedule (EDGAR version only).
(b) The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1999.
(c) Exhibits required by Item 601 of Regulation S-K are indexed under (a)(3)
above.
(d) Separate financial statements of: (1) subsidiaries not consolidated and
fifty percent or less owned persons; (2) affiliates whose securities are
pledged as collateral; and (3) other Schedules are not filed because they
are either not applicable or the items do not exceed the various
disclosure levels.
- 20 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized, this 17th day of March, 2000.
HELIX TECHNOLOGY CORPORATION
(Registrant)
/s/Robert J. Lepofsky
----------------------------------
Robert J. Lepofsky
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant on this 17th day of March, 2000, in the capacities
indicated.
Signatures Titles
(i) Principal Executive Officer
/s/Robert J. Lepofsky
---------------------
Robert J. Lepofsky President and Chief Executive Officer
(ii) Principal Financial and
Accounting Officer
/s/Michael El-Hillow
--------------------
Michael El-Hillow Senior Vice President and Chief
Financial Officer
- 21 -
<PAGE>
(iii) A Majority of the Board of Directors
/s/Arthur R. Buckland Director
------------------------
Arthur R. Buckland
/s/Matthew O. Diggs, Jr. Director
------------------------
Matthew O. Diggs, Jr.
/s/Frank Gabron Director
-------------------------
Frank Gabron
/s/Robert H. Hayes Director
-------------------------
Robert H. Hayes
/s/Robert J. Lepofsky Director
-------------------------
Robert J. Lepofsky
/s/Marvin G. Schorr Director and Chairman of the Board
-------------------------
Marvin G. Schorr
/s/Mark S. Wrighton Director
-------------------------
Mark S. Wrighton
- 22 -
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Stockholders
of Helix Technology Corporation:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows present fairly, in all material respects, the financial position of Helix
Technology Corporation at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. These 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 of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audits 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
- -----------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 21, 2000
- 23 -
<PAGE>
<TABLE>
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
(in thousands except share data) Notes 1999 1998
- ------------------------------------------------------------------------------------------------
ASSETS
Current:
<S> <C> <C> <C>
Cash and cash equivalents A $ 11,408 $ 8,843
Investments A 15,912 18,152
Receivables - net of allowances of $185 in
1999 and $228 in 1998 19,479 9,783
Inventories A 18,442 14,811
Deferred income taxes A&C 7,040 5,157
Other current assets 1,626 1,106
-------------------------
Total Current Assets 73,907 57,852
-------------------------
Property, plant and equipment at cost A 38,724 36,691
Less: accumulated depreciation (28,093) (25,990)
-------------------------
Net property, plant and equipment 10,631 10,701
Other assets A&E 9,117 7,099
-------------------------
TOTAL ASSETS $ 93,655 $ 75,652
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable $ 8,490 $ 3,752
Payroll and compensation 4,768 2,884
Retirement costs G 4,561 3,588
Income taxes A&C 3,238 507
Other accrued liabilities H 975 1,553
-------------------------
Total Current Liabilities 22,032 12,284
-------------------------
Commitments B - -
Stockholders' Equity:
Preferred stock, $1 par value; authorized
2,000,000 shares; issued and outstanding: none - -
Common stock, $1 par value; authorized 60,000,000
shares; issued and outstanding: 22,375,631 in 1999
and 22,319,131 in 1998 D 22,376 22,319
Capital in excess of par value 9,314 7,936
Treasury stock, $1 par value, 11,602 shares in
1999 and 34,000 shares in 1998 (198) (438)
Retained earnings 39,063 33,910
Accumulated other comprehensive income (loss) 1,068 (359)
-------------------------
Total Stockholders' Equity 71,623 63,368
-------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 93,655 $ 75,652
=========================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
- 24 -
<PAGE>
<TABLE>
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
For the years ended December 31,
(in thousands except per share data) Notes 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $139,389 $ 95,345 $157,076
--------------------------------------
Costs and expenses:
Cost of sales 77,487 57,373 81,325
Research and development A 9,916 10,106 11,540
Selling, general and administrative D 31,976 26,581 30,891
Merger, restructuring and special charges H - 6,046 -
--------------------------------------
119,379 100,106 123,756
--------------------------------------
Operating income (loss) 20,010 (4,761) 33,320
Joint venture income E 1,415 957 1,744
Interest and other income 856 1,234 1,754
Gain on sale of building I 1,397 - -
--------------------------------------
Income (loss) before taxes 23,678 (2,570) 36,818
Income tax provision (benefit) A&C 7,814 (650) 11,274
-------------------------------------
Net income (loss) $ 15,864 $ (1,920) $ 25,544
======================================
Net income (loss) per share:
Basic A&D $ 0.71 $ (0.09) $ 1.15
Diluted A&D $ 0.70 $ (0.09) $ 1.14
======================================
Number of shares used in per share calculations:
Basic A&D 22,336 22,262 22,151
Diluted A&D 22,623 22,262 22,353
======================================
Pro Forma Results (unaudited)
Income (loss) before taxes $ (2,570) $ 36,818
Income tax (benefit) provision (824) 12,767
------------------------
Pro forma net income (loss) $ (1,746) $ 24,051
========================
Pro forma net income (loss) per share:
Basic $ (0.08) $ 1.09
Diluted $ (0.08) $ 1.08
========================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
- 25 -
<PAGE>
<TABLE>
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Common Stock Accumulated
Capital Other Statements of
Par in Excess Deferred Treasury Retained Comprehensive Comprehensive
(in thousands) Value of Par Compensation Stock Earnings Income (Loss) Total Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $22,035 $ 2,104 $(885) $ - $ 45,396 $ 833 $ 69,483
Comprehensive income, net of tax:
Net income - - - - 25,544 - 25,544 $25,544
Other comprehensive loss:
Foreign currency translation
adjustments - - - - - (762) (762) (762)
------ --------
Other comprehensive loss - - - - - (762) (762)
--------
Comprehensive income $24,782
========
Shares issued for stock options 157 1,625 - - - - 1,782
Income tax effect from exercise
of stock options - 448 - - - - 448
Restricted stock (Note H) 73 494 (68) - - - 499
Shares tendered for exercise of
stock options (52) (987) - - - (1,039)
Cash dividends - - - - (16,260) - (16,260)
-------------------------------------------------------------------------------
Balance, December 31, 1997 22,213 3,684 (953) - 54,680 71 79,695
-------------------------------------------------------------------------------
Comprehensive loss, net of tax:
Net loss - - - - (1,920) - (1,920) $(1,920)
Other comprehensive loss:
Foreign currency translation
adjustments - - - - - (440) (440) (440)
Unrealized gain on available-
for-sale investment - - - - - 10 10 10
------ --------
Other comprehensive loss - - - - - (430) (430)
--------
Comprehensive loss $(2,350)
========
Shares issued for stock options 106 1,785 - - - - 1,891
Income tax effect from exercise
of stock options - (224) - - - - (224)
Restricted stock and acquisition
adjustment (Note H) - 2,691 953 - (2,783) - 861
Shares tendered for exercise of
stock options - - - (438) - - (438)
Cash dividends - - - - (16,067) - (16,067)
-------------------------------------------------------------------------------
Balance, December 31, 1998 22,319 7,936 - (438) 33,910 (359) 63,368
-------------------------------------------------------------------------------
Comprehensive income, net of tax:
Net income - - - - 15,864 - 15,864 $15,864
Other comprehensive income:
Foreign currency translation
adjustments - - - - - 1,467 1,467 1,467
Unrealized loss on available-
for-sale investment - - - - - (40) (40) (40)
------- --------
Other comprehensive income - - - - - 1,427 1,427
--------
Comprehensive income $17,291
========
Shares issued for stock options 57 746 - - - - 803
Shares issued for employee
savings plan - 302 - 318 - - 620
Income tax effect from exercise
of stock options - 330 - - - - 330
Shares tendered for exercise of
stock options - - - (78) - - (78)
Cash dividends - - - - (10,711) - (10,711)
-------------------------------------------------------------------------------
Balance, December 31, 1999 $22,376 $ 9,314 $ - $(198) $ 39,063 $ 1,068 $ 71,623
===============================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
- 26 -
<PAGE>
<TABLE>
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended December 31,
(in thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ 15,864 $ (1,920) $ 25,544
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 4,045 3,999 3,713
Deferred income taxes (1,883) (923) (801)
Gain on sale of property (1,397) - -
Restructuring charge - 667 -
Undistributed earnings of joint venture, other (533) (769) (1,561)
Amortization of deferred compensation - 861 499
Performance-based stock compensation 1,581 959 1,300
Shares issued for employee savings plan 620 - -
Net change in other operating assets and liabilities (1) (5,867) 4,535 (1,235)
----------------------------------------
Net cash provided by operating activities 12,430 7,409 27,459
----------------------------------------
Cash flows from investing activities:
Proceeds from sale of property 2,500 - -
Capital expenditures (4,561) (2,557) (5,248)
Purchase of investments (23,910) (53,047) (4,444)
Sale of investments 26,092 38,585 3,470
----------------------------------------
Net cash provided/(used) by investing activities 121 (17,019) (6,222)
----------------------------------------
Cash flows from financing activities:
Shares tendered for exercise of stock options (78) (438) (1,039)
Net cash provided by employee stock plans 803 241 543
Cash dividends paid (10,711) (16,067) (16,260)
----------------------------------------
Net cash used by financing activities (9,986) (16,264) (16,756)
----------------------------------------
Increase (decrease) in cash and cash equivalents 2,565 (25,874) 4,481
Cash and cash equivalents, January 1 8,843 34,717 30,236
----------------------------------------
Cash and cash equivalents, December 31 $ 11,408 $ 8,843 $ 34,717
========================================
(1) Change in other operating assets and liabilities:
(Increase)/decrease in accounts receivable $ (9,696) $ 8,402 $ (4,871)
(Increase)/decrease in inventories (3,631) 560 484
(Increase)/decrease in other current assets (520) 12 (218)
Increase/(decrease) in accounts payable 4,738 (1,284) 67
Increase/(decrease) in other accrued expenses 3,242 (3,155) 3,303
----------------------------------------
Net change in other operating assets and liabilities $ (5,867) $ 4,535 $ (1,235)
========================================
Income taxes paid $ 6,619 $ 3,528 $ 10,131
========================================
Supplemental disclosure of non-cash activity in 1999, 1998 and 1997, $0,
$1,650,000 and $1,240,000, respectively, was reclassed from accrued expenses to
equity in connection with issuance of stock options.
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
- 27 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates. Certain reclassifications have been made to prior
years' consolidated financial statements to conform with the current
presentation.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after elimination of all intercompany
transactions. The investment in and operating results of the Company's
50%-owned joint venture are included on the basis of the equity method of
accounting.
Business Combination
In May 1998, the Company acquired Granville-Phillips Company ("GPC"). The
acquisition was accounted for as a pooling of interests under Accounting
Principles Board Opinion No. 16 "Business Combinations." All prior period
consolidated financial statements have been restated to include the
financial position, results of operations, stockholders' equity and cash
flows of GPC.
Foreign Currency Translation
Assets and liabilities of operations outside the United States are
translated into U.S. dollars using current exchange rates. Income and
expense accounts are translated at the average rates in effect during the
year. The effects of foreign currency translation adjustments are
included in comprehensive income as a component of stockholders' equity.
The cumulative translation adjustment for the Company's 50%-owned joint
venture is reported net of income taxes. Transaction gains/losses were
not material. The effect of foreign currency exchange rates on cash and
cash equivalents was not material.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits, money market accounts
and other highly liquid investments with original maturities of three
months or less.
- 28 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies (continued)
Investments
The Company's investments are classified as available-for-sale
securities, and the difference in the cost and fair value of these
investments is included in comprehensive income. The Company's
investments consist of the following:
December 31,
------------------------------------------
1999 1998
------------------- -------------------
(in thousands) Cost Fair Value Cost Fair Value
-------------------------------------------------------------------------
Money market funds $ 1,855 $ 1,855 $ 2,336 $ 2,336
Municipal and tax-free bonds 14,114 14,057 15,516 15,531
Treasury bills - - 285 285
-----------------------------------------
$15,969 $15,912 $18,137 $18,152
=========================================
Financial Instruments
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash
equivalents, short-term investments and trade accounts receivable. The
Company invests in investment-grade securities. The Company's customers
are concentrated in one industry segment, the semiconductor manufacturing
industry, and, historically, a significant portion of the Company's sales
have been to a limited number of customers within this industry. The
Company performs ongoing credit evaluations of its customers' financial
condition and may require deposits on large orders but does not require
collateral or other security to support customer receivables.
Inventories
December 31,
(in thousands) 1999 1998
----------------------------------------------------------------------
Finished goods $ 5,157 $ 3,067
Work in process 8,716 7,597
Materials and parts 4,569 4,147
------------------------
$18,442 $14,811
========================
Inventories are stated at the lower of cost or market on a first-in,
first-out basis.
- 29 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies (continued)
Property, Plant and Equipment
December 31,
(in thousands) 1999 1998
-------------------------------------------------------------
Land $ - $ 20
Leasehold improvements 3,962 5,454
Machinery and equipment 34,762 31,217
---------------------
$38,724 $36,691
=====================
Depreciation is provided on the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized over the
lesser of their useful life or the remaining life of the lease. Estimated
useful lives of machinery and equipment range from 3 to 15 years.
Maintenance and repairs are charged to expense as incurred, and
betterments are capitalized. The cost of assets sold or retired and
related depreciation are removed from the accounts at the time of sale
and any resulting gain or loss is reflected in income.
Revenue Recognition
The Company records revenue on its products when units are shipped and
when services are performed.
Research and Development
Research and development costs are expensed as incurred.
Income Taxes
Deferred income taxes result from temporary differences in the
recognition of revenues and expenses between financial statements and tax
returns. Tax credits are recognized when realized for tax purposes using
the "flow-through" method of accounting. The Company has not provided for
federal income taxes applicable to undistributed earnings of its foreign
subsidiaries since these earnings are indefinitely reinvested.
- 30 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies (continued)
Net Income Per Share
Basic net income (loss) per common share is based on the weighted average
number of common shares outstanding during the year. Diluted net income
(loss) per common share reflects the potential dilution that could occur
if outstanding stock options were exercised.
The following table sets forth the computation of basic and diluted net
income (loss) per common share:
For the years ended December 31,
(in thousands except per share data) 1999 1998 1997
-------------------------------------------------------------------------
Net income (loss) $15,864 $(1,920) $25,544
===============================
Basic shares 22,336 22,262 22,151
Add: Common equivalent shares (1) 287 - 202
-------------------------------
Diluted shares 22,623 22,262 22,353
Basic net income (loss) per share $ 0.71 $ (0.09) $ 1.15
===============================
Diluted net income (loss) per share $ 0.70 $ (0.09) $ 1.14
===============================
(1) Common equivalent shares represent shares issuable upon conversion of
stock options (using the treasury stock method). As of December 31,
1999, the Company had no stock options that were anti-dilutive.
Options outstanding not included in the computation of diluted shares
were 491,000 in 1998 because the Company was in a net loss position,
and the inclusion of such shares would be anti-dilutive. For 1997,
30,000 options outstanding were not included in the computation,
because the option price was greater than the average market price of
the common shares.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative
instruments, including some derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging
activities. The Company will adopt SFAS 133 in 2001, in accordance with
SFAS 137, which deferred the effective date of SFAS 133. The adoption of
this Standard in 2001 is not expected to have a material impact on the
Company's financial statements.
- 31 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies (continued)
New Accounting Pronouncements (continued)
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 summarizes the staff's view in applying generally
accepted accounting principles to selected revenue recognition issues.
The application of the guidance in SAB 101 will be required in the
Company's first quarter of 2000. The Company has evaluated the
application of SAB 101 and determined that it will have no impact.
B. Lease Commitments and Contingent Obligations
The Company leases certain facilities and equipment under long-term
operating leases.
Future minimum lease payments under the noncancelable operating leases
are:
(in thousands) Operating Leases
-------------------------------------------------------------------
2000 $ 4,495
2001 3,550
2002 3,491
2003 3,267
2004 3,025
Later years 9,428
----------
Total $ 27,256
==========
Total rental expense under operating leases was $4,130,000 in 1999,
$3,526,000 in 1998, and $3,289,000 in 1997.
The Company enters into short-term foreign currency forward contracts
with its primary bank to minimize the effect of foreign currency exchange
rate fluctuations on certain intercompany transactions with its wholly
owned European and Japanese subsidiaries. Net realized and unrealized
gains and losses on these transactions are not material and are recorded
in the statements of operations. The notional amounts of the Company's
outstanding foreign currency forward contracts at December 31, 1999 and
1998, were $4,027,000 and $2,153,000, respectively.
In the normal course of business, the Company is subject to various legal
proceedings and claims. The Company is a defendant in an action brought
by Raytheon Company claiming damages from the sale of allegedly defective
components by the Company to Raytheon, which the Company no longer sells.
The Company believes that it has meritorious defenses to the claims and
that, although the outcome of the action cannot be predicted with
certainty, the disposition of the claim should not have a material effect
on the financial position of the Company.
- 32 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
C. Income Taxes
The components of income (loss) before income taxes and the related
provision for (benefit from) income taxes are presented below:
For the years ended December 31,
(in thousands) 1999 1998 1997
------------------------------------------------------------------------
Income (loss) before income taxes:
Domestic $22,500 $(2,572) $36,106
Foreign 1,178 2 712
----------------------------------
$23,678 $(2,570) $36,818
==================================
Provision for (benefit from)
income taxes:
Current:
Federal $ 8,114 $ 176 $10,096
Foreign 558 18 250
State 1,025 79 1,729
----------------------------------
9,697 273 12,075
Deferred:
Federal (1,675) (611) (656)
State (208) (312) (145)
----------------------------------
(1,883) (923) (801)
----------------------------------
Total $ 7,814 $ (650) $11,274
==================================
The Company's deferred tax assets and (liabilities) are comprised of the
following:
December 31,
(in thousands) 1999 1998
------------------------------------------------------------------------
Deferred tax assets:
Inventory valuation $ 1,821 $ 1,411
Compensation and benefit plans 3,643 2,208
Leases 190 223
Depreciation 671 305
Net operating loss and tax credit carryforwards 457 656
Other 335 434
---------------------
Total deferred tax assets 7,117 5,237
Deferred tax liabilities (77) (80)
---------------------
Net deferred tax assets $ 7,040 $ 5,157
=====================
Deferred income taxes on undistributed earnings of the foreign
subsidiaries are not material. The Company believes that its deferred tax
assets are more likely than not realizable; therefore, no valuation
allowance is required.
- 33 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
C. Income Taxes (continued)
The table below reconciles the expected U.S. federal income tax provision
(benefit) to the recorded income tax provision (benefit) in the
statements of operations:
<TABLE>
<CAPTION>
December 31,
----------------------------------
(in thousands) 1999 1998 1997
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax computed at statutory rate of 35% $8,287 $(899) $12,886
State income taxes, net of federal income tax benefit 531 (151) 1,063
Non-taxable S-Corporation loss (income) - 165 (1,514)
Foreign sales corporation tax benefit (548) - (907)
Earnings not subject to U.S. income taxes (308) (191) (414)
R&D and foreign tax credits (508) (357) (516)
Non-deductible acquisition costs - 620 -
Other, net 360 163 676
-----------------------------------
Income tax provision (benefit) $7,814 $(650) $11,274
===================================
</TABLE>
Prior to the acquisition on May 7, 1998, Granville-Phillips Company
("GPC") had elected to be treated as an S-Corporation for federal income
tax reporting purposes. Under this election, the individual stockholders
of GPC are deemed to have received a pro rata distribution of taxable
income of GPC (whether or not an actual distribution was made), which is
included in their taxable income. Accordingly, GPC did not provide for
federal income taxes. Unaudited pro forma net income (loss) per share for
1998 and 1997 reflects the unaudited pro forma income tax benefit
(provision) of GPC as if GPC was combined and subject to the effective
federal and state statutory rates of approximately 38% throughout these
periods. GPC's S-Corporation tax reporting status was terminated on the
date of the acquisition and, therefore, the undistributed earnings of
$2.8 million as of the date of acquisition have been reclassified to
additional paid-in capital.
D. Capital Stock
On October 16, 1997, the Company's Board of Directors authorized a
two-for-one common stock split that was effected in the form of a 100%
stock dividend. Stock certificates were distributed on November 13, 1997,
to stockholders of record on October 30, 1997. All references in the
financial statements and notes to number of shares, per share amounts and
market prices of the Company's common stock have been retroactively
restated to reflect the increased number of common shares outstanding.
Options for the purchase of shares of the Company's common stock have
been granted to officers, directors and key employees under various
nonqualified stock option agreements. The terms of these agreements
provide that the options are exercisable over a number of years from the
date of grant at not less than the fair market value at the date of
grant.
- 34 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. Capital Stock (continued)
Options expire at various dates through the year 2009. At December 31,
1999 and 1998, respectively, 1,151,274 and 1,207,774 shares of common
stock were reserved for stock options. At December 31, 1999 and 1998,
respectively, 115,274 and 97,024 nonqualified stock options were
exercisable. In 1989, the Company entered into an agreement with its
president under which options to purchase up to 800,000 shares of the
Company's common stock were granted, at a price of $1.69 per share,
exercisable over a ten-year period subject to the attainment of certain
financial performance targets. At December 31, 1999, options for the
purchase of 640,000 shares had become exercisable. The remaining 160,000
shares will become exercisable on March 1, 2000. In connection with this
agreement, compensation expense of $1,581,000, $959,000 and $1,300,000
was charged in 1999, 1998 and 1997, respectively.
In the first quarter of 1999, the Company entered into a new employment
agreement with its president under which nonqualified options to purchase
up to 200,000 shares of the Company's common stock were granted at the
fair market value of $20.81 per share, vesting over an eight-year period.
The following table summarizes option activity for the years ended 1997,
1998 and 1999:
Number of Weighted Average
Options Outstanding Common Shares Exercise Price
------------------------------------------------------------------------
December 31, 1996 615,000 $ 5.95
Options granted 121,000 $ 20.90
Options exercised (157,226) $ 3.45
Options cancelled (82,000) $ 14.66
-----------
December 31, 1997 496,774 $ 8.95
Options granted 180,000 $ 22.33
Options exercised (106,000) $ 2.27
---------
December 31, 1998 570,774 $ 14.41
Options granted 331,500 $ 21.68
Options exercised (56,500) $ 14.21
Options cancelled (73,500) $ 20.65
------------
December 31, 1999 772,274 $ 16.95
============
- 35 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. Capital Stock (continued)
The following table summarizes information concerning currently
outstanding and exercisable options:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- --------------------------------
Range of Number Weighted Average Weighted Number Weighted
Exercise Outstanding Remaining Average Exercisable Average
Prices at 12/31/99 Contractual Life Exercise Price at 12/31/99 Exercise Price
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.69 - $ 1.69 160,000 .16 years $ 1.69 - -
$ 2.86 - $ 3.85 12,274 3.82 years $ 3.68 12,274 $ 3.68
$ 9.13 - $20.81 407,500 7.09 years $19.56 64,000 $16.76
$23.11 - $40.69 192,500 8.09 years $24.97 39,000 $24.96
--------------- ------- ------------ ------ --------- ------
$ 1.69 - $40.69 772,274 5.85 years $16.95 115,274 $18.14
</TABLE>
The Company adopted the disclosure only option under Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation" as of December 31, 1996. If the accounting
provisions of SFAS 123 had been adopted, the effect on net income (loss)
and basic and diluted net income (loss) per share would have been as
follows:
For the years ended December 31,
(in thousands except per share data) 1999 1998 1997
------------------------------------------------------------------------
As Reported
Net income (loss) $15,864 $(1,920) $25,544
Basic net income (loss) per share $ 0.71 $ (0.09) $ 1.15
Diluted net income (loss) per share $ 0.70 $ (0.09) $ 1.14
Pro Forma
Net income (loss) $15,179 $(2,438) $25,371
Basic net income (loss) per share $ 0.68 $ (0.11) $ 1.15
Diluted net income (loss) per share $ 0.67 $ (0.11) $ 1.14
The weighted average fair value of options granted during 1999, 1998 and
1997 was $10.63, $8.44 and $8.06, respectively. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions:
1999 1998 1997
------------------------------------------------------------------------
Dividend yield 1.8% 4.2% 4.2%
Expected stock price volatility 50% 50% 50%
Risk-free interest rate 5.18% 5.49% 6.34%
Expected holding period (years) 7.4 6.4 6.4
- 36 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. Other Assets
The Company has a 50/50 joint venture company, Ulvac Cryogenics, Inc.,
with an unrelated Japanese manufacturer to produce cryogenic vacuum pumps
in Japan.
Condensed results of operations for the joint venture for each of the
three fiscal years ended September 30, are as follows:
(in thousands) 1999 1998 1997
------------------------------------------------------------------------
Net sales $24,229 $19,511 $27,638
===============================
Gross profit $ 7,847 $ 5,280 $ 8,488
===============================
Net income $ 1,762 $ 1,092 $ 2,364
===============================
Joint venture income, including
royalty income and equity income $ 1,415 $ 957 $ 1,744
===============================
Condensed balance sheet information as of September 30, is as follows:
(in thousands) 1999 1998
------------------------------------------------------------------------
Current assets $26,548 $15,314
Noncurrent assets 4,119 2,906
-------------------
Total assets $30,667 $18,220
===================
Current liabilities $11,291 $ 4,572
Long-term liabilities 1,113 829
Stockholders' equity 18,263 12,819
-------------------
Total liabilities and
stockholders' equity $30,667 $18,220
===================
The Company's net investment in the joint venture of approximately
$8,549,000 and $6,500,000 at December 31, 1999 and 1998, respectively, is
reported in other assets. The Company's net investment at December 31,
1999 and 1998, reflects a cumulative translation gain (loss) of
$1,083,000 and ($168,000), respectively (net of income tax provision of
$583,000 and benefit of $90,000, respectively). This currency translation
gain or loss, which is included in stockholders' equity, resulted from
translating the balance sheet of the joint venture into U.S. dollars.
F. Segment Information
Line of Business and Foreign Operations
The Company adopted Statement of Financial Accounting Standards No. 131
(SFAS 131), "Disclosure about Segments of an Enterprise and Related
Information" for 1998. The Company operates in several operating segments
and in one reportable segment: the development, manufacture, sale and
support of cryogenic and vacuum equipment. These operating segments have
been combined in accordance with the aggregation criteria of SFAS 131.
- 37 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F. Segment Information (continued)
The consolidated financial statements include the accounts of wholly
owned international subsidiaries which operate customer support
facilities to sell and service products manufactured in the United
States. A summary of United States and International operations follows
for the years ended December 31:
United
(in thousands) States International Consolidated
------------------------------------------------------------------------
1999
Net sales $119,154 $20,235 $139,389
Long-lived assets $ 17,328 $ 2,420 $ 19,748
1998
Net sales $ 81,747 $13,598 $ 95,345
Long-lived assets $ 16,707 $ 1,093 $ 17,800
1997
Net sales $143,083 $13,993 $157,076
Long-lived assets $ 18,387 $ 531 $ 18,918
Intercompany transactions are at prices that are comparable to
third-party sales.
Export Sales and Significant Customers
The Company's export sales, principally to customers in the Far East,
were $10,663,000 in 1999, $9,231,000 in 1998 and $13,105,000 in 1997.
The Company's largest customer represented 29%, 20%, and 30% of net sales
for 1999, 1998 and 1997, respectively.
- 38 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G. Employee Benefit Plans
The Company's retirement and savings plans cover substantially all of the
Company's employees who have one year of service. A noncontributory
defined benefit pension plan and a defined contribution plan function
together as the Company's retirement program.
The Company adopted Statement of Financial Accounting Standards No. 132,
"Employees' Disclosure about Pensions and Other Retirement Benefits,"
during 1998. The following tables set forth the funded status, projected
benefit obligation and fair value of assets of the plan.
Reconciliation of Funded Status
December 31,
(in thousands) 1999 1998
------------------------------------------------------------------------
Funded status $ 2,336 $ 1,402
Unrecognized prior service cost 33 40
Unrecognized net transition asset (145) (184)
Unrecognized net actuarial gain (5,819) (4,018)
--------------------
Accrued pension cost $(3,595) $(2,760)
====================
Reconciliation of Projected Benefit Obligation
(in thousands) 1999 1998
-------------------------------------------------------------------------
Beginning of year benefit obligation (January 1) $ 7,271 $ 6,369
Service cost 1,024 981
Interest cost 515 508
Actuarial (gain) loss (1,975) 963
Benefits paid (956) (1,061)
Curtailment gain (1) - (489)
--------------------
End of year benefit obligation (December 31) $ 5,879 $ 7,271
====================
Reconciliation of Fair Value of Assets
(in thousands) 1999 1998
-------------------------------------------------------------------------
Beginning of year, fair value of assets (January 1) $ 8,673 $ 8,190
Actual return on plan assets 498 1,544
Benefits paid (956) (1,061)
--------------------
End of year, fair value of assets (December 31) $ 8,215 $ 8,673
====================
- 39 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G. Employee Benefit Plans (continued)
The Company's net pension cost included the following components:
(in thousands) 1999 1998 1997
-------------------------------------------------------------------
Service cost $1,024 $ 981 $ 894
Interest cost 515 508 481
Expected return on assets (546) (563) (537)
Net amortization of:
Prior service cost 7 8 8
Net actuarial gain (125) (131) (131)
Transition obligation (39) (39) (39)
Curtailment gain(1) - (489) -
------------------------------------
Net periodic pension cost $ 836 $ 275 $ 676
====================================
(1) The curtailment gain relates to certain participants in the pension
plan who were terminated from employment in connection with the
Company's restructuring plan. (Note H).
Key assumptions used in computing year-end obligations for the defined
benefit plan were:
1999 1998 1997
------------------------------------------------------------------------
Discount rate for obligations 7.75% 6.75% 7.0%
Rate of compensation increase 5.5% 5.0% 5.0%
Long-term rate of return on assets 9.0% 9.0% 9.0%
The Company has Employee Savings Plans, qualified under Section 401(k),
which are designed to supplement retirement income. The Company
contributes a percentage of the participants' contributions up to a
defined maximum amount. The contributions expense, net of forfeitures,
was $1,239,000 in 1999, $826,000 in 1998 and $812,000 in 1997.
The Company has a Supplemental Key Executive Retirement Plan which is
designed to supplement benefits paid to participants under
Company-funded, tax-qualified retirement plans. The Company recorded
additional retirement costs of $186,000 in 1999, $170,000 in 1998 and
$69,000 in 1997 in connection with this Plan.
- 40 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
H. Merger, Restructuring and Special Charges
In the second quarter of 1998, the Company acquired Granville-Phillips
Company ("GPC") in a transaction accounted for as a pooling of interests.
GPC operates in the same line of business as the Company; the
development, manufacture, sale and support of vacuum equipment. The
Company issued 2,382,925 shares of common stock in exchange for all
outstanding common stock of GPC at May 7, 1998. Direct acquisition costs,
primarily compensation expense relating to shares issued to certain GPC
employees as part of a restricted stock plan, and professional fees
amounted to $3.5 million and were charged against the results of
operations. At the time of the acquisition, GPC common shares included in
the restricted stock plan were exchanged for the equivalent value of the
Company's common shares. GPC was an S-Corporation for tax purposes prior
to the acquisition. In accordance with SAB Topic 4B, the amount of
undistributed earnings of $2.8 million generated during the periods that
GPC was taxed as an S-Corporation was reclassified from retained earnings
to capital in excess of par value at the time of the merger and $0.8
million was recorded in capital in excess of par value for stock
incentive plans in 1998.
The following information presents certain statement of operations data
of the Company and GPC for the periods prior to the acquisition.
(Unaudited)
Three Months Ended Year Ended
(in thousands) Mar. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
Net sales for:
Helix $25,872 $131,519
GPC 5,622 25,557
-----------------------------
Combined $31,494 $157,076
=============================
Net income (loss) for:
Helix $ 2,941 $ 21,315
GPC (1,075) 4,229
-----------------------------
Combined $ 1,866 $ 25,544
=============================
During the third quarter of 1998, the Company recorded restructuring and
other special charges of $2.5 million. The Company restructured its
domestic operations to eliminate non-strategic spending, while
redirecting resources to the Company's global customer support structure
and other strategic initiatives. The charges primarily included
provisions for termination benefits of $1.3 million for approximately 80
personnel, exit costs related to a leased facility of $1.0 million and
$0.2 million for the impairment of certain assets. At December 31, 1999,
the restructuring accrual was fully utilized.
- 41 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
H. Merger, Restructuring and Special Charges (continued)
The amounts accrued and charged against the provisions described above
were as follows:
<TABLE>
<CAPTION>
1998 1999
Cash Payments Dec. 31, Cash Payments Dec. 31
and Asset 1998 and Asset 1999
(in thousands) Provision Write-offs Balance Write-offs Balance
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employee termination
benefits $1,300 $1,000 $300 $300 $ -
Leased facility 1,000 400 600 600 -
Asset impairment 200 200 - - -
-------------------------------------------------------------------
Total $2,500 $1,600 $900 $900 $ -
===================================================================
</TABLE>
I. Gain on Sale of Building
During 2000, the Company will consolidate its Colorado operations into a
new 60,000 square foot leased facility. In anticipation of this
consolidation, the Company sold its Colorado facility in December 1999,
recognizing a $1.4 million gain, and entered into a lease with the new
owner to facilitate the transition into the new facility.
- 42 -
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board Of Directors and Stockholders
of Helix Technology Corporation:
Our report on the consolidated financial statements of Helix Technology
Corporation is included on Page 23 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in the index on Page 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/PricewaterhouseCoopers LLP
- -----------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 21, 2000
- 43 -
<PAGE>
<TABLE>
HELIX TECHNOLOGY CORPORATION
QUARTERLY RESULTS
(UNAUDITED)
<CAPTION>
First Second Third Fourth
(in thousands except per share data) Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------------------------
1999
<S> <C> <C> <C> <C>
Net sales $25,900 $32,533 $39,036 $41,920
Gross profit 10,789 14,154 17,605 19,354
Operating income 1,566 4,004 6,510 7,930
Net income 1,260 2,992 4,785 6,827
Basic net income per share $ 0.06 $ 0.13 $ 0.21 $ 0.31
Diluted net income per share $ 0.06 $ 0.13 $ 0.21 $ 0.30
1998
Net sales $31,494 $25,706 $18,550 $19,595
Gross profit 14,702 9,955 5,948 7,367
Operating income (loss) 2,821 (1,873) (4,765) (944)
Net income (loss) 1,866 (434) (3,431) 79
Basic net income (loss) per share $ 0.08 $ (0.02) $ (0.15) $ 0.00
Diluted net income (loss) per share $ 0.08 $ (0.02) $ (0.15) $ 0.00
</TABLE>
- 44 -
<PAGE>
HELIX TECHNOLOGY CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1999, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
Additions
---------------------------
Balance at Charged to Charged to Deductions Balance at
Beginning Costs and Other from at End of
Description of Period Expenses Accounts Reserves Period
- -----------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1999
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $228 $ 63 $ - $ 106 $185
===================================================================================================================
Warranty $297 $ 742 $ - $ 748 $291
===================================================================================================================
Year ended December 31, 1998
Allowance for doubtful accounts $240 $ 5 $ - $ 17 $228
===================================================================================================================
Warranty $292 $1,375 $ - $1,370 $297
===================================================================================================================
Year ended December 31, 1997
Allowance for doubtful accounts $238 $ 17 $ - $ 15 $240
===================================================================================================================
Warranty $303 $1,614 $ - $1,625 $292
===================================================================================================================
</TABLE>
- 45 -
THIRD AMENDMENT OF LEASE
THIS THIRD AMENDMENT OF LEASE dated as of July 26, 1999 between LONG
GATE LLC ("Landlord") and HELIX TECHNOLOGY CORPORATION ("Tenant").
BACKGROUND
Landlord is the current Landlord (as successor to Mansfield Commerce
Realty Trust) and Tenant is the Tenant under a Lease dated as of July 24, 1984
as amended by First Amendment to Lease dated May 9, 1989 and Amendment to Lease
(the "Second Amendment") dated as of September 19, 1994 (the "Lease") of
premises at 375 Forbes Boulevard, Mansfield, Massachusetts. The term of the
Lease will expire on September 30, 1999. The parties desire to extend the term
of the Lease and to otherwise amend the Lease, all as hereinafter set forth.
WITNESSETH
NOW THEREFORE, Landlord and Tenant hereby agree as follows:
1. The term of the Lease is hereby extended for the period commencing on October
1, 1999 and terminating on September 30, 2004. Except as herein amended, all
terms of the Lease shall continue in full force and effect.
2. The fixed rent payable under Section 5(a) of the Lease shall be $430,252.50
from October 1, 1999 through September 30, 2000; $444,594.50 per annum from
October 1, 2000 through September 30, 2002; and $458,936.00 per annum from
October 1, 2002 through September 30, 2004. Such fixed rents shall be paid in
advance in equal monthly installments on the first day of each month.
3. Section 4 of the Second Amendment is hereby deleted from the Lease in its
entirety.
4. Tenant shall have one (1) option to extend the term of the Lease for a five
(5) year period (the "Option Period"), provided (a) Tenant shall give notice to
Landlord of its exercise of such option prior to October 1, 2003, (b) no default
beyond any applicable grace period in the obligations of Tenant under the Lease
shall exist at the time such notice is given and (c) Tenant shall not have been
in default under the Lease beyond any applicable grace period on more than two
(2) occasions prior to the commencement of the Option Period. All of the terms
and provisions of the Lease shall be applicable during the Option Period except
that (a) Tenant shall have no option to extend the term of the Lease beyond the
Option Period and (b) the fixed rent payable under Section 5(a) of the Lease for
the Option Period shall be the greater of (i) the fixed rent payable under
Section 5(a) of the Lease for the year ending September 30, 2004 or (ii) 95% of
the Market Rent, as defined below, as of the first day of the Option Period.
<PAGE>
"Market Rent" shall be computed as of the applicable date at the then
current rentals being charged to new tenants for comparable space located in
comparable buildings in the industrial park in which the Premises are located,
taking into account and giving effect to, in determining comparability, without
limitation, such considerations as size, location and condition of premises and
lease term.
Landlord shall initially designate Market Rent and shall furnish data
in support of such designation. If Tenant shall disagree with Landlord's
designation of the Market Rent, then Tenant shall have the right, by notice
given within fourteen (14) days after Tenant shall have been notified of
Landlord's designation, to submit such Market Rent to arbitration as follows.
Market Rent shall be determined by arbitrators, one chosen by Tenant, one chosen
by Landlord and a third selected, if necessary, as below provided. All
arbitrators selected under this Section shall be experienced real estate
appraisers with substantial experience with properties in the vicinity of the
Premises. If within fourteen (14) days after Tenant's notice the parties shall
agree upon a single arbitrator or if one party shall fail to select an
arbitrator, the arbitrator selected by the other shall be the sole arbitrator,
and Market Rent shall be determined by such arbitrator. The unanimous written
decision of the two first chosen (or the decision of the first, if a second
arbitrator is not chosen) without selection and participation of a third
arbitrator, or otherwise the written decision of a majority of the three
arbitrators chosen and selected as provided herein, shall be conclusive and
binding upon Landlord and Tenant. Landlord and Tenant shall each notify the
other of its chosen arbitrator within fourteen (14) days following the call for
arbitration, and, unless such two arbitrators shall have either reached a
unanimous decision within thirty (30) days after their designation or jointly
selected a third arbitrator, they shall so notify the then President of the
local Real Estate Board and request him to select an impartial third arbitrator
to act hereunder. Such third arbitrator and the first two chosen shall hear the
parties and their evidence and render their decision within thirty (30) days
following the conclusion of such hearing and notify Landlord and Tenant thereof.
Landlord and Tenant shall bear the expense of the third arbitrator (if any)
equally. If the dispute between the parties as to Market Rent shall not have
been resolved before the commencement of Tenant's obligation to pay rent based
upon Market Rent, then Tenant shall pay rent based upon the Market Rent
designated by Landlord until either the agreement of the parties as to the
Market Rent or the decision of the arbitrators, as the case may be, at which
time Tenant shall pay any underpayment of rent to Landlord or Landlord shall
refund any overpayment of rent to Tenant.
<PAGE>
WITNESS the execution hereof as an instrument under seal as of the date
first above written.
LANDLORD:
LONG GATE LLC
By: /s/ Cynthia Sarver
------------------------------
Cynthia Sarver
Its VP
TENANT:
HELIX TECHNOLOGY CORPORATION
By: /s/Michael El-Hillow
------------------------------
Michael El-Hillow
Its Chief Financial Officer
LEASE
Boulder Tech Center
THIS LEASE ("Lease"), dated May 14, 1999, is between MUM IV, LLC, a
Colorado limited liability company ("Landlord") and Helix Technology
Corporation, a Delaware corporation ("Tenant").
For and in consideration of the covenants and agreements herein
contained, Landlord and Tenant hereby agree as follows:
Section 1. ADDITIONAL DEFINED TERMS
In addition to those terms defined in the introductory paragraph of
this Lease, the following terms shall have the following meanings when used in
this Lease:
(a) Estimated Operating Cost: An amount equal to Two Dollars and
Forty-five Cents ($2.45) per square foot per calendar year, which represents an
estimate of the Operating Cost for the entire year in which the Term of this
Lease begins.
(b) Base Rent: The annual amount of rent payable with respect to each
Lease Year during the term of this Lease payable as set forth in Section 4(a).
The amount of the Base Rent for the first Lease Year shall be Eight Dollars and
Ninety-Five Cents ($8.95) per square foot of Rentable Area of the Premises. The
amount of the Base Rent for all Lease Years after the first Lease Year shall be
calculated in the manner set forth in Section 4(a). During each Lease Year, Base
Rent shall include the previous year's Base Rent and any rental increase from
the previous year.
(c) Building: The building to be constructed by Landlord upon the
Premises pursuant to Section 10 of this Lease, the plans and specifications for
which are shown on Exhibit B attached hereto, which building shall contain
approximately 60,906 (sixty thousand nine hundred six) Rentable Square Feet and
shall have two (2) floors.
(d) Commencement Date: The date the Term of this Lease commences as
determined in accordance with provisions of Section 30.
(e) Default Rate: An annual rate of interest equal to fifteen percent
(15%).
(f) Lease Year:
(i) For the First Lease Year, the period beginning on the
Commencement Date and ending on the last day of the same calendar month in which
the Commencement Date occurred in the next calendar year; and
<PAGE>
(ii) For Lease Years after the First Lease Year, the
twelve-month period beginning on the next day following the
expiration of the preceding Lease Year.
(g) Operating Cost: As defined in Section 6(b).
(h) Parking Lot: The on-grade parking lot to be constructed by
Landlord upon the Premises pursuant to Section 10 of this Lease and as shown on
Exhibit B attached hereto, containing not less than 150 parking spaces for use
by passenger motor vehicles.
(i) Premises: That certain parcel of real property described as: Lot
2E, Block 3, REPLAT E, BOULDER TECH CENTER, County of Boulder, State of
Colorado, as shown on the recorded plat attached hereto as Exhibit A and
incorporated herein (such plat has been recorded on Planfile P-39, F-1, #23)
together with the Building, the Parking Lot and all other improvements from time
to time hereafter located on such parcel of real property and any and all
appurtenant rights relating thereto.
(j) Term: The period beginning at noon on the Commencement Date and
ending at 11:59 p.m. on the last day of the calendar month in which the
fifteenth (15th) anniversary of the Commencement Date occurs.
(k) Rentable Area or Rentable Square Feet: The sum of the area of each
story of the Building expressed in square feet measured from the outside of the
exterior walls.
Section 2. LEASE OF PREMISES
Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the Premises. The Premises are leased on the terms and conditions set
forth in this Lease.
Section 3. TERM
The term of this Lease shall be as set forth in Section 1(j), unless
sooner terminated or extended pursuant to the terms of this Lease.
Section 4. RENT
(a) Tenant shall pay Landlord during each Lease Year the Base Rent, in
equal monthly installments in the amount of one-twelfth of the Base Rent on the
Commencement Date and on the first day of each succeeding calendar month during
the Term of this Lease; provided that the rent payable on the Commencement Date
shall be prorated for the remaining days left in the calendar month in which the
<PAGE>
Commencement Date occurs. Except as expressly set forth in this Lease to the
contrary, all payments of Base Rent shall be paid in advance, without notice,
set-off or deduction, in lawful money of the United States, at the address of
Landlord set forth in Section 40 of this Lease, or at such other place as
Landlord may from time to time designate in writing.
The amount of the Base Rent for each year after the first Lease Year
shall be increased. The Base Rent shall increase at such times by an amount
determined by multiplying the amount of the Base Rent in effect for the
preceding Lease Year by an escalation factor which factor shall be calculated in
the following manner.
(i) For the Lease Years two through 5 of the term of
the Lease the escalation factor shall be two percent (2%) annually.
(ii) For the 6th through the 10th years of the Lease the
escalation factor for each Lease Year shall be calculated in the following
manner: 1) Calculate the average annual change in Lease Years 3, 4 and 5 of the
All Items Revised Consumer Price Index for All Urban Consumers, CPI-U, Denver
(1982-84 equals 100), as determined by the United States Department of Labor,
Bureau of Labor Statistics ("CPI"). 2) Add the annual increase used for the
initial five Lease Years (two percent (2%)) to the average increase calculated
in 1) above, but if the average increase calculated in (1) above is higher than
10%, use 10% as the calculation of (1) above; 3) Divide the sum by two. This
result will be the escalation factor for Lease Years 6 through 10. By way of
example, if the average annual CPI increase during Lease Years 3, 4 and 5 was
1%, you would add 2% to 1% for a sum of 3%, then divide that sum by two, for an
annual increase in the rental rate for Lease Years 6 through 10 of 1 1/2 % per
year.
(iii) For the 11th through the 15th Lease Years of the
Lease the escalation factor for each Lease Year shall be calculated in the
following manner: 1) Calculate the average annual change in Lease Years 8, 9 and
10 of the All Items Revised Consumer Price Index for All Urban Consumers, CPI-U,
Denver (1982-84 equals 100), as determined by the United States Department of
Labor, Bureau of Labor Statistics. 2) Add the annual increase used for the Lease
Years 6 through 10 to the average increase calculated in 1) above, but if the
average increase calculated in (1) above is higher than 10%, use 10% as the
calculation of (1) above; 3) Divide the sum by two. This result will be the
escalation factor for Lease Years 11 through 15. By way of example, if the
average annual CPI increase in Lease Years 8, 9 and 10 was 20% and using the
previous example's result where the annual increase for Lease Years 6-10 was 1
1/2%, you would add 1 1/2% to 10% for
<PAGE>
a sum of 11 1/2%, then divide that sum by two, for an annual increase in the
rental rate for Lease Years 11-15 of 5 3/4%.
In no event shall the Base Rent for any Lease Year ever decrease below
any previous Lease Year's Base Rent.
(b) If the index specified in Section 4(a) above is discontinued in
its current form, or if the basis on which it was calculated should be revised,
an appropriate conversion of the revised index to a common base will be made
upon conversion factors published by the Bureau of Labor Statistics or upon
conversion factors otherwise made available.
(c) For Lease Years 6 through 15, in the event that Tenant has not been
notified of the escalation factor and the resulting adjustment in Base Rent by
the first day of a Lease Year, the first monthly rental payment of Base Rent
which includes new increased rent shall also include the new increased rent, if
any, for each month in the then current Lease Year which elapsed prior to
Tenant's receipt of Landlord's notice. The Base Rent due hereunder shall be
apportioned for any fractional calendar months at the beginning and end of the
Term of this Lease and any renewals and extensions thereof.
(d) In addition to the Base Rent (as increased each Lease Year), Tenant
shall pay Landlord in monthly installments simultaneously with payments of the
Base Rent, one-twelfth (1/12th) of the Estimated Operating Cost (or new estimate
of Operating Cost) determined as set forth in Section 6, and such other charges
as are required by the terms of this Lease to be made by Tenant, including, but
not limited to, 100% of the Operating Cost adjustment. Any such adjustment or
charge shall be deemed to be additional rent and shall be payable in the manner
provided for the payment of Base Rent and shall be recoverable as Base Rent, and
Landlord shall have all rights against Tenant for default in payment thereof as
in the case of arrears of Base Rent.
(e) In the event the Building as constructed by Landlord is not
substantially in accordance with the plans and specifications provided in
Exhibit B and as a result the Rentable Area of the Building is less than 60,906
Rentable Square Feet, Tenant shall have the right within thirty (30) days
following the Commencement Date to cause the Rentable Area of the Building to be
measured by the Architect (as defined in Section 10), at Landlord's expense, and
the Base Rent hereunder shall be reduced on a pro rata basis by the same
percentage amount by which the Rentable Area is less than 60,906 square feet.
Promptly after such measurement, Landlord and Tenant shall enter into an
amendment to this Lease documenting the Base Rent to be paid hereunder.
Section 5. USE
(a) Tenant shall use and occupy the Premises for manufacturing,
warehousing, offices and other uses incidental thereto and for no other purpose
<PAGE>
without Landlord's consent, which shall not be unreasonably withheld, delayed or
conditioned and shall be deemed to be given if Landlord has not responded within
ten (10) days of Tenant's request for such consent. Tenant shall use the
Premises in a careful, safe and proper manner and shall not use or permit the
Premises to be used for any purpose prohibited by the certificate of occupancy
issued for the Premises or the laws of the United States or the State of
Colorado, or the ordinances of the County of Boulder. Neither Tenant nor
Landlord shall do or permit to be done any act or thing upon the Premises which
shall or might subject the other to any liability or responsibility for injury
to any person or persons or to property by reason of any business or operation
carried on upon the Premises or for any reason.
(b) In the event that any official shall hereafter at any time contend
or declare by notice, violation, order or in any other manner whatsoever that
the Premises are used for a purpose which is a violation of any permit,
certificate of occupancy, statute, ordinance or other requirement of law
applicable to the Premises, Tenant shall, upon ten (10) days' written notice
from Landlord, immediately discontinue such use of the Premises.
(c) Tenant, at its sole expense, shall comply with all laws, orders and
regulations of federal, state, county and municipal authorities, and with any
direction of any public officer or officers, pursuant to law, which shall
declare any violation or impose any order or duty upon Landlord or Tenant with
respect to the Premises, or the use or occupation thereof. Notwithstanding the
foregoing, Tenant shall not be obligated to comply with any such laws, orders,
or regulations, including but not limited to the Americans With Disabilities
Act, which (a) relate to the design or construction of the Premises, (b) relate
to the structural portions of the Premises, or (c) may require structural
alterations, structural changes, structural repairs or structural additions, all
of which shall be the obligation of Landlord at its sole cost and expense;
provided, however, if such laws, orders or regulations relate to the specific
type or nature of the business being conducted or to be conducted by Tenant upon
the Premises or to the specific accommodations made or to be made for certain of
Tenant's employees as opposed to being related to industrial or office
buildings, generally, Tenant shall nevertheless be required to comply with them.
Without limiting the generality of the foregoing, but subject to the proviso in
the preceding sentence, Landlord, at it sole cost and expense, shall be
responsible for complying with the applicable provisions of the Americans With
Disabilities Act and the regulations and Accessibility Guidelines for Buildings
and Facilities issued pursuant thereto, as same may be amended (collectively,
the "ADA"), relating to (i) the design and construction of the Premises and the
work within the Premises to be performed by Landlord pursuant to this Lease, and
(ii) the structural portions of the Premises (collectively, "Landlord's Work").
Section 6. OPERATING COST ADJUSTMENT
<PAGE>
(a) If in any calendar year the Operating Cost is greater than the
Estimated Operating Cost, Tenant shall pay to Landlord as additional rent an
amount equal to such excess. Any amount payable by Tenant to Landlord under this
Section 6 shall be paid within thirty (30) days after written notice thereof by
Landlord, such notice to be given by Landlord not later than March 31 of each
calendar year. Landlord may, either prior to the beginning of or during any
calendar year, compute a bona fide estimate of Operating Cost for such calendar
year. Upon receipt of written notice thereof, Tenant shall pay to Landlord, in
monthly installments simultaneously with payments of Base Rent under Section
4(a), one-twelfth of such new estimate of Operating Cost. An annual adjustment
shall be made between the parties within thirty (30) days after Landlord's
determination of Operating Cost. Any amounts of excess estimated Operating Cost
which Landlord is required to return may be offset by accrued amounts payable by
Tenant to Landlord. If the term of this Lease ends before the end of a calendar
year, any amount payable by Tenant or Landlord in respect of that year under
this Section 6 shall be adjusted proportionately on a daily basis utilizing the
previous year's determination of Operating Costs and the obligation to pay such
amount shall survive the expiration or earlier termination of this Lease.
(b) As used in this Lease, "Operating Cost" means an amount per
calendar year (projected to an annual figure for the calendar year in which the
Premises is first occupied) which represents the actual Operating Cost for any
calendar year during the Term of this Lease. The Operating Cost shall be
determined by Landlord and shall be equal to the sum of the items of cost listed
in Section 6(b)(i) and Section 6(b)(ii) but not the items listed in Section
6(b)(iii) in respect of a calendar year:
(i) All general and special real estate taxes, special
assessments, assessments for improvements, special district or improvement
district assessments, water charges, sewer charges, vault charges and other ad
valorem taxes, rates, levies and assessments payable in respect of the Term upon
or in respect of the Premises imposed by any governmental or quasi-governmental
authority and all taxes specifically imposed in lieu of any such taxes, but
excluding any inheritance, estate, succession, transfer, gift, franchise,
corporation, income, rental or profit tax or capital levy imposed on Landlord
("Taxes"). If due to a future change in the method of taxation, any franchise,
income, profit or other tax shall be levied against Landlord in whole or in part
in lieu of any tax which would otherwise constitute one of the foregoing taxes
or charges or if there shall be levied against Landlord a tax or license fee
measured by gross rents, such franchise, income, profit or other tax or license
fee shall be deemed to be a real estate tax for the purposes hereof. The taxes
described in this Section 6(b)(i) shall also include all of Landlord's expenses,
including, but not limited to, attorney's fees, incurred by Landlord in any
effort to minimize such taxes, whether by contesting proposed increases in
assessments or
<PAGE>
by any other means or procedures appropriate in the circumstances; provided that
Landlord and Tenant shall agree to the procedures to be taken prior to Landlord
taking such procedures. If Landlord secures an abatement or refund of any Taxes,
Landlord shall pass such abatement through to the Tenant as a credit to be
applied against rent next becoming due, or if no further rent is due by Tenant,
by cash payment from Landlord to Tenant.
(ii) Except as otherwise set forth in this Lease, all costs,
charges and expenses (not directly reimbursed by insurance proceeds) which are
attributable to the ownership, operation, maintenance and repair of the
Premises, including, but not limited to, reasonable management fees that fall
within industry standards for the Boulder area, building supplies, window
cleaning services, normal maintenance and repair of the Premises, including but
not limited to, heating and air conditioning systems, electrical and plumbing
systems, elevator system, landscaping, snow removal, Parking Lot repair and
maintenance, insurance (including boiler and machinery, loss of rent, accidental
and direct physical loss, all risk, public liability and other insurance as
provided in Section 20) and labor costs incurred in the operation or maintenance
of the Premises. Except as provided in Section 6(a)(iii), and except for repairs
and replacements for which Landlord is reimbursed from insurance proceeds, all
repairs and replacements shall either be made by Tenant directly or shall be
made by Landlord at Tenant's expense as an Operating Cost.
Operating Costs shall be based upon competitive charges for similar
services and materials that are available in the general vicinity of the
Premises. Operating Costs shall be reduced by the proceeds of insurance or
eminent domain awards of settlement received by Landlord with respect to items
of Operating Cost (or the amount of any proceeds or awards which would have been
received if Landlord had carried the insurance required by this Lease or
diligently pursued its rights, as the case may be) or recoveries from warranty
claims. Landlord shall not be permitted to recover more than the actual
out-of-pocket cost incurred by Landlord on a non-profit basis for the Operating
Cost. The Operating Cost shall be determined on a "cash basis" and costs which
may be paid in installments without finance charges shall be paid in
installments. Promptly upon receipt thereof, Landlord shall pay Tenant any
refund or recovery made with respect to any Operating Cost previously paid by
Tenant.
(iii) The following expenses and costs shall not be included
within the "Operating Costs" for the Premises: Costs incurred in connection with
the original construction of the Premises or in connection with any major change
in the Premises; depreciation, interest and principal payments on mortgages and
other debt costs, if any; costs of correcting patent and/or latent defects in,
or design errors relating to the design, or construction of the Building located
on the Premises; costs for which the Landlord is reimbursed by insurance
proceeds; costs associated with the operation of the business of the Landlord as
a separate entity, as the same are
<PAGE>
distinguished from the cost of operating the Premises; the wages and benefits of
any executive or other employee at or above the level of building manager, or
any employee who does not devote substantially all of his or her employee time
to the Premises unless such wages and benefits are prorated to reflect time
spent on operating and managing the Premises; fines, penalties and interests;
tax penalties incurred as a result of the Landlord's negligence, inability, or
unwillingness to make payments when due; any expense resulting from the
negligence of, or any violation of law by, Landlord or its agents, contractors,
employees or invitees; and Landlord's general overhead and general
administrative expenses. Except where the need for repair or replacement results
from the negligence of Tenant or its agents, employees or invitees, or as a
result of the operations of Tenant's business, Landlord shall, upon reasonable
notice from Tenant and at its expense and without reimbursement by Tenant (other
than from insurance proceeds from insurance provided by Tenant), perform all
replacement of, and structural repairs to the structural portions of the
Premises as are necessary to keep the same in first class order, condition and
repair, reasonable wear and tear excepted. For purposes of this Lease,
"structural portions" of the Premises shall mean the foundation, supporting
members of the roof, floor slabs, exterior walls, structural girders and
columns, load-bearing walls and columns. (It is acknowledged that movement of
floor slabs is normal and not generally repaired in first class industrial
buildings, unless the movement is excessive.)
(c) Tenant shall have the right to inspect all documents reflecting any
part of the Operating Costs and the calculations of any amount payable under
Section 6(a) of this Lease, and Landlord shall provide written receipts and
accounting records supporting its itemized statements and calculations of
Operating Costs and the amounts due under Section 6(a) once each year upon
request by Tenant. If Tenant wishes to dispute the determination of Operating
Costs under Section 6(a) or the calculation of any amount payable under Section
6(a), Tenant shall give Landlord written notice of such dispute within ninety
(90) days after receipt of notice from Landlord of the matter giving rise to the
dispute. If Tenant does not provide Landlord such notice within such time,
Tenant shall have waived its right to dispute such determination or calculation.
Promptly after the giving of such written notice, Tenant shall cause to be made
a complete audit of Landlord's records relating to the matter in dispute by a
nationally recognized firm of independent certified public accountants mutually
agreed upon by Landlord and Tenant. The cost of such audit shall be borne by
Tenant unless such audit discloses an error which overstated Operating Cost by
more than two percent (2%) of the amount determined by the audit, in which event
Landlord shall bear the cost of such audit. If such audit reveals that the
amount previously determined by Landlord was incorrect, a correction shall be
made and either Landlord shall promptly return to Tenant any overpayment or
Tenant shall promptly pay to Landlord any underpayment which was based on such
incorrect amount. Notwithstanding the pendency of any dispute
<PAGE>
hereunder, Tenant shall make payments based upon Landlord's determination or
calculation until such determination or calculation has been established
hereunder to be incorrect.
Section 7. UTILITIES & CLEANING.
Tenant shall directly contract for and pay for all utilities serving
the Premises, including, but not limited to, gas, steam, water, fuel oil,
electricity, sewer charges, telephone and communications systems and the like;
and Landlord shall not be responsible for or involved in the payment of or the
contracting for any said utilities. Likewise, Tenant shall directly contract for
and pay for janitorial services and interior window cleaning and Landlord shall
not be responsible for or involved in the payment of or contracting for any of
said services.
Section 8. TAXES
Tenant shall pay before delinquency any and all taxes, assessments,
license taxes and other charges levied, assessed or imposed and which become
payable during the Term of this Lease upon Tenant's operations at, occupancy of,
or conduct of business at the Premises or upon equipment, furniture, appliances,
trade fixtures and other personal property of any kind installed or located at
the Premises; provided, however, Tenant may pay such amounts after delinquency
to the extent that such delay is necessary to Tenant's good faith and diligent
contest of such amounts, but only so long as there is no risk of Tenant having
any of its assets or Landlord's assets foreclosed upon or seized by the taxing
authority.
Section 9. QUIET ENJOYMENT
Landlord covenants and agrees with Tenant that upon Tenant paying the
Base Rent and additional rent hereunder and observing and performing all the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed, Tenant may peaceably and quietly enjoy the Premises subject,
nevertheless, to the terms and conditions of this Lease and the matters shown as
items 8-20 on Schedule B to the Landlord's title policy, a copy of which is
attached hereto as Exhibit D.
Section 10. PREPARATION OF PREMISES
(a) Landlord shall Substantially Complete (as defined in Section 30)
the work in the Premises required to be done by Landlord as specified in Exhibit
B attached hereto ("Landlord's Work"). All Landlord's Work shall be performed in
a good and workmanlike manner with new, first quality materials in compliance
with all laws, codes and all regulations. Landlord will obtain a fifteen (15)
year warranty on the roof naming the Landlord and Tenant on all related
warranties. Landlord represents that the Premises will be in compliance with the
ADA. If Landlord's Work is not performed as herein required, or if such work or
the Premises in not in compliance with all laws, codes or other regulations,
Landlord shall perform the
<PAGE>
necessary remedial work at its sole cost and expense. Landlord and Tenant agree
that Wyatt Construction Company shall be the general contractor (the
"Contractor") and RVP Architecture shall be the architect (the "Architect") used
by the parties for the purposes of performing Landlord's Work subject to change
in the event of failure or inability to perform. Landlord shall exercise due
diligence in pursuit of completing Landlord's Work. Landlord shall permit Tenant
to have access to the Premises prior to the commencement of the Lease for
purposes of inspecting Landlord's Work or with Contractor's consent, for
performing work in the Premises. Landlord agrees to proceed with due diligence
to complete any portion of Landlord's Work that shall not have been completed as
of the date of Substantial Completion of the foregoing by not later than thirty
(30) days after the date of Substantial Completion (excluding seasonal
landscaping, which shall be completed promptly as soon as the season permits).
(b) Except for minor changes to comply with applicable law or to
correct any mistakes in the plans or specifications, no change orders from the
plans and specifications set forth on Exhibit B shall be permitted, unless duly
authorized representatives of both Tenant and Landlord shall agree to the change
order in writing. Each change order shall set forth the changes in the plans and
specifications and an estimate of the increase in the price to be charged by the
Contractor and any delay in the construction schedule. Thereafter, within thirty
(30) days after receipt of documentation showing the amount charged to Landlord
by the Contractor for the change order, Tenant shall reimburse Landlord for such
amount, unless such amount is more than 10% more than the estimate set forth in
the change order, in which event Tenant shall pay Landlord the amount of the
estimate plus 10% of the amount of the estimate.
(c) Landlord acknowledges that it is a material provision of this Lease
that Landlord deliver the Premises to Tenant by the date Landlord sets forth in
its Official Estimate (defined below) and in the condition provided herein. An
Initial Estimate date shall be provided by Landlord to Tenant within fifteen
(15) days after the appropriate building permit has been issued by the
government authorities. In no case shall the Initial Estimate date be later than
the Substantially Complete date set forth in Section 30 herein. In recognition
thereof, Landlord agrees to provide Tenant with preliminary written statements
signed by both Landlord and the Contractor on the first day of each month, from
and after the commencement of construction until the Commencement Date of the
Lease, detailing the status of Landlord's Work compared to the Initial Estimate
date and/or the Official Estimate date and the estimated date of substantial
completion of Landlord's Work. Landlord's preliminary estimates may change the
Initial Estimate date of substantial completion of Landlord's work (reference
Section 30); provided that once Landlord's estimate of such date falls within
ninety (90) days of the date of the Substantial Completion date, it shall be
referred to as the "Official Estimate". In the event that the
<PAGE>
Commencement Date occurs on or after that date which is fifteen (15) days plus
any days of delay caused by change orders or Tenant's work on the Premises after
the Commencement Date set forth in the Official Estimate, Tenant shall be
entitled to a rent reduction equal to $750.00 times the number of days after the
fifteenth day plus any days of delay caused by change orders or Tenant's work on
the Premises after the Commencement Date set forth in the Official Estimate, but
before the actual Commencement Date.
Section 11. ACCEPTANCE OF PREMISES
Taking possession of the Premises by Tenant shall be conclusive
evidence as against Tenant that the Premises were in good and satisfactory
condition when Possession was taken subject to correction (by Landlord at its
expense) of punch list or other defective items disclosed to Landlord prior to
taking of possession of the Premises by Tenant, defects not reasonably
discoverable prior to taking possession and disclosed to Landlord within a
reasonable period of time after discovery of same by Tenant, but no later ninety
(90) days after taking possession of the Premises, and latent defects disclosed
to Landlord within a reasonable time after discovery of same by Tenant.
Section 12. ACCESS TO PREMISES
Landlord and Tenant acknowledge that Tenant shall be performing
confidential work within the Premises, which confidential work shall not be
accessible to Landlord. Accordingly, Landlord agrees that it will cooperate with
Tenant so as to preserve the confidentiality of Tenant's work (and such
cooperation shall include, but not be limited to, if requested by Tenant, the
execution of confidentiality agreements by Landlord and its agents, assigns,
employees and contractors, and other reasonable measures to preserve Tenant's
confidentiality). Unless Tenant shall consent to a shorter time, Landlord will
provide at least twenty-four (24) hours advance notice to Tenant prior to
entering the Building, will schedule with Tenant the time and place of all entry
by Landlord or its agents, assigns, employees or contractors, and will only
enter upon the Building with a duly-authorized representative of Tenant, except
in the event of an emergency. Landlord agrees to use its best efforts not to
interfere unreasonably with the Tenant or the Tenant's business in the course of
exercising its rights under this paragraph.
Section 13. ALTERATIONS BY TENANT
(a) Other than interior, non-structural alterations, for which
Landlord's consent is not required, Tenant shall make no alterations,
decorations, installations, additions or improvements in or to the Premises
without first obtaining the written consent of Landlord. Tenant understands that
Landlord's consent will be conditioned on Tenant's compliance with Landlord's
requirements as in effect at the time permission is requested, which
requirements will include, but not be limited to Landlord's approval of plans,
specifications, contractors, insurance, and hours of
<PAGE>
construction. Prior to the commencement of any work in or to the Premises by
Tenant's contractor, Tenant shall comply with all applicable laws (for example,
by obtaining a building permit if required), and Tenant shall on request deliver
to Landlord certificates issued by applicable insurance companies evidencing
that workmen's compensation and public liability insurance and property damage
insurance, all in amounts and with companies, and on forms reasonably
satisfactory to Landlord, are in force and effect and maintained by all
contractors and subcontractors engaged by Tenant to perform such work. Each such
certificate shall provide that it may not be cancelled without ten days' prior
written notice to Landlord.
(b) All articles of personal property, and all movable business and
trade fixtures, machinery and equipment, cabinetwork, furniture and movable
partitions owned or installed by Tenant at its sole expense (and with respect to
which no credit or allowance was granted to Tenant by Landlord) in the Premises
shall remain the property of Tenant and may be removed by Tenant at any time,
provided that Tenant, at its expense, shall repair any damage to the Premises
caused by such removal. All alterations, decorations, installations, additions
or improvements in or to the Premises other than those specified in the first
sentence of this Section 13(b) shall, upon the completion thereof, become the
property of Landlord and shall be surrendered to Landlord upon the expiration or
other termination of the Term of this Lease. Landlord may elect to require
Tenant to remove all or any part of the property described in the first sentence
of this Section 13(b) at the expiration or other termination of the Term of this
Lease, in which event such removal shall be done at Tenant's expense, and Tenant
shall, at its expense, repair any damage to the Premises caused by such removal.
(c) Tenant shall be solely responsible for the consequences of Tenant's
repairs and alterations on the Premises' structure and on the operation of its
systems, such as heating, air conditioning, ventilating, electrical and
plumbing, whether or not Tenant had received Landlord's consent to such repairs
or alterations pursuant to this Section 13.
Section 14. MAINTENANCE AND REPAIRS
(a) Except for the maintenance, repairs and replacements Landlord is
required to make pursuant to Section 13(b) of this Lease, and except for items
expressly excluded from Operating Costs under Section 6(b)(iii), Tenant shall
take good care of the Premises and the fixtures and improvements therein, and,
at its sole cost and expense, make repairs, restorations or replacements as and
when needed to keep the Premises in first class order, condition, and repair,
reasonable wear and tear excepted. If Tenant fails, after notice to Tenant and
the lapse of applicable grace periods in accordance with Section 31(b) of this
Lease, to make any repairs, restorations or replacements required by this Lease,
Landlord may (but without any obligation to do so) make such repairs,
restorations, or replacements at the
<PAGE>
reasonable expense of Tenant and such expense shall be due within thirty (30)
days of receipt by Tenant of written notice by Landlord, as additional rent.
Tenant shall comply with all provisions of Section 13 and Section 15 of this
Lease in connection with such repairs, restorations and replacements.
(b) Subject to Section 14(c), (d) and (e) hereof, and subject to
Tenant's reimbursement of Landlord as provided in Section 6(b) hereunder,
Landlord shall act as property manager for the Premises and, in such capacity,
shall be responsible for the operation, maintenance and repair of the Premises,
including but not limited to: Building maintenance, exterior window cleaning,
normal maintenance and repair of the Premises (including heating and air
conditioning systems, electrical and plumbing systems, landscaping, roof, roof
membrane, elevator system, utility systems, Parking Lot, and snow removal) and
security outside of the Building. In addition, Landlord shall make the
structural repairs and replacements to the structural portion of the Premises
that Landlord is required to make, at Landlord's cost and expense, without
reimbursement from Tenant, pursuant to Section 6(b)(iii) of this Lease.
(c) Landlord agrees not to assign its responsibilities as property
manager of the Premises to any other person or entity without first providing
written notice to Tenant and obtaining Tenant's written consent to such
assignment.
(d) Landlord agrees, by not later than 45 days prior to the
Commencement Date, to provide Tenant's Facilities Manager with a detailed
property management plan for the Premises, including proposed staffing levels
and standards of management and maintenance of the Premises. Tenant shall
respond with its comments or approval of such plan within thirty (30) days of
receipt of the management plan and to any revised submittal within ten (10) days
of its receipt of the same. Landlord and Tenant shall discuss who Landlord shall
hire or contract with as major service providers for the Premises. Landlord
shall have yearly inspections of the roof as required by the terms of the roof
warranty and Landlord and Tenant shall cooperate in the enforcement of the roof
warranty. Landlord shall advise Tenant in advance of any repair or maintenance
cost believed to be in excess of $10,000. In the event Landlord or Tenant shall
disagree about such plans, the need for such maintenance or repairs, or whom to
hire as service providers, then Landlord and Tenant shall agree to a third party
property manager, which third party property manager shall informally arbitrate
such disputes.
(e) Except as provided elsewhere in this Lease to the contrary, there
shall be no allowance to Tenant for a diminution of rental value and no
liability on the part of Landlord, by reason of inconvenience, annoyance or
injury to, or interruption of business, arising from Landlord, Tenant or others
making any repairs, restorations, replacements, alterations, additions or
improvements in or to any portion of the Premises, or in or to fixtures,
appurtenances or equipment thereof; provided that such repairs, restorations,
etc. do not prevent Tenant from operating
<PAGE>
in the Premises as anticipated hereunder for more than twenty-four hours. In
such case, Rent hereunder shall be abated in proportion to the untenantable
space in the Premises. Notwithstanding the provisions of Section 12, Section 14
or Section 21 or any other provision of this Lease to the contrary, in
exercising its rights pursuant to this Lease, Landlord shall not unreasonably
interfere with the access to the Premises or Tenant's business operations
therein.
Section 15. MECHANIC'S LIENS
(a) Tenant shall, at Tenant's option, pay or cause to be paid or
provide bond for all costs for work done by it or caused to be done by it on the
Premises of a character which will or may result in liens on Landlord's interest
therein and Tenant will keep the Premises free and clear of all mechanic's
liens, and other liens on account of work done for Tenant or persons claiming
under it. Tenant shall indemnify and hold Landlord harmless against any
liability, loss, damage, costs or expenses, including reasonable attorney's
fees, on account of any claims of any nature whatsoever, including claims of
liens of laborers or materialmen or others for work performed for, or materials
or supplies furnished to Tenant or persons claiming under Tenant.
(b) Should any liens be filed or recorded against the Premises or any
action affecting the title thereto be commenced due to Tenant's contracts with
third parties, Tenant shall give Landlord written notice thereof. Tenant shall
thereafter cause such liens to be removed of record within ten days after the
filing of the liens. If a final judgment establishing the validity or existence
of a lien for any amount is entered, Tenant shall pay and satisfy the same at
once. If Tenant shall be in default in paying any charge for which a mechanic's
lien or suit to foreclose the lien has been recorded or filed, Landlord may (but
without being required to do so) pay such lien or judgment and any costs, and
the amount so paid, together with reasonable attorney's fees incurred in
connection therewith, shall be immediately due from Tenant to Landlord with
interest at the Default Rate from the dates of Landlord's payments. Landlord
shall be responsible for the payment for all work (including Landlord's Work),
and the removal of all liens of record relating to work of Landlord occurring
prior to the Commencement Date, or, thereafter, work performed by Landlord or
its contractors.
(c) At least five days prior to the commencement of any work permitted
to be done by persons requested by Tenant on the Premises in excess of
$10,000.00, Tenant shall notify Landlord of the proposed work and the names and
addresses of the persons supplying labor and materials for the proposed work so
that Landlord may avail itself of the provisions of statutes such as Section
38-22-105(2) of Colorado Revised Statutes (1973, as amended). During any such
work on the Premises, Landlord and its representatives shall have the right to
go upon and inspect the Premises at all reasonable times, and shall have the
right to post and keep posted thereon notices such as those provided for by
Section 38-22-105(2).
<PAGE>
Section 16. CASUALTY
(a) If the Building or the Parking Lot or means of access or ingress
to the Premises shall be so damaged by fire or other casualty as to render the
Premises untenantable, and if such damage shall be so great that an architect
selected by Landlord and agreed to by Tenant shall certify in writing to
Landlord and Tenant that the Premises with the exercise of reasonable diligence,
but without the payment of overtime or other premiums cannot be made tenantable
within 90 days from the happening of the fire or other casualty, or if the
damage shall be such that Landlord's architect shall certify that the Premises
can be made tenantable within the 90-day period from the happening of the fire
or other casualty, but insurance proceeds are not made available to Landlord for
repair of such damage, then Landlord or Tenant may terminate this Lease. If
neither Landlord nor Tenant terminates this Lease as set forth above, then,
except as hereinafter provided, Landlord shall with reasonable promptness,
repair the damage so done except that Landlord shall not be required to repair,
replace or restore any personal property of Tenant specified in the first
sentence of Section 13(b). Until such repair is substantially completed, the
Base Rent shall be abated in proportion to the part of the Premises which is
unusable by Tenant in the reasonable conduct of its business or profession.
There shall be no abatement of Base Rent by reason of any portion of the
Premises being unusable for a period of one day or less, unless covered by
Landlord's loss of rent insurance. If the damage is due to the fault or
negligence of Tenant or Tenant's employees, agents or invitees, there shall be
no abatement of Base Rent, unless covered by Landlord's loss of rent insurance.
(b) If the Premises shall be damaged by fire or other casualty, but not
so as to render the entire Building untenantable, Landlord shall cause the
damage to be repaired with reasonable promptness and, if not repaired
sufficiently that the entire Premises is tenantable within one day, there shall
be an abatement of Base Rent and all other amounts due under this Lease in
proportion to the Rentable Square Footage of the Premises rendered untenantable.
If the fire or other casualty causing damage to the Premises shall have been
caused by the negligence of Tenant, or Tenant's employees, agents or invitees,
such damage shall be repaired by Landlord and the amount paid for such repair
shall be due from Tenant to Landlord with interest at the Default Rate from the
dates of Landlord's payments, unless Landlord is paid for such loss by
insurance.
Section 17. EMINENT DOMAIN
(a) If any portion of the Premises shall be taken by right of eminent
domain or shall be conveyed in lieu of any such taking, which shall render the
Premises untenantable, then this Lease, at the option of either Landlord or
Tenant exercised by either party giving written notice to the other of such
termination within thirty (30) days after such taking or conveyance, shall
forthwith cease and terminate and the Base Rent and all other sums payable
hereunder shall be duly apportioned as
<PAGE>
of the date of such taking or conveyance. Tenant thereupon shall surrender to
Landlord the Premises and all interest therein under this Lease, and Landlord
may re-enter and take possession of the Premises and remove Tenant therefrom. If
neither party exercises the option to terminate this Lease, Landlord shall make
an equitable adjustment of the Base Rent payable by Tenant for the tenantable
portion of the Premises.
(b) In the event of any taking or conveyance described above, Landlord
shall receive the entire award or consideration for the lands and improvements
so taken and Tenant hereby waives all claims against Landlord and assigns to
Landlord all claims against the condemnor for or on account of or incident to
such taking or conveyance, except that Tenant may separately claim and recover
from the condemnor, the value of any personal property of Tenant which Tenant
was entitled to remove pursuant to this Lease, as well as compensation for loss
of leasehold estate, and leasehold improvements done and paid for by Tenant
without contribution from Landlord, relocation expenses and lost profits.
Section 18. INJURY TO PERSON OR PROPERTY
(a) Subject to Section 19(a), Landlord hereby agrees to indemnify,
defend and hold harmless Tenant from and against any and all demands, claims,
causes of action, liabilities or judgments and any and all expenses (including,
without limitation, reasonable attorney fees) incurred by Tenant, arising from
(i) the neglect or fault of Landlord, its employees, contractors or agents; or
(ii) Landlord's breach of its obligations under this Lease.
(b) Tenant shall neither hold nor attempt to hold Landlord or
Landlord's employees or agents liable for, and subject to Section 19(a), Tenant
shall hold harmless and indemnify Landlord and Landlord's employees or agents
from and against, any and all demands, claims, causes of action, liabilities, or
judgments, and any and all expenses (including, without limitation, reasonable
attorney's fees) incurred by Landlord in investigating and resisting the same,
arising from any of the following:
(i) Any injury or damage to the person or property of Tenant
or to any other person rightfully on the Premises for any purpose whatsoever, to
the extent the injury or damage is caused by the neglect or fault of Tenant or
Tenant's employees, agents or invitees, or to the extent such injuries are the
result of the violation of laws or ordinances, governmental orders of any kind,
or of the provisions of this Lease including the rules and regulations provided
for in Section 27 of this Lease, by any of such persons;
(ii) Any injury or damage of any nature suffered by Tenant or
Tenant's employees, agents or invitees to the extent the injury or damage is
caused by the loss or destruction by any person of furniture, inventory,
valuables, files or any other property kept or stored on the Premises; and
<PAGE>
(iii) Any injury or damage not specified above to the person
or property of Tenant, or Tenant's employees, agents or invitees, to the extent
the injury or damage is caused by any reason other than the fault or negligence
of Landlord or Landlord's employees or agents, or breach of this Lease by
Landlord, including, but not limited to any injury or damage resulting from
fire, explosion, falling plaster or glass, steam, gas, electricity, water, rain
or snow or leaks from any part of the Building, or from the pipes, appliances or
plumbing works or from the roof, street, subsurface or from any other place or
by dampness.
Section 19. TENANT'S INSURANCE
(a) At all times during the Term of this Lease, Tenant shall, at its
own expense, maintain (i) public liability insurance for claims for personal
injury or death and property damage with limits of not less than $1,000,000
combined single limit of liability plus umbrella coverage of not less than
$5,000,000; and (ii) fire and extended coverage insurance on all property
described in the first sentence of Section 13(b) to the extent of at least 90
percent of their insurable value. All such policies described in subsection
(a)(i) only shall name Landlord as an additional insured and shall be with
insurance companies and on forms reasonably satisfactory to Landlord. Tenant
shall, prior to Tenant's occupancy of the Premises and thereafter at Landlord's
request, furnish Landlord with certificates of all insurance to be maintained by
Tenant and with evidence of payment of the premiums thereon. All such policies
shall contain a clause or endorsement to the effect that they may not be
terminated or amended during the Term of this Lease except after thirty days'
written notice thereof to Landlord. All insurance policies maintained by or on
behalf of Landlord and Tenant with respect to the Premises shall include a
waiver of subrogation against Landlord and Tenant on the part of the respective
insurance carriers and each of the parties hereby releases the other, to the
extent of the releasing party's insurance coverage, from any and all liability
for any loss or damage covered by such insurance which may be inflicted upon the
property of such party even if such loss or damage shall be brought about by the
fault or negligence of the other party, its agents or employees; provided,
however, that this release shall be effective only with respect to loss or
damage occurring during such time as the appropriate policy of insurance shall
contain a clause to the effect or otherwise provide that this release shall not
affect said policy or the right of the insured to recover thereunder.
(b) Tenant shall not use or suffer or permit any other firm or person
to use the Premises for any hazardous purpose or in any manner that will
violate, suspend, void, make inoperative or increase the rate of any policies of
insurance of any kind at any time carried by Landlord upon the Premises and the
Building, fixtures and
<PAGE>
property therein. Tenant at Tenant's sole expense shall comply with all rules,
orders, regulations or requirements of the board of fire underwriters, or any
other similar body, having jurisdiction over the Premises. Any increase in the
cost of any insurance carried by Landlord attributable to Tenant's activities on
the Premises or Tenant's failure to perform and observe Tenant's obligations and
covenants hereunder shall be borne by Tenant and payable to Landlord, from time
to time, on demand.
Section 20. LANDLORD'S INSURANCE
At all times during the Term of this Lease, Landlord shall maintain
public liability insurance for claims for personal liability or death and
property damage with limits of not less than $5,000,000. Landlord, with respect
to all structures and improvements on the Premises, including leasehold
improvements, shall, during the Term of this Lease, carry full and adequate
insurance under a so-called all-risk policy, which shall include but not be
limited to coverage for boiler and machinery, accidental and direct physical
loss. Landlord's insurance shall also include rental value insurance for the
protection of Landlord, which insurance shall provide for payment of net rental
and other charges due hereunder for a minimum period of one (1) year following a
casualty, such policy providing that payments will be made to Landlord
regardless of whether this Lease is terminated as a result of such casualty.
During the period Landlord is performing Landlord's Work (and for any
additional period prior to delivery of the Premises to Tenant), Landlord shall
maintain, or cause its Contractor to maintain, property insurance under an all
risk form or builder's risk coverage in amounts and in a form acceptable to
Tenant. Landlord shall also require the Architect to carry errors and omissions
coverage in an amount of not less than $1,000,000. Landlord's insurance policies
shall be deposited with the Tenant and renewals thereof shall be deposited not
less than ten (10) days prior to the expiration date of the then expiring
policy. All such policies maintained by Landlord shall provide that the same
shall not be amended or canceled without at least thirty (30) days' prior
written notice to the Tenant.
Section 21. SERVICES PROVIDED BY LANDLORD
(a) Pursuant to Section 10 above, Landlord shall furnish or cause
to be furnished on or before the Commencement Date the following services:
(i) Heating or air conditioning; provided that Tenant will be
solely responsible to pay for the power to operate such heating and air
conditioning on the Premises;
(ii) Domestic running water for the operation of lavatories,
ordinary drinking fountains at all times (but paid for by Tenant);
(iii) 110-volt electric current for the office, warehouse and
manufacturing portions of the Premises and 220-volt or 408-volt electric current
for
<PAGE>
the manufacturing portion of the Premises, all as shown on Exhibit B; provided
that Tenant will be solely responsible to pay the electric bill to operate such
systems on the Premises; After the Commencement Date, the costs of maintaining
the availability of such utilities shall be Operating Costs pursuant to Section
6(b)(ii).
(b) Tenant covenants and agrees that at all times its use of electric
current shall never exceed the capacity of any wiring installation in or to the
Premises.
(c) Landlord shall not be liable to Tenant or any other person, for
direct or consequential damage, or otherwise, for breach of Section 21(a) above
when Landlord uses reasonable diligence to supply such services. Landlord
reserves the right temporarily to discontinue such services, or any of them, at
such times as may be necessary by reason of accident, unavailability of
employees, repairs, alterations or improvements, strikes, lockouts, riots, acts
of God, governmental preemption in connection with a national or local
emergency, any rule, order or regulation of any governmental agency, conditions
of supply and demand, Landlord's compliance with any mandatory governmental
energy conservation or environmental protection program or any other happening
beyond the control of Landlord. Landlord shall not be liable for damages to
person or property or for injury to, or interruption of, business for any
discontinuance permitted under this Section 21, nor shall such discontinuance in
any way be construed as an eviction of Tenant or cause an abatement of rent or
operate to release Tenant from any of Tenant's obligations hereunder, unless
Landlord is negligent in its duties to maintain the heating and air conditioning
system, the plumbing, and the electrical system.
Section 22. ASSIGNMENT AND SUBLETTING
(a) Tenant shall not assign this Lease or any interest herein or sublet
all or any part of the Premises, or suffer or permit the Premises or any part
thereof to be occupied by others, without the prior written consent of Landlord
in each instance, which consent shall not be unreasonably withheld. Any such
attempted assignment, subletting, or occupancy without Landlord's prior written
consent shall be void and shall confer no rights whatsoever on any party. Tenant
will notify Landlord in writing of any interest in this Lease which Tenant
wishes to assign or any portion of the Premises which Tenant wishes to sublet or
permit others to occupy which notice shall specify the terms and conditions of
such transaction and shall be accompanied by such information as Landlord may
require with respect to the proposed assignee, sublessee or occupant. Upon
receipt of such notice and information, Landlord shall have the right in its
discretion, reasonably exercised, to either:
(i) Consent to such assignment, subletting or occupancy in
which event one-half (1/2) of any rent or other consideration realized by Tenant
under any such assignment, subletting or occupancy in excess of the Base Rent
and other sums payable hereunder reasonably attributable to the space subject to
the
<PAGE>
assignment, subletting or occupancy arrangement, after amortization of the
reasonable costs incurred by Tenant for leasing commissions and leasehold
improvements in connection with such assignment, subletting or occupancy over
the term of such assignment, subletting or occupancy, shall be paid to Landlord
by Tenant; or
(ii) Refuse to consent to such assignment, subletting or
occupancy setting forth its reasons for such refusal in writing. If Landlord
does not deliver written notice as to Landlord's election of one of the options
referred to above within thirty (30) days after its receipt of the notice and
information from Tenant, Landlord shall be deemed to have consented to the
proposed assignment, subletting or occupancy. If this Lease or any interest
herein is assigned, or if the Premises or any part thereof be sublet or occupied
by anybody other than Tenant, with or without the consent of Landlord having
first been obtained, Landlord may, after default by Tenant, collect rent from
the assignee, subtenant or occupant, and apply the net amount collected to the
Base Rent and other sums due hereunder, but no collection shall be deemed a
waiver of this covenant, or the acceptance of the assignee, subtenant or
occupancy as the tenant hereof or a release of Tenant from the further
performance by Tenant of covenants on the part of Tenant contained in this
Lease. The consent by Landlord to an assignment, subletting, or occupancy
arrangement shall not relieve Tenant from primary liability hereunder or from
the obligation to obtain the express consent in writing of Landlord to any
further assignment, subletting, or occupancy arrangement.
(b) Notwithstanding anything contained in this Lease to the contrary
and provided the assignee assumes this Lease, none of the following, nor any
assignments or transfers of this Lease resulting from the following, shall
require Landlord's prior written consent or the payment by Tenant of any fees or
charges of any kind: (a) a transfer of stock or other ownership interests in
Tenant; (b) the merger, consolidation or amalgamation of Tenant with a third
party or the sale of all or substantially all of the stock or assets of Tenant;
or (c) a transfer to a parent, subsidiary or "affiliate" of Tenant. An
"affiliate" shall mean any trust, corporation, partnership or limited liability
company (i) which owns or "controls" the majority of the ownership interest of
Tenant, either directly or indirectly through other entities; (ii) the majority
of whose ownership interests is owned or "controlled" by Tenant; or (iii) which
owns or "controls" a majority of the ownership interests of Tenant. As used
herein, the word "control" shall mean the right or power to direct or cause the
direction of the management and policies of the entity in question.
Section 23. END OF TERM
<PAGE>
Upon the expiration or other termination of the Term of this Lease,
Tenant shall promptly quit and surrender to Landlord the Premises broom-clean,
in good order and condition, ordinary wear, condemnation, casualty and
Landlord's repair obligations excepted, and Tenant shall remove all of its
movable furniture and other effects and such alterations, additions and
improvements as Landlord shall require Tenant to remove pursuant to Section 13.
For purposes of the foregoing sentence, items which are partially worn from
normal use, but not yet in need of repair, shall be considered to be in good
condition. Likewise, items which are worn from normal use and have been in such
condition without Landlord repairing them shall be considered to be in good
condition. All movable furniture and other effects and alterations, additions
and improvements not so removed shall conclusively be deemed to have been
abandoned and may be appropriated, sold, stored, destroyed or otherwise disposed
of by Landlord without notice to Tenant or any other person and without
obligation to account therefor; and Tenant shall pay Landlord all reasonable
expenses incurred in connection with such property, including, but not limited
to, the cost of repairing any damage to the Building or Premises caused by
removal of such property. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this Lease.
Section 24. HOLDOVER
If Tenant or any party claiming through or under Tenant shall remain or
continue to be in possession of the Premises or any part thereof after the
termination of this Lease, and Landlord continues to accept rent payments,
Tenant or such party or both shall be deemed to be a month to month tenant of
the Premises on all the terms and conditions of this Lease, except that the Base
Rent shall be 110% of the amount of the Base Rent for the final Lease Year.
Nothing herein contained shall be construed to limit Landlord's right to obtain
possession of the Premises upon termination of this Lease by unlawful detainer
proceedings or otherwise in the event that Landlord does not continue to accept
rent payments after termination of this Lease.
Section 25. SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE
(a) This Lease is subordinate to all mortgages, trust indentures and
other encumbrances which may now or hereafter affect such leases or all or any
portion of the Premises and to all renewals, modifications, consolidations,
replacements and extensions thereof. This clause shall be self-operative and no
further instrument or subordination shall be required in order to effectuate it.
Tenant covenants and agrees nevertheless, to execute and deliver promptly any
certificate or other assurance in confirmation of such subordination reasonably
requested by any mortgagee.
<PAGE>
(b) Tenant agrees that in the event any proceedings are brought for the
foreclosure of any mortgage to which this Lease is subordinate, Tenant will
attorn to the purchaser at any such foreclosure sale and will recognize such
purchaser as its landlord under this Lease. Any attornment to a purchaser
pursuant to this Section 25 shall occur automatically, but Tenant shall on
request by and without cost to Landlord or any purchaser execute and deliver any
reasonable instruments evidencing such attornment.
(c) Notwithstanding the foregoing, no subordination or attornment
pursuant to the provisions of this Section 25 shall be effective unless prior to
the date any party desiring such subordination or attornment obtains title to
the Premises, such party has acknowledged by written notice to Tenant that this
Lease and Tenant's rights hereunder shall continue undisturbed while Tenant is
not in default hereunder; except that party shall not be:
(i) Liable for any act or omission of any prior Landlord;
provided, however, such party shall not be released from liability if such act
or omission constitutes a breach of the Landlord's obligations under the Lease
and continues after the lender or purchaser succeeds to the interest of the
Landlord under the Lease; or
(ii) Subject to any offsets or defenses which Tenant might
have against any prior Landlord; or
(iii) Bound by any Base Rent which Tenant might have
paid for more than one month in advance to any prior Landlord.
In addition, and notwithstanding the provisions of this Section 25, any
subordination of this Lease or attornment by Tenant shall be subject to Tenant's
receipt of written assurance from the mortgagee or deed of trust holder that (a)
Tenant's possession and this Lease, including any options to extend the Lease,
will not be disturbed so long as Tenant is not in default hereunder beyond any
applicable notice and cure periods and attorns to the record owner of the
Premises; and (b) in the event of foreclosure or sale, the Lease shall continue
in full force and effect in accordance with its terms as a direct lease between
Tenant and such mortgagee, deed of trust holder, or other purchaser; provided
that such rights of Tenant shall be subject to the provisions of Section
25(c)(i) through (iii) above.
(d) In the event a foreclosure is commenced against the Premises,
Landlord will give Tenant notice of such commencement at least thirty (30) days
prior to the foreclosure sale.
Section 26. STATEMENT OF PERFORMANCE
<PAGE>
Each party agrees at any time and from time to time, to execute and
deliver to the other, within twenty (20) days following a request therefor, a
statement in writing certifying that this Lease is in full force and effect, and
unmodified (or specifying any modifications), that the requesting party is not
in default hereunder (or specifying any alleged defaults by the requesting
party), and any further information about this Lease or the Premises which the
requesting party may reasonably request. Each party understands that prospective
purchasers, mortgagees or lessors of the Building and prospective assignees of
this Lease or prospective subleases or occupants of the Building will rely on
such certificates. Any failure by either party to respond to a request within
twenty (20) days after receipt of the request shall constitute an admission that
the matters set forth in the requested certificate are true.
Section 27. RULES AND REGULATIONS
The rules and regulations set forth on Exhibit C attached hereto are
hereby made a part of this Lease. Landlord may from time to time amend, modify,
delete or add new and additional reasonable rules and regulations for the use,
safety, cleanliness and care of the Premises. Such new or modified rules and
regulations shall be effective upon notice to Tenant from Landlord thereof.
Tenant and Tenant's employees, agents and invitees, shall at all times observe
faithfully and comply strictly with, the rules and regulations set forth on
Exhibit C or as hereinafter modified by Landlord. In the event of any breach of
any rules or regulations set forth on Exhibit C or any amendments or additions
thereto, Landlord shall have all remedies in this Lease provided for in the
event of default by Tenant and shall, in addition have any remedies available at
law or in equity including the right to enjoin any breach of such rules and
regulations. In the event of any conflict between the terms of this Lease and
the terms of any rules and regulations issued by Landlord, including those set
forth in Exhibit C, the terms of this Lease shall control.
Section 28. INTENTIONALLY LEFT BLANK.
Section 29. INDEMNITY; WAIVER
(a) Tenant shall indemnify and hold Landlord harmless from any and all
demands, claims, causes of action, liabilities, judgments, fines and expenses
(including, without limitation, reasonable attorney's fees) incurred or suffered
by Landlord by reason of any breach of this Lease (beyond applicable grace and
cure periods) by Tenant or Tenant's employees, agents or invitees of any
covenant or provision of this Lease.
(b) Landlord has no knowledge of any present violations of applicable
federal, state, or local laws and regulations, including all laws related to
toxic
<PAGE>
hazardous waste and hereby agrees to indemnify and hold harmless Tenant from
liability for any such hazardous waste existing prior to Tenant's occupancy of
the Premises. The Tenant shall comply with all applicable federal, state, and
local laws and regulations, including but not limited to the Federal Water
Pollution Control Act, 33 U.S.C. ss.1251, et seq., the Oil Pollution Act, 33
U.S.C. ss.2701 et seq., the Clean Air Act, 42 U.S.C. ss.7401, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. ss.6901, et seq., and the
Comprehensive Environmental Response, Control, and Liability Act, 42 U.S.C.
ss.9601, et seq., as subsequently amended. Prior to the date that is thirty (30)
days from the date hereof, Landlord agrees, as a material condition of this
Lease, to provide Tenant with an environmental assessment of the Premises, in
form and substance satisfactory to Tenant, certified by a third-party
environmental consultant licensed to practice in the State of Colorado and
reasonably acceptable to Tenant, which report shows to Tenant's satisfaction
that the Premises are free and clear of Hazardous Materials and the Premises are
not in violation of any environmental laws, rules, regulations or enactments
(the "Environmental Assessment"). In the event Landlord is unable to timely
deliver such report, Tenant shall be entitled to terminate this Lease upon
written notice to Landlord delivered no later than July 1, 1999. The Tenant
shall indemnify, defend, and hold the Landlord harmless for any violations
incurred under any such laws and regulations or for any costs, damages, claims,
liabilities, and judgments to the extent arising from past, present, and future
acts or omissions of the Tenant in connection with the use and/or occupancy
authorized by the Lease or other acts of Tenant or its agents. This
indemnification and hold harmless agreement includes, but is not limited to,
acts and omissions of the Tenant in connection with the use and/or occupancy
authorized by the Lease which result in: (1) violations of the above or any
applicable laws and regulations; (2) judgments, claims, or demands assessed
against the Landlord; (3) reasonable costs, expenses, and damages incurred by
the Landlord; or (4) other releases or threatened releases on or into the land,
property, and other interest of the Landlord by solid waste and/or hazardous
substance(s).
(c) The Tenant's indemnification of the Landlord shall also include any
damages to life or property arising from the Tenant's occupancy or use of land,
property, and other interest of the Landlord. The Landlord has no duty to
inspect leasehold area or to warn of hazards and, if the Landlord does inspect
the area, it shall incur no additional duty nor liability for identified or
non-identified hazards. This covenant may be enforced by the Landlord in a court
of competent jurisdiction. This, and all other Tenant indemnifications of
Landlord and Landlord indemnifications of Tenant under this Lease, shall survive
the expiration or termination of this Lease.
(d) LANDLORD AND TENANT HEREBY MUTUALLY WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER
ON ANY MATTERS WHATSOEVER ARISING OUT OF
<PAGE>
OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND
TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, OR ANY CLAIM OF INJURY OR
DAMAGE, OTHER THAN CLAIMS FOR PERSONAL INJURY OR DEATH.
(e) Binding Arbitration.
(i) Any controversy, claim or dispute arising out of or
relating to the construction provisions of this Lease (Section 10) or the
breach, termination, enforceability or validity thereof, other than claims for
personal injury or death, shall be determined exclusively by binding arbitration
in Boulder County before three arbitrators. The arbitration shall be governed by
the American Arbitration Association under its Commercial Arbitration Rules,
provided that at least one member of the panel shall have relevant knowledge of
or experience in the commercial real estate industry.
(ii) No provision of, nor the exercise of any rights under
Section 29(e) shall limit the right of any party: (A) to bring a forcible entry
and detainer, unlawful detainer, or eviction or constructive eviction action;
(B) to exercise self-help remedies provided for in this Lease or by law; or (C)
to request and obtain from a court having jurisdiction before, during or after
the pendency of any arbitration, provisional or ancillary remedies and relief
including, but not limited to, injunctive or mandatory relief or the appointment
of a receiver. The institution and maintenance of an action or judicial
proceeding for, or pursuit of, provisional or ancillary remedies or exercise of
self-help remedies shall not constitute a waiver of the right of any party
hereto, even if such party is the plaintiff, to submit the dispute to
arbitration if such party would otherwise have such right.
(iii) At any such arbitration proceeding, the arbitrator shall
not have the power or authority to award punitive damages to any party. Judgment
upon the award rendered may be entered in any court having jurisdiction.
(iv) Each of the parties shall, subject to the award of
the arbitrators, pay an equal share of the arbitrators' fees.
(f) Landlord represents and warrants to Tenant as follows:
(i) Neither Landlord nor any of its agents, officers,
employees or consultants has any knowledge of any (a) hazardous or toxic
materials, wastes or substances ("Hazardous Materials") which are located in or
which have been treated, stored, generated or disposed of upon the Premises; or
(b) violation of any state,
<PAGE>
federal or local law enacted for the protection of the environment or the safety
of workers at the Premises.
(ii) Tenant shall not have any responsibility or obligation
for clean-up, remediation, defense or indemnification with respect to any
environmental pollution, environmental impairment or Hazardous Materials not
caused by Tenant, its suppliers, agents, contractors, employees, invitees, or as
a result of Tenant's operations at the Premises.
Section 30. COMMENCEMENT OF THE TERM
Subject to Section 10 above, the Term of this Lease shall commence on
whichever of the following dates shall first occur:
(a) The date on or after December 15, 1999 on which the Premises are
"Substantially Complete" (which shall mean that (i) Landlord shall have
substantially completed the work in the Premises required to be completed by
Landlord as specified in Exhibit B (including the Building, the Parking Lot and
all necessary access and egress thereto), exclusive of minor "punch list" items
of mechanical and cosmetic adjustment that do not prevent Tenant from using or
enjoying the Premises for the use intended hereunder, (ii) Landlord has
furnished to Tenant a final unconditional certificate of occupancy for the
Premises, and (iii) Landlord has delivered to Tenant an Environmental Assessment
for the Premises (as defined in Section 29 herein) in form and substance
satisfactory to Tenant; provided that, in the event Landlord shall be delayed in
completing Landlord's Work by any interference with or hindrance of such work by
Tenant, Tenant's contractor or any of their employees, servants or agents or by
any changes in such work requested by Tenant and agreed to by Landlord
("Tenant-Caused Delays"), the Premises shall be deemed to have been
Substantially Complete on the date on which Landlord would have Substantially
Completed Landlord's Work had such Tenant-Caused Delay not occurred); or
(b) The date on which Tenant shall take possession and occupy the
Premises.
Landlord and Tenant shall execute and record an agreement specifying the date,
determined in the manner specified above, on which the term of this Lease
commenced, which date shall be the Commencement Date for all purposes under this
Lease.
Section 31. TENANT'S DEFAULT
<PAGE>
The following shall constitute defaults of Tenant hereunder:
(a) Tenant shall fail to pay when due any installment of Base Rent or
any other sum payable by Tenant under terms of this Lease, and Tenant shall fail
to remedy such failure within ten (10) days after Landlord shall have given
Tenant written notice specifying such failure;
(b) Tenant shall neglect or fail to perform or observe any of the
covenants herein contained on Tenant's part to be performed or observed and
Tenant shall fail to remedy such default within thirty (30) days after Landlord
shall have given to Tenant written notice specifying such neglect or failure (or
within such period, if any, as may be reasonably required to cure such default
if it is of such nature that it cannot be cured within such thirty-day period
and Tenant proceeds with reasonable diligence thereafter to cure such default);
(c) This Lease or the Premises or any part thereof shall be taken upon
execution or by other process of law directed against Tenant, or shall be taken
upon or subject to any attachment at the instance of any creditor of or claimant
against Tenant, and such, attachment shall not be discharged or disposed of
within ninety (90) days after the levy thereof;
(d) Tenant shall lock the Premises so as to prevent the entry therein
of Landlord or Landlord's representatives as permitted by the terms of this
Lease and the same is not corrected within three (3) days of written notice by
Landlord to Tenant;
(e) Tenant shall:
(i) Make an assignment of all or a substantial part of
Tenant's property for the benefit of creditors;
(ii) Apply for or consent to or acquiesce in the appointment
of a receiver, trustee or liquidator of Tenant or of all or a substantial part
of Tenant's property or of the Premises or of Tenant's interest in this Lease;
or
(iii) File a voluntary petition in bankruptcy or a petition or
an answer seeking reorganization under any bankruptcy or insolvency law or an
arrangement with creditors, or take advantage of any insolvency law or file an
answer admitting the material allegations of a petition filed against Tenant in
any bankruptcy, reorganization or insolvency proceedings; or
<PAGE>
(f) The entry of a court order, judgment or decree without the
application, approval or consent of Tenant, approving a petition seeking
reorganization of Tenant under any bankruptcy or insolvency law or appointing a
receiver, trustee or liquidator of Tenant or of all or a substantial part of
Tenant's property or of the Premises or of Tenant's interest in this Lease, or
adjudicating Tenant as bankrupt or insolvent, and such order, judgment or decree
shall not be vacated, set aside or stayed within ninety (90) days from the date
of entry.
Section 32. REMEDIES
If Tenant shall default under this Lease as set forth in Section 31,
Landlord shall have the following rights and remedies in addition to all other
remedies at law or equity, and none of the following, whether or not exercised
by Landlord, shall preclude the exercise of any other right or remedy whether
herein set forth or existing at law or equity:
(a) Landlord shall have the right to terminate this Lease by giving
Tenant notice in writing, and upon the giving of such notice, this Lease and the
Term hereof as well as the right, title and interest of Tenant under this Lease
shall wholly cease and expire in the same manner and with the same force and
effect (except as to Tenant's liability on the date specified in such notice as
if such date were the expiration date of the Term of this Lease) without the
necessity of re-entry or any other act on Landlord's part. Upon any termination
of this Lease, Tenant shall quit and surrender to Landlord the Premises as set
forth in Section 23. If this Lease is terminated, Tenant shall remain liable to
Landlord for all Base Rent accrued and unpaid and other sums due hereunder to
the date of termination of this Lease. Landlord shall also be entitled to
recover from Tenant the worth at the time of such termination of the excess, if
any, of the amount of Base Rent reserved in this Lease for the balance of the
Term of this Lease (which shall be calculated using a reasonable discount rate
determined at that time) over the then reasonable rental value of the Premises
for the same period.
(b) To the extent permitted in accordance with applicable law, Landlord
may without demand or notice, re-enter and take possession of the Premises or
any part thereof, and repossess the same as of Landlord's former estate and
expel Tenant and those claiming through or under Tenant, and remove the effects
of any and all such persons (forcibly, if necessary) without being deemed guilty
of any manner of trespass and without prejudice to any remedies for arrears of
rent or preceding breach of covenants. Should landlord elect to re-enter as
provided in this Section 32(b), or should Landlord take possession pursuant to
legal proceedings or pursuant to any notice provided for by law, Landlord may,
from time to time, without terminating this Lease, relet the Premises or any
part thereof for such term or terms
<PAGE>
and at such rental or rentals, and upon such other conditions as Landlord may
deem advisable, with the right to make alterations and repairs to the Premises.
No such re-entry or repossession of the Premises by Landlord shall be construed
as an election on Landlord's part to terminate this Lease unless a written
notice of termination is given to Tenant by Landlord. No such re-entry or
repossession of the Premises shall relieve Tenant of its liability and
obligation under this Lease, all of which shall survive such re-entry or
repossession. Upon the occurrence of such re-entry or repossession, Landlord
shall be entitled to the amount of the monthly Base Rent, and any other sums,
which would be payable hereunder if such re-entry or repossession had not
occurred, less the net proceeds, if any, of any reletting of the Premises after
deducting all of Landlord's expenses in connection with such reletting,
including but without limitation, all repossession costs, brokerage commissions,
legal expenses, reasonable attorney's fees, expenses of employees, alteration
costs and expenses of preparation for such reletting. Tenant shall pay such
amount to Landlord on the days on which the Base Rent or any other sums due
hereunder would have been payable hereunder if possession had not been retaken.
In no event shall Tenant be entitled to receive the excess, if any, of net rent
collected by Landlord as a result of such reletting over the sums payable by
Tenant to Landlord hereunder. Notwithstanding the provisions of this Section 32
or any other provision of this Lease to the contrary, (a) Landlord shall not
have the right to accelerate the rent and other charges due hereunder so long as
Tenant is not in default in the payment of any rent or charges due under this
Lease for a period of more than thirty (30) days; (b) any costs and expenses
incurred by Landlord in attempting to relet the Premises (including renovation
expenses, reasonable attorney fees and any free rent granted to a new tenant)
shall be spread over the entire term of the new lease, and the rent to be
received by Landlord shall be likewise determined at an average annual rate over
the entire term of such lease, and Tenant shall be obligated only for the
expenses attributable to the balance of the Term and Tenant shall receive credit
for such rent attributable to the Term; and (c) in exercising its remedies
pursuant to this Lease, Landlord shall use commercially reasonable efforts to
mitigate its damages.
(c) If Tenant shall default in making any payment required to be made
by Tenant (other than payments of Base Rent) or shall default in performing any
other obligations of Tenant under this Lease (after applicable grace and cure
periods), Landlord may, but shall not be obligated to, make such payment or on
behalf of Tenant, expend such sum as may be necessary to perform such
obligation. All sums so expended by Landlord with interest thereon at the
Default Rate shall be repaid by Tenant to Landlord as additional rent. No such
payment or expenditure by Landlord shall be deemed a waiver of Tenant's default
nor shall it affect any other remedy of Landlord by reason of such default.
<PAGE>
If Tenant shall fail to pay by the fifth day of the month any
installment of Base Rent due on the first of the month (even if such failure is
timely cured), Landlord may charge and Tenant shall pay upon demand interest
thereon at the Default Rate from the first day of the month and a collection
charge (in addition to any reasonable attorney's fees incurred) equal to five
percent (5%) of the amount of said late payment. If either party shall fail to
pay when due any sum other than Base Rent due under this Lease (even if such
failure is timely cured), the receiving party may charge and the paying party
shall pay upon demand interest thereon at the Default Rate, and if any such
amount is not paid within ten (10) days after written notice of delinquency, a
collection charge (in addition to any reasonable attorney's fees incurred) equal
to five percent (5%) of the amount of said late payment.
Section 33. LANDLORD'S DEFAULT
If Landlord defaults in the performance of any of its obligations,
covenants and warranties hereunder and such default continues for a period of
thirty (30) days after written notice thereof to Landlord from Tenant specifying
the nature of such default, or such additional period as Landlord may reasonably
require to cure the same (except in an emergency that Landlord shall fail to
cure immediately), in addition to all other rights and remedies available to
Tenant, Tenant may, at its option, cure the same on behalf of Landlord,
whereupon the cost of such curing plus interest thereon at the Default Rate
shall be immediately due and payable to Tenant from Landlord upon written demand
therefor by Tenant. Failure of Landlord to reimburse Tenant shall entitle Tenant
to deduct the costs thereof from the next subsequent rents due hereunder. Tenant
shall not have the remedy of termination of this Lease unless Landlord's default
is so substantial as to make the Premises untenantable, or Landlord is
repeatedly in default in a persistent manner on a subject of a substantial
nature; provided, however; any Tenant right of termination in such instances
shall still be subject to Landlord's right to cure.
Section 34. LANDLORD'S WARRANTIES
Landlord represents, covenants and warrants (i) that it has lawful
title to the Premises and has full right, power and authority to enter into this
Lease; (ii) that in the construction of the Building, the Parking Lot and all
other improvements on the Premises, it shall comply with all applicable laws,
ordinances, regulations and requirements of governmental authorities having
jurisdiction thereof; and (iii) the Premises will be developed, managed and
maintained in a neat, attractive and reputable manner.
<PAGE>
Section 35. NO IMPLIED SURRENDER OR WAIVER
The failure of either party to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this Lease
or any of the rules and regulations set forth in Exhibit C to this Lease or
hereafter adopted by Landlord shall not prevent a subsequent act, which would
have originally constituted a violation, from having all the force and effect of
an original violation. The receipt by either party of any sums due hereunder
with knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. The failure of Landlord to enforce any of the rules and
regulations set forth in Exhibit C, or hereafter adopted, against Tenant shall
not be deemed a waiver of such rules and regulations or any part thereof. Except
as set forth in this Lease, no provisions of this Lease shall be deemed to have
been waived by either party hereto unless such waiver is in writing signed by
such party. No act or thing done by Landlord or Landlord's agents during the
Term of this Lease shall be deemed an acceptance of a surrender of the Premises,
and no agreement to accept such surrender shall be valid unless in writing
signed by Landlord. No employees of Landlord or of Landlord's agents shall have
any power to accept the keys of the Premises prior to the termination of this
Lease. The delivery of keys to any employee of Landlord, or of Landlord's
agents, shall not operate as a termination of this Lease or a surrender of the
Premises. No payment by one party, or receipt by the other party, of a lesser
amount than any sums due hereunder, shall be deemed to be other than on account
of the earliest stipulated amount, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and the receiving party may accept such check or
payment without prejudice to such party's right to recover the balance of such
amount or pursue any other remedy available to such party. Whenever the consent
or approval of a party is required under this Lease, such consent or approval
shall not be unreasonably withheld, delayed or conditioned unless expressly
provided herein to the contrary, and shall be deemed given if such party has not
responded within ten (10) days of the other party's request for the same if such
request reminds the recipient that the request is deemed given if there is no
response within ten (10) days. Further, in the event any costs or expenses
(including attorney fees) are to be reimbursed by one party to the other, such
expenses shall be reasonable in amount and the incurring of such expenses shall
be reasonable. In the event either party commences arbitration or litigation in
order to enforce its rights under this Lease or as a result of a default by the
other party, the losing party shall pay the reasonable attorney fees and
expenses incurred by the prevailing party.
Section 36. TIME IS OF THE ESSENCE
Time is of the essence hereof.
<PAGE>
Section 37. PAYMENTS AFTER TERMINATION
No payment of money by Tenant to Landlord after the termination of this
Lease, in any manner, or after the giving of any notice (other than a demand for
payment of money) by Landlord to Tenant, shall reinstate, continue, or extend
the Term of this Lease or make ineffective any notice given to Tenant prior to
the payment of such money. After the service of notice or the commencement of a
suit or after final judgment granting Landlord possession of the Premises,
Landlord may receive and collect any sums due hereunder, and the payment of such
sums shall not make ineffective any notice, or in any manner affect any pending
suit or any judgment theretofore obtained.
Section 38. NO REPRESENTATIONS; ENTIRE AGREEMENT
Landlord, Tenant and their respective agents have made no
representations, warranties, agreements or promises with respect to the Premises
except such as are expressed herein. The entire contract of the parties is
contained herein, and there are no promises, agreements, representations,
warranties, conditions or understandings, either oral or written, between them,
other than as are herein set forth.
Section 39. BROKERAGE
Except that Landlord has dealt with Callan and Company and has agreed
to pay its brokerage fee in connection with this Lease, each party represents
and warrants that it has dealt only with Landlord or Tenant, respectively, in
connection with this Lease and that no broker negotiated this Lease or is
entitled to any commission in connection herewith. Each party further agrees to
indemnify and hold harmless the other party with respect to any claim for
broker's commission or similar compensation brought by any person by reason of
the indemnifying party's acts.
Section 40. NOTICE
Any notice, demand or communications concerning the Lease by Landlord
to Tenant shall be in writing and shall be deemed sufficiently given or rendered
if delivered personally to Tenant or any of its officers, or three days after
having been sent by United States certified or registered mail, return receipt
requested, postage prepaid, or one (1) business day after having been sent by a
nationally recognized overnight delivery service, addressed to Tenant at the
most current address of Tenant known by Landlord, or, after commencement of the
Term of this Lease, at the Premises. Any notice, demand or communication
concerning this Lease by Tenant to Landlord shall be in writing and must be
served by certified or registered United States mail, postage prepaid, or sent
by a nationally recognized overnight delivery
<PAGE>
service, addressed to Landlord at 6676 Gunpark Drive, Suite D, Boulder, Colorado
80301. Either party shall have the right to designate in writing, served as
above, a different address to which any notice, demand or communication is to be
mailed.
Section 41. AMENDMENT OR MODIFICATION
Except as herein otherwise provided, no amendment, alteration,
modification of or addition to this Lease shall be valid or binding unless
expressed in writing and signed by the party or parties to be bound thereby.
Section 42. DEFINITION OF LANDLORD
The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner or owners at the time in question of the Premises. In the
event that the interest of the Landlord herein named in the Premises is
transferred, whether by sale, lease or sublease, foreclosure, or otherwise, the
named Landlord shall be and hereby is entirely freed and relieved of all
covenants and obligations of Landlord hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and any such transferee that such transferee
has assumed and agreed to carry out any and all covenants and obligations of the
named Landlord, whether accruing before or after the transfer, and is the
Landlord hereunder.
Section 43. SEVERABILITY
If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the Term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby. It is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added as a
part of this Lease a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and be legal,
valid and enforceable.
Section 44. CAPTIONS; GENDER AND NUMBER
The caption of each Section is added as a matter of convenience only
and shall be considered of no effect in the construction of any provision or
provisions of this Lease. The term "Tenant" herein, or any pronoun used in place
thereof, shall include the masculine, feminine, singular, plural, individuals,
partnerships or corporations where applicable.
Section 45. SUCCESSORS, ASSIGNS; JOINT AND SEVERAL LIABILITY
<PAGE>
The covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their respective heirs,
distributees, executors, administrators, and successors.
Section 46. GOVERNING LAW
This Lease shall be governed by and interpreted in accordance with the
laws of the State of Colorado.
Section 47. MEMORANDUM
This Lease shall not be recorded, but Landlord and Tenant shall execute
and record, at Tenant's option and expense, a memorandum of this Lease
(including the right of first refusal) in the office of the Boulder County Clerk
and Recorder.
Section 48. OPTIONS TO EXTEND
(a) Grant of First Option. Tenant shall have the option to extend the
Term of this Lease for an additional five (5) years (the "First Option");
provided that Tenant is not in default under this Lease beyond any applicable
notice and cure periods.
(b) Exercise of First Option. Tenant may only exercise its First Option
by written notice to Landlord served upon Landlord during the time period
between twelve (12) months and six (6) months prior to the end of the original
Term. Once such notice is served, the Term of the Lease shall automatically be
modified so that the Term of the Lease shall end at 11:59 p.m. on the last day
of the calendar month in which the twentieth anniversary of the Commencement
Date occurs.
(c) Grant of Second Option. Provided that Tenant has exercised its
First Option, Tenant shall have the option to extend the Term of this Lease for
another five (5) year additional period (the "Second Option"); provided that
Tenant is not in default under this Lease beyond any applicable notice and cure
periods, at the time the Second Option is exercised, the First Option and the
Second Option shall also be referred to herein separately as the "Option Term"
and together as the "Option Terms".
(d) Exercise of Second Option. Tenant may only exercise its Second
Option by written notice to Landlord served upon Landlord during the time period
between twelve (12) months and six (6) months prior to the end of the Term as
modified by the exercise of the First Option. Once such notice is served, the
Term of the Lease shall be automatically modified so that the Lease will end at
11:59 p.m. on the last day of the calendar month in which the twenty-fifth
anniversary of the Commencement Date occurs.
<PAGE>
(e) Option Rent. If Tenant exercises its option to extend in accordance
with the provisions of this Section 48, this Lease shall be extended for the
applicable Option Term at an annual Base Rent, as determined by agreement
between Landlord and Tenant or, if no agreement is reached, equal to the market
rental value of the Premises for the five-year Option Term as of the
commencement date of the applicable Option Term as determined by appraisal in
accordance with the provisions of this Section 48, provided, however, that such
annual Base Rent for the Option Term shall not in any event be less than the
annual Base Rent in effect as of the last day of the immediately preceding Term
or Option Term.
After receipt of notice of Tenant's exercise of its option to extend,
and after verbal discussion with Tenant as to the appropriate Base Rent,
Landlord shall deliver to Tenant Landlord's proposed annual Base Rent for the
applicable Option Term. If Tenant disagrees with Landlord's proposed annual Base
Rent for the Option Term, and if the parties cannot agree upon an annual Base
Rent by the date that is five (5) months prior to the expiration of then current
Term or Option Term, then the annual Base Rent for the Option Term shall be
determined as follows:
Landlord and Tenant will each promptly choose one disinterested
commercial real estate appraisal firm of recognized competence and experience in
the Boulder market and each firm shall designate an appraiser, who must have at
least ten years of commercial appraising experience in eastern Colorado and who
must be either a Senior Real Property Appraiser of the Society of Real Estate
Appraisers or a member of the American Institute of Real Estate Appraisers, to
perform an appraisal of the fair market rental value of the Premises for the
applicable Option Term. By that date which is four (4) months prior to the
expiration of the initial Term or Option Term, as the case may be, at a mutually
agreeable time and place, Landlord and Tenant shall simultaneously exchange in
writing the two fair market rental value appraisals of the Premises. If the two
fair market rental values of the Premises, as determined by such appraisal
firms, are within ten percent (10%) of each other (i.e., if the lower of the two
appraised values, on a present value basis, is at least 90% of the higher of the
two appraised values, on a present value basis), the fair market value of the
Premises for the Option Term shall be deemed to be the average of such appraised
rent values. Such average appraised rental values shall be final and
conclusively binding on the two parties. Prior to submitting their appraisals,
the two appraisal firms shall select (subject to the approval of Landlord and
Tenant) a third disinterested commercial real estate appraisal firm of
comparable qualifications to perform the same appraisal, if necessary. If the
two fair market rental values shown by the two appraisal firms are not within
10% of each other, then the third appraisal firm shall, within thirty (30) days
after the exchange of the two fair market rental value appraisals, determine
which of the two appraisals is closest to its opinion as to the fair market
rental value of the Premises for the applicable Option Term in
<PAGE>
accordance with the foregoing instructions and such third appraisal firm shall
notify Landlord and Tenant of its determination. The appraisal so chosen by the
third appraisal firm shall be final and conclusively binding on the parties as
to the fair market rental value of the Premises for the applicable Option Term.
Landlord and Tenant will be responsible for compensating the appraisal firm
selected by each, and the third appraisal firm, if any, shall be compensated
equally by the parties.
In the event the annual Base Rent for the Option Term is not determined
until after the commencement date of the applicable Option Term, Tenant shall
continue paying the annual Base Rent payable under the Lease for the preceding
Lease Year and, at such time as any increase in the annual Base Rent is
determined, (i) the annual Base Rent shall be retroactively adjusted to the
commencement date of the applicable Option Term, (ii) Tenant shall (within
thirty (30) days of Landlord's written demand) pay to Landlord the increased
annual Base Rent for the period between the commencement date of the applicable
Option Term and the last day of the month in which Landlord's demand for such
payment is made, and (iii) commencing on the first day of the month following
the month in which such demand for the lump sum payment is made by Landlord,
Tenant shall start making payments of monthly installments of annual Base Rent
in the recomputed amount. Once annual Base Rent for the Option Term has been
established, each of the parties agree, on the demand of the other, to execute
an appropriate amendment to the Lease to incorporate the annual Base Rent
established.
(f) All Other Provisions of the Lease to Remain the Same During Option
Periods. All the provisions of the Lease shall remain the same during the
extended Terms in the event either or both of the options granted hereunder are
exercised (including the payment of Operating Costs), except for Option Rent, as
provided in Section 48(d) above. If the Term of the Lease is extended as herein
provided, the term "Term" as used herein shall include such Option Term or
Terms.
Section 49. RIGHT OF FIRST REFUSAL
(a) Right of First Refusal. If at any time during the Term Landlord
proposes to sell the Premises (for example, where Landlord receives an
unsolicited offer it proposes to accept) or list them for sale, Landlord shall
first make a written offer to sell the Premises to Tenant on the same terms and
conditions on which the Landlord proposes to transfer or list the Premises.
(b) Acceptance of Offer. The Tenant shall have the right for a period
of thirty (30) days after receipt of the offer from the Landlord to elect to
purchase the Premises, during which time Tenant may conduct any and all
inspections of the Premises. The making of a counteroffer by Tenant shall not be
deemed a rejection of Landlord's offer or otherwise shorten Tenant's thirty (30)
day period to accept
<PAGE>
Landlord's offer. To exercise this right of first refusal, the Tenant shall give
written notice to the Landlord within said thirty-day period. Upon exercise of
the right of first refusal, the sale shall be closed and payment made on the
terms set forth in the offer made to Tenant pursuant to Section 49(a), except
that Tenant shall be entitled to a credit against the purchase price in the
amount of one-half of the amount of the brokerage commission Landlord would have
paid but avoided by selling to Tenant, and except for the time for closing which
shall be conducted at a time and place acceptable to the parties, but in no
event later than one hundred twenty (120) days after receipt by Tenant of
Landlord's offer.
(c) Failure to Accept Offer. If Tenant does not elect to purchase the
Premises in accordance with Section 49(b) above, or if the purchase is not
closed, then Landlord may transfer the Premises within six (6) months after
making the offer to Tenant to an unaffiliated third party pursuant to a bona
fide arm's length agreement at a price not less than ninety percent (90%) of the
price offered to Tenant or at a price not less than the Tenant's last
counter-offer to Landlord, whichever is greater, and Tenant's first right of
refusal shall thereupon terminate. In the event Landlord does not so transfer
the Premises within such six (6) month period, then Tenant's first right of
refusal shall continue. In any event, Tenant's first right of refusal shall
terminate at the end of the Term or earlier termination of this Lease.
(d) Trade. The sale that Landlord may make after Tenant does not elect
to purchase the Premises under Section 49(c), or such a purchase is not closed
may be pursuant to a trade for other property so long as such other property has
a fair market value of at least ninety percent (90%) of the price offered to
Tenant pursuant to Section 49(a) above, or not less than the Tenant's last
counter-offer to Landlord, whichever is greater.
(e) Transfer to Related Entity. The Tenant's right of first refusal
granted under this Section 49 shall not apply to any transaction whereby
Landlord transfers the Premises to Landlord's Members or relatives of the
Members of Landlord or to an entity in which any of them own beneficial
interests; provided, however, that in such event the first right of refusal
shall continue and the interest of the transferee partnership or limited
liability company shall be subject to this first right of refusal.
(f) Tenant's Rights. Landlord hereby agrees not to grant purchase,
option or first refusal rights of any kind with respect to the Premises or any
part thereof or any interest therein, to any person or party other than Tenant,
unless the same are expressly made subject to the rights of Tenant hereunder.
(g) Sale of Property to a Third Party. If Tenant elects not to exercise
its right of first refusal and the Premises are sold to a third-party, the sale
shall be subject to this Lease except that this first right of refusal shall
have terminated.
<PAGE>
(h) Part of Premises. Tenant's first right of refusal shall also apply
when Landlord proposes to sell or list a part of the Premises, in which event
Landlord shall offer the part of the Premises it proposes to list or sell to
Tenant and the provisions of this Section 49 shall also govern such offer and
first right of refusal.
Section 50: LENDERS PROTECTION CLAUSE
Tenant agrees to give each holder of a mortgage, deed of trust or other
encumbrance secured by the Premises, by certified or registered mail, or
nationally recognized overnight delivery service, a copy of any notice of
default served upon the Landlord, provided that prior to such notice Tenant has
been notified in writing of the address of such holder. Tenant further agrees
that all of such holders shall have thirty (30) days from the date of such
notice within which to cure such default or if such default cannot be cured
within that time, then in such additional time as may be necessary if within
such thirty (30) days, such holder has commenced and is diligently pursuing, the
remedies necessary to cure such default (including, but not limited to,
commencement of foreclosure proceedings, if necessary, to effect such cure) in
which event this Lease shall not be terminated while such remedies are being so
diligently pursued. The preceding sentence is not intended to alter or delay any
rights the Tenant may have hereunder or by law, except to prohibit any Tenant
right to terminate this Lease until the notice and cure opportunity set forth in
the preceding sentence have been given.
EXECUTED as of the date first set forth above.
LANDLORD: TENANT:
MUM IV, LLC HELIX TECHNOLOGY CORPORATION
By /s/Donald W. Unkefer By /s/Michael El-Hillow
---------------------------- ---------------------------
Donald W. Unkefer Michael El-Hillow
General Manager Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT A
Recorded Plan of the Premises
<PAGE>
EXHIBIT B
Building Plans and Specifications
<PAGE>
EXHIBIT C
Rules and Regulations
The Rules and Regulations set forth in this Exhibit shall be and hereby
are made a part of the Lease to which they are attached. Whenever the term
"Tenant" is used in these rules and regulations, it shall be deemed to include
Tenant, its employees, agents, or invitees. The following rules and regulations
may from time to time be modified by Landlord in the manner set forth in Section
27 of the Lease.
1. Use of the Water Fixtures. Water closets and other water fixtures
shall not be used for any purpose other than that for which they are intended,
and any damage resulting to such fixtures from misuse on the part of the Tenant
shall be paid for by Tenant, except to the extent such payment is made from
proceeds of insurance to Landlord.
2. Trash. All trash shall be placed in receptacles provided by Tenant
on the Premises.
3. Hazardous Operations and Items. Tenant shall not bring or permit to
be brought or kept in or on the Premises by hazardous, flammable, combustible or
explosive fluid, material, chemical or substance except those that shall be
handled in a safe manner according to OSHA standards and the environmental laws
set forth in Section 29.
4. Outside Storage. There shall be no outside storage of any articles
of any nature unless it is screened from adjacent rights of way or other
building sites in the subdivision in a manner approved by Landlord.
5. Captions. The caption for each of these rules and regulations is
added as a matter of convenience only and shall be considered of no effect in
the construction of any provision or provisions of these rules.
<PAGE>
EXHIBIT D
Covenants and Restrictions
SUPPLEMENTAL BENEFIT PLAN
OF
HELIX TECHNOLOGY CORPORATION
Effective April 1, 1999
Section 1. Purpose. This Supplemental Benefit Plan of Helix Technology
Corporation (the "Supplemental Benefit Plan") provides for the payment of
additional compensation to certain employees of Helix Technology Corporation
(the "Company") to compensate them for benefits not payable to them under the
Helix Technology Corporation Employees' Pension Plan (the "Pension Plan") due to
limits on Pension Plan benefits imposed by the Internal Revenue Code of 1986
(the "Code").
Section 2. Eligibility. A person is eligible for benefits under this
Supplemental Benefit Plan if the person is an employee of the Company who is a
participant in the Pension Plan and who has been designated by the Company's
Board of Directors as a participant in this Supplemental Benefit Plan (a
"Participant").
Section 3. Supplemental Benefit. The benefit payable to a Participant
under this Supplemental Benefit Plan (the "Supplemental Benefit") is the excess
of (a) the benefit that would be payable to the Participant from the Pension
Plan if the benefit under the Pension Plan were calculated without regard to the
limitation on the amount of the benefit imposed by section 415(b) of the Code
and the limitation on the amount of compensation that may be taken into account
in calculating the benefit imposed by section 401(a)(17) of the Code over (b)
the benefit actually payable from the Pension Plan. The Supplemental Benefit
will be determined on a single life annuity basis. Actuarial equivalence under
this Plan, including conversions to other permitted forms of benefits, will be
based on the actuarial assumptions in the Pension Plan at the time the benefit
begins to be paid from the Pension Plan.
Section 4. Time and Manner of Payment. Subject to the other provisions
of this Plan, the Company will pay the Supplemental Benefit to the Participant
at the same time or times and in the same form or forms as the Participant's
benefit is paid from the Pension Plan. All forms of benefit payable under the
Supplemental Benefit Plan will be actuarilly equivalent.
Section 5. Death. If the Participant dies before his or her entire
benefit has been paid from this Supplemental Benefit Plan, any unpaid portion of
the Supplemental Benefit will be paid to the same extent, at the same time or
times, in the same form or forms, and to the same beneficiary or beneficiaries
as a death benefit is paid to the Participant's beneficiary or beneficiaries
under the Pension Plan.
Section 6. Company's Right to Change Time or Manner of Payment. In the
best interest of the financial integrity and administration of the Supplemental
Benefit Plan, the Company may, at any time at or after occurrence of the event
that causes a Participant's
<PAGE>
Supplemental Benefit to begin to be paid, shorten the period over which the
Supplemental Benefit will be paid or change the form in which the Supplemental
Benefit will be paid, provided that the changed period or form produces a
benefit that is actuarially equivalent to the Supplemental Benefit payable at
the time and in the form that the Participant's benefit is payable from the
Pension Plan.
Section 7. Unfunded Obligation; Trust. The obligations of the Company
to make payments under this Plan will be unfunded, except that the Company may
in its discretion arrange for a trust to hold assets that may be used to satisfy
the Company's obligations under the Plan, but only if the establishment of such
a trust will not cause Participants to have any rights under this Plan or the
trust greater than the rights of general unsecured creditors of the company.
Participants may not assign their rights under this Plan.
Section 8. Separable Plan. To the extent that this Plan provides
benefits in excess of the limit of section 415 of the Code, those benefits shall
be a separable part of the Plan; and that separable part will be a separate plan
that is an excess benefit plan within the meaning of section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended.
Section 9. Administration. This Plan will be administered by the
Human Resources and Compensation Committee of the Board of Directors (the
"Administrator"). The Administrator is the named fiduciary of the Plan.
Section 10. Effective Date; Amendment; Termination. This Plan is
effective for benefits paid on or after April 1, 1999. the Plan may be
terminated or amended in any respect by the Administrator, provided that no such
termination or amendment may reduce the benefit payable to a Participant with
respect to the benefit earned before the date of such termination or amendment.
The Company's obligations under this Plan shall be binding upon any successor to
substantially all the assets and business of the Company.
Section 11. Governing Law. To the extent not governed by federal law,
this Plan will be construed, enforced, and administered in accordance with the
laws of the Commonwealth of Massachusetts.
By signing this document, a duly authorized officer of the Company has
acknowledged adoption of this Plan by the Company.
HELIX TECHNOLOGY CORPORATION
By /s/Michael El-Hillow
---------------------
Michael El-Hillow
Senior Vice President
Exhibit 21. Subsidiaries of the Registrant
Percentage of Voting
Subsidiary Place Organized Securities Owned
Helix Securities
Corporation Massachusetts Wholly owned
CTI-Cryogenics, Inc. Barbados Wholly owned
CTI-Cryogenics Ltd. England Wholly owned
CTI-Cryogenics SA France Wholly owned
CTI-Cryogenics GmbH Germany Wholly owned
Helix Technology KK Japan Wholly owned
Granville-Phillips Company Washington Wholly owned
Helix Taiwan Ltd. Taiwan Wholly owned
Exhibit 23. Consent of Experts and Counsel
CONSENT OF INDEPENDENT ACCOUNTANTS
To The Board Of Directors and Stockholders
of Helix Technology Corporation:
We consent to the incorporation by reference in the registration
statement of Helix Technology Corporation on Form S-8 (File No. 2-83974) of our
reports dated January 21, 2000, on our audits of the consolidated financial
statements and financial statement schedule of Helix Technology Corporation as
of December 31, 1999 and 1998, and for the years ended December 31, 1999, 1998
and 1997, which reports are included in this Annual Report on Form 10-K.
/s/PricewaterhouseCoopers LLP
- -----------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 17, 2000
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