<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 1996
REGISTRATION NO. 333-08383
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CYMER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 3559 33-0175463
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
16275 TECHNOLOGY DRIVE
SAN DIEGO, CALIFORNIA 92127
(619) 487-2442
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DR. ROBERT P. AKINS
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
CYMER, INC.
16275 TECHNOLOGY DRIVE
SAN DIEGO, CALIFORNIA 92127
(619) 487-2442
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
HENRY P. MASSEY, JR., ESQ. JAY K. HACHIGIAN, ESQ.
DAVID C. DRUMMOND, ESQ. RALPH L. ARNHEIM III, ESQ.
GREGORY T. COX, ESQ. NANCY S. KIM, ESQ.
WILSON SONSINI GOODRICH & ROSATI GUNDERSON DETTMER STOUGH VILLENEUVE
PROFESSIONAL CORPORATION FRANKLIN & HACHIGIAN, LLP
650 PAGE MILL ROAD 600 HANSEN WAY, SECOND FLOOR
PALO ALTO, CALIFORNIA 94304-1050 PALO ALTO, CALIFORNIA 94304
(415) 493-9300 (415) 843-0500
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effect registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
------------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED BE REGISTERED(1) PER SECURITY(2) OFFERING PRICE(2) FEE(3)
-----------------
- --------------------------------------------------------------------------------------------------------------------
Common Stock $0.001 par value........... 3,983,918 shares $9.50 $37,847,221 $13,051
</TABLE>
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- --------------------------------------------------------------------------------
(1) Includes 501,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any. Also includes 142,918 shares to be offered
on a continuous basis by certain stockholders of the Company (including
12,992 shares underlying certain warrants held by such stockholders).
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457.
(3) $11,897 of the registration fee was previously paid in connection with the
filing of the original registration statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
CYMER, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF PART I ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM AND HEADING IN FORM S-1
REGISTRATION STATEMENT PROSPECTUS LOCATION IN PROSPECTUS
- ------------------------------------------------ --------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............. Prospectus Summary; The Company; Risk
Factors
4. Use of Proceeds............................ Prospectus Summary; Use of Proceeds
5. Determination of Offering Price............ Outside Front Cover Page; Underwriters
6. Dilution................................... Dilution
7. Selling Security Holders................... Principal and Selling Stockholders
8. Plan of Distribution....................... Outside and Inside Front Cover Pages;
Underwriters; Outside Back Cover Page
9. Description of Securities to be
Registered............................... Description of Capital Stock; Dividend
Policy
10. Interests of Named Experts and Counsel..... Legal Matters; Experts
11. Information with Respect to the
Registrant............................... Outside and Inside Front Cover Pages;
Prospectus Summary; The Company; Risk
Factors; Dividend Policy; Capitalization;
Dilution; Selected Consolidated Financial
Data; Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Description of Capital
Stock; Shares Eligible for Future Sale;
Consolidated Financial Statements; Outside
Back Cover Page
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
PROSPECTUS (Subject to Completion)
Issued August 22, 1996
3,340,000 Shares
LOGO
COMMON STOCK
------------------------
OF THE 3,340,000 SHARES OF COMMON STOCK OFFERED HEREBY, 3,002,032 SHARES ARE
BEING SOLD BY THE COMPANY AND 337,968 SHARES ARE BEING SOLD BY THE SELLING
STOCKHOLDERS. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL
NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES BY THE
SELLING STOCKHOLDERS. PRIOR TO THIS OFFERING, THERE HAS BEEN NO
PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS
CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE
WILL BE BETWEEN $7 1/2 AND $9 1/2 PER SHARE. SEE
"UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS TO
BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC
OFFERING PRICE.
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON
PAGE 5 HEREOF.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<S> <C> <C> <C> <C>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
------------------------------------------------------------
Per Share............................ $ $ $ $
Total(3)............................. $ $ $ $
</TABLE>
- ------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
(2) Before deducting expenses payable by the Company estimated at $1,000,000.
(3) The Company has granted to the Underwriters an option, exercisable within
30 days of the date hereof, to purchase up to an aggregate of 501,000
additional Shares at the price to public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$ , $ and $ , respectively. See "Underwriters."
------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to the approval of certain legal
matters by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
counsel for the Underwriters. It is expected that delivery of the Shares will be
made on or about , 1996, at the offices of Morgan Stanley & Co.
Incorporated, New York, New York, against payment therefor in immediately
available funds.
------------------------
MORGAN STANLEY & CO.
Incorporated
MONTGOMERY SECURITIES
NEEDHAM & COMPANY, INC.
, 1996
<PAGE> 4
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
STOCKHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF,
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Company........................... 4
Risk Factors.......................... 5
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Selected Consolidated Financial
Data................................ 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 27
<CAPTION>
PAGE
----
<S> <C>
Management............................ 41
Certain Transactions.................. 48
Principal and Selling Stockholders.... 50
Description of Capital Stock.......... 52
Shares Eligible for Future Sale....... 54
Underwriters.......................... 56
Legal Matters......................... 58
Experts............................... 58
Additional Information................ 58
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------
The Company intends to furnish its stockholders annual reports containing
consolidated financial
statements audited by its independent auditors, and quarterly reports containing
unaudited consolidated financial data for the first three quarters of each
fiscal year.
------------------------
Cymer and the Cymer logo are registered trademarks of the Company. All
other trademarks or trade names referred to in this Prospectus are the property
of their respective owners.
------------------------
Except as otherwise indicated, all information contained in this
Prospectus: (i) reflects the reincorporation of the Company into Nevada effected
in August 1996 and an increase in the number of authorized shares of Common
Stock to 25,000,000 effected in connection therewith; (ii) assumes no exercise
of the Underwriters' over-allotment option; (iii) reflects the conversion of all
outstanding shares of existing series of Preferred Stock (the "Redeemable
Convertible Preferred Stock") into 7,562,527 shares of Common Stock and the
authorization of a new class of 5,000,000 shares of blank check Preferred Stock,
which will occur upon the closing of this offering; and (iv) assumes the
issuance simultaneously with the offering of 78,571 shares of Common Stock upon
the anticipated exercise of outstanding warrants.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus.
THE COMPANY
Cymer is the leading provider of excimer laser illumination sources for use
in deep ultraviolet ("DUV") photolithography systems targeted at the pilot and
volume production segments of the semiconductor manufacturing market. The
Company's lasers are incorporated into step-and-repeat and step-and-scan
photolithography systems for use in the manufacture of semiconductors with
critical feature sizes below 0.35 microns. The Company believes that its excimer
lasers constitute a substantial majority of all excimer lasers incorporated in
DUV photolithography tools. The Company's customers include all five
manufacturers of DUV photolithography systems: ASM Lithography, Canon,
Integrated Solutions, Nikon and SVG Lithography. Photolithography systems
incorporating the Company's excimer lasers have been purchased by each of the
world's 10 largest semiconductor manufacturers: Intel, NEC, Toshiba, Hitachi,
Motorola, Samsung, Texas Instruments, Mitsubishi, Fujitsu and Philips.
The Company believes its leading position in the excimer laser market is
attributable to its development of advanced technologies that address the needs
of its customers as well as semiconductor manufacturers. The performance
characteristics of the Company's excimer lasers include high pulse repetition
rate, narrow bandwidth, energy stability and reliability relative to competing
products. The Company also believes that it is currently the only volume
supplier of excimer laser systems for DUV photolithography applications. The
Company's krypton fluoride excimer lasers are currently capable of producing
critical features as small as 0.25 microns, and the Company believes its
technology is extendible to critical feature sizes as small as 0.10 microns by
using different gas combinations and advanced optical and photomask technology.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered................................... 3,340,000 shares, including
3,002,032 shares by the Company(1) and
337,968 shares by the Selling Stockholders
Common Stock to be outstanding after the offering...... 11,845,922 shares(1)(2)
Use of proceeds........................................ Repayment of indebtedness and general corporate
purposes, including working capital
Proposed Nasdaq National Market symbol................. CYMI
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -------------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues...................................... $ 4,480 $ 9,131 $ 5,699 $ 8,921 $18,820 $ 7,279 $19,182
Operating income (loss)............................. (3,181) (1,117) (2,696) (1,788) (150) (397) 876
Net income (loss)................................... (2,961) (1,268) (2,924) (2,045) 69 (383) 957
Pro forma earnings (loss) per share (3)............. $ 0.01 $ (0.06) $ 0.10
Pro forma weighted average common and common
equivalent shares outstanding (3)................. 7,571 6,692 9,666
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------
ACTUAL AS ADJUSTED(4)
------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................................................................... $ 1,981 $ 19,462
Working capital................................................................................ 5,961 28,692
Total assets................................................................................... 31,376 48,857
Total debt (5)................................................................................. 9,497 4,247
Redeemable Convertible Preferred Stock......................................................... 35,234 --
Stockholders' equity (deficit)................................................................. (21,991) 35,974
</TABLE>
- ---------------
(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriters."
(2) Based on the number of shares outstanding as of June 30, 1996. Assumes the
issuance simultaneously with the offering of 78,571 shares of Common Stock
upon the anticipated exercise of outstanding warrants. Excludes (i)
1,191,753 shares of Common Stock issuable upon exercise of options
outstanding as of June 30, 1996 at a weighted average exercise price of
$1.83 per share, (ii) 1,500,000 shares reserved for issuance under the
Company's 1996 Stock Option Plan, (iii) 100,000 shares reserved for issuance
under the Company's 1996 Director Stock Option Plan and (iv) 250,000 shares
of Common Stock reserved for issuance under the Company's 1996 Employee
Stock Purchase Plan. Also excludes 385,334 shares of Common Stock issuable
upon exercise of outstanding warrants at a weighted average exercise price
of $3.42 per share. See "Management -- Stock Plans" and Note 6 of Notes to
Consolidated Financial Statements.
(3) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing pro forma earnings (loss)
per share. See "Selected Consolidated Financial Data" for supplementary
earnings (loss) per share information.
(4) Adjusted to reflect the conversion of all outstanding shares of Redeemable
Convertible Preferred Stock into 7,562,527 shares of Common Stock upon the
closing of this offering, the assumed issuance of 78,571 shares of Common
Stock upon the exercise of certain outstanding warrants, the sale by the
Company of 3,002,032 shares of Common Stock offered hereby at an assumed
initial public offering price of $8.50 per share and after deducting
underwriting discounts and commissions and estimated offering expenses
payable by the Company, and the application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."
(5) Total debt includes indebtedness for borrowed money and capital lease
obligations.
3
<PAGE> 6
THE COMPANY
Cymer is the leading provider of excimer laser illumination sources for use
in deep ultraviolet ("DUV") photolithography systems targeted at the pilot and
volume production segments of the semiconductor manufacturing market. The
Company's lasers are incorporated into step-and-repeat and step-and-scan
photolithography systems for use in the manufacture of semiconductors with
critical feature sizes below 0.35 microns. The Company believes that its excimer
lasers constitute a substantial majority of all excimer lasers incorporated in
DUV photolithography tools. The Company's customers include all five
manufacturers of DUV photolithography systems: ASM Lithography, Canon,
Integrated Solutions, Nikon and SVG Lithography. Photolithography systems
incorporating the Company's excimer lasers have been purchased by each of the
world's 10 largest semiconductor manufacturers: Intel, NEC, Toshiba, Hitachi,
Motorola, Samsung, Texas Instruments, Mitsubishi, Fujitsu and Philips.
To compete effectively, semiconductor manufacturers are continually seeking
to improve their process and design technologies to manufacture smaller, more
powerful, more complex devices at a lower cost per function. A major factor in
fabricating such devices is the ability to reduce circuit geometries, measured
in microns (a millionth of a meter, "m") and defined in terms of critical, or
smallest, feature size. Reduced circuit geometries permit semiconductor
manufacturers to increase the number of transistors per area of silicon. The
trend toward smaller critical feature sizes is expected to continue, with the
Semiconductor Industry Association's Technology Roadmap projecting production of
leading edge 0.25m devices by 1998 and 0.18m devices by 2001. The Company
believes that volume production of semiconductors with critical geometries below
0.35m generally requires DUV photolithography systems and that the excimer laser
is the optimal illumination source for such DUV systems.
The Company believes its leading position in the excimer laser market is
attributable to its development of advanced technologies that address the needs
of its customers as well as semiconductor manufacturers. The performance
characteristics of the Company's excimer lasers include high pulse repetition
rate, narrow bandwidth, energy stability and reliability relative to competing
products. The Company also believes that it is currently the only volume
supplier of excimer laser systems for DUV photolithography applications. The
Company's krypton fluoride ("KrF") excimer lasers are currently capable of
producing critical features as small as 0.25m, and the Company believes its
technology is extendible to critical feature sizes as small as 0.10m by using
different gas combinations and advanced optical and photomask technology.
The Company's objective is to maintain its position as the leading supplier
of DUV illumination sources to photolithography tool manufacturers. To
accomplish this objective, the Company expects to continue to make significant
investments in research and development to enhance its KrF lasers and develop
its next generation argon fluoride ("ArF") laser. As part of this effort, the
Company is collaborating with its customers on advanced technology development
to better anticipate technology trends in the semiconductor manufacturing
industry. To meet current and anticipated demand for its products, the Company
is increasing its manufacturing capability at its San Diego facility and has
entered into a contract manufacturing agreement with Seiko Instruments to
manufacture excimer lasers in Japan. In order to support its growing installed
base, the Company is expanding its field service and support operations in the
United States, Japan, Korea and Europe and is in the process of establishing a
field service and support presence in Taiwan and Southeast Asia.
The Company was incorporated in California in 1986 and reincorporated in
Nevada in August 1996. The Company's principal offices are located at 16275
Technology Drive, San Diego, California 92127-1815, and its telephone number at
that location is (619) 487-2442. Unless the context otherwise requires, the
terms "Cymer" and the "Company" as used in this Prospectus refer to Cymer, Inc.,
Cymer Laser Technologies (Cymer, Inc.'s California predecessor) and Cymer,
Inc.'s wholly-owned subsidiary, Cymer Japan, Inc.
4
<PAGE> 7
RISK FACTORS
In addition to other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing shares of the Common Stock offered hereby.
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from those
described in such forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in the following
risk factors.
Likely Fluctuations in Quarterly Operating Results. The Company's
quarterly operating results have in the past fluctuated and are likely in the
future to fluctuate significantly depending upon a variety of factors. Such
factors may include: the demand for semiconductors in general and, in
particular, for leading edge devices with smaller circuit geometries;
cyclicality in the market for semiconductor manufacturing equipment; the timing
and size of orders from the Company's small base of customers; the ability of
the Company to manufacture, test and deliver laser systems in a timely and cost
effective manner; the ability of the Company's competitors to obtain orders from
the Company's customers; the timing of new product announcements and releases by
the Company and its competitors; the entry of new competitors into the market
for DUV photolithography illumination sources; the ability of the Company to
manage its costs as it begins to supply its products in volume; and the
Company's ability to manage effectively its exposure to foreign currency
exchange rate fluctuations, principally with respect to the yen (in which sales
by the Company's Japanese subsidiary are denominated).
The Company has historically derived a substantial portion of its quarterly
and annual revenues from the sale of a relatively small number of systems, which
are priced at up to $450,000. As a result, the precise timing of the recognition
of revenue from an order for one or a small number of systems can have a
significant impact on the Company's total revenues and operating results for a
particular period. The Company's operating results for a particular period could
be adversely affected if orders for a small number of systems, or even one
system, are canceled or rescheduled by customers or cannot be filled in time to
recognize revenue during that period due to, for example, unanticipated
manufacturing, testing, shipping or product acceptance delays. The Company had a
backlog of orders at June 30, 1996 of approximately $49.3 million for shipment
during the 12 months ending June 30, 1997. However, customers may cancel or
delay orders with little or no penalty, and because of the Company's limited
experience in producing lasers in volume, there can be no assurance that the
Company will recognize revenue on any significant portion of this backlog. The
Company's expense levels are based, in large part, on the Company's expectations
as to future revenues and are, therefore, relatively fixed in the short term. If
revenue levels fall below expectations, net income will be disproportionately
and adversely affected. The impact of these and other factors on the Company's
revenues and operating results in any future period cannot be forecast with any
degree of certainty. See "Business -- Backlog."
The Company believes that semiconductor manufacturers are currently
developing capability for pilot production of 0.25(LOGO)mm devices. The Company
also believes that demand for its excimer lasers for DUV photolithography tools
is currently being driven by the efforts to develop such capability. Once
semiconductor manufacturers have acquired such capability, the Company believes
that they will not invest in DUV photolithography tools to expand their capacity
to manufacture 0.25(LOGO)mm devices until such time as their sales forecasts
justify such investment. As a result, the Company believes that once current
demand is satisfied, the Company's revenues could flatten or even decline in
future periods before resuming growth in response to future demand, if any.
Accordingly, the Company currently expects that demand for its DUV excimer
lasers, and thus its revenues, may decrease in the second half of 1997, as
compared to the first half of 1997.
Recently, the Company has significantly increased the scale of its
operations and its manufacturing capacity, including hiring additional personnel
and substantially increasing the number of systems in production. This expansion
has resulted in higher materials and work-in-process inventory levels and
significantly higher operating expenses, and has required the Company to
implement a variety of new systems, procedures and controls. Based on its
backlog of orders at June 30, 1996, the Company expects to continue to increase
its inventories and operating expenses. If orders received by the Company do not
result in sales, or if
5
<PAGE> 8
the Company is unable to sustain its revenues at anticipated levels, the
Company's operating results will be materially adversely affected.
Due to the foregoing factors, as well as other unanticipated factors, it is
likely that in some future quarter the Company's operating results will be below
the expectations of public market analysts or investors. In such event, the
price of the Company's Common Stock would be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
History of Losses; Unpredictability of Future Operating Results. The
Company was founded in 1986 and shipped its first prototype laser system in
1988. Although the Company's revenues have increased over the last three years
and each of the last six quarters, the Company has incurred annual operating
losses since inception and incurred an operating loss in the quarter ended March
31, 1996. The Company had an accumulated deficit of approximately $21.9 million
at June 30, 1996. There can be no assurance that the Company's revenues will
grow or be sustained in future periods or that the Company will be profitable in
any future period. The Company's history of annual and quarterly operating
losses, its substantial expansion in manufacturing capacity, its limited
experience in supplying products in volume and the difficulty of predicting the
demand for its products, among other factors, make the prediction of future
operating results difficult if not impossible. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business -- Backlog."
Risk of Excessive Inventory Buildups by Photolithography Tool
Manufacturers. Substantially all of the Company's customers are
photolithography tool manufacturers, which in turn sell their systems to
semiconductor manufacturers. Over the past year, the Company's customers have
substantially increased their forecasted shipments of DUV photolithography
tools. The Company believes that the increase in demand for DUV photolithography
tools coupled with the dependence of the manufacturers of these tools on a
limited number of laser suppliers may have caused a degree of over-ordering of
the Company's products. The Company is working with its customers to better
understand end user demand for DUV photolithography tools. However, there can be
no assurance that the Company will be successful in this regard, or that its
customers will not build excessive laser inventories. Excessive customer laser
inventories could result in a material decline in the Company's revenues and
operating results in future periods as such inventories are brought into
balance.
Risks Associated with Rapid and Substantial Manufacturing Expansion. To
meet current and anticipated demand for its products, the Company must
substantially increase the rate by which it manufactures and tests its
photolithography laser systems by the end of 1996. This increase would follow a
nearly four-fold increase in the manufacturing rate from December 1995 to June
1996. The Company is currently unable to manufacture and test its
photolithography laser systems fast enough to fill orders and is behind on its
delivery schedules. While the Company is not aware of any order cancellations as
a result of these delays, such delays, if they continue or recur, increase the
risk that customers will cancel orders and seek to meet all or a portion of
their needs for illumination sources from the Company's competitors. The Company
is also increasingly relying on outside suppliers for the manufacture of various
components and subassemblies used in its products and is dependent upon these
suppliers to meet the Company's manufacturing schedules. The failure by one or
more of these suppliers to supply the Company on a timely basis with sufficient
quantities of components or subassemblies that perform to the Company's
specifications could affect the Company's ability to deliver completed lasers to
its customers on schedule. Additionally, the Company may underestimate the costs
required to increase its manufacturing capacity, which may materially adversely
affect the Company's results of operations.
In addition to increasing manufacturing capacity at its facilities in San
Diego, California, the Company is also seeking to qualify Seiko Instruments,
Inc. ("Seiko") of Japan as a contract manufacturer of its photolithography
lasers. While the Company is seeking to have Seiko begin limited production of
lasers for the Company in 1996, there can be no assurance that Seiko will be
successfully qualified and commence production on schedule. The failure of Seiko
to be so qualified or to commence production on schedule could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Manufacturing" and "-- Intellectual Property
Rights."
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<PAGE> 9
Dependence on Single Product Line. The Company's only product line is
excimer lasers, the primary market for which is for use in DUV photolithography
equipment for manufacturing deep-submicron semiconductor devices. Demand for the
Company's products will depend in part on the rate at which semiconductor
manufacturers adopt excimer lasers as the illumination source for their
photolithography tools. Impediments to such adoption include a shortage of
engineers with experience implementing, utilizing and maintaining DUV
photolithography systems that incorporate excimer laser illumination sources,
instability of photoresists used in DUV photolithography and a shortage of
specialized glass used in DUV optics. There can be no assurance that such
impediments can or will be overcome, and, in any event, such impediments may
materially reduce the demand for the Company's products. In addition, to the
extent that such manufacturers are able to produce semiconductors with smaller
critical feature sizes by extending the performance capabilities of mercury lamp
illumination sources used in existing i-line or DUV photolithography tools, the
demand for the Company's products would also be materially reduced. Further, if
the Company's customers experience reduced demand for DUV photolithography
tools, or if the Company's competitors are successful in obtaining significant
orders from such customers, the Company's results of operations would be
materially adversely affected.
Limited Production Use of Excimer Lasers. The Company first shipped its
lasers for photolithography applications in 1988. The Company is not aware of
any semiconductor manufacturer using the Company's lasers for volume production
of semiconductor devices. There can be no assurance that the Company's products
will meet production specifications when subjected to prolonged and intense use
in volume production in semiconductor manufacturing processes. If any
semiconductor manufacturer is not able to successfully achieve volume production
using the Company's lasers, the Company's reputation with semiconductor
manufacturers or the limited number of photolithography tool manufacturers could
be damaged, which would have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on Small Number of Customers. The Company's primary customer
base is composed of a small number of manufacturers of DUV photolithography
tools. Four large firms, ASM Lithography, Canon, Nikon and SVG Lithography (a
subsidiary of Silicon Valley Group, Inc.), dominate the photolithography tool
business and collectively accounted for approximately 65% and 86% of the
Company's total revenues in 1995 and the six months ended June 30, 1996,
respectively. Sales to ASM Lithography, Canon, Nikon and SVG Lithography
accounted for approximately 18%, 19%, 27% and 1%, respectively, of total
revenues in 1995 and approximately 22%, 37%, 20% and 7%, respectively, of total
revenues in the six month period ended June 30, 1996. The Company expects that
sales of its systems to these customers will continue to account for
substantially all of its revenues in the foreseeable future. None of the
Company's customers is obligated to purchase a minimum number of the Company's
products. Loss of any significant business from any one of these customers or a
significant reduction in orders from any one of these customers, including
reductions caused by changes in a customer's competitive position, a decision to
purchase illumination sources from other suppliers or economic conditions in the
semiconductor and photolithography tool industries, would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business -- Customers and End Users" and "-- Backlog."
Need to Manage a Changing Business. The Company recently has dramatically
expanded the scope of its operations and the number of employees in most of its
functional areas. For example, the Company increased the number of its employees
from 136 to 240 between December 31, 1995 and June 30, 1996. The Company also
substantially increased its manufacturing capacity during that period and
installed a new management information system. If demand for the Company's
products continues to grow, the Company will be required to continue this
expansion. The management of such growth, if such growth occurs, will require
the Company to continue to improve and expand its management, operational and
financial systems, procedures and controls, including accounting and other
internal management systems, and its quality control, delivery and field service
and customer support capabilities. The Company will also be required to manage
effectively its expanding international operations, including the operations of
its Japanese subsidiary, its field service and support presence in Asia and
Europe and its qualification of Seiko as a manufacturer of its photolithography
lasers. There can be no assurance that the Company will be able to successfully
expand its
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<PAGE> 10
operations, effect timely deliveries of its products or maintain the product
quality and reliability required by its customers. The Company has experienced,
and may continue to experience, delays in deliveries to customers as a result of
its inability to increase its manufacturing capacity fast enough to meet demand.
Any failure to manage the Company's growth, if such growth occurs, would
materially adversely effect the Company's financial condition and results of
operations.
Dependence on Semiconductor Industry. Substantially all of the Company's
revenues are derived from photolithography tool manufacturers that in turn
depend on the demand for their products from semiconductor manufacturers.
Semiconductor manufacturers correspondingly depend on the demand from
manufacturers of end-products or systems that use semiconductors. The
semiconductor industry is highly cyclical and has historically experienced
periodic and significant downturns, which often have had a severe effect on the
demand for semiconductor manufacturing equipment, including photolithography
tools. The Company believes that downturns in the semiconductor manufacturing
industry will occur in the future, and will result in decreased demand for
semiconductor manufacturing equipment. In addition, the Company believes that
its ability to reduce expenses in a future downturn will be constrained by the
need for continual investment in research and development, and the need to
maintain extensive ongoing customer service and support capability. Accordingly,
any downturn in the semiconductor industry could have a material adverse effect
on the Company's business, financial condition and results of operations.
Dependence on Key Suppliers. Certain of the components and subassemblies
included in the Company's products are obtained from a single supplier or a
limited group of suppliers. In particular, there are no alternative sources for
certain of the components and subassemblies, including certain optical
components and the pre-ionizer tubes used in the Company's lasers. In addition,
the Company is increasingly outsourcing the manufacture of various
subassemblies. Although to date the Company has been able to obtain adequate
supplies of its components and subassemblies in a timely manner from existing
sources, the Company has only recently commenced volume production of its laser
systems. If the Company is unable to obtain sufficient quantities of components
or subassemblies, or if such items do not meet the Company's quality standards,
delays or reductions in product shipments could occur which would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Manufacturing."
Competition. The Company currently has two significant competitors in the
market for excimer laser systems for photolithography applications,
Lambda-Physik R&D ("Lambda-Physik"), a German-based subsidiary of Coherent, Inc.
("Coherent"), and Komatsu, Ltd. ("Komatsu"), located in Japan. Both of these
companies are larger than the Company, have access to greater financial,
technical and other resources than does the Company and are located in closer
proximity to the Company's customers than is the Company. Although the Company
believes that these competitors are not yet supplying excimer lasers in volume
for photolithography applications, the Company believes that both companies are
aggressively seeking to gain larger positions in this market. The Company
believes that its customers have each purchased one or more products offered by
these competitors and that its customers will consider further purchases, in
part as a result of delays in deliveries by the Company in recent months as the
Company has been seeking to expand its manufacturing capacity. The Company also
believes that its customers are actively seeking a second source for excimer
lasers. Furthermore, photolithography tool manufacturers may seek to develop or
acquire the capability to manufacture internally their own excimer lasers. In
the future, the Company will likely experience competition from other
technologies, such as X-ray, electron beam and ion projection processes. To
remain competitive, the Company believes that it will be required to manufacture
and deliver products to customers on a timely basis and without significant
defects and that it will also be required to maintain a high level of investment
in research and development and in sales and marketing. There can be no
assurance that the Company will have sufficient resources to continue to make
the investments necessary to maintain its competitive position. In addition, the
market for excimer lasers is still small and immature and there can be no
assurance that larger competitors with substantially greater financial
resources, including other manufacturers of industrial lasers, will not attempt
to enter the market. There can be no assurance that the Company will remain
competitive. A failure to remain competitive would have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Competition" and "-- Intellectual Property Rights."
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<PAGE> 11
Rapid Technological Change; New Product Introductions. Semiconductor
manufacturing equipment and processes are subject to rapid technological change.
The Company believes that its future success will depend in part upon its
ability to continue to enhance its excimer laser products and their process
capabilities and to develop and manufacture new products with improved
capabilities. In order to enhance and improve its products and develop new
products, among other things, the Company must work closely with its customers,
particularly in the product development stage, to integrate its lasers with its
customer's photolithography tools. There can be no assurance that future
technologies, such as X-ray, electron beam and ion projection processes, will
not render the Company's excimer laser products obsolete or that the Company
will be able to develop and introduce new products or enhancements to its
existing products and processes in a timely manner that satisfy customer needs
or achieve market acceptance. The failure to do so could materially adversely
affect the Company's business, financial condition and results of operations.
Need to Expand Field Service and Support Organization. The Company
believes that the need to provide fast and responsive service to the
semiconductor manufacturers using its lasers is critical and that it will not be
able to depend solely on its customers to provide this specialized service.
Therefore, the Company believes it is essential to establish, through trained
third-party sources or through its own personnel, a rapid response capability to
service its lasers throughout the world. Accordingly, the Company intends to
expand its direct support infrastructure in Japan and Europe, expand its field
service and support in Korea through an independent firm, and establish a joint
service and support capability with an independent firm to serve Taiwan and
Southeast Asia. The establishment of these activities will entail recruiting and
training qualified personnel, identifying qualified independent firms and
building effective and highly trained organizations that can provide service to
customers in various countries in their assigned regions. There can be no
assurance that the Company will be able to attract qualified personnel to
establish these operations successfully or that the costs of such operations
will not be excessive. A failure to implement this plan effectively could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Service and Support."
Need for Additional Capital. The Company requires substantial working
capital to fund its business, particularly to finance inventories and accounts
receivable and for capital expenditures. The Company believes that the net
proceeds of this offering, together with anticipated cash provided by operations
and available lines of credit, will be adequate to meet its cash needs for at
least the next 12 months. The Company's future capital requirements will depend
on many factors, including the rate of the Company's manufacturing expansion,
the timing and extent of spending to support product development efforts and
expansion of sales and marketing and field service and support, the timing of
introductions of new products and enhancements to existing products, and market
acceptance of the Company's products. The Company expects that it may need to
raise additional equity or debt financing in the future. There can be no
assurance that additional equity or debt financing, if required, will be
available on acceptable terms or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Risks Associated with Customer-Funded Research and Development. The
Company has in the past funded a significant portion of its research and
development expenses from research and development revenues received from
photolithography tool manufacturers and from SEMATECH, a semiconductor industry
consortium, in connection with the design and development of specific products.
The Company's staffing levels and other expenditures for research and
development are, in part, determined by the level of funding that the Company
expects to receive for specific projects. No assurance can be given that the
Company will continue to generate research and development revenues to offset a
sufficient portion of its product development costs. Any material cancellation
of this funding or a failure to secure research and development funding
commensurate with the Company's expectations could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the recognition of research and development revenues is dependent
on the Company accomplishing certain research and development milestones. If
such milestones are not achieved, the Company will not recognize the associated
research and development revenues, which could have a material adverse effect on
its business, financial condition and results of operations. Although the
Company anticipates that it will continue to receive research and development
revenues in the future, there can be no assurance that this level of support
will be maintained at
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<PAGE> 12
past levels, and the Company believes that such revenues will constitute a
decreasing percentage of its overall revenues. As a result, the Company may have
to bear a greater proportion of the cost of design and development of its
products which could have a material adverse effect on the Company's business,
financial condition and results of operations.
Although the Company's arrangements with photolithography tool
manufacturers and SEMATECH seek to clarify the ownership of the intellectual
property arising from research and development services performed by the
Company, there can be no assurance that disputes over the ownership or rights to
use or market such intellectual property will not arise between the Company and
such parties. Any such dispute could result in restrictions on the Company's
ability to market its products and could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Research and Development" and "-- Intellectual
Property Rights."
Uncertainty Regarding Patents and Protection of Proprietary
Technology. The Company believes that the success of its business depends more
on such factors as the technical expertise of its employees, as well as their
innovative skills and marketing and customer relations abilities, than on
patents, copyrights trade secrets and other intellectual property rights.
Nevertheless, the success of the Company may depend in part on patents, and the
Company owns 16 United States patents covering certain aspects of technology
associated with excimer lasers which expire from May 2008 to December 2011 and
has applied for 12 additional patents in the United States, two of which have
been allowed. The Company also has filed 22 patent applications in other
countries. There can be no assurance that the Company's pending patent
applications or any future applications will be approved, that any issued
patents will provide it with competitive advantages or will not be challenged by
third parties, or that the patents of others will not have an adverse effect on
the Company's ability to do business. In this regard, due to cost constraints,
the Company did not begin filing for patents in Japan or other countries with
respect to inventions covered by its United States patents and patent
applications until recently and has therefore lost the right to seek patent
protection in those countries for certain of its inventions. Additionally,
because foreign patents may afford less protection under foreign law than is
available under United States patent law, there can be no assurance that any
such patents issued to the Company will adequately protect the Company's
proprietary information. Furthermore, there can be no assurance that others will
not independently develop similar products, duplicate the Company's products or,
if patents are issued to the Company, design around the patents issued to the
Company.
Others may have filed and in the future may file patent applications that
are similar or identical to those of the Company. To determine the priority of
inventions, the Company may have to participate in interference proceedings
declared by the United States Patent and Trademark Office that could result in
substantial cost to the Company. No assurance can be given that any such patent
application will not have priority over patent applications filed by the
Company.
The Company also relies upon trade secret protection, employee and
third-party nondisclosure agreements and other intellectual property protection
methods to protect its confidential and proprietary information. Despite these
efforts, there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or disclose such technology or that
the Company can meaningfully protect its trade secrets.
The Company has in the past been, and may in the future be, notified that
it may be infringing intellectual property rights possessed by third parties,
although there are no pending lawsuits involving any such claims. In November
1993 with respect to one patent and, following further correspondence between
the parties, in June 1996 with respect to a second patent, the Company was
notified by Coherent, the parent corporation of Lambda-Physik, one of the
Company's competitors, that certain aspects of the Company's lasers might
infringe the two patents owned by Coherent and that the Company might wish to
procure a license with respect to these patents. The Company has been advised by
patent counsel in this matter, Townsend and Townsend and Crew, LLP, that in the
opinion of such firm the Company's products do not infringe any valid claim of
the patents that have been asserted by Coherent to the Company. However, there
can be no assurance that, if it elects to do so, the Company will be able to
negotiate a license with respect to
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<PAGE> 13
these patents at all or on reasonable terms, that litigation will not ensue with
respect to these patents or that the Company would ultimately be successful in
any such litigation.
In July 1996, the Company's prospective Japanese manufacturing partner,
Seiko, was notified by Komatsu, one of the Company's competitors, that certain
aspects of the Company's lasers might infringe certain claims furnished by
Komatsu to Seiko that Komatsu advised Seiko were included in a patent
application filed by Komatsu in Japan (the "Patent Claims"). Komatsu also
advised Seiko that the Patent Claims have been allowed by the Japanese Patent
Office. Seiko in turn notified the Company of this claim. In connection with its
manufacturing agreement with Seiko, the Company has agreed to indemnify Seiko
against such claims under certain circumstances. The Company has been advised by
its patent counsel in this matter, Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation, which is relying in part on the opinion of the
Company's Japanese patent counsel, that in the opinion of such firm the
Company's products do not infringe any valid Patent Claims. However, there can
be no assurance that, if the patent issues, litigation will not ensue with
respect to these claims or that the Company and Seiko would ultimately prevail
in any such litigation.
Any patent litigation would at a minimum be costly and would divert the
efforts and attention of the Company's management and technical personnel, which
would have a material adverse effect on the Company's business, financial
condition and results of operations. Furthermore, there can be no assurance that
other infringement claims by third parties or other claims for indemnification
by customers or end users of the Company's products resulting from infringement
claims will not be asserted in the future or that such assertions, if proven to
be true, will not materially adversely affect the Company's business, financial
condition and results of operations. If any such claims are asserted against the
Company, the Company may seek to obtain a license under the third party's
intellectual property rights. There can be no assurance, however, that a license
will be available on reasonable terms or at all. The Company could decide, in
the alternative, to resort to litigation to challenge such claims or to design
around the patented technology. Such actions could be costly and would divert
the efforts and attention of the Company's management and technical personnel,
which would materially adversely affect the Company's business, financial
condition and results of operations.
The Company has registered the trademark CYMER in the United States and
certain other countries and is seeking additional registrations in certain
countries. In Japan, the Company's application for registration was rejected on
the grounds that it is similar to a trademark previously registered by a
Japanese company for a broad range of products. The Company is seeking a partial
nullification of the other registration with respect to laser devices and
related components and does not believe that the holder of the other trademark
is engaged in any business similar to that of the Company. For this reason, the
Company is continuing to use the trademark CYMER in Japan and believes that it
will ultimately be permitted to register such mark for use with its products and
that it is not infringing the other company's trademark. There can be no
assurance that the Company will ultimately succeed in its efforts to register
its trademark in Japan or that it will not be subjected to an action for
trademark infringement, which could be costly to defend and, if successful,
would require the Company to cease use of the mark and, potentially, to pay
damages. See "Business -- Intellectual Property Rights."
Dependence on Key Personnel. The Company is highly dependent on the
services of a number of key employees in various areas, including engineering,
research and development, sales and marketing and manufacturing. In particular,
there are a limited number of experts in excimer laser technology and
competition for such personnel is intense. The Company has in the past
experienced difficulty in hiring personnel, including experts in laser
technology. The Company believes that, to a large extent, its future success
will depend upon the continued service of its engineering, research and
development, sales and marketing and manufacturing personnel and on its ability
to attract and retain highly skilled personnel in each of these areas. The
Company does not have employment agreements with any of its employees, and there
is no assurance that the Company will be able to retain its key employees. The
failure of the Company to hire and retain such personnel could have a material
adverse effect on the Company's business, financial condition and results of
operation. See "Business -- Employees."
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Risks of International Sales and Operations. Approximately 54%, 69% and
83% of the Company's revenues in 1994, 1995 and the six months ended June 30,
1996, respectively, were derived from customers located outside the United
States. Because a significant majority of the Company's principal customers are
located in other countries, the Company anticipates that international sales
will continue to account for a significant portion of its revenues. In order to
support its overseas customers, the Company maintains a subsidiary in Japan, is
expanding its field service and support operations in Japan and Europe, is
working with an independent firm to expand field service and support in Korea,
is seeking to establish with an independent firm a joint field service and
support capability to serve Taiwan and Southeast Asia, and is seeking to qualify
Seiko as a manufacturer of its products in Japan. There can be no assurance that
the Company will be able to manage these operations effectively or that the
Company's investment in these activities will enable it to compete successfully
in international markets or to meet the service and support needs of its
customers. Additionally, a significant portion of the Company's sales and
operations could be subject to certain risks, including tariffs and other
barriers, difficulties in staffing and managing foreign subsidiary and branch
operations, currency exchange risks and exchange controls, potentially adverse
tax consequences and the possibility of difficulty in accounts receivable
collection. Further, while the Company has experienced no difficulty to date in
complying with U.S. export controls, these rules could change in the future and
make it more difficult or impossible for the Company to export its products to
various countries. There can be no assurance that any of these factors will not
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Service and Support."
The Company's results of operations are subject to fluctuations in the
value of the Japanese yen against the U.S. dollar due to sales by the Company to
its Japanese subsidiary being denominated in dollars, and sales by the
subsidiary to customers in Japan being denominated in yen. The Company's
subsidiary manages its exposure to such fluctuations by entering into foreign
currency exchange contracts to hedge its purchase commitments. Although
management will continue to monitor the Company's exposure to currency
fluctuations, and, when appropriate, use financial hedging techniques to
minimize the effect of these fluctuations, there can be no assurance that
exchange rate fluctuations will not have a material adverse effect on the
Company's results of operations or financial condition. In the future, the
Company could be required to sell its products in other currencies, which would
make the management of currency fluctuations more difficult and expose the
Company to greater risks in this regard. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The Company's products are subject to numerous foreign government standards
and regulations that are continually being amended. Although the Company
endeavors to meet foreign technical and regulatory standards, there can be no
assurance that the Company's products will continue to comply with foreign
government standards and regulations, or changes thereto, or that it will be
cost effective for the Company to redesign its products to comply with such
standards and regulations. The inability of the Company to design or redesign
products to comply with foreign standards could have a material adverse effect
on the Company's business, financial condition and results of operations.
Environmental and Other Government Regulations. Federal, state and local
regulations impose various controls on the storage, handling, discharge and
disposal of substances used in the Company's manufacturing process and on the
facility leased by the Company. The Company believes that its activities conform
to present governmental regulations applicable to its operations and its current
facilities, including those related to environmental, land use, public utility
utilization and fire code matters. There can be no assurance that such
governmental regulations will not in the future impose the need for additional
capital equipment or other process requirements upon the Company or restrict the
Company's ability to expand its operations. The adoption of such measures or any
failure by the Company to comply with applicable environmental and land use
regulations or to restrict the discharge of hazardous substances could subject
the Company to future liability or could cause its manufacturing operations to
be curtailed or suspended.
Risk of Product Liability Claims. The Company faces a significant risk of
exposure to product liability claims in the event that the use of its products
results in personal injury or death, and there can be no assurance that the
Company will not experience material product liability losses in the future. The
Company maintains insurance against product liability claims in the amount of
$5.0 million per occurrence and
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<PAGE> 15
$6.0 million in the aggregate, but there can be no assurance that such coverage
will continue to be available on terms acceptable to the Company or that such
coverage will be adequate for liabilities actually incurred. Also, in the event
that any of the Company's products prove to be defective, the Company may be
required to recall or redesign such products. A successful claim brought against
the Company in excess of available insurance coverage, or any claim or product
recall that results in significant adverse publicity against the Company, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Unallocated Proceeds of the Offering. A significant portion of the net
proceeds of the offering has not been designated for specific uses. Accordingly,
management of the Company will have broad discretion with respect to the use of
these funds. In particular, the Company could use a portion of these funds for
the acquisition of complementary businesses, products and technologies, although
it has no present plans, agreements or commitments with respect to any such
transaction. Acquisitions involve numerous risks, including difficulties
assimilating new operations and products, the need to manage geographically
remote business units and the diversion of management attention from other
business concerns. There can be no assurance that any acquisition would result
in long-term benefits to the Company or that management would be able to manage
effectively the resulting business. See "Use of Proceeds."
Shares Eligible for Future Sale. Sales of a substantial number of shares
of Common Stock in the public market following this offering could adversely
affect the market price for the Company's Common Stock. The number of shares of
Common Stock available for sale in the public market is limited by restrictions
under the Securities Act of 1933, as amended (the "Securities Act"), and by
lock-up agreements under which certain holders of such shares have agreed not to
sell or otherwise dispose of any of their shares for a period of 180 days after
the date of this Prospectus without the prior written consent of Morgan Stanley
& Co. Incorporated. However, Morgan Stanley & Co. Incorporated, in its capacity
as Representative of the several Underwriters, may, in its sole discretion and
at any time without notice, release all or any portion of the securities subject
to lock-up agreements. Certain other stockholders of the Company have agreed not
to sell or otherwise dispose of any of their shares for a period of 120 days
after the date of this Prospectus without the prior written consent of the
Company. The Company has agreed not to release any of the shares subject to such
lock-up agreements without the prior written consent of Morgan Stanley & Co.
Incorporated. As a result of these restrictions, based on shares, options and
warrants outstanding as of June 30, 1996, the following shares of Common Stock
will be eligible for future sale: on the date of this Prospectus, 224,965 shares
in addition to the 3,340,000 shares offered hereby will be eligible for sale; an
additional 17,412 shares will be eligible for sale 90 days after the date of
this Prospectus; an additional 297,897 shares will be eligible for sale 120 days
after the date of this Prospectus; an additional 6,494,581 shares will be
eligible for sale 180 days after the date of this Prospectus; and an additional
1,809,035 shares will be eligible for sale thereafter upon expiration of their
respective two-year holding periods. In addition, the Company intends to
register for sale not earlier than 180 days following the date of this
Prospectus a total of 3,041,753 shares of Common Stock subject to outstanding
options or reserved for issuance under the Company's 1987 Stock Option Plan,
1996 Stock Option Plan, 1996 Director Stock Option Plan and Employee Stock
Purchase Plan. In addition, the Company has, pursuant to agreements with certain
stockholders, included in the Registration Statement, of which this Prospectus
is a part, 142,918 shares of Common Stock to be offered on a continuous basis by
such stockholders beginning 180 days following the date of this Prospectus.
Further, upon expiration of the lock-up agreements referred to above, holders of
approximately 7,555,525 shares of Common Stock will be entitled to certain
registration rights with respect to such shares. If such holders, by exercising
their registration rights, cause a large number of shares to be registered and
sold in the public market, such sales could have a material adverse effect on
the market price for the Company's Common Stock. In addition, if the Company is
required to include in a Company-initiated registration shares held by such
holders pursuant to the exercise of their registration rights, the Company's
ability to raise needed capital may be adversely affected. See
"Management -- Stock Plans," "Description of Capital Stock -- Registration
Rights," "Shares Eligible for Future Sale" and "Underwriters."
No Prior Market; Possible Volatility of Stock Price; Dilution. Prior to
the offering contemplated by this Prospectus, there has been no public market
for the Common Stock of the Company, and there can be no assurance that an
active public market will develop or be sustained after the offering. The
initial public offering price will be determined by negotiations among the
Company and the representatives of the
13
<PAGE> 16
Underwriters based upon several factors. The trading price of the Company's
Common Stock could be subject to wide fluctuations in response to quarterly
variations in operating results, announcements of technological innovations or
new products by the Company or its competitors, as well as other events or
factors. In addition, the equity markets have from time to time experienced
extreme price and volume fluctuations which have particularly affected the
market price of many high technology companies and which often have been
unrelated to the operating performance of these companies. These broad market
fluctuations may adversely affect the market price of the Company's Common
Stock. Furthermore, purchasers of the Common Stock offered by this Prospectus
will suffer an immediate and substantial dilution in the net tangible book value
per share of the Common Stock from the initial public offering price. See
"Dilution" and "Underwriters."
Anti-Takeover Effect of Nevada Law and Charter and Bylaw Provisions;
Availability of Preferred Stock for Issuance. Nevada law and the Company's
Articles of Incorporation and Bylaws contain provisions that could discourage a
proxy contest or make more difficult the acquisition of a substantial block of
the Company's Common Stock. In addition, the Board of Directors is authorized to
issue, without stockholder approval, up to 5,000,000 shares of Preferred Stock
with voting, conversion and other rights and preferences that may be superior to
those of the Common Stock and that could adversely affect the voting power or
other rights of the holders of Common Stock. The issuance of Preferred Stock or
of rights to purchase Preferred Stock could be used to discourage an unsolicited
acquisition proposal. See "Description of Capital Stock -- Preferred Stock" and
"-- Nevada Anti-Takeover Statutes."
14
<PAGE> 17
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,002,032 shares of
Common Stock offered by the Company hereby are estimated to be $22.7 million
($26.7 million if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $8.50 per share and after deducting
estimated underwriting discounts and commissions and estimated offering expenses
payable by the Company. The Company expects to use approximately $10.0 million
of such proceeds to retire outstanding indebtedness (including $5.3 million
outstanding as of June 30, 1996, and $4.7 million expected to be incurred prior
to the completion of this offering), which the Company anticipates will consist
of the following:
(i) $9.0 million under line of credit agreements with a bank that
provide for the following facilities: (a) a $1.0 million revolving bank
line of credit that is secured by the Company's assets, bears interest at a
rate of prime plus 0.75% per annum (9.0% as of June 30, 1996), is due March
5, 1997 and was incurred for general working capital purposes, and (b) $8.0
million under lines of credit that are guaranteed by the Export-Import Bank
of the United States, bear interest at a rate of prime plus 0.75% per annum
(9.0% as of June 30, 1996), are due March 5, 1997 (as to $3.0 million) and
June 27, 1997 (as to $5.0 million) and were incurred to finance inventory
and receivables for export sales; and
(ii) a $1.0 million term loan from Mitsubishi International
Corporation which is due on the earlier of March 31, 1997 or the completion
of this offering and bears interest at a rate of prime plus 1.5% per annum
(9.75% as of June 30, 1996).
The Company also anticipates that approximately $2.0 million of the net
proceeds to the Company from this offering will be used for capital expenditures
through 1996, primarily for factory expansion and improvements, test equipment,
research tools and computer equipment. The remaining net proceeds to the Company
from this offering will be used primarily for general corporate purposes,
including working capital. A portion of the net proceeds to the Company from
this offering may also be used for the acquisition of businesses, products and
technologies that are complementary to those of the Company. The Company has no
present plans, agreements or commitments and is not currently engaged in any
negotiations with respect to any such transaction. Pending such uses, the net
proceeds to the Company from this offering will be invested in short-term,
investment grade, interest-bearing securities. The Company will not receive any
proceeds from the sale of shares of Common Stock by the Selling Stockholders.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future. In
addition, the Company's bank lines of credit prohibit the payment of cash
dividends without the bank's consent.
15
<PAGE> 18
CAPITALIZATION
The following table sets forth, as of June 30, 1996, (i) the actual
short-term obligations and capitalization of the Company, (ii) the short-term
obligations and capitalization of the Company on a pro forma basis after giving
effect to (a) the conversion of all outstanding shares of Redeemable Convertible
Preferred Stock into 7,562,527 shares of Common Stock and the authorization of a
new class of Preferred Stock, which will occur upon the closing of this
offering, (b) the assumed issuance of 78,571 shares of Common Stock upon the
exercise of certain outstanding warrants and (c) the reincorporation of the
Company into Nevada and the increase in the authorized number of shares of
Common Stock to be effected in connection therewith, and (iii) the pro forma
short-term obligations and capitalization of the Company as adjusted to give
effect to the receipt by the Company of the estimated net proceeds from the sale
of the 3,002,032 shares of Common Stock offered by the Company at an assumed
initial public offering price of $8.50 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company and the application of the net proceeds thereof.
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Short-term obligations(1)................................. $ 9,110 $ 9,110 $ 3,860
======== ======== ========
Capital lease obligations (excluding current
portion)(1)............................................. $ 387 $ 387 $ 387
-------- -------- --------
Redeemable Convertible Preferred Stock: actual -- $0.01
par value, 9,834,880 shares authorized, 7,527,000 shares
issued and outstanding; pro forma and as
adjusted -- $0.001 par value, no shares authorized,
issued or outstanding................................... 35,234 -- --
-------- -------- --------
Stockholders' equity (deficit):
Preferred Stock, $0.001 par value: actual -- no shares
authorized, issued or outstanding; pro forma and as
adjusted -- 5,000,000 shares authorized, no shares
issued or outstanding................................ -- -- --
Common Stock: actual -- $0.01 par value, 15,000,000
shares authorized, 1,203,000 shares issued and
outstanding; pro forma and as adjusted -- $0.001 par
value, 25,000,000 shares authorized; pro
forma -- 8,843,890 shares issued and outstanding; as
adjusted -- 11,845,922 shares issued and
outstanding(2)....................................... 12 9 12
Additional paid-in capital................................ 241 27,471 50,199
Accumulated deficit....................................... (21,947) (13,940) (13,940)
Cumulative translation adjustment......................... (297) (297) (297)
-------- -------- --------
Total stockholders' equity (deficit)................. (21,991) 13,243 35,974
-------- -------- --------
Total capitalization................................. $ 13,630 $ 13,630 $ 36,361
======== ======== ========
</TABLE>
- ---------------
(1) Short-term obligations consist of short-term indebtedness for borrowed money
and the current portion of capital lease obligations. See Notes 3 and 8 of
Notes to Consolidated Financial Statements.
(2) Excludes 1,500,000 shares of Common Stock available for issuance pursuant to
the Company's 1987 Stock Option Plan, of which 1,191,753 shares were subject
to outstanding options at a weighted average exercise price of $1.83 per
share as of June 30, 1996. Also excludes 385,334 shares of Common Stock
issuable upon exercise of outstanding warrants at a weighted average
exercise price of $3.42 per share. Subsequent to June 30, 1996, the Company
adopted the 1996 Stock Option Plan to succeed the 1987 Stock Option Plan,
and reserved 1,500,000 shares for issuance thereunder. In addition,
subsequent to June 30, 1996, the Company (i) adopted the 1996 Employee Stock
Purchase Plan and reserved 250,000 shares of Common Stock for issuance
thereunder and (ii) adopted the 1996 Director Stock Option Plan and reserved
100,000 shares for issuance thereunder. See "Management -- Stock Plans."
16
<PAGE> 19
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1996
was $13,243,000, or approximately $1.50 per share. Pro forma net tangible book
value per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of Common Stock outstanding after
giving effect to the conversion of all outstanding shares of Redeemable
Convertible Preferred Stock into 7,562,527 shares of Common Stock and the
assumed issuance of 78,571 shares of Common Stock as a result of the exercise of
warrants upon completion of this offering. After giving effect to the sale by
the Company of 3,002,032 shares of Common Stock in this offering at an assumed
initial public offering price of $8.50 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company, the pro forma net tangible book value of the Company at June 30,
1996 would have been $35,974,000, or $3.04 per share. This represents an
immediate increase in pro forma net tangible book value of $1.54 per share to
existing stockholders and an immediate dilution in pro forma net tangible book
value of $5.46 per share to new investors purchasing shares of Common Stock in
this offering. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $8.50
Pro forma net tangible book value per share as of June 30, 1996.... $1.50
Increase in pro forma net tangible book value per share
attributable to new investors................................... 1.54
-----
Pro forma net tangible book value per share after the offering....... 3.04
-----
Dilution per share to new investors.................................. $5.46
=====
</TABLE>
The following table summarizes on a pro forma basis, as of June 30, 1996,
the difference between the existing stockholders and the purchasers of shares in
the offering with respect to the number of shares purchased from the Company,
the total consideration paid and the average price per share paid, assuming
conversion of all outstanding shares of Redeemable Convertible Preferred Stock
into Common Stock, the assumed issuance of shares of Common Stock as a result of
the exercise of warrants upon completion of this offering and the sale of
3,002,032 shares of Common Stock at an initial public offering price of $8.50
per share (before deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).... 8,843,890 74.7% $27,320,000 51.7% $3.09
New investors............... 3,002,032 25.3 25,517,000 48.3 8.50
------- ----- -------- -----
Total............. 11,845,922 100.0% $52,837,000 100.0%
======= ===== ======== =====
</TABLE>
- ---------------
(1) Sales by the Selling Stockholders in the offering will reduce the number of
shares held by existing stockholders to 8,505,922 shares, or 71.8% of the
total number of shares outstanding after the offering, and will increase the
number of shares held by new investors to 3,340,000 shares, or 28.2% of the
total number of shares outstanding after the offering. See "Principal and
Selling Stockholders."
The foregoing analysis assumes no exercise of outstanding options. As of
June 30, 1996, 1,191,753 shares were subject to outstanding options under the
Company's 1987 Stock Plan at a weighted average exercise price of $1.83 per
share and 33,268 shares remained available for future grant. Subsequent to June
30, 1996, the Company adopted the 1996 Stock Plan to replace the 1987 Stock
Plan, and reserved 1,500,000 shares for issuance thereunder. In addition,
subsequent to June 30, 1996, the Company (i) adopted the Employee Stock Purchase
Plan and reserved 250,000 shares of Common Stock for issuance thereunder and
(ii) adopted the 1996 Director Stock Option Plan and reserved 100,000 shares for
issuance thereunder. To the extent outstanding options are exercised, or shares
reserved for future option grants or direct issuances are issued, there will be
further dilution to new investors. See "Management -- Stock Plans" and Note 6 of
Notes to Consolidated Financial Statements.
17
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Company's consolidated financial statements and notes
thereto and with Management's Discussion and Analysis of Financial Condition and
Results of Operations, which are included elsewhere in this Prospectus. The
consolidated statement of operations data for the years ended December 31, 1993,
1994 and 1995 and the six months ended June 30, 1996 and the consolidated
balance sheet data at December 31, 1994 and 1995 and June 30, 1996 are derived
from, and are qualified by reference to, the consolidated financial statements
included elsewhere in this Prospectus, which have been audited by Deloitte &
Touche LLP. The consolidated statement of operations data for the years ended
December 31, 1991 and 1992 and the consolidated balance sheet data at December
31, 1991, 1992 and 1993 are derived from consolidated financial statements not
included in this Prospectus, which have also been audited by Deloitte & Touche
LLP. The consolidated statement of operations data for the six months ended June
30, 1995 are derived from unaudited financial statements included elsewhere in
this Prospectus that have been prepared on the same basis as the audited
financial statements and, in the opinion of management, contain all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for such
period. These historical results are not necessarily indicative of the results
to be expected in the future and results for interim periods are not necessarily
indicative of results for the entire year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales............................ $ 4,480 $ 7,423 $ 3,393 $ 7,705 $15,576 $5,458 $17,768
Other.................................... -- 1,708 2,306 1,216 3,244 1,821 1,414
------- ------- ------- ------- ------- ------ -------
Total revenues.................... 4,480 9,131 5,699 8,921 18,820 7,279 19,182
------- ------- ------- ------- ------- ------ -------
Costs and expenses:
Cost of product sales.................... 3,275 4,404 2,726 4,797 9,282 3,243 10,929
Research and development................. 1,903 2,673 2,733 3,283 6,154 2,920 4,249
Sales and marketing...................... 1,710 2,182 2,154 1,780 2,353 1,011 1,825
General and administrative............... 773 989 782 849 1,181 502 1,303
------- ------- ------- ------- ------- ------ -------
Total costs and expenses.......... 7,661 10,248 8,395 10,709 18,970 7,676 18,306
------- ------- ------- ------- ------- ------ -------
Operating income (loss).................... (3,181) (1,117) (2,696) (1,788) (150) (397) 876
Other income (expense)..................... 220 (51) (7) (199) 255 50 267
------- ------- ------- ------- ------- ------ -------
Income (loss) before provision for income
taxes.................................... (2,961) (1,168) (2,703) (1,987) 105 (347) 1,143
Provision for income taxes................. -- 100 221 58 36 36 186
------- ------- ------- ------- ------- ------ -------
Net income (loss).......................... $(2,961) $(1,268) $(2,924) $(2,045) $ 69 $ (383) $ 957
======== ======== ======== ======== ======== ====== ========
Pro forma earnings (loss) per share(1)..... $ 0.01 $(0.06) $ 0.10
======== ====== ========
Pro forma weighted average common and
common equivalent shares
outstanding(1)........................... 7,571 6,692 9,666
======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
------- ------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 557 $ 1,537 $ 715 $ 2,326 $ 2,015 $ 1,981
Working capital................................ 2,245 2,289 (122) (1,557) 3,845 5,961
Total assets................................... 6,046 6,265 5,805 9,172 15,619 31,376
Total debt(2).................................. 1,059 1,026 2,717 6,879 4,164 9,497
Redeemable convertible preferred stock......... 10,980 12,889 12,989 19,290 28,409 35,234
Stockholders' deficit.......................... (7,647) (8,947) (11,828) (19,752) (21,830) (21,991)
</TABLE>
- ---------------
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing pro forma net income (loss)
per share. Supplementary earnings (loss) per share was $0.03, $(0.03) and
$0.09 in 1995, the six months ended June 30, 1995 and the six months ended
June 30, 1996, respectively. Supplementary weighted average common and
common equivalent shares outstanding were 10,523, 9,692, and 12,668 for
1995, the six months ended June 30, 1995 and the six months ended June 30,
1996, respectively. Supplementary earnings (loss) per share and the related
weighted average common and common equivalent shares outstanding were
determined giving effect to the transactions described in note (4) to
"Summary Consolidated Financial Data," and the reduction of historical
interest expense resulting from the retirement of indebtedness with a
portion of the proceeds of the offering. See "Use of Proceeds" and
"Capitalization."
(2) Total debt includes indebtedness for borrowed money and capital lease
obligations.
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains trend analysis and other forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ materially from those described in such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed below and elsewhere in this Prospectus, particularly under "Risk
Factors."
OVERVIEW
The Company was founded in 1986 to develop commercial applications for
excimer lasers. In 1987, the Company began to focus on applications for
semiconductor photolithography and, in 1988, shipped its first semiconductor
photolithography laser. In 1990, the Company shipped its second generation
photolithography laser, the ELS-4000, of which three successive versions were
introduced through 1994. From 1986 through 1994, the Company shipped a total of
78 laser systems, principally for use in semiconductor photolithography research
and development applications. During this period, revenues generated by lasers,
replacement parts and service were small and fluctuated widely, and the Company
funded its operations primarily through successive rounds of equity financing as
well as through government, industry and customer research and development
contracts. In 1992, the Company introduced a higher power, industrial laser, the
model HPL-100K series KrF laser. The Company licensed this complementary laser
technology to Seiko in 1992 for the Japanese market in exchange for up-front
license fees totaling $3.0 million over a two-year period. The Company expects
minimal revenues from industrial laser products in 1996. See
"Business -- Manufacturing, Assembly and Test."
In August 1994, the Company entered into a contract with SEMATECH to
develop a production-
worthy laser illumination source for SVG Lithography's Micrascan step-and-scan
photolithography tool. SEMATECH paid the Company an aggregate of $1.6 million
over the term of the contract, which ended in December 1995. The Company
obtained additional development contracts in early 1995 from certain stepper
manufacturers to develop a production-worthy, narrower bandwidth version of its
laser illumination source. These development efforts led directly to the
introduction of the ELS-4000F in the third quarter of 1995 and the 5000 series
laser in the first quarter of 1996.
Beginning in 1995, as both photolithography tool and semiconductor
manufacturers began to anticipate the need for production-worthy DUV
photolithography equipment, the Company's order backlog for photolithography
lasers began to grow. The Company's twelve-month order backlog was $28.5 million
at December 31, 1995, and $49.3 million at June 30, 1996. The Company believes
that semiconductor manufacturers are currently developing capability for pilot
production of 0.25(LOGO)mm devices. The Company also believes that demand for
its excimer lasers for DUV photolithography tools is currently being driven by
the efforts to develop such capability. Once semiconductor manufacturers have
acquired such capability, the Company believes that they will not invest in DUV
photolithography tools to expand their capacity to manufacture 0.25(LOGO)mm
devices until such time as their sales forecasts justify such investment. As a
result, the Company believes that once current demand is satisfied, the
Company's revenues could flatten or even decline in future periods before
resuming growth in response to future demand, if any. Accordingly, the Company
currently expects that demand for its DUV excimer lasers, and thus its revenues,
may decrease in the second half of 1997, as compared to the first half of 1997.
See "Risk Factors -- Likely Fluctuations in Operating Results" and
"Business -- Backlog."
The Company's sales are generated primarily by shipments to customers in
Japan, the Netherlands, and the United States. Approximately 78%, 54%, 69% and
83% of the Company's sales in 1993, 1994, 1995 and the first six months of 1996,
respectively, were derived from customers outside of the United States. The
Company maintains a wholly-owned Japanese subsidiary which sells to the
Company's Japanese customers. Revenues from Japanese customers, generated
primarily by this subsidiary, accounted for 68%, 33%, 50% and 60% of revenues
for 1993, 1994, 1995 and the first six months of 1996, respectively. The
activities of the Company's Japanese subsidiary are limited to sales and service
of products purchased by the subsidiary from
19
<PAGE> 22
the parent corporation. All costs of development and production of the Company's
products, including costs of shipment to Japan, are recorded on the books of the
parent company. The Company anticipates that international sales will continue
to account for a significant portion of its net sales. See Notes 1 and 11 of
Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth certain items in the Company's statements of
operations as a percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
PERCENT OF TOTAL REVENUES
------------------------------------------------------
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- -----------------
1993 1994 1995 1995 1996
-------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales......................... 59.5% 86.4% 82.8% 75.0% 92.6%
Other................................. 40.5 13.6 17.2 25.0 7.4
-------- -------- ------ ------ ------
Total revenues................ 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of product sales................. 47.8 53.8 49.3 44.6 57.0
Research and development.............. 48.0 36.8 32.7 40.1 22.1
Sales and marketing................... 37.8 20.0 12.5 13.9 9.5
General and administrative............ 13.7 9.5 6.3 6.9 6.8
-------- -------- ------ ------ ------
Total costs and expenses...... 147.3 120.1 100.8 105.5 95.4
-------- -------- ------ ------ ------
Operating income (loss)................. (47.3) (20.1) (0.8) (5.5) 4.6
Other income (expense).................. (0.1) (2.2) 1.4 0.7 1.4
-------- -------- ------ ------ ------
Income (loss) before provision for (47.4) (22.3) 0.6 (4.8) 6.0
income taxes..........................
Provision for income taxes.............. 3.9 0.7 0.2 0.5 1.0
-------- -------- ------ ------ ------
Net income (loss)....................... (51.3)% (23.0)% 0.4% (5.3)% 5.0%
======== ======== ====== ====== ======
Gross margin on product sales........... 19.7% 37.7% 40.4% 40.6% 38.5%
======== ======== ====== ====== ======
</TABLE>
SIX MONTHS ENDED JUNE 30, 1995 AND 1996
Revenues. The Company's total revenues consist of product sales, which
include sales of laser systems and spare parts and service and training
revenues, and other revenues, which include license fees and revenues from
funded development activities performed for customers and for SEMATECH. Revenue
from product sales is generally recognized at the time of shipment unless
customer agreements contain inspection or other conditions, in which case
revenue is recognized at the time such conditions are satisfied. Funded
development contracts are accounted for on the percentage-of-completion method
based on the relationship of costs incurred to total estimated costs, after
giving effect to estimates of costs to complete the development project.
Product sales increased 226% from $5.5 million in the six months ended June
30, 1995 to $17.8 million in the six months ended June 30, 1996, primarily due
to increased sales of DUV photolithography laser systems. A total of 42 laser
systems (39 of which were DUV photolithography laser systems) were sold in the
first six months of 1996 compared to 11 laser systems (three of which were DUV
photolithography laser systems) in the first six months of 1995. The decrease in
sales of industrial lasers reflects the Company's increasing focus on its
photolithography laser products. Funded development revenues decreased 22% from
$1.8 million for the six months ended June 30, 1995 to $1.4 million in the six
months ended June 30, 1996, primarily due to the completion in 1995 of a laser
research project sponsored by SEMATECH.
20
<PAGE> 23
Cost of Product Sales. Cost of product sales includes direct material and
labor, warranty expenses, license fees and manufacturing and service overhead.
Cost of product sales rose 237% from $3.2 million for the six months ended June
30, 1995 to $10.9 million for the six months ended June 30, 1996. The gross
margin on these sales decreased to 38.5% for the six months ended June 30, 1996
from 40.6% in the first six months of 1995 as the Company incurred increased
costs associated with expansion of its manufacturing capacity and service
support infrastructure.
Research and Development. Research and development expenses include costs
of internally-funded and customer-funded projects as well as continuing product
support expenses which primarily include employee and material costs,
depreciation of equipment and other engineering related costs. Research and
development expenses increased 46% from $2.9 million in the six months ended
June 30, 1995 to $4.2 million in the six months ended June 30, 1996, due
primarily to increased product support efforts associated with the release of
the Company's 5000 series lasers and the hiring of additional technical
personnel. As a percentage of total revenues, such expenses declined from 40.1%
to 22.1% in the respective periods due to the growth in the Company's revenues.
Sales and Marketing. Sales and marketing expenses include the expenses of
the sales, marketing and customer support staffs and other marketing expenses.
Sales and marketing expenses increased 81% from $1.0 million for the six months
ended June 30, 1995 to $1.8 million in the six months ended June 30, 1996 due
primarily to increased sales commissions and increased sales support efforts and
marketing activities as more lasers were placed in the field. As a percentage of
total revenues, such expenses declined from 13.9% to 9.5% in the respective
periods due to the growth in the Company's revenues.
General and Administrative. General and administrative expenses consist
primarily of management and administrative personnel costs, professional
services and administrative operating costs. These expenses increased 160% from
$502,000 in the six months ended June 30, 1995 to $1.3 million in the six months
ended June 30, 1996 due to an increase in general and administrative support as
the Company's sales volume, manufacturing capacity and overall level of business
activity increased. As a percentage of total revenues, such expenses decreased
from 6.9% to 6.8% in the respective periods.
Other Income (Expense). Other income (expense) consists primarily of
interest income and expense and foreign currency exchange gains and losses
associated with fluctuations in the value of the Japanese yen against the U.S.
dollar. Other income increased from $50,000 for the six months ended June 30,
1995 to $267,000 for the six months ended June 30, 1996. Foreign currency
exchange gains totaled $167,000 and interest expense totaled $138,000 for the
six months ended June 30, 1995 compared to $388,000 and $148,000, respectively,
for the six months ended June 30, 1996.
The Company's results of operations are subject to fluctuations in the
value of the Japanese yen against the U.S. dollar due to the fact that sales by
the Company to its Japanese subsidiary are denominated in dollars, and sales by
the subsidiary to customers in Japan are denominated in yen. The Company's
subsidiary manages its exposure to such fluctuations by entering into foreign
currency exchange contracts to hedge its purchase commitments to the Company.
While management will continue to monitor the Company's exposure to currency
fluctuations, and, as deemed appropriate, use financial hedging techniques to
minimize the effect of these fluctuations, there can be no assurance that
exchange rate fluctuations will not have a material adverse effect on the
Company's results of operations or financial condition. In the future, the
Company could be required to sell its products in other currencies, which would
make the management of currency fluctuations more difficult and expose the
Company to greater risks in this regard.
Provision for Income Taxes. The provision for income taxes was
insignificant in the six months ended June 30, 1995 and primarily represented
taxes in Japan for research and development revenues generated from agreements
with Seiko. The tax provision of $186,000 for the six months ended June 30, 1996
was primarily attributable to income generated in the second quarter of 1996. At
June 30, 1996, the Company had $6.6 million in federal and state net operating
loss carryforwards which may be offset against future income.
21
<PAGE> 24
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
Revenues. Product sales increased 127%, from $3.4 million in 1993 to $7.7
million in 1994, and 102% to $15.6 million in 1995, reflecting significant
increases in sales of DUV photolithography laser systems and replacement parts
and, to a lesser extent, increases in sales of industrial laser systems. The
Company sold five, 10 and 26 DUV photolithography laser systems in 1993, 1994
and 1995, respectively, and sold two, seven and eight industrial laser systems
during the same periods. In 1993, the Company generated license fees of $2.0
million from Seiko for industrial laser technology. See "Business--Proprietary
Rights" and Note 9 of Notes to Consolidated Financial Statements. Funded
development revenues increased 297%, from $306,000 in 1993 to $1.2 million in
1994, and 167% to $3.2 million in 1995. These increases were primarily due to
increased customer interest in the development of production-worthy illumination
sources. The Company expects that funded development revenues will decrease as a
percentage of total revenues as the Company focuses on product sales.
Cost of Product Sales. Cost of product sales increased 76% from $2.7
million in 1993 to $4.8 million in 1994 and 94% to $9.3 million in 1995, as the
Company's product sales increased. Gross margin on product sales increased from
19.7% in 1993 to 37.7% in 1994 to 40.4% in 1995. These increases were primarily
due to economies of scale realized as the Company's sales volume increased.
Research and Development. Research and development expenses increased 20%,
from $2.7 million in 1993 to $3.3 million in 1994, and 87% to $6.2 million in
1995. The substantial increase in 1995 was primarily due to the Company's
research contract with SEMATECH for the EX-5000 series laser system and to
continuing product development and enhancements associated with the ELS-4000F
series laser system. As a percentage of revenues, research and development
expenses decreased from 48.0% to 36.8% and to 32.7% in 1993, 1994 and 1995 due
to the growth in the Company's revenues in those periods.
Sales and Marketing. Sales and marketing expenses decreased 17% from $2.2
million in 1993 to $1.8 million in 1994, due to the reclassification of certain
costs associated with the testing of lasers to customer specifications to cost
of product sales and, to a lesser extent, reduced depreciation on lasers used
for demonstrations and customer training. In 1995, as industry interest in DUV
photolithography accelerated, the Company's sales and marketing expenses,
including sales commissions, increased 32% to $2.4 million. As a percentage of
total revenues, these expenses declined from 37.8% to 20.0% to 12.5% in 1993,
1994, and 1995, respectively.
General and Administrative. General and administrative expenses increased
9%, from $782,000 in 1993 to $849,000 in 1994, and 39% to $1.2 million in 1995,
reflecting increases in general and administrative support as the Company's
sales volume increased and its scope of operations expanded. As a percentage of
total revenues, these expenses decreased from 13.7% to 9.5% and to 6.3% in 1993,
1994 and 1995, respectively, reflecting economies of scale as total revenues
increased.
Other Income (Expense). Other expense increased from $7,000 in 1993 to
$199,000 in 1994, primarily reflecting increased interest expense in 1994 on
bridge financing obtained from the Company's investors to support its expanding
operations. This debt financing was subsequently converted into equity by the
investors in February 1995. The Company generated other income of $255,000 in
1995 due to foreign exchange gains of $506,000 and interest income of $32,000,
which were partially offset by interest expense of $283,000.
Provision for Income Taxes. The Company's provision for income taxes,
which primarily represents taxes paid in Japan for license fees and research and
development revenues generated from agreements with Seiko, decreased from
$221,000 to $58,000 and to $36,000 in 1993, 1994 and 1995, respectively, as
revenues from these activities decreased over these periods.
To date, inflation has not had a significant effect on the Company or its
results of operations.
22
<PAGE> 25
SELECTED QUARTERLY INFORMATION
The following table sets forth consolidated statement of operations data
for each of the six quarters through the period ended June 30, 1996 and the
percentage of the Company's total revenues represented by each item of the
respective quarter. This unaudited quarterly information has been prepared on
the same basis as the audited consolidated financial statements presented
elsewhere in this Prospectus and, in management's opinion, includes all
adjustments (consisting only of normal recurring entries) necessary for a fair
presentation of the information for the quarters presented. The operating
results for any quarter are not necessarily indicative of results for any future
period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales.................... $ 1,476 $3,982 $ 4,892 $5,226 $ 6,526 $ 11,242
Other............................ 802 1,019 827 596 634 780
------ ------ ------ ------ ------ -------
Total revenues................ 2,278 5,001 5,719 5,822 7,160 12,022
------ ------ ------ ------ ------ -------
Costs and expenses:
Cost of product sales............ 967 2,276 2,893 3,146 4,210 6,719
Research and development......... 1,347 1,573 1,773 1,461 1,958 2,291
Sales and marketing.............. 421 590 652 690 755 1,070
General and administrative....... 235 267 324 355 551 752
------ ------ ------ ------ ------ -------
Total costs and expenses...... 2,970 4,706 5,642 5,652 7,474 10,832
------ ------ ------ ------ ------ -------
Operating income (loss)............ (692) 295 77 170 (314) 1,190
Other income (expense)............. 90 (40) 11 194 64 203
------ ------ ------ ------ ------ -------
Income (loss) before provision for
income taxes..................... (602) 255 88 364 (250) 1,393
Provision for income taxes......... 9 27 -- -- 10 176
------ ------ ------ ------ ------ -------
Net income (loss).................. $ (611) $ 228 $ 88 $ 364 $ (260) $ 1,217
====== ====== ====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUES
-----------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales.................... 64.8% 79.6% 85.5% 89.8% 91.2% 93.5%
Other............................ 35.2 20.4 14.5 10.2 8.8 6.5
------ ------ ------ ------ ------ -------
Total revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------ ------ -------
Costs and expenses:
Cost of product sales............ 42.4 45.5 50.6 54.1 58.8 55.9
Research and development......... 59.1 31.5 31.0 25.1 27.4 19.1
Sales and marketing.............. 18.5 11.8 11.4 11.9 10.5 8.9
General and administrative....... 10.3 5.3 5.7 6.1 7.7 6.3
------ ------ ------ ------ ------ -------
Total costs and expenses...... 130.3 94.1 98.7 97.2 104.4 90.2
------ ------ ------ ------ ------ -------
Operating income (loss)............ (30.3) 5.9 1.3 2.8 (4.4) 9.8
Other income (expense)............. 3.9 (0.8) 0.2 3.4 0.9 1.7
------ ------ ------ ------ ------ -------
Income (loss) before provision for
income taxes..................... (26.4) 5.1 1.5 6.2 (3.5) 11.5
Provision for income taxes......... 0.4 0.5 -- -- 0.1 1.5
------ ------ ------ ------ ------ -------
Net income (loss).................. (26.8)% 4.6% 1.5% 6.2% (3.6)% 10.0%
====== ====== ====== ====== ====== =======
Gross margin on product sales...... 34.5% 42.8% 40.9% 39.8% 35.5% 40.2%
====== ====== ====== ====== ====== =======
</TABLE>
23
<PAGE> 26
The Company's total revenues have increased in each quarter since the first
quarter of 1995, primarily due to increased sales of DUV photolithography laser
systems. Of the three systems sold in the quarter ended March 31, 1995, one was
a DUV photolithography laser system, and of the 27 systems sold in the quarter
ended June 30, 1996, 26 were DUV photolithography laser systems. The Company
also generated modest other revenues in each of the past six quarters from
research and development activities performed for certain of the Company's
customers and for SEMATECH.
Cost of product sales also increased in absolute dollars in each of the
past six quarters as sales of laser systems and replacement parts increased.
Gross margins on product sales have ranged from a high of 42.8% in the second
quarter of 1995 to a low of 34.5% in the first quarter of 1995. The increase in
gross margin in the second quarter of 1995 was due to economies of scale
realized as unit sales increased. The decrease in gross margin in the third
quarter of 1995 was caused primarily by a relatively higher proportion of sales
of the Company's industrial laser product, which has a lower gross margin than
the Company's photolithography laser product, as well as replacement parts for
such product. The subsequent decrease in gross margin in the fourth quarter of
1995 was due primarily to the write off of inventory associated with the
Company's older lasers caused by the introduction of the ELS-4000F and 5000
series products. Gross margin declined in the first quarter of 1996 as the
Company began to experience increased manufacturing overhead costs as it
expanded capacity to meet its growing order backlog. The increase in gross
margin during the second quarter of 1996 was due to realization of economies of
scale associated with increased laser unit sales.
Operating expenses have generally increased in absolute dollars over the
quarters shown as the Company has increased staffing in research and
development, sales and marketing and administrative functions. Research and
development expenses increased through the first three quarters of 1995
reflecting the increased development activity under the SEMATECH contract and
material costs associated with the delivery of the first prototype unit in the
early part of the fourth quarter. Following such delivery, research and
development expenses decreased in the fourth quarter of 1995. Research and
development expenses rose rapidly in the first quarter of 1996 as the Company
expanded its product support capabilities in response to customer requirements.
As a percentage of total revenues, operating expenses have generally declined as
the Company's revenues have increased in the past four quarters, although
research and development and general and administrative expenses increased
somewhat as a percentage of revenues in the first quarter of 1996.
The Company achieved operating income and net income in the last three
quarters of 1995, but reported a loss for the first quarter of 1996 due to
delays in manufacturing, testing and shipping laser systems.
The Company's operating results have in the past fluctuated and are likely
in the future to fluctuate significantly depending upon a variety of factors.
Such factors may include: the demand for semiconductors in general and for
leading edge devices with smaller circuit geometries in particular; cyclicality
in the market for semiconductor manufacturing equipment; the timing and size of
orders from the Company's small base of customers; the ability of the Company to
manufacture, test and deliver systems in a timely and cost effective manner; the
ability of the Company's competitors to win orders from the Company's customers;
the timing of new product announcements and releases by the Company and its
competitors; the entry of new competitors into the market for DUV
photolithography illumination sources; the ability of the Company to manage its
costs as it begins to supply its products in volume; and the Company's ability
to manage effectively its exposure to foreign currency exchange rate
fluctuations, principally with respect to the yen (in which sales by the
Company's Japanese subsidiary are denominated).
The Company has historically derived a substantial portion of its quarterly
and annual revenues from the sale of a relatively small number of systems, which
are priced at up to $450,000. As a result, the precise timing of the recognition
of revenue from an order for one or a small number of systems can have a
significant impact on the Company's total revenues and operating results for a
particular period. The Company's operating results for a particular period could
be adversely affected if orders for a small number of systems, or even one
system, are canceled or rescheduled by customers or cannot be filled in time to
recognize revenue during that period due to, for example, unanticipated
manufacturing, testing, shipping or product acceptance delays. The Company had a
backlog of orders at June 30, 1996 of approximately $49.3 million for shipment
during the 12 months ending June 30, 1997. However, customers may cancel or
delay orders with little or no penalty, and
24
<PAGE> 27
because of the Company's limited experience in producing lasers in volume, there
can be no assurance that the Company will recognize revenue on any significant
portion of this backlog. The Company's expense levels are based, in large part,
on the Company's expectations as to future revenues and are therefore relatively
fixed in the short term. Therefore, if revenue levels fall below expectations,
net income will be disproportionately and adversely affected. The impact of
these and other factors on the Company's revenues and operating results in any
future period cannot be forecast with certainty. See "Business -- Backlog."
Recently, the Company has significantly increased the scale of its
operations and its manufacturing capacity. This has included the hiring of
additional personnel and substantially increasing the number of systems in
production. This expansion has resulted in higher materials and work-in-process
inventory levels and significantly higher operating expenses, and has required
the Company to implement a variety of new systems, procedures and controls.
Based on its backlog of orders at June 30, 1996, the Company expects to continue
to increase its inventories and operating expenses. If orders received by the
Company do not result in sales, or if the Company is unable to sustain its
revenues at anticipated levels, the Company's operating results will be
materially adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has funded its operations primarily through
the private sale of equity securities, totaling approximately $27.1 million,
borrowings from its investors for bridge financing and bank borrowings. As of
June 30, 1996, the Company had approximately $2.0 million in cash and cash
equivalents, $6.0 million in working capital and $9.5 million in bank and other
debt.
Net cash used in operating activities was approximately $2.1 million, $2.2
million, $2.1 million and $5.8 million for 1993, 1994, 1995, and the six months
ended June 30, 1996, respectively. The relatively consistent use of cash in
operations during the three full years was primarily the result of improved
operating results which offset to a degree increasing working capital
requirements as the Company's business expanded during these periods. The
increase in cash used in operations in the six months ended June 30, 1996 was
primarily attributable to an increase in accounts receivable and inventory.
Net cash used for investing activities was approximately $410,000,
$549,000, $2.4 million and $5.0 million in 1993, 1994, 1995 and the six months
ended June 30, 1996. These expenditures were primarily for the purchase of
computer equipment, test equipment, research and development tools, a management
information system, and, particularly during the six months ended June 30, 1996,
manufacturing process machinery and tenant improvements in the manufacturing
area. The Company anticipates making additional capital expenditures of
approximately $4.0 million for the remainder of 1996, primarily for
manufacturing expansion and improvements, test equipment, research tools and
computer equipment.
The Company's financing activities provided net cash of approximately $1.7
million, $4.5 million, $4.3 million and $10.7 million in 1993, 1994, 1995 and
the six months ended June 30, 1996, respectively. In 1993, this consisted
primarily of borrowings of approximately $474,000 from investors and bank
borrowings of approximately $1.6 million, partially offset by a reduction in
advances against commercial drafts in Japan of $487,000. In 1994, the Company
borrowed approximately $3.2 million from investors, received approximately
$404,000 from the sale of Redeemable Convertible Preferred Stock and received
approximately $945,000 in net advances against commercial drafts in Japan. In
1995, the Company sold Redeemable Convertible Preferred Stock for approximately
$3.4 million, increased its bank borrowings by $1.2 million and reduced advances
against commercial drafts by $390,000. In the six months ended June 30, 1996,
the Company received net proceeds of approximately $5.8 million from the sale of
Redeemable Convertible Preferred Stock and increased bank borrowings by $4.5
million. During the same period, the Company received net advances against
commercial drafts in Japan of approximately $459,000.
The Company has available line of credit arrangements with a bank
permitting borrowings of up to $11.0 million. These borrowings are secured by
substantially all of the Company's assets, including its intellectual property,
and provide for the following facilities: (i) a $5.0 million revolving line of
credit expiring June 27, 1997, which is based on eligible accounts receivable of
the Company's Japanese subsidiary and eligible inventory of the Company and its
subsidiary and is partially guaranteed by the Export-Import Bank of the United
States; (ii) a $3.0 million revolving line of credit expiring March 5, 1997
based on eligible international
25
<PAGE> 28
accounts receivable and inventory (excluding Japan) and partially guaranteed by
the Export-Import Bank of the United States; (iii) a $1.0 million domestic
revolving loan facility expiring March 5, 1997 based on eligible domestic
accounts receivable; and (iv) a $2.0 million term loan facility from a bank
which is due September 30, 1998. The Company also has a $1.0 million loan
facility which is guaranteed by Mitsubishi International Corporation, is due on
the earlier March 31, 1997 or the completion of this offering and was fully
utilized at June 30, 1996. At June 30, 1996, the Company had outstanding
indebtedness for borrowed money of $7.3 million. See Notes 3 and 9 of Notes to
Consolidated Financial Statements. The Company intends to repay a portion of the
indebtedness under the above facilities from the net proceeds of this offering.
See "Use of Proceeds." The Company also has through its subsidiary in Japan a
Y500 million credit facility for the discounting of customer promissory notes,
under which Y184 million ($1.7 million) was outstanding as of June 30, 1996. The
Company also has two foreign currency exchange facilities. See Note 1 of Notes
to Consolidated Financial Statements. The Company anticipates that it will seek
to expand its credit lines following this offering.
The Company anticipates that the proceeds from this offering together with
anticipated cash provided by operations and available bank credit will be
adequate to meet its cash needs for at least the next 12 months. Thereafter, the
Company may require additional funds to support its working capital requirements
or for other purposes and may seek to raise such additional funds through public
or private equity financings or other sources. There can be no assurance that
additional financing will be available at all or that, if available, such
financing will be obtainable on terms favorable to the Company and would not be
dilutive. See "Risk Factors -- Need for Additional Capital."
26
<PAGE> 29
BUSINESS
Cymer is the leading provider of excimer laser illumination sources for use
in deep ultraviolet ("DUV") photolithography systems targeted at the pilot and
volume production segments of the semiconductor manufacturing market. The
Company's lasers are incorporated into step-and-repeat and step-and-scan
photolithography systems for use in the manufacture of semiconductors with
critical feature sizes below 0.35 microns. The Company believes that its excimer
lasers constitute a substantial majority of all excimer lasers incorporated in
DUV photolithography tools. The Company's customers include all five
manufacturers of DUV photolithography systems: ASM Lithography, Canon,
Integrated Solutions, Nikon and SVG Lithography. Photolithography systems
incorporating the Company's excimer lasers have been purchased by each of the
world's 10 largest semiconductor manufacturers: Intel, NEC, Toshiba, Hitachi,
Motorola, Samsung, Texas Instruments, Mitsubishi, Fujitsu and Philips.
INDUSTRY BACKGROUND
Semiconductor Industry
The worldwide market for semiconductors has grown from approximately $22
billion in 1985 to over $140 billion in 1995 as the use of semiconductors has
expanded beyond computer systems to a wide array of additional applications such
as telecommunications and data communications systems, automotive products,
consumer goods, medical products, household appliances and industrial automation
and control systems. To compete effectively in this market, semiconductor
manufacturers are continually seeking to improve their process and design
technologies to manufacture smaller, more powerful, more complex, more reliable
devices at a lower cost per function. A major factor in fabricating such devices
is the ability to reduce circuit geometries, measured in microns (a millionth of
a meter, "m") and defined in terms of critical, or smallest, feature size.
Reduced circuit geometries permit semiconductor manufacturers to increase
transistor density or the number of transistors per area of silicon. On average,
the power and complexity (number of transistors) of semiconductor devices has
doubled every 18 months with proportionate decreases in cost. This phenomenon
was first articulated by Dr. Gordon Moore, a co-founder of Intel Corporation,
and has come to be known as "Moore's Law."
Recent advances in both memory circuits, such as DRAMs, and logic devices,
such as microprocessors, illustrate this continuing trend toward higher
complexity and smaller critical feature sizes. According to the Semiconductor
Industry Association's ("SIA") Technology Roadmap, critical feature sizes in
leading edge (first engineering samples) DRAM devices have decreased from 0.8m
in four megabit devices in 1989, to 0.5m in 16 megabit devices in 1992, to 0.35m
in 64 megabit devices in 1995. The SIA expects that this trend will continue
with the introduction of leading edge 256 megabit DRAMs with 0.25m geometries in
1998. Critical feature sizes in microprocessors have also followed a similar
downward sloping curve. The following graph illustrates the reduction in
critical feature size in DRAM devices over time:
REDUCTION IN CRITICAL FEATURE SIZE OVER TIME
<TABLE>
<S> <C> <C> <C> <C>
1986 1.2
1989 .8
1992 .5
1995 .35
1998 .25
2001 .18
</TABLE>
27
<PAGE> 30
Semiconductor Photolithography Process
Integrated circuits ("ICs") are complex semiconductor devices made up of
multiple transistors fabricated on silicon wafers in a series of process steps.
During IC fabrication, thin films of material are deposited or grown on the
surface of a wafer. Following thin film deposition, IC features are projected
onto light-sensitive emulsion ("photoresist") on the surface of the wafer with
optical photolithography tools. Advanced ICs require 20 or more deposition and
photolithography steps. After photolithography, IC features are formed with etch
systems that selectively remove unwanted material as determined by the
patterning process. Ultimately, IC features are formed into functioning
electronic circuits.
Photolithography is one of the most critical and expensive steps in the IC
manufacturing process. This process requires either a step-and-repeat
photolithography system ("stepper") or a step-and-scan photolithography system
that projects light through a photomask containing the master image of a
particular circuit layer onto a light sensitive photoresist coated on the wafer.
ICs are patterned through a series of such optical exposures until the full
three-dimensional structure of the circuit elements has been completed. The
critical feature size of a semiconductor device depends upon the resolution
capability of the stepper or step-and-scan photolithography system. Resolution
capability, in turn, is a function of the projected wavelength of the
illumination source and the numerical aperture of the lens, with a shorter
wavelength or higher numerical aperture enabling smaller feature sizes.
Historically, notwithstanding adjustments in numerical aperture and advancements
in optical and photomask technology, photolithography tools have had physical
resolution limits approximating the wavelength of their illumination source.
Accordingly, shorter wavelength illumination technology has been used to achieve
the higher resolution requirements of successive IC generations.
Mercury arc lamps have been the primary illumination source used for the
last decade. Initially, g-line emission from these lamps, with a wavelength of
436nm (0.436m), was used to commercially produce critical feature sizes down to
0.6m. Subsequently, i-line emission from these lamps, with a wavelength of 365nm
(0.365m), has been used to commercially produce critical feature sizes of 0.6m
to 0.35m. The next generation of photolithography tools use DUV light with
wavelengths of 250nm (0.25m) and below. The graph below shows how the adoption
of the three principal illumination technologies corresponds to decreases in
critical feature sizes:
CRITICAL FEATURE SIZE AND ILLUMINATION TECHNOLOGIES
LOGO
As critical feature sizes approached 0.6m, i-line systems began to be
widely deployed and g-line systems were used for applications requiring less
critical resolutions. The Company believes i-line systems were purchased in
volume by IC manufacturers in advance of reaching the physical resolution limits
of g-line systems for two principal reasons. First, by adopting i-line
technology early, IC manufacturers were able to
28
<PAGE> 31
perfect new process technology at geometries well above the practical limits of
i-line steppers. Second, because these systems had the capability to be used in
the production of multiple future IC generations, they were more extendable and
therefore more cost effective than the older g-line systems. Today's i-line
steppers are capable of producing resolutions as fine as 0.35m, and possibly
lower, when used in conjunction with photomask technologies such as phase shift
or optical proximity correction.
The SIA's Technology Roadmap projects production of leading edge 0.25m
devices by 1998 and 0.18m devices by 2001. The Company believes that volume
production of ICs with critical geometries below 0.35m will require DUV steppers
or step-and-scan systems. While the Company believes that semiconductor
manufacturers are no longer attempting to achieve sub-0.35m geometries with
i-line steppers employing mercury arc lamp light sources, successful process
development at 0.25m has been achieved with DUV step-and-scan systems using the
250nm emission of mercury arc lamps. However, mercury arc lamps are not optimal
for DUV step-and-scan systems for several reasons. First, mercury arc lamps emit
a wide spectrum of light. This wide band of wavelengths causes a degradation of
resolution for DUV photolithography which limits its effectiveness for critical
feature sizes below 0.30m. Second, because only a portion of the light emitted
by mercury arc lamps is of the appropriate wavelength for DUV applications, the
relatively small amount of DUV light delivered to the wafer's surface
necessitates a longer exposure time which slows throughput. Third, recent
advances in step-and-scan optical system designs require narrower-band light
than the 250nm emission of mercury arc lamps. Consequently, at critical feature
sizes below 0.35m, the Company believes that mercury arc lamp technology will be
inadequate for volume production and that manufacturers of DUV photolithography
tools require alternative illumination sources for their DUV steppers and
step-and-scan systems.
THE CYMER SOLUTION -- EXCIMER LASERS
The Company believes that the excimer laser is the optimal illumination
source for volume production of semiconductors using DUV photolithography at
critical geometries below 0.35m. The excimer laser is a gas discharge laser that
produces pulses of powerful, narrow bandwidth and short wavelength light,
permitting very fine feature resolution. In addition, its high power allows for
shorter exposure times, thereby increasing throughput. Finally, the Company
believes that excimer laser technology is ultimately extendible to critical
feature sizes as small as 0.10m by using different gas combinations and advanced
optical and photomask technology.
Cymer is the leading provider of excimer laser illumination sources for use
in DUV photolithography systems targeted at the pilot and volume production
segments of the semiconductor market. The Company believes that its leadership
position in the photolithography excimer laser market is attributable to the
Company's development of advanced technologies that address the needs of its
customers and semiconductor manufacturers. The performance characteristics of
the Company's excimer laser include high pulse repetition rate, narrow
bandwidth, energy stability and reliability relative to competitive products.
The Company's krypton fluoride ("KrF") excimer lasers are currently capable of
producing critical features as small as 0.25m. When combined with advanced
optical and photomask technology and advanced wafer processing techniques such
as chemical mechanical planarization, the Company's KrF systems are capable of
producing critical features as small as 0.20m. The Company believes that its
technological capabilities provide it with a competitive advantage in supplying
excimer lasers for both DUV steppers and DUV step-and-scan systems. The Company
also believes that it is currently the only volume supplier of excimer laser
systems for photolithography applications. The Company has sold its
photolithography lasers to all five DUV photolithography tool manufacturers: ASM
Lithography, Canon, Integrated Solutions, Nikon and SVG Lithography. In
addition, photolithography systems that incorporate the Company's excimer lasers
have been purchased by the world's 10 largest semiconductor manufacturers:
Intel, NEC, Toshiba, Hitachi, Motorola, Samsung, Texas Instruments, Mitsubishi,
Fujitsu and Philips.
29
<PAGE> 32
STRATEGY
Cymer's objective is to maintain its position as the leading supplier of
DUV illumination sources to photolithography tool manufacturers. The principal
elements of the Company's strategy include:
Maintain Technology Leadership. Since entering the excimer laser
photolithography market in 1988, the Company has achieved a technology
leadership position in this market by investing heavily in research and
development, by developing higher performance products and by focusing on
satisfying the needs of both its photolithography customers and end user IC
manufacturers. The Company intends to continue to invest heavily in
research and development to enhance its KrF excimer laser and is working
with its customers on developing its next-generation argon fluoride ("ArF")
excimer laser in preparation for a transition to 0.18m and smaller critical
feature sizes. In addition, the Company intends to continue to invest in
other advanced technologies for photolithography and other applications of
excimer laser technology.
Deepen Customer Relationships. The Company maintains relationships
with all of the manufacturers that make DUV photolithography tools: ASM
Lithography, Canon, Integrated Solutions, Nikon and SVG Lithography and
believes that deepening these relationships will play an important role in
maintaining its leading position in the photolithography excimer laser
market. The Company is seeking to build and expand relationships with its
customers at multiple levels within their organizations. The Company is
collaborating with its customers on advanced technology development to
better anticipate technology trends in the semiconductor manufacturing
industry. Three of these companies, ASM Lithography, Canon and Nikon, have
made equity investments in the Company.
Increase Volume Manufacturing Capability. The Company is investing
heavily in its laser manufacturing facilities in response to increased
demand for its photolithography laser products and intends to increase
production capacity substantially to fulfill both backlog and anticipated
customer orders. During the first six months of 1996, the Company increased
its clean room manufacturing space to approximately 11,000 square feet from
approximately 6,000 square feet, increased the number of test bays to 15
from six, created an in-house manufacturing capability for its solid-state
pulse power modules, installed a new management information system,
outsourced the manufacturing of several major sub-assemblies and increased
its manufacturing headcount to 78 from 43. The Company intends to continue
to increase its manufacturing capability by hiring and training additional
manufacturing and test personnel, improving its assembly and test processes
in order to reduce cycle time, investing in additional manufacturing
tooling and implementing a multi-shift testing schedule. In addition, under
a contract manufacturing agreement with the Company, Seiko is establishing
a manufacturing capability to produce photolithography lasers for the
Company in Japan.
Enhance Worldwide Service and Support. The Company is expanding its
field service and support operations in the United States, Japan, Korea and
Europe and is in the process of establishing a presence in Taiwan and
Southeast Asia. The Company believes that this five-region presence, in
close proximity to both the photolithography tool manufacturers and major
semiconductor manufacturers, will enable it to enhance customer
productivity, provide a faster response time and receive continual feedback
on its excimer laser performance and desired technological and product
refinements.
Pursue Additional Applications for Excimer Laser Technology. The
Company believes that there is an opportunity to use excimer lasers in
areas of semiconductor manufacturing other than photolithography. For
example, the Company has recently manufactured and sold a laser system that
is being evaluated by the customer for use in photoresist stripping. In
addition, the Company believes that applications exist for the Company's
excimer laser outside of the semiconductor manufacturing industry. As the
Company satisfies demand for DUV photolithography lasers, the Company
intends to pursue new applications for its laser systems over the next
several years.
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<PAGE> 33
PRODUCTS
The Company's products consist of photolithography lasers, industrial high
power lasers and replacement parts.
Photolithography Laser Products
The Company's photolithography lasers produce narrow bandwidth pulses of
short wavelength light. The lasers permit very fine feature resolution and high
throughput. The Company has designed its lasers to be highly reliable, easy to
install and compatible with existing semiconductor manufacturing processes.
Introduced in the third quarter of 1995, the Company's ELS-4000F KrF
excimer laser is designed to meet the requirements of photolithography tool and
semiconductor manufacturers. The laser operates at a 600Hz pulse repetition rate
and provides power output of 7.2 watts of 248nm wavelength light. The ELS-4000F
incorporates advanced discharge chamber technology and solid state pulse power
technology to excite the laser gas efficiently, reducing the cost of ownership.
The ELS-4000F achieves high resolution and stable focus through proprietary
optical modules that perform line-narrowing and wavelength stabilization,
thereby optimizing the light emitted by the laser for the photolithography
application. The list price of the ELS-4000F is approximately $425,000.
The Company's 5000 series KrF excimer lasers, introduced in the first
quarter of 1996, are offered in both narrowband, ELS-5000, and broadband,
EX-5000, configurations. The 5000 series lasers incorporate the advanced
technological features of the Company's ELS-4000F laser but operate at a higher
pulse repetition rate and provide higher power outputs that shorten exposure
time and increase throughput, and in the case of the ELS-5000, a narrower
bandwidth. The 5000 series lasers incorporate the Company's proprietary line
narrowing and wavelength stabilization modules together with an atomic reference
for long-term accuracy of the wavemeter calibration. The 5000 series lasers
utilize a modular design that allows the Company to outsource many of the
system's subassemblies, thereby reducing manufacturing cycle times. The list
price of the 5000 series is approximately $450,000.
The Company's lasers incorporate advanced software control and diagnostic
systems. The control system provides users with on-line monitoring of laser
operating conditions, with approximately 75 diagnostic readings (including flow
rate, temperatures, pressures and light quality), that are automatically
monitored by the photolithography tool's control system. Additionally,
approximately 140 configurable parameters can be adjusted to optimize the
laser's performance for each customer's system. A portable computer attached to
the laser logs this data, automatically providing critical information about
performance and reliability. The lasers are also designed for easy
serviceability, with most major modules and components articulated for easy
swing-out or roll-out motion to facilitate inspection and replacement.
Certain specifications of the Company's photolithography lasers are set
forth below:
<TABLE>
<CAPTION>
PRODUCT SPECIFICATIONS COMPONENT LIFE
------------------------------------------------------------------------------------------------------------
---------------------------------
FREQUENCY AND BANDWIDTH AND
OUTPUT POWER STABILITY
--------------------- -------------------------
PULSE AVERAGE (BILLION PULSES) GAS CHARGE
REPETITION OUTPUT SPECTRAL ENERGY POWER LIFE
-----------------
POWER BANDWIDTH PULSES
------- ------------ STABILITY CHAMBER WINDOW SUPPLY --------- DAYS
RATE (WATTS) (PICOMETERS) --------- ------- ------ ------------ (MILLION) ----
----------
(HERTZ)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NARROWBAND
ELS-5000........ 1000 10 <0.8 <P1% 3 1 10 100 5
ELS-4000F....... 600 7.2 <3.0 <P1% 2 1 10 50 3
BROADBAND
EX-5000......... 1000 15 100 <P1% 3 1 10 100 5
</TABLE>
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<PAGE> 34
Industrial High Power Laser Products
The Company's HPL-100K/110K series KrF excimer lasers are designed to meet
the rigors of high duty cycle industrial usage, such as microdrilling,
micromachining and annealing applications. The laser operates at a 200 to 250Hz
pulse repetition rate and provides average power output of 100 watts for the
HPL-100K and 110 watts for the HPL-110K. The pulse repetition rate and high
power makes these lasers well suited for micro-fabrication processes. The
Company is currently focusing its development and marketing efforts on its
photolithography laser products, and the Company expects minimal revenues from
industrial laser products in 1996. Sales of industrial lasers to Tamarack
Scientific Co., Inc., a supplier of equipment used by Hewlett-Packard to
manufacture InkJet print heads, accounted for 10% of the Company's total
revenues in 1995.
Replacement Parts
Certain components and subassemblies included in the Company's lasers
require replacement or refurbishment following continued operation. For example,
the discharge chamber of the Company's lasers has a component life of
approximately two to three billion pulses, depending on the model. The Company
estimates that a laser used in a semiconductor production environment will
require one to three replacement chambers per year. Similarly, certain optical
components of the laser will deteriorate with continued exposure to DUV light
and will require periodic replacement. The Company provides these and other
spare and replacement parts for its photolithography lasers as needed by its
customers. On a limited basis, the Company also refurbishes and resells complete
laser systems.
CUSTOMERS AND END USERS
The Company sells its photolithography laser products to each of the five
manufacturers of DUV photolithography tools:
<TABLE>
<S> <C>
ASM Lithography Nikon
Canon SVG Lithography
Integrated Solutions
</TABLE>
The Company believes that maintaining and strengthening these customer
relationships will play an important role in maintaining its leading position in
the photolithography market. The Company works closely with its customers to
integrate the Company's products into their photolithography tools and is
collaborating with certain of its customers on advanced technology developments
under jointly funded programs. See "-- Research and Development." Sales to ASM
Lithography, Canon and Nikon accounted for 18%, 19% and 27%, respectively, of
total revenue in 1995 and 22%, 37% and 20% in the six months ended June 30,
1996. ASM Lithography, Canon and Nikon are stockholders of the Company. See
"Risk Factors -- Dependence on Small Number of Photolithography Tool
Manufacturers" and "Principal and Selling Stockholders."
End users of the Company's lasers include the world's 10 largest
semiconductor manufacturers. The following semiconductor manufacturers have
purchased one or more DUV photolithography tools incorporating the Company's
laser:
UNITED STATES
Advanced Micro Devices
Digital Equipment Corporation
IBM
Integrated Device Technology
Intel Corporation
Micron Technology
Motorola
SEMATECH*
Texas Instruments
JAPAN
Fujitsu
Hitachi
Mitsubishi Electric
NEC
NTT
Oki Electric
Sharp
Sony
Toshiba
KOREA
Hyundai
Samsung
EUROPE
C-Net
IMEC
LETI
Philips
- ---------------
* A semiconductor industry consortium.
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<PAGE> 35
BACKLOG
The Company schedules production of lasers based upon order backlog and
informal customer forecasts. The Company includes in backlog only those orders
to which a purchase order number has been assigned by the customer and for which
delivery has been specified within 12 months. Because customers may cancel or
delay orders with little or no penalty, the Company's backlog as of any
particular date may not be a reliable indicator of actual sales for any
succeeding period. At June 30, 1996, the Company had a backlog of approximately
$49.3 million, compared with a backlog of $28.5 million at December 31, 1995.
See "Risk Factors -- Potential Fluctuations in Operating Results," and "-- Risk
of Excessive Inventory Buildup by Photolithography Tool Manufacturers."
TECHNOLOGY
The word "excimer" derives from the combination of "excited" and "dimer." A
dimer is a molecule consisting of two atoms. Excimer lasers utilize a mixture of
a rare gas (krypton, argon, xenon) and a halogen gas (fluorine, chlorine,
bromine). Through electrical discharge, these two gases combine to form excited
dimers such as KrF or ArF molecules, which only exist in an excited state and
have a very short lifetime. In an avalanching process of stimulated emission,
the excimer de-excites and in the process releases energy in the form of DUV
light. The emitted light from an excimer laser consists of a band of colors, or
wavelengths, in the DUV spectrum. The KrF excimer laser produces a band of light
centered around 248 nanometers and the ArF excimer laser produces a band of
light centered around 193 nanometers. The Company believes that both of these
laser gases and wavelengths will be of importance in current and future
photolithography applications.
The excimer lasers' emissions are beyond the transmission capabilities of
optical materials traditionally used in photolithography applications, such as
borosilicate glass or flint glass. Materials exhibiting both good optical
transmissive properties in the DUV spectrum and the mechanical and thermal
stability necessary for precise optical performance are limited and include
fused silica (synthetic quartz) for KrF lasers and calcium fluoride for ArF
lasers. However, such single-material lenses cannot be designed to be
color-corrected to produce a sharply focused image on a particular plane over a
broad range of wavelengths. Instead, these projection lenses need to be operated
at very narrow and stable DUV wavelengths to produce sharp and stable images.
As a result of the foregoing, there are four principal technical challenges
the Company has had to overcome to produce excimer lasers for photolithography
applications:
- Devise a means to contain and electrically excite highly reactive
KrF gas mixtures in a minimally-reactive fashion to provide long gas
life and stable optical power;
- Adapt a technology that provides the high voltage electrical charge
required to excite gases in order to produce a laser beam with a
high pulse repetition rate while minimizing the naturally
destructive effects of the process on the discharge chamber;
- Develop a technology to "compress" the broadband, multi-color DUV
emission from an excimer laser into a very narrow wavelength band
suitable for sharp focus using single-material projection lenses;
and
- Devise a technique to precisely measure and stabilize the wavelength
of the resulting light, preventing any drift of this narrowed
emission to ensure stable focus at the wafer plane.
The Company has had to combine successfully the four core technologies
described above with the product engineering necessary to provide reliable,
production-caliber manufacturing equipment for the semiconductor industry.
Production-worthy lasers must be easy to operate and service and be capable of
meeting industry reliability requirements. Such lasers must be customized to
interface mechanically, optically and electrically with a variety of wafer
stepper and step-and-scan equipment. The control and self-diagnostic systems in
the laser must be electronically and software compatible with the control
systems residing inside the photolithography tool. Finally, production-worthy
laser equipment must meet the rigorous safety and facilities standards of the
semiconductor manufacturing industry.
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<PAGE> 36
A schematic diagram of the Company's photolithography excimer laser is
shown below.
LOGO
The Company has addressed the technical challenges described above by
developing the following subassemblies:
Laser Discharge Chamber. The Company's discharge chamber incorporates
an all-metal and ceramic design to present only extremely inert materials
to the reactive gases. Corona pre-ionization provides consistent, uniform
preseeding of the gas with charge carriers to enhance electrical discharge
uniformity and pulse-to-pulse energy stability. An electrostatic filtration
system prevents contaminants from adhering to laser window surfaces,
promoting a longer lifetime. A temperature stabilization system eliminates
warm-up periods and provides higher operating efficiency.
Solid State Pulse Power Module ("SSPPM"). The SSPPM utilizes a high
power silicon control rectifier switch that has been developed by a third
party to replace the thyratron vacuum tube technology traditionally used
for high power switching in lasers, radar and similar applications. Working
with the developers of this technology, Cymer adapted the technology for
excimer laser applications and is the exclusive licensee for such
applications. The expected lifetime of the SSPPM is approximately 10 times
that of a thyratron-based power source, reducing the cost of ownership of
the laser. When the SSPPM is used in conjunction with advanced chamber
designs, the discharge chamber lifetime can be significantly extended,
thereby further decreasing the laser's cost of ownership.
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<PAGE> 37
Line Narrowing Module. The broadband DUV emission from the laser is
compressed into a narrow band wavelength by the line narrowing module in
the laser's optical system. A one-dimensional beam expander illuminates a
highly dispersive reflection grating positioned to reflect back into the
discharge chamber only that wavelength desired by the photolithography
tool. This line narrowing system is "tunable" in two ways to optimize
performance. First, a unique grating distortion system matches the
curvature of the grating surface to the natural wavefront curvature,
minimizing the spectral bandwidth of the laser light. Second, a computer
controlled stepper motor automatically realigns the angle of the
diffraction grating to compensate, as necessary, for any wavelength drift.
Wavelength Stabilization Module. Prior to the narrowed light exiting
the laser enclosure, the wavelength stabilization module measures the
bandwidth and center wavelength stability of the laser light. These
measurements are made using a two channel etalon-based diagnostic system,
referenced to an ultra-stable optically contacted etalon reference. If any
wavelength drift is detected, a feedback control signal is directed to the
stepper motor in the line narrowing module to automatically compensate for
such drift. Periodically, the wavemeter can be automatically calibrated to
an atomic reference that is optional on the ELS-4000F laser and standard on
the 5000 series lasers.
MANUFACTURING
The Company's manufacturing activities consist of assembly, integration and
test. These activities are performed in a 22,800 square foot facility in San
Diego, California that includes approximately 11,000 square feet of class 1000
clean room manufacturing and test space. In order to focus on its core
technology, leverage the expertise of its key suppliers and respond more
efficiently to customer demand, the Company has outsourced many of its
subassemblies. The Company's outsourcing strategy is exemplified by the modular
design of the Company's 5000 series laser, for which substantially all of the
nonproprietary subassemblies have been outsourced. The Company believes that the
highly outsourced content and manufacturable design of the 5000 series laser
allows for reduced manufacturing cycle times and increased output per employee.
To meet current and anticipated demand for its products, the Company must
substantially increase the rate by which it manufactures and tests its
photolithography laser systems by the end of 1996. In order to accomplish this
objective, the Company intends to hire and train additional manufacturing
personnel, improve its assembly and test processes in order to reduce cycle
time, invest in additional manufacturing tooling and implement a multi-shift
testing schedule. This increase would follow a nearly four-fold increase in the
manufacturing rate from December 1995 to June 1996. The Company has been unable
to manufacture and test its photolithography laser systems fast enough to fill
orders and is behind on its delivery schedules. While the Company is not aware
of any order cancellations as a result of these delays, such delays, if they
continue or recur, increase the risk that customers will cancel orders and seek
to meet all or a portion of their needs for illumination sources from the
Company's competitors. The Company is also increasingly relying on outside
suppliers for the manufacture of various components and subassemblies used in
its products and is dependent upon these suppliers to meet the Company's
manufacturing schedules. The failure by one or more of these suppliers to supply
the Company on a timely basis with sufficient quantities of components or
subassemblies that perform to the Company's specifications could affect the
Company's ability to deliver completed lasers to its customers on schedule.
Additionally, the Company may underestimate the costs required to increase its
manufacturing capacity, which may materially adversely affect the Company's
results of operations.
In addition to increasing manufacturing capacity at its San Diego facility,
the Company has entered into a contract manufacturing agreement with Seiko
Instruments under which Seiko has agreed to manufacture for the Company a
certain number of the Company's photolithography excimer lasers and subsequent
enhancements. In order to ensure uniformity of product for all customers, the
Company will maintain control of all work flow design, manufacturing process,
engineering changes and component sourcing decisions. The Company will
manufacture and seal all core technology modules in San Diego. The agreement
expires in 2001, but will automatically renew for two-year terms unless one
year's notice to terminate is given by either party. While the Company is
seeking to have Seiko begin limited production of lasers in 1996, there can be
no assurance that the Seiko factory will be successfully qualified and commence
production on schedule. See "-- Proprietary Rights" for a description of a
license granted to Seiko to manufacture and sell the Company's
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<PAGE> 38
industrial laser product and a notice of alleged patent infringement received by
Seiko from one of the Company's competitors.
Certain of the components and subassemblies included in the Company's
products are obtained from a single supplier or a limited number of suppliers.
In particular, there are no alternative sources for certain of the components
and subassemblies, including certain optical components and the pre-ionizer
tubes used in the Company's lasers. In addition, the Company is increasingly
outsourcing the manufacture of various subassemblies. Although to date the
Company has been able to obtain adequate supplies of its components and
subassemblies in a timely manner from existing sources, the Company has only
recently commenced volume production of its laser systems. If the Company were
unable to obtain sufficient quantities of components or subassemblies, or if
such items do not meet the Company's quality standards, delays or reductions in
product shipments could occur which would have a material adverse effect on the
Company's business, financial condition and results of operations.
SALES AND MARKETING
The Company's sales and marketing efforts have been predominately focused
on DUV photolithography tool manufacturers. The Company markets and sells its
products through four account managers, two of whom are located in the United
States and two of whom are based in Japan. The Company is in the process of
developing product and applications engineering teams to support the account
managers and the Company's customers. The Company believes that to facilitate
the sales process it must work closely with and understand the requirements of
semiconductor manufacturers, the end users of the Company's products. The
Company visits major semiconductor manufacturers, and their representatives
attend Company-sponsored seminars on advanced excimer photolithography. In
Japan, the Company sponsors an annual seminar with Seiko in conjunction with
Semicon Japan. This seminar has attracted representatives of semiconductor
manufacturers from Japan, Korea, the United States and SEMATECH, as well as
photolithography tool manufacturers and other photolithography process
suppliers.
SERVICE AND SUPPORT
The Company believes its success in the semiconductor photolithography
market is highly dependent upon after-sales support of both the customer and the
end user. The Company supports its customers with field service, technical
service engineers and training programs, and in some cases provides ongoing
on-site technical support at the customer's manufacturing facility. Prior to
shipment, the Company's support personnel typically assist the customer in site
preparation and inspection and provide customers with training at the Company's
facilities or at the customer's location. Customers and end users are also
provided with a comprehensive set of manuals, including operations, maintenance,
service, diagnostic and safety manuals.
The Company's field engineers and technical support specialists are based
at its San Diego headquarters, its field service office near Boston and its
Japanese facility. Support in Korea is provided by EO Technics, a contractor
trained and supported by the Company. As part of its customer service, the
Company maintains an inventory of spare parts at each of its service facilities.
The Company believes that the need to provide fast and responsive service
to the semiconductor manufacturers using its lasers is critical and that it will
not be able to depend solely on its customers to provide this specialized
service. Therefore, the Company believes it is essential to establish, through
trained third party sources or through its own personnel, a rapid response
capability to service its customers throughout the world. Accordingly, the
Company intends to expand its direct support infrastructure in Japan and Europe,
expand its field service and support in Korea through an independent firm, and
establish a joint service and support capability with an independent firm to
serve Taiwan and Southeast Asia. The establishment of these activities will
entail recruiting and training qualified personnel or identifying qualified
independent firms and building effective and highly trained organizations that
can provide service to customers in various countries in their assigned regions.
There can be no assurance that the Company will be able to attract qualified
personnel to establish these operations successfully or that the costs of such
operations will not be excessive. A failure to
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<PAGE> 39
implement this plan effectively could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company generally warrants its products against defects in design,
materials and workmanship for the earlier to occur of 17 months from the date of
shipment or 12 months after acceptance by the end user.
RESEARCH AND DEVELOPMENT
The semiconductor industry is subject to rapid technological change and new
product introductions and enhancements. The Company believes that continued and
timely development and introduction of new and enhanced laser products are
essential for the Company to maintain its competitive position. The Company
intends to continue to develop its technology and innovative products to meet
customer demands. Current projects include the development of the next
generation of photolithography lasers, including ArF lasers. Other research and
development efforts are currently focused on reducing manufacturing costs,
lowering the cost of laser operation, enhancing laser performance and developing
new features for existing lasers. See "Risk Factors -- Rapid Technological
Change; New Product Introductions."
The Company has historically devoted a significant portion of its financial
resources to research and development programs and expects to continue to
allocate significant resources to these efforts. As of June 30, 1996, the
Company had 64 employees engaged in research and development. Research and
development expenses for 1993, 1994, 1995 and the first six months of 1996 were
approximately $2.7 million, $3.3 million, $6.2 million and $4.2 million,
respectively.
In addition to funding its own research and development projects, the
Company has pursued a strategy of securing research and development contracts
from customers, government agencies and SEMATECH in order to develop advanced
technology for current and future laser systems based on the Company's core
technology. Revenues generated from research and development contracts amounted
to approximately $306,000, $1.2 million, $3.2 million and $1.4 million during
1993, 1994, 1995 and the first six months of 1996. See "Risk Factors -- Risks
Associated with Customer Funded Research and Development."
INTELLECTUAL PROPERTY RIGHTS
The Company believes that the success of its business depends more on such
factors as the technical expertise of its employees, as well as their innovative
skills and marketing and customer relations abilities, than on patents,
copyrights trade secrets and other intellectual property rights. Nevertheless,
the success of the Company may depend in part on patents, and the Company owns
16 United States patents covering certain aspects of technology associated with
excimer lasers which expire from May 2008 to December 2011 and has applied for
12 additional patents in the United States, two of which have been allowed. The
Company also has filed 22 patent applications in other countries. There can be
no assurance that the Company's pending patent applications or any future
applications will be approved, that any issued patents will provide it with
competitive advantages or will not be challenged by third parties, or that the
patents of others will not have an adverse effect on the Company's ability to do
business. In this regard, due to cost constraints, the Company did not begin
filing for patents in Japan or other countries with respect to inventions
covered by its United States patents and patent applications until recently and
has therefore lost the right to seek patent protection in those countries for
certain of its inventions. Additionally, because foreign patents may afford less
protection under foreign law than is available under United States patent law,
there can be no assurance that any such patents issued to the Company will
adequately protect the Company's proprietary information. Furthermore, there can
be no assurance that others will not independently develop similar products,
duplicate the Company's products or, if patents are issued to the Company,
design around the patents issued to the Company.
Others may have filed and in the future may file patent applications that
are similar or identical to those of the Company. To determine the priority of
inventions, the Company may have to participate in interference proceedings
declared by the United States Patent and Trademark Office that could result in
substantial cost to the Company. No assurance can be given that any such patent
application will not have priority over patent applications filed by the
Company.
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<PAGE> 40
The Company also relies upon trade secret protection, employee and
third-party nondisclosure agreements and other intellectual property protection
methods to protect its confidential and proprietary information. Despite these
efforts, there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or disclose such technology or that
the Company can meaningfully protect its trade secrets.
The Company has in the past been, and may in the future be, notified that
it may be infringing intellectual property rights possessed by third parties,
although there are no pending lawsuits involving any such claims. In November
1993 with respect to one patent and, following further correspondence between
the parties, in June 1996 with respect to a second patent, the Company was
notified by Coherent, the parent corporation of Lambda-Physik, one of the
Company's competitors, that certain aspects of the Company's lasers might
infringe the two patents owned by Coherent and that the Company might wish to
procure a license with respect to these patents. The Company has been advised by
patent counsel in this matter, Townsend and Townsend and Crew, LLP, that in the
opinion of such firm the Company's products do not infringe any valid claim of
the patents that have been asserted by Coherent to the Company. However, there
can be no assurance that, if it elects to do so, the Company will be able to
negotiate a license with respect to these patents at all or on reasonable terms,
that litigation will not ensue with respect to these patents or that the Company
would ultimately be successful in any such litigation.
In July 1996, the Company's prospective Japanese manufacturing partner,
Seiko, was notified by Komatsu, one of the Company's competitors, that certain
aspects of the Company's lasers might infringe certain claims furnished by
Komatsu to Seiko that Komatsu advised Seiko were included in a patent
application filed by Komatsu in Japan (the "Patent Claims"). Komatsu also
advised Seiko that the Patent Claims have been allowed by the Japanese Patent
office. Seiko in turn notified the Company of this claim. In connection with its
manufacturing agreement with Seiko, the Company has agreed to indemnify Seiko
against such claims under certain circumstances. The Company has been advised by
its patent counsel in this matter, Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation, which is relying in part on the opinion of the
Company's Japanese patent counsel, that in the opinion of such firm the
Company's products do not infringe any valid Patent Claims. However, there can
be no assurance that, if the patent issues, litigation will not ensue with
respect to these claims or that the Company and Seiko would ultimately prevail
in any such litigation.
Any patent litigation would at a minimum be costly and would divert the
efforts and attention of the Company's management and technical personnel, which
would have a material adverse effect on the Company's business, financial
condition and results of operations. Furthermore, there can be no assurance that
other infringement claims by third parties or other claims for indemnification
by customers or end users of the Company's products resulting from infringement
claims will not be asserted in the future or that such assertions, if proven to
be true, will not materially adversely affect the Company's business, financial
condition and results of operations. If any such claims are asserted against the
Company, the Company may seek to obtain a license under the third party's
intellectual property rights. There can be no assurance, however, that a license
will be available on reasonable terms or at all. The Company could decide, in
the alternative, to resort to litigation to challenge such claims or to design
around the patented technology. Such actions could be costly and would divert
the efforts and attention of the Company's management and technical personnel,
which would materially adversely affect the Company's business, financial
condition and results of operations.
The Company has registered the trademark CYMER in the United States and
certain other countries and is seeking additional registrations in certain
countries. In Japan, the Company's application for registration was rejected on
the grounds that it is similar to a trademark previously registered by a
Japanese company for a broad range of products. The Company is seeking a partial
nullification of the other registration with respect to laser devices and
related components and does not believe that the holder of the other trademark
is engaged in any business similar to that of the Company. For this reason, the
Company is continuing to use the trademark CYMER in Japan and believes that it
will ultimately be permitted to register such mark for use with its products and
that it is not infringing the other company's trademark. There can be no
assurance that the Company will ultimately succeed in its efforts to register
its trademark in Japan or that it will not be subjected to an action for
trademark infringement, which could be costly to defend and, if successful,
would require the Company to cease use of the mark and, potentially, to pay
damages.
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Effective August 1, 1989 and lasting until the expiration of the licensed
patents, the Company entered into an agreement for a nonexclusive worldwide
license to certain patented laser technology with Patlex Corp., a patent holding
company ("Patlex"). Under the terms of the agreement, the Company is required to
pay royalties ranging from 0.25% to 5% of gross sales and leases of its lasers,
as defined, based on total revenues earned. During 1995 and the first six months
of 1996, royalty fees totaled $64,000 and $66,000, respectively.
The Company has granted to Seiko the exclusive right in Japan and the
non-exclusive right outside of Japan to manufacture and sell the Company's
industrial high power laser and subsequent enhancements thereto. The Company has
also granted Seiko a right of first refusal to fund the Company's development
of, and receive a license to, new industrial laser technologies not developed
with funding from other parties. In exchange for these rights, the Company
received upfront license fees of $3.0 million. The Company is also entitled to
royalties of 5% on related product sales through September 1999, after which the
royalty rate is subject to renegotiation. The license agreement also provides
that product sales between the Company and Seiko will be at a 15% discount from
the respective companies' list prices. The agreement terminates in August 2012.
See "Risk Factors -- Dependence on Patents and Intellectual Property."
COMPETITION
The Company believes that the principal elements of competition in the
Company's markets are the technical performance characteristics of the excimer
laser products; the cost of ownership of the system, which is based on price,
operating cost and productivity; customer service and support; and product
availability. The Company believes that it competes favorably with respect to
these factors.
The Company also believes that the development of the next generation of
excimer lasers will be an important element of competition. The Company believes
that its competitors are emphasizing development of ArF lasers as the next
generation of excimer lasers. The Company is engaging in its own research and
development with respect to ArF lasers. There can be no assurance, however, that
the Company will emerge as the technological or market leader with respect to
ArF lasers, even if it maintains its leadership position in the KrF laser
market.
The Company currently has two significant competitors in the market for
photolithography laser systems, Lambda-Physik, a German-based subsidiary of
Coherent, and Komatsu located in Japan. Both of these companies are larger than
the Company, have access to greater financial, technical and other resources
than the Company and are located in closer proximity to certain of the Company's
customers than is the Company. Although the Company believes that these
competitors are not yet supplying excimer lasers in volume, the Company believes
that both companies are aggressively seeking to gain larger positions in the
market for photolithography applications. The Company believes that its
customers have each purchased one or more products offered by these competitors
and that its customers may consider further purchases, in part as a result of
delays in deliveries by the Company in recent months as the Company has been
seeking to expand its manufacturing capacity. The Company also believes that its
customers are actively seeking a second source for excimer lasers. Furthermore,
photolithography tool manufacturers may seek to develop or acquire the
capability to manufacture internally their own excimer lasers. In the future,
the Company will likely experience competition from other technologies, such as
X-ray, electron beam and ion projection processes. To remain competitive, the
Company believes that it will be required to manufacture and deliver products to
customers on a timely basis and without significant defects and that it will
also be required to maintain a high level of investment in research and
development and sales and marketing. There can be no assurance that the Company
will have sufficient resources to continue to make the investments necessary to
maintain its competitive position. In addition, the market for excimer lasers is
still relatively small and immature and there can be no assurance that larger
competitors with substantially greater financial resources, including other
manufacturers of industrial lasers, will not attempt to enter the market. There
can be no assurance that the Company will remain competitive. A failure to
remain competitive would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Risk
Factors -- Competition."
39
<PAGE> 42
EMPLOYEES
As of June 30, 1996, the Company employed 240 people on a full-time basis,
including 12 in Japan. The Company believes that its relations with its
employees are good. None of the employees is covered by a collective bargaining
agreement or employment agreements. See "Risk Factors -- Dependence on Key
Personnel."
FACILITIES
Cymer's headquarters and manufacturing facility is housed in a 65,775
square foot building located in San Diego, California which the Company leases
under a lease expiring in January 1, 2010. For use as a field service office,
the Company also leases a 400 square foot facility near Boston, Massachusetts
under a lease expiring on August 31, 1998, and, for use as a field service and
sales office, the Company leases 268 square meters of facilities in Ichikawa,
Japan under four renewable one and two year leases expiring at various times but
cancelable by the Company upon three months notice. The Company intends to add
additional field service offices as necessary to service its customers. The
Company is currently seeking to expand its San Diego facility by leasing
approximately 30,000 square feet of additional space and believes that it will
be able to secure such space on commercially reasonable terms.
40
<PAGE> 43
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
June 30, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- -------------------------------------------------------
<S> <C> <C>
Dr. Robert P. Akins.......... 44 Chairman of the Board, Chief Executive Officer and
President
William A. Angus, III........ 49 Senior Vice President, Chief Financial Officer and
Secretary
Kurt J. Lightfoot............ 49 Senior Vice President of Market Operations
G. Scott Scholler............ 45 Senior Vice President of Operations
Thomas C. Dannemiller........ 36 Vice President of Manufacturing
Dr. Richard L. Sandstrom..... 45 Vice President of Advanced Research
Nancy J. Baker............... 34 Controller
Richard P. Abraham(1)........ 66 Director
Kenneth M. Deemer(1)......... 44 Director
Peter J. Simone(2)........... 49 Director
F. Duwaine Townsen(2)........ 63 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
DR. ROBERT P. AKINS, a co-founder of the Company, has served as its
President, Chief Executive Officer and Chairman of the Board since its inception
in January 1986. From 1980 to 1985, Dr. Akins was a Senior Program Manager for
HLX, Inc., a manufacturer of laser and defense systems, where he was responsible
for managing the development of a compact excimer laser for military
communications applications and an excimer laser trigger for the particle beam
fusion accelerator at Sandia National Laboratories. Dr. Akins received a B.S. in
Physics and a B.A. in Literature in 1974, and a Ph.D. in Applied Physics in
1983, from the University of California, San Diego.
WILLIAM A. ANGUS, III has served as Senior Vice President and Chief
Financial Officer since February 1996 and Secretary of the Company since July
1990. From July 1990 to February 1996, Mr. Angus served as Vice President of
Finance and Administration. From April 1988 to June 1990, Mr. Angus was
Executive Vice President and Chief Operating Officer, and from May 1985 to April
1988, Chief Financial Officer, of Avant-Garde Computing Inc., a manufacturer of
data communications network management systems. Mr. Angus graduated from the
Wharton School of the University of Pennsylvania with a B.S. in Economics in
1968.
KURT J. LIGHTFOOT has served as Senior Vice President of Market Operations
of the Company since August 1995. From May 1995 to August 1995, Mr. Lightfoot
served as Vice President of Sales and Marketing for Gregory Associates, a
specialty contract manufacturer. From April 1993 to April 1995, he served as
Director of Marketing for the Semiconductor Equipment Group of Watkins-Johnson
Company, a maker of semiconductor equipment and electronic products for wireless
communications and defense. From June 1989 to June 1991, Mr. Lightfoot was
Division Vice President of Sales for the Reticle and Photomask Inspection
Division, and from June 1991 to October 1992, Division Vice President of
Marketing, for the Automated Test Systems Division at KLA Instruments
Corporation ("KLA"), a maker of inspection and metrology systems for the
semiconductor manufacturing industry. Mr. Lightfoot received a B.S. in
Automotive Technology from Western Michigan University in 1970.
G. SCOTT SCHOLLER has served as Senior Vice President of Operations of the
Company since March 1996. From June 1995 to February 1996, Mr. Scholler served
as a consultant in product development and program management for Electro
Scientific Industries, a manufacturer of semiconductor capital equipment. From
March 1994 until October 1995, Mr. Scholler was a co-founder and President of
Black Rose Ltd., a developer of computer telephony software for automated
commerce applications. From August 1992 to September 1994, he was Senior Vice
President of Operations for Whittaker Communications, Inc., a wholly-owned
subsidiary of Whittaker Corporation, and a manufacturer of high-performance
multimedia servers. From October 1988 to August 1992, Mr. Scholler served as
Vice President of Operations for Etec Systems, Inc., a manufacturer of
semiconductor capital equipment and as General Manager of its Laser Lithography
subsidiary. From 1986 to
41
<PAGE> 44
1988, Mr. Scholler was Director of Engineering, and from 1983 to 1986, Director
of Manufacturing, of the Etch Products Division of Applied Materials Inc., a
supplier of equipment to the semiconductor industry. Mr. Scholler received a
B.S. in Nuclear Engineering from the United States Military Academy at West
Point in 1972 and an M.S. in Research and Development Management in 1978 from
the University of Southern California.
DR. RICHARD L. SANDSTROM, a co-founder of the Company, has served as its
Vice President of Advanced Research since June 1994. From February 1986 to June
1994, Dr. Sandstrom served as Vice President of Technology for the Company. Dr.
Sandstrom received a B.A. in Physics in 1972 and a Ph.D. in Engineering Physics
in 1979 from the University of California, San Diego.
THOMAS C. DANNEMILLER has served as Vice President of Manufacturing of the
Company since July 1995. From May 1991 to July 1995, Mr. Dannemiller served as
Director of Logistics at A.G. Associates, Inc., a manufacturer of rapid thermal
processing equipment for the semiconductor industry. From September 1988 to
February 1991, he was Director of Operations for KLA. From 1986 to 1988, Mr.
Dannemiller served as Manufacturing Manager for Applied Materials, Inc., a
supplier of equipment to the semiconductor industry. Mr. Dannemiller graduated
from the DeVry Institute of Technology with a B.S. in Electronics Engineering
Technology in 1982.
NANCY J. BAKER has served as Controller of the Company since August 1992.
From March 1987 to April 1992, Ms. Baker was Accounting Manager at International
Totalizator Systems, Inc., a designer, manufacturer and distributor of lottery
and racetrack wagering systems. Ms. Baker graduated from the University of Texas
with a B.B.A. in Accounting in 1985.
RICHARD P. ABRAHAM has served as a Director of the Company since October
1987. From October 1994 to the present, Mr. Abraham has served as Chairman and
President of BTR, Inc., which licenses various technologies to the semiconductor
industry. From October 1993 to the present, he has served as Chairman and
President of Advantage Logic, Inc., which also licenses various technologies to
the semiconductor industry. From 1987 to the present, Mr. Abraham has served as
a general partner of Weeden Capital Partners. From 1980 to the present, Mr.
Abraham has served as President of Pacific Associates, a consulting firm for the
semiconductor industry. From 1988 to the present, Mr. Abraham has served as a
director of Rainbow Technology, a maker of software protection devices for the
computer industry and encryption chips for the satellite communications
industry. Mr. Abraham received a B.S. in Electrical Engineering in 1951, and an
M.S. in Electrical Engineering in 1954, from Stanford University.
KENNETH M. DEEMER has served as a Director of the Company since June 1988.
Since 1985, Mr. Deemer has been a Vice President of InterVen Partners, Inc., a
venture capital firm and an affiliate of InterVen II, L.P., and InterVen
Ventures 1987. From January 1982 to June 1985, Mr. Deemer served as a Vice
President at First Interstate Capital, a venture capital firm. Mr. Deemer
received a B.S. in Physics and a B.S. in Electrical Engineering in 1975 from
Massachusetts Institute of Technology and an M.B.A. from Carnegie Mellon
University in 1979.
PETER J. SIMONE has served as a Director of the Company since July 1993.
Since December 1992, he has served as Group Vice President of Simplex Time
Recorder Company, a manufacturer of time, attendance, building life safety and
security systems. From May 1987 to December 1992, he was President and a
director of GCA Corporation, a manufacturer of wafer stepper photolithography
equipment. Mr. Simone received a B.S. in Accounting from Bentley College in 1970
and an M.B.A. from Babson College in 1974.
F. DUWAINE TOWNSEN has served as a Director of the Company since October
1987. Since June 1983, he has been a managing partner of Ventana Growth Fund,
L.P., a venture capital firm and investor in the Company. Mr. Townsen received a
B.S. in Business Administration and Accounting from San Diego State University
in 1962.
All directors are elected annually and serve until the next annual meeting
of stockholders or until the election and qualification of their successors. All
executive officers serve at the discretion of the Board of Directors. There are
no family relationships between any of the directors or executive officers of
the Company.
The Company's articles of incorporation currently provide that holders of
the Company's Common Stock elect two members of the Board of Directors, holders
of Series A Preferred Stock elect two members, holders
42
<PAGE> 45
of Series B Preferred Stock elect one member and that the holders of Preferred
Stock voting as a class elect any remaining directors. The Board of Director
currently consists of five members. Four founders of the Company who are holders
of Common Stock, including Robert Akins, President, and Richard Sandstrom, Vice
President of Advanced Research, and the holders of the Company's Series A and
Series B Preferred Stock have agreed that they will vote their shares of the
Company's capital stock so as to elect (i) two of such four founding
stockholders as the two directors representing the Common Stock, (ii) one
representative of Weeden Capital Partners, L.P. and one representative of
Interven II, L.P. as the two directors representing the Series A Preferred Stock
and (iii) one representative of Ventana Growth Fund II, L.P. as the director
representing the Series B Preferred Stock. Currently, Mr. Akins and Mr. Simone
serve as the directors elected by holders of the Common Stock, Mr. Abraham and
Mr. Deemer serve as the directors elected by holders of the Series A Preferred
Stock and Mr. Townsen serves as the director elected by holders of the Series B
Preferred Stock. Both the special voting provisions in the articles of
incorporation and the contractual voting provisions will terminate upon the
completion of this offering.
DIRECTOR COMPENSATION
With the exception of Mr. Simone who receives $1,000 per meeting, members
of the Company's Board of Directors do not receive compensation for their
services as directors. The Company's 1996 Director Option Plan provides that
options will be granted to non-employee directors pursuant to an automatic
nondiscretionary grant program. See "-- 1996 Director Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors was formed in June
1996 and consists of Richard P. Abraham and Kenneth M. Deemer. Neither of these
individuals was at any time during 1995, or at any other time, an officer or
employee of the Company. No executive officer of the Company serves as a member
of the board of directors or compensation committee of any entity that has one
or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth in summary form information concerning the
compensation awarded to, earned by, or paid for services rendered to the Company
in all capacities during the year ended December 31, 1995, by (i) the Company's
Chief Executive Officer and (ii) the Company's most highly compensated executive
officers whose salary and bonus for such year exceeded $100,000 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
FISCAL 1995 -------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY(1) BONUS($)(2) OPTIONS(#) COMPENSATION(3)
- -------------------------------------------- --------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
Robert P. Akins............................. $ 147,611 -- 147,300 $ 1,830
Chairman of the Board, Chief Executive
Officer and President
William A. Angus, III....................... 105,809 -- 75,000 3,524
Chief Financial Officer, Senior Vice
President and Secretary
</TABLE>
- ---------------
(1) Messrs. Lightfoot, Dannemiller and Scholler, who are currently being
compensated at annual rates in excess of $100,000, recently joined the
Company.
(2) The Company did not have a bonus plan in fiscal 1995 but has adopted an
incentive bonus plan for fiscal 1996.
(3) Consists of health insurance premiums paid by the Company.
43
<PAGE> 46
STOCK OPTION INFORMATION
The following table sets forth certain information with respect to stock
option grants in 1995 to the Named Executive Officers:
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR SHARE(2)(3) DATE(4) 5% 10%
- ------------------------------------ --------- ------------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Akins..................... 147,300 15.05% $0.50 4/20/00 $20,348 $44,964
William A. Angus, III............... 75,000 7.66 0.50 4/20/00 10,361 22,894
</TABLE>
- ---------------
(1) Potential realizable value is based on the assumption that the Common Stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the 5-year option term. These
numbers are calculated based on Securities and Exchange Commission
requirements and do not reflect the Company's estimate of future stock price
growth.
(2) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock, as determined by the Board of Directors on the
date of grant.
(3) Exercise price may be paid in cash, check, promissory note, by delivery of
already-owned shares of the Company's Common Stock subject to certain
conditions, or any combination of the foregoing methods of payment or such
other consideration or method of payment to the extent permitted under
applicable law.
(4) Options become exercisable as to 25% of the option shares on the first
anniversary of the vesting commencement date and as to 6.25% of the option
shares at the end of each three-month period thereafter, with full vesting
occurring on the fourth anniversary of the date of the vesting commencement
date.
The following table sets forth certain information regarding the value of
stock options held by the Named Executive Officers on December 31, 1995. There
were no stock option exercises by the Named Executive Officers in 1995.
YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert P. Akins.............................. -- 147,300 $ -- $ 368,250
William A. Angus, III........................ -- 75,000 -- 187,500
</TABLE>
- ---------------
(1) Fair market value of the Common Stock as of December 31, 1995 ($3.00 per
share), as determined by the Company's Board of Directors, minus the
exercise price.
44
<PAGE> 47
STOCK PLANS
1987 Stock Option Plan
The Company's 1987 Stock Plan (the "1987 Stock Plan"), which originally
provided for the grant of 450,000 shares of Common Stock, was approved by the
Company's Board of Directors and stockholders in 1987. Subsequent amendments
have increased the number of shares subject to the 1987 Stock Plan to 1,500,000
shares. The 1987 Stock Plan provides for the granting to employees (including
officers) of qualified "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and for the
granting to employees (including officers), consultants and directors of
nonqualified stock options. As of June 30, 1996, options to purchase an
aggregate of 1,191,753 shares of Common Stock were outstanding under the 1987
Stock Plan, 33,268 shares remained available for future grants and options to
purchase 274,979 shares had been exercised.
The 1987 Stock Plan is administered by the Board of Directors or a
committee appointed by the Board. Options generally become exercisable at a rate
of 25% of the shares subject to the option on the first anniversary of the
vesting commencement date and 6.25% of the shares subject to the option at the
end of each three month period thereafter, and generally expire five years from
the date of grant. The 1987 Stock Plan permits employees to pay for the shares
issuable upon exercise of stock options with promissory notes.
The exercise price of incentive stock options granted under the 1987 Stock
Plan must be at least equal to the fair market value of the Company's Common
Stock on the date of grant, and the exercise price of nonstatutory stock options
must equal at least 85% of the fair market value of the Common Stock on the date
of grant. The exercise price of options granted to an optionee who owns more
than 10% of the Company's outstanding voting securities must equal at least 110%
of the fair market value of the Common Stock on the date of grant. Options have
been granted at exercise prices ranging from $0.25 to $6.00. The 1987 Stock Plan
will terminate in October 1997.
In the event of a merger of the Company with or into another corporation,
the options will terminate upon the consummation of the merger, unless assumed
or substituted by such successor corporation. Notwithstanding the foregoing, if
the options were granted prior to June 3, 1992, the Board has the discretion to
accelerate the vesting of the options upon the consummation of a merger (unless
assumed or substituted by the successor corporation) so that such options become
fully vested and exercisable.
1996 Stock Option Plan
The Company's 1996 Stock Option Plan (the "1996 Stock Plan") was adopted by
the Board of Directors and approved by the stockholders of the Company in July
1996. A total of 1,500,000 shares of Common Stock have been reserved for
issuance under the 1996 Stock Plan. No options have been granted under this
Plan. The 1996 Stock Plan provides for the grant of "incentive" stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and nonqualified stock options to employees, directors and
consultants of the Company. Incentive stock options may be granted only to
employees. The 1996 Stock Plan is administered by the Board of Directors or by a
committee appointed by the Board of Directors, which determines the terms of
options granted, including the exercise price and the number of shares subject
to the option. The exercise price of incentive stock options granted under the
1996 Stock Plan must be at least equal to the fair market value of the Company's
Common Stock on the date of grant and the exercise price of nonqualified stock
options must be at least equal to 85% of the fair market value of the Company's
Common Stock on the date of grant. The maximum term of options granted under the
1996 Stock Plan is ten years.
In the event of a merger of the Company with or into another corporation,
all outstanding options may be assumed or an equivalent option substituted by
the successor corporation. If the successor corporation does not assume or
substitute equivalent options for the outstanding options, the exercisability of
shares subject to such options will accelerate and become fully vested and
exercisable. In such event, the Company shall notify the holders of outstanding
options that such options are fully exercisable, and all options not exercised
will then terminate 15 days after the date of such notice.
45
<PAGE> 48
1996 Employee Stock Purchase Plan
The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Company's Board of Directors and approved by the Company's
stockholders in July 1996. The Purchase Plan is intended to qualify under
Section 423 of the Code. The Company has reserved 250,000 shares of Common Stock
for issuance under the Purchase Plan. Under the Purchase Plan, an eligible
employee may purchase shares of Common Stock from the Company through payroll
deductions of up to 10.0% of his or her base compensation (excluding bonuses,
overtime and sales commissions), at a price per share equal to 85.0% of the
lower of (i) the fair market value of the Company's Common Stock as of the first
day of each six-month offering period under the Purchase Plan or (ii) the fair
market value of the Common Stock at the end of the offering period. Each
offering period will commence the first day on which the national stock
exchanges and the Nasdaq National Market are open for trading, on or after May 1
and November 1 of each year, with the first offering period beginning on the
date of this offering and ending on April 30, 1997. In the event of a merger or
asset sale, the offering period then in progress will be shortened so that each
participant's options will be exercised before the date of the merger or sale.
Any employee who is customarily employed for at least 20 hours per week and more
than five months per calendar year and who has been so employed for at least
three consecutive months on or before the commencement date of an offering
period is eligible to participate in the Purchase Plan.
1996 Director Option Plan
The Company's 1996 Director Option Plan (the "Director Option Plan") was
adopted by the Board of Directors and approved by the stockholders of the
Company in July 1996. The Director Option Plan will go into effect upon this
offering. Under the Director Option Plan, the Company reserved 100,000 shares of
Common Stock for issuance to non-employee directors of the Company pursuant to
nonstatutory stock options. Each director who is elected or appointed to the
Board of Directors subsequent to the adoption of the Director Option Plan and
who is not an employee of the Company will automatically receive a nonstatutory
option to purchase 10,000 shares of Common Stock of the Company on the date such
person becomes a director. In addition, each non-employee director shall receive
an option to acquire 2,500 shares of the Company's Common Stock upon such
director's reelection at each Annual Meeting of Stockholders, provided that on
such date such director shall have served on the Board of Directors for at least
six months. Each option granted under the Director Option Plan shall be
exercisable at 100% of the fair market value of the Company's Common Stock on
the date such option was granted. Of the options granted under the Director
Option Plan, 6.25% shall vest three months after their dates of grant, with an
additional 6.25% vesting at the end of each subsequent three month period. The
Plan shall be in effect for a term of ten years unless sooner terminated by the
Board.
In the event of a merger of the Company with or into another corporation,
all outstanding options may be assumed or an equivalent option substituted by
the successor corporation. Following such assumption or substitution, if the
director's service terminates other than a voluntary resignation by the
optionee, the option will become fully exercisable. If the successor corporation
does not assume an outstanding option or substitute an equivalent option for
such outstanding option, such option will become fully vested and exercisable.
In such event, the Board will notify the optionee that such optionee has 30 days
from the date of notice to exercise the fully vested option and the option will
terminate at the end of the 30-day period.
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND RELATED MATTERS
The Company's Articles of Incorporation limit, to the maximum extent
permitted by Section 78.751 of Nevada General Corporation Law, the personal
liability of directors and officers for monetary damages for breach of their
fiduciary duties as directors and officers (other than liabilities arising from
acts or omissions which involve intentional misconduct, fraud or knowing
violations of law or the payment of distributions in violation of Nevada General
Corporation Law). The Articles of Incorporation provide further that the Company
shall indemnify to the fullest extent permitted by Nevada General Corporation
Law any person made a party to an action or proceeding by reason of the fact
such person was a director, officer, employee or agent or the Company. Subject
to the Company's Articles of Incorporation, the Bylaws provide that the
46
<PAGE> 49
Company shall indemnify directors and officers for all costs reasonably incurred
in connection with any action, suit or proceeding in which such director or
officer is made a party by virtue of his being an officer or director of the
Company except where such director or officer is finally adjudged to have been
derelict in the performance of his duties as such director or officer. The
Company has entered into indemnification agreements with its officers and
directors containing provisions which may require the Company, among other
things, to indemnify the officers and directors against certain liabilities that
may arise by reason of their status or service as directors or officers (other
than liabilities arising from willful misconduct of a culpable nature), and to
advance their expenses incurred as a result of any proceeding against them as to
which they could be indemnified.
At the present time, there is no pending material litigation or proceeding
involving a director, officer, employee or other agent of the Company in which
indemnification would be required or permitted. The Company is not aware of any
threatened material litigation or proceeding which may result in a claim for
such indemnification.
47
<PAGE> 50
CERTAIN TRANSACTIONS
Beginning in October 1993, the Company conducted a series of interim debt
and warrant financings with its existing stockholders to finance the Company
until it could complete an additional equity financing. In October 1993, the
Company issued and sold at par and for cash $474,010 principal amount of 8%
promissory notes due June 30, 1994 and 5-year warrants to purchase 13,941 shares
of Series E or Series F Preferred Stock with an exercise price of $3.40 per
share to four investors (the "First Bridge Financing"). In June 1994, the
Company issued and sold, to these same four investors in exchange for the
securities they had purchased in the First Bridge Financing, and to them and to
several other stockholders of the Company at par and for cash, a total of
$1,625,010 principal amount of 8% promissory notes due December 31, 1994, and
5-year warrants to purchase 252,914 shares of Series E or Series F Preferred
Stock with an exercise price of $3.40 per share (the "Second Bridge Financing").
In November and December 1994, the Company issued and sold at par and for cash
approximately $2,000,000 principal amount of 8% promissory notes due December
31, 1994 and 5-year warrants to purchase 146,989 shares of Series F Preferred
Stock with an exercise price of $3.40 per share (the "Third Bridge Financing").
On December 31, 1994, the maturity dates of all of the notes issued in these
financings were extended until February 28, 1995. The purchasers of these
securities included the following holders of more than five percent of the
Company's voting securities and other entities affiliated with directors of the
Company:
<TABLE>
<CAPTION>
SECOND BRIDGE
FIRST BRIDGE FINANCING FINANCING THIRD BRIDGE FINANCING
---------------------- ---------------------- ----------------------
SERIES F SERIES F SERIES F
NOTE PREFERRED NOTE PREFERRED NOTE PREFERRED
PRINCIPAL WARRANT PRINCIPAL WARRANT PRINCIPAL WARRANT
INVESTORS AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- -------------------------------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ventana Growth Fund II,
L.P.(1)....................... $118,878 3,496 $118,878 17,482 $150,000 11,029
InterVen II, L.P.(2)............ -- -- 200,000 29,412 199,000 14,632
Clearwater Ventures............. 200,000 5,882 830,000 122,059 468,000 34,412
Allsop Venture Partners III,
L.P. ......................... -- -- 100,000 14,706 -- --
</TABLE>
- ---------------
(1) F. Duwaine Townsen, a director of the Company, is a managing partner of
Ventana Growth Fund II, L.P.
(2) Kenneth Deemer, a director of the Company, is a general partner of InterVen
II Partners, L.P., which is the general partner of InterVen II, L.P. Mr.
Deemer is also a general partner of InterVen Ventures 1987. InterVen
Ventures 1987 also participated in the Second and Third Bridge Financings.
In February and March 1995, the Company issued and sold a total of
1,900,000 shares of its Series F Preferred Stock (the "Series F Preferred Stock
Financing"). The following holders of more than five percent of the Company's
voting securities and other entities affiliated with a director of the Company
purchased shares of the Company's Series F Preferred Stock, convertible on a
one-to-one basis into the Company's Common Stock, at a purchase price of $3.50
per share:
<TABLE>
<CAPTION>
SERIES F
INVESTORS PREFERRED STOCK PURCHASE PRICE(1)
- -------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Ventana Growth Fund II, L.P................................... 35,990 $ 125,965
InterVen II, L.P.............................................. 118,465 414,627
Clearwater Ventures........................................... 446,218 1,561,763
Allsop Venture Partners III, L.P.............................. 30,274 105,959
</TABLE>
- ---------------
(1) Consisted of principal and interest from the promissory note issued to the
investor in the Second Bridge Financing, except that Clearwater Ventures
also paid a portion of the purchase price in cash.
Weeden & Co., L.P., which served as the placement agent for the Series F
Preferred Stock Financing (the "Placement Agent"), is an affiliate of Weeden
Capital Partners, L.P., which beneficially owns more than 5% of the Common Stock
of the Company. In lieu of a cash commission, the Placement Agent was granted
five-year warrants to purchase an aggregate of 443,624 shares of Series F
Preferred Stock at an exercise price of $3.50 per share (the "Placement Agent
Warrants"). The Placement Agent also was granted the right to co-manage any
future initial public offering for the Company's Common Stock.
48
<PAGE> 51
In October 1995, as an inducement for holders of its Series F Preferred
Stock warrants to exercise their warrants, the Company offered one new 5-year
warrant to purchase Common Stock with an exercise price of $3.40 per share for
each 10 Series F Preferred Stock warrants exercised. Among the warrantholders
accepting this offer, Clearwater Ventures exercised warrants to purchase 161,618
shares of Series F Preferred Stock for total proceeds of $549,501 and was issued
new warrants to purchase an aggregate of 16,161 shares of Common Stock.
In May 1996, a similar offer was extended to the holders of the Placement
Agent Warrants, which had by then been distributed to various employees and
affiliates of the Placement Agent. Three employees of the Placement Agent
exercised Placement Agent Warrants for 43,395, 69,770 and 16,761 shares of
Series F Preferred Stock for total proceeds of $454,741 and also received
warrants to purchase 4,339, 6,977 and 1,676 shares of Common Stock,
respectively. In connection with this offer, the Placement Agent relinquished
its right to manage the Company's initial public offering and the warrantholders
who exercised their Placement Agent warrants were granted certain registration
rights with respect to the underlying shares. See "Shares Eligible for Future
Sale -- Registration Rights."
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of its
directors and executive officers pursuant to which the Company is obligated to
indemnify such individuals to the fullest extent permitted by law including
certain liabilities and claims arising under the Securities Act.
49
<PAGE> 52
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of June 30, 1996 and as adjusted to
reflect the sale of the 3,340,000 shares of Common Stock offered hereby, (i) by
each person or entity who is known by the Company to own beneficially more than
5% of the Common Stock, (ii) by ASM Lithography, Canon and Nikon, (iii) by each
of the Named Executive Officers, (iv) by each of the directors of the Company,
(v) by each Selling Stockholder and (vi) by all directors and executive officers
of the Company as a group. Except as otherwise noted, the stockholders named in
the table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to applicable
community property laws.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO NUMBER OF OWNED AFTER
OFFERING(1) SHARES OFFERING
5% STOCKHOLDERS, NAMED EXECUTIVE OFFICERS AND ----------------- BEING -----------------
DIRECTORS NUMBER PERCENT OFFERED NUMBER PERCENT
- --------------------------------------------------- ------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Allsop Venture Partners III, L.P.(2)............... 458,950 5.2% -- 458,950 3.9%
7400 College Boulevard
Overland Park, KS 66210
Clearwater Ventures(3)............................. 806,796 9.1 2,925 803,871 6.8
c/o Weeden & Co., L.P.
145 Mason Street
Greenwich, CT 06830
Entities affiliated with InterVen II Partners,
L.P.(4)
2401 Pine Avenue
Manhattan Beach, CA 90266........................ 800,086 9.0 -- 800,086 6.7
K-Sun, Inc. ....................................... 478,826 5.4 -- 478,826 4.0
6-1 Ohtemachi, 2-chome
Chiyoda-ku
Tokyo, Japan
Entities affiliated with Weeden Securities
Corporation(5)................................... 649,657 7.3 -- 649,657 5.4
145 Mason Street
Greenwich, CT 06830
ASM Lithography Holding N.V. ...................... 403,726 4.6 -- 403,726 3.4
Canon, Inc. ....................................... 403,725 4.6 -- 403,725 3.4
Nikon Corporation.................................. 403,725 4.6 -- 403,725 3.4
Robert P. Akins(6)................................. 302,231 3.4 -- 302,231 2.6
William A. Angus, III(7)........................... 33,438 * -- 33,438 *
Richard Abraham.................................... 27,900 * -- 27,900 *
Kenneth M. Deemer(8)............................... 800,086 9.0 -- 800,086 6.7
Peter Simone(9).................................... 10,000 * -- 10,000 *
F. Duwaine Townsen(10)............................. 422,409 4.8 -- 422,409 3.6
All directors and executive officers as a group
(11 persons)..................................... 697,195 7.8 -- 697,195 5.9
OTHER SELLING STOCKHOLDERS
Herman Alswanger................................... 3,000 * 500 2,500 *
Anglo-American Partnership......................... 29,412 * 14,000 15,412 *
Controlfida B.V.I.(11)............................. 436,205 4.9 130,000 306,205 2.6
Samuel X. Difeo IRA................................ 14,285 * 14,285 -- --
Angelo M. Gregos................................... 15,000 * 15,000 -- --
John D. Lium....................................... 7,142 * 2,500 4,642 *
U.S. Clearing Corp., Custodian for Joseph Mitolo
IRA Rollover Trust............................... 7,141 * 5,000 2,141 *
Ellsworth R. Roston................................ 23,438 * 4,000 19,438 *
Charles Schwartz................................... 7,812 * 1,500 6,312 *
Uday Sengupta...................................... 286,000 3.2 20,000 266,000 2.2
Joel and Gail Sheriff.............................. 6,000 * 6,000 -- --
Savas C. Tsivicos.................................. 15,000 * 15,000 -- --
Xerox Corporation(12).............................. 426,671 4.8 107,258 319,413 2.7
</TABLE>
- ---------------
* Less than 1%
50
<PAGE> 53
(1) Applicable percentage of ownership is based on 8,843,890 shares of Common
Stock outstanding as of June 30, 1996 together with applicable options for
such stockholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, and includes voting and
investment power with respect to shares. Shares of Common Stock subject to
options or warrants currently exercisable or exercisable within 60 days
after June 30, 1996 are deemed outstanding for purposes of computing the
percentage ownership of the person holding such options or warrants, but
are not deemed outstanding for computing the percentage of any other
stockholder.
(2) Includes 8,823 shares issuable upon exercise of a currently exercisable
warrant.
(3) Includes 16,601 shares issuable upon exercise of currently exercisable
warrants.
(4) Includes 770,269 shares held by InterVen II, L.P. and 3,259 shares held by
InterVen Ventures 1987. InterVen II, L.P. and InterVen Ventures 1987 also
hold currently exercisable warrants to purchase 26,426 shares and 132
shares, respectively. InterVen II Partners, L.P. is the general partner of
InterVen II, L.P. InterVen II Partners, L.P. has the following five general
partners: Kenneth M. Deemer, David B. Jones, Jonathan E. Funk, Wayne B.
Kingsley and Keith P. Larson. Each of these general partners shares voting
and investment power over the shares held by InterVen II, L.P. InterVen
Ventures 1987 is a general partnership, of which Mssrs. Deemer, Jones,
Funk, Kingsley and Larson are general partners and share voting and
investment power over the shares held by InterVen Ventures 1987. Each of
Mssrs. Deemer, Jones, Funk, Kingsley and Larson disclaims beneficial
ownership of the shares except to the extent of his proportionate
partnership interest.
(5) Includes 527,925 shares held by Weeden Capital Partners, L.P., 12,500
shares held by Weeden Securities Corporation Pension Plan and Trust DTD
1/1/88, 89,232 shares issuable upon exercise of a currently exercisable
warrant held by Weeden & Co., L.P. and 20,000 shares issuable upon exercise
of a currently exercisable warrant held by Weeden Investors Profit Sharing
& Trust.
(6) Includes 46,031 shares issuable upon exercise of options that are currently
exercisable or exercisable within 60 days of June 30, 1996.
(7) Includes 23,438 shares issuable upon exercise of options that are currently
exercisable or exercisable within 60 days of June 30, 1996.
(8) Includes 770,269 shares held by InterVen II, L.P. and 3,259 shares held by
InterVen Ventures 1987. Also includes 26,426 shares issuable upon exercise
of currently exercisable warrants held by InterVen II, L.P. and 132 shares
issuable upon exercise of currently exercisable warrants held by InterVen
Ventures 1987. Mr. Deemer is a general partner of InterVen II Partners,
L.P., which is the general partner of InterVen II, L.P. Mr. Deemer is also
a general partner of InterVen Ventures 1987. Mr. Deemer disclaims
beneficial ownership of the shares except to the extent of his
proportionate partnership interest.
(9) Includes 10,000 shares issuable upon exercise of options that are currently
exercisable or exercisable within 60 days of June 30, 1996.
(10) Includes 409,823 shares held by Ventana Growth Fund II, L.P. and 12,546
shares issuable upon exercise of currently exercisable warrants held by
Ventana Growth Fund II, L.P., of which Mr. Townsen is a managing general
partner.
(11) Includes 7,353 shares issuable upon exercise of a currently exercisable
warrant.
(12) Includes 25,295 shares issuable upon exercise of currently exercisable
warrants.
51
<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 25,000,000 shares of Common Stock, $.001 par value, and
5,000,000 shares of Preferred Stock, $.001 par value, after giving effect to the
reincorporation of the Company into Nevada and the amendment and restatement of
the Company's Articles of Incorporation to change the number of shares of
authorized Common and Preferred Stock and to delete references to Series A
through Series G Preferred Stock following conversion of such Preferred Stock
into Common Stock upon the closing of the offering.
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of the Company's Articles of Incorporation,
which is included as an exhibit to the Registration Statement of which this
Prospectus is a part and by the provisions of applicable law.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior rights of
Preferred Stock, if any, then outstanding. The Common Stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions available to the Common Stock. All outstanding shares of
Common Stock are fully paid and non-assessable, and the shares of Common Stock
to be issued upon completion of this offering will be fully paid and
non-assessable.
At June 30, 1996, 1,202,792 shares of Common Stock were outstanding and
held of record by 67 stockholders, and options to purchase an aggregate of
1,191,753 shares of Common Stock were also outstanding. See "Management -- Stock
Plans."
PREFERRED STOCK
Pursuant to the Company's Articles of Incorporation, the Board of Directors
has the authority, without further action by the stockholders, to issue up to
5,000,000 shares of Preferred Stock in one or more series and to fix the
designations, powers, preferences, privileges, and relative participation,
optional or special rights and the qualifications, limitations or restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, any or all of which may be greater than
the rights of the Common Stock. The Board of Directors, without stockholder
approval, can issue Preferred Stock with voting, conversion or other rights that
could adversely affect the voting power and other rights of the holders of
Common Stock. Preferred Stock could thus be issued quickly with terms calculated
to delay or prevent a change in control of the Company or make removal of
management more difficult. Additionally, the issuance of Preferred Stock may
have the effect of decreasing the market price of the Common Stock. Upon the
completion of this offering, there will be no shares of Preferred Stock
outstanding. The Company has no plans to issue any of the Preferred Stock. See
"Risk Factors -- Anti-Takeover Effect of Nevada Law and Charter and Bylaw
Provisions; Availability of Preferred Stock for Issuance."
WARRANTS
As of June 30, 1996 (assuming the conversion of all outstanding shares of
Preferred Stock into Common Stock and the net exercise of certain warrants
immediately prior to the closing of this offering), warrants to purchase an
aggregate of 385,384 shares of the Company's Common at a weighted average
exercise price of $3.42 per share. Generally, the Company's warrants terminate
five years after issuance and provide for certain anti-dilution adjustments.
Certain of the Company's warrants may be exercised pursuant to a "cashless
exercise" procedure in which the warrant holder may, in lieu of paying the
exercise price in cash, exchange the
52
<PAGE> 55
warrant for a number of shares of Preferred Stock determined in accordance with
a formula based on the market value of the Company's stock at the time of
exercise.
REGISTRATION RIGHTS
The holders of an aggregate of 7,555,525 shares of Common Stock will be
entitled to certain rights with respect to the registration of such shares under
the Securities Act. Kenneth M. Deemer and F. Duwaine Townsen, directors of the
Company, are entitled to such registration rights with respect to the shares of
Common Stock indicated as owned by each of them in "Principal and Selling
Stockholders." Under the terms of certain registration rights agreements, if the
Company proposes to register any of its securities under the Securities Act,
either for its own account or for the account of other securityholders
exercising registration rights, such holders are entitled to notice of such
registration and are entitled to include such shares of Common Stock in the
registration. The rights are subject to certain conditions and limitations,
among them the right of the underwriters of an offering subject to the
registration to limit the number of shares included in such registration.
Holders of Common Stock benefiting from these rights may also require the
Company to file a registration statement under the Securities Act at its expense
with respect to their shares of Common Stock, and the Company is required to use
its best efforts to effect such registration, subject to certain conditions and
limitations. Furthermore, such holders may require the Company to file
additional registration statements on Form S-3 subject to certain conditions and
limitations.
NEVADA ANTI-TAKEOVER STATUTES
The Company is subject to the provisions of Sections 78.411 through 78.444
of the General Corporation Law of Nevada. In general, this statute prohibits a
publicly-held Nevada corporation from engaging in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless the
business combination is approved in a prescribed manner. An "interested
stockholder" is a person who, directly or indirectly, owns (or within the prior
three years did own) 10% or more of the corporation's voting stock.
Nevada has also adopted a "control shares" statute which limits the
acquisition of a "controlling interest" in the corporation, as defined in the
statute. This statute is designed to prevent an "acquiring person" from gaining
voting control of the corporation without the approval of the corporation's
stockholders. It provides that an acquiring person obtains only such voting
rights in the control shares as are conferred by a resolution of the
stockholders. Nevada's control shares statute applies to any issuing corporation
which has 200 or more stockholders, at least 100 of whom are stockholders of
record and residents of Nevada. The Company did not meet this requirement prior
to this offering.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services.
53
<PAGE> 56
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common
Stock of the Company and no predictions can be made of the effect, if any, that
the sale or availability for sale of shares of additional Common Stock will have
on the market price of the Common Stock. Nevertheless, sales of substantial
amounts of such shares in the public market, or the perception that such sales
could occur, could adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities.
Upon completion of this offering, the Company will have 11,845,922 shares
of Common Stock outstanding assuming the conversion of all outstanding shares of
Redeemable Convertible Preferred Stock into Common Stock, no exercise of the
Underwriters overallotment option, no exercise of options after June 30, 1996,
and no exercise of outstanding warrants (other than the exercise of warrants to
purchase 78,571 shares simultaneously with the closing of this offering). Of
these shares, the 3,340,000 shares sold in this offering will be freely tradable
without restriction or registration under the Securities Act, except that any
shares purchased by "affiliates" of the Company, as that term is defined under
the Securities Act ("Affiliates"), may generally only be sold in compliance with
the limitations of Rule 144 described below.
In addition, the Company has, pursuant to agreements with certain
stockholders, included in the Registration Statement of which this Prospectus is
a part 142,918 shares of Common Stock, to be offered on a continuous basis by
such stockholders beginning 180 days following this offering.
The remaining 8,843,890 shares of outstanding Common Stock are deemed
"Restricted Shares" under Rule 144. The number of shares of Common Stock
available for sale in the public market is limited by restrictions under the
Securities Act and lock-up agreements under which the holders of such shares
have agreed not to sell or otherwise dispose of any of their shares for a period
of 180 days after the date of this Prospectus without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the Underwriters. Restricted
Shares may be sold in the public market only if registered or if they qualify
for an exemption from Registration under Rules 144, 144(k) or 701 promulgated
under the Securities Act.
As a result of contractual restrictions described below and the provisions
of Rules 144, 144(k) and 701, Restricted Shares will be available for sale in
the public market in the Public market as follows: (i) 224,965 shares will be
available for immediate sale in the public market on the date of this
Prospectus; (ii) 17,412 shares will be eligible for sale 90 days after the date
of this Prospectus; (iii) 297,897 shares will be eligible for sale 120 days
after the date of this Prospectus; (iv) 6,494,581 shares will be eligible for
sale 180 days after the date of this Prospectus and (v) 1,809,035 shares will be
eligible for sale thereafter upon expiration of their respective two-year
holding periods.
Upon expiration of the lock-up agreements described below, the holders of
7,555,525 shares of Common Stock, or their transferees, will be entitled to
certain rights with respect to the registration of such shares under the
Securities Act. See "Description of Capital Stock -- Registration Rights."
Registration of such shares under the Securities Act would result in such shares
becoming freely tradeable without restriction under the Securities Act (except
for shares purchased by Affiliates) immediately upon the effectiveness of such
registration.
In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after this offering, a person (or persons whose shares are
aggregated) who has beneficially owned "restricted" shares for at least two
years, including a person who may be deemed an Affiliate, is entitled to sell
within any three-month period a number of shares of Common Stock that does not
exceed the greater of 1% of the then outstanding shares of Common Stock of the
Company (approximately 118,459 shares after giving effect to this offering) and
the average weekly trading volume of the Common Stock on the Nasdaq National
Market during the four calendar weeks preceding such sale. Sales under Rule 144
of the Securities Act are subject to certain restrictions relating to manner of
sale, notice, and the availability of current public information about the
Company. A person who is not an Affiliate at any time during the 90 days
preceding a sale, and who has beneficially owned shares for at least three
years, would be entitled to sell such shares immediately following
54
<PAGE> 57
this offering without regard to the volume limitations, manner of sale
provisions, or notice or other requirements of Rule 144 of the Securities Act.
Any employee of the Company who purchased his or her shares of Common Stock
pursuant to a written compensation plan or contract may be entitled to rely on
the resale provisions of Rule 701 under the Securities Act, which permits
nonaffiliates to sell their Rule 701 shares without having to comply with the
current public information, holding period, volume limitation or notice
provision of Rule 144 and permits affiliates to sell their Rule 701 shares
without having to comply with the holding period restrictions of Rule 144.
Notwithstanding the foregoing, in connection with the offering, the
Company, its executive officers and directors and certain existing stockholders
of the Company, have agreed that, without the prior written consent of the
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, they will not
(a) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any share of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (whether such shares or any such
securities are then owned by such person or are thereafter acquired directly
from the Company), or (b) enter into any swap or similar agreement that
transfers, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (a) or (b) of
this paragraph is to be settled by delivery of such Common Stock or such other
securities, in case or otherwise, for a period of 180 days after the date of
this Prospectus, other than (i) the sale to the Underwriters of the shares of
Common Stock under the Underwriting Agreement or (ii) the issuance of the
Company of shares of Common Stock upon the exercise of an option sold or granted
pursuant to existing benefit plans of the Company and outstanding or reserved
for issuance on the date of this prospectus.
In addition, certain stockholders of the Company have agreed not to sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares of Common Stock for a period of 120 days after the
offering without the prior written consent of the Company. The Company has
agreed not to release any of the shares subject to such lock-up agreements
without the prior written consent of Morgan Stanley & Co. Incorporated.
In connection with the offering, the Company intends to file a registration
statement under the Securities Act covering approximately 3,041,753 shares of
Common Stock subject to outstanding options or reserved for the issuance under
the 1987 Stock Option Plan and the 1996 Stock Option Plan, 100,000 shares
reserved for issuance under the Director Stock Option Plan and 250,000 shares of
Common Stock reserved for issuance under the Employee Stock Purchase Plan, in
each case, for the sale of such shares not earlier than 180 days after the date
of this Prospectus. See "Management -- Stock Plans." Accordingly, shares
registered under such registration statement will, subject to Rule 144 volume
limitations applicable to Affiliates and the lapsing of the Company's repurchase
options, be available for sale in the open market, except to the extent that
such shares are subject to vesting restrictions with the Company or the
contractual restrictions described above.
No predictions can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the
prevailing market price for the Common Stock. Sales of substantial amounts of
Common Stock, or the perception that such sales might occur, could adversely
affect prevailing market prices for the Common Stock and could impair the
Company's future ability to obtain capital through an offering of equity
securities.
55
<PAGE> 58
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement, the Underwriters named below, for whom Morgan Stanley & Co.
Incorporated, Montgomery Securities and Needham & Company, Inc. are serving as
Representatives, have severally agreed to purchase, and the Company and the
Selling Stockholders have agreed to sell to the Underwriters, the respective
number of shares of Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
------------------------------------------------------------------ ---------
<S> <C>
Morgan Stanley & Co. Incorporated.................................
Montgomery Securities.............................................
Needham & Company, Inc. ..........................................
-------
Total................................................... 3,340,000
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by counsel
and to certain other conditions. The Underwriters are obligated to take and pay
for all of the shares of Common Stock offered hereby (other than the shares
covered by the over-allotment option described below) if any are taken.
The Underwriters initially propose to offer part of the shares of Common
Stock offered hereby directly to the public at the initial public offering price
set forth on the cover page hereof and part to certain dealers at a price that
represents a concession not in excess of $ per share under the initial
public offering price. Any Underwriter may allow, and such dealers may reallow,
a concession not in excess of $ per share to other Underwriters or to
certain other dealers.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 501,000 additional
shares of Common Stock at the initial public offering price set forth on the
cover page hereof, less underwriting discounts and commissions. The Underwriters
may exercise such option to purchase solely for the purpose of covering
over-allotments, if any, incurred in the sale of the shares of Common Stock
offered hereby.
The Representatives of the Underwriters have informed the Company that the
Underwriters do not intend sales to discretionary accounts to exceed five
percent of the total number of shares of Common Stock offered by them.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
Subject to certain limited exceptions, the Company has agreed not to offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for Common Stock, or enter into any swap or similar agreement that
transfers in whole or in part, the economic risk of ownership of the Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of Morgan Stanley & Co. Incorporated. See "Shares Eligible
for Future Sale" for a description of certain arrangements by which all Selling
Stockholders, officers and directors and substantially all other stockholders
and optionholders have agreed not to sell or otherwise dispose of the Common
Stock or convertible securities of the Company held by them for certain periods
following the date of this Prospectus, without the prior written consent of
Morgan Stanley & Co. Incorporated.
56
<PAGE> 59
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the Common
Stock of the Company. The initial public offering price will be determined by
negotiations among the Company, the Selling Stockholders and the Representatives
of the Underwriters. Among the factors to be considered in determining the
initial public offering price will be the future prospects of the Company and
its industry in general, sales, earnings and certain other financial and
operating information of the Company in recent periods, and the price-earnings
ratios, price-sales ratios, market prices of securities and certain financial
and operating information of companies engaged in activities similar to those of
the Company. The estimated initial public offering price range set forth on the
cover page of this Preliminary Prospectus is subject to change as a result of
market conditions and other factors.
57
<PAGE> 60
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, Palo
Alto, California. As of June 30, 1996, two members of Wilson, Sonsini, Goodrich
& Rosati, Professional Corporation, and investment partnerships principally
comprised of members of that firm, beneficially owned 22,499 shares of the
Company's Common Stock. Certain legal matters relating to the offering will be
passed upon for the Underwriters by Gunderson Dettmer Stough Villeneuve Franklin
& Hachigian, LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements as of December 31, 1994 and 1995 and
June 30, 1996 and for each of the three years in the period ended December 31,
1995 and the six months ended June 30, 1996 included in this Prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report (which report contains an explanatory paragraph that describes a change
during 1994 in the Company's method of accounting for the accretion on the
Company's redeemable convertible preferred stock) appearing herein, and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The statements in this Prospectus in the fourth paragraph under the caption
"Risk Factors -- Uncertainty Regarding Patents and Protection of Proprietary
Technology" and in the fourth paragraph under the caption
"Business -- Intellectual Property Rights" as such relate to matters referred to
in the correspondence between the Company and Coherent, Inc. described therein
have been reviewed and approved by Townsend and Townsend and Crew, LLP, special
patent counsel for the Company, as experts in such matters, and are included
herein in reliance upon such review and approval.
The statements in this Prospectus in the fifth paragraph under the caption
"Risk Factors -- Uncertainty Regarding Patents and Protection of Proprietary
Technology" and in the fifth paragraph under the caption
"Business -- Intellectual Property Rights" have been reviewed and approved by
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, special patent
counsel for the Company, as experts in such matters, and are included herein in
reliance upon such review and approval.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1, including amendments
thereto, under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus omits certain information contained in the
Registration Statement, and reference is made to the Registration Statement and
the exhibits and schedules thereto for further information with respect to the
Company and the Common Stock offered hereby. Statements contained herein
concerning the provisions of any documents are not necessarily complete, and in
each instance reference is made to the copy of such document filed as an exhibit
to the Registration Statement. Each such statement is qualified in its entirety
by such reference. The Registration Statement, including exhibits and schedules
filed therewith, may be inspected without charge at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and copies of all or any part thereof may
be obtained from such office upon payment of the prescribed fees. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the site is http://www.sec.gov.
58
<PAGE> 61
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996........ F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and
1995 and for the six months ended June 30, 1995 (unaudited) and 1996................ F-4
Consolidated Statements of Stockholders' Deficit for the years ended December 31,
1993, 1994 and 1995 and for the six months ended June 30, 1996...................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and for the six months ended June 30, 1995 (unaudited) and 1996................ F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 62
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Cymer, Inc.:
We have audited the accompanying consolidated balance sheets of Cymer, Inc.
(successor to Cymer Laser Technologies) and its subsidiary (collectively the
"Company") as of December 31, 1994 and 1995 and June 30, 1996, and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
each of the three years in the period ended December 31, 1995 and for the six
months ended June 30, 1996. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1994 and 1995 and June 30, 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 and for
the six months ended June 30, 1996 in conformity with generally accepted
accounting principles.
As discussed in Note 10 to the financial statements, during 1994 the
Company changed its method of accounting for the accretion of the 8% per annum
redemption provision on the Company's Redeemable Convertible Preferred Stock.
DELOITTE & TOUCHE LLP
San Diego, California
August 9, 1996 (August 21, 1996 as to the
second paragraph in Note 1 and Note 12)
F-2
<PAGE> 63
CYMER, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
STOCKHOLDERS'
EQUITY
JUNE 30,
-------------
1996
-------------
DECEMBER 31, JUNE 30,
--------------------- -----------
1994 1995 1996
-------- -------- -----------
<S> <C> <C> <C> <C>
ACTUAL
-----------
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 2,326 $ 2,015 $ 1,981
Accounts receivable................................ 2,451 4,832 9,213
Inventories........................................ 2,526 5,315 11,334
Prepaid expenses and other assets.................. 447 306 769
-------- -------- -----------
Total current assets........................ 7,750 12,468 23,297
Property -- net...................................... 1,346 3,053 7,850
Other Assets......................................... 76 98 229
-------- -------- -----------
TOTAL ASSETS................................ $ 9,172 $ 15,619 $ 31,376
========= ========= ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Revolving loan and security agreements............. $ 1,546 $ 2,786 $ 7,250
Advances against commercial drafts................. 1,709 1,305 1,675
Accounts payable................................... 935 2,369 5,099
Accrued liabilities................................ 1,015 1,187 2,243
Deferred revenue................................... 478 951 712
Current portion of capital lease obligations....... 25 185
Income taxes payable............................... 172
Subordinated promissory notes...................... 3,624
-------- -------- -----------
Total current liabilities................... 9,307 8,623 17,336
-------- -------- -----------
Deferred Rent........................................ 327 369 410
-------- -------- -----------
Capital Lease Obligations............................ 48 387
-------- -----------
Commitments and Contingencies (Note 8)...............
Redeemable Convertible Preferred Stock, authorized --
9,834,880 shares; $.01 stated par value, issued and
outstanding 4,325,000, 6,496,000 and 7,527,000
shares (liquidation preference -- $35,234 at June
30, 1996).......................................... 19,290 28,409 35,234 $ --
-------- -------- ----------- -------------
Stockholders' Equity (Deficit):
Preferred Stock:
-- authorized -- 5,000,000 shares; $0.001 par
value, no shares issued or outstanding......... --
Common Stock:
-- authorized -- 15,000,000 shares; $.01 stated
par value, issued and outstanding 1,091,000,
1,160,000 and 1,203,000 shares................. 11 12 12 --
-- authorized -- 25,000,000 shares; $0.001 par
value, issued and outstanding 8,844,000
shares......................................... 9
Paid-in capital.................................... 164 195 241 27,471
Accumulated deficit................................ (19,898) (21,832) (21,947) (13,940)
Cumulative translation adjustment.................. (29) (205) (297) (297)
-------- -------- ----------- -------------
Total stockholders' equity (deficit)........ (19,752) (21,830) (21,991) $ 13,243
-------- -------- -----------
============
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT................................... $ 9,172 $ 15,619 $ 31,376
========= ========= ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 64
CYMER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- -----------------------
1993 1994 1995 1996
------- ------- ------- 1995 -------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Product sales........................ $ 3,393 $ 7,705 $15,576 $ 5,458 $17,768
Other................................ 2,306 1,216 3,244 1,821 1,414
------- ------- ------- ------ -------
Total revenues............... 5,699 8,921 18,820 7,279 19,182
------- ------- ------- ------ -------
COSTS AND EXPENSES:
Cost of product sales................ 2,726 4,797 9,282 3,243 10,929
Research and development............. 2,733 3,283 6,154 2,920 4,249
Sales and marketing.................. 2,154 1,780 2,353 1,011 1,825
General and administrative........... 782 849 1,181 502 1,303
------- ------- ------- ------ -------
Total costs and expenses..... 8,395 10,709 18,970 7,676 18,306
------- ------- ------- ------ -------
OPERATING INCOME (LOSS)................ (2,696) (1,788) (150) (397) 876
------- ------- ------- ------ -------
OTHER INCOME (EXPENSE):
Foreign currency exchange
gain -- net....................... 18 65 506 167 388
Interest and other income............ 27 17 32 21 27
Interest and other expense........... (52) (281) (283) (138) (148)
------- ------- ------- ------ -------
Total other income
(expense) -- net........... (7) (199) 255 50 267
------- ------- ------- ------ -------
Income (Loss) Before Provision for
Income Taxes......................... (2,703) (1,987) 105 (347) 1,143
Provision for Income Taxes............. 221 58 36 36 186
------- ------- ------- ------ -------
NET INCOME (LOSS)...................... $(2,924) $(2,045) $ 69 $ (383) $ 957
======= ======= ======= ====== =======
PRO FORMA EARNINGS (LOSS) PER SHARE
DATA (Note 1):
Pro forma earnings (loss) per
share............................. $ 0.01 $ (0.06) $ 0.10
======= ====== =======
Pro forma weighted average common and
common equivalent shares
outstanding....................... 7,571 6,692 9,666
======= ====== =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 65
CYMER, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
--------------- PAID-IN ACCUMULATED TRANSLATION
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT TOTAL
------ ------ -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993................ 1,057 $ 11 $146 $ (9,032) $ (72) $ (8,947)
Exercise of common stock options...... 6 3 3
Net loss.............................. (2,924) (2,924)
Translation adjustment................ 40 40
----- --- ---- -------- ----- --------
BALANCE, DECEMBER 31, 1993.............. 1,063 11 149 (11,956) (32) (11,828)
Exercise of common stock options...... 28 15 15
Net loss.............................. (2,045) (2,045)
Accretion of redemption -- preferred
stock (Note 10).................... (5,897) (5,897)
Translation adjustment................ 3 3
----- --- ---- -------- ----- --------
BALANCE, DECEMBER 31, 1994.............. 1,091 11 164 (19,898) (29) (19,752)
Exercise of common stock options...... 69 1 31 32
Net income............................ 69 69
Accretion of redemption -- preferred
stock.............................. (2,003) (2,003)
Translation adjustment................ (176) (176)
----- --- ---- -------- ----- --------
BALANCE, DECEMBER 31, 1995.............. 1,160 12 195 (21,832) (205) (21,830)
Exercise of common stock options...... 43 46 46
Net income............................ 957 957
Accretion of redemption -- preferred
stock.............................. (1,072) (1,072)
Translation adjustment................ (92) (92)
----- --- ---- -------- ----- --------
BALANCE, JUNE 30, 1996.................. 1,203 $ 12 $241 $ (21,947) $ (297) $(21,991)
===== === ==== ======== ===== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 66
CYMER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- ----------------------
1993 1994 1995 1996
------- ------- ------- 1995 -------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).................................. $(2,924) $(2,045) $ 69 $ (383) $ 957
Adjustments to reconcile net income (loss) to net
cash used for operating activities:
Depreciation and amortization.................... 826 677 820 410 753
Change in assets and liabilities:
Accounts receivable............................ (653) (207) (2,574) (557) (4,599)
Inventories.................................... 153 (1,205) (2,813) (1,726) (6,059)
Prepaid expenses and other assets.............. (73) (233) 99 52 (614)
Accounts payable............................... 220 424 1,404 513 2,646
Accrued liabilities............................ 125 397 337 (53) 1,172
Income taxes payable........................... 172
Deferred revenue............................... 186 (17) 502 341 (230)
Deferred rent.................................. 80 10 42 (12) 41
------- ------- ------- ------- -------
Net cash used for operating activities...... (2,060) (2,199) (2,114) (1,415) (5,761)
------- ------- ------- ------- -------
INVESTING ACTIVITIES:
Acquisition of property............................ (536) (640) (2,653) (1,105) (5,031)
Disposal of property............................... 126 91 226 150 16
------- ------- ------- ------- -------
Net cash used for investing activities...... (410) (549) (2,427) (955) (5,015)
------- ------- ------- ------- -------
FINANCING ACTIVITIES:
Net (payments) borrowings under revolving loan and
security agreements.............................. 1,588 (42) 1,240 (46) 4,464
Proceeds from issuance of redeemable convertible
preferred stock.................................. 100 404 3,407 2,611 5,752
Proceeds from issuance of common stock............. 3 15 32 35 46
Net advances against (discounting of) commercial
drafts........................................... (487) 945 (390) (1,460) 459
Payments on capital lease obligations.............. (27) (5) (49)
Net proceeds from issuance of subordinated
promissory notes................................. 474 3,150
------- ------- ------- ------- -------
Net cash provided by financing activities... 1,678 4,472 4,262 1,135 10,672
------- ------- ------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS........................................ (30) (113) (32) (207) 70
------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ (822) 1,611 (311) (1,442) (34)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..... 1,537 715 2,326 2,326 2,015
------- ------- ------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........... $ 715 $ 2,326 $ 2,015 $ 884 $ 1,981
======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid...................................... $ 27 $ 162 $ 219 $ 65 $ 125
======= ======= ======= ======= =======
Income taxes paid.................................. $ 221 $ 58 $ 36 $ 28 $ 11
======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Capital lease obligations incurred for furniture
and equipment.................................... $ 100 $ 46 $ 573
======= ======= =======
Net book value of property transferred to inventory
for resale....................................... $ 125 $ 39 $ 177 $ 150
======= ======= ======= =======
Conversion of subordinated promissory notes and
related interest payable to redeemable
convertible preferred stock...................... $ 3,755 $ 3,755
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 67
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations -- Cymer, Inc. (successor to Cymer Laser Technologies)
and its subsidiary (collectively the "Company") is engaged primarily in the
development, manufacturing and marketing of excimer lasers for sale to
manufacturers of photolithography tools in the semiconductor equipment industry.
The Company sells its product to customers primarily in Japan, the Netherlands
and the United States.
On July 15, 1996, the Company's Board of Directors approved a
reincorporation into the State of Nevada that became effective on August 21,
1996 following approval by the Company's stockholders. In connection with the
reincorporation, the Company increased its authorized common stock to 25,000,000
shares. The Board of Directors and stockholders have also approved the creation
of a new class of 5,000,000 shares of undesignated preferred stock which will
become authorized on the closing of the Company's planned initial public
offering. Consolidated stockholders' equity as of June 30, 1996 has been shown
on an unaudited pro forma basis, assuming conversion of 7,527,000 shares of
redeemable convertible preferred stock then outstanding into 7,563,000 shares of
common stock, the issuance of 79,000 shares of common stock upon the exercise of
certain outstanding warrants, and the reincorporation of the Company into the
State of Nevada at $0.001 par value per common and preferred share (Note 12).
Principles of Consolidation -- The consolidated financial statements
include the accounts of Cymer, Inc. (successor to Cymer Laser Technologies) and
its wholly-owned subsidiary, Cymer Japan, Inc., (collectively, the "Company").
The Company primarily sells its excimer lasers in Japan through Cymer Japan,
Inc. All significant intercompany balances have been eliminated in
consolidation.
Accounting 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 and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from those estimates.
Cash Equivalents -- Cash equivalents consist of money market instruments
purchased with an original maturity of three months or less.
Inventories -- Inventories are carried at the lower of cost (first-in,
first-out) or market.
Property -- Property is stated at cost. Depreciation is provided using the
straight-line or declining balance methods over the estimated useful lives of
the assets (generally three to five years). Leasehold improvements are
amortized, using the straight-line method, over the shorter of the life of the
improvement or the remaining lease term. Lasers built for internal use are
capitalized and depreciated using the straight-line method over three years.
Revenue Recognition -- Revenue from product sales is generally recognized
at the time of shipment unless customer agreements contain inspection or other
conditions, in which case revenue is recognized at the time such conditions are
satisfied. Product sales includes sales of lasers, replacement parts, and
product service contracts. Other revenue primarily represents revenue earned
from funded development activities and license fees. Such revenue is recognized
on a basis consistent with the performance requirement of the agreements.
Payments received in advance of performance are recorded as deferred revenue.
Long-term contracts are accounted for on the percentage-of-completion method
based upon the relationship of costs incurred to total estimated costs, after
giving effect to estimates of costs to complete.
License fees totaled $2,000,000 for the year ended December 31, 1993.
Research and development revenues totaled $306,000, $1,216,000 and $3,244,000
for the years ended December 31, 1993, 1994 and 1995, respectively, and
$1,821,000 and $1,414,000 for the six months ended June 30, 1995 and 1996,
respectively.
F-7
<PAGE> 68
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Warranty Expense -- The Company generally warrants its products against
defects for the earlier to occur of 17 months from the date of shipment or 12
months after acceptance by the end-user. The Company accrues a provision for
warranty expense for all products sold. The amount of the provision is based on
actual historical expenses incurred and estimated probable future expenses
related to current sales. Warranty costs incurred are charged against the
provision.
Stock-Based Compensation -- Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of the grant over the amount an employee must
pay to acquire the stock.
Foreign Currency Translation -- Gains and losses resulting from foreign
currency translation are accumulated as a separate component of consolidated
stockholders' deficit. Gains and losses resulting from foreign currency
transactions are included in the consolidated statements of operations.
Foreign Exchange Contracts -- The Company enters into foreign currency
exchange contracts to hedge purchase commitments by Cymer Japan, Inc. Net
realized gains or losses are recorded on the contract settlement date and are
included in the consolidated statements of operations.
The Company recognized net gains from the above foreign currency exchange
contracts of $480,000, $0 and $552,000 for the year ended December 31, 1995 and
the six months ended June 30, 1995 and 1996, respectively. The face amount of
the underlying contracts was $4,048,000, $500,000 and $7,351,000, respectively.
The Company also had forward foreign exchange contracts at June 30, 1996 to buy
$25.4 million for Y2.6 billion under foreign currency exchange facilities with a
Japanese bank. Such contracts expire on various dates through February 1997. As
of June 30, 1996, there were $799,000 of deferred foreign currency gains under
such contracts.
Concentration of Credit Risk -- The Company invests its excess cash in
money market accounts. The Company has not experienced any losses on its cash
accounts. The Company has a small number of significant customers (see "Major
Customers and Related Parties"). The Company does not expect any credit losses
and therefore, no provision for credit losses has been made.
Major Customers and Related Parties -- Revenues from major customers are
detailed as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------- -------------------------
CUSTOMER 1993 1994 1995 1995 1996
--------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
A................. $1,563,000 $2,134,000 $5,035,000 $2,112,000 $3,910,000
B................. 3,557,000 1,148,000 7,009,000
C................. 1,472,000 3,395,000 4,304,000
D................. 1,293,000
E................. 2,271,000
F................. 1,320,000 1,954,000 1,630,000
G................. 1,231,000 709,000
</TABLE>
Receivables from these customers totaled $218,000, $2,576,000 and
$5,575,000 at December 31, 1994 and 1995 and June 30, 1996, respectively.
Revenues from Japanese customers, generated primarily by the Company's
subsidiary, accounted for 68%, 33%, and 50% of revenues for the years ended
December 31, 1993, 1994, and 1995, respectively, and 47% and 60% for the six
months ended June 30, 1995 and 1996, respectively. Revenues from a customer in
the
F-8
<PAGE> 69
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Netherlands accounted for 8%, 17% and 18% of revenues for the years ended
December 31, 1993, 1994, and 1995, respectively, and 8% and 22% for the six
months ended June 30, 1995 and 1996, respectively.
Revenues from stockholders totaled $3,857,000, $2,917,000 and $9,085,000
for the years ended December 31, 1993, 1994 and 1995, respectively, and
$3,961,000 and $15,908,000 for the six months ended June 30, 1995 and 1996,
respectively.
Pro Forma Earnings Per Share -- Pro forma earnings (loss) per share is
computed based on the weighted average number of common and common equivalent
shares outstanding during the year using the treasury stock method and assumes
conversion of all outstanding redeemable convertible preferred stock and the
exercise of all outstanding warrants. Stock options, redeemable convertible
preferred stock and warrants are considered to be common stock equivalents,
except for the six months ended June 30, 1995, where the stock options are not
assumed converted as such conversion would be antidilutive. All shares of common
stock and common stock equivalents issued within twelve months of an initial
public offering at a price per share less than the estimated offering price are
considered to be outstanding for all periods presented in the same manner as a
stock split. Accordingly, all shares of common stock and common stock
equivalents issued subsequent to August 1995 at a price per share below the
estimated offering price are considered to be outstanding for all periods
presented.
Unaudited Interim Financial Data -- The interim financial data relating to
the six months ended June 30, 1995 is unaudited; however, in the opinion of the
Company's management, the interim data includes all adjustments, consisting of
only normal recurring accruals, necessary for a fair presentation of the results
of operations for such period. The audited results for the six months ended June
30, 1996 are not necessarily indicative of the results to be expected for the
full year or for any other interim period.
Reclassifications -- Certain amounts in the prior years' financial
statements have been reclassified to conform to current period presentation.
2. BALANCE SHEET DETAILS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE
------------------- 30,
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
INVENTORIES:
Raw materials....................................... $ 773 $ 2,114 $ 4,438
Work-in-progress.................................... 1,171 2,232 5,633
Finished goods...................................... 582 969 1,263
------- ------- -------
Total....................................... $ 2,526 $ 5,315 $11,334
======= ======= =======
PROPERTY -- at cost:
Furniture and equipment............................. $ 2,753 $ 4,113 $ 6,962
Capitalized lasers.................................. 1,423 1,788 2,338
Leasehold improvements.............................. 151 245 1,671
Construction in process............................. 24 587 1,091
------- ------- -------
4,351 6,733 12,062
Less accumulated depreciation and amortization...... (3,005) (3,680) (4,212)
------- ------- -------
Total....................................... $ 1,346 $ 3,053 $ 7,850
======= ======= =======
</TABLE>
F-9
<PAGE> 70
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. BORROWING FACILITIES
Revolving Loan Facility -- At June 30, 1996, the Company had a revolving
loan facility ("Loan Facility") providing for borrowings of up to $1,000,000.
Borrowings under the facility bear interest at prime plus 1.5% (9.75%), payable
quarterly, due on the earlier of March 31, 1997 or the completion of the
Company's planned initial public offering, and are guaranteed by a preferred
stockholder of the Company (Note 9). In connection with the guarantee, the
Company has granted the preferred stockholder a security interest in the
Company's lasers located in Japan. At June 30, 1996, $1,000,000 was borrowed
against the Loan Facility.
Loan and Security Agreement -- The Loan and Security Agreement (the
"Agreement") provides for three revolving loan facilities and a loan with a bank
to provide for combined borrowings of up to a maximum of $11,000,000 with
interest on outstanding borrowings ranging from prime plus 0.75% to prime plus
1.5% (9.0% and 9.75%, respectively, at June 30, 1996). Borrowings under the
Agreement are secured by substantially all the Company's assets. The Agreement
provides for the following: (i) $2,000,000 bank loan which is secured by the
Company's assets, bears interest at a rate of prime plus 1.5% per annum, is due
September 30, 1996, (ii) a $1,000,000 revolving bank line of credit which is
also secured by the Company's assets, bears interest at a rate of prime plus
0.75% per annum, is due March 5, 1997 and (iii) $8,000,000 under lines of credit
secured by the Companys foreign receivables and inventory and guaranteed by the
U.S. Export-Import Bank, which bear interest at a rate of prime plus 0.75% per
annum, and are due March 5, 1997 (as to $3,000,000) and June 27, 1997 (as to
$5,000,000). The Agreement requires the Company to maintain compliance with
certain financial statement and other covenants including, among other items,
limitation on additional debt, total liabilities to tangible net worth and
minimum tangible net worth. As of June 30, 1996, the Company was in compliance
with all such covenants. There was $6,250,000 outstanding under the Agreement at
June 30, 1996.
In connection with the original Agreement, the Company issued the bank a
five-year warrant to purchase 15,000 shares of the Company's Series D Redeemable
Convertible Preferred Stock at $8.50 per share. In February 1995, warrants to
purchase 16,000 shares of the Company's Series E Redeemable Convertible
Preferred Stock at $4.00 per share were exchanged for the 15,000 Series D
warrants (Note 5).
In addition to the loan facilities, in 1995, the Agreement was modified to
include a foreign exchange contract facility. The facility provides up to
$3,500,000 to be utilized for spot and future foreign exchange contracts. The
total gross amount to be settled within 2 business days is not to exceed
$1,000,000 (settlement limit) at any one time. The settlement limit may be
increased against the revolving credit line availability or advance payment
arranged prior to delivery of the foreign currency overseas. There were no
foreign exchange contracts outstanding under the Agreement at December 31, 1995
and June 30, 1996.
Advances Against Commercial Drafts -- Advances against commercial drafts
represent funds advanced by a Japanese bank in connection with the discounting
of certain commercial drafts received from customers as payment for the purchase
of merchandise. The commercial drafts are discounted at the bill discount rate
plus 1.0% (1.875% at June 30, 1996) and generally mature within 120 days. The
bank reserves the right to call for repayment on demand.
4. CONVERSION OF SUBORDINATED PROMISSORY NOTES -- STOCKHOLDERS
During 1995, principal totalling $3,622,000 plus accrued interest of
$133,000 relating to loans obtained from certain stockholders in 1994 were
converted into 1,073,000 fully-paid and non-assessable shares of Series F
Redeemable Convertible Preferred Stock of the Company at $3.50 per share. In
connection with the original loan, the Company also issued warrants to purchase
shares of Series F Redeemable Convertible Preferred Stock (Note 5).
F-10
<PAGE> 71
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Redeemable Convertible Preferred Stock ("Preferred Stock") will
automatically convert to the Company's common stock upon completion of the
Company's planned initial public offering and is summarized as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
SHARES ISSUED AND OUTSTANDING AT REDEMPTION/
-------------------------------- LIQUIDATION
PREFERENCE AT
DECEMBER 31, JUNE 30, 1996
SHARES --------------------- JUNE 30, -------------------
SERIES AUTHORIZED 1993 1994 1995 1996 PER SHARE TOTAL*
------------------------------ ---------- ----- ----- ----- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Series A...................... 2,269 2,264 2,269 2,269 2,269 $1.60 $ 6,002
Series B...................... 1,310 1,296 1,310 1,310 1,310 $3.40 6,952
Series C...................... 200 200 200 200 200 $7.00 2,086
Series D...................... 486 470 470 470 470 $8.50 5,463
Series E...................... 1,670 76 76 76 $5.00 449
Series F...................... 3,000 2,171 2,302 $3.50 8,711
Series G...................... 900 900 $6.00 5,571
----- ----- ----- ----- ----- -------
Total............... 9,835 4,230 4,325 6,496 7,527 $35,234
===== ===== ===== ===== ===== =======
</TABLE>
- ---------------
* Includes accretion of 8% cumulative from issuance, less previously paid
dividends.
Conversion -- The Preferred Stock is convertible by the holder at any time
into common stock and is automatically convertible into common stock in the
event of a firm commitment public offering of the Company's common stock with
gross proceeds of at least $10 million and a price of at least $6 per share of
common stock. The conversion of the Preferred Stock to common stock is generally
on a 1 for 1 basis, subject to adjustments for stock splits, stock dividends and
other items, except for the Series E Preferred Stock that is converted on an
approximate 1 for 1.5 basis. Based on such conversion ratios, the 7,527,000
shares of Preferred Stock outstanding as of June 30, 1996 will convert to
7,563,000 shares of common stock upon the completion of the Company's planned
initial public offering. Upon the conversion of the Preferred Stock, the
dividends and other rights discussed below cease.
Dividends -- The holders of Preferred Stock are entitled to receive
dividends in preference to common stock at the rate of 8% per annum when, if and
as declared by the Company's Board of Directors. If the Board of Directors shall
elect to pay additional dividends, such dividends shall be distributed to the
holders of common stock and Preferred Stock as if the Preferred Stock had been
converted to common stock prior to the payment of the additional dividends.
Dividends on the Preferred Stock are not cumulative. Upon liquidation,
dissolution, merger or sale of substantially all of the assets of the
corporation, the holders of the Preferred Stock shall be entitled to receive in
preference to the holders of common stock the per share liquidation preference
indicated in the table above, plus 8% per annum of the liquidation value from
date of original issue less any dividends paid.
Voting Rights -- The holders of Preferred Stock are entitled to notice of
any shareholders meeting in accordance with the bylaws of the Company. The
holders of shares of Series A Preferred Stock, voting separately as a class,
shall elect two members of the Board of Directors and the holders of shares of
Series B Preferred Stock, voting separately as a class, shall elect one member
of the Board of Directors. Any additional directors shall be elected by the
holders of Preferred Stock and common stock voting together as a single class.
Registration Rights -- The holders of outstanding shares of Preferred Stock
and warrants to purchase Preferred Stock are entitled to certain rights with
respect to the registration of the common stock issuable upon conversion of
their shares of Preferred Stock under the Securities Act.
F-11
<PAGE> 72
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Redemption Rights -- Certain redemption and sinking fund provisions are
applicable to the Preferred Stock. On each of March 15, 1997, March 15, 1998 and
March 15, 1999, the Company is required to offer to redeem one-third of the
outstanding shares of each series of Preferred Stock which are outstanding as of
March 15, 1997 for an amount equal to the redemption preference indicated in the
table above, plus 8% per annum of such amount from the date of the first
issuance of each such series less any dividends actually paid on such shares to
the date of redemption. The Company is required to deposit a sum equal to the
aggregate redemption price due on a redemption date, as set forth above, with a
bank or trust company on or prior to each redemption date. The Company has the
right to redeem all or any portion of any series of its Preferred Stock provided
that it shall have received the prior written consent of holders of at least
two-thirds of the outstanding shares of each series of Preferred Stock, with
each series voting separately as a class.
Preferred Stock Warrants -- At June 30, 1996, the Company had warrants
outstanding to purchase 22,000, 131,000, and 306,000 shares of Series E, Series
F and Series F Preferred Stock, respectively, at a price of $4.00, $3.40 and
$3.50 per share, respectively, expiring in 1999. In lieu of exercise, certain
warrants may be surrendered for stock based upon a formula. The number and
exercise price of the warrants is subject to adjustment as defined in the
warrants. The $3.40 Series F warrants must be exercised prior to an initial
public offering of the Company's stock. The conversion of such warrants
simultaneously with the Company's planned initial public offering will result in
the issuance of 79,000 shares of common stock. The other warrants convert to
common stock warrants upon such an offering.
6. STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock -- Holders of common stock are entitled to one vote. They are
subject to prior rights of the preferred stockholders (Note 5).
Common Stock Warrants -- At June 30, 1996, the Company had warrants
outstanding to purchase 40,000 shares of its common stock at a price of $3.40
per share. The warrants expire in 2000 and 2001. These warrants and the Series E
and $3.50 Series F Preferred Stock warrants discussed in Note 5, have a weighted
average exercise price of $3.42 per share and are issuable into 385,000 shares
of common stock, assuming completion of the Company's planned initial public
offering.
Stock Option Plan -- The Company's 1987 Stock Plan, as amended through June
1995, (the Plan) provides that incentive and nonstatutory options to purchase up
to 1,500,000 shares of common stock may be granted to employees and consultants
at prices that are not less than 100% (85% for nonstatutory options) of fair
market value on the date the options are granted. The Plan also provides for
various restrictions regarding option terms, prices, transferability and other
matters. Options issued under the Plan expire five to ten years after the
options are granted and generally become exercisable ratably over a four-year
period following the date of grant. Stock option transactions are summarized as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
NUMBER OF
SHARES PRICE PER SHARE
--------- ---------------
<S> <C> <C>
Outstanding, January 1, 1993............................... 490 $ 0.50 - $0.85
Granted.................................................. 64 $ 0.85 - $1.00
Exercised................................................ (6) $ 0.50 - $0.85
Terminated............................................... (56) $ 0.50 - $0.85
---------
Outstanding, December 31, 1993............................. 492 $ 0.50 - $1.00
Granted.................................................. 67 $ 0.50
Exercised................................................ (28) $ 0.50 - $1.00
Terminated............................................... (107) $ 0.50 - $0.85
---------
</TABLE>
F-12
<PAGE> 73
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES PRICE PER SHARE
--------- ---------------
<S> <C> <C>
Outstanding, December 31, 1994............................. 424 $ 0.50 - $1.00
Granted.................................................. 979 $ 0.50 - $3.00
Exercised................................................ (59) $ 0.50 - $1.00
Terminated............................................... (383) $ 0.50 - $0.85
---------
Outstanding, December 31, 1995............................. 961 $ 0.50 - $3.00
Granted.................................................. 305 $ 4.00 - $6.00
Exercised................................................ (43) $ 0.50 - $1.00
Terminated............................................... (31) $ 0.50 - $5.00
---------
Outstanding, June 30, 1996................................. 1,192 $ 0.50 - $6.00
========
Exercisable, June 30, 1996................................. 198 $ 0.50 - $5.00
========
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its plan. Accordingly, no compensation expense has been recognized for its
stock-based compensation plan. Had compensation cost been determined based upon
the fair value at the grant date for awards under the plan consistent with the
methodology prescribed under Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," the Company's net income and pro
forma earnings per share for the six month period ended June 30, 1996 would have
been reduced by approximately $111,000, or $0.01 per share. The fair value of
the options granted during 1996 is estimated as $375,000 on the date of grant
using the Black-Scholes option-pricing model with the following assumptions: no
dividend yield or volatility, risk-free interest rate of 5.33% to 7.54%, assumed
forfeiture rate of 3.0%, and an expected life of five years.
The following table summarizes information as of June 30, 1996 concerning
currently outstanding and exercisable options:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------- ------------------------------------
WEIGHTED AVERAGE NUMBER
RANGE OF REMAINING WEIGHTED AVERAGE EXERCISABLE WEIGHTED AVERAGE
EXERCISE PRICES CONTRACTUAL LIFE EXERCISE PRICE --------------- EXERCISE PRICE
- --------------- ---------------- ---------------- (IN THOUSANDS) ----------------
NUMBER (YEARS)
OUTSTANDING
--------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$ 0.25 - $1.00 774 3.68 $ 0.60 197 $ 0.60
$ 1.50 - $3.00 114 4.19 $ 1.55 0 $ 0.00
$ 4.00 - $6.00 304 4.68 $ 5.06 1 $ 5.00
------ ---------------- ---
1,192 198
=========== ===========
</TABLE>
Common Shares Reserved -- As of June 30, 1996, the Company had reserved the
following number of shares of common stock for issuance:
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------
(IN THOUSANDS)
<S> <C>
Conversion of outstanding preferred stock to common stock.............. 7,563
Issuance under stock plan.............................................. 33
Exercise of common stock purchase warrants............................. 40
Exercise of preferred stock purchase warrants.......................... 459
------
Total.................................................................. 8,095
===========
</TABLE>
Unaudited Pro Forma Stockholders' Equity as of June 30, 1996 -- See Note 1.
F-13
<PAGE> 74
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," effective January 1, 1993. This Statement
supersedes Accounting Principles Board Opinion No. 11, which had been in use by
the Company. There was no cumulative effect of adopting SFAS No. 109.
Income taxes in the statement of operations for each of the three years in
the period ended December 31, 1995 and for the six months ended June 30, 1995
primarily represent taxes paid in Japan for research and development revenues
generated from agreements with Japanese companies (Note 9).
The components of the provision for income taxes are summarized as follows
for the six month period ended June 30, 1996 (in thousands):
<TABLE>
<S> <C>
Current income taxes:
Federal.................................................................... $ 183
Foreign.................................................................... 3
-----
Total.............................................................. 186
-----
Deferred income taxes:
Federal.................................................................... 288
State...................................................................... 211
Foreign.................................................................... (38)
-----
Total.............................................................. 461
-----
Reduction in valuation allowance............................................. (461)
-----
Provision for income taxes................................................... $ 186
=====
</TABLE>
The provision for income taxes is different from that which would be
obtained by applying the statutory Federal income tax rate (34%) to income
before provision for income taxes. The items causing this difference for the six
month period ended June 30, 1996 are as follows:
<TABLE>
<S> <C>
Provision at statutory rate................................................ 34.0%
Foreign provision in excess of Federal statutory rate...................... 3.7
State income taxes, net of Federal benefit................................. 4.8
Reduction in valuation allowance........................................... (26.5)
-----
Provision at effective rate................................................ 16.0%
=====
</TABLE>
F-14
<PAGE> 75
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE
------------------- 30,
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net operating loss carryforwards...................... $ 3,608 $ 3,195 $ 2,279
Tax credit carryforwards.............................. 1,241 1,829 1,570
Capitalized research and development costs............ 298 359 307
Reserves and accruals not currently deductible........ 254 339 170
Differences between book and tax basis of inventory
and
fixed assets........................................ 242 450 1,294
Unearned revenues..................................... 199 307 308
Deferred rent......................................... 141 159 177
State taxes........................................... (351) (427) (355)
------- ------- -------
Net deferred tax assets before valuation allowance.... 5,632 6,211 5,750
Valuation allowance................................... (5,632) (6,211) (5,750)
------- ------- -------
Total....................................... $ -- $ -- $ --
======= ======= =======
</TABLE>
The Company has provided a valuation allowance equal to the net deferred
tax assets recorded due to uncertainties as to their ultimate realization.
The Company's net operating loss carryforwards of $6,592,000 and credit
carryforwards of $1,570,000 as of June 30, 1996 expire at various dates through
2010. The Tax Reform Act of 1986 and the California Conformity Act of 1987
impose substantial restrictions on the utilization of net operating losses in
the event of an "ownership change" as defined by Section 382 of the Internal
Revenue Code of 1986. There may have been, and there may be in the future,
ownership changes, such as the issuance of the Company's preferred and common
stock, which may significantly limit the Company's ability to immediately
utilize the stated net operating loss carryforwards.
8. COMMITMENTS AND CONTINGENCIES
Leases -- The Company leases its primary facilities under non-cancelable
operating leases. The lease term is through January 1, 2010. The leases also
provide for certain rent abatements and minimum annual increases. The Company
also leases certain other facilities and equipment under capital and short-term
operating lease agreements. The capital leases expire on various dates through
2000.
Rent expense under operating leases, including common area maintenance
charges, is recognized on a straight-line basis over the life of the related
leases and totaled approximately $530,000, $555,000, and $736,000 for the years
ended December 31, 1993, 1994 and 1995, respectively, and $301,000 and $507,000
for the six months ended June 30, 1995 and 1996, respectively.
The net book value of assets under capital leases at December 31, 1995 and
June 30, 1996 was approximately $85,000 and $613,000 net of accumulated
amortization of approximately $16,000 and $61,000, respectively.
F-15
<PAGE> 76
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total future minimum lease commitments under operating leases, including
common area maintenance charges, and capital leases, are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, OPERATING CAPITAL
------------------------------------------ --------- -------
<S> <C> <C>
1996 (six months)......................... $ 384 $ 128
1997...................................... 776 183
1998...................................... 777 152
1999...................................... 784 148
2000...................................... 793 93
Thereafter................................ 8,099
-------
Total................................... $11,613 704
=======
Less amount representing interest......... 132
Present value of minimum lease payments... 572
Less current portion...................... 185
Long-term obligations under capital
leases.................................. $ 387
</TABLE>
Patent License Agreement -- The Company has a patent license agreement for
a non-exclusive worldwide license to certain patented laser technology. Under
the terms of the agreement, the Company is required to pay royalties ranging
from 0.25% to 5% of gross sales and leases as defined depending on the total
amounts attained. Royalty fees totaled $13,000, $30,000 and $64,000 for the
years ended December 31, 1993, 1994 and 1995, respectively, and $24,000 and
$66,000 for the six months ended June 30, 1995 and 1996, respectively.
Employee Savings Plan -- The Company has a 401(k) plan that allows
participating United States employees to contribute 1% to 20% of their salary,
subject to annual limits. The Company is not required to make contributions and
through June 30, 1996, no contributions have been made.
Retirement Plan -- During the six months ended June 30, 1996, Cymer Japan,
Inc. adopted a retirement benefit plan for all Cymer Japan, Inc. employees and
Japanese directors. The plan consists of a multi-employer retirement plan
covering all employees and life insurance policies covering all employees and
Japanese directors. The multi-employer retirement plan was established under the
Small and Medium-Size Enterprise Retirement Benefits Cooperative Law.
The multi-employer retirement plan pays each employee a defined benefit of
$45,000 upon mandatory retirement at age 60. The employee has the option to
receive the payment in installments. In the case of termination of employment
prior to age 60, benefits are paid in the amounts predetermined by the plan.
Total expense for the six months ended June 30, 1996 amounted to $1,000.
The insurance policies pay each employee $91,000 and the Japanese directors
from $255,000 to $319,000 at death or upon mandatory retirement at age 60 for
employees and age 65 for the Japanese directors. In the case of termination of
employment prior to age 60, the policy's cash surrender value is to be paid to
each participant. Total expense for the six months ended June 30, 1996 amounted
to $13,000.
Contingency -- The Company has been notified of alleged infringements of
certain patents related to its manufacture and sale of laser systems. The
Company believes, based upon the advice of counsel, that the Company's products
do not infringe any valid claim of the asserted patents.
9. RELATED PARTY TRANSACTIONS
Collaborative Arrangement -- The Company has a collaborative arrangement
with a Japanese company that is also a stockholder of the Company. Pursuant to
such arrangement entered into in August 1992, the stockholder and the Company
entered into a (i) stock purchase agreement, (ii) research and development
F-16
<PAGE> 77
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
agreement, (iii) product license agreement, and (iv) contract manufacturing
agreement. The general provisions of these agreements are as follows:
Stock Purchase Agreement -- The stockholder purchased 235,295 shares of the
Company's Series D Redeemable Convertible Preferred Stock at $8.50 per share and
net proceeds to the Company of $1,909,000.
Research and Development Agreement -- The stockholder will reimburse the
Company 50% of the Company's total research and development expenses under
annual sub-agreements, as defined, to a maximum of $500,000 per year.
Reimbursements of $375,000, $375,000 and $250,000 were received under the
Agreement for the years ended December 31, 1993, 1994 and 1995, respectively. Of
the total received, $195,000, $47,000 and $0 was recorded as deferred revenue at
December 31, 1993, 1994 and 1995, respectively. This agreement expired in June
1995.
Product License Agreement -- The Company granted to the stockholder the
exclusive right in Japan and the non-exclusive right outside Japan to
manufacture and sell one of the Company's products and subsequent enhancements
thereto. The Company also granted the stockholder the right of first refusal to
license and fund the development of new technologies not developed with funding
from other parties. In exchange for these rights, the Company received up-front
license fees of $3,000,000, of which the Company received $1,000,000 in 1992 and
$2,000,000 in 1993. The Company is also entitled to royalties of 5% on related
product sales through September 1999, after which the royalty rate is subject to
renegotiation. The license agreement also provides that product sales between
the Company and the stockholder will be at a 15% discount from the respective
companies' list price. The agreement terminates in August 2012.
Contract Manufacturing Agreement -- The stockholder has agreed to
manufacture for the Company another of its products. The Company will be
required to purchase a specified percentage of its total annual product, as
defined. The agreement expires in August 2001, and will automatically renew for
two-year terms unless one year's notice is given by either party. No purchases
were made under the agreement during 1993, 1994, 1995 and 1996.
Design and Development Agreements -- During 1995, the Company entered into
design and development agreements with certain of its major customers who are
also stockholders. Such agreements generally provide, among other things,
discounts to these customers on future sales of the related lasers. Revenues
from such agreements are a not material component of 1996 revenues.
Service Agreement -- The Company has a service agreement with another
Japanese company who is also a preferred stockholder of the Company. The general
provisions of the service agreement are as follows:
Sales and Marketing -- The Japanese company is to assist the Company in
establishing sales, marketing, manufacturing, and maintenance capabilities in
exchange for consideration equal to a percentage of net sales of certain
products in Japan. The agreement initially expired in March 1996 and
automatically extends until the total consideration paid under the agreement
aggregates $2,000,000. Under certain conditions, if the agreement is terminated,
the Company may be required to pay liquidated damages equal to $2,000,000 less
the aggregate of previous consideration plus other eligible consideration paid
to the Japanese company as defined in the agreement. Consideration expensed
under the agreement for the years ended December 31, 1993, 1994 and 1995,
totaled $52,000, $67,000 and $211,000, respectively, and $53,000 and $350,000,
for the six months ended June 30, 1995 and 1996, respectively.
Business Strategy -- In addition, the Japanese company has agreed to assist
the Company in establishing a business strategy for the Japanese market,
evaluating third party contractors, preparing and negotiating the terms and
conditions of a license proposal with third party contractors, and finding new
investors. In exchange for such assistance, the Company agreed to pay the
Japanese company a percentage of any: (i) up-front license fees, (ii) royalties
received on certain sales, and (iii) funding received from new investors.
Payments made under the agreement for the year ended December 31, 1993 totaled
$100,000.
F-17
<PAGE> 78
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Royalties -- The Company has also agreed to pay the Japanese company
additional royalties on net sales of certain products manufactured by the third
party contractor as well as a fee for each laser chamber refurbished by the
third party contractor. Such royalties are applicable only for the period
subsequent to the expiration of the original agreement.
10. ACCOUNTING CHANGE
In 1994, the Company changed its method of accounting for the 8% per annum
accretion of the redemption price for the Company's redeemable convertible
preferred stock (Note 5). Prior to 1994, the Company did not record the
accretion, as it was not probable that funds would be available for redemption.
However, in 1994, the Company's prospects improved, justifying the change in
method in accounting for the accretion. The impact of the change was to increase
the balance of redeemable convertible preferred stock by $5,897,000 with a
respective increase in the accumulated deficit in stockholders' deficit as of
December 31, 1994.
11. GEOGRAPHIC INFORMATION
Presented below is information regarding sales, income (loss) from
operations, and identifiable assets, classified by operations located in the
United States and Japan. The Company sells its excimer lasers in Japan through
Cymer Japan, Inc. All significant intercompany balances are eliminated in
consolidation. The majority of consolidated costs and expenses are incurred in
the United States and are reflected in the operating income (loss) from the
United States operations.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales:
United States.......................... $ 4,114 $ 6,661 $11,303 $ 4,693 $ 9,431
Japan.................................. 1,585 2,260 7,517 2,586 9,751
------- ------- ------- ------- -------
Total.......................... $ 5,699 $ 8,921 $18,820 $ 7,279 $19,182
======= ======= ======= ======= =======
Operating income (loss):
United States.......................... $(2,838) $(2,312) $(3,425) $(1,465) $(4,064)
Japan.................................. 142 524 3,275 1,068 4,940
------- ------- ------- ------- -------
Total.......................... $(2,696) $(1,788) $ (150) $ (397) $ 876
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Identifiable assets:
United States.......................... $ 3,706 $ 6,414 $10,876 $ 7,956 $24,875
Japan.................................. 2,099 2,758 4,743 2,996 6,501
------ ------ ------- ------- -------
Total.......................... $ 5,805 $ 9,172 $15,619 $10,952 $31,376
====== ====== ======= ======= =======
</TABLE>
12. SUBSEQUENT EVENTS
Recapitalization -- The Company's Board of Directors and stockholders'
approved a reincorporation of the Company that became effective on August 21,
1996. In addition, all outstanding shares of redeemable convertible preferred
stock will automatically convert to the Company's common stock upon the
satisfaction of certain conditions, including the closing of a firm commitment
public offering of the Company's common stock at a minimum offering price of $6
per share of common stock with net proceeds to the Company of not less than
$10,000,000. See Note 1.
F-18
<PAGE> 79
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Employee Stock Plans -- Subsequent to June 30, 1996, the Company's Board of
Directors adopted the 1996 Stock Plan, the 1996 Employee Stock Purchase Plan and
the 1996 Director Option Plan. These plans are subject to stockholder approval.
The Company has reserved 1,500,000, 250,000, and 100,000 shares of common stock
for issuance under the respective plans.
* * * * * *
F-19
<PAGE> 80
APPENDIX -- (DESCRIPTION OF GRAPHICS)
GATEFOLD FOLLOWING INSIDE FRONT COVER
[Graphic: The graphic depicts in the left panel a photograph of the Company's
5,000 Series excimer laser product, the front panel of which is transparent,
revealing the components of the laser.]
GRAPHIC CAPTION: ABOVE PHOTOGRAPH: CYMER IS THE LEADING PROVIDER OF EXCIMER
LASER ILLUMINATION SOURCES FOR USE IN DEEP UV PHOTOLITHOGRAPHY SYSTEMS.
GRAPHIC CAPTION: BELOW PHOTOGRAPH: CYMER: ENABLING DEEP UV SEMICONDUCTOR
PHOTOLITHOGRAPHY FOR THE NEXT GENERATION AND BEYOND.
[Graph: Right panel: This graph illustrates the adoption of illumination
technologies used to produce semiconductors with decreases in critical feature
sizes. The vertical axis depicts microns (from 0.0 microns to 1.2 microns); the
horizontal axis depicts time (from 1986 to 2001). Three downward sloping curved
arrows cascade down the graph representing each of the three illumination
technologies and show the critical feature sizes the technologies are used to
produce as well as their date of initial use.]
GRAPHIC CAPTION: ABOVE GRAPH: ENABLING MOORE'S LOW WITH DEEP UV
PHOTOLITHOGRAPHY.
[Graphic Captions: BELOW GRAPH: Deep ultraviolet (DUV) photolithography is a
next-generation technology designed for semiconductor manufacturing below 0.35
microns. G-line and i-line photolithography systems, which have generally been
used for critical feature sizes above 0.35 microns, have primarily used mercury
arc lamps as their illumination source. Cymer's excimer lasers have been
selected as an illumination source by all five of the world's DUV
photolithography system manufacturers, and photolithography systems
incorporating Cymer's excimer lasers have been purchased by each of the world's
ten largest semiconductor manufacturers.]
PAGE 27
[Graphic: This graph illustrates the reduction in critical feature sizes in
DRAMs over time. The vertical axis depicts microns (from 0.0 microns to 1.2
microns); the horizontal axis depicts time (from 1986 to 2001). A downward
sloping curve connects six points in the graph, each of which depicts the
critical feature sizes of DRAM devices at three year intervals.]
[Graphic caption: Reduction in critical feature size over time.]
PAGE 28
[Graphic: The graph on the right panel of the gatefold following inside front
cover is reproduced here.]
GRAPHIC CAPTION: CRITICAL FEATURE SIZE AND ILLUMINATION TECHNOLOGIES.
PAGE 34
[Graphic: This diagram depicts one of the Company's photolithography lasers,
with arrows labelling certain subassemblies.]
<PAGE> 81
(This page intentionally left blank)
<PAGE> 82
LOGO
<PAGE> 83
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE
PAID
----------
<S> <C>
Registration Fee......................................................... $ 11,897
NASD Filing Fee.......................................................... 4,350
Nasdaq National Market Listing fee....................................... 45,000
Printing................................................................. 200,000
Legal Fees and Expenses.................................................. 350,000
Accounting Fees and Expenses............................................. 200,000
Blue Sky Fees and Expenses............................................... 15,000
Transfer Agent Fees...................................................... 10,000
Miscellaneous............................................................ 163,753
Total.......................................................... $1,000,000
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of the Nevada General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act"). The Registrant's Bylaws provide that the Registrant shall indemnify its
directors and officers to the fullest extent permitted by Nevada law, including
circumstances in which indemnification is otherwise discretionary under Nevada
law. The Registrant has entered into indemnification agreements with its
directors and officers containing provisions which are in some respects broader
than the specific indemnification provisions contained in the Nevada General
Corporation Law. The indemnification agreements may require the Registrant,
among other things, to indemnify its directors and officers against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified, and to obtain directors' and
officers' insurance if available on reasonable terms. Article 5 of the
Registrant's Restated Articles of Incorporation (Exhibit 3.1 hereto) provides
for indemnification of its directors and officers to the maximum extent
permitted by the Nevada General Corporation Law and Article 26 of the
Registrant's Amended and Restated Bylaws (Exhibit 3.3 hereto) provides for
indemnification of its directors, officers, employees and other agents to the
maximum extent permitted by the Nevada General Corporation Law. Reference is
also made to Section 9 of the Underwriting Agreement contained in Exhibit 1.1
hereto, which contains provisions with respect to the indemnification of the
officers and directors of the Registrant against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(1) In October 1993, the Company issued and sold 8% promissory notes in
the aggregate principal amount of $474,010 and warrants for the purchase of
13,941 shares of Series E or F Preferred Stock at an exercise price of $3.40 per
share to two venture funds, one corporation and one individual. Each of the
investors was an existing security holder of the Company, with the exception of
the individual, who was an accredited investor.
II-1
<PAGE> 84
(2) In February 1994, the Company sold 75,600 shares of its Series E
Preferred Stock, $.01 par value, to two Japanese companies, each of which was an
existing security holder and customer of the Company, for aggregate
consideration of $378,000.
(3) In June 1994, the Company exchanged the 8% promissory notes and
warrants described in note (1) above into a subsequent bridge loan financing
whereby the Company issued and sold convertible promissory notes in the
aggregate principal amount of $1,625,010 and warrants for the purchase of
252,914 shares of the Company's Series E or F Preferred Stock at an exercise
price of $3.40 per share to five venture funds, four individuals and one
corporation. All of the investors were existing security holders of the Company,
with the exception of three of the individuals, who were each accredited
investors.
(4) In November and December 1994, the Company sold additional convertible
promissory notes in the aggregate principal amount of $1,999,052 and warrants
for the purchase of 146,989 shares of the Company's Series E or F Preferred
Stock at an exercise price of $3.40 per share to four venture funds and one
domestic and one foreign corporation, all of which were existing security
holders of the Company.
(5) In February 1995, the Company exchanged a warrant for the purchase of
15,000 shares of Series D Preferred Stock at an exercise price of $8.50 per
share, which had been issued in May 1992 to a financial institution in
connection with a loan and security agreement, for warrants for the purchase of
16,000 shares of Series E Preferred Stock at an exercise price of $4.00 per
share.
(6) In February and March 1995, the Company issued and sold a total of
1,900,000 shares of its Series F Preferred Stock for aggregate consideration of
$6,650,000, of which $2,895,092 was in cash and $3,754,908 was the principal and
interest from the conversion of the promissory notes described in (3) and (4)
above, to eight venture funds, two foreign corporations, one domestic
corporation, forty-five individuals, four trusts and one investment club. Of
these investors, twelve were existing security holders of the Company and the
remainder were all accredited investors. In connection with this financing, the
Company issued to Weeden & Co., L.P., an existing security holder of the
Company, as Placement Agent, in lieu of a cash commission, five-year warrants to
purchase 443,624 shares of Series F Preferred Stock at a per share exercise
price of $3.50.
(7) In December 1995, the Company issued warrants for the purchase of
27,005 shares of Common Stock, at an exercise price of $3.40 per share, to one
venture fund, one foreign corporation and three individuals, all existing
security holders of the Company which had concurrently exercised warrants for
the purchase of 270,074 shares of Series F Preferred Stock at an exercise price
of $3.40 per share.
(8) In January and February 1996, the Company issued and sold a total of
900,000 shares of its Series G Preferred Stock to three of its customers two of
which were existing security holders of the Company and one of which was an
accredited investor for an aggregate consideration of $5,400,000.
(9) In May and June 1996, the Company issued warrants for the purchase of
12,992 shares of Common Stock, at an exercise price of $3.40 per share, to three
individuals affiliated with the Placement Agent who had concurrently exercised
warrants for the purchase of 129,926 shares of Series F Preferred Stock at an
exercise price of $3.50 per share.
(10) Since June 1993, the Company has issued and sold shares of Common
Stock to employees at prices ranging from $.50 to $1.00, upon exercise of stock
options pursuant to the Company's 1987 Stock Plan.
The sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder, or Rule 701 promulgated
under Section 3(b) of the Securities Act as transactions by an issuer not
involving a public offering or transactions pursuant to the compensatory benefit
plans and contracts relating to compensation as provided under such Rule 701.
The recipients of securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were attached to the share certificates issued in such transactions. All
recipients had adequate access to information about the Registrant.
II-2
<PAGE> 85
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <S>
1.1 Revised Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation of Registrant
3.2 Articles of Incorporation to be filed upon the closing of the offering
3.3 Bylaws of Registrant
3.4 Bylaws of Registrant to be filed upon the closing of the offering
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati, P.C.
10.1 Form of Indemnification Agreement with Directors and Officers
10.6 Series A Preferred Stock Purchase Agreement, dated May 3, 1988
10.7 Series B Preferred Stock Purchase Agreement, dated June 28, 1989
10.8 Series C Preferred Stock Purchase Agreement, dated April 16, 1990
10.9 Series D Preferred Stock Purchase Agreement, dated March 15, 1991
10.10 Series E Preferred Stock Purchase Agreement, dated February 25, 1994
10.11 Series F Preferred Stock Purchase Agreement, dated February 28, 1995
10.12 Series G Preferred Stock Purchase Agreement, dated January 30, 1996
10.13 Patent License Agreement, dated October 13, 1989, by and between the Company and
Patlex Corporation
10.14 Loan Agreement, dated August 15, 1991, by and between Mitsubishi International
Corporation and the Company
10.15 Standard Industrial Lease -- Multi-Tenant, dated August 19, 1991, by and between
Frankris Corporation and the Company
10.16 Contract Manufacturing Agreement -- Lithography Laser, dated August 28, 1992, by and
between the Company and Seiko Instruments Inc.
10.17 Product License and Manufacturing Agreement -- High Power Laser, dated August 28,
1992, by and between the Company and Seiko Instruments Inc.
10.18 Agreement, dated December 14, 1994, between the Company and EO Technics Co., Ltd.
10.19 Master Lease Agreement, dated April 23, 1996, between Tokai Financial Services and
the Company
11.1 Calculation of earnings per share
23.1 Independent Auditors' Consent
23.2 Consent of Counsel (included in Exhibit 5.1)
23.3 Consent of Townsend and Townsend and Crew
24.1 Power of Attorney (see page II-5)
</TABLE>
- ---------------
* To be supplied by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the
II-3
<PAGE> 86
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(5) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE> 87
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, Cymer, Inc., a corporation organized and existing under the laws of
the State of Nevada, has duly caused this Amendment No. 2 to this Registration
Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on this 22nd day
of August 1996.
CYMER, INC.
By: /s/ WILLIAM A. ANGUS, III
------------------------------------
William A. Angus, III
Senior Vice President of Finance and
Administration, Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -------------------
<C> <S> <C>
President, Chief Executive August 22, 1996
ROBERT P. AKINS* Officer and Chairman of the
- ------------------------------------------ Board
Robert P. Akins
Senior Vice President and August 22, 1996
/s/ WILLIAM A. ANGUS, III Chief Financial Officer
- ------------------------------------------
William A. Angus, III
Controller, Chief Accounting August 22, 1996
NANCY J. BAKER* Officer
- ------------------------------------------
Nancy J. Baker
RICHARD P. ABRAHAM* Director August 22, 1996
- ------------------------------------------
Richard P. Abraham
KENNETH M. DEEMER* Director August 22, 1996
- ------------------------------------------
Kenneth M. Deemer
PETER J. SIMONE*
- ------------------------------------------ Director August 22, 1996
Peter J. Simone
F. DUWAINE TOWNSEN* Director August 22, 1996
- ------------------------------------------
F. Duwaine Townsen
*By: /s/ WILLIAM A. ANGUS, III
- ------------------------------------------
William A. Angus, III
(Attorney-in-fact)
</TABLE>
II-5
<PAGE> 88
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
- -------- ------------------------------------------------------------------------------
<C> <S> <C>
1.1 Revised Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation of Registrant
3.2 Articles of Incorporation to be filed upon the closing of the offering
3.3 Bylaws of Registrant
3.4 Bylaws of Registrant to be filed upon the closing of the offering
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati, P.C.
10.1 Form of Indemnification Agreement with Directors and Officers
10.6 Series A Preferred Stock Purchase Agreement, dated May 3, 1988
10.7 Series B Preferred Stock Purchase Agreement, dated June 28, 1989
10.8 Series C Preferred Stock Purchase Agreement, dated April 16, 1990
10.9 Series D Preferred Stock Purchase Agreement, dated March 15, 1991
10.10 Series E Preferred Stock Purchase Agreement, dated February 25, 1994
10.11 Series F Preferred Stock Purchase Agreement, dated February 28, 1995
10.12 Series G Preferred Stock Purchase Agreement, dated January 30, 1996
10.13 Patent License Agreement, dated October 13, 1989, by and between the Company
and Patlex Corporation
10.14 Loan Agreement, dated August 15, 1991, by and between Mitsubishi International
Corporation and the Company
10.15 Standard Industrial Lease -- Multi-Tenant, dated August 19, 1991, by and
between Frankris Corporation and the Company
10.16 Contract Manufacturing Agreement -- Lithography Laser, dated August 28, 1992,
by and between the Company and Seiko Instruments Inc.
10.17 Product License and Manufacturing Agreement -- High Power Laser, dated August
28, 1992, by and between the Company and Seiko Instruments Inc.
10.18 Agreement, dated December 14, 1994, between the Company and EO Technics Co.,
Ltd.
10.19 Master Lease Agreement, dated April 23, 1996, between Tokai Financial Services
and the Company
11.1 Calculation of earnings per share
23.1 Independent Auditors' Consent
23.2 Consent of Counsel (included in Exhibit 5.1)
23.3 Consent of Townsend and Townsend and Crew
24.1 Power of Attorney (see page II-5)
</TABLE>
- ---------------
* To be supplied by amendment.
<PAGE> 1
3,340,000 Shares
CYMER, INC.
COMMON STOCK (PAR VALUE $0.001 PER SHARE)
UNDERWRITING AGREEMENT
September ___, 1996
<PAGE> 2
September ___, 1996
Morgan Stanley & Co. Incorporated
Montgomery Securities
Needham & Company, Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
Cymer, Inc., a Nevada corporation (the "Company"), proposes to
issue and sell to the several Underwriters named in Schedule II hereto (the
"Underwriters"), and certain stockholders of the Company (the "Selling
Stockholders") named in Schedule I hereto severally propose to sell to the
several Underwriters, an aggregate of 3,340,000 shares of the Common Stock (par
value $0.001 per share) of the Company (the "Firm Shares"), of which 3,002,032
shares are to be issued and sold by the Company and 337,968 shares are to be
sold by the Selling Stockholders, each Selling Stockholder selling the amount
set forth opposite such Selling Stockholders' name in Schedule I hereto.
The Company also proposes to issue and sell to the several
Underwriters not more than an additional 501,000 shares of its Common Stock (par
value $0.001 per share) (the "Additional Shares") if and to the extent that you,
as Managers of the offering, shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such shares of common stock granted to the
Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "Shares." The shares of Common Stock
(par value $0.001 per share) of the Company to be outstanding after giving
effect to the sales contemplated hereby are hereinafter referred to as the
"Common Stock." The Company and the Selling Stockholders are hereinafter
sometimes collectively referred to as the "Sellers."
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, including a prospectus,
relating to the Shares. The registration statement as amended at the time it
becomes effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement," the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "Prospectus."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "Rule 462 Registration Statement"), then any reference herein to the
term "Registration Statement' shall be deemed to include such Rule 462
Registration Statement.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no
stop order suspending the effectiveness of the Registration Statement
is in effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
(b) (i)Each part of the Registration Statement, when it
became effective, did not contain and each such part, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
(ii) the Registration Statement and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Prospectus does
not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this
1
<PAGE> 3
paragraph 1(b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its Subsidiary (as defined below), taken as a whole.
(d) Other than Cymer Japan, Inc., a Japanese corporation
("Cymer Japan" or the "Subsidiary"), the Company has no subsidiaries.
Cymer Japan has been duly incorporated, is validly existing as a
corporation in good standing under the laws of Japan, has the corporate
power and authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on the
Company and the Subsidiary, taken as a whole. All of the issued shares
of capital stock of Cymer Japan have been duly and validly authorized
and issued, are fully paid and non-assessable, and owned directly by
the Company, free and clear of all liens, encumbrances, equities or
claims.
(e) Neither the Company nor its Subsidiary owns any real
properties. The Company and its Subsidiary have good and marketable
title to all personal property owned by them, in each case free and
clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as do not materially affect the
value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its Subsidiary;
and any real property and buildings held under lease by the Company and
its Subsidiary are held by them under valid, subsisting and enforceable
leases except with such exceptions as are not material and do not
interfere with the current and proposed use of such property and
buildings by the Company and its Subsidiary, in each case except as
described in or contemplated by the Prospectus.
(f) This Agreement has been duly authorized, executed and
delivered by the Company.
(g) The authorized capital stock of the Company conforms
as to legal matters to the description thereof contained in the
Prospectus.
(h) The shares of Common Stock (including the Shares to
be sold by the Selling Stockholders) outstanding prior to the issuance
of the Shares to be sold by the Company have been duly authorized and
are validly issued, fully paid and non-assessable. Except as set forth
in the Prospectus and other than options granted to employees after
June 30, 1996 pursuant to the Company's 1987 Stock Plan (the "1987
Plan") as described in the Prospectus and other than the _______ [to
come from WSGR, if any], neither the Company nor its Subsidiary has
outstanding any options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible
securities or obligations. All outstanding shares of capital stock and
options and other rights to acquire capital stock have been issued in
compliance with the registration and qualification provisions of all
applicable securities laws and were not issued in violation of any
preemptive rights, rights of first refusal and other similar rights.
(i) The Shares to be sold by the Company have been duly
authorized, and when issued and delivered in accordance with the terms
of this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to
any preemptive or similar rights.
2
<PAGE> 4
(j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or its Subsidiary that is material
to the Company and its Subsidiary, taken as a whole, or any judgment,
order or decree of any governmental body, agency or court having
jurisdiction over the Company or its Subsidiary, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares.
(k) There has not occurred any material adverse change,
or any development involving a prospective material adverse change, in
the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its Subsidiary, taken as a whole, from
that set forth in the Prospectus.
(l) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
(i) the Company and its Subsidiary have not incurred any material
liability or obligation, direct or contingent, nor entered into any
material transaction not in the ordinary course of business; (ii) the
Company has not purchased any of its outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock other than ordinary and customary dividends;
and (iii) there has not been any material change in the capital stock,
short-term debt or long-term debt of the Company and its consolidated
Subsidiary, taken as a whole, except in each case as described in or
contemplated by the Prospectus.
(m) There are no legal or governmental proceedings
pending or, to the best of the Company's knowledge, threatened to which
the Company or its Subsidiary is a party or to which any of the
properties of the Company or its Subsidiary is subject that are
required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as required.
(n) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 or Rule 462 under the Securities
Act, complied when so filed in all material respects with the
Securities Act and the applicable rules and regulations of the
Commission thereunder.
(o) The Company is not and, after giving effect to the
offering and sale of the shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
(p) There is no owner of any securities of the Company
who has any right, not effectively satisfied or waived, to require
registration of any shares of capital stock of the Company in
connection with the filing of the Registration Statement or the sale of
any shares thereunder.
(q) The Company and its Subsidiary are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; neither the Company nor its
Subsidiary has been refused any insurance coverage sought or applied
for; and neither the Company nor its Subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or
operations of the Company and its Subsidiary, taken as a whole, except
as described in or contemplated by the Prospectus.
3
<PAGE> 5
(r) The Company and its Subsidiary(i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its Subsidiary, taken as a
whole.
(s) The costs and liabilities, if any, associated with
the effect of Environmental Laws on the business, operations and
properties of the Company and its Subsidiary (including, without
limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws
or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties)
would not, singly or in the aggregate, have a material adverse effect
on the Company and its Subsidiary, taken as a whole.
(t) The Company has complied with all provisions of
Section 517.075, Florida Statutes relating to doing business with the
Government of Cuba or with any person or affiliate located in Cuba.
(u) The Company and its Subsidiary owns or possesses
adequate licenses or other rights to use all patents, copyrights,
trademarks, service marks, trade names, technology and know-how
necessary to conduct its business in the manner described in the
Prospectus and, except as disclosed in the Prospectus, neither the
Company nor its Subsidiary has received any notice of infringement or
conflict with asserted rights of others with respect to any patents,
copyrights, trademarks, service marks, trade names, technology or
know-how that could result in any material adverse effect upon the
Company and its Subsidiary, taken as a whole; and, except as described
in the Prospectus, the discoveries, inventions, products or processes
of the Company and its Subsidiary referred to in the Prospectus do not,
to the best knowledge of the Company, infringe or conflict with any
right or patent of any third party, or any discovery, invention,
product or process that is the subject of a patent application filed by
any third party, known to the Company or its Subsidiary that could have
a material adverse effect on the Company and its Subsidiary, taken as a
whole.
(v) The Company and its Subsidiary possess all consents,
approvals, orders, certificates, authorizations and permits issued by,
and has made all declarations and filings with, all appropriate
federal, state or foreign governmental and self-regulatory authorities
and all courts and other tribunals necessary to conduct their
respective businesses and to own, lease, license and use their
properties in the manner described in the Prospectus, except to the
extent that the failure to obtain or file would not have a material
adverse effect on the Company and its Subsidiary, taken as a whole, and
neither the Company nor its Subsidiary has received any notice of
proceedings related to the revocation or modification of any such
consent, approval, order, certificate, authorization or permit that,
singly or in the aggregate, if the subject of any unfavorable decision,
ruling or finding, or failure to obtain or file, would result in a
material adverse change in the condition, financial or otherwise, or in
the earnings, business or operations of the Company and its Subsidiary,
taken as a whole, except as described in the Prospectus.
(w) The Company and its Subsidiary maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with generally accepted accounting principals of the United States and
to maintain asset accountability; (iii) access to assets is permitted
only in accordance with management's general or specific authorization;
and (iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
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(x) No material labor dispute with employees of the
Company or its Subsidiary exists or to the knowledge of the Company is
imminent, and, without conducting any independent investigation, the
Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could result in any material adverse
change in the condition, financial or otherwise, the earnings, the
business or operations of the Company and its Subsidiary, taken as a
whole.
(y) No less than [__%] outstanding shares of Common
Stock, and no less than [__%] securities convertible into or
exercisable or exchangeable for Common Stock, are subject to valid,
binding and enforceable agreements (collectively, the "Lock-Up
Agreements") that restrict the holders thereof from selling, making any
short sale of, granting any option for the purchase of, or otherwise
transferring or disposing of, any of such shares of Common Stock, or
any such securities convertible or exercisable or exchangeable for
Common Stock, for a period of 180 days after the date of the
Prospectus.
(z) The Company has notified each holder of a currently
outstanding option issued under the 1987 Plan and each person who has
acquired share so Common Stock pursuant to the exercise of any option
granted under the 1987 Plan, none of such options or shares may be sold
or otherwise transferred or disposed of for a period of 180 days after
the date of the initial public offering of the Shares and has imposed a
stop-transfer instruction with the Company's transfer agent in order to
enforce the foregoing lock-up provision imposed pursuant to the 1987
Plan.
(aa) As of the date the Registration Statement became
effective, the Common Stock was authorized for quotation on the Nasdaq
National Market upon official notice of issuance.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING
STOCKHOLDER. Each of the Selling Stockholders, severally and not jointly,
represents and warrants to and agrees with each of the Underwriters that:
(a) This Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder and constitutes a
valid and binding obligation upon such Selling Stockholder.
(b) The execution and delivery by such Selling
Stockholder of, and the performance by such Selling Stockholder of its
obligations under, this Agreement, the Custody Agreement signed by such
Selling Stockholder and Chase Mellon Stockholder Services, as
Custodian, relating to the deposit of the Shares to be sold by such
Selling Stockholder (the "Custody Agreement") and the Power of Attorney
appointing certain individuals as such Selling Stockholder's
attorneys-in-fact to the extent set forth therein, relating to the
transactions contemplated hereby and by the Registration Statement (the
"Power of Attorney') will not contravene any provision of applicable
law, or the certificate of incorporation or by-laws of such Selling
Stockholder (if such Selling Stockholder is a corporation), or any
agreement or other instrument binding upon such Selling Stockholder or
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over such Selling Stockholder, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by such
Selling Stockholder of its obligations under this Agreement or the
Custody Agreement or Power of Attorney of such Selling Stockholder,
except such as may be required by the securities or Blue Sky laws of
the various states in connection with the offer and sale of the Shares.
(c) Such Selling Stockholder has, and on the Closing Date
will have, valid title to the Shares to be sold by such Selling
Stockholder and the legal right and power, and all authorization and
approval required by law, to enter into this Agreement, the Custody
Agreement and the Power of Attorney and to sell, transfer and deliver
the Shares to be sold by such Selling Stockholder.
(d) The Shares to be sold by such Selling Stockholder
pursuant to this Agreement have been duly authorized and are validly
issued, fully paid and non-assessable.
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<PAGE> 7
(e) The Custody Agreement and the Power of Attorney have
been duly authorized, executed and delivered by such Selling
Stockholder and are valid and binding agreements of such Selling
Stockholder.
(f) Assuming the Underwriters purchase the shares to be
sold by each Stockholder for value, in good faith and without notice of
any adverse claim within the meaning of Article VII of the Uniform
Commercial Code, delivery of the Shares to be sold by such Selling
Stockholder pursuant to this Agreement will pass marketable title to
such Shares free and clear of any security interests, claims, liens,
equities and other encumbrances.
(g) All information furnished in writing by or on behalf
of such Selling Stockholder for use in the Registration Statement is,
and on the Closing Date will be, true, correct and complete, and does
not, and on the Closing Date will not, contain any untrue statement of
a material fact or omit to state any material fact necessary to make
such information not misleading, and all information furnished in
writing by or on behalf of such Selling Stockholder for use in the
Prospectus is, and on the Closing Date will be, true, correct and
complete, and does not, and on the Closing Date will not, contain any
untrue statement of a material fact or omit to state any material fact
necessary to make such information not misleading in the light of the
circumstances under which they were made.
3. AGREEMENTS TO SELL AND PURCHASE. Each Seller,
severally and not jointly, hereby agrees to sell to the several Underwriters,
and each Underwriter, upon the basis of the representations and warranties
herein contained, but subject to the conditions hereinafter stated, agrees,
severally and not jointly, to purchase from such Seller at $ _ a share (the
"Purchase Price") the number of Firm Shares (subject to such adjustments to
eliminate fractional shares as you may determine) that bears the same proportion
to the number of Firm Shares to be sold by such Seller as the number of Firm
Shares set forth in Schedule II hereto opposite the name of such Underwriter
bears to the total number of Firm Shares.
On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, the Company agrees
to sell to the Underwriters the Additional Shares, and the Underwriters shall
have a one-time right to purchase, severally and not jointly, up to
____________________ Additional Shares at the Purchase Price. If you, on behalf
of the Underwriters, elect to exercise such option, you shall so notify the
Company in writing not later than 30 days after the date of this Agreement,
which notice shall specify the number of Additional Shares to be purchased by
the Underwriters and the date on which such shares are to be purchased. Such
date may be the same as the Closing Date (as defined below) but not earlier than
the Closing Date nor later than ten business days after the date of such notice.
Additional Shares may be purchased as provided in Section 5 hereof solely for
the purpose of covering over-allotments made in connection with the offering of
the Firm Shares. If any Additional Shares are to be purchased, each Underwriter
agrees, severally and not jointly, to purchase the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of Firm Shares set forth in Schedule II
hereto opposite the name of such Underwriter bears to the total number of Firm
Shares.
Each Seller hereby agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it
will not, during the period ending 180 days after the date of the Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder or (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof (C) options issued under
1996 Stock Plan and the shares issuable upon exercise thereof, (D) options
issued under Director Option Plan and the shares issuable upon exercise thereof
and (E) shares issued under 1996 Employee Stock Purchase Plan. In addition, each
Selling Stockholder, agrees that, without the prior written consent
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<PAGE> 8
of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of the Prospectus, make any
demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock.
4. TERMS OF PUBLIC OFFERING. The Sellers are advised by
you that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Sellers
are further advised by you that the Shares are to be offered to the public
initially at $__________ a share (the "Public Offering Price") and to certain
dealers selected by you at a price that represents a concession not in excess of
$__________ a share under the Public Offering Price, and that any Underwriter
may allow, and such dealers may reallow, a concession, not in excess of
$__________ a share, to any Underwriter or to certain other dealers.
5. PAYMENT AND DELIVERY. Payment for the Firm Shares to
be sold by each Seller shall be made by certified or official bank check or
checks payable to the order of such Seller in same day funds at the office of
Wilson Sonsini Goodrich & Rosati at 10:00 A.M., local time, on ______________,
1996 or at such other time on the same or such other date, not later than
_____________, 1996, as shall be designated in writing by you. The time and date
of such payment are hereinafter referred to as the `"Closing Date."
Payment for any Additional Shares shall be made by certified
or official bank check or checks payable to the order of the Company in same day
funds at the office of Wilson Sonsini Goodrich & Rosati at 10:00 A.M., local
time, on the date specified in the notice described in Section 3 or on such
other date, in any event not later than _______________, 1996 as shall be
designated in writing by you. The time and date of such payment are hereinafter
referred to as the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall
be in definitive form and registered in such names and in such denominations as
you shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
6. CONDITIONS TO THE UNDERWRITER' OBLIGATIONS. The
obligations of the Sellers to sell the Shares to the Underwriters and the
several obligations of the Underwriters to purchase and pay for the Shares on
the Closing Date are subject to the condition that the Registration Statement
shall have become effective not later than ___________ (New York time) on the
date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date:
(i) there shall not have occurred any
downgrading, nor shall any notice have been given of any
intended or potential downgrading or of any review for a
possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or
any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings,
business or operations of the Company and its Subsidiary,
taken as a whole, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent
to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
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<PAGE> 9
(b) The Underwriters shall have received on the Closing
Date a certificate, dated the Closing Date and signed by an executive
officer of the Company, to the effect set forth in clause (a)(i) above
and to the effect that the representations and warranties of the
Company contained in this Agreement are true and correct as of the
Closing Date and that the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely
upon his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing
Date an opinion of Wilson Sonsini Goodrich & Rosati, outside counsel
for the Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification
except to the extent that the failure to be so qualified would
not have a material adverse effect on the Company and its
Subsidiary, taken as a whole;
(ii) to such counsel's knowledge, the Company has
no subsidiaries other than the Subsidiary;
(iii) the authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained in the Prospectus;
(iv) the shares of Common Stock (including the
Shares to be sold by the Selling Stockholders) outstanding
prior to the issuance of the Shares to be sold by the Company
have been duly authorized and are validly issued and
non-assessable and, to such counsel's knowledge, fully paid;
(v) the Shares to be sold by the Company have
been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of
such Shares will not be subject to any preemptive or, to such
counsel's knowledge, similar rights;
(vi) to the knowledge of such counsel, there is
no legal or beneficial owner of any securities of the Company
who has any rights, not effectively satisfied or waived, to
require registration of any shares of capital stock of the
Company in connection with the filing of the Registration
Statement;
(vii) the Company has corporate power and
authority to enter into this Agreement and to issue, sell and
deliver to the Underwriters the Shares to be issued and sold
by the Company;
(viii) This Agreement has been duly authorized,
executed and delivered by the Company;
(ix) the execution and delivery by the Company
of, and the performance by the Company of its obligations
under, this Agreement will not contravene any provision of
applicable law or the certificate of incorporation or by-laws
of the Company or, to such counsel's knowledge, any agreement
or other instrument binding upon the Company or its Subsidiary
that is material to the Company and its Subsidiary, taken as a
whole (where such agreements and instruments have been
identified to such counsel by the Company as all of the
material agreements and instruments binding upon the Company
or its Subsidiary), or, to such counsel's
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<PAGE> 10
knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or
its Subsidiary, and no consent, approval, authorization or
order of, or qualification with, any governmental body or
agency is required for the performance by the Company of its
obligations under this Agreement, except such as may be
required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares;
(x) to the best of such counsel's knowledge: (I)
the Registration Statement has become effective under the
Securities Act, no stop order proceedings with respect thereto
have been instituted or are pending or threatened under the
Securities Act, and (II) any required filing of the Prospectus
and any supplement thereto pursuant to Rule 424(b) under the
Securities Act has been made in the manner and within the time
period required by such Rule 424(b);
(xi) the Shares to be sold under this Agreement
to the Underwriters by the Company and the Selling
Stockholders are duly authorized for quotation on the Nasdaq
National Market;
(xii) the statements (A) in the Prospectus under
the captions "Management--1987 Stock Option Plan,"
"Management--1996 Stock Option Plan," "Management--1996
Employee Stock Purchase Plan," "Management--1996 Director
Option Plan," "Management--Limitations on Liability and
Indemnification Matters," "Certain Transactions," "Description
of Capital Stock," "Shares Eligible for Future Sale" and
"Underwriters" (to the extent of the description of this
Agreement) and (B) in the Registration Statement in Items 14
and 15, in each case insofar as such statements constitute
summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings
and fairly summarize the matters referred to therein;
(xiii) such counsel does not know of any legal or
governmental proceedings pending or threatened to which the
Company or its Subsidiary is a party or to which any of the
properties of the Company or its Subsidiary is subject that
are required to be described in the Registration Statement or
the Prospectus and are not so described or of any statutes,
regulations, or to such counsel's knowledge, contracts or
other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described
or filed as required;
(xiv) the Company is not and, after giving effect
to the offering and sale of the Shares and the application of
the proceeds thereof as described in the Prospectus, will not
be an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended;
(xv) the Agreement and Plan of Merger (the "Plan
of Merger") by and between the Company and Cymer Laser
Technologies, a California corporation ("Cymer Laser"), has
been duly authorized by all necessary board of directors and
stockholder action on part of the Company and Cymer Laser and
has been duly executed and delivered by each of the parties
thereto;
(xvi) the execution and delivery of the Plan of
Merger and the consummation of the merger contemplated thereby
does not contravene any provision of applicable law or the
certificate of incorporation or bylaws of the Company or the
articles of incorporation or bylaws of Cymer Laser or any
agreement or other instrument binding upon the Company or its
Subsidiary that is material to the Company or its Subsidiary,
taken as a whole (where such agreements and instruments have
been identified to such counsel by the Company as all of the
material agreements and instruments binding upon the Company
or its Subsidiary) or, to such counsel's knowledge, any
judgment or decree of any governmental body, agency or court
having jurisdiction over Cymer Laser or Cymer Japan, and no
consent, approval, authorization or order of or qualification
with any governmental body or agency is required for the
performance by the
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<PAGE> 11
Company and Cymer Laser of its obligations under the Plan of
Merger except such as have been obtained;
(xvii) the merger contemplated by the Plan of
Merger is effective under the laws of the State of California
and the State of Nevada;
(xviii) the description of the Company's patent
portfolio contained in the Prospectus contains accurate
descriptions of the number and expiration dates of the
Company's issued and allowed patents and of the number of the
Company's currently pending U.S. and foreign patent
applications, including those U.S. patent applications which
have been allowed;
(xix) such counsel has listed and provided to the
Underwriters an accurate list of all issued and allowed United
States patents of the Company and of all currently pending
United States patent applications filed by the Company. Such
counsel has no actual knowledge of any fact or circumstance
which would render any of the issued United States patents so
listed invalid;
(xx) such counsel has scheduled and provided to
the Underwriters an accurate list of all currently pending
foreign patent applications which are being prosecuted for the
Company. Such counsel has no actual knowledge of any fact or
circumstance which would render any of the issued foreign
patents so listed invalid. The Company's foreign patent
applications so listed properly claimed priority based on the
corresponding United States patent applications;
(xxi) the Company's pending United States patent
applications have been properly filed and, to the best of such
counsel's knowledge, properly prepared and diligently pursued
on behalf of the Company, and the inventions described in the
Patents and Applications have been assigned to the Company.
Such counsel has no actual knowledge of any fact or
circumstance which would render any pending foreign patent
application so listed defective. Except for the claims made by
or which may be made by Coherent, Inc., such counsel has no
actual knowledge of any other entity or individual having
asserted any ownership right or claim in any of the Patents
and Applications, other than the Company;
(xxii) such counsel has no actual knowledge of any
fact or circumstance which would give any other entity or
individual any right or claim in any of the issued patents or
applications; and
(xxiii) other than governmental examination
proceedings related to the prosecution of the Patents and
Applications, such counsel has no actual knowledge of any
pending or threatened judicial or governmental proceedings
relating to such Patents or Patent Applications to which the
Company is a party, or of which any property of the Company is
subject, and except for the claims made by or to be made by
Coherent, Inc., such counsel is not aware of any pending or
threatened action, suit or claim by others that the Company is
infringing or otherwise violating any patent rights of others.
In addition, such counsel shall state that in addition to
rendering legal advice and assistance to the Company in the course of the
preparation of the Registration Statement and the Prospectus, involving, among
other things, discussions and inquiries concerning various legal matters and the
review of certain corporate records, documents and proceedings, such counsel
also participated in conferences with certain officers and other representatives
of the Company, including its independent certified public accountants and with
the Underwriters and their counsel, at which the contents of the Registration
Statement and the Prospectus and related matters were discussed; provided, such
counsel may state that they have not independently verified the accuracy,
completeness or fairness of the information contained in the Registration
Statement and Prospectus.
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<PAGE> 12
Such counsel shall also state that based upon its
participations as described in the preceding paragraph, (i) they believe that
the Registration Statement and the Prospectus (except for financial statements
and schedules and other financial data derived therefrom as to which they need
express no belief) complied as to form in all material respects with the
requirements of the Act and the rules and regulations of the Commission
thereunder and (ii) nothing has come to the attention of such counsel that leads
counsel to believe that (except for financial statements and schedules and other
financial data derived therefrom as to which they need express no belief) the
Registration Statement, as of its effective date, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that
(except for financial statements and schedules and other financial data derived
therefrom as to which they need express no belief) the Prospectus, on the
effective date and such date or dates as such opinion is delivered, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d) The Underwriters shall have received on the Closing
Date an opinion of Wilson Sonsini Goodrich & Rosati, counsel for the
Selling Stockholders, dated the Closing Date, to the effect that:
(i) this Agreement has been duly authorized,
executed and delivered by or on behalf of each of the Selling
Stockholders;
(ii) the execution and delivery by each Selling
Stockholder of, and the performance by such Selling
Stockholder of its obligations under, this Agreement and the
Custody Agreement and Powers of Attorney of such Selling
Stockholder will not contravene any provision of applicable
law, or the certificate of incorporation or by-laws of such
Selling Stockholder (if such Selling Stockholder is a
corporation), or, to such counsel's knowledge, any agreement
or other instrument binding upon such Selling Stockholder or,
to such counsel's knowledge, any judgment, order or decree of
any governmental body, agency or court having jurisdiction
over such Selling Stockholder, and no consent, approval,
authorization or order of, or qualification with, any
governmental body or agency is required for the performance by
such Selling Stockholder of its obligations under this
Agreement or the Custody Agreement or Power of Attorney of
such Selling Stockholder, except such as may be required by
the securities or Blue Sky laws of the various states in
connection with offer and sale of the Shares;
(iii) each of the Selling Stockholders has valid
marketable title to the Shares to be sold by such Selling
Stockholder and the legal right and power, and all
authorization and approval required by law or contract, to
enter into this Agreement and the Custody Agreement and Power
of Attorney of such Selling Stockholder and to sell, transfer
and deliver the Shares to be sold by such Selling Stockholder;
(iv) the Custody Agreement and the Power of
Attorney of each Selling Stockholder have been duly
authorized, executed and delivered by such Selling Stockholder
and are valid and binding agreements of such Selling
Stockholder;
(v) assuming the Underwriters purchase the
Shares to be sold by each Selling Stockholder for value, in
good faith and without notice of any adverse claim within the
meaning of Article VII of the Uniform Commercial Code,
delivery of the Shares to be sold by each Selling Stockholder
pursuant to this Agreement will pass title to such Shares free
and clear of any security interests, claims, liens, equities
and other encumbrances; and
(e) You shall have received on the Closing Date the
opinion of Townsend and Townsend and Crew, LLC, special intellectual
property counsel for the Company, dated the Closing Date, to the effect
that, based upon its representation of the Company in connection with
the matters referred to in correspondence between the Company and
Coherent, Inc. as discussed described in the Prospectus in the fourth
paragraph under the caption "Risk Factors--Uncertainty Regarding
Patents and Protection of Proprietary Technology" and in the forth
paragraph under the caption "Business--Intellectual Property
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<PAGE> 13
Rights" (the "Coherent Disclosure"), nothing has come to the attention
of such counsel that leads counsel to believe that such Coherent
Disclosure, as of the effective date of the Registration Statement,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Coherent Disclosure, on
the effective date and such date or dates as such opinion is delivered,
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(f) The Underwriters shall have received on the Closing
Date an opinion of [_________________], Japanese counsel for Cymer
Japan, dated the Closing Date, to the effect that:
(i) Cymer Japan has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification;
(ii) all of the issued shares of capital stock of
Cymer Japan have been duly and validly authorized and issued,
are fully paid and non-assessable, and owned directly by the
Company, free and clear of all liens, encumbrances, equities
or claims;
(iii) the execution and delivery by the Company
of, and the performance by the Company of its obligations
under, this Agreement will not contravene any provision of
applicable law or the [certificate of incorporation or
by-laws] of Cymer Japan or, to such counsel's knowledge, any
agreement or other instrument binding upon Cymer Japan that is
material to the Company and its Subsidiary, taken as a whole,
or, to such counsel's knowledge, any judgment, order or decree
of any governmental body, agency or court having jurisdiction
over the Company or its Subsidiary, and no consent, approval,
authorization or order of, or qualification with, any
governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of
the various states in connection with the offer and sale of
the Shares;
(iv) such counsel does not know of any legal or
governmental proceedings pending or threatened to which Cymer
Japan is a party or to which any of the properties of Cymer
Japan is subject; and
(g) The Underwriters shall have received on the Closing
Date an opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP, counsel for the Underwriters, dated the Closing Date,
covering the matters referred to in subparagraphs (v), (vii), (x) (but
only as to the statements in the Prospectus under "Description of
Capital Stock" and "Underwriters") and clause (I) in the second
paragraph following the enumberated opinions in paragraph (c) above.
With respect to subparagraph (xv) of paragraph (c) above,
Wilson Sonsini Goodrich & Rosati and Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP, may state that their opinion and belief are based
upon their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification,
except as specified. With respect to paragraph (d) above, Wilson Sonsini
Goodrich & Rosati may rely upon an opinion or opinions of counsel for any
Selling Stockholders and, with respect to factual matters and to the extent such
counsel deems appropriate, upon the representations of each Selling Stockholder
contained herein and in the Custody Agreement and Power of Attorney of such
Selling Stockholder and in other documents and instruments; provided that (A)
each such counsel for the Selling Stockholders is satisfactory to your counsel,
(B) a copy of each opinion so relied upon is delivered to you and is in form and
substance satisfactory to your counsel, (C) copies of such Custody Agreements
and Powers of Attorney and of any such other documents and instruments
12
<PAGE> 14
shall be delivered to you and shall be in form and substance satisfactory to
your counsel and (D) Wilson Sonsini Goodrich & Rosati shall state in their
opinion that they are justified in relying on each such other opinion.
The opinions of Wilson Sonsini Goodrich & Rosati described in
paragraphs (c) and (d) above (and any opinions of counsel for any Selling
Stockholder referred to in the immediately preceding paragraph) shall be
rendered to the Underwriters at the request of the Company or one or more of the
Selling Stockholders, as the case may be, and shall so state therein.
(h) The Underwriters shall have received, on each of the
date hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from Deloitte & Touche LLP independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall use a
"cut-off date" not earlier than the date hereof.
(i) The "lock-up" agreements between you and certain
stockholders, officers and directors of the Company relating to sales
and certain other dispositions of shares of Common Stock or certain
other securities, delivered to you on or before the date hereof, shall
be in full force and effect on the Closing Date.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the delivery to you on the Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of the
Additional Shares and other matters related to the issuance of the Additional
Shares.
7. COVENANTS OF THE COMPANY. In further consideration of
the agreements of the Underwriters herein contained, the Company covenants with
each Underwriter as follows:
(a) To furnish to you, without charge, four (4) signed
copies of the Registration Statement (including exhibits thereto) and
for delivery to each other Underwriter a conformed copy of the
Registration Statement (without exhibits thereto) and to furnish to you
in New York City, without charge, prior to 5:00 P.M. local time on the
business day next succeeding the date of this Agreement and during the
period mentioned in paragraph (c) below, as many copies of the
Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of the
public offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the Company)
to which Shares may have been sold by you on behalf of the Underwriters
and to any other dealers upon request, either amendments or supplements
to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances
when the Prospectus is delivered to a purchaser, be misleading or so
that the Prospectus, as amended or supplemented, will comply with law.
13
<PAGE> 15
(d) To endeavor to qualify the Shares for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earnings statement
covering the twelve-month period ending December 31, 1997 that
satisfies the provisions of Section 11(a) of the Securities Act and the
rules and regulations of the Commission thereunder.
(f) To pay or cause to be paid all expenses incident to
the performance of its obligations under this Agreement, including: (i)
the fees, disbursements and expenses of the Company's counsel and the
Company's accountants in connection with the registration and delivery
of the Shares under the Securities Act and all other fees or expenses
in connection with the preparation and filing of the Registration
Statement, any preliminary prospectus, the Prospectus and amendments
and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof
to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and
delivery of the Shares to the Underwriters, including any transfer or
other taxes payable thereon, (iii) the cost of printing or producing
any Blue Sky or Legal Investment memorandum in connection with the
offer and sale of the Shares under state securities laws and all
expenses in connection with the qualification of the Shares for offer
and sale under state securities laws as provided in Section 7(d)
hereof, including filing fees and the reasonable fees and disbursements
of counsel for the Underwriters in connection with such qualification
and in connection with the Blue Sky or Legal Investment memorandum,
(iv) all filing fees and disbursements of counsel to the Underwriters
incurred in connection with the review and qualification of the
offering of the Shares by the National Association of Securities
Dealers, Inc., (v) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A
relating to the Common Stock and all costs and expenses incident to
listing the Shares on the Nasdaq National Market, (vi) the cost of
printing certificates representing the Shares, (vii) the costs and
charges of any transfer agent, registrar or depositary, (viii) the
costs and expenses of the Company relating to investor presentations on
any "road show" undertaken in connection with the marketing of the
offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road
show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and
any such consultants, and the cost of any aircraft chartered in
connection with the road show, and (ix) all other costs and expenses
incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section. It is
understood, however, that except as provided in this Section, Section 9
entitled "Indemnity and Contribution", and the last paragraph of
Section 11 below, the Underwriters will pay all of their costs and
expenses, including fees and disbursements of their counsel, stock
transfer taxes payable on resale of any of the Shares by them and any
advertising expenses connected with any offers they may make.
(g) To not release any shares of Common Stock from any
restrictions imposed upon such shares by the Lock-Up Agreements without
the prior written consent of Morgan Stanley & Co. Incorporated.
8. EXPENSES OF SELLING STOCKHOLDERS. Each Selling
Stockholder, severally and not jointly, agrees to pay or cause to be paid (i)
all taxes, if any, on the transfer and sale of the Shares being sold by such
Selling Stockholder and (ii) such Selling Stockholder's pro rata share
(determined by dividing the number of Shares sold by such Selling Stockholder by
the total number of Shares sold by all Sellers) of all expenses of counsel for
the Selling Stockholders.
9. INDEMNITY AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), from and against
14
<PAGE> 16
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar
as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission
based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use
therein; provided, however, that the foregoing indemnity agreement with
respect to any preliminary prospectus shall not inure to the benefit of
any Underwriter, or any person controlling such Underwriter, from whom
the person asserting any such losses, claims, damages or liabilities
purchased Shares, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss,
claim, damage or liability.
(b) Each Selling Stockholder agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its
officers who sign the Registration Statement and each person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with
reference to information relating to such Selling Stockholder furnished
in writing by or on behalf of such Selling Stockholder expressly for
use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto. The liability of
each Selling Stockholder under the indemnity agreement contained in
this paragraph shall be limited to an amount equal to the net proceeds
received by such Selling Stockholder (before deducting expenses) from
the offering of the Shares sold by such Selling Stockholder; provided,
however, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any
Underwriter, or any person controlling such Underwriter, from whom the
person asserting any such losses, claims, damages or liabilities
purchased Shares, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss,
claim, damage or liability.
(c) Each Underwriter agrees, severally and not jointly,
to indemnify and hold harmless the Company, the Selling Stockholders,
the directors of the Company, the officers of the Company who sign the
Registration Statement and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with
reference to information relating to such Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use in
the
15
<PAGE> 17
Registration Statement, any preliminary prospectus, the Prospectus or
any amendments or supplements thereto.
(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to paragraph (a), (b) or (c) of
this Section 9, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection
with any proceeding or related proceedings in the same jurisdiction, be
liable for the fees and expenses of more than one separate firm (in
addition to any local counsel) for (i) all Underwriters and all
persons, if any, who control any Underwriter within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange
Act, (ii) the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the
Company within the meaning of either such Section and (iii) all Selling
Stockholders and all persons, if any, who control any Selling
Stockholder within the meaning of either such Section , and that all
such fees and expenses shall be reimbursed as they are incurred. In the
case of any such separate firm for the Underwriters and such control
persons of the Underwriters, such firm shall be designated in writing
by Morgan Stanley & Co. Incorporated. In the case of any such separate
firm for the Company, and such directors, officers and control persons
of the Company, such firm shall be designated in writing by the
Company. In the case of any such separate firm for the Selling
Stockholders and such controlling persons of the Selling Stockholders,
such firm shall be designated in writing by the persons named as
attorneys-in-fact for the Selling Stockholders under the Powers of
Attorney. The indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled
with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of
any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying
party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject
matter of such proceeding.
(e) To the extent the indemnification provided for in
paragraph (a), (b) or (c) of this Section 9 is unavailable to an
indemnified party or insufficient in respect of any losses, claims,
damages or liabilities referred to therein, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the
one hand and the indemnified party or parties on the other hand from
the offering of the Shares or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the
16
<PAGE> 18
indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities,
as well as any other relevant equitable considerations. The relative
benefits received by the Sellers on the one hand and the Underwriters
on the other hand in connection with the offering of the Shares shall
be deemed to be in the same respective proportions as the net proceeds
from the offering of the Shares (before deducting expenses) received by
each Seller and the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on
the cover of the Prospectus, bear to the aggregate Public Offering
Price of the Shares. The relative fault of the Sellers on the one hand
and the Underwriters on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Sellers or by the
Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Underwriters' respective obligations to contribute
pursuant to this Section 9 are several in proportion to the respective
number of Shares they have purchased hereunder, and not joint.
(f) The Sellers and the Underwriters agree that it would
not be just or equitable if contribution pursuant to this Section 9
were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in paragraph (e) of this Section 9. The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 9,
no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by
it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section
9 are not exclusive and shall not limit any rights or remedies which
may otherwise be available to any indemnified party at law or in
equity.
(g) The indemnity and contribution provisions contained
in this Section 9 and the representations, warranties and other
statements of the Company and the Selling Stockholders contained in
this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, any Selling Stockholder or any person
controlling any Selling Stockholder, or the Company, its officers or
directors or any person controlling the Company and (iii) acceptance of
and payment for any of the Shares.
10. TERMINATION. This Agreement shall be subject to
termination by notice given by you to the Company, if (a) after the execution
and delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses (a) (i) through (iv), such
event, singly or together with any other such event, makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.
11. EFFECTIVENESS: DEFAULTING UNDERWRITERS. This
Agreement shall become effective upon the execution and delivery hereof by the
parties hereto.
17
<PAGE> 19
If, on the Closing Date or the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares that it has or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule II bears to
the aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; provided that in no event shall the
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 11 by an amount in excess of
one-ninth of such number of Shares without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail
or refuse to purchase Firm Shares and the aggregate number of Firm Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Firm Shares to be purchased, and arrangements satisfactory to you, the
Company and the Selling Stockholders for the purchase of such Firm Shares are
not made within 36 hours after such default, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter, the Company or
the Selling Stockholders. In any such case either you or the relevant Sellers
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the Registration
Statement and in the Prospectus or in any other documents or arrangements may be
effected. If, on the Option Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Additional Shares to be purchased, the
non-defaulting Underwriters shall have the option to (i) terminate their
obligation hereunder to purchase Additional Shares or (ii) purchase not less
than the number of Additional Shares that such non-defaulting Underwriters would
have been obligated to purchase in the absence of such default. Any action taken
under this paragraph shall not relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of any Seller to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason any Seller shall be unable to perform its obligations under
this Agreement, the Sellers will reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.
12. COUNTERPARTS. This Agreement may be signed in two or
more counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
13. APPLICABLE LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York.
14. HEADINGS. The headings of the sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed a part of this Agreement.
18
<PAGE> 20
Very truly yours,
CYMER, INC.
By:_________________________________________
Name:
Title:
The Selling Stockholders
named in Schedule I hereto,
acting severally
By:_________________________________________
Attorney-in-Fact
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Montgomery Securities
Needham & Company, Inc.
Acting severally on behalf
of themselves and the
several underwriters named
herein.
By: Morgan Stanley & Co.
Incorporated
By:____________________________
Name:
Title:
<PAGE> 21
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Firm Shares
Selling Stockholder To Be Sold
- ------------------- ----------
<S> <C>
To come
--------------------------------
Total..............................
================================
</TABLE>
<PAGE> 22
SCHEDULE II
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter To Be Purchased
- ----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated
Montgomery Securities
Needham & Company, Inc.
---------------------------------
Total.............................
=================================
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CYMER, INC.
Pursuant to Sections 78.380 and 78.403 of the Nevada General
Corporation Law, the articles of incorporation of Cymer, Inc., a Nevada
corporation, are hereby amended and restated to read in their entirety as
follows:
"1. NAME OF CORPORATION. The name of the corporation is Cymer, Inc.
2. RESIDENT AGENT. The address of the corporation's registered office
in the State of Nevada is 402 N. Division Street, Carson City, Nevada 89703. The
name of its registered agent at such address is Roy L. Farrow.
3. SHARES. The corporation (sometimes referred to in these Articles of
Incorporation as the "Company") is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares of Common Stock authorized to be issued is Twenty- five Million
(25,000,000), $.001 par value per share. The total number of shares of Preferred
Stock authorized to be issued is Nine Million Eight Hundred Thirty-four Thousand
Eight Hundred Eighty (9,834,880), $.001 par value per share. The Preferred Stock
shall be issued in seven series. The first series of Preferred Stock shall be
designated as 8% Non-Cumulative Voting Redeemable Convertible Series A Preferred
Stock (the "Series A Preferred Stock") and shall consist of Two Million Two
Hundred Sixty-Nine Thousand Two Hundred Sixty-One (2,269,261) shares with the
rights, preferences, privileges and restrictions set forth below. The second
series of Preferred Stock shall be designated as 8% NonCumulative Voting
Redeemable Convertible Series B Preferred Stock (the "Series B Preferred Stock")
and shall consist of One Million Three Hundred Ten Thousand Twenty-Nine
(1,310,029) shares with the rights, preferences, privileges and restrictions set
forth below. The third series of Preferred Stock shall be designated as 8%
Non-Cumulative Voting Redeemable Convertible Series C Preferred Stock (the
"Series C Preferred Stock") and shall consist of Two Hundred Thousand (200,000)
shares with the rights, preferences, privileges and restrictions set forth
below. The fourth series of Preferred Stock shall be designated as 8%
Non-Cumulative Voting Redeemable Convertible Series D Preferred Stock (the
"Series D Preferred Stock") and shall consist of Four Hundred Eighty-Five
Thousand Five Hundred Ninety (485,590) shares with the rights, preferences,
privileges and restrictions set forth below. The fifth series of Preferred Stock
shall be designated as 8% Non-Cumulative Voting Redeemable Convertible Series E
Preferred Stock (the "Series E Preferred Stock") and shall consist of One
Million Six Hundred Seventy Thousand (1,670,000) shares with the rights,
preferences, privileges and restrictions set forth below. The sixth series of
Preferred Stock shall be designated as 8% Non-Cumulative Voting Redeemable
Convertible Series F Preferred Stock (the "Series F Preferred Stock") and shall
consist of Three Million (3,000,000) shares with the rights, preferences,
privileges and restrictions set forth below. The seventh series of Preferred
Stock shall be designated as 8% Non-Cumulative Voting Redeemable Convertible
Series G Preferred Stock (the "Series G Preferred Stock") and shall consist of
Nine Hundred Thousand (900,000)
<PAGE> 2
shares with the rights, preferences, privilege and restrictions set forth below.
The rights, preferences, privileges and restrictions granted to and imposed upon
the Preferred Stock are as follows:
A. Dividend Rate. The holders of record of shares of Preferred
Stock shall be entitled to receive, when, if and as declared by the Board of
Directors of the Company (the "Board") out of any assets of the Company legally
available therefor, an annual cash dividend at the rate per share of 8% of the
Liquidation Value of the respective series, which shall be payable when and if
declared by the Board on a pari passu basis. "Series A Liquidation Value,"
"Series B Liquidation Value," "Series C Liquidation Value," "Series D
Liquidation Value", "Series E Liquidation Value", "Series F Liquidation Value"
and "Series G Liquidation Value" shall mean $1.60, $3.40, $7.00, $8.50, $5.00,
$3.50 and $6.00 per share, respectively. No dividends (other than those payable
solely in Common Stock) shall be declared or paid or set aside for payment or
other distribution made with respect to the Common Stock during any fiscal year
of the Company nor shall any shares of Common Stock be redeemed, purchased or
otherwise acquired by the Company until a dividend equal to 8% per annum of the
applicable Liquidation Value per share of Preferred Stock has been paid or
declared and set apart during the fiscal year. If in the event of the
declaration of a dividend, the assets and funds thus distributed among the
holders of Preferred Stock shall be insufficient to permit the payment to such
holders of the full dividend, then such assets and funds shall be distributed
ratably among the holders of the Preferred Stock (in proportion to the
applicable Liquidation Values). Any reference in these Articles of Incorporation
to Common Stock includes any other class or series of Common Stock that may be
authorized from time to time. The foregoing restriction on redemption,
repurchase or acquisition of Common Stock shall be inapplicable to (i) the
redemption provisions of these Articles of Incorporation, (ii) any payments in
lieu of issuance of fractional shares thereof whether upon any merger,
conversion, stock dividend or otherwise, (iii) repurchases of Common Stock by
the Company pursuant to the terms of the Company's 1987 Stock Option Plan, 1996
Stock Option Plan or the Common Stock Restriction Agreements entered into by the
Company with each of Robert P. Akins, Uday Sengupta, Richard L. Sandstrom and
Donald G. Larson and any other repurchases by the Company under circumstances
comparable to those contemplated by the Company's Incentive Stock Option Plan or
the Common Stock Restriction Agreements or (iv) the rescission by the Company of
any transaction pursuant to which such stock was issued. Dividends on the
Preferred Stock shall not be cumulative and no rights to dividends shall accrue
to the holders of Preferred Stock in the event that the Company shall fail to
declare or pay dividends in whole or in part on any series of Preferred Stock in
any previous fiscal year of the Company, whether or not the earnings of the
Company in that previous fiscal year were sufficient to pay such dividends in
whole or in part. After dividends in the amount of 8% per annum of the
applicable Liquidation Value per share on the Preferred Stock have been paid or
declared and set aside in any one fiscal year of the Company, if the Board shall
elect to declare additional dividends out of funds legally available therefor in
that fiscal year, such additional dividends shall be paid on the Common Stock
and on the Preferred Stock as if the Preferred Stock had been converted to
Common Stock prior to the payment of the additional dividends.
B. Voting.
(1) Subject to subsection B(2) hereof, each holder of
Preferred Stock shall be entitled to vote on all matters submitted to a vote
(or, if action by written consent is permitted by the Bylaws of the Company, to
give their written consent in lieu of a vote) of stockholders of the Company
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<PAGE> 3
and, with respect to such vote, shall be entitled to cast the number of votes he
would have been entitled to cast had he converted all of his shares of Preferred
Stock into Common Stock immediately prior to such vote. Except as otherwise
provided herein or required by law, the holders of shares of Preferred Stock and
Common Stock shall vote together and not as separate classes or series.
(2) The holders of shares of Common Stock voting
separately as a class shall elect two members of the Board of Directors of the
Company, the holders of shares of Series A Preferred Stock voting separately as
a class shall elect two members of the Board of Directors of the Company, and
the holders of shares of Series B Preferred Stock voting separately as a class
shall elect one member of the Board of Directors. Additional members of the
Board of Directors, if any, shall be elected by the holders of shares of Common
Stock and Preferred Stock voting together as a single class. If a vacancy on the
Board of Directors is to be filled by the Board of Directors, only a director or
directors elected by the same class of stockholders as those who would be
entitled to vote to fill such vacancy, if any, shall vote to fill such vacancy.
No action by members of the Board of Directors filling a vacancy on the Board of
Directors shall be effective until 10 days after all Board members who do not
have a right to vote on such appointment have received notice thereof. A
majority of the Board members entitled to receive such notice may waive such
notice requirement on behalf of all such Board members.
C. Protective Provisions.
(1) The Company shall not, without the consent of
persons holding at least a majority of the outstanding shares of Preferred
Stock, voting together as a class:
(a) Amend or restate the Articles of
Incorporation in a manner which would adversely alter or change the rights,
preferences, privileges or restrictions of the Preferred Stock;
(b) Establish any class or series of capital
stock which would rank senior to or on a parity with the Preferred Stock with
respect to the right to receive dividends or any distribution upon the
liquidation, dissolution, Liquidating Merger (as defined below) or winding up of
the Company;
(c) Effect or permit any sale, lease,
encumbrance, assignment, transfer or conveyance or merger of all or
substantially all of the assets of the Company, or any liquidation or winding up
of the Company;
(d) Increase or decrease (other than by
permitted repurchase, redemption or conversion) the total number of authorized
shares of capital stock or reduce the stated capital of the Company;
(e) Amend the Articles of Incorporation or
the Bylaws of the Company to increase the authorized number of members of the
Board of Directors in excess of seven; or
(f) Obligate itself to do any of the
foregoing.
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<PAGE> 4
(2) The Company shall not, without the consent of
persons holding at least a majority of the outstanding shares of Series C , D,
E, F or G Preferred Stock, as the case may be:
(a) Amend or restate the Articles of
Incorporation in a manner which would adversely alter or change the rights,
preferences, or privileges of such series of Preferred Stock, provided such
series of Preferred Stock is adversely affected by such amendment or restatement
in a different manner than the other outstanding series of Preferred Stock;
(b) Establish any class or series of capital
stock which would rank senior to or on a parity with such series of Preferred
Stock with respect to the right to receive dividends or any distribution upon
the liquidation, dissolution, Liquidating Merger (as defined below) or winding
up of the Company, provided such series of Preferred Stock is adversely affected
by such establishment in a different manner than the other outstanding series of
Preferred Stock; or
(c) Obligate itself to do any of the
foregoing.
D. Redemption and Sinking Fund.
(1) So long as any Preferred Stock remains
outstanding, the Company shall, on each of the dates set forth in the following
schedule (each a "Sinking Fund Payment Date"), set aside as and for a sinking
fund for the redemption of the Preferred Stock (hereinafter called the "Sinking
Fund") in cash out of any funds legally available therefor, a sum equal to the
product of (a) the applicable Redemption Price (as hereinafter defined)
multiplied by (b) the maximum number of shares of Preferred Stock to be redeemed
as set forth below opposite such Sinking Fund Payment Date:
<TABLE>
<CAPTION>
Sinking Fund Number of Shares of Preferred
Payment Date Stock to be Redeemed
- --------------------------------------------------------------------------------
<S> <C>
March 15, 1997 One third of the shares of each
series of Preferred Stock then outstanding.
March 15, 1998 One third of the shares of each
series of Preferred Stock outstanding as of
March 15, 1997.
March 15, 1999 One third of the shares of each
series of Preferred Stock outstanding as of
March 15, 1997.
</TABLE>
(2) The Redemption Price for each share of Preferred
Stock shall be an amount in cash equal to the sum of the Liquidation Value of
such series plus 8% per annum of the Liquidation Value from date of original
issuance of such series by the Company's predecessor, Cymer Laser
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<PAGE> 5
Technologies, a California corporation (the "Predecessor Corporation"), less any
dividends actually paid on such share of Preferred Stock to the date of
redemption.
(3) If on any Sinking Fund Payment Date the funds of
the Company legally available therefor shall be insufficient to discharge such
Sinking Fund requirement in full, funds to the extent legally available for such
purpose shall be set aside for the Sinking Fund. Such Sinking Fund requirements
shall be cumulative, so that if for any year or years such requirements shall
not be fully discharged as they accrue, funds legally available therefor, after
such payment or provisions for dividends, for each year thereafter shall be
applied thereto until such requirements are fully discharged.
(4) On or before the fifth day (the "Redemption
Date") following each Sinking Fund Payment Date, the cash in the Sinking Fund
shall be used to acquire by redemption, in the manner provided below, the number
of shares of Preferred Stock to be redeemed as determined in subsection D(7)
hereof.
(5) In the event of the redemption of only a part of
the outstanding shares of Preferred Stock, the Company shall effect such
redemption pro rata among the total of all series of Preferred Stock according
to the number of shares to be redeemed by the Company for each holder of
Preferred Stock.
(6) At least 30 days but not more than 60 days prior
to the Redemption Date, a written offer (an "Offer to Redeem"), shall be mailed,
postage pre-paid, to each holder of record of Preferred Stock offered to be
redeemed at his address last shown on the records of the Company. The Offer to
Redeem shall state:
(a) Whether all or less than all of the
outstanding shares of Preferred Stock are offered to be redeemed and the total
number of shares offered for redemption;
(b) The number of shares of Preferred Stock
held by the holder that the Company intends to redeem;
(c) The Redemption Date and the Redemption
Price for each series;
(d) The date upon which the holder's rights
to convert such shares of Preferred Stock into Common Stock will terminate; and
(e) That the holder is to surrender to the
Company, in the manner and at the place designated, his certificate or
certificates representing the shares of Preferred Stock to be redeemed.
(7) If a holder of Preferred Stock elects to accept
the Offer to Redeem on or before the applicable Redemption Date (unless such
holder has exercised his right to convert the shares as provided in Section E
hereof), such holder shall (i) deliver to the principal offices of the Company a
written statement accepting the Offer to Redeem and setting forth the number of
shares of Preferred
-5-
<PAGE> 6
Stock such holder desires to have redeemed and identifying the series of such
shares and (ii) surrender the certificate or certificates representing such
shares to the Company, in the manner and at the place designated in the Offer to
Redeem, and thereupon the Redemption Price for such shares shall be payable to
the order of the person whose name appears on such certificate or certificates
as the owner thereof, and each surrendered certificate shall be canceled and
retired. In the event less than all of the shares represented by such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(8) If the Offer to Redeem shall have been duly
given, and if on the Redemption Date the Redemption Price is either paid or made
available for payment through the deposit arrangement specified in subsection
D(9) below, then notwithstanding that the certificates evidencing any of the
shares of Preferred Stock so called for redemption shall not have been
surrendered, the dividends with respect to such shares shall cease to accrue
after the Redemption Date and all rights with respect to such shares shall
forthwith after the Redemption Date terminate, except only the right of the
holders to receive the Redemption Price without interest upon surrender of their
certificate or certificates therefor.
(9) On or prior to the Redemption Date, the Company
shall deposit with any bank or trust company in the State of California, having
a capital and surplus of at least $100,000,000 as a trust fund, a sum equal to
the aggregate Redemption Price of all shares of Preferred Stock as to which the
holders thereof have accepted the Company's offer to redeem and not yet
redeemed, with irrevocable instructions and authority to the bank or trust
company to pay, on or after the Redemption Date or prior thereto, the Redemption
Price to the respective holders upon the surrender of their share certificates.
From and after the later of the date of such deposit or the applicable
Redemption Date, the shares so called for redemption shall be redeemed. The
deposit shall constitute full payment of the shares to their holders, and from
and after the later of the date of the deposit or the applicable Redemption
Date, the shares shall be deemed to be no longer outstanding, and the holders
thereof shall cease to be stockholders of the Company with respect to such
shares and shall have no rights with respect thereto except the rights to
receive from the bank or trust company payment of the Redemption Price of the
shares, without interest, upon surrender of their certificates therefor, and the
right to convert such shares as provided in Section E hereof. Any funds so
deposited and unclaimed at the end of one year from the Redemption Date shall be
released or repaid to the Company, after which the holders of shares called for
redemption shall be entitled to receive payment of the Redemption Price only
from the Company.
(10) The Company may elect to redeem all or a portion
of any series of Preferred Stock at any time, provided, that it shall have
received the prior written consent of persons holding sixty-six and two-thirds
percent (66-2/3) of the outstanding shares of such series of Preferred Stock,
with each series voting separately as a class.
E. Conversion.
(1) In General. Subject to subsection E(5) below, the
Preferred Stock shall be convertible at the option of the holder at any time
into fully paid and nonassessable shares of Common Stock of the Company
initially at the Conversion Rate for each series (as defined herein) of one (1)
share
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<PAGE> 7
of Common Stock for each share of Preferred Stock, except in the case of the
Series E Preferred Stock for which the Conversion Rate shall initially be
1.470588 shares of Common Stock for each share of Preferred Stock; provided,
however, that in case of the redemption of any shares of Preferred Stock, such
right of conversion shall cease and terminate as to the shares which the holder
thereof has accepted the Company's Offer to Redeem, at the close of business on
the day prior to the Redemption Date for those shares, notwithstanding any
earlier deposit by the Company of funds sufficient for such redemption, unless
default shall be made in the payment of the Redemption Price, in which case the
rights of conversion granted hereby shall survive.
(2) The number of shares of Common Stock which shall
be deliverable in exchange for a share of Preferred Stock upon conversion
thereof is hereinafter referred to as the "Conversion Rate" for each such
series. The Conversion Rate of each series shall be subject to adjustment from
time to time in certain instances as hereinafter provided.
(3) An irrevocable notice of conversion shall be
mailed by each holder of Preferred Stock electing to convert his shares
addressed to the Company. If less than all of the shares of the Preferred Stock
owned by such holder are to be converted, the notice shall specify the number of
shares thereof which are to be converted. Two days after the mailing of such
notice, notwithstanding that no certificate for the shares of Common Stock into
which the Preferred Stock was converted shall have been received by the holder
so electing to convert and notwithstanding that no certificate for shares of the
Preferred Stock converted into the Common Stock shall have been surrendered to
the Company, the conversion of the Preferred Stock shall be deemed effective and
the certificate or certificates representing the shares of Preferred Stock for
which notice of conversion was mailed shall be deemed to evidence the shares of
Common Stock into which they were converted until such time as they are
exchanged for a new certificate representing the shares of Common Stock into
which they were converted.
(4) Exchange of Certificates. As soon as possible
after the holder mails its notice of conversion to the Company, but in no event
later than five (5) business days thereafter; (a) the holder shall surrender the
certificate or certificates for such Preferred Stock at the office of any duly
appointed transfer agent for such Preferred Stock or the Company's offices. Such
certificate or certificates shall be duly endorsed to the Company or in blank
and accompanied by proper instruments of transfer to the Company, unless the
Company shall waive such requirement, and shall state in writing therein the
name or names in which the holder wishes the certificate or certificates for
Common Stock issued; and (b) the Company will issue and deliver to the person
for whose account such Preferred Stock was so surrendered, or to his nominee or
nominees, certificates for the number of full shares of Common Stock to which he
shall be entitled as aforesaid, together with a cash adjustment for any fraction
of a share as hereinafter stated, if the shares of Preferred Stock surrendered
for conversion are not in the aggregate evenly convertible into a number of full
shares of Common Stock. In the event of any liquidation, dissolution,
Liquidating Merger (as hereinafter defined) or winding up of the affairs of the
Company, all conversion rights of the holders of Preferred Stock shall terminate
on the date fixed by resolutions of the Board of Directors of the Company, which
date shall not be later than ten (10) days nor earlier than twenty (20) days
prior to such liquidation, dissolution, Liquidating Merger or winding up.
-7-
<PAGE> 8
(5) Automatic Conversion.
(a) All shares of Preferred Stock
outstanding shall be converted automatically and without the requirement of any
election on the part of any holder of such shares of Preferred Stock at the
applicable Conversion Rate in effect immediately prior to the closing by the
Company of a bona fide firm commitment underwritten public offering registered
under the Securities Act of 1933, as amended, of its Common Stock at a public
offering price of not less than $6.00 per share of Common Stock (as adjusted for
any stock dividend, stock split or combination) with net proceeds to the Company
of not less than $10,000,000 (an "Automatic Conversion Event").
(b) Written notice shall be given to the
holders of the Preferred Stock immediately upon the occurrence of an Automatic
Conversion Event. On and after the date of mailing of such notice, and
notwithstanding that any certificates for the Preferred Stock shall not have
been surrendered for conversion, the shares of Preferred Stock evidenced thereby
shall be deemed to be no longer outstanding, and all rights with respect thereto
shall forthwith cease and terminate, except any rights of the holder (1) to
receive the shares of Common Stock to which he shall be entitled upon conversion
thereof, (2) to receive the amount of cash payable in respect of any fractional
share of Common Stock to which he shall be entitled and (3) to receive any
dividends declared but unpaid on such Preferred Stock prior to the Automatic
Conversion Event. No adjustments with respect to the Conversion Rate for each
series shall be made on account of any holder's rights to dividends that have
been declared but are unpaid prior to the Automatic Conversion Event; provided,
however, that no dividends shall thereafter be paid on the Common Stock unless
dividends have first been paid to the holders of Preferred Stock entitled to
payment prior to the Automatic Conversion Event. As soon as practicable after
such Automatic Conversion Event, but in no event later than ten (10) business
days after a holder of Preferred Stock shall have received notice from the
Company of such Automatic Conversion Event: (1) such holder shall surrender the
certificate or certificates for such Preferred Stock at the office and in the
manner provided for such purpose pursuant to subsection E(4) above; and (2) the
Company shall issue and deliver to the person for whose account such Preferred
Stock was so surrendered, or to his nominee or nominees, certificates for the
number of full shares of Common Stock to which he shall be entitled as
aforesaid, together with a cash adjustment for any fraction of a share as
hereinafter stated, if the shares of Preferred Stock automatically converted are
not in the aggregate evenly convertible into a number of full shares of Common
Stock.
F. Anti-Dilution Protection. The Conversion Rates for the
Preferred Stock shall be subject to adjustment from time to time as set forth
below.
(1) Certain Definitions and Assumptions. For purposes
of this Section F, the following definitions and assumptions shall apply:
(a) "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities.
-8-
<PAGE> 9
(b) "Convertible Securities" shall mean any
evidence of indebtedness, shares (other than the Preferred Stock) or other
securities convertible into or exchangeable for Common Stock.
(c) "Original Issue Date" shall mean the
date on which the merger of the Predecessor Corporation into the Company becomes
effective under the laws of the State of Nevada.
(d) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (or pursuant to this subsection
F(1), deemed to be issued) by the Company subsequent to the Original Issue Date,
other than shares of Common Stock issued or issuable (or pursuant to this
subsection F(1), deemed to be issued) at any time:
(i) upon conversion of the Preferred
Stock (including any such shares of Preferred stock issued on or issuable upon
conversion or exercise of Convertible Securities or Options);
(ii) to employees, consultants,
agents or directors of the Company as approved by the Board after the Original
Issue Date;
(iii) pursuant to Options and
options or warrants to purchase Preferred Stock outstanding on the Original
Issue Date, including Options and options or warrants to purchase Preferred
Stock resulting from the assumption of or substitution for such instruments from
the Predecessor Corporation; and
(iv) by way of dividend or
distribution pursuant to subsection F(2) or F(3) below or a dividend or
distribution on Preferred Stock.
(e) "Conversion Price" for Series A, Series
B, Series C, Series D, Series E, Series F and Series G Preferred Stock shall
mean $1.60, $3.40, $7.00, $8.50, $5.00, $3.50 and $6.00, respectively, divided
by the applicable Conversion Rate in effect at the time of any such
determination.
(f) The issuance of Options or Convertible
Securities of the Company shall be deemed the issuance of the shares of Common
Stock which may be acquired upon the exercise of the Options or the exchange or
conversion of the Convertible Securities for a consideration equal to the
consideration for which such Options were issued, plus the exercise price of any
such Options or the consideration equal to the consideration for which the
Convertible Securities were issued, plus any additional consideration to be
received on exchange or conversion thereof. Such shares of Common Stock shall be
deemed outstanding for the purposes of this Section F.
(g) Once an adjustment has been made to the
applicable Conversion Rate by reason of the deemed issuance of Additional Shares
of Common Stock, no further adjustment in the Conversion Rate for each series
shall be made upon the subsequent issue of Convertible Securities
-9-
<PAGE> 10
or shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities.
(h) If such Option or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any increase
or decrease in the consideration payable to the Company upon exercise, exchange
or conversion thereof or increase or decrease in the number of shares of Common
Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Rate for each series shall, upon any such increase or decrease
becoming effective, be equitably adjusted to reflect such increase or decrease.
(i) Upon the expiration of any such Options
or any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Rate for each series computed upon
the original issue thereof and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:
(i) in the case of Convertible
Securities or Options for Common Stock, the only Additional Shares of Common
Stock issued were shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Company for the issue of all such Options, whether or
not exercised, plus the consideration actually received by the Company upon such
exercise, or for the issue of all such Convertible Securities which were
actually converted or exchanged, plus the additional consideration, if any,
actually received by the Company upon such conversion or exchange, and
(ii) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such Options, and
the consideration received by the Company for Additional Shares of Common Stock
deemed to have been then issued was the consideration actually received by the
Company for the issue of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Company upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised.
(2) Dividends. If at any time the Company pays a
dividend on Common Stock payable in Common Stock or Convertible Securities,
subdivides its outstanding shares of Common Stock into a larger number of shares
or combines the outstanding shares of Common Stock into a smaller number of
shares by reclassification or otherwise (each, a "Dilutive Event"), the
Conversion Rate for each series in effect immediately prior to such Dilutive
Event shall be adjusted by multiplying such Conversion Rate by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such Dilutive Event (assuming exercise or conversion of all
outstanding Options and Convertible Securities) and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such Dilutive Event (assuming exercise or conversion of all outstanding Options
and Convertible Securities). An adjustment made pursuant to this subsection
F(2), shall become effective retroactively to the record date in the case of a
dividend and shall become effective on the effective date in the case of a
subdivision or combination.
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<PAGE> 11
(3) Distribution of Assets. If the Company shall
distribute to holders of shares of Common Stock any assets (other than any
regular quarterly cash dividend out of earned surplus), any evidence of
indebtedness or other securities of the Company or any rights to subscribe
thereto (the "Assets") then in each such case the Conversion Rate for each
series of Preferred Stock shall be increased by multiplying the applicable
Conversion Rate in effect on the record date for the determination of the
stockholders entitled to receive such distribution, and prior to such
distribution, by the absolute value of a fraction the numerator of which shall
be the product of (a) the fair value per share (determined as provided in
subsection F(5) below) of the Common Stock on such record date (assuming
exercise or conversion of all Options and Convertible Securities) and (b) the
number of shares of Common Stock outstanding on such record date (assuming
exercise or conversion of all Options and Convertible Securities) prior to such
distribution and the denominator of which shall be the remainder of (c) the
numerator and (d) the fair value (as determined in a resolution adopted by the
Board of Directors of the Company, which shall be conclusive evidence of such
fair value) of all of the Assets distributed by the Company to holders of shares
of Common Stock on such record date. Such adjustment to the Conversion Rate for
each series shall become effective retroactively immediately after the record
date.
(4) Issuance or Sale Below the Conversion Price for
Preferred Stock. If at any time after the Original Issue Date the Company shall
issue or sell, or shall, pursuant to subsection F(1), be deemed to have issued
and sold Additional Shares of Common Stock without consideration or at a price
per share less than the Conversion Price for a series of Preferred Stock, then,
in each such case, the Conversion Rate for such series of Preferred Stock shall
be increased, concurrently with such issuance or sale, to an amount determined
by multiplying the Conversion Rate for such series in effect on the date of and
immediately prior to such issuance or sale by a fraction the numerator of which
shall be the number of shares of Common Stock outstanding immediately after such
issuance or sale (assuming exercise or conversion of all outstanding Options and
Convertible Securities) and the denominator of which shall be the sum of (a) the
number of shares of Common Stock outstanding (assuming exercise or conversion of
all outstanding Options and Convertible Securities) on the date immediately
preceding the date on which the Additional Shares of Common Stock were issued or
sold and (b) the number of shares of Common Stock which the aggregate
consideration to be received by the Company in respect of such Additional Shares
of Common Stock would have purchased at the Conversion Price of such series in
effect immediately prior to such issuance or sale. Notwithstanding the
foregoing, no adjustment to the Conversion Price for the Series C or D Preferred
Stock shall occur pursuant to this subsection F(4) unless the purchase price per
share of the Additional Shares of Common Stock is less than $3.40 per share.
(5) Fair Value. For the purpose of any computation
under subsection F(3), the "fair value" on any date shall be as mutually agreed
upon by the Board of Directors of the Company with the representatives of the
holders of the shares of Preferred Stock voting in favor of such valuation;
provided, however, that if the Common Stock is listed or admitted to trading on
a national securities exchange, the fair value on any date shall be equal to the
average of the daily closing prices for the thirty (30) consecutive trading days
commencing forty-five (45) trading days before the date in question. The closing
price for each day shall be the last sales price regular way, or if no such sale
takes place, the average of the closing bid and asked prices regular way on the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading, or if not listed on such an exchange, the average
of the closing bid and asked prices for a share of Common Stock on the
over-the-counter
-11-
<PAGE> 12
market, as reported by the National Association of Securities Dealer's Automated
Quotation System at the close of business on such date.
(6) Capital Reorganization. In the case of any
capital reorganization or any reclassification of the capital stock of the
Company or in case of the consolidation or merger of the Company with another
corporation (other than a merger not involving any reclassification, conversion
or exchange of Common Stock, in which, subject to subsection F(7), the Company
is the surviving corporation), each share of Preferred Stock shall thereafter be
convertible into the number of shares of stock (or of any class or classes) or
other securities or property receivable upon such capital reorganization,
reclassification of capital stock, consolidation or merger as the case may be,
by a holder of the number of shares of Common Stock into which such share of
Preferred Stock was convertible immediately prior to such capital
reorganization, reclassification of capital stock, consolidation or merger; and,
in any case, appropriate adjustment (as determined by the Board) shall be made
in the application of the provisions herein set forth with respect to the rights
and interests thereafter of the holders of the Preferred Stock, to the end that
the provisions set forth herein (including the specified changes in and other
adjustments of the Conversion Rate for each series) shall thereafter be
applicable, as near as reasonably practical, in relation to any shares of stock
or other securities or other property thereafter deliverable upon the conversion
of the Preferred Stock.
(7) Liquidating Merger. If, as a result of (a) a sale
or conveyance of all or substantially all of the assets of the Company, or (b)
the merger, reorganization or consolidation of the Company with or into another
corporation or of another corporation into it, the beneficial owners of all of
the equity interest in the Company (assuming conversion of all options and
Convertible Securities outstanding at the time of such merger or consolidation)
immediately prior to any such merger or consolidation will not beneficially own
a majority of the equity interest of the entity surviving such merger or
consolidation immediately after such merger or consolidation (each such event
being hereinafter referred to as a "Liquidating Merger"), such sale, conveyance,
merger, reorganization or consolidation shall be deemed a liquidation and shall
be subject to the provisions of Section G.
(8) Transfer Agents. Whenever the Conversion Rate of
a series of Preferred Stock is adjusted as herein provided, the Company shall
(a) forthwith file with any transfer agent or agents for such series of
Preferred Stock a certificate signed by the President or one of the Vice
Presidents of the Company and by its Treasurer or an Assistant Treasurer,
stating the adjusted Conversion Rate for such series determined as provided in
this Section F, and in reasonable detail the facts requiring such adjustment and
(b) cause a notice to be mailed to the respective holders of record of such
series of Preferred Stock setting forth the adjustment and the Conversion Rate
for such series, as adjusted. Any such transfer agents shall be under no duty to
make any inquiry or investigation as to the statements contained in any such
certificate or as to the manner in which any computation was made, but may
accept such certificates as conclusive evidence of the statements therein
contained, and each transfer agent shall be fully protected with respect to any
and all acts done or action taken or suffered by it in reliance thereon. No
transfer agent in its capacity as transfer agent shall be deemed to have any
knowledge with respect to any change of capital structure of the Company unless
and until it receives a notice thereof pursuant to the provisions of this
subsection F(8) and in default of any such notice each transfer agent may
conclusively assume that there has been no such change.
-12-
<PAGE> 13
(9) Availability of Authorized Shares. The Company
shall at all times reserve and keep available, out of its authorized and
unissued or treasury shares of Common Stock, or other stock or securities
deliverable upon conversion, solely for the purpose of effecting the conversion
of the Preferred Stock, such number of shares as shall from time to time be
sufficient to effect the conversion of all shares of Preferred Stock from time
to time outstanding. The Company shall from time to time, in accordance with the
laws of the State of Nevada, increase the authorized amount of its Common Stock
and/or securities issuable upon conversion of the Preferred Stock if at any time
the number of shares of Common Stock (or such other securities) remaining
unissued or treasury shares of Common Stock (or such other securities) shall not
be sufficient to permit the conversion of all the then outstanding Preferred
Stock.
(10) No Fractional Shares. No fractions of shares of
Common Stock are to be issued upon conversion of Preferred Stock, but in lieu
thereof the Company will pay therefor in cash an amount determined by
multiplying the fraction of a share by the applicable Liquidation Value.
(11) Delivery of Common Stock. The Company will pay
all issue and other taxes that may be payable in respect of any issue on
delivery of shares of Common Stock on conversion of shares of Preferred Stock
pursuant hereto. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of Common Stock in a name other than that in which the Preferred Stock
so converted was registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Company the tax so
required.
G. Liquidation Rights.
(1) In the event of any liquidation, dissolution,
Liquidating Merger or winding up of the Company, whether voluntary or
involuntary, before any distribution or payment shall be made to the holders of
Common Stock, the holders of the Preferred Stock shall be entitled to receive
from the assets of the Company available for distribution to its stockholders an
amount per share in cash equal to the Liquidation Value of the respective series
of Preferred Stock plus a liquidation premium of 8% per annum of the applicable
Liquidation Value per share from the date of original issuance of such series,
less any dividends that have actually been paid on such series, since it was
issued (the "Liquidation Preference Amount"). If upon the occurrence of such
event, the assets thus distributed among the holders of Preferred Stock shall be
insufficient to permit the payment to such holders of the full Liquidation
Preference Amount of the respective series of Preferred Stock, then the entire
assets of the Company legally available for distribution shall be distributed
ratably among the holders of the Preferred Stock in proportion to the applicable
Liquidation Preference Amounts.
(2) Upon completion of the distribution required by
subsection G(1), if any assets remain in the Company, the remaining assets of
the Company shall be distributed to the holders of Common Stock. Written notice
of such liquidation, dissolution, Liquidating Merger or winding up, stating a
payment date, the amount of the payment and the place where the amounts
distributable shall be payable, shall be mailed or caused to be mailed by the
Company by certified or registered mail, return receipt requested, not less than
sixty (60) days prior to the date stated therein, to each holder of record
-13-
<PAGE> 14
of any share of the Preferred Stock at his address as the same appears on the
books of record of the Company. No consolidation or merger of the Company or
sale or transfer by the Company of its assets which does not qualify as a
Liquidating Merger, nor the reduction of the authorized number of shares of any
class or series of capital stock of the Company, shall be deemed to be a
liquidation, dissolution, Liquidating Merger or winding up of the corporation
within the meaning of any of the provisions of this Section G.
H. Status of Redeemed or Converted Shares. Any shares of
Preferred Stock which at any time shall have been redeemed pursuant or converted
hereto shall after such redemption or conversion be canceled and no longer be
available for issuance by the Company.
I. Notice. The holders of shares of the Preferred Stock shall
receive notice of certain events as follows:
(1) not less than thirty (30) days before the
occurrence of any of the following: (a) any distributions of capital stock to
holders of shares of the Company's Common Stock including without limitation,
any stock splits, stock dividends, stock reclassifications, or the issuance of
any rights or warrants, (b) the declaration of any record date or (c) any
meeting of the holders of shares of the Company's capital stock called by the
Company's Board of Directors (which notice must set forth in reasonable detail
the business to be transacted at such meeting); (ii) not more than ten (10) days
after the occurrence of an Automatic Conversion Event, that such event has
occurred; and (iii) not less than twenty (20) days prior to the date fixed by
the Board of Directors for the termination of the conversion rights of the
Preferred Stock as a result of any liquidation, dissolution, Liquidating Merger
or winding up of the affairs of the Company that such event will occur.
J. Consent for Certain Repurchases of Common Stock Deemed to
be Distributions. Each holder of Preferred Stock shall be deemed to have
consented, for the purposes of any applicable provisions of the Nevada General
Corporation Law, to distributions made by the Company in connection with the
repurchase of shares of Common Stock issued to or held by employees or
consultants upon termination of their employment or services pursuant to
agreements providing for such right of repurchase between the Company and such
persons.
4. GOVERNING BOARD. The members of this corporation's governing board
shall be styled as directors. The number of directors from time to time shall be
determined as set forth in the bylaws. The present Board of Directors consists
of five (5) members and the names and addresses are as follows:
Name Address
- ----------------------- ------------------------------
Richard P. Abraham Weeden Capital Partners, L.P.
12833 La Vida Real
Los Altos Hills, CA 94022
-14-
<PAGE> 15
Robert P. Akins Cymer Laser Technologies
16275 Technology Drive
San Diego, CA 92127
Kenneth M. Deemer Interven Partners
2401 Pine Avenue
Manhattan Beach, CA 90266
Peter J. Simone Simplex Time Recorder Co.
Group Vice President
Simplex Plaza
Gardner, MA 01441
F. Duwaine Townsen Ventana Growth Fund
Rio Vista Towers
Suite 500
8880 Rio San Diego Drive
San Diego, CA 92108
5. PERSONAL LIABILITY.
(a) To the fullest extent permitted by the Nevada
General Corporation Law as the same exists or as may hereafter be amended, a
director or officer of the corporation shall not be personally liable to the
corporation or its stockholders for damages for breach of fiduciary duty;
provided, however, that this provision shall not eliminate or limit the
liability of a director or officer for acts or omissions involving intentional
misconduct, fraud or a knowing violation of law, or for the payment of
distributions in violation of Nevada Revised Statutes Section 78.300.
(b) The corporation shall indemnify to the fullest
extent permitted by law any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director or officer of the
corporation or any predecessor of the corporation or serves or served at any
other enterprise as a director, officer, employee or agent at the request of the
corporation or any predecessor to the corporation. To the fullest extent
permitted by law, the corporation shall pay all expenses of directors and
officers as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
such director or officer to repay the amount if it is ultimately determined by a
court that such director or officer is not entitled to be indemnified.
(c) Neither any amendment nor repeal of this Article
5, nor the adoption of any provision of this corporation's articles of
incorporation inconsistent with this Article 5, shall eliminate or reduce the
effect of this Article 5 in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article 5, would accrue or
arise, prior to such amendment, repeal or adoption of an inconsistent
provision."
-15-
<PAGE> 16
THE UNDERSIGNED, being the sole incorporator of Cymer, Inc., does
hereby declare and certify as required by Section 78.380(1) of the Nevada
General Corporation Law that the following facts are true:
(a) The undersigned, being the sole incorporator of Cymer, Inc.,
constitutes at least two-thirds of the incorporators of Cymer, Inc. The name of
the corporation is "Cymer, Inc."
(b) The original articles of incorporation of Cymer, Inc. were filed with
the Nevada Secretary of State on July 12, 1996.
(c) To the date hereof, no capital stock of Cymer, Inc. has been issued.
The undersigned does make and file this certificate, hereby declaring and
certifying that the facts herein stated are true.
________________________________________
Henry P. Massey, Jr., Incorporator
STATE OF CALIFORNIA )
)
County of Santa Clara )
On this ______ day of________________, before
me,_____________________________, a Notary Public, State of California, duly
commissioned and sworn, personally appeared Henry P. Massey, Jr., personally
known to me to be the person whose name is subscribed to this instrument, and
acknowledged that he executed it.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal in the Santa Clara County of California on the date set forth above on this
certificate.
________________________________________
Notary Public, State of California
My commission expires __________________
-16-
<PAGE> 1
EXHIBIT 3.2
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CYMER, INC.
Pursuant to Sections 78.390 and 78.403 of the Nevada General
Corporation Law, the articles of incorporation of Cymer, Inc., a Nevada
corporation, are hereby amended and restated to read in their entirety as
follows:
"1. NAME OF CORPORATION. The name of the corporation is Cymer, Inc.
2. RESIDENT AGENT. The address of the corporation's registered office
in the State of Nevada is 402 N. Division Street, Carson City, Nevada 89703. The
name of its registered agent at such address is Roy L. Farrow.
3. SHARES. The corporation (sometimes referred to in these Articles of
Incorporation as the "Company") is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares of Common Stock authorized to be issued is Twenty- five Million
(25,000,000), $.001 par value per share. The total number of shares of Preferred
Stock authorized to be issued is Five Million (5,000,000), $.001 par value per
share.
The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article III, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Nevada, to establish from time to
time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall
include, but not be limited to, determination of the following:
(1) The number of shares constituting that series and
the distinctive designation of that series;
(2) The dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends on shares of
that series;
(3) Whether that series shall have voting rights in
addition to the voting rights provided by law, and, if so, the terms of such
voting rights;
(4) Whether that series shall have conversion
privileges, and, if so, the terms and conditions of such privileges, including
provision for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
<PAGE> 2
(5) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(6) Whether that series shall have a sinking fund for
the redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(7) The rights of the shares of that series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, of any, of payment of shares
of that series; and
(8) Any other relative rights, preferences and
limitations of that series.
4. GOVERNING BOARD. The members of this corporation's governing board
shall be styled as directors. The number of directors from time to time shall be
determined as set forth in the bylaws. The present Board of Directors consists
of five (5) members and the names and addresses are as follows:
Name Address
- --------------------- ----------------------------------
Richard P. Abraham Weeden Capital Partners, L.P.
12833 La Vida Real
Los Altos Hills, CA 94022
Robert P. Akins Cymer Laser Technologies
16275 Technology Drive
San Diego, CA 92127
Kenneth M. Deemer Interven Partners
2401 Pine Avenue
Manhattan Beach, CA 90266
Peter J. Simone Simplex Time Recorder Co.
Group Vice President
Simplex Plaza
Gardner, MA 01441
F. Duwaine Townsen Ventana Growth Fund
Rio Vista Towers
Suite 500
8880 Rio San Diego Drive
San Diego, CA 92108
-2-
<PAGE> 3
5. PERSONAL LIABILITY.
(a) To the fullest extent permitted by the Nevada
General Corporation Law as the same exists or as may hereafter be amended, a
director or officer of the corporation shall not be personally liable to the
corporation or its stockholders for damages for breach of fiduciary duty;
provided, however, that this provision shall not eliminate or limit the
liability of a director or officer for acts or omissions involving intentional
misconduct, fraud or a knowing violation of law, or for the payment of
distributions in violation of Nevada Revised Statutes Section 78.300.
(b) The corporation shall indemnify to the fullest
extent permitted by law any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director or officer of the
corporation or any predecessor of the corporation or serves or served at any
other enterprise as a director, officer, employee or agent at the request of the
corporation or any predecessor to the corporation. To the fullest extent
permitted by law, the corporation shall pay all expenses of directors and
officers as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
such director or officer to repay the amount if it is ultimately determined by a
court that such director or officer is not entitled to be indemnified.
(c) Neither any amendment nor repeal of this Article
5, nor the adoption of any provision of this corporation's articles of
incorporation inconsistent with this Article 5, shall eliminate or reduce the
effect of this Article 5 in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article 5, would accrue or
arise, prior to such amendment, repeal or adoption of an inconsistent
provision."
-3-
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
CYMER, INC.
<PAGE> 2
TABLE OF CONTENTS
(CONTINUED)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article 1 - Corporate Offices.........................................................................................1
1.1 Principal Office....................................................................................1
1.2 Other Offices.......................................................................................1
Article 2 - Stockholders' Meetings....................................................................................1
Article 3 - Annual Meetings...........................................................................................1
Article 4 - Special Meetings..........................................................................................2
Article 5 - Notice of Stockholders' Meetings..........................................................................2
Article 6 - Waiver; Consent; Ratification.............................................................................2
6.1 Waiver of Notice....................................................................................2
6.2 Consent of Stockholders in Lieu of Meeting..........................................................3
6.3 Ratification and Approval of Actions at Special Meetings............................................3
Article 7 - Quorum of Stockholders....................................................................................3
Article 8 - Proxy and Voting..........................................................................................3
Article 9 - Board of Directors........................................................................................4
Article 10 - Powers of Directors......................................................................................4
Article 11 - Meetings and Consents....................................................................................5
11.1 Meetings............................................................................................5
11.2 Telephonic/Electronic Meetings......................................................................5
11.3 Consent to Action...................................................................................5
Article 12 - Quorum of Directors......................................................................................5
Article 13 - Limitations of Power.....................................................................................6
Article 14 - Committees...............................................................................................6
14.1 Committees of Directors.............................................................................6
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
14.2 Committee Minutes...................................................................................7
14.3 Meetings and Action of Committees...................................................................7
Article 15 - Officers.................................................................................................7
Article 16 - Eligibility of Officers..................................................................................7
Article 17 - Additional Officers and Agents...........................................................................8
Article 18 - Chief Executive Officer..................................................................................8
Article 19 - Chief Financial Officer..................................................................................8
Article 20 - Secretary................................................................................................8
Article 21 - Treasurer................................................................................................9
Article 22 - Resignations and Removals................................................................................9
Article 23 - Vacancies................................................................................................9
Article 24 - Certificates of Stock...................................................................................10
Article 25 - Transfer of Stock.......................................................................................10
Article 26 - Indemnity...............................................................................................10
26.1 Indemnification of Officers and Directors in Advance...............................................10
26.2 Indemnification of Employees and Agents............................................................11
26.3 Indemnity Not Exclusive............................................................................12
26.4 Indemnification for Successful Defense.............................................................12
26.5 Continuing Right to Indemnification................................................................12
26.6 Insurance and Other Financial Arrangements.........................................................12
Article 27 - Transfer Books and Record Date..........................................................................12
27.1 Record Date for Notice and Voting..................................................................12
27.2 Record Date for Purposes Other Than Notice and Voting..............................................13
Article 28 - Loss of Certificates....................................................................................13
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article 29 - Corporate Authority.....................................................................................14
29.1 Checks; Drafts; Evidences of Indebtedness..........................................................14
29.2 Corporate Contracts and Instruments; How Executed.................................................14
Article 30 - Amendments..............................................................................................14
</TABLE>
-iii-
<PAGE> 5
BYLAWS
OF
CYMER, INC.,
A NEVADA CORPORATION
Article 1
Corporate Offices
1.1 Principal Office
The principal office of the corporation shall be located at 16275
Technology Drive, San Diego, California 92127, unless and until otherwise
decided by the Board of Directors, who may fix the location of the principal
office of the corporation at any place within or outside the State of Nevada. If
the principal office is located outside the State of Nevada and the corporation
has one or more business offices in the State of Nevada, then the board of
directors shall fix and designate a principal business office in the State of
Nevada.
1.2 Other Offices
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
Article 2
Stockholders' Meetings
All meetings of stockholders shall be held either at the principal
office of the corporation or at any other place within or without the State of
Nevada or the United States as the Board of Directors or any person authorized
to call such meeting or meetings may designate.
Article 3
Annual Meetings
The annual meeting of the stockholders of the corporation shall be held
on the first Friday of May in each year at 2:00 p.m., or at such other date and
time designated by the Board of Directors. In the event that such annual meeting
is omitted by oversight or otherwise on the date herein provided for, the
directors shall cause a meeting in lieu thereof to be held as soon thereafter as
conveniently may be, and any business transacted or elections held at such
meeting shall be as valid as if transacted or held at the
<PAGE> 6
annual meeting. Such subsequent meeting shall be called in the same manner as
provided for the annual stockholders' meeting.
Article 4
Special Meetings
Except as otherwise provided by law, special meetings of the
stockholders of this corporation shall be held whenever called by the president
or by a majority of the Board of Directors or whenever one or more stockholders
who are entitled to vote and who hold at least ten percent (10%) of the capital
stock issued and outstanding shall make written application therefor to the
secretary stating the time, place, and purpose of the meeting called for.
Article 5
Notice of Stockholders' Meetings
Notice of all stockholders' meetings stating the time and the place,
and the objects for which such meetings are called, shall be given by the
president or secretary or by any one or more stockholders entitled to call a
special meeting of the stockholders or any such other person or persons as the
Board may designate, by mail not less than ten (10), nor more than sixty (60)
days prior to the date of the meeting, to each stockholder of record at his or
her address as it appears on the stock books of the corporation, unless he or
she shall have filed with the secretary of the corporation a written request
that notice intended for him or her be mailed to some other address, in which
case it shall be mailed to the address designated in such request. The person
giving such notice shall make an affidavit in relation thereto.
Any meeting of which all stockholders shall at any time waive or have
waived notice in writing shall be a legal meeting for the transaction of
business, notwithstanding that notice has not been given as hereinbefore
provided.
Article 6
Waiver; Consent; Ratification
6.1 Waiver of Notice
Whenever any notice whatsoever is required to be given by these Bylaws,
or the Articles of Incorporation of this corporation, or any of the corporation
laws of the State of Nevada, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
-2-
<PAGE> 7
6.2 Consent of Stockholders in Lieu of Meeting
Unless otherwise provided in the Articles of Incorporation or these
Bylaws, any action which may be taken by the vote of stockholders at a meeting,
may be taken without a meeting if authorized by the written consent of
stockholders holding at least a majority of the voting power, except that, if a
greater proportion of voting power is required for such an action, then the
greater proportion of written consents is required. In no instance where action
is authorized by written consent need a meeting of stockholders be called or
noticed.
6.3 Ratification and Approval of Actions at Special Meetings
Whenever all persons entitled to vote at any meeting, whether of
directors or stockholders, consent, either by a writing on the record of the
meeting or filed with the secretary, or presence at such meeting and oral
consent entered on the minutes, or taking part in the deliberations at such
meeting without objection, the doings of such meeting shall be valid as if such
meeting was regularly called and noticed. At such meeting any business may be
transacted which is not excepted from the written consent or to the
consideration of which no objection for want of notice is made at the time.
If any meeting be irregular for want of notice or of consent, provided
a quorum was present at such meeting, the proceedings of the meeting may be
ratified and approved and rendered likewise valid and the irregularity or defect
therein waived by a writing signed by all parties having the right to vote at
such meeting. Such consent or approval of stockholders or creditors may be by
proxy or attorney, but all such proxies and powers of attorney must be in
writing.
Article 7
Quorum of Stockholders
Except as hereinafter provided or otherwise provided by the Articles of
Incorporation or by law, at any meeting of the stockholders, the holders of a
majority of the stock issued, outstanding and entitled to vote thereat,
represented by stockholders in person or by proxy, shall constitute a quorum.
When a quorum is present at any meeting, a majority vote of the shares present
shall decide any question brought before such meeting, unless the question is
one upon which by express provision of law or of the Articles of Incorporation
or of these bylaws a larger or different vote is required, in which case such
express provision shall govern and control the decision of such question.
Article 8
Proxy and Voting
Stockholders of record may vote at any meeting either in person or by
proxy or proxies appointed by a signed and executed instrument in writing, or by
telegram, cablegram, or other means of electronic
-3-
<PAGE> 8
transmission or copy thereof, provided that the validity of such transmission
can be determined by reference to information set forth thereon. Such instrument
or transmission shall be filed with the secretary of the meeting before being
voted. In the event that any such instrument or transmission shall designate two
or more persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one, shall have and may
exercise all of the powers conferred by such instrument or transmission upon all
of the persons so designated unless such instrument or transmission shall
otherwise provide.
No proxy shall be valid after the expiration of six (6) months from the
date of its execution unless coupled with an interest, or unless the person
executing it specifies therein the length of time for which it is to continue in
force, which in no case shall exceed seven (7) years from the date of its
execution. Subject to the above, any proxy duly executed is not revoked and
continues in full force and effect until an instrument revoking it or a duly
executed proxy bearing a later date is filed with the secretary of the
corporation.
Article 9
Board of Directors
The Board of Directors shall be chosen by ballot at the annual meeting
of the stockholders or at any meeting held in place thereof as provided by law.
The authorized number of directors of this corporation shall be five (5).
Subject to any limitation set forth in the provisions of the Articles of
Incorporation, the Board of Directors may, by resolution adopted, increase or
decrease the number of the directors of this corporation, provided that no such
reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
Each director shall serve until the next annual meeting of the
stockholders and until his or her successor is duly elected and qualified.
Directors need not be stockholders in the corporation. Directors shall be over
the age of eighteen (18).
Article 10
Powers of Directors
In the management and control of the property, business, and affairs of
the corporation, the Board of Directors is hereby vested with all the powers
possessed by the corporation itself, so far as this delegation of authority is
not inconsistent with the Nevada General Corporation Law, with the Articles of
Incorporation of the corporation, or with these Bylaws. The Board of Directors
may fix the compensation of directors for services in any capacity.
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<PAGE> 9
Article 11
Meetings and Consents
11.1 Meetings
Regular meetings of the Board of Directors shall be held at such places
and at such times as the Board by vote may determine, and if so determined no
notice thereof need be given. Special meetings of the Board of Directors may be
held at any time or place, whenever called by the president, a vice-president,
the treasurer, the secretary, an assistant secretary or two directors, notice
thereof being given to each director by the secretary or an assistant secretary
or an officer calling the meeting, or at any time without formal notice provided
all the directors are present or those not present shall waive or have waived
notice thereof. Notice of special meetings, stating the time and place thereof,
shall be given by mailing the same to each director at his or her residence or
business address at least four (4) days before the meeting, or by delivering the
same to him or her personally or telegraphing the same to him or her at his or
her residence or business address not later than forty-eight (48) hours before
the time at which the meeting is to be held, unless, in case of emergency, the
chairman of the Board of Directors or the president shall prescribe a shorter
notice to be given personally or by telegraphing each director at his or her
residence or business address.
11.2 Telephonic/Electronic Meetings
Members of the Board of Directors or the governing body of the
corporation, or of any committee designated by such Board or body, may
participate in a meeting of such Board, body, or committee by means of a
conference telephone network, or a similar communications method by which all
persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this subsection constitutes presence in person at such
meeting.
11.3 Consent to Action
Any action required or permitted to be taken at any meeting of the
Board, body or committee may be taken without a meeting if, before or after such
action, a written consent thereto is signed by all members of the Board, body,
or committee. Such written consent shall be filed with the minutes of the
proceedings of the Board, body, or committee.
Article 12
Quorum of Directors
Unless the Articles of Incorporation or these Bylaws provide for a
different proportion, a majority of members of the Board of Directors of the
corporation, at a meeting duly assembled, shall constitute a quorum for the
transaction of business. When a quorum is present at any meeting, the act of
directors holding a majority of the voting power of the directors present shall
be the act of the Board of Directors.
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<PAGE> 10
Article 13
Limitations of Power
The enumeration of the powers and duties of the directors in these
Bylaws shall not be construed to exclude all or any powers and duties, except
insofar as the same are expressly prohibited or restricted by the provisions of
these Bylaws or the Articles of Incorporation. The directors may exercise all
other powers and perform all such duties as may be granted by the Nevada General
Corporation Law and as do not conflict with the provisions of these Bylaws or
the Articles of Incorporation.
Article 14
Committees
14.1 Committees of Directors
The Board of Directors may, by resolution passed by a majority of the
whole Board, designate one or more committees, and each committee shall have as
a member at least one (1) director and such other natural persons as the Board
of Directors may select. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he, she or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors or
in these Bylaws of the corporation, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers that may require it; but no such committee shall have the
power or authority to (i) amend the Articles of Incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors
as provided in Section 78.195 of the Nevada General Corporation Law, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
(ii) adopt an agreement or plan of merger, consolidation or share exchange under
the Nevada General Corporation Law, (iii) recommend to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, (iv) recommend to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or (v) amend the Bylaws of the
corporation; and, unless the Board resolution establishing the committee, the
Bylaws or the Articles of Incorporation expressly so provide, no such committee
shall have the power or authority to declare a dividend, or to authorize the
issuance of stock.
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<PAGE> 11
14.2 Committee Minutes
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
14.3 Meetings and Action of Committees
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of these Bylaws applicable to the full
Board of Directors, with such changes in the context of those Bylaws as are
necessary to substitute the committee and its members for the Board of Directors
and its members; provided, however, that (i) the time of regular meetings of
committees may be determined either by resolution of the Board of Directors or
by resolution of the committee, and (ii) special meetings of committees may also
be called by resolution of the Board of Directors and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules not inconsistent with the provisions of these Bylaws for the
government of any committee.
Article 15
Officers
The officers of this corporation shall include, without limitation, a
president, a secretary, and a treasurer. The Board of Directors, in its
discretion, may elect a chairman of the Board of Directors, who, when present,
shall preside at all meetings of the Board of Directors, and who shall have such
other powers as the Board shall prescribe.
The officers of the corporation shall be elected by the Board of
Directors after its election by the stockholders, and a meeting may be held
without notice for this purpose immediately after the annual meeting of the
stockholders and at the same place. Any person may hold two or more offices at
once.
Article 16
Eligibility of Officers
The chairman of the Board of Directors need not be a stockholder. The
president, secretary, treasurer, and such other officers as may be elected or
appointed need not be stockholders or directors of the corporation. Any person
may hold more than one office, provided the duties thereof can be consistently
performed by the same person.
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<PAGE> 12
Article 17
Additional Officers and Agents
The Board of Directors, at its discretion, may appoint one or more vice
presidents, assistant secretaries, assistant treasurers, and such other officers
or agents as it may deem advisable, and prescribe the duties thereof.
Article 18
Chief Executive Officer
The chief executive officer shall be the president of the corporation
and, when present, shall preside at all meetings of the stockholders and, unless
a chairman of the Board of Directors has been elected and is present, shall
preside at meetings of the Board of Directors. The president, unless some other
person is specifically authorized by vote of the Board of Directors, shall sign
all certificates of stock, bonds, deeds, mortgages, extension agreements,
modification of mortgage agreements, leases, and contracts of the corporation.
He or she shall perform all of the duties commonly incident to his or her office
and shall perform such other duties as the Board of Directors shall designate.
Article 19
Chief Financial Officer
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. He or she shall perform all of the duties
commonly incident to his or her office and such other duties as the Board of
Directors shall designate. The books of account shall at all reasonable times be
open to inspection by any director.
Article 20
Secretary
The secretary shall keep accurate minutes of all meetings of the
stockholders and the Board of Directors, and shall perform all the duties
commonly incident to his or her office, and shall perform such other duties and
have such other powers as the Board of Directors shall designate. The secretary
shall have power, together with the president, to sign certificates of stock of
the corporation. In his or her absence at the meeting an assistant secretary or
a secretary pro tempore shall perform his or her duties.
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<PAGE> 13
Article 21
Treasurer
The treasurer, subject to the order of the Board of Directors, shall
have the care and custody of the money, funds, valuable papers, and documents of
the corporation (other than his or her own bond, if any, which shall be in the
custody of the president), and shall have and exercise, under the supervision of
the Board of Directors, all the powers and duties commonly incident to his or
her office, and shall give bond in such form and with such sureties as shall be
required by the Board of Directors. He or she shall deposit all funds of the
corporation in such bank or banks, trust company or trust companies, or with
such firm or firms, doing a banking business, as the directors shall designate.
He or she may endorse for deposit or collection all checks and notes payable to
the corporation or to its order, may accept drafts on behalf of the corporation,
and together with the president may sign certificates of stock. He or she shall
keep accurate books of account of the corporation's transactions which shall be
the property of the corporation, and, together with all property in his or her
possession, shall be subject at all times to the inspection and control of the
Board of Directors.
All checks, drafts, notes, or other obligations for the payment of
money shall be signed by such officer or officers or agent or agents as the
Board of Directors shall by general or special resolution direct. The Board of
Directors may also in its discretion require, by general or special resolutions,
that checks, drafts, notes, and other obligations for the payment of money shall
be countersigned or registered as a condition to their validity by such officer
or officers or agent or agents as shall be directed in such resolution.
Article 22
Resignations and Removals
Any director or officer of the corporation may resign at any time by
giving written notice to the corporation, to the Board of Directors, or to the
chairman of the Board, or to the president, or to the secretary of the
corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified therein, upon its acceptance by the
Board of Directors.
Any director may be removed from office by the vote of stockholders
representing not less than two-thirds (2/3) of the issued and outstanding
capital stock entitled to voting power.
Article 23
Vacancies
Vacancies in the Board of Directors, including those caused by an
increase in the number of directors, may be filled by a majority of the
remaining directors, though less than a quorum. Vacancies
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<PAGE> 14
in the Board of Directors may be filled for the unexpired term by the
stockholders at a meeting called for that purpose, unless such vacancy shall
have been filled by the directors. Vacancies resulting from an increase in the
number of directors may be filled in the same manner.
Article 24
Certificates of Stock
Every stockholder shall be entitled to a certificate or certificates of
the capital stock of the corporation in such form as may be prescribed by the
Board of Directors, duly numbered and sealed with the corporate seal of the
corporation and setting forth the number and kind of shares. Such certificates
shall be signed by the president and by the treasurer or an assistant treasurer
or the secretary or an assistant secretary.
Article 25
Transfer of Stock
Unless further limited by the Articles of Incorporation, shares of
stock may be transferred by delivery of the certificate accompanied either by an
assignment in writing on the back of the certificate or by a written power of
attorney to sell, assign, and transfer the same on the books of the corporation,
signed by the person appearing by the certificate to be the owner of the shares
represented thereby, together with all necessary federal and state transfer tax
stamps affixed and shall be transferable on the books of the corporation upon
surrender thereof so assigned or endorsed. The person registered on the books of
the corporation as the owner of any shares of stock shall be entitled to all the
rights of ownership with respect to such shares. It shall be the duty of every
stockholder to notify the corporation of his or her post office address.
Article 26
Indemnity
26.1 Indemnification of Officers and Directors in Advance
The corporation shall, to the maximum extent and in the manner
permitted by Section 78.751 of the Nevada General Corporation Law, indemnify
each of its directors and officers against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation. For purposes of this Article, an
"officer" or "director" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) is or was serving at the request
of the corporation as a
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<PAGE> 15
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or (iii) was a director or officer of a corporation which was
a predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
The corporation shall, to the maximum extent permitted by Section
78.751 of the Nevada General Corporation Law, indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation against expenses,
including amounts paid in settlement and attorneys' fees.
The corporation shall pay the expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
corporation.
26.2 Indemnification of Employees and Agents
The corporation shall have the power, to the maximum extent and in the
manner permitted by Section 78.751 of the Nevada General Corporation Law, to
indemnify each of its employees and agents against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation. For
purposes of this Article, an "employee" or "agent" of the corporation includes
any person (i) who is or was an employee or agent of the corporation, (ii) is or
was serving at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) was
an employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
The corporation shall have the power, to the maximum extent and in the
manner permitted by Section 78.751 of the Nevada General Corporation Law, to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was an employee or agent of the corporation, or is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or was an employee or
agent of a corporation which was a predecessor corporation of the corporation or
of another enterprise at the request of such predecessor corporation against
expenses, including amounts paid in settlement and attorneys' fees.
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<PAGE> 16
26.3 Indemnity Not Exclusive
The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under the Articles of Incorporation, any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
26.4 Indemnification for Successful Defense
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2 of Section 78.751
of the Nevada General Corporation Law, or in defense of any claim, issue or
matter therein, he or she must be indemnified by the corporation against
expenses, including attorneys' fees, actually and reasonably incurred by him or
her in connection with the defense.
26.5 Continuing Right to Indemnification
The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to Section 78.751 of the Nevada General Corporation
Law continues for a person who has ceased to be a director, officer, employee or
agent and inures to the benefit of the heirs, executors and administrators of
such a person.
26.6 Insurance and Other Financial Arrangements
The corporation shall have the power, to the maximum extent and in the
manner permitted by Section 78.752 of the Nevada General Corporation Law, to
purchase and maintain insurance or make other financial arrangements on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or was a director, officer, employee or
agent of a corporation which was a predecessor corporation of the corporation or
of another enterprise at the request of such predecessor corporation for any
liability asserted against him and liability and expenses incurred by him in his
capacity as a director, officer, employee or agent, or arising out of his status
as such, whether or not the corporation has the authority to indemnify him
against such liability and expenses.
Article 27
Transfer Books and Record Date
27.1 Record Date for Notice and Voting
The Board of Directors may prescribe a period not exceeding sixty (60)
days before any meeting of the stockholders during which no transfer of stock on
the books of the corporation may be made, or
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<PAGE> 17
may fix a day not more than sixty (60) days before the holding of any such
meeting as the day as of which stockholders entitled to notice of and to vote at
such meetings must be determined. Only stockholders of record on that day are
entitled to notice or to vote at such meeting.
If the Board of Directors does not so fix a record date:
(1) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held; and
(2) the record date for determining stockholders entitled to
give consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
27.2 Record Date for Purposes Other Than Notice and Voting
For purposes of determining the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or the stockholders entitled to exercise any rights in respect of any other
lawful action (other than action by stockholders by written consent without a
meeting), the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Nevada General Corporation Law. If the Board of
Directors does not so fix a record date, then record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the board adopts the applicable resolution or the sixtieth (60th) day
before the date of action, whichever is later.
Article 28
Loss of Certificates
In case of loss, mutilation, or destruction of a certificate of stock,
a duplicate certificate may be issued upon such terms as the Board of Directors
shall prescribe.
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<PAGE> 18
Article 29
Corporate Authority
29.1 Checks; Drafts; Evidences of Indebtedness
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
29.2 Corporate Contracts and Instruments; How Executed
The board of directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
Article 30
Amendments
The Bylaws of the corporation, regardless of whether made by the
stockholders or by the Board of Directors, may be amended, added to, or repealed
by the stockholders of the issued and outstanding capital stock of this
corporation, at any meeting of the stockholders, provided notice of the proposed
change is given in the notice of meeting, or notice thereof is waived in
writing.
Subject to the Bylaws, if any, adopted by the stockholders of the
issued and outstanding capital stock of this corporation, the Board of Directors
may amend, add to, or repeal the Bylaws of the corporation.
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<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
CYMER, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article 1 - Corporate Offices................................................... 1
1.1 Principal Office.............................................. 1
1.2 Other Offices................................................. 1
Article 2 - Stockholders' Meetings.............................................. 1
Article 3 - Annual Meetings..................................................... 1
Article 4 - Special Meetings.................................................... 2
Article 5 - Notice.............................................................. 2
5.1 Notice of Stockholders' Meetings.............................. 2
5.2 Advance Notice of Stockholder Nominees........................ 2
5.3 Advance Notice of Stockholder Business........................ 3
Article 6 - Waiver; Consent; Ratification....................................... 4
6.1 Waiver of Notice.............................................. 4
6.2 No Consent of Stockholders In Lieu of Meeting................. 4
6.3 Ratification and Approval of Actions at Special Meetings...... 4
Article 7 - Quorum of Stockholders.............................................. 5
Article 8 - Proxy and Voting.................................................... 5
Article 9 - Board of Directors.................................................. 5
Article 10 - Powers of Directors................................................ 6
Article 11 - Meetings and Consents.............................................. 6
11.1 Meetings...................................................... 6
11.2 Telephonic/Electronic Meetings................................ 6
11.3 Consent to Action............................................. 7
Article 12 - Quorum of Directors................................................ 7
Article 13 - Limitations of Power............................................... 7
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article 14 - Committees......................................................... 7
14.1 Committees of Directors....................................... 7
14.2 Committee Minutes............................................. 8
14.3 Meetings and Action of Committees............................. 8
Article 15 - Officers........................................................... 9
Article 16 - Eligibility of Officers............................................ 9
Article 17 - Additional Officers and Agents..................................... 9
Article 18 - Chief Executive Officer............................................ 9
Article 19 - Chief Financial Officer............................................ 10
Article 20 - Secretary.......................................................... 10
Article 21 - Treasurer.......................................................... 10
Article 22 - Resignations and Removals.......................................... 11
Article 23 - Vacancies.......................................................... 11
Article 24 - Certificates of Stock.............................................. 11
Article 25 - Transfer of Stock.................................................. 12
Article 26 - Indemnity.......................................................... 12
26.1 Indemnification of Officers and Directors in Advance.......... 12
26.2 Indemnification of Employees and Agents....................... 13
26.3 Indemnity Not Exclusive....................................... 13
26.4 Indemnification for Successful Defense........................ 13
26.5 Continuing Right to Indemnification........................... 14
26.6 Insurance and Other Financial Arrangements.................... 14
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article 27 - Transfer Books and Record Dates.................................... 14
27.1 Record Date for Notice and Voting............................. 14
27.2 Record Date for Purposes Other Than Notice and Voting......... 15
Article 28 - Loss of Certificates............................................... 15
Article 29 - Corporate Authority................................................ 15
29.1 Checks; Drafts; Evidences of Indebtedness..................... 15
29.2 Corporate Contracts and Instruments; How Executed............ 15
Article 30 - Amendments......................................................... 16
</TABLE>
-iii-
<PAGE> 5
BYLAWS
OF
CYMER, INC.,
A NEVADA CORPORATION
Article 1
Corporate Offices
1.1 Principal Office
The principal office of the corporation shall be located at 16275
Technology Drive, San Diego, California 92127, unless and until otherwise
decided by the Board of Directors, who may fix the location of the principal
office of the corporation at any place within or outside the State of Nevada. If
the principal office is located outside the State of Nevada and the corporation
has one or more business offices in the State of Nevada, then the board of
directors shall fix and designate a principal business office in the State of
Nevada.
1.2 Other Offices
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
Article 2
Stockholders' Meetings
All meetings of stockholders shall be held either at the principal
office of the corporation or at any other place within or without the State of
Nevada or the United States as the Board of Directors or any person authorized
to call such meeting or meetings may designate.
Article 3
Annual Meetings
The annual meeting of the stockholders of the corporation shall be held
on the first Friday of May in each year at 2:00 p.m., or at such other date and
time designated by the Board of Directors. In the event that such annual meeting
is omitted by oversight or otherwise on the date herein provided for, the
directors shall cause a meeting in lieu thereof to be held as soon thereafter as
conveniently may be, and any business transacted or elections held at such
meeting shall be as valid as if transacted or held at the
<PAGE> 6
annual meeting. Such subsequent meeting shall be called in the same manner as
provided for the annual stockholders' meeting.
Article 4
Special Meetings
Except as otherwise provided by law, special meetings of the
stockholders of this corporation shall be held whenever called by the president
or by a majority of the Board of Directors or whenever one or more stockholders
who are entitled to vote and who hold at least ten percent (10%) of the capital
stock issued and outstanding shall make written application therefor to the
secretary stating the time, place, and purpose of the meeting called for.
Article 5
Notice
5.1 Notice of Stockholders' Meetings
Notice of all stockholders' meetings stating the time and the place,
and the objects for which such meetings are called, shall be given by the
president or secretary or by any one or more stockholders entitled to call a
special meeting of the stockholders or any such other person or persons as the
Board may designate, by mail not less than ten (10), nor more than sixty (60)
days prior to the date of the meeting, to each stockholder of record at his or
her address as it appears on the stock books of the corporation, unless he or
she shall have filed with the secretary of the corporation a written request
that notice intended for him or her be mailed to some other address, in which
case it shall be mailed to the address designated in such request. The person
giving such notice shall make an affidavit in relation thereto.
Any meeting of which all stockholders shall at any time waive or have
waived notice in writing shall be a legal meeting for the transaction of
business, notwithstanding that notice has not been given as hereinbefore
provided.
5.2 Advance Notice of Stockholder Nominees
Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the discretion of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this Section . Such nominations, other than those made
by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the secretary of the corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the corporation not less than twenty (20) days
nor more than sixty (60) days
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<PAGE> 7
prior to the meeting; provided, however, that in the event less than thirty (30)
days notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such stockholder's notice shall set forth (a) as to each person, if any,
whom the stockholder proposes to nominate for election or re-election as a
director: (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the corporation which are beneficially owned by
such person, (iv) any other information relating to such person that is required
by law to be disclosed in solicitations of proxies for election of directors,
and (v) such person's written consent to being named as a nominee and to serving
as a director if elected; and (b) as to the stockholder giving the notice: (i)
the name and address, as they appear on the corporation's books, of such
stockholder, and (ii) the class and number of shares of the corporation which
are beneficially owned by such stockholder, and (iii) a description of all
arrangements or understandings between such stockholder and each nominee and any
other person or persons (naming such person or persons) relating to the
nomination. At the request of the Board of Directors any person nominated by the
Board for election as a director shall furnish to the secretary of the
corporation that information required to be set forth in the stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the corporation unless nominated in accordance
with the procedures set forth in this Section . The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he or she should so determine, he or she shall so declare at the
meeting and the defective nomination shall be disregarded.
5.3 Advance Notice of Stockholder Business
At the annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (a) as specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. Business to be brought before an annual
meeting by a stockholder shall not be considered properly brought if the
stockholder has not given timely notice thereof in writing to the secretary of
the corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation not
less than twenty (20) nor more than sixty (60) days prior to the meeting;
provided, however, that in the event that less than thirty (30) days notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting: (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address of the stockholder proposing such business, (iii) the class
and number of shares of the corporation, which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business, and
(v) any other information that is required by law to be provided by the
stockholder in his or her capacity as a proponent
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of a stockholder proposal. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section . The chairman of the
annual meeting shall, if the facts warrant, determine and declare at the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of this Section , and, if he or she should so determine, he or
she shall so declare at the meeting that any such business not properly brought
before the meeting shall not be transacted.
Article 6
Waiver; Consent; Ratification
6.1 Waiver of Notice
Whenever any notice whatsoever is required to be given by these Bylaws,
or the Articles of Incorporation of this corporation, or any of the corporation
laws of the State of Nevada, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
6.2 No Consent of Stockholders In Lieu of Meeting
No action which may be taken by the vote of stockholders at a meeting
may be taken without a meeting by the written consent of stockholders.
6.3 Ratification and Approval of Actions at Special Meetings
Whenever all persons entitled to vote at any meeting, whether of
directors or stockholders, consent, either by a writing on the record of the
meeting or filed with the secretary, or presence at such meeting and oral
consent entered on the minutes, or taking part in the deliberations at such
meeting without objection, the doings of such meeting shall be valid as if such
meeting was regularly called and noticed. At such meeting any business may be
transacted which is not excepted from the written consent or to the
consideration of which no objection for want of notice is made at the time.
If any meeting be irregular for want of notice or of consent, provided
a quorum was present at such meeting, the proceedings of the meeting may be
ratified and approved and rendered likewise valid and the irregularity or defect
therein waived by a writing signed by all parties having the right to vote at
such meeting. Such consent or approval of stockholders or creditors may be by
proxy or attorney, but all such proxies and powers of attorney must be in
writing.
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Article 7
Quorum of Stockholders
Except as hereinafter provided or otherwise provided by the Articles of
Incorporation or by law, at any meeting of the stockholders, the holders of a
majority of the stock issued, outstanding and entitled to vote thereat,
represented by stockholders in person or by proxy, shall constitute a quorum.
When a quorum is present at any meeting, a majority vote of the shares present
shall decide any question brought before such meeting, unless the question is
one upon which by express provision of law or of the Articles of Incorporation
or of these bylaws a larger or different vote is required, in which case such
express provision shall govern and control the decision of such question.
Article 8
Proxy and Voting
Stockholders of record may vote at any meeting either in person or by
proxy or proxies appointed by a signed and executed instrument in writing, or by
telegram, cablegram, or other means of electronic transmission or copy thereof,
provided that the validity of such transmission can be determined by reference
to information set forth thereon. Such instrument or transmission shall be filed
with the secretary of the meeting before being voted. In the event that any such
instrument or transmission shall designate two or more persons to act as
proxies, a majority of such persons present at the meeting, or, if only one
shall be present, then that one, shall have and may exercise all of the powers
conferred by such instrument or transmission upon all of the persons so
designated unless such instrument or transmission shall otherwise provide.
No proxy shall be valid after the expiration of six (6) months from the
date of its execution unless coupled with an interest, or unless the person
executing it specifies therein the length of time for which it is to continue in
force, which in no case shall exceed seven (7) years from the date of its
execution. Subject to the above, any proxy duly executed is not revoked and
continues in full force and effect until an instrument revoking it or a duly
executed proxy bearing a later date is filed with the secretary of the
corporation.
Article 9
Board of Directors
The Board of Directors shall be chosen by ballot at the annual meeting
of the stockholders or at any meeting held in place thereof as provided by law.
The authorized number of directors of this corporation shall be five (5).
Subject to any limitation set forth in the provisions of the Articles of
Incorporation, the Board of Directors may, by resolution adopted, increase or
decrease the number of
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the directors of this corporation, provided that no such reduction of the
authorized number of directors shall have the effect of removing any director
before that director's term of office expires.
Each director shall serve until the next annual meeting of the
stockholders and until his or her successor is duly elected and qualified.
Directors need not be stockholders in the corporation. Directors shall be over
the age of eighteen (18).
Article 10
Powers of Directors
In the management and control of the property, business, and affairs of
the corporation, the Board of Directors is hereby vested with all the powers
possessed by the corporation itself, so far as this delegation of authority is
not inconsistent with the Nevada General Corporation Law, with the Articles of
Incorporation of the corporation, or with these Bylaws. The Board of Directors
may fix the compensation of directors for services in any capacity.
Article 11
Meetings and Consents
11.1 Meetings
Regular meetings of the Board of Directors shall be held at such places
and at such times as the Board by vote may determine, and if so determined no
notice thereof need be given. Special meetings of the Board of Directors may be
held at any time or place, whenever called by the president, a vice-president,
the treasurer, the secretary, an assistant secretary or two directors, notice
thereof being given to each director by the secretary or an assistant secretary
or an officer calling the meeting, or at any time without formal notice provided
all the directors are present or those not present shall waive or have waived
notice thereof. Notice of special meetings, stating the time and place thereof,
shall be given by mailing the same to each director at his or her residence or
business address at least four (4) days before the meeting, or by delivering the
same to him or her personally or telegraphing the same to him or her at his or
her residence or business address not later than forty-eight (48) hours before
the time at which the meeting is to be held, unless, in case of emergency, the
chairman of the Board of Directors or the president shall prescribe a shorter
notice to be given personally or by telegraphing each director at his or her
residence or business address.
11.2 Telephonic/Electronic Meetings
Members of the Board of Directors or the governing body of the
corporation, or of any committee designated by such Board or body, may
participate in a meeting of such Board, body, or committee by means of a
conference telephone network, or a similar communications method by which all
persons
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participating in the meeting can hear each other. Participation in a meeting
pursuant to this subsection constitutes presence in person at such meeting.
11.3 Consent to Action
Any action required or permitted to be taken at any meeting of the
Board, body or committee may be taken without a meeting if, before or after such
action, a written consent thereto is signed by all members of the Board, body,
or committee. Such written consent shall be filed with the minutes of the
proceedings of the Board, body, or committee.
Article 12
Quorum of Directors
Unless the Articles of Incorporation or these Bylaws provide for a
different proportion, a majority of members of the Board of Directors of the
corporation, at a meeting duly assembled, shall constitute a quorum for the
transaction of business. When a quorum is present at any meeting, the act of
directors holding a majority of the voting power of the directors present shall
be the act of the Board of Directors.
Article 13
Limitations of Power
The enumeration of the powers and duties of the directors in these
Bylaws shall not be construed to exclude all or any powers and duties, except
insofar as the same are expressly prohibited or restricted by the provisions of
these Bylaws or the Articles of Incorporation. The directors may exercise all
other powers and perform all such duties as may be granted by the Nevada General
Corporation Law and as do not conflict with the provisions of these Bylaws or
the Articles of Incorporation.
Article 14
Committees
14.1 Committees of Directors
The Board of Directors may, by resolution passed by a majority of the
whole Board, designate one or more committees, and each committee shall have as
a member at least one (1) director and such other natural persons as the Board
of Directors may select. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he,
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she or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors or in these Bylaws of the corporation,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers that may
require it; but no such committee shall have the power or authority to (i) amend
the Articles of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors as provided in Section 78.195 of the
Nevada General Corporation Law, fix the designations and any of the preferences
or rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), (ii) adopt an agreement or plan of
merger, consolidation or share exchange under the Nevada General Corporation
Law, (iii) recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the Bylaws of the corporation; and, unless the Board
resolution establishing the committee, the Bylaws or the Articles of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, or to authorize the issuance of stock.
14.2 Committee Minutes
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
14.3 Meetings and Action of Committees
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of these Bylaws applicable to the full
Board of Directors, with such changes in the context of those Bylaws as are
necessary to substitute the committee and its members for the Board of Directors
and its members; provided, however, that (i) the time of regular meetings of
committees may be determined either by resolution of the Board of Directors or
by resolution of the committee, and (ii) special meetings of committees may also
be called by resolution of the Board of Directors and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules not inconsistent with the provisions of these Bylaws for the
government of any committee.
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Article 15
Officers
The officers of this corporation shall include, without limitation, a
president, a secretary, and a treasurer. The Board of Directors, in its
discretion, may elect a chairman of the Board of Directors, who, when present,
shall preside at all meetings of the Board of Directors, and who shall have such
other powers as the Board shall prescribe.
The officers of the corporation shall be elected by the Board of
Directors after its election by the stockholders, and a meeting may be held
without notice for this purpose immediately after the annual meeting of the
stockholders and at the same place. Any person may hold two or more offices at
once.
Article 16
Eligibility of Officers
The chairman of the Board of Directors need not be a stockholder. The
president, secretary, treasurer, and such other officers as may be elected or
appointed need not be stockholders or directors of the corporation. Any person
may hold more than one office, provided the duties thereof can be consistently
performed by the same person.
Article 17
Additional Officers and Agents
The Board of Directors, at its discretion, may appoint one or more vice
presidents, assistant secretaries, assistant treasurers, and such other officers
or agents as it may deem advisable, and prescribe the duties thereof.
Article 18
Chief Executive Officer
The chief executive officer shall be the president of the corporation
and, when present, shall preside at all meetings of the stockholders and, unless
a chairman of the Board of Directors has been elected and is present, shall
preside at meetings of the Board of Directors. The president, unless some other
person is specifically authorized by vote of the Board of Directors, shall sign
all certificates of stock, bonds, deeds, mortgages, extension agreements,
modification of mortgage agreements, leases, and contracts of the corporation.
He or she shall perform all of the duties commonly incident to his or her office
and shall perform such other duties as the Board of Directors shall designate.
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Article 19
Chief Financial Officer
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. He or she shall perform all of the duties
commonly incident to his or her office and such other duties as the Board of
Directors shall designate. The books of account shall at all reasonable times be
open to inspection by any director.
Article 20
Secretary
The secretary shall keep accurate minutes of all meetings of the
stockholders and the Board of Directors, and shall perform all the duties
commonly incident to his or her office, and shall perform such other duties and
have such other powers as the Board of Directors shall designate. The secretary
shall have power, together with the president, to sign certificates of stock of
the corporation. In his or her absence at the meeting an assistant secretary or
a secretary pro tempore shall perform his or her duties.
Article 21
Treasurer
The treasurer, subject to the order of the Board of Directors, shall
have the care and custody of the money, funds, valuable papers, and documents of
the corporation (other than his or her own bond, if any, which shall be in the
custody of the president), and shall have and exercise, under the supervision of
the Board of Directors, all the powers and duties commonly incident to his or
her office, and shall give bond in such form and with such sureties as shall be
required by the Board of Directors. He or she shall deposit all funds of the
corporation in such bank or banks, trust company or trust companies, or with
such firm or firms, doing a banking business, as the directors shall designate.
He or she may endorse for deposit or collection all checks and notes payable to
the corporation or to its order, may accept drafts on behalf of the corporation,
and together with the president may sign certificates of stock. He or she shall
keep accurate books of account of the corporation's transactions which shall be
the property of the corporation, and, together with all property in his or her
possession, shall be subject at all times to the inspection and control of the
Board of Directors.
All checks, drafts, notes, or other obligations for the payment of
money shall be signed by such officer or officers or agent or agents as the
Board of Directors shall by general or special resolution direct. The Board of
Directors may also in its discretion require, by general or special resolutions,
that checks, drafts, notes, and other obligations for the payment of money shall
be countersigned or registered
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as a condition to their validity by such officer or officers or agent or agents
as shall be directed in such resolution.
Article 22
Resignations and Removals
Any director or officer of the corporation may resign at any time by
giving written notice to the corporation, to the Board of Directors, or to the
chairman of the Board, or to the president, or to the secretary of the
corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified therein, upon its acceptance by the
Board of Directors.
Any director may be removed from office by the vote of stockholders
representing not less than two-thirds (2/3) of the issued and outstanding
capital stock entitled to voting power.
Article 23
Vacancies
Vacancies in the Board of Directors, including those caused by an
increase in the number of directors, may be filled by a majority of the
remaining directors, though less than a quorum. Vacancies in the Board of
Directors may be filled for the unexpired term by the stockholders at a meeting
called for that purpose, unless such vacancy shall have been filled by the
directors. Vacancies resulting from an increase in the number of directors may
be filled in the same manner.
Article 24
Certificates of Stock
Every stockholder shall be entitled to a certificate or certificates of
the capital stock of the corporation in such form as may be prescribed by the
Board of Directors, duly numbered and sealed with the corporate seal of the
corporation and setting forth the number and kind of shares. Such certificates
shall be signed by the president and by the treasurer or an assistant treasurer
or the secretary or an assistant secretary.
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Article 25
Transfer of Stock
Unless further limited by the Articles of Incorporation, shares of
stock may be transferred by delivery of the certificate accompanied either by an
assignment in writing on the back of the certificate or by a written power of
attorney to sell, assign, and transfer the same on the books of the corporation,
signed by the person appearing by the certificate to be the owner of the shares
represented thereby, together with all necessary federal and state transfer tax
stamps affixed and shall be transferable on the books of the corporation upon
surrender thereof so assigned or endorsed. The person registered on the books of
the corporation as the owner of any shares of stock shall be entitled to all the
rights of ownership with respect to such shares. It shall be the duty of every
stockholder to notify the corporation of his or her post office address.
Article 26
Indemnity
26.1 Indemnification of Officers and Directors in Advance
The corporation shall, to the maximum extent and in the manner
permitted by Section 78.751 of the Nevada General Corporation Law, indemnify
each of its directors and officers against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation. For purposes of this Article, an
"officer" or "director" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) is or was serving at the request
of the corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, or (iii) was a director or officer of
a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
The corporation shall, to the maximum extent permitted by Section
78.751 of the Nevada General Corporation Law, indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation against expenses,
including amounts paid in settlement and attorneys' fees.
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The corporation shall pay the expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
corporation.
26.2 Indemnification of Employees and Agents
The corporation shall have the power, to the maximum extent and in the
manner permitted by Section 78.751 of the Nevada General Corporation Law, to
indemnify each of its employees and agents against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation. For
purposes of this Article, an "employee" or "agent" of the corporation includes
any person (i) who is or was an employee or agent of the corporation, (ii) is or
was serving at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) was
an employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
The corporation shall have the power, to the maximum extent and in the
manner permitted by Section 78.751 of the Nevada General Corporation Law, to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was an employee or agent of the corporation, or is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or was an employee or
agent of a corporation which was a predecessor corporation of the corporation or
of another enterprise at the request of such predecessor corporation against
expenses, including amounts paid in settlement and attorneys' fees.
26.3 Indemnity Not Exclusive
The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under the Articles of Incorporation, any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
26.4 Indemnification for Successful Defense
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2 of Section 78.751
of the Nevada General Corporation Law, or in defense of any claim, issue or
matter therein, he or she must be indemnified by the corporation against
expenses, including attorneys' fees, actually and reasonably incurred by him or
her in connection with the defense.
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26.5 Continuing Right to Indemnification
The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to Section 78.751 of the Nevada General Corporation
Law continues for a person who has ceased to be a director, officer, employee or
agent and inures to the benefit of the heirs, executors and administrators of
such a person.
26.6 Insurance and Other Financial Arrangements
The corporation shall have the power, to the maximum extent and in the
manner permitted by Section 78.752 of the Nevada General Corporation Law, to
purchase and maintain insurance or make other financial arrangements on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or was a director, officer, employee or
agent of a corporation which was a predecessor corporation of the corporation or
of another enterprise at the request of such predecessor corporation for any
liability asserted against him and liability and expenses incurred by him in his
capacity as a director, officer, employee or agent, or arising out of his status
as such, whether or not the corporation has the authority to indemnify him
against such liability and expenses.
Article 27
Transfer Books and Record Dates
27.1 Record Date for Notice and Voting
The Board of Directors may prescribe a period not exceeding sixty (60)
days before any meeting of the stockholders during which no transfer of stock on
the books of the corporation may be made, or may fix a day not more than sixty
(60) days before the holding of any such meeting as the day as of which
stockholders entitled to notice of and to vote at such meetings must be
determined. Only stockholders of record on that day are entitled to notice or to
vote at such meeting.
If the Board of Directors does not so fix a record date:
(1) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held; and
(2) the record date for determining stockholders entitled to
give consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be
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at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
27.2 Record Date for Purposes Other Than Notice and Voting
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any other lawful
action (other than action by stockholders by written consent without a meeting),
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Nevada General Corporation Law. If the Board of
Directors does not so fix a record date, then the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the board adopts the applicable resolution or the sixtieth (60th) day
before the date of that action, whichever is later.
Article 28
Loss of Certificates
In case of loss, mutilation, or destruction of a certificate of stock,
a duplicate certificate may be issued upon such terms as the Board of Directors
shall prescribe.
Article 29
Corporate Authority
29.1 Checks; Drafts; Evidences of Indebtedness
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
29.2 Corporate Contracts and Instruments; How Executed
The board of directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent
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or employee shall have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
Article 30
Amendments
The Bylaws of the corporation, regardless of whether made by the
stockholders or by the Board of Directors, may be amended, added to, or repealed
by the stockholders of the issued and outstanding capital stock of this
corporation, at any meeting of the stockholders, provided notice of the proposed
change is given in the notice of meeting, or notice thereof is waived in
writing.
Subject to the Bylaws, if any, adopted by the stockholders of the
issued and outstanding capital stock of this corporation, the Board of Directors
may amend, add to, or repeal the Bylaws of the corporation.
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EXHIBIT 5.1
August 21, 1996
Cymer, Inc.
16275 Technology Drive
San Diego, CA 92127
RE: REGISTRATION STATEMENT NO 333-08383 ON FORM S-1
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 filed by you
with the Securities and Exchange Commission on July 18, 1996, Amendment No. 1
thereto filed on July 22, 1996 and Amendment No. 2 thereto to be filed on August
22, 1996 (the "Registration Statement") in connection with the registration
under the Securities Act of 1933, as amended, of 3,340,000 shares of Common
Stock (including 501,000 shares subject to an over allotment option granted
to the underwriters)(the "Shares") of Cymer, Inc. As your counsel in connection
with this transaction, we have examined the proceedings proposed to be taken in
connection with said sale and issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken
or contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states, where required, the Shares when issued and sold in the
manner referred to in the Registration Statement will be legally and validly
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
<PAGE> 1
EXHIBIT 10.1
CYMER, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made effective as of
_______________ by and between Cymer, Inc., a Nevada corporation (the
"Company"), and ____________________ ("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and its
related entities;
WHEREAS, the Company and Indemnitee recognize the substantial increase
in corporate litigation in general, subjecting directors, officers, employees,
agents and fiduciaries to expensive litigation risks; and
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified by the Company as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. Certain Definitions.
(a) "Change in Control" shall mean, and shall be deemed to
have occurred if, on or after the date of this Agreement, (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company acting in such capacity or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing more than 20%
of the total voting power represented by the Company's then outstanding Voting
Securities, (ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least two
thirds (2/3) of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof,
or (iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation other than a merger or consolidation
which would result in the Voting Securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving
entity) at least 80% of the total voting power represented by the Voting
Securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders of the Company approve a plan
of
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<PAGE> 2
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of (in one transaction or a series of related transactions) all
or substantially all of the Company's assets.
(b) "Claim" shall mean any threatened, pending or completed
action, suit, proceeding or alternative dispute resolution mechanism, or any
hearing, inquiry or investigation that Indemnitee in good faith believes might
lead to the institution of any such action, suit, proceeding or alternative
dispute resolution mechanism, whether civil, criminal, administrative,
investigative or other.
(c) References to the "Company" shall include, in addition to
Cymer, Inc., any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger to which Cymer, Inc. (or any
of its wholly owned subsidiaries) has been or becomes a party which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees, agents or fiduciaries, so that if
Indemnitee is or was a director, officer, employee, agent or fiduciary of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise, Indemnitee shall stand in the same position under the provisions of
this Agreement with respect to the resulting or surviving corporation as Indem
nitee would have with respect to such constituent corporation if its separate
existence had continued.
(d) "Expenses" shall mean any and all expenses (including
attorneys' fees and all other costs, expenses and obligations incurred in
connection with investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, to be a witness in or to
participate in, any action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines, penalties and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) of any Claim
regarding any Indemnifiable Event and any federal, state, local or foreign taxes
imposed on the Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement.
(e) "Expense Advance" shall mean an advance payment of
Expenses to Indemnitee pursuant to Section 3(a).
(f) "Indemnifiable Event" shall mean any event or occurrence
related to the fact that Indemnitee is or was a director, officer, employee,
agent or fiduciary of the Company, or any subsidiary of the Company, or any
predecessor of the Company or subsidiary, or is or was serving at the request of
the Company or a predecessor of the Company as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in such capacity.
(g) "Independent Legal Counsel" shall mean an attorney or firm
of attorneys, selected in accordance with the provisions of Section 2(c) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
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<PAGE> 3
(h) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries.
(i) "Reviewing Party" shall mean (i) the Company's Board of
Directors by majority vote of a quorum consisting of directors who were not
parties to the particular Claim for which Indemnitee is seeking indemnification,
(ii) or, if so ordered by the Company's Board of Directors by majority vote of a
quorum consisting of directors who were not parties to the particular Claim for
which Indemnitee is seeking indemnification, Independent Legal Counsel in a
written opinion, or (iii) if a quorum consisting of directors who were not
parties to the particular Claim for which Indemnitee is seeking indemnification
cannot be found, then Independent Legal Counsel in a written opinion.
(j) "Voting Securities" shall mean any securities of the
Company that vote generally in the election of directors.
2. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any Claim by reason of (or
arising in part out of) any Indemnifiable Event against Expenses, including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses. Such payment of Expenses shall be made by the Company
as soon as practicable but in any event no later than thirty (30) business days
after written demand by Indemnitee therefor is presented to the Company (or, if
demand is made pursuant to Section 3(a) hereof, then no later than the date set
forth in such section).
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
obligations of the Company under Section 2(a) shall be subject to the condition
that, unless ordered by a court or advanced pursuant to Section 3(a) hereof, the
Reviewing Party shall have determined that indemnification is proper in the
circumstances, and (ii) the obligation of the Company to make an Expense Advance
shall be conditioned upon receipt by the Company of an undertaking by or on
behalf of Indemnitee to repay the amount advanced if it is ultimately determined
by a court of competent jurisdiction (in a final judicial determination as to
which all rights of appeal have been exhausted or lapsed) that Indemnitee is not
entitled to be indemnified by the Company. Indemnitee's obligation to reimburse
the Company for any Expense Advance shall be unsecured and no interest shall be
charged thereon. If there has not been a Change in Control, the Reviewing Party
shall be determined by the Board of Directors as set forth in Section 1(i)
above, and if there has been such a Change in Control (other than a Change in
Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), the
Reviewing Party shall be the Independent Legal Counsel. If there has been no
determination by the Reviewing Party or if the Reviewing Party determines that
Indemnitee substantively would not be permitted to be indemnified in whole or in
part under applicable law,
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<PAGE> 4
Indemnitee shall have the right to commence litigation seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, including the legal or factual bases
therefor, and the Company hereby consents to service of process and to appear in
any such proceeding. Absent such litigation, any determination by the Reviewing
Party shall be conclusive and binding on the Company and Indemnitee.
(c) Independent Legal Counsel. With respect to all matters
arising concerning the rights of Indemnitee to payments of Expenses and Expense
Advances under this Agreement or any other agreement or under the Company's
articles of incorporation or bylaws as now or hereafter in effect, Independent
Legal Counsel, if called for under this Agreement, shall be selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld). Such counsel, among other things, shall render its written opinion to
the Company and Indemnitee as to whether and to what extent Indemnitee would be
permitted to be indemnified under applicable law and the Company agrees to abide
by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the Company otherwise determines or (ii) any
Indemnitee shall provide a written statement setting forth in detail a
reasonable objection to such Independent Legal Counsel representing other
Indemnitees.
(d) Change in Control. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), then, if desired by Indemnitee,
Indemnitee shall have the right to choose Independent Legal Counsel as provided
for in Section 2(c) above.
(e) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 9 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim regarding any Indemnifiable Event, Indemnitee shall be indemnified against
all Expenses incurred by Indemnitee in connection therewith.
3. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all
Expenses incurred by Indemnitee. The advances to be made hereunder shall be paid
by the Company to Indemnitee as soon as practicable but in any event no later
than twenty (20) business days after written demand by Indemnitee therefor to
the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon
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<PAGE> 5
as practicable of any Claim made against Indemnitee for which indemnification
will or could be sought under this Agreement. Notice to the Company shall be
directed to the Chief Executive Officer of the Company at the address or
facsimile number shown on the signature page of this Agreement (or such other
address or facsimile number as the Company shall designate in writing to
Indemnitee). In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or con viction, or upon a plea of nolo
contendere, or its equivalent, shall not, of itself, create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law. In addition, neither the failure of the Reviewing
Party to have made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor an actual
determination by the Reviewing Party that Indemnitee has not met such standard
of conduct or did not have such belief, prior to the commencement of legal
proceedings by Indemnitee to secure a judicial determination that Indemnitee
should be indemnified under applicable law, shall be a defense to Indemnitee's
claim or create a presumption that Indemnitee has not met any particular
standard of conduct or did not have any particular belief. In connection with
any determination by the Reviewing Party or otherwise as to whether the
Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be
on the Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 3(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim the Company, if
appropriate, shall be entitled to assume the defense of such Claim with counsel
approved by Indemnitee (not to be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election so to do. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same Claim; provided that, (i) Indemnitee shall have the right to
employ Indemnitee's separate counsel in any such Claim at Indemnitee's expense
and (ii) if (A) the employment of separate counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense, or (C) the Company shall not
continue to retain such counsel to defend such Claim, then the fees and expenses
of Indemnitee's separate counsel shall be at the expense of the Company.
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<PAGE> 6
4. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify the
Indemnitee to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's articles of incorporation or bylaws (as now or
hereafter in effect), or by statute. In the event of any change after the date
of this Agreement in any applicable law, statute or rule which expands the right
of a Nevada corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, it is the intent of the parties hereto
that Indemnitee shall enjoy by this Agreement the greater benefits afforded by
such change. In the event of any change in any applicable law, statute or rule
which narrows the right of a Nevada corporation to indemnify a member of its
board of directors or an officer, employee, agent or fiduciary, such change, to
the extent not otherwise required by such law, statute or rule to be applied to
this Agreement, shall have no effect on this Agreement or the parties' rights
and obligations hereunder except as set forth in Section 9(a) hereof.
(b) Nonexclusivity. The indemnification provided by this
Agreement shall be in addition to any rights to which Indemnitee may be entitled
under the Company's articles of incorporation or its bylaws (as now or hereafter
in effect), any other agreement, any vote of stockholders or disinterested
directors, the Nevada General Corporation Law, or otherwise. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity even though
Indemnitee may have ceased to serve in such capacity.
5. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's articles of
incorporation, bylaws (as now or hereafter in effect) or otherwise) of the
amounts otherwise indemnifiable hereunder.
6. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
7. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its direc tors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
8. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
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<PAGE> 7
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
9. Exceptions. Notwithstanding any other provision of this Agreement,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
acts, omissions or transactions from which Indemnitee may not be relieved of
liability under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
articles of incorporation or bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under the Nevada General Corporation Law, regardless of
whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be.
(c) Lack of Good Faith. To indemnify Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
10. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and all of which taken
together shall constitute one instrument.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal
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<PAGE> 8
representatives. The Company shall require and cause any successor (whether
direct or indirect, and whether by purchase, merger, consolidation or otherwise)
to all, substantially all, or a substantial part, of the business or assets of
the Company, by written agreement in form and substance satisfactory to
Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. This Agreement shall continue in effect
regardless of whether Indemnitee continues to serve as a director, officer,
employee, agent or fiduciary (as applicable) of the Company or of any other
enterprise at the Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless as a part of such action a court
of competent jurisdiction over such action determines that each of the material
assertions made by Indemnitee as a basis for such action were not made in good
faith or were frivolous. In the event of an action instituted by or in the name
of the Company under this Agreement to enforce or interpret any of the terms of
this Agreement, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee in defense of such action (including costs and expenses incurred with
respect to Indemnitee's counterclaims and cross-claims made in such action), and
shall be entitled to the advancement of Expenses with respect to such action,
unless as a part of such action a court having jurisdiction over such action
determines that each of Indemnitee's material defenses to such action were made
in bad faith or were frivolous.
14. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, (ii) if sent by facsimile with written evidence of successful
transmission, on the date of such transmission, or (iii) if mailed by domestic
certified or registered mail with postage prepaid, on the third business day
after the date postmarked. Addresses for notice to either party are as shown on
the signature page of this Agreement, or as subsequently modified by written
notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Nevada for
all purposes in connection with any action or proceeding which arises out of or
relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the state courts
of the State of Nevada.
16. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself
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<PAGE> 9
invalid, void or unenforceable) shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable.
17. Choice of Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State of
Nevada as applied to contracts between Nevada residents entered into and to be
performed entirely within the State of Nevada, without regard to conflict of
laws provisions which would otherwise require application of the substantive law
of another jurisdiction.
18. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
19. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
20. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
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IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
CYMER, INC.
By: __________________________________
Name: __________________________________
Title: __________________________________
Address: 16275 Technology Drive
San Diego, CA 92127
Tel: 619-487-2442
Fax: 619-487-2441
AGREED TO AND ACCEPTED
INDEMNITEE:
___________________________________
(signature)
___________________________________
(name of Indemnitee)
___________________________________
___________________________________
(address)
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EXHIBIT 10.6
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
SERIES A PREFERRED STOCK PURCHASE AGREEMENT is made as of May 3, 1988
(this "Agreement"), by and among CYMER LASER TECHNOLOGIES, a California
corporation (the "Company"), the persons whose names are set forth on Schedule
1.1 hereto (hereinafter referred to individually as a "Founder", and
collectively as the "Founders") and the persons whose names are set forth on
Schedule 1.2 hereto (hereinafter referred to individually as an "Investor", and
collectively as the "Investors").
RECITALS
1. The Company has duly authorized the issuance and sale to the
Investors of an aggregate of two million one hundred seven thousand eight
hundred eighty two (2,107,882) shares (the "Shares") of the Company's 8%
Non-Cumulative Voting Redeemable Convertible Series A Preferred Stock, $.01 par
value per share (the "Series A Preferred Stock"), with such rights, preferences
and limitations as are set forth in the Company's Restated Articles of
Incorporation attached hereto as Exhibit A (the "Restated Articles of
Incorporation"), including, without limitation, the right to convert each Share
into one share of the Company's common stock, $.01 par value per share (the
"Common Stock"), or an aggregate of two million one hundred seven thousand eight
hundred eighty two (2,107,882) shares of Common Stock, subject to adjustment for
any dilution event described in the Restated Articles of Incorporation or
similar event (the "Conversion Shares");
2. The Investors desire to purchase from the Company an aggregate
of not less than One Million Two Hundred Fifty Thousand (1,250,000) Shares and
not more than an aggregate of two million one hundred seven thousand eight
hundred eighty two (2,107,882) Shares, for a per Share purchase price with
respect to each Investor as set forth on Schedule 1.2 and upon the terms and
conditions set forth below;
3. The Company has borrowed an aggregate of One Million ($1,000,000)
Dollars from Weeden Capital Partners, L.P. ("Weeden") and Ventana Growth Fund
II, L.P. ("Ventana") pursuant to Notes Secured By Security Agreements dated
October 2, 1987 (as amended pursuant to Amendment Agreements dated October 2,
1987), and February 5, 1988 (herein referred to collectively as the "Loans"),
and Weeden and Ventana have each agreed to cancel the indebtedness of the
Company under the Loans, including principal
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and interest accrued thereon through and including May 3, 1988, in exchange
for Shares upon the terms and conditions herein set forth;
4. The Company has borrowed an aggregate of Sixty Five Thousand
($65,000) Dollars from Larry and Elizabeth Hyland (the "Hylands") pursuant to
Promissory Notes dated March 25, 1987, and October 2, 1987 (herein referred to
collectively as the "Hyland Notes"), and the Hylands have agreed to cancel the
indebtedness of the Company under the Hyland Notes, including principal and
interest accrued thereon through and including May 3, 1988, in exchange for
Shares upon the terms and conditions herein set forth; and
5. The Company has borrowed an aggregate of Twenty Five Thousand
($25,000) Dollars from Utpal and Caroline Sengupta (the "Senguptas") pursuant to
a Promissory Note dated July 20, 1987 (herein referred to as the "Sengupta
Note"), and the Senguptas have agreed to cancel the indebtedness of the Company
under the Sengupta Note, including principal and interest accrued thereon
through and including May 3, 1988, in exchange for Shares upon the terms and
conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual premises and the
representations, warranties and covenants herein contained, and of other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Sale, Purchase and Delivery of Shares.
1.1 Agreement to Sell and Purchase Shares.
Subject to the terms and conditions of this Agreement and in reliance upon the
representations, warranties, covenants and agreements contained herein, at the
Closing (as defined herein), the Company shall issue, sell and deliver to each
Investor, and each Investor, severally and not jointly, shall purchase from the
Company, the number of Shares set forth opposite the name of such Investor on
Schedule 1.2 at the price per Share set forth opposite the name of such
Investor on Schedule 1.2. The aggregate purchase price of the Shares being
purchased by each Investor is set forth opposite the name of such Investor on
Schedule 1.2.
1.2 Delivery of Shares. At the Closing, the
Company shall deliver to each Investor against receipt of the respective
purchase prices therefor one or more certificates bearing the appropriate
legend in accordance with Section 4.3
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hereof, evidencing ownership of the number of Shares being purchased hereunder
by such Investor in such denominations and registered in such manner, as is
indicated on Schedule 1.2.
1.3 Payment of Purchase Price. Payment of the purchase price
for Shares shall be made at the option of each Investor, in cash, by wire
transfer or by certified or official bank check payable to the order of the
Company; provided, that in the case of Weeden, Ventana, the Hylands and the
Senguptas, payment of the purchase price for their Shares shall be made by the
surrender of the Company's indebtedness to them under the Loans, the Hyland
Notes and the Sengupta Note, respectively. Upon the Closing, the security
interests of Weeden and Ventana under the Loans shall terminate.
2. Closing. Subject to the fulfillment of all of the conditions
precedent contained herein, the consummation of the sale and purchase of the
Shares contemplated hereby (the "Closing") shall take place at the offices of
Wilson, Sonsini, Goodrich & Rosati, Two Palo Alto Square, Suite 900 at 3:00 p.m.
California time on May 3, 1988, or at such other place, time or date as the
Company and a majority of the Investors shall designate by written notice
delivered to the Company not less than five (5) business days prior to the
Closing Date. The time and date upon which the Closing occurs is hereinafter
referred to as the "Closing Date". All events which shall occur at the Closing
shall be deemed to occur simultaneously.
3. Representations and Warranties of the Company and the Founders.
The Company represents and warrants to each of the Investors as follows:
3.1 Organization and Good Standing; Power and Authority. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority and the legal right to transact the business in which it is
presently engaged, to own, lease and operate all of the assets and properties
owned, leased or operated by it, to enter into and perform this Agreement, and
will have at the Closing, all requisite corporate power and authority to sell
the Shares and to issue the Conversion Shares and to otherwise perform and
comply with all other actions and agreements arising hereunder. The Company
does not own or lease any property or engage in any activity in any jurisdiction
which might require its qualification to do business as a foreign corporation in
any such jurisdiction. The Company has furnished each Investor with true,
correct and complete copies (certified by the Secretary or Assistant Secretary
of the Company) of its (a) Restated Articles
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of incorporation and (b) By-Laws, and will make available to each Investor (c)
the minute books of the Company (containing records of all meetings and
consents in lieu of meetings of its stockholders and the Board of Directors of
the Company (the "Board") (and any committees thereof) since the date of its
incorporation and (d) the stock transfer books of the Company. Copies of the
Restated Articles of Incorporation and By-Laws are attached hereto as Exhibits
A and B, respectively.
3.2 Subsidiaries. The Company has no
subsidiaries and does not own (of record or beneficially) and has made no
commitment to purchase any shares or securities of, or otherwise make any
investment in, any other corporation, association, partnership or other entity
and is not a participant in any joint venture.
3.3 Capitalization.
(a) Upon the filing of the Restated Articles of
Incorporation, the authorized capital stock of the Company will consist of Ten
Million (10,000,000) shares of Common Stock, Nine Hundred Forty Thousand
(940,000) shares of which are issued and outstanding and Three Million
(3,000,000) shares of Series A Preferred Stock, none of which will be issued
and outstanding prior to the closing. The ownership of Common Stock is set
forth on Schedule 3.3(a) hereof and no other shares of Common Stock are
outstanding. All of the outstanding shares of Common Stock are duly authorized
and validly issued, fully paid and nonassessable. The Company has reserved the
following shares of Common Stock for issuance: (i) 450,000 shares of Common
Stock upon exercise of options granted or to be granted to the Founders and the
Company's employees; (ii) 156,250 shares of Series A Preferred Stock upon
exercise of the warrants to purchase shares of Series A Preferred Stock
required to be issued to Weeden and Ventana under the Loans (hereinafter
referred to as the "Warrants"). A schedule of the holders of options and
warrants of the Company is set forth on Schedule 3.3(b) hereof. No other
classes of capital stock of the Company are authorized or outstanding.
(b) Except as set forth in this Agreement and on
Schedule 3.3(b), as of the date hereof there are no other outstanding rights,
subscriptions, warrants, calls, preemptive rights, options or other agreements
of any kind to purchase or otherwise to receive from or sell to the Company any
of the outstanding, authorized but unissued, unauthorized or treasury shares of
the capital stock or any other security of the Company, and there is no
security of any kind convertible into such capital stock. The Company has no
obligation or agreement under
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any contingency whatsoever to issue any equity, debt or other security, or to
pay, perform, guaranty, be responsible for, or satisfy in whole or in part
any debt, security, obligation or agreement incurred or made by an individual
or entity other than the Company, and the Company has no obligation under any
condition or contingency whatsoever to share its income with anyone, or to
make, accrue or set aside any payment or amount measured in any way by any
part or all of its sales or income. The Company is not indebted to any of
the Founders or any of its stockholders or employees in any amount other than
for accrued but unpaid compensation.
(c) Upon issuance pursuant to this Agreement, the Shares
will have the rights and preferences set forth in the Restated Articles of
Incorporation and each Share will be, when issued, initially convertible into
one Conversion Share, subject to adjustment for any dilution event described in
the Restated Articles of Incorporation or similar event. The Shares delivered
to the Investors pursuant to this Agreement, upon payment of the respective
purchase prices therefor, shall be duly authorized, validly issued, fully paid
and non-assessable and the Conversion Shares issuable upon conversion of the
Shares have been duly and validly reserved and, upon issuance in accordance
with the conversion provisions of the Shares, shall be duly authorized, validly
issued, fully paid and non-assessable. Subject to the provisions of applicable
federal and state securities laws and compliance with the terms of this
Agreement, upon the consummation of the transactions contemplated hereby, the
Shares and the Conversion Shares will be freely transferable and free and clear
of all lions and encumbrances, other than lions, encumbrances or restrictions
on transfer arising hereunder or under agreements entered into or actions taken
by the Investors.
(d) All of the outstanding shares of Common Stock have
been, and all Shares to be issued pursuant to this Agreement and all Conversion
Shares to be issued will be, offered, issued and sold in compliance with all
federal and state securities laws.
3.4 Compliance with Laws. Except as set forth on
Schedule 3.4(a), the Company is not in violation of (a) any applicable order,
judgment, injunction, award or decree, or (b) to the best of the Company's
knowledge, any federal, state, local or foreign law, ordinance or regulation or
any other requirement of any governmental or regulatory body, court or
arbitrator applicable to the business of the Company except for immaterial and
insubstantial violations which could not have a material adverse effect on the
business or properties of the Company and would not be in violation of any such
law, ordinance,
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regulation or other requirement that has been enacted or adopted but is not
yet effective if it were effective. The Company has obtained all licenses,
permits, orders and approvals of any federal, state, local or foreign
governmental or regulatory body (collectively, "Permits") that are material
to or necessary for the conduct of the business of the Company. All of such
Permits are in full force and effect, no violations are or have been recorded
in respect of any Permit and no proceeding is pending or, to the best of the
Company's knowledge, threatened to revoke or limit any such Permit. A list
of all Permits is set forth on Schedule 3.4(b).
3.5 Validity of Agreement; Binding Effect. To the best
of the Company's knowledge and except as set forth on Schedule 3.5 hereto, no
approval or consent of any foreign, federal, state, county, local or other
governmental or regulatory body is required in connection with the execution
and delivery by the Company of this Agreement, the issuance of the Shares or
the Conversion Shares and the consummation and performance by the Company of
the transactions contemplated hereby. The execution, delivery and performance
of this Agreement, the issuance of the Shares and the Conversion Shares and the
consummation of the transactions contemplated herein by the Company have been
duly authorized by all necessary corporate action on the part of the company,
including any action which may have been required to be taken by the Company's
stockholders, and this Agreement, when executed, will constitute the legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms (except insofar as the enforcement hereof may be
limited by (a) applicable bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting creditors' rights generally from time to time in
effect, (b) equitable principles of general application and (c) limitations of
public policy as applied to sections 8.13 and 10 of this Agreement).
3.6 No Breach. Except as set forth on Schedule 3.6, the
execution and delivery of this Agreement does not and the issuance of the
Shares or Conversion Shares and consummation of and compliance with the
transactions and agreements contemplated hereby will not conflict with or
constitute a violation or breach of (a) the Restated Articles of Incorporation
or By-laws of the Company, (b) to the best of the Company's knowledge, any
provision of any contract or other instrument to which the Company is a party
or by which the Company may be bound or by which the business, assets or
properties of the Company may be affected or secured, (c) any order, writ,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body against or binding upon the Company or upon the securities,
properties or business of the
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<PAGE> 7
Company, (d) to the best of the Company's knowledge, any statute, law, rule or
regulation (including, without limitation, applicable federal and state
securities laws) of any jurisdiction to which the Company is subject or (e) any
Permit.
3.7 Financial Information. The Company has
furnished each of the Investors with (a) true copies of its balance sheet dated
as of December 31, 1987, together with statements of operations, stockholders'
deficit and changes in financial position of the Company for the year ended
December 31, 1987 and cumulative since inception (January 21, 1986) with the
related opinion of Deloitte, Haskins & Sells, independent public accountants
(collectively, the "Audited Financials"), and (b) an unaudited balance sheet
dated as of March 31, 1988 and an unaudited statement of operations for the
period then ended (the "Unaudited Financials"; the Audited Financials and the
Unaudited Financials are herein referred to collectively as the "Financial
Statements"). The Financial Statements are complete and correct, and present
fairly the financial position and assets and liabilities of the Company at
their respective dates and the results of its operations and changes in
financial position for the periods then ended and cumulative since inception;
provided, however, that the Unaudited Financials are subject to year-end audit
adjustments and do not contain all footnotes required under generally accepted
accounting principles. Copies of the Financial Statements are attached hereto
as Schedule 3.7.
3.8 Absence of Undisclosed Liabilities and
Obligations. The Company has no liability or obligation, either accrued,
absolute, direct, or to the best of its knowledge, contingent or indirect, or
otherwise, whether as principal, agent, partner, coventurer, guarantor or in
any capacity whatsoever which are not reflected in the Financial Statements,
other than (a) obligations and liabilities incurred in the ordinary course of
business that are not individually or in the aggregate material and (b)
obligations under contracts made in the ordinary course of business that would
not be required to be reflected in the Financial Statements.
3.9 Cost Data; Customers. The Company will
provide the Investors, if requested, with complete and accurate cost data with
respect to each of the products produced or provided by the Company, and all
other costs and expenses relating thereto or otherwise to be borne by the
Company with respect thereto, and the same will have been calculated in
accordance with generally accepted accounting principles applied on a basis
consistent with the Financial Statements.
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3.10 Absence of Certain Chances. Except as set
forth on Schedule 3.10, since December 31, 1987, there has not been any event
or condition of any character which has either singly or in the aggregate
materially adversely affected the Company's business or prospects, including
but not limited to:
(a) Any change in the condition (financial or
otherwise), assets, liabilities or business of the Company from that shown on
the Financial Statements;
(b) Any damage, destruction or loss of any of the
properties or assets of the Company (whether or not covered by insurance)
affecting the business or plans of the Company;
(c) Any declaration, setting aside, payment or
other distribution in respect of any of the Company's capital stock, or any
direct or indirect redemption, purchase or other acquisition of any of such
stock by the Company;
(d) Any waiver by the Company of any rights of
value;
(e) Any purchase, sale or transfer of any assets
or properties of the Company, any satisfaction or cancellation of
any mortgage or pledge or any incurring of any debts or claims, or the
subjection of any assets or property of the Company to any lien, charge,
security interest on other encumbrance or any other transaction entered into by
the Company other than in the ordinary course of business;
(f) Any increase in the compensation of any of
the officers, other employees or agents of the Company, including without
limitation, any increase by means of any bonus or pension plan, contract or
other commitment; or
(g) Any labor trouble, or any event or condition
of any character, affecting the business or plans of the Company.
3.11 Real Property. Schedule 3.11 sets forth a
list and summary description of all evidences of ownership of real property by
the Company, all leases, subleases or other agreements under which the Company
is lessor or lessee of any real property, and of all options held by the
Company to purchase or acquire real property. Such leases, subleases and other
agreements and all options are in full force and effect and the Company has not
received any notice of any default thereunder. No approval or consent of any
person is needed in order that the leases, subleases or other agreements and
all options under or pursuant to which the Company is lessor or lessee of any
real
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property continue in full force and affect after the Closing. The leasehold
interests of the Company are not subject to any liens or encumbrances and
such leasehold interests enjoy a right of quiet possession as against any
liens or encumbrances on the properties. The Company is not subject to any
contractual obligation to purchase or acquire any interest in real property
or to sell or dispose of any interest in real property, and the Company has
not granted any options to purchase or acquire any interest in real property,
other than as set forth on Schedule 3.11. The Company has good and marketable
title to all the real property held by it outright and none of such real
property or any of the structures or improvements thereon is in violation of
any applicable building, zoning, environmental or other laws, ordinances or
regulations. None of such real property has been condemned or is the subject
of any eminent domain proceeding and the Company has no grounds to believe
that any such condemnation or eminent domain proceeding is threatened or
taking place.
3.12 Tangible Assets and Equipment. Schedule 3.12
contains a list of all the tangible assets and equipment of the Company that
are material to the operation of its business. The Company owns outright and
has good and marketable title to all of its tangible assets and equipment
including all tangible assets and equipment reflected in the Financial
Statements, in each case free and clear of any lien or encumbrance, subject
only to liens and encumbrances set forth on Schedule 3.12 and liens for taxes
not yet due or which are being contested in good faith and by appropriate
proceedings and for which adequate reserves have been set aside on the books of
the Company. To the best of the Company's knowledge, each tangible asset and
piece of equipment of the Company is in good operating condition, ordinary wear
and tear excepted, is being and has been properly serviced and maintained.
3.13 Tax Returns and Audits.
(a) To the best of the Company's knowledge, (i)
the Company has properly completed and filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) in correct form all federal, state and other income, profits,
franchise, real property, personal property, sales, use, employment, payroll,
excise and other tax returns and reports required to be filed by the company,
(ii) all taxes imposed or which may be imposed or asserted by the U.S. Internal
Revenue Service, the State of California, or any other taxing authority, and
all deficiencies, assessments, additions to tax, penalties and interest, which
are due and payable by the Company through December 31, 1987, or which are
attributable to the operations, business, properties or assets of the Company
through that date have been paid in full, and (iii) all monies required to be
withheld by the Company from
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employees for income taxes, Social Security and unemployment insurance taxes
have been collected or withheld and either paid to the respective
governmental agencies or adequately provided for by reserves on the books of
the Company, other than returns and reports, the non-filing of which,
deficiencies, assessments, additions to tax, penalties and interest, the
non-payment of which, and withholdings, the non-collection or withholding of
which would not either singly or in the aggregate have a material adverse
effect on the Company.
(b) To the best of the Company's knowledge there
are (i) no other tax returns or reports which are required to be filed by the
Company which have not been so filed and (ii) no unpaid assessments for
additional taxes for any fiscal period or any basis therefor. The Company's
tax returns have not, to the best of the Company's knowledge, been audited by
the U.S. Internal Revenue Service, the State of California or any other taxing
authority to which the Company is subject. The Company has not consented to
any extensions of time to assess any tax.
(c) The Company has successfully revoked its
election to be treated as an S corporation and is presently filing tax returns
and reports to, and is recognized by, the U.S. Internal Revenue Service, the
State of California and all other relevant taxing authorities as a C
corporation.
3.14 Patents and Trademarks. To the best of the
Company's knowledge, it owns or possesses, has access to, or can become
licensed on reasonable terms under all patents, patent applications,
inventions, trademarks, tradenames, servicemarks, copyrights, and other
proprietary intellectual property rights (collectively referred to as
"Proprietary Rights") (a) necessary for the lawful conduct of its business as
now conducted and as proposed to be conducted, and the lack of which would
materially and adversely affect its business or properties, and (b) to the best
of its knowledge, without any material infringement of or conflict with the
rights of others. All of the Proprietary Rights are set forth on Schedule 3.14
hereto and are free and clear of any liens or other encumbrances. Except as
set forth on Schedule 3.14, the Company has not granted any licenses to its
Proprietary Rights and is not aware of any third parties who are infringing or
violating any of same. To the best of the Company's knowledge, there are no
disputes nor claims regarding the Proprietary Rights listed on Schedule 3.14
hereto.
3.15 Contracts and Other Agreements; Insurance.
(a) Schedule 3.15(a) sets forth all of the
material contracts and other agreements to which the Company is a party or by
or to which the Company or its assets or properties are bound or subject
including, without limitation, group life,
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health and other employee benefit plans or arrangements and each bonus, stock
option, deferred compensation, pension, profit sharing or other similar plan
or arrangement, to which the Company is a party or pursuant to which it has
any obligation or liability. All of such contracts and other agreements are
valid, existing, in full force and effect and binding upon the parties
thereto in accordance with their terms, and the Company has paid in full or
accrued all amounts due thereunder which are required to be accrued in
accordance with generally accepted accounting principles and has satisfied in
full or provided for all of their current liabilities and obligations
thereunder, and are not in default under any of them, nor to the best of the
Company's knowledge (i) is any other party to any such contract or other
agreement in default thereunder, or (ii) does any condition exist that with
notice or lapse of time or both would constitute a default thereunder.
Except as separately identified on Schedule 3.15(a), the Company is not a
party to and is not bound by any contract or other agreement that adversely
affects its assets, properties, business, operations or condition (financial
or otherwise), or that was entered into other than in the ordinary course of
its business. No approval or consent of any person is needed in order that
the contracts and other agreements set forth on Schedule 3.15(a) or on any
other Schedule to this Agreement or the Permits set forth on Schedule 3.4(b)
continue in full force and effect after the Closing. The Company has
delivered to the Investors or their counsel true and correct copies of all
the agreements listed on Schedule 3.15(a).
(b) Schedule 3.15(b) sets forth the Company's insurance policies
currently in force. The Company maintains insurance with reputable insurance
companies, on so much of its properties, to such an extent and against such
risks, as reasonably prudent persons engaged in similar businesses would
customarily insure properties of a similar character.
3.16 Employees. (a) To the best of the Company's
knowledge, no key employee of the Company is, or is now expected to be in
violation of any term of any employment contract, patent disclosure agreement,
non-competition agreement, or any other contract or agreement or any
restrictive covenant or any other common law obligation to a former employer
relating to the right of any such employee to be employed by the Company
because of the nature of the business conducted or to be conducted by the
Company or to the use of trade secrets or proprietary information of others,
and the employment of the Company's employees does not subject the Company or
any Investors to any material liability. There is neither pending nor, to the
Company's knowledge threatened, any actions, suits, proceedings or claims, or
any basis therefor or thereof with respect to any contract, agreement, covenant
or obligation referred to in the preceding
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sentence. Except as set forth on Schedule 3.16(a) the Company is not a
party, or subject to, any obligation, liability or commitment with respect to
any written employment, compensation, consulting, severance pay or similar
agreement and any and all oral employment, compensation, consulting or
similar commitments are terminable at will and without notice by the Company
and without payment or penalty. The Company is not a party to any collective
bargaining or other union contracts and its employees are not represented by
any union.
(b) Schedule 3.16(b) hereto contains a list of
all employees of the Company whose present compensation from the Company
exceeds $30,000 per annum, and all relatives of the Founders employed or paid
by the Company since the Company's inception, and their remuneration, in each
year of employment.
3.17 Confidentiality. Each person employed by the
Company who has access to any Proprietary Rights or other propriety information
of or about the Company has executed and delivered to the Company an Employee
Agreement in the form set forth on Schedule 3.17(a) (an "Employee Agreement").
Each person hired by the Company as a consultant who has access to any
Proprietary Rights or other proprietary information of or about the Company has
executed and delivered to the Company a Nondisclosure Agreement in the form set
forth on Schedule 3.17(b) (a "Nondisclosure Agreement").
3.18 Litigation. (a) Except as set forth on
Schedule 3.18 there are no legal, administrative or other proceedings,
investigations or inquiries, or other asserted claims, judgments, injunctions or
restrictions, pending or outstanding or, to the best knowledge of the Company,
threatened against the Company, any of its properties or business, or against
or involving any of the the Company or the Founders or the officers or
directors of the Company, or any action related to this Agreement, the issuance
of the Shares or any of the transactions contemplated herein that might if
determined adversely to the Company, either singly or in the aggregate, result
in any material adverse change in the business, prospects, operations,
properties or condition (financial or otherwise) of the company or in any
material liability on the part of the Company. To the best of the Company's
knowledge, there is no fact, event or circumstance that may give rise to any
suit, action, claim, investigation or proceeding that would be required to be
set forth on Schedule 3.18 if currently pending or threatened. There are no
actions, suits or claims or legal, administrative or arbitration proceedings
pending or to the best of the Company's knowledge threatened that would give
rise to any right of indemnification on the part of any director or officer of
the Company or the heirs, executors or administrators of such director of
officer against the Company.
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(b) The Company has not admitted in writing its
inability to pay its debts generally as they become due, filed or consented to
the filing against it of a petition in bankruptcy or a petition to take
advantage of any insolvency act, made an assignment for the benefit of
creditors, consented to the appointment of a receiver for itself or for the
whole or any substantial part of its property, or had a petition in bankruptcy
filed against it, been adjudicated a bankrupt, or filed a petition or answer
seeking reorganization or arrangement under the federal bankruptcy laws or any
other law or statute of the U.S. or any other jurisdiction.
3.19 Claims of the Company and the Founders.
(a) The Founders have no claims presently pending
against the Company, including, without limitation, any claim relating to any
Proprietary Rights of the Company and to the best knowledge of the Company and
the Founders, there are no circumstances existing which would give rise to a
claim by the Founders against the Company.
(b) The Company has no claims presently pending
against the Founders or any of them including, without limitation, any claim
relating to any Proprietary Rights of the Company and to the best knowledge of
the Company and the Founders, there are no circumstances existing which would
give rise to a claim by the Company against the Founders.
3.20 No Change of Control Provisions. The Company
is not a party to any agreement or contract which would require the making of
any payment to any Founder, employee, officer or director of the Company or to
any other person upon consummation of the transactions contemplated herein.
3.21 No Prohibition Against Merger. The Company
is not a party to any agreement, contract or restriction which would prevent
the merger of the Company into any other company and any such merger would not
constitute a default under any such agreement, contract or restriction.
3.22 ERISA. No employee pension benefit plan,
within the meaning of Section 3(a) of the Employment Retirement Income Security
Act of 1974, as amended ("ERISA"), is currently maintained or sponsored by the
Company and the Company does not contribute to, and is not obligated to
contribute to, and none of the employees of the Company is a participant in,
any multiemployer plan within the meaning of Section 400(a) of ERISA.
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3.23 Environmental Compliance Matters. Except as set forth on
Schedule 3.23:
(a) There is no soil or ground water contamination by any
"Hazardous Material" for which the Company is or may be liable. "Hazardous
Material" shall mean any flammables, asbestos, explosives, radioactive
materials, hazardous wastes, toxic substances or related materials, including
without limitation any substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," or "toxic
substances" under any applicable federal, state or local laws, rules,
regulations or orders or which federal, state or local laws, rules, regulations
or orders have designated as potentially dangerous to public health and/or
safety when present in the environment;
(b) No "Hazardous Material" has been stored and the Company
will not store any Hazardous Material; and
(c) There are no (i) enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened against
the Company pursuant to any applicable federal, state or local laws, ordinances
or regulations relating to any Hazardous Material, (ii) claims made or
threatened by any third party against the Company with respect to or because of
its property relating to damage, contribution, cost recovery compensation, loss
or injury resulting from any Hazardous Material or (iii) conditions on any of
the properties of the Company that could cause such properties or any part
thereof to be subject to any restrictions on the ownership, occupancy,
transferability or use of any of such properties under any Hazardous Material
law.
3.24 Use of Proceeds. The net proceeds to be paid
to the Company at the Closing are to be used for working capital including for
employee compensation and benefits, materials and miscellaneous expenses
associated with developing products, lease payments, capital expenditures and
marketing expenses.
3.25 Registration Rights. Except as provided for
in this Agreement and the Warrants, the Company is not under any obligation to
register under the Securities Act of 1933, as amended (the "Act"), any of its
currently outstanding securities or any of its securities which may hereafter
be issued.
3.26 Escrowed Certificates of Founder Common
Stock. The certificates for all shares of Common Stock held by the Founders
have been delivered to Wilson, Sonsini, Goodrich &
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Rosati, counsel to the Company, in the form required by, and in accordance
with the terms of, the Common Stock Restriction Agreements executed by and
between the Company and each of the Founders (the "Restriction Agreements"),
copies of which have been provided to the Investors on Schedule 3.15(a).
3.27 Other Adverse Information; Disclosure.
(a) Except as set forth in this Agreement or in the
Financial Statements, certificates, exhibits, schedules or other documents
delivered pursuant hereto (the "Information"), the Company does not have
knowledge of any information of a materially adverse nature with respect to the
business, prospects, operations, properties or condition (financial or
otherwise) of the Company including, without limitation, plans or announcements
by any person or firm to compete with the Company in any area in which such
person or firm does not presently compete with the Company.
(b) All Information delivered by or on behalf of the
Company in connection with this Agreement and the transactions contemplated
hereby are true, complete and authentic. No representation or warranty by the
Company contained in this Agreement, and no other Information furnished or to
be furnished by or on behalf of the Company pursuant hereto, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make any representation or warranty of the Company
or the Information not false or misleading.
3.28 Representations and Warranties of the Founders.
(a) Each of the Founders (other than Donald G.
Larson), jointly and severally, makes the representations and warranties set
forth in Sections 3.19, 3.25 and 3.26 to each of the Investors to the same
extent made by the Company; provided, that a representation or warranty made
to the best of the Company's knowledge shall be deemed made to the best of
the Founder's knowledge. Each of the Founders (other than Donald G. Larson),
jointly and severally, represents and warrants to each of the Investors that
they have transferred to the Company all of their rights with respect to any
of the Company's Proprietary Rights and they hereby relinquish all claims to
and agree that they shall have no rights, including without limitation, any
rights to any payments, other than their rights as stockholders of the
Company, with respect to any Proprietary Rights.
(b) With respect to all of the representations and
warranties made by the Company not set forth specifically in subsection (a)
above (the "Residual Representations"), each of
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<PAGE> 16
the Founders (other than Donald G. Larson), jointly and severally, represents
and warrants to each of the Investors that, to the best of his knowledge, none
of the Residual Representations contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the Residual Representations not false or misleading.
(c) Each of the Founders, severally and not joint-
ly, represents and warrants to each of the Investors that (i) neither the
execution and delivery of this Agreement, nor the fulfillment of or compliance
with, the terms, conditions or provisions hereunder will conflict with, or
result in a breach of, the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, any material contract or other
instrument to which such Founder is a party, and which conflict, breach,
default or violation would have a material and adverse impact on the Company,
(ii) there is no litigation, proceeding or governmental investigation pending,
or to the best of such Founder's knowledge, threatened against such Founder,
which litigation, proceeding or investigation could materially adversely affect
the Company, and (iii) this Agreement when executed by such Founder will
constitute the legal, valid and binding obligation of such Founder, enforceable
against the Founder in accordance with its terms (except insofar as enforcement
thereof may be limited by (A) applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors rights generally
from time to time in effect, (B) equitable principles of general application
and (C) limitations of public policy as applied to Section 10 of this
Agreement.
(d) The representations of the Founders contained in
this Section 3.28 are herein referred to individually as a "Founder
Representation" and collectively as the "Founder Representations"; provided,
however, that with respect to Donald G. Larson, such terms shall refer only to
the representations made by him in Section 3.28(c). None of the Founder
Representations contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
Founder Representations not false or misleading.
4. Representations and Warranties of the Investors. Each
Investor, severally and not jointly, hereby represents and warrants to the
Company as follows:
4.1 Organization and Standing. If the Investor is a
corporation, it is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation poration. If the Investor is
a partnership, it is validly existing and in good standing under the laws of the
jurisdiction of its organization.
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<PAGE> 17
4.2. Authorization and Approval of and Ability to
Carry Out This Agreement. The Investor has duly authorized the execution and
delivery of this Agreement and the transactions contemplated hereby. The
Investor, if a corporation, has all requisite corporate power and authority
(and, if a partnership, is permitted under its partnership agreement) to enter
into this Agreement and to consummate the transactions contemplated herein.
This Agreement constitutes the legal, valid and binding obligation of the
Investor, to the extent provided for herein, enforceable in accordance with its
terms (except insofar as the enforcement hereof may be limited by (a)
applicable bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting creditors' rights generally from time to time in effect, (b) by
equitable principles of general application, and (c) limitations of public
policy as applied to Sections 8.13 and 10 of this Agreement).
4.3. Investment Representation. The Investor (and
the representation made under this Section 4.3 is made to each other Investor
as well) is purchasing the Shares (including, for purposes hereof, the
Conversion Shares) for its own account without a view to any distribution
thereof in violation of the Act, subject, nevertheless, to any requirement of
law that the disposition of its property shall at all times be within its
control. The Investor represents that it (a) is an "Accredited Investor" as
that term is defined under Rule 502 under the Act, (b) is experienced in
evaluating and making investments of the type contemplated by this Agreement
and (c) is financially able to bear the risks of the investment. The Investor
acknowledges that the Company is issuing and selling the Shares in reliance
upon the exemption from registration provided in Section 4(2) of the Act and is
relying upon these representations, and agrees that the Shares may only be
transferred if registered under the Act or pursuant to an exemption from such
registration requirements. The Investor understands that Rule 144 promulgated
under the Act is not presently available with respect to the Shares or
Conversion Shares, and that absent registration of the Shares or Conversion
Shares under the Act, compliance with an applicable exemption under the Act is
required for a sale or other disposition of the Shares or Conversion Shares.
The Investor agrees that the following legend may be placed on any
certificates evidencing its Shares or Conversion Shares and any other
securities issued in respect of Shares or Conversion Shares, upon any dilution
event described in the Restated Articles of Incorporation or similar event:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares have
been acquired for investment and may not be pledged or
hypothecated, and may not be sold or
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<PAGE> 18
transferred except in compliance with the registration
requirements of the Securities Act of 1933, or upon delivery to
Cymer Laser Technologies of an opinion of counsel to the
shareholder, in form and substance satisfactory to said
corporation and its counsel, that registration under such Act is
not required."
The Investor understands that, so long as the legend remains on the
certificates representing the Shares or Conversion Shares, the Company may
maintain appropriate "stop transfer" orders with respect to the Shares or
Conversion Shares on its books and records and with its registrar and transfer
agent. Notwithstanding the foregoing, such Investor shall be entitled to
replacement certificates without such legend if permitted under Rule 144 or
upon presentation by such Investor to the Company of a favorable written
opinion of counsel reasonably satisfactory in form and substance to the Company
and its counsel that the removal of such legend is not in violation of either
the Act and the rules and regulations thereunder or applicable provisions of
state securities law.
5. Investor Access Prior to Closing. The Investors and
their authorized agents, officers and representatives shall be granted full
access to the books, documents and records, including income tax returns of the
Company, to conduct such examinations and investigations thereof as they deem
necessary from the date hereof to the Closing Date; provided, such examinations
shall be conducted during the usual business hours of the Company. The officers
and employees of the Company will be available for consultation and discussion
with the Investors, its authorized agents, officers and representatives, during
usual business hours. All information, except trade secrets and that which
relates to Proprietary Rights, must be identified as confidential in order to be
considered "Confidential Information" hereunder. All trade secrets and
Proprietary Rights and information relating thereto shall be deemed
"Confidential Information" whether or not designated as such. All Confidential
Information obtained by any Investor shall remain confidential and shall not be
disclosed to anyone other than persons with whom such Investors consult in the
ordinary course of evaluating transactions of the nature of those set forth
herein, except (a) to the extent that disclosure is required pursuant to any
applicable law, regulation, judicial process or order, (b) when the information
has been discovered or developed by the Investor independently of the Company
and such discovery or development has previously been documented in writing,
which documentation shall be provided to the Company upon request, or (c) when
the
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<PAGE> 19
information is in the public domain at the time of disclosure, as evidenced
by an article or other writing with a publication date prior to the date on
which such Confidential Information was disclosed to the Investor.
6. Affirmative Covenants. Except as hereinafter provided,
the Company hereby covenants that from and after the date of this Agreement and
so long as the Investors or any of them hold beneficially or of record any of
the Shares or Conversion Shares:
6.1 Corporate Existence. The Company will
maintain its corporate existence and make reasonable efforts to comply with all
laws, government regulations, rules and ordinances and judicial orders,
judgments and decrees applicable and material to the Company, its business and
properties.
6.2 Taxes and Liens. The Company will (a)
punctually pay and discharge or cause to be paid and discharged before the same
shall become delinquent (i) all taxes, assessments and governmental charges
lawfully imposed upon the company, or any of its property, or upon the income
and profits thereof, and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might be a lien upon the property of the Company,
(b) withhold all monies required to be withheld by the Company from employees
for income taxes, Social Security and unemployment insurance taxes and (c)
complete and file, on a timely basis, all tax returns and reports required to
be filed by it (including, without limitation, returns and reports of the type
set forth in Section 3.13(a)(i)).
6.3 Maintain Property. The Company will cause
all material properties used or useful in the conduct of its business to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs as
in the judgment of the Company may be necessary so that business carried on in
connection therewith may be properly and advantageously conducted.
6.4 Financial Statements and Reports. (a) The
Company will keep adequate and accurate books of account and will prepare the
financial statements referred to herein, in accordance with generally accepted
accounting principles, consistently applied.
(b) Until the Initial Public offering (as herein
defined), the Company shall furnish to each holder of at least 210,788 Shares
and/or Conversion Shares (appropriately adjusted for any dilution event
described in the Restated Articles of Incorporation or other similar event) (a
"Significant Holder"):
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<PAGE> 20
(i) As soon as practicable (and in any event at
least thirty (30) days) prior to the beginning of each fiscal year, an annual
projected budget for the following fiscal year, and an annual operating plan
and strategic plan (collectively, the "Plan") as approved by the Board.
(ii) As soon as practicable (and in any event
within thirty (30) days) after the end of each month, a reasonably detailed
statement of revenues, costs, expenses, orders received, backlog, shipments,
commitments and contingencies (including the commencement of any material
litigation by or against the Company), incurred during the month and a
comparison of such statements with the Company's projections as set forth in
the Plan, certified by the Company's Chief Financial Officer to present fairly
the data reflected thereon.
(c) Until the Initial Public Offering, the
Company shall furnish to each holder of Shares or Conversion Shares as soon as
practicable (and in any event within ninety (90) days) after the end of each
fiscal year of the Company, an audited balance sheet of the Company as of the
end of the year and the related statement of operations, retained earnings or
deficit and changes in financial position of the Company as of the end of the
year setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by an audit report
and opinion in respect of such financial statement (consolidated if applicable)
of the independent certified public accountants selected by the Company (which
shall be a "Big Eight" firm of accountants), and such report and opinion shall
be unqualified as to the scope of the audit.
6.5 Confidentiality. The Company shall, after
the date hereof, cause each person employed by, or retained as a consultant to,
the Company who has access to any Proprietary Rights or other proprietary
information of or about the Company to execute an Employee Agreement, in the
case of an employee, and a Nondisclosure Agreement, in the case of a
consultant.
6.6 Conversion Shares. The Company shall reserve
and keep available from its authorized shares of Common Stock, solely for the
purpose of issuance upon conversion of the Shares, such number of Conversion
Shares as shall then be issuable upon the conversion of all of the Shares,
taking into account any anti-dilution rights of the holders thereof.
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6.7 Access to Books and Records. Until the
Initial Public offering, each significant Holder and its agents shall (a) have
access upon reasonable notice to the Company, during usual business hours, and
as often as may reasonably be desired, to the accounts, books and records of
the Company shall be entitled to examine, make copies and extract therefrom,
and from any other items, such information relating to the Company as each such
Investor shall reasonably specify and (b) be permitted, upon reasonable notice
to the Company to visit and inspect any of the properties of the Company;
provided, however, that all Confidential Information obtained by any
Significant Holder shall remain confidential and shall not be disclosed to
anyone other than persons with whom such Significant Holders consult in the
ordinary course of evaluating transactions of the nature of those set forth
herein except (a) to the extent that disclosure is required pursuant to any
applicable law, regulation, judicial process or order, (b) when the information
has been discovered or developed by the Investor independently of the Company
and such discovery or development has previously been documented in writing,
which documentation shall be provided to the Company upon request, or (c) when
the information is in the public domain at the time of disclosure, as evidenced
by an article or other writing with a publication date prior to the date on
which such Confidential Information was disclosed to the Investor.
6.8 Right of First Offer.
(a) The Company hereby grants to the Significant
Holders the right of first offer to purchase, pro-rata, all (or any part) of
New Securities (as defined in this Section 6.8) which the Company may, from
time to time, propose to sell and issue. A Significant Holder's pro-rata
portion, for purposes of this Agreement, is the ratio of the number of the
Shares and/or Conversion Shares held by such Significant Holder at the time
that the rights of Significant Holders set forth in this Section 6.8 and in
Sections 6.9, 7.1 and 7.2, to the total number of Shares and Conversion Shares
of the Company issued and outstanding at such time. Each Significant Holder
shall have a right of over-allotment such that if any Significant Holder fails
to exercise his right hereunder to purchase his pro-rata portion of New
Securities, the other Significant Holders may purchase the non-purchasing
Significant Holder's portion on a pro-rata basis within five (5) days from the
date it receives notice from the Company that a non-purchasing Significant
Holder has failed to exercise its right hereunder to purchase its pro-rata
share of New Securities. This right of first offer shall be subject to the
following provisions:
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(b) "New Securities" shall mean any capital stock
of the Company whether now authorized or not, and rights, options or warrants
to purchase capital stock, and securities of any type whatsoever that are, or
may become, convertible into capital stock; provided, however, that the right
of first offer shall apply at the time of issuance of the right, warrant or
option and not to the exercise thereof; provided, further, that the term "New
Securities" does not include: (i) the Shares or Conversion Shares; (ii) shares
of Series A Preferred Stock issued pursuant to the Warrants (or such securities
as may be substituted for the Series A Preferred Stock pursuant to the terms of
the Warrants); (iii) securities offered to the public pursuant to a
registration statement filed pursuant to the Act; (iv) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all the assets or other reorganization whereby the
Company owns not less than 51% of the voting power of such corporation; (v) any
borrowings, direct or indirect, from financial institutions or other persons by
the Company, whether or not presently authorized, including any type of loan or
payment evidenced by any type of debt instrument, provided such borrowings do
not have any equity features, including warrants, options or other rights to
purchase capital stock, and are not convertible into capital stock of the
Company; (vi) 450,000 shares of Common Stock reserved for issuance to Founders
or employees pursuant to the exercise of options granted or to be granted; or
(vii) warrants issued in connection with the leasing of equipment by the
Company which have been approved by the Board with the representatives of the
Significant Holders voting in favor of such issuance.
(c) In the event the Company proposes to issue
New Securities, it shall give each Significant Holder written notice of its
intention, describing the type of New Securities, the price and the general
terms upon which the Company proposes to issue the same. Each Significant
Holder shall have ten (10) days from the date of receipt of any such notice to
agree to purchase the Significant Holder's pro-rata share of such New
Securities for the price and upon the general terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
(d) In the event the Significant Holders fail to
exercise the right of first offer with respect to all of the New Securities
proposed to be sold by the Company within said ten-day period and after the
expiration of the five (5) day period for the exercise of the over-allotment
provisions of this Section 6.8, the Company shall have 120 days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within 120 days from
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<PAGE> 23
the date of said agreement), to sell the New Securities respecting which the
Significant Holder's options were not exercised, at a price and upon general
terms no more favorable to the purchasers thereof than specified in the
Company's notice. In the event the Company has not sold within said 120-day
period or entered into an agreement to sell the New Securities within said
120-day period (or sold and issued New Securities in accordance with the
foregoing within 120 days from the date of said agreement), the Company shall
not thereafter issue or sell any New Securities, without first offering such
securities to the Significant Holders in the manner provided above.
(e) The right of first offer set forth in this
Section 6.8 is nonassignable, except that such right is assignable (i) by each
Significant Holder to any Person (as herein defined) controlling, controlled by
or under common control with such Significant Holder and (ii) between and among
any of the Significant Holders, and (iii) upon the death of a Significant
Holder, such right shall pass to the beneficiaries under the deceased
Significant Holder's last will and testament or to the distributees of the
deceased Significant Holder's estate.
6.9 Right of First Refusal And/Or Repurchase
Agreement. It shall be a condition to any issuance of shares of Common Stock
(other than Conversion Shares) including, without limitation, Common Stock to
Founders, officers or employees of the Company pursuant to an employee stock
purchase, stock option or other benefit or incentive plan established by the
Company, that the Company will cause the person to whom the Common Stock is to
be issued to execute and deliver to the Company an appropriate right of first
refusal agreement and/or a repurchase agreement (in the event that the shares
of Common Stock being issued are subject to absolute prohibitions on transfer
that lapse over time) in a form approved by the Board which shall provide,
among other things, that the Significant Holders shall have the right to
exercise the Company's rights thereunder in the event the Company shall fail to
do so.
6.10 Insurance. The Company will insure and keep
insured, with reputable insurance companies, so much of its properties, to such
an extent and against such risks, as reasonably prudent persons engaged in
similar businesses would customarily insure properties of a similar character
or as otherwise approved by its Board.
6.11 Notice of Record Dates. (a) In the event of
any taking by the Company of a record of the holders of any class of securities
for the purpose of determining the holders thereof
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who are entitled to receive any dividend or other distribution, the Company
shall mail to each holder of Shares, at least ten (10) days prior to such
record date, specified herein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
(b) In the event of (i) any consolidation or
merger to which the Company is a party and for which approval of any
shareholders of the Company is required, (ii) the conveyance or transfer of
all, or substantially all, of the properties and assets of the Company, (iii)
any capital reorganization or any reclassification of the Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or (iv)
the voluntary or involuntary dissolution, liquidation or winding up of the
Company, the Company shall mail to each holder of Shares, at least ten days
prior to the applicable record date, a notice specifying the date on which any
such record is to be taken for the purpose of such transaction.
6.12 Employee Stock Purchase Agreement. The
Company will not issue any of its capital stock, or grant an option to purchase
any of its capital stock, to any Founder, employee, or officer of the Company
(other than any options or grants already made to any Founders or employees of
the Company) except pursuant to a plan adopted by the Board, with the
representatives of the Investors on the Board having voted in favor thereof.
6.13 State Securities Law Filings. The Company
shall make any and all filings necessary (whether before or after the Closing)
in connection with the offer, issuance and sale of the Shares and the issuance
of the Conversion Shares under the securities or blue sky laws of New York,
California and any other jurisdiction in which such filing is required by law.
6.14 Lapse of Covenants. Except as otherwise
specifically provided in this Section 6, the covenants contained herein shall
lapse and be of no further force and effect upon the consummation by the
Company of an Initial Public Offering. "Initial Public Offering" for purposes
of this Agreement, shall be defined as the receipt by the Company of the
proceeds of a bona fide firm commitment underwritten public offering registered
under the Act, which offering does not exclusively relate to securities under
an employee stock option, bonus or other compensation plan and at a price of
not less than $5.00 per share of Common Stock (as equitably adjusted for any
dilutive event set forth in the Restated Articles of Incorporation or other
similar event) and net proceeds to the Company of not less than $5,000,000.
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7. Further Agreements.
7.1 Right of First Refusal and
Repurchase with Respect To Founder Stock. In connection with the exercise of
the Incentive Stock Options granted to each of the Founders and to certain of
the Company's employees (the "Optionees") each of the Founders and the Optionees
is required to execute a Restricted Stock Purchase Agreement (the "Restricted
Stock Purchase Agreements"), a copy of which has been provided to the Investors
on Schedule 3.15 (a). Pursuant to the Restricted Stock Purchase Agreements and
the Restriction Agreements, the Company has the right of first refusal in
connection with the sale by the Founders and the Optionees of any vested shares
of Common Stock and the right to repurchase any unvested shares of Common Stock.
Pursuant to the assignment provisions contained in the Restriction Agreements
and the Restricted Stock Purchase Agreements, the Company hereby agrees that if
on any occasion it elects not to exercise any of its rights of first refusal or
repurchase under the Restriction Agreements or the Restricted Stock Purchase
Agreements or to exercise such rights only with respect to a portion of the
shares to which they are applicable, that it shall so notify the Significant
Holders in writing (the "Company Notice") within ten (10) days of all of the
details of the notice or event which triggered the Company's right of first
refusal or repurchase and the Significant Holders shall thereafter have all of
the rights of the Company to exercise on a pro-rata basis the rights of first
refusal and repurchase granted thereunder to the Company with respect to all of
the shares of Common Stock to which the Company's rights apply or with respect
to that portion of the shares of Common Stock that the Company has elected not
to purchase on the same terms granted to the Company pursuant to the Restriction
Agreements or Restricted Stock Purchase Agreements, as applicable. Each
Significant Holder shall deliver a notice to the Company stating the number of
shares of Common Stock which the Significant Holder desires to purchase pursuant
to this Section 7.1 or to sell pursuant to Section 7.2 within ten (10) days of
its receipt of the Company Notice. The Company shall notify the Significant
Holders (the "Non-Exercise Notice") of any Significant Holder's election not to
exercise, or to exercise only in part, its rights under Sections 7.1 or 7.2 and
each Significant Holder shall have a right of over-allotment to purchase the
non-exercising Significant Holder's portion on a pro-rata basis within five (5)
days from the date it receives the Non-Exercise Notice. Notwithstanding
anything to the contrary contained in the Restriction Agreements or in the
Restricted Stock Purchase Agreements, the notice provisions and time periods set
forth in Sections 7.1 and 7.2 shall control in the event the Company assigns its
rights under the Restriction Agreements or Restricted Stock Purchase Agreements
to the Significant Holders.
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<PAGE> 26
7.2 Co-Sale Agreement on Sale of Founder Stock.
Notwithstanding anything to the contrary contained in the Restriction
Agreements or in the Restricted Stock Purchase Agreements, in the event the
Company does not elect to purchase any or all of a Founder's shares of Common
Stock subject to the rights of first refusal set forth in the Restriction
Agreements and in the Restricted Stock Purchase Agreements apply, and in the
event the Significant Holders do not elect to purchase any or all shares of
Common Stock subject to their rights of first refusal as set forth in Section
7.1 above, then, with respect to any shares of a Founder's Common Stock not
purchased by the Significant Holders the Founder hereby grants to the
Significant Holders the right to participate, pro rata, in the sale of 50% of
such shares in accordance with the following provisions of this Section 7.2:
(a) Each Significant Holder may elect to
participate, pro rata, in the proposed sale of shares of Common Stock which the
selling Founder desires to sell on the same terms as set forth in the Founder's
notice of sale which triggered the right of first refusal, upon delivery of
notice of election to the selling Founder within the time prescribed for
exercising the Significant Holder's right of first refusal with respect to the
selling Founder's shares of Common Stock.
(b) In the event all of the Significant Holders
fail to exercise the right of co-sale within the time period allotted therefor,
the selling Founder shall have the right to sell the shares of Common Stock
which were subject to the right of co-sale on the same terms as those set forth
in the notice triggering the right of first refusal; provided, however, that
the sale is consummated within the period of time provided for in the
Restriction Agreements or the Restricted Stock Purchase Agreements, as
applicable.
(c) In the event any or all of the Significant
Holders elect to exercise their rights of co-sale in a manner consistent with
Section 7.2(a), the selling Founder agrees to reduce the number of shares of
Common Stock to be sold by him, and to sell, for the account of the selling
Significant Holders that amount of Common Stock tendered for sale by the
Significant Holders. Each Significant Holder shall have a right of
overallotment such that if any Significant Holder fails to exercise his rights
hereunder, the other Significant Holders may sell on a pro-rata basis an amount
of Shares equal to the number of Shares which the non-exercisinq Significant
Holder would have been permitted to sell. In no event shall the total number
of shares of Common Stock sold by the Significant Holders pursuant to their
right of co-sale exceed fifty percent (50%) of the total number
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<PAGE> 27
of shares of Common Stock actually being sold by the selling Founder, other
than to Significant Holders pursuant to Section 7.1, in any given sales
transaction.
7.3 Board Representation. The Founders and
Investors agree to vote their Shares and Conversion Shares in such a manner as
to maintain the Board at five (5) members and to vote all of their Shares and
Conversion Shares in favor of the election to the Board of (a) two (2) members
to be selected by the Founders and (b) one (1) member to be selected by each of
Weeden, Ventana and Interven II, L.P. The Board shall, immediately after the
Closing, be comprised of the following people: Robert P. Akins, Richard P.
Abraham, Duwaine Townsen, Kenneth M. Deemer and one member remaining to be
named by the Founders. Allsop Venture Partners is hereby granted the right to
have a representative of Allsop present at all meetings of the Board as a
non-voting observer and notice of all meetings of the Board shall be given to
Allsop at the time notice is given to the members of the Board.
8. Restrictions on Transferability of Shares;
Compliance with the Act.
8.1 Restrictions on Transferability. The Shares
and the Conversion Shares shall not be sold, assigned, transferred or pledged,
except upon the conditions specified in this Section 8, which conditions are
intended to insure compliance with the provisions of the Act and in the case of
Conversion Shares being sold pursuant to a Registration Statement, to assist in
an orderly distribution. Each Investor will cause any proposed purchaser,
assignee, transferee or pledgee of Shares or Conversion Shares held by that
Investor to agree to take and hold those Shares or Conversion Shares subject to
the provisions and upon the conditions specified in this Section 8.
8.2 Certain Definitions. As used in this Section
10, the following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
commission or any other federal agency at the time administering the Act.
"Holder" shall mean any holder of Registrable Securities
(including any Transferee (as herein defined)) which have not been sold to the
public.
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"Initiating Holders" shall mean any Holders who in the
aggregate hold 50% or more of the outstanding Registrable Securities.
The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean (a) the Conversion
Shares (whether issued or issuable), (b) any Common Stock or other securities
of the Company issued or issuable in respect of the Conversion Shares (or any
other securities of the Company issued in respect of the Shares) on account of
any stock split, reverse stock split, stock dividend, dilution event described
in the Restated Articles of Incorporation or other similar event, (c) any
Common Stock issuable upon conversion of the Series A Preferred Stock received
upon exercise of the Warrants, and (d) any Shares or Conversion shares or
Common Stock acquired pursuant to the right of first offer set forth in Section
6.8 or the Right of first refusal and repurchase with respect to Founder Stock
set forth in Section 7.1 or pursuant to any right to purchase stock from any
employee pursuant to an agreement provided for by Section 6.9; provided,
however, that shares of Common Stock or other securities shall only be treated
as Registrable Securities if and so long as (i) they have not been sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, (ii) they have not been sold in a transaction exempt
from the registration and prospectus delivery requirement of the Act under
Section 4(l) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of each sale.
"Registration Expenses" shall mean all expenses incurred
by the Company in compliance with Sections 8.4, 8.5 and 8.6 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses, and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of the
Company required to bear or bearing the legend set forth in Section 4.3 hereof.
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"Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities and
all fees and disbursements of counsel for any Holder.
8.3 Notice of Proposed Transfers. The transferee
of each certificate representing Restricted Securities (a "Transferee") by
acceptance thereof agrees to comply in all respects with the provisions of this
Agreement and shall have all the rights of an Investor hereunder with respect
to the Restricted Shares. Prior to any proposed sale, assignment, transfer or
pledge of any Restricted Securities (other than under circumstances described
in Sections 8.4, 8.5 and 8.6 hereof), the Holder thereof shall give written
notice to the Company of such Holder's intention to effect such transfer. Each
such notice shall describe the manner and circumstances of the proposed sale,
assignment, transfer or pledge, in sufficient detail, and shall be accompanied
(except in transactions in compliance with Rule 144) by either (a) a favorable
written opinion of counsel reasonably satisfactory in form and substance to the
Company and its counsel, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Act, or
(b) a "no action" letter from the Commission to the effect that the
distribution of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the Holder of such Restricted Securities shall be entitled
to transfer such Restricted Securities in accordance with the terms of the
notice delivered by the holder to the Company. Notwithstanding the foregoing,
Holders of Restricted Securities and their transferees shall be permitted to
transfer such Restricted Securities without complying with the provision of
this Section to (a) any Person controlling, controlled by or under common
control with such Holder or (b) to any other Holder of Restricted Securities.
Each certificate evidencing the Restricted Securities transferred as above
provided shall, subject to the provisions of Section 4.3, bear the appropriate
restrictive legend set forth therein.
8.4 Demand Registration Rights.
(a) On two occasions, upon the demand, in
writing, of Initiating Holders that the Company effect a registration with
respect to all or any part of the Registrable Securities, the Company shall
give written notice of such demand within ten (10) days to all other Holders.
The notice shall advise such Holders of their right to participate in such
demand registration, which right may be exercised by each such Holder giving
written notice
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to the Company of its intention to so participate within twenty (20) days of
receipt of such notice from the Company. The Company will thereafter use its
best efforts to prepare, file and process to effectiveness a registration
statement and any amendments or supplements required to be filed to insure that
such registration statement remains effective under the Act, to permit the
Holders or any of them, or an underwriter on behalf of any of them, to offer
and sell to the public the number of Registrable Securities for which demand
registration rights are exercised hereunder. The Company shall file the
aforesaid registration statement as soon as reasonably practicable, and in any
event, within sixty (60) days following receipt of such written request. The
Company shall use its best efforts to cause such registration statement to
become and remain effective until the earlier of the sale of all of the
Registrable Securities included in the registration statement or one hundred
twenty (120) days from the effective date thereof.
(b) Notwithstanding the foregoing, the Company
shall not be obligated to register the Registrable Securities pursuant to this
Section 8.4 (i) during any period within six (6) months following a prior
primary or secondary public offering of the Company's Common Stock, including
any registration of the Registrable Securities but excluding a "shelf" or
continuing registration, (ii) during any period in which the Company has
commenced preparation of a registration statement of securities and pursuant to
which it has notified the Holders of their "piggy-back" registration rights
pursuant to Section 8.4 hereof, (iii) in any particular jurisdiction in which
the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Act, (iv) if the Company shall furnish to such Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration to be filed in the near
future, then the Company's obligation to use its best efforts to register under
this Section 8.4 shall be deferred for a period not to exceed ninety (90) days
from the receipt of the request to file such Registration Statement by
Initiating Holders; provided, however, that the Company shall not exercise the
right to defer registration granted by this subsection (iv) more than once in
any twelve month period.
(c) The right of any Holder to registration
pursuant to Section 8.4 shall be conditioned upon such Holder's participation
in the underwriting arrangements required by this
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Section 8.4 and the inclusion of such Holder's registrable securities in the
underwriting to the extent requested and to the extent provided herein. The
Company shall (together with all Holders proposing to distribute their
securities through such an underwriting) enter into an underwriting agreement
in customary form with the managing underwriters selected for such underwriting
by a majority in interest of the Initiating Holders (which managing
underwriters shall be reasonably acceptable to the Company). The Holders agree
to be bound by the provisions of Section 8.9 herein regarding cutbacks. If any
Holder of Registrable Securities disapproves of the terms of the underwriting,
such persons may elect to withdraw therefrom by written notice to the Company,
the Managing Underwriter and the Holders participating in the registration.
The Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such registrable securities shall not be
transferred in a public distribution prior to ninety (90) days after the
effective date of such registration.
8.5 Piggy-Back Registration Rights.
(a) On each occasion, if any, following the date
hereof that the Company contemplates filing with the Commission a registration
statement under the Act relating in whole or in part to the primary offer and
sale of shares of its Common Stock, other than a registration statement which
exclusively relates to the registration of securities under (i) an employee
stock option, bonus or other compensation plan, or (ii) a registration relating
solely to a transaction under Rule 145 promulgated by the Commission, the
Company shall so notify the Holders in writing of its intention to do so at
least thirty (30) days prior to the filing of each such registration statement.
Each Holder who gives written notice to the Company, within twenty (20) days of
receipt of such notice from the Company, of such Holder's desire to have any of
its Registrable Securities included in such registration statement, may,
subject to the provisions of this Section 8.5, have its Registrable Securities
so included. The Company shall file any required amendments of or supplements
to any registration statement filed pursuant to this Section 8.5 and otherwise
use its beat efforts to insure that such registration statement remains in
effect under the Act until the earlier of the sale of all of the Registrable
Securities included in the registration or the expiration of one hundred twenty
(120) days from the effective date thereof.
(b) If the registration of which the Company
gives notices is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as a part
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of the written notice given pursuant to Section 8.5(a). In such event the right
of any Holder to registration pursuant to Section 8.5 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company (or by the Holders who have demanded such registration). The Holders
agree to be bound by the terms and conditions of Section 8.9 hereof regarding
cutbacks.
(c) The Company shall have the right to terminate
or withdraw any registration initiated by it under this Section 8.5 prior to
the effectiveness of such registration whether or not any Holder has elected to
include securities in such registration.
8.6 Registration on Form S-3. (a) The Company
shall use its best efforts to qualify for registration on Form S-3 or any
comparable or successor form. After the Company has qualified for the use of
Form S-3, in addition to the rights contained in Sections 8.4 and 8.5, the
Holders of Registrable Securities shall have the right to demand that the
Company promptly use its best efforts to effect one registration per annum on
Form S-3, provided, such request shall be made by Holders of at least 25% of
the outstanding Registrable Securities and with respect to an amount of
Registrable Securities which have a reasonably anticipated aggregate price to
the public of not less than $500,000.
(b) Notwithstanding the foregoing, the Company
shall not be obligated to take any action pursuant to this Section 8.6 (i) in
any particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration, unless
the Company is already subject to service in such jurisdiction and except as
may be required by the Act, (ii) during the period starting with the date sixty
(60) days prior to the filing of and, ending on a date six (6) months following
the effective date of a registration statement (other than with respect to a
registration statement relating to a Rule 145 transaction, and offered solely
to employees, provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective, or
(iii) if the Company shall furnish to Holder a certificate signed by the
President of the
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Company stating that in the good faith judgment of the Board of Directors it
would be seriously detrimental to the Company or its shareholders for a
registration statement to be filed in the near future, then the Company's
obligation to use its beat efforts to file a registration statement shall be
deferred for a period not to exceed ninety (90) days from the receipt of the
request to file such registration by the Holders; provided, however, that the
Company shall not exercise the right to defer registration granted by this
subsection (iii) more than once in any twelve month period.
8.7 Rule 144 Reporting. With a view to making
available the benefits of certain rules and regulations of the Commission which
may permit the sale of the Restricted Securities to the public without
registration, the Company agrees to:
(a) Make and keep public information available as
those terms are understood and defined in Rule 144 under the Act, at all times
from and after 90 days following the effective date of the first registration
under the Act filed by the Company for an offering of its securities to the
general public;
(b) Use its best efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") at any time after is has become subject to such reporting
requirements; and
(c) So long as a Holder owns any Restricted
Securities, furnish to the Holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of Rule 144
(at any time from and after 90 days following the effective date of the first
registration statement filed by the Company for an offering of its securities
to the general public), and of the Act and the Exchange Act (at any time after
it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
8.8 Expenses of Registration. Subject to any
Blue Sky requirements with respect to the allocation of expenses, all
Registration Expenses incurred in connection with registration statements under
Section 8.5 and the first two registration statements filed by the Company
pursuant to Sections 8.4 and 8.6, shall be borne by the Company, and all
Selling Expenses shall be
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borne by the holders of the Registrable Securities so registered pro rata on
the basis of the number of their shares of Registrable Securities so
registered; provided, however, that the Company shall not be required to pay
any Registration Expenses if, as a result of the withdrawal of a request for
registration by Initiating Holders (unless in response to a material adverse
change in the Company), the registration statement does not become effective,
in which case the Holders requesting registration shall bear such Registration
Expenses pro-rata on the basis of the number of their shares of Registrable
Securities so included in the registration request; provided, further, that
such registration shall not be counted as a registration pursuant to Section
8.4, 8.5 or 8.6.
8.9 Cutbacks. In the event the underwriter for a
registration statement filed pursuant to Sections 8.4, 8.5 or 8.6 advises the
Company in writing that the number of Registrable Securities proposed to be
sold in any such offering or sale is greater than the number of shares which
the underwriter believes feasible to sell at that time at the price and upon
the terms approved by or on behalf of the Company with respect to a
registration statement filed under Section 8.5 or on behalf of the Holders
holding a majority of the Registrable Securities to be included in such
registration statement with respect to a registration statement to be filed
under Section 8.4 or 8.6, then the number of Registrable Securities which the
underwriter believes may be sold shall (a) in the case of a registration
statement filed under Section 8.5, first be allocated to the Company and the
remaining Registrable Securities shall be allocated among the Holders in
proportion to the Registrable Securities each first proposed for inclusion in
the registration statement and (b) in the case of a registration statement
filed under Sections 8.4 or 8.6, be allocated to the Holders in proportion to
the number of Registrable Securities each first proposed for inclusion in the
registration statement.
8.10 Additional Covenants Concerning Sale of
Shares. In connection with any registration statement referred to in Section 8
of this Agreement, the Company shall furnish to each Holder whose shares of
Registrable Securities are included therein (or to any broker or other person
at its request) a reasonable number of copies of such registration statement,
each amendment and supplement thereto and each document included therein, such
number of copies of the then current prospectus included therein as they may
from time to time reasonably request, and a copy of the opinion of counsel to
the Company and a copy of the Company's accountants' "cold comfort letter"
which are delivered to the underwriter, if such counsel or accountants, as the
case may be, so consent.
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8.11 Blue Sky Provisions. Except in those
jurisdictions in which the Company would be required to execute a general
consent to service of process, the Company, at its expense, shall endeavor to
cause any of the Registrable Securities included in a registration statement
referred to herein to be qualified under the laws of such number of
jurisdictions as the Holders, or the managing underwriter named herein, may
reasonably designate, and the Company will continue such qualification in
effect so long as may be necessary to comply with all applicable laws
regulating sales of securities.
8.12 Advising the Holders. In connection with any
registration statement referred to in Section 8 hereof, the Company will
promptly advise each Holder whose Registrable Securities are included therein,
and confirm such advice in writing (a) when the registration statement has
become effective, (b) upon the filing of any amendment or supplement to the
registration statement, (c) when any post-effective amendment to the
registration statement becomes effective, and (d) of any request by the
Commission for any amendment or supplement to the registration statement or
prospectus or for additional information. If at any time the Commission should
institute or threaten to institute any proceeding for the purpose of issuing,
or should issue, a stop order suspending the effectiveness of the registration
statement, the Company will promptly notify the Holders whose Registrable
Securities are included in such registration statement, and will use its best
efforts to prevent the issuance of any such stop order or to obtain the
withdrawal thereof as soon as possible; and the Company will advise the Holders
promptly of any order or communication of any public board or body addressed to
the Company suspending or threatening to suspend the qualification of any
shares of Common Stock for sale in any jurisdiction.
8.13 Indemnification
(a) With respect to the registration rights
described in Section 8 hereof, the Company hereby agrees to indemnify, hold
harmless and defend, each Holder and each Person who controls, is controlled by
or under common control of any such Holder within the meaning of the Act,
against any and all losses, claims, damages, liabilities and expenses
(including reasonable legal and other expenses incurred in investigating and
defending against the same), to which they, or any of them, may become subject
under the Act or other statute or common law, arising out of or based upon (i)
any alleged untrue statement of a material fact contained in any registration
statement or prospectus included therein, or any amendment thereof or
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supplement thereto, or (ii) the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
contained therein not misleading; provided, however, that the indemnity
contained in this Section 8.13(a) shall not apply to any such alleged untrue
statement or omission made in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of such Holder. As soon as
practicable after the receipt by any Holder of notice of any claim or action
against any of the Holders in respect of which indemnity may be sought from the
Company hereunder, such Holder shall notify the Company thereof in writing, and
the Company shall assume the defense of such claim or action (and the cost
thereof) by counsel of its own choosing, who shall be reasonably satisfactory
to a majority in interest of the Holders.
(b) Each Holder whose Registrable Securities are
included in a registration statement, severally but not jointly, hereby agrees,
to indemnify, hold harmless and defend the Company, its directors and officers,
and each Person who controls, is controlled by or under common control of the
Company within the meaning of the Act, and each other Holder against any and
all losses, claims, damages, liabilities and expenses (including reasonable
legal or other expenses incurred in investigating and defending against the
same), to which they or any of them may become subject under the Act or other
statute or common law, arising out of or based upon (i) any alleged untrue
statement of a material fact contained in any such registration statement or
prospectus included therein, or any amendment thereof or supplement thereto, or
(ii) the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading; provided, however, that the indemnity contained in this Section
8.13(a) shall apply in each case only to the extent such statement or omission
was made solely in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Holder in connection with the
preparation of the registration statement. The Company, and any other person
in respect of which indemnity may be sought from a Holder hereunder, shall, as
soon as practicable after the receipt of notice of any claim or action against
the Company or such other person or entity, notify such Holder thereof in
writing and such Holder shall assume the defense of any such claim or action
(and the cost thereof) by counsel of its own choosing, who shall be reasonably
satisfactory to the Company and a majority in interest of any Holders claiming
indemnity hereunder.
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8.14 Registration under the Exchange Act. If the
Company shall at any time have completed a public offering of shares of its
Common Stock, it shall thereafter take such steps as may be necessary to
register its Common Stock under Section 12 of the Exchange Act (whether or not
required by law to do so), to maintain such status, and to file with the
Commission all current reports and other information as may be necessary to
enable the Investors or the Transferees to effect sales of their Conversion
Shares in reliance upon Rule 144 under the Act.
8.15 Information by Holder. The Holder or Holders
of Registrable Securities included in any registration shall furnish to the
Company such information regarding such Holder or Holders, the registrable
securities held by them and the distribution proposed by such Holder or Holders
as the Company may reasonably request in writing and as shall be required in
connection with any registration referred to in this Section 8.
8.16 Transfer of Registration Rights. The rights
to cause the Company to register securities granted to Holders under Sections
8.4, 8.5 and 8.6 may be assigned to a transferee or assignee in connection with
any transfer or assignment by a Holder of at least Ten Thousand (10,000) Shares
of Registrable Securities, subject to adjustment for any dilution event
described in the Certificate of Determination or similar event; provided,
however, that the Company is given written notice by the Holder effecting such
transfer or assignment.
8.17 Standoff Agreement. Each Holder agrees in
connection with any registration of the Company's securities that, upon request
of the Company or the underwriters managing any underwritten offering of the
Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration statement) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 120 days) from the effective date of such
registration as may be requested by the Company or such managing underwriters;
provided, however, that (all officers and directors of the Company have entered
into substantially similar agreements. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of each Holder (and the shares or securities of every
other person subject to the foregoing restriction) until the end of such
period.
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8.18 Termination of Rights. The rights of any
particular Holder to cause the Company to register securities under Sections
8.4, 8.5 and 8.6 shall terminate with respect to such Holder following a bona
fide, firmly underwritten public offering of shares of Common Stock registered
under the Act at such time as such Holder is able to dispose of all of his
Registrable Securities in one three-month period, pursuant to the provisions of
Rule 144.
9. Survival of Representations, Warranties and
Covenants.
9.1 Survival of Representations, Warranties and
Covenants of the Company and the Founders. The Investors shall
have the right to rely fully upon the representations, warranties and covenants
of the Company and upon the Founder Representations contained in this Agreement
(notwithstanding any knowledge of facts determined or determinable by the
Investors). All such representations and warranties shall survive the
execution and delivery hereof and the Closing, and, except as otherwise
specifically provided in this Agreement, shall thereafter terminate and expire
on the earlier of (a) the second anniversary of the Closing Date and (b) the
consummation of the Initial Public Offering by the Company. The covenants of
the Company contained herein shall continue until they lapse in accordance with
the provisions of this Agreement.
9.2 Survival of Representations and Warranties of
the Investors. The Company shall have the right to rely fully upon the
representations and warranties of the Investors contained in this Agreement
(notwithstanding any knowledge of facts determined or determinable by the
Company). All such representations, warranties, covenants and agreements shall
survive the execution and delivery hereof and the Closing and, except as
otherwise specifically provided in this Agreement, shall thereafter terminate
and expire on the earlier of (a) the second anniversary of the Closing Date and
(b) the consummation of the Initial Public Offering by the Company. The
covenant made by the Investors in Section 4.3 hereof shall survive
indefinitely, unless a lesser period is prescribed by an applicable statute.
10. Indemnification. The following provisions
are in addition to the provisions for indemnification contained in Section 8.
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10.1 Obligation of the Company and the Founders to
Indemnify. The Company and the Founders hereby agree jointly and severally to
indemnify, defend and hold harmless each Investor (and any of such Investor's
directors, officers, employees, affiliates and assigns) from and against all
losses, liabilities, damages, deficiencies, costs or expenses (including
interest, penalties and reasonable attorneys' fees and disbursements)
("Losses") which it may incur out of any material inaccuracy in or any material
breach of any representation, warranty, covenant or agreement of the Company
and the Founders (with respect to the Founder Representations) contained in
this Agreement or in the Information delivered by the Company.
10.2 Obligation of the Investors to Indemnify.
Each Investor, severally and not jointly, agrees to indemnify, defend and hold
harmless the Company (and its directors, officers, employees, affiliates and
assigns) from and against any Losses which it may incur out of or otherwise in
respect of any material inaccuracy in or material breach of any representation,
warranty, covenant or agreement of such Investor contained in this Agreement or
in any Information delivered by the Investor hereunder.
10.3 Notice and Opportunity to Defend.
10.3.1 Notice of Asserted Liability. Promptly after
receipt by any party hereto (the "Indemnitee") of notice of any demand, claim
or circumstances which, with the lapse of time, would give rise to a claim or
the commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party
(or parties) obligated to provide indemnification pursuant to sections 8, 12.1
or 12.2 (the "Indemnifying Party"). The Claims Notice shall describe the
Asserted Liability in reasonable detail, and shall indicate the amount
(estimated, if necessary) of the Loss that has been or may be suffered by
the Indemnitee.
10.3.2 Opportunity to Defend. The Indemnifying
Party may elect to compromise or defend, at its own expense and by its own
counsel, any Asserted Liability. If the Indemnifying Party elects to
compromise or defend such Asserted Liability, it shall, within 30 days (or
sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall reasonably
cooperate, at the expense of the Indemnifying Party, in the compromise of or
defense against, such Asserted Liability. If the Indemnifying
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Party elects not to compromise or defend the Asserted Liability, fails to
notify the Indemnitee of its election as herein provided or contests its
obligation to indemnify under this Agreement, the Indemnitee may pay,
compromise or defend such Asserted Liability. Notwithstanding the foregoing,
neither the Indemnifying Party nor the Indemnitee may consent to settlement or
compromise of any such Asserted Liability over the objection of the other;
provided, however, that consent to settlement or compromise shall not be
unreasonably withheld, and provided further that the Indemnifying Party shall
not be liable to the Indemnitee for more than the Indemnifying Party could have
settled any Asserted Liability but for the objection of the Indemnitee. In any
event, the Indemnitee and the Indemnifying Party may participate, at their own
expense, in the defense of such Asserted Liability. If the Indemnifying Party
chooses to defend any claim, the Indemnitee shall make available to the
Indemnifying Party any books, records or other documents within its control
that are necessary or appropriate for such defense.
10.4 Indemnification of Brokerage. Each Investor
severally, and not jointly, represents and warrants to the Company and the
Company and the Founders jointly and severally represent and warrant to each of
the Investors that no broker, finder, agent, or similar intermediary has acted
on its behalf in connection with this Agreement or the transactions
contemplated hereby and that there are no brokerage commissions, finder's fees
or similar fees or commissions payable in connection herewith or therewith.
Each Investor severally agrees to indemnify and hold harmless the Company and
the Founders from any claim or demand for commission or other compensation by
any broker, finder, agent or similar intermediary claiming to have been
employed by or on behalf of such Investor, and the Company and the Founders
agree jointly and severally to indemnify and save harmless the Investors from
any claim or demand for commission or other compensation by any broker, finder,
agent or similar intermediary claiming to have been employed by or on behalf of
the Company or the Founders. The indemnification under this Section 10.4 is in
addition to and not a limitation of any other indemnification hereunder, and
the procedures in Section 10.3 hereof shall be followed with respect to
indemnification pursuant to this Section 10.4.
11. Conditions Precedent to Obligations of the
Investors. Except an may be waived in writing by any Investor (but only as to
himself or itself), the obligations of each Investor to consummate the purchase
of the Shares set forth on Schedule 1.2 hereto shall be conditioned on the
following:
-40-
<PAGE> 41
11.1 Representations and Warranties Correct. Each of the
representations and warranties of the Company and the Founders (with respect
to the Founder Representations) contained in this Agreement and in any
certificate delivered to the Investors pursuant hereto shall in all
material respects be true and correct when made and as of the Closing Date,
with the same effect as if made at the Closing Date (or the date to which
it relates in the case of any representation or warranty which specifically
relates to an earlier date).
11.2 Compliance with This Agreement. The Company shall
have performed and complied with all covenants, agreements and conditions
required to be performed or complied with by the Company on or prior to the
Closing Date.
11.3 Minimum Purchase. At least 1,250,000 Shares
shall have been purchased in the aggregate by all of the Investors for an
aggregate purchase price of not less than $2,000,000.
11.4 Satisfaction of Investors and Their Counsel. All
corporate proceedings taken in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form to each Investor and its counsel, Shereff, Friedman,
Hoffman & Goodman.
11.5 No Actions or Proceedings. No action, suit or
proceeding by or before any court, agency or other governmental body
shall have been asserted, instituted or threatened by any party to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement.
11.6 Opinion of Company's Counsel. The Company shall
have delivered to the Investors an opinion of Wilson, Sonsini, Goodrich &
Rosati, counsel for the Company, addressed to the Investors and dated as of
the Closing Date in substantially the form attached hereto as Exhibit C.
11.7 No Lapse in Insurance Coverage. No lapse shall
have occurred prior to the Closing Date in the coverage provided under any of
the policies of insurance of the Company, including any liability policies,
which relate to the business, assets, properties or employees of the Company.
11.8 Employee Agreements and Nondisclosure Agreements.
The Employee Agreements and Nondisclosure Agreements set forth on Schedules
3.17(a) and 3.17(b) shall continue to be in full force and effect.
-41-
<PAGE> 42
11.9 Warrants. Weeden and Ventana shall have received the
Warrants containing the terms set forth in the Loans and in form satisfactory
to Weeden and Ventana and their counsel.
11.10 Officer's Certificate. The Investors shall have
received a certificate dated the Closing Date and signed by the President
certifying the fulfillment of the conditions by the Company specified in this
Section 11 and that he does not have any knowledge of any facts which have not
been disclosed to the Investors in writing which will or may reasonably be
expected to have any material adverse effect on the value of the assets,
properties, business, goodwill or prospects of the Company. General economic
conditions shall not be deemed a fact within the meaning or application of this
paragraph.
11.11 Certificate of Secretary or Assistant Secretary. The
Investors shall have received a certificate dated the Closing Date and signed
by the Secretary or Assistant Secretary of the Company certifying as to:
(a) the Restated Articles of Incorporation in the form
attached as Exhibit A hereto;
(b) the amended By-Laws of the Company in the form
attached as Exhibit B hereto;
(c) resolutions of the Board authorizing and approving
the execution and delivery of this Agreement and all documents required to be
delivered pursuant hereto by the Company, and the performance of its
obligations hereunder and that such resolutions are in full force and effect on
and as of the Closing Date;
(d) resolutions of the shareholders of the Company
approving the Restated Articles of Incorporation and amended By-Laws of the
Company and that such resolutions are in full force and effect on and as of the
Closing Date; and
(e) the incumbency and signature of each of the
officers of the Company signing this Agreement and any of the documents
delivered hereunder.
11.12 Delivery of Documents. All of the documents and
resolutions required to be delivered by the Company to the Investors at
closing shall have been delivered.
12. Conditions Precedent to the Obligation of the Company.
Except an may be waived in writing by the Company, the obligations of the
Company to consummate the sale of the Shares herein provided for shall be
conditioned upon the following:
-42-
<PAGE> 43
12.1 Representations and Warranties Correct. Each
of the representations and warranties of each Investor in this Agreement and in
any certificate delivered to the Company pursuant hereto certifying the
fulfillment of the conditions by such Investor specified in this Section 12
shall in all material respects be true and correct when made and as of the
Closing Date (or on the date to which it relates in the case of any
representation or warranty which specifically relates to an earlier date).
12.2 Compliance with this Agreement. Each
Investor shall have performed and complied with all covenants, agreements and
conditions required to be performed or complied with by such Investor on or
prior to the Closing Date.
12.3 Satisfaction of Company and its Counsel. All
corporate, partnership and other proceedings taken in connection with the
transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form to the Company and its
counsel, Wilson, Sonsini, Goodrich & Rosati.
12.4 No Actions or Proceedings. No action, suit
or proceeding by or through any court, agency or other governmental body shall
have been asserted, instituted or threatened by any party to restrain, prohibit
or invalidate the transactions contemplated by this Agreement.
13. Documents to be Delivered at Closing.
13.1 Documents to be Delivered by the Company. At
the Closing the Company shall deliver to each of the Investors:
(a) the Restated Articles of Incorporation, in the form
attached as Exhibit C hereto, certified by the Secretary of State of the State
of California;
(b) an opinion, dated the Closing Date, of Wilson,
Sonsini, Goodrich & Rosati, counsel to the Company, in substantially the form
attached as Exhibit C hereto;
(c) a certificate of the President certifying as to the
matters set forth in Section 11.10;
(d) a certificate of the Secretary or Assistant
Secretary certifying as to the matters set forth in Section 11.11;
-43-
<PAGE> 44
(e) a Good Standing Certificate certified by the
Secretary of State of the State of California as to the good standing of the
Company in California;
(f) a Tax Certificate from the Franchise Tax Board
stating that the Company does not owe any franchise taxes to the State of
California;
(g) certificates representing the Shares being
purchased by such Investor;
(h) any amounts remaining unpaid under the Loans, the
Hyland Notes and the Sengupta Note that are not being converted into Shares
shall be paid to Weeden, Ventana, the Hylands and the Senguptas, respectively;
(i) evidence satisfactory to the Investors and their
counsel that Larry Hyland has the authority to enter into this Agreement on
behalf of Elizabeth Hyland;
(J) evidence satisfactory to the Investors and their
counsel that Utpal Sengupta has the authority to enter into this Agreement on
behalf of Caroline Sengupta; and
(k) such additional documents as the Investors or their
counsel shall have reasonably requested.
13.2 Documents to be Delivered by the Investors.
At the Closing, the Investors shall deliver to the Company:
(a) the sum of at least $2,000,000 in the manner set
forth in Section 1.2 hereof;
(b) such other documents as the Company or its counsel
shall have reasonably requested;
(c) Weeden and Ventana shall each deliver the Notes
Secured By Security Agreements issued to them by the Company appropriately
cancelled and a UCC-2 releasing the security pledged by the Company under the
Loans;
(d) Larry Hyland shall deliver the Hyland Notes
appropriately cancelled; and
(e) Utpal Sengupta shall deliver the Sengupta Note
appropriately cancelled.
-44-
<PAGE> 45
14. Miscellaneous.
14.1 Definition of Person. "Person" for
purposes of the Agreement means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture or other entity of whatever nature.
14.2 Definition of Knowledge. "To the best of the
Company's knowledge" and "to the best of the Founder's knowledge" shall mean
the actual knowledge of the Company or the Founders or information which they
should have obtained after due inquiry into the conduct of the Company's
business and matters related thereto.
14.3 Additional Actions. The parties shall
execute and deliver such other and further instruments and perform such other
and further acts as may reasonably be required fully to consummate the
transactions contemplated hereby.
14.4 Expenses. The Company agrees that at the
Closing, it will pay the reasonable legal fees and disbursements of Shereff,
Friedman, Hoffman & Goodman, counsel to the Investors, incurred in connection
with the preparation of this Agreement, the Certificate of Determination and
other ancillary documents called for in this Agreement and the consummation of
the transactions contemplated hereby upon presentation of statements or other
reasonable evidence thereof.
14.5 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same document.
14.6 Binding Effect; No Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and legal representatives. This Agreement is not
assignable by any party hereto without the prior written consent of the other
parties.
14.7 Notices. All notices or other
communications hereunder shall be in writing and shall be mailed, certified or
registered mail, return receipt requested, or shall be sent by messenger or by
electronic transmission, addressed to such party at the address indicated on
Schedule 14.7 or to any such other address as any such party shall specify in a
notice to the Company, with a copy in the case of a notice to any Investor, to
Shereff, Friedman, Hoffman & Goodman, 919 Third Avenue, New York, New York
10022, Attention: Victoria E. Schonfeld, Esq.,
-45-
<PAGE> 46
and, if intended for the Company or the Founders, with a copy to Wilson,
Sonsini, Goodrich & Rosati, Two Palo Alto Square, Suite 900, Palo Alto,
California 94306 Attention: Henry P. Massey, Jr., Esq.
14.8 Applicable Laws. This Agreement shall be
construed and governed by the laws of the State of California applicable to
contracts made and to be performed within such state.
14.9 Entire Agreement. This Agreement
constitutes the entire Agreement between the parties hereto, and no party
hereto shall be bound by any communications between them on the subject matter
hereof unless such communications are in writing and bear a date
contemporaneous with or subsequent to the date hereof. Any prior written
agreements or letters of intent between the parties shall, upon execution of
this Agreement, be null and void.
14.10 Waivers and Amendments; Noncontractual
Remedies; Preservation of Remedies. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof may be waived, only by a
written instrument duly executed and acknowledged with the same formality as
this Agreement, and signed by the Investors (or their Transferees) holding at
least two-thirds of the Shares or Conversion Shares. No delay on the part of
any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any such
right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege.
14.11 Table of Contents; Captions. The Table of
Contents and the captions of the various sections of this Agreement are
inserted for convenience of reference only, and shall not constitute a part
hereof.
14.12 Schedules and Exhibits Part of Agreement.
The Schedules and Exhibits referred to herein and delivered pursuant hereto,
including any amendments thereto or changes therein prior to the Closing Date,
shall be deemed part of this Agreement as fully and effectively as if set forth
at length herein.
14.13 Severability. If any provision of this
Agreement or the application thereof shall for any reason be invalid or
unenforceable, that provision shall be limited only to
-46-
<PAGE> 47
IN WITNESS WHEREOF, each of the parties hereto has
executed this Agreement as of the day and year first above written.
CYMER LASER TECHNOLOGIES
By:___________________________
Name: Robert P. Akins
Title: President
-47-
<PAGE> 48
FOUNDERS:
ROBERT AKINS
____________________________
MARTIN PEDLEY
____________________________
RICHARD SANDSTROM
____________________________
UDAY SENGUPTA
____________________________
-48-
<PAGE> 49
InterVen II, L.P.
By: InterVen II Partners, L.P.
By: Funk Deemer Partners
By: ______________________
Kenneth A Deemer
General Partner
-48-
<PAGE> 50
ALLSOP VENTURE PARTNERS III L.P.
By:_____________________________
-48-
<PAGE> 51
(attached)
K-SUN, INC.
By: __________________________
Name: G. R. Baker
Title: President
-48-
<PAGE> 52
INVESTOR: W.S. INVESTORS
By: __________________________
Henry P. Massey Jr., Esq
Title: ________________________
-48-
<PAGE> 53
INVESTOR: VENTANA GROWTH FUND II, L.P.
By: ____________________________
F. D. Townsen
Managing General Partner
-48-
<PAGE> 54
INVESTOR: WEEDEN CAPITAL PARTNERS, L.P.
By: ___________________________
Richard P. Abraham
General Partner of
Weeden Capital Management
General Partner of
Weeden Capital Partners, L.P.
-48-
<PAGE> 55
FOUNDERS:
__________________________________
Robert Akins
__________________________________
Uday Sengupta
__________________________________
Richard Sandstrom
__________________________________
Martin Pendley
INVESTORS:
VENTANA GROWTH FUND II, L.P.
By:_______________________________
, General Partners
WEEDEN CAPITAL PARTNERS, L.P.
By: Weeden Capital Management L.P.,
its General Partner
By:_______________________________
, General Partner
__________________________________
UTPAL SENGUPTA, Individually
__________________________________
Larry Hyland, Individually
-48-
<PAGE> 56
FOUNDERS:
___________________________________
Robert Akins
___________________________________
Uday Sengupta
___________________________________
Richard Sandstrom
___________________________________
Martin Pendley
INVESTORS:
VENTANA GROWTH FUND II, L.P.
By: _______________________________
, General Partner
WEEDEN CAPITAL PARTNERS, L.P.
By: Weeden Capital Management L.P.,
its General Partner
By:_________________________________
, General Partner
____________________________________
UTPAL SENGUPTA, Individually
-48-
<PAGE> 57
INVESTOR: FOR CLEARWATER VENTURES,
a Partnership
___________________________________
By:
Title:
-48-
<PAGE> 58
INVESTOR: __________________________________
C. IAN SYM-SMITH
Individually
-48-
<PAGE> 59
INVESTOR:
__________________________________
Charles E. Sporck, Individually
-48-
<PAGE> 60
InterVen Ventures 1987
By: Funk Deemer Partners II
By:____________________________
Kenneth M. Deemer
General Partner
-48-
<PAGE> 61
INVESTOR:
By:
----------------------------
Henry P. Massey, Jr.
-48-
<PAGE> 62
INVESTOR:
---------------------------------
FREDRIK C. SCHREUDER
Individually
-48-
<PAGE> 63
INVESTOR: CONVERGENCES GESTION SA
By:
--------------------------------
Signature
Type/Print Name and Title:
Gilles THEVES - Directeur General
---------------------------------
-48-
<PAGE> 64
CYMER LASER TECHNOLOGIES
Schedule 1.1 - Founders
Robert P. Akins
Donald G. Larson
Martin B. Pedley
Richard L. Sandstrom
Uday K. Sengupta
<PAGE> 65
CYMER LASER TECHNOLOGIES
Schedule 1.2
Investors; Number of Shares Purchased;
Aggregate Purchase Price; Per Share Purchase Price
<TABLE>
<CAPTION>
Number of Aggregate Per Share
Shares Purchase Purchase
Investors Purchased Price Price
--------- --------- ---------- ----------
<S> <C> <C> <C>
Ventana Growth
Fund II, L.P. 325,558 $520,892 $1.60
Weeden Capital
Partners, L.P. 325,558 $520,892 $1.60
Interven II, L.P. 468,750 $750,000 $1.60
WS Investments 9,375 $ 15,000 $1.60
Allsop Venture Partners 312,500 $500,000 $1.60
K-Sun, Inc. 312,500 $500,000 $1.60
Interven Ventures 1987 2,344 $ 3,750 $1.60
Clearwater Ventures 87,500 $140,000 $1.60
Robert P. Akins 4,200 $ 6,720 $1.60
Stuart Anderson 7,500 $ 12,000 $1.60
Martin B. Pedley 9,375 $ 15,000 $1.60
Richard L. Sandstrom 6,500 $ 10,400 $1.60
Uday Sengupta 2,000 $ 3,200 $1.60
C. Ian Sym-Smith 62,500 $100,000 $1.60
Convergences Gestion 62,500 $100,000 $1.60
Frederik C. Schreuder 10,000 $ 16,000 $1.60
</TABLE>
<PAGE> 66
CYMER LASER TECHNOLOGIES
Schedule 1.2
(continued)
Investors; Number of Shares Purchased;
Aggregate Purchase Price; Per Share Purchase Price
<TABLE>
<CAPTION>
Number of Aggregate Per Share
Shares Purchase Purchase
Investors Purchased Price Price
--------- --------- ------------ ----------
<S> <C> <C> <C>
Charles E. Sporck 15,625 $25,000 $1.60
Henry P. Massey 3,125 $5,000 $1.60
Larry Hyland 59,400 $71,280 $1.20
Utpal Senqupta 21,072 $26,972 $1.28
Total 2,107,882 $ 3,342,106
</TABLE>
<PAGE> 67
CYMER LASER TECHNOLOGIES
SCHEDULE 3.3(a) Ownership of Common Stock
<TABLE>
<CAPTION>
COMMON
OWNERS STOCK
-------- --------
<S> <C>
AKINS 252,000
LARSON 10,000
PEDLEY 142,000
SANDSTROM 252,000
SENGUPTA 284,000
TOTAL 940,000
</TABLE>
<PAGE> 68
CYMER LASER TECHNOLOGIES
SCHEDULE 3.3(b) Holders of Options and Warrants
<TABLE>
<CAPTION>
STOCK
COMMON STOCK HOLDERS OPTIONS WARRANTS
-------------------- ------ ---------
<S> <C> <C>
PRINCIPALS
AKINS 40,000
LARSON 80,000
PEDLEY 40,000
SANDSTROM 40,000
SENGUPTA 40,000
EMPLOYEES
ANDERSON 10,000
CLUBINE 1,000
MOE 1,000
FOSTER 3,000
WILSON 2,500
CAMPEAU 5,000
-------
SUBTOTAL 262,500
FUTURE EMPLOYEE OPTIONS 187,500
WARRANT HOLDERS (PREFERRED SERIES A)
VENTANA GROWTH FUND II ($500K * 10% * $1.60 * 40%) 78,125
WEEDEN CAPITAL MANAGEMENT ($50OK * 10% * $1.60 * 40%) 78,125
CONVERTIBLE DEBT
UTPAL SENGUPTA
LARRY HYLAND
LARRY HYLAND
SUBTOTAL 156,250
</TABLE>
<PAGE> 69
CYMER LASER TECHNOLOGIES
3.3(b) Holders of Options and Warrants (Con't)
<TABLE>
<CAPTION>
Note Holders Amount Interest Rate
----------- ---------- --------------
<S> <C> <C>
Larry Hyland (1) $20,000 9.0%
Larry Hyland (1) $45,000 9.0%
Uptal Sengupta (2) $20,000 10.0%
Weeden Capital (3) $256,000 10.0%
Weeden Capital (3) $244,000 10.0%
Ventana Growth Fund (3) $256,000 10.0%
Ventana Growth Fund (3) $244,000 10.0%
</TABLE>
- ------------------
1) Convertible (principal plus interest) into shares of Preferred Stock
Series "A" at a 25% discount to the offering price.
2) Convertible (principal plus interest) into shares of Preferred Stock
Series "A" at a 20% discount to the offering price.
3) Convertible (principal plus interest) into shares of Preferred Stock
Series "A" at the offering price. Attached warrants for 10% of the note
amount at a 60% discount to the offering price (see previous page).
<PAGE> 70
CYMER LASER TECHNOLOGIES
SCHEDULE 3.4(a) Compliance with Laws
- No known violations -
<PAGE> 71
CYMER LASER TECHNOLOGIES
SCHEDULE 3.4(b) Permits
Permits List
1) California State Board of Equalization Sellers Permit
2) City of San Diego Certificate of payment of Business Tax
<PAGE> 72
CYMER LASER TECHNOLOGIES
SCHEDULE 3.4(b) Permits
______________________________________________________________________________
| |
| CALIFORNIA STATE BOARD OF EQUALIZATION |
| |
| |
| [SEAL] SELLER'S PERMIT |
| |
| |
| ACCOUNT NUMBER |
| THIS PERMIT DOES __ __________________ |
| NOT AUTHORIZE THE | | |
| HOLDER TO ENGAGE SR FHB 25-810210 |
| IN ANY BUSINESS |
| CONTRARY TO LAWS BIOLUMEN, INC. |
| REGULATING THAT 187 CALLE MAGDALENA, #112 |
| BUSINESS OR TO ENCINITAS, CA 92024 |
| POSSESS OR OPER- |__ __| |
| ATE ANY ILLEGAL |
| DEVICE. IS HEREBY AUTHORIZED PURSUANT TO SALES |
| AND USE TAX LAW TO ENGAGE IN THE BUSINESS |
| OF SELLING TANGIBLE PERSONAL PROPERTY AT |
| THE ABOVE LOCATION |
| |
| STATE BOARD OF EQUALIZATION |
| |
| ????? IS VALID UNTIL REVOKED OR |
| ????? ??? IS NOT TRANSFERABLE |
| |
| Not valid at any other address |
| |
| |
| ST???-R Rev. 9 (1-83) [ILLEGIBLE] |
|______________________________________________________________________________|
DISPLAY CONSPICUOUSLY AT THE PLACE OF BUSINESS FOR WHICH ISSUED
[SEAL] CITY OF SAN DIEGO 87002556
CERTIFICATE OF PAYMENT CERT. # ________
OF BUSINESS TAX 07/31/89
EXP. DATE ________
(NO REMITTANCE REQUIRED. POST IN A CONSPICUOUS PLACE OR KEEP ON PERSON.)
- --------------------------------------------------------------------------------
THIS CERTIFICATE ACKNOWLEDGES FEE PAYMENT PURSUANT TO THE SAN DIEGO MUNICIPAL
CODE AND IS NOT A LICENSE TO DO BUSINESS WITHIN THE CITY OF SAN DIEGO IN
VIOLATION OF ANY SECTION OF THE MUNICIPAL CODE OR REGULATION ADOPTED BY THE
CITY COUNCIL, INCLUDING, BUT NOT LIMITED TO: ZONING RESTRICTIONS, LAND USE
SPECIFICATIONS AS DEFINED IN PLANNED DISTRICTS, REDEVELOPMENT AREAS,
HISTORICAL DISTRICTS OR REVITALIZATION AREAS, BUSINESS TAX REGULATIONS,
POLICE DEPARTMENT REGULATIONS, AND FIRE, HEALTH, OR SANITATION PERMITS AND
REGULATIONS.
THIS DOCUMENT IS ISSUED WITHOUT VERIFICATION THAT THE PAYOR IS SUBJECT TO OR
EXEMPT FROM LICENSING BY THE STATE OF CALIFORNIA.
PAYMENT OF THE REQUIRED TAX OR FEE AT THE TIME OR TIMES DUE IS FOR THE TERM
AND PURPOSE STATED AND IS PURSUANT TO CITY ORDINANCE. PLEASE REFER TO
DELINQUENCY INFORMATION ON THE REVERSE SIDE.
THE TAX OR FEES COLLECTED ARE NOT REFUNDABLE UNLESS COLLECTED AS A RESULT OF
AN ERROR BY THE CITY OF SAN DIEGO.
THIS CERTIFICATE IS VALID ONLY AT THE LOCATION SHOWN. IT MAY BE TRANSFERRED
TO ANOTHER LOCATION AFTER REQUEST IS MADE TO THE CITY TREASURER'S OFFICE.
MAIL
TO:
CYMER LASER TECHNOLOGIES
CYMER LASER TECHNOLOGIES
7887 DUNBROOK RD SUITE H
SAN DIEGO CA 92126
- --------------------------------------------------------------------------------
BUSINESS LOCATION
- --------------------------------------------------------------------------------
NO. | DIR | STREET NAME | SUFX | CITY | STATE | ZIP
- --------------------------------------------------------------------------------
7887 | | DUNBROOK | RD | SAN DIEGO | CA | 92126
- --------------------------------------------------------------------------------
BUSINESS TYPE | UNITS | CURRENT ISSUE DATE | CURRENT EFFECTIVE DATE
- --------------------------------------------------------------------------------
MANUF OPTICAL,MED GOODS | 5 | 04/15/88 | 08/01/87
- --------------------------------------------------------------------------------
DP-796 (Rev 3-87)
<PAGE> 73
CYMER LASER TECHNOLOGIES
SCHEDULE 3.5 Required Approvals and Consents
- No known exceptions -
<PAGE> 74
CYMER LASER TECHNOLOGIES
3.6 Violations and Breaches
Cymer Laser Technologies' promissory note to Uptal Sengupta (see Schedule
3.3(b)) required payment of principal and interest by January 20, 1988. We are
in technical default of that repayment. However, Mr. Uptal Sengupta has
authorized, in writing, the conversion of that note plus accrued interest
(under the terms of the note) into shares of Preferred Stock Series "A".
<PAGE> 75
CYMER LASER TECHNOLOGIES
SCHEDULE 3.7 Financial Statements
Financial Statements Attached
1) Statement of Operations (1986, 1987 and Qtr 1 1988)
2) Balance Sheet Statement (1986, 1987 and Qtr 1 1988)
3) 1987 Audited Financial Statements
<PAGE> 76
SCHEDULE 3.7 Financial Statement (1/2)
CYMER LASER TECHNOLOGIES BUSINESS PLAN STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
MARCH 31, 1988
<TABLE>
<CAPTION>
(Audited) (Audited) (Unaudited)
1986 1987 QTR 1 '88
---------- ---------- ----------
<S> <C> <C> <C>
NET REVENUES 0 0 50
COST OF PRODUCT 0 0 149
---------- ---------- ---------
GROSS PROFIT 0 0 (99)
OPERATING EXPENSES
RESEARCH & DEVELOPMENT 85 224 158
COMMISSIONS 0 0 0
MARKETING & SALES 0 31 26
GEN & ADMIN 16 126 77
PROV FOR DOUBTFUL ACCT'S 0 0 0
---------- ---------- ---------
TOTAL 101 381 261
INCOME FROM OPERATIONS (101) (381) (360)
INTEREST EXPENSE 0 18 22
INTEREST INCOME 1 2 3
---------- ---------- ---------
INC BEFORE TAXES (100) (397) (379)
PROVISION FOR INCOME TAX 0 0 0
---------- ---------- ---------
NET INCOME (100) (397) (379)
========== ========== =========
</TABLE>
<PAGE> 77
SCHEDULE 3.7 Financial Statement (2/2)
CYMER LASER TECHNOLOGIES BUSINESS PLAN BALANCE SHEET STATEMENT
(IN THOUSANDS OF DOLLARS)
MARCH 31, 1988
<TABLE>
<CAPTION>
(Audited) (Audited) (Unaudited)
1986 1987 QTR 1 '88
--------- ---------- ----------
<S> <C> <C> <C>
ASSETS
- ------
CASH & INVESTMENTS 12 150 159
GROSS RECEIVABLES 0 0 58
LESS ALLOWANCES 0 0 0
NET RECEIVABLES 0 0 58
INVENTORIES 0 178 184
PREPAID EXPENSES 2 3 4
--------- ---------- ----------
CURRENT ASSETS 14 331 405
PROPERTY 0 43 132
ACCUM DEPRECIATION 0 2 7
NET PROPERTY 0 41 125
OTHER ASSETS 3 0 0
--------- ---------- ----------
TOTAL ASSETS 17 372 530
========= ========== ==========
LIABILITIES & EQUITY
- --------------------
S/T BORROWING 0 537 1,025
ACCOUNTS PAYABLE 11 99 99
ACCRUED EXPENSES 0 47 91
ACCRUED WARRANTY 0 0 5
ACCRUED INCOME TAXES 0 0 0
--------- ---------- ----------
CURRENT LIABILITIES 11 683 1,220
LONG TERM DEBT 0 65 65
--------- ---------- ----------
TOTAL LIABILITIES 11 748 1,285
EQUITY
- ------
CAPITAL STOCK 106 121 121
RETAINED EARNINGS 0 (100) (497)
EARNINGS YTD (100) (397) (379)
--------- ----------- ----------
TOTAL EQUITY 6 (376) (755)
--------- ---------- ----------
LIABILITIES & EQUITY 17 372 530
========= ========== ==========
</TABLE>
<PAGE> 78
[DELOITTE LETTERHEAD]
________________________________________________________________________________
Suite 1900
701 "B" Street
San Diego, California 92101-8198
(619) 232-6500
ITT Telex: 4995722
AUDITORS' OPINION
Cymer Laser Technologies:
We have examined the balance sheet of Cymer Laser Technologies (a development
stage enterprise) as of December 31, 1987 and the related statements of
operations, stockholders' deficit, and changes in financial position for the
year then ended and cumulative since inception (January 21, 1986). Our
examinations were made in accordance with generally accepted auditing standards
and, accordingly, included such tests of the accounting records and such other
auditing procedures as we considered necessary in the circumstances.
In our opinion, such financial statements present fairly the financial position
of Cymer Laser Technologies (a development stage enterprise) as of December 31,
1987 and the results of its operations and the changes in its financial
position for the year then ended and cumulative since inception, in conformity
with generally accepted accounting principles applied on a basis consistent
with that of the preceding period.
DELOITTE HASKINS + SELLS
February 26, 1988
<PAGE> 79
CYMER LASER TECHNOLOGIES
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1987 AND
CUMULATIVE SINCE INCEPTION
<TABLE>
<CAPTION>
CUMULATIVE SINCE
1987 INCEPTION
------------- -------------
<S> <C> <C>
PRODUCT DEVELOPMENT AND
MANUFACTURING COSTS $224,430 $309,881
GENERAL AND ADMINISTRATIVE 125,574 140,598
MARKETING 31,004 31,004
------------- -------------
LOSS FROM OPERATIONS 381,008 481,483
------------- -------------
OTHER (INCOME) EXPENSE:
Interest income (2,182) (3,023)
Interest expense 18,041 18,041
Other 450 650
------------- -------------
Total 16,309 15,668
------------- -------------
NET LOSS $397,317 $497,151
============= =============
</TABLE>
See notes to financial statements.
________________________________________________________________________________
<PAGE> 80
CYMER LASER TECHNOLOGIES
(A DEVELOPMENT STATE ENTERPRISE)
- --------------------------------
BALANCE SHEET
DECEMBER 31, 1987
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
ASSETS LIABILITIES AND STOCKHOLDERS' DEFICIT NOTES
- ------ ------------------------------------- -----
<S> <C> <C> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash $150,043 Accounts payable $ 98,656
Inventories 177,890 Accrued liabilities 47,379
Prepaids and other assets 2,800 Notes payable 4,6 537,000
-------- --------
PROPERTY - At cost (less accumulated Total current liabilities 683,035
depreciation of $1,600) 41,151 --------
-------- NOTES PAYABLE 4 65,000
--------
COMMITMENTS 5
STOCKHOLDERS' DEFICIT:
Common stock - 10,000,000 shares authorized 2,6 121,000
Deficit accumulated during the development stage (497,151)
--------
Total stockholders' deficit (376,151)
--------
TOTAL $371,884 TOTAL $371,884
======== ========
</TABLE>
See notes to financial statements.
<PAGE> 81
CYMER LASER TECHNOLOGIES
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1987 AND CUMULATIVE SINCE INCEPTION
<TABLE>
<CAPTION>
DEFICIT ACCUMULATED
COMMON STOCK DURING TOTAL
-------------------------------- DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT STAGE DEFICIT
------------ ------------ ------------------- ------------
<S> <C> <C> <C> <C>
SALE OF COMMON
STOCK:
January through
April 1986 -
for $0.06
per share 600,000 $ 36,000 $ 36,000
September through
December 1986 -
for $0.25
per share 280,000 70,000 70,000
NET LOSS $ (99,834) (99,834)
------------ ------------ ------------ ----------
BALANCE, DECEMBER
31, 1986 880,000 106,000 (99,834) 6,166
SALE OF COMMON
STOCK:
July 1987 - for
$0.25 per share 60,000 15,000 15,000
NET LOSS (397,317) (397,317)
------------ ------------ ------------ ----------
BALANCE, DECEMBER
31, 1987 940,000 $121,000 $(497,151) $(376,151)
============ ============ ============ ==========
</TABLE>
See notes to financial statements.
________________________________________________________________________________
<PAGE> 82
CYMER LASER TECHNOLOGIES
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED DECEMBER 31, 1987 AND
CUMULATIVE SINCE INCEPTION
<TABLE>
<CAPTION>
CUMULATIVE SINCE
1987 INCEPTION
---------- ----------
<S> <C> <C>
SOURCES OF FUNDS:
Sale of common stock $ 15,000 $ 121,000
Long-term notes payable 65,000 65,000
---------- ----------
Total sources of funds 80,000 186,000
---------- ----------
USES OF FUNDS:
Operations:
Net loss 397,317 497,151
Subtract depreciation not
affecting working capital (1,600) (1,600)
---------- ----------
Total funds used for operations 395,717 495,551
Purchase of property 42,751 42,751
---------- ----------
Total uses of funds 438,468 538,302
---------- ----------
DECREASE IN WORKING CAPITAL $(358,468) $(352,302)
========== ==========
INCREASE (DECREASE) IN WORKING
CAPITAL BY COMPONENTS:
Cash $ 138,172 $ 150,043
Inventories 177,890 177,890
Prepaids and other assets (2,800) 2,800
Accounts payable (87,931) (98,656)
Accrued liabilities (46,799) (47,379)
Notes payable (537,000) (537,000)
---------- ----------
DECREASE IN WORKING CAPITAL $(358,468) $(352,302)
========== ==========
</TABLE>
See notes to financial statements.
________________________________________________________________________________
<PAGE> 83
CYMER LASER TECHNOLOGIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1987
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
As of December 31, 1987, planned operations have commenced, but there
has been no revenue therefrom. Accordingly, the Company's activities
have been accounted for as those of a "development stage enterprise"
as set forth in Financial Accounting Standards Board Statement No. 7.
Inventories
Inventories are carried at the lower of cost or market on a first-in,
first-out basis.
Depreciation
Depreciation is provided using the straight-line method over the
estimated useful lives of the assets (generally three years).
Patents
During 1987 the Company has expensed as incurred approximately $20,000
of patent costs.
2. STOCKHOLDERS' DEFICIT
Stock Option Plan
The Company adopted a Stock Option Plan (the Plan) during 1987. The
Plan provides that incentive and nonstatutory options to purchase up
to 450,000 shares of Common Stock may be granted to employees and
consultants at prices that are not less than 100% (85% for
nonstatutory options of fair market value on the date the options are
granted. The Plan provides for various restrictions regarding option
terms, prices, and other matters. Options issued under the Plan
generally expire five years after the option is granted. As of
December 31, 1987, the number of shares under option was 245,000 at
prices ranging from $0.25 to $0.50 per share and the number of shares
to which options were exercisable is 77,500. No options have been
exercised.
<PAGE> 84
Preferred Stock Offering and Stock Warrants
The Company's Board of Directors have authorized the issuance of
Preferred Stock totaling at least $2,000,000 (the Offering). If the
Offering is agreed to by April 15, 1988 and completed by April 30,
1988, the Company has agreed to issue warrants to certain note holders
to purchase $51,200 of Preferred Stock at a price per share equivalent
to 40% of the Offering price. These warrants shall have a term of
five years. If the above conditions are not met, the Company has
agreed to issue warrants to the note holders to purchase 236,308
shares of Common Stock at a price per share of $0.65. These warrants
shall have a term of five years and are exercisable after six months.
3. INCOME TAXES
From May 1, 1986 through September 30, 1987, the Company elected S
Corporation status under the Federal tax code. Accordingly, losses
for that period pass through to the stockholders of the Company. As
of December 31, 1987, the Company has Federal and state net operating
losses of $127,000 and $8,000 which are available to reduce future
Federal and state taxable income through 2002.
4. NOTES PAYABLE
The following summarizes short-term and long-term notes payable at
December 31, 1987:
<TABLE>
<CAPTION>
Short-Term Notes Payable
<S> <C>
Notes payable, 10% interest compounded semi-
annually, due upon the earlier of March 31,
1988 or the sale of at least $2,000,000 of
Preferred Stock (see Note 6), convertible
into Preferred Stock at Offering price (see
Note 2), collateralized by substantially all
assets of the Company $512,000
Note payable, 10% interest, due on demand,
convertible into Preferred Stock at
the lower of $2.25 per share or 80% of
Offering price (see Note 2) 25,000
----------
Total short-term notes payable $537,000
==========
Long-Term Notes Payable
Notes payable, 9% interest, due March 25, 1989
($20,000) and April 13, 1989 ($45,000),
convertible into Preferred Stock at the lower of $1.95
per share or 75% of Offering price (see Note 2) $65,000
==========
</TABLE>
<PAGE> 85
5. COMMITMENTS
Leases
The Company leases its facilities and certain equipment under
short-term operating lease agreements requiring total payments of
$48,571 during 1988.
6. SUBSEQUENT EVENT
In February 1988, the Company borrowed an additional $488,000 from
certain creditors of the Company under notes payable which bear
interest at 10% per annum, compounded semiannually. The notes are due
upon the earlier of April 30, 1988 or the sale of at least $2,000,000
of Preferred Stock. The notes are convertible into Preferred Stock at
the Offering price (see Note 2) and are collateralized by
substantially all assets of the Company. If the Offering of Preferred
Stock is agreed to by April 15, 1988 and completed by April 30, 1988,
the Company has agreed to issue warrants to the note holders to
purchase $48,800 of Preferred Stock at a price per share equivalent to
40% of the Offering price. These warrants shall have a term of five
years. If the above conditions are not met, the Company has agreed
to issue warrants to the note holders to purchase 225,230 shares of
Common Stock at a price per share of $0.65. These warrants shall have
a term of five years and are exercisable after six months.
________________________________________________________________________________
<PAGE> 86
CYMER LASER TECHNOLOGIES
SCHEDULE 3.10 Changes Since December 31, 1987
In February 1988, the Company borrowed an additional $488,000 from Ventana
Growth Fund and Weeden Capital Partners under notes payable which bear interest
at 10% per annum, compounded semiannually. The notes are due upon the earlier
of April 30, 1988 or the sale of at least $2,000,000 of Preferred Stock. The
notes are convertible into Preferred Stock at the offering price and are
collateralized by substantially all assets of the Company. If the offering of
Preferred Stock is agreed to by April 15, 1988 and completed by April 30, 1988,
the Company has agreed to issue warrants to the note holders to purchase
$48,800 of Preferred Stock at a price per share equivalent to 40% of the
Offering price. These warrants shall have a term of five years. If the above
conditions are not met, the Company has agreed to issue warrants to the note
holders to purchase 225,230 shares of Common Stock at a price per share of
$0.65. These warrants shall have a term of five years and are exercisable after
six months.
In conjunction with the above note, an earlier note dated October 2, 1987 for
$512,000 which carried warrants was also amended as follows: If the offering of
Preferred Stock is agreed to by April 15, 1988 and completed by April 30, 1988,
the Company has agreed to issue warrants to the note holders to purchase
$51,200 of Preferred Stock at a price per share equivalent to 40% of the
Offering price. These warrants shall have a term of five years. If the above
conditions are not met, the Company has agreed to issue warrants to the note
holders to purchase 236,308 shares of Common Stock at a price per share of
$0.65. These warrants shall have a term of five years and are exercisable after
six months.
<PAGE> 87
CYMER LASER TECHNOLOGIES
SCHEDULE 3.11 Real Property
See attached property lease.
<PAGE> 88
STANDARD INDUSTRIAL LEASE GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. PARTIES. This Lease, dated, for reference purposes only, March 31,
1988, is made by and between GREYSTONE, A DEVELOPMENT COMPANY, A CALIFORNIA
CORPORATION, (herein called "Lessor") and CYMER LASER TECHNOLOGIES, A CALIFORNIA
CORPORATION (herein called "Lessee").
2. PREMISES. Lessor hereby leases to Lessee and Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
that certain real property situated in the County of San Diego State of
California commonly known as 7887 Dunbrook Rd., Unit G&H and described as
approximately 1,625 square feet of improved industrial space for unit G and
approximately 3,858 square feet of improved industrial space for unit H which
equals 5,483 square feet. Said real property including the land and all
improvements therein is herein called "The Premises".
3. TERM.
3.1 Term. The term of this Lease shall be for Twelve (12) months
commencing on April 1, 1988 and ending on March 31, 1989 unless sooner
terminated pursuant to any provision hereof.
3.2 Delay in Possession. Notwithstanding said commencement date,
if for any reason Lessor cannot deliver possession of the Premises to Lessee on
said date, Lessor shall not be subject to any liability therefor nor shall such
failure affect the validity of this Lease or the obligations of Lessee
hereunder or extend the term hereof but in such case, Lessee shall not be
obligated to pay rent until possession of the Premises is tendered to Lessee,
provided, however, that if Lessor shall not have delivered possession of the
Premises within sixty (60) days from said commencement date, Lessee may, at
Lessee's option, by notice in writing to Lessor within ten (10) days
thereafter, cancel this lease, in which event the parties shall be discharged
from all obligations hereunder provided further, however, that if such written
notice of Lessee is not received by Lessor within said ten (10) day period,
Lessee's right to cancel this Lease hereunder shall terminate and be of no
further force or effect.
3.3 Early Possession. If Lessee occupies the Premises prior to
said commencement date, such occupancy shall be subject to all provisions
hereof, such occupancy shall not advance the termination date, and Lessee shall
pay rent for such period at the initial monthly rates set forth below.
4. RENT. Lessee shall pay to Lessor as rent for the Premises, monthly
payments of $4,660.55*, in advance, on the first day of each month of the term
hereof. Lessee shall pay Lessor upon the execution hereof $4,660.55 as rent
for 1st month *Rent for months 1-12 shall be $4,660.55.
Rent for any period during the term hereof which is for less than one
month shall be a pro rata portion of the monthly installment. Rent shall be
payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may designate
in writing.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof $2,000.00** as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default or for the payment of any other
sum to which Lessor may become obligated by reason of Lessee's default, or to
compensate Lessor for any loss or damage which Lessor may suffer thereby. If
Lessor so uses or applies all or any portion of said deposit, Lessee shall
within ten (10) days after written demand therefor deposit cash with Lessor in
an amount sufficient to restore said deposit to the full amount hereinabove
stated and Lessee's failure to do so shall be a material breach of this Lease.
If the monthly rent shall, from time to time, increase during the term of this
Lease, Lessee shall thereupon deposit with Lessor additional security deposit
so that the amount of security deposit held by Lessor shall at all times bear
the same proportion to current rent as the original security deposit bears to
the original monthly rent set forth in paragraph 4 hereof. Lessor shall not be
required to keep said deposit separate from its general accounts. If Lessee
performs all of Lessee's obligations hereunder, said deposit, or so much
thereof as has not theretofore been applied by Lessor, shall be returned
without payment of interest or other increment for its use, to Lessee for, at
Lessor's option, to the last assignee, if any, of Lessee's interest hereunder)
at the expiration of the term hereof, and after Lessee has vacated the
Premises. No trust relationship is created herein between Lessor and Lessee
with respect to said Security Deposit.
** ON DEPOSIT.
6. USE.
6.1 Use. The Premises shall be used and occupied only for
research, development of laser technology or any other use which is reasonably
comparable and for no other purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in its state
existing on the date that the Lease term commences, but without regard to the
use for which Lessee will use the Premises, does not violate any covenants or
restrictions of record, or any applicable building code, regulation or ordinance
in effect on such Lease term commencement date. In the event it is determined
that this warranty has been violated, then it shall be the obligation of the
Lessor after written notice from Lessee to promptly, at Lessor's sole cost and
expense, rectify any such violation. In the event Lessee does not give to
Lessor written notice of the violation of this warranty within six months from
the date that the Lease term commences, the correction of same shall be the
obligation of the Lessee at Lessee's sole cost. The warranty contained in this
paragraph 6.2(a) shall be of no force or effect if, prior to the date of this
Lease, Lessee was the owner or occupant of the Premises, and, in such event,
Lessee shall correct any such violation at Lessee's sole cost.
(b) Except as provided in paragraph 6.2(a), Lessee shall, at
Lessee's expense, comply promptly with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements in effect during the term or any part of the term hereof,
regulating the use by Lessee of the Premises. Lessee shall not use nor permit
the use of the Premises in any manner that will lend to create waste or a
nuisance or, if there shall be more than one tenant in the building containing
the Premises, shall tend to disturb such other tenants.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee clean and free
of debris on Lease commencement date (unless Lessee is already in possession)
and Lessor further warrants to Lessee that the plumbing, lighting, air
conditioning, heating, and loading doors in the Premises shall be in good
operating condition on the Lease commencement date in the event that it is
determined that this warranty has been violated, then it shall be the
obligation of Lessor, after receipt of written notice from Lessee setting forth
with specificity the nature of the violation, to promptly, at Lessor's sole
cost, rectify such violation. Lessee's failure to give such written notice to
Lessor within thirty (30) days after the Lease commencement date shall cause
the conclusive presumption that Lessor has complied with all of Lessor's
obligations hereunder. The warranty contained in this paragraph 6.3(a) shall
be of no force or effect if prior to the date of this Lease, Lessee was the
owner or occupant of the Premises.
(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises in their condition existing as of the Lease commencement
date or the date that Lessee takes possession of the Premises, whichever is
earlier, subject to all applicable zoning, municipal, county and state laws,
ordinances and regulations governing and regulating the use of the Premises,
and any covenants or restrictions of record, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has made
any representation or warranty as to the present or future suitability of the
Premises for the conduct of Lessee's business.
7. MAINTENANCE, REPAIRS AND ALTERATIONS.
7.1 Lessor's Obligations. Subject to the provisions of paragraphs
6.7.2 and 9 and except for damage caused by any negligent or intentional act
or omission of Lessee, Lessee's agents, employees, or invitees in which event
Lessee shall repair the damage. Lessor, at Lessor's expense, shall keep in
good order, condition and repair the foundations, exterior walls and the
exterior roof of the Premises. Lessor shall not, however, be obligated to
paint such exterior nor shall Lessor be required to maintain the interior
surface of exterior walls, windows, doors or plate glass. Lessor shall have no
obligation to make repairs under this Paragraph 7.1 until a reasonable time
after receipt of written notice of the need for such repairs. Lessee expressly
waives the benefits of any statute now or hereafter in effect which would
otherwise afford Lessee the right to make repairs at Lessor's expense or to
terminate this Lease because of Lessor's failure to keep the premises in good
order, condition and repair.
7.2 Lessee's Obligations.
(a) Subject to the provisions of paragraph 6.7.1 and 9,
Lessee, at Lessee's expense, shall keep in good order, condition and repair the
Premises and every part thereof (whether or not the damaged portions of the
Premises or the means of repairing the same are reasonably or readily
accessable to Lessee) including, without limiting the generality of the
foregoing, all plumbing, heating, air conditioning, (Lessee shall provide and
Initials: /s/ RPA
------------------
<PAGE> 89
maintain at Lessee's expense, an air conditioning system maintenance contract)
ventilating, electrical and lighting facilities and equipment within the
Premises, fixtures, interior walls and interior surface of exterior walls,
ceilings, windows, doors, plate glass and skylights, located within the
Premises, and all landscaping, driveways, parking lots, fences and signs
located in the Premises and all sidewalks and parkways adjacent to the Premises.
(b) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.2 or under any other paragraph of this Lease, Lessor may at Lessor's
option enter upon the Premises after 10 days prior written notice to Lessee
(except in the case of emergency, in which case no notice shall be required),
perform such obligations on Lessee's behalf and but the Premises in good order,
condition and repair, and the cost thereof; together with interest thereon at
the maximum rate then allowable by law shall be due and payable as additional
rent to Lessor together with Lessee's next rental installment.
(c) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as
received, ordinary wear and tear excepted, clean and free of debris. Lessee
shall repair any damage to the Premises occasioned by the installation or
removal of its trade fixtures, furnishings and equipment. Notwithstanding
anything to the contrary otherwise stated in this Lease, Lessee shall leave the
air lines, power panels, electrical distribution systems, lighting fixtures,
space heaters, air conditioning, plumbing and fencing on the premises in good
operating condition.
7.3 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions or Utility installations in, on or about
the Premises except for nonstructural alterations not exceeding $2,500 in
cumulative costs during the term of this Lease in any event, whether or not in
excess of $2,500 in cumulative cost. Lessee shall make no change or alteration
to the exterior of the Premises nor the exterior of the building(s) on the
Premises without Lessor's prior written consent. As used in the Paragraph 7.3
the term "Utility Installation" shall mean carpeting, window coverings, air
lines, power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing, and fencing. Lessor may require that
Lessee remove any or all of said alterations, improvements, additions or
Utility installations at the expiration of the term, and restore the Premises
to their prior condition. Lessor may require Lessee to provide Lessor at
Lessee's sole cost and expense, a lien and completion bond in an amount equal
to one and one-half times the estimated cost of such improvements, to insure
Lessor against any liability for mechanic's and materialmen's liens and to
insure completion of the work. Should Lessee make any alterations,
improvements, additions or Utility installations without the prior approval of
Lessor, Lessor may require that Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility installations
in, or about the Premises that Lessee shall desire to make an which requires
the consent of the Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the consent shall be
deemed conditioned upon Lessee acquiring a permit to do so from appropriate
government agencies, the furnishing of a copy thereof to Lessor prior to the
commencement of the work and the compliance by Lessee of all conditions of said
permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days notice prior to the commencement of any
work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Lessee shall,
in good faith, contest the validity of any such lien, claim or demand, then
Lessee shall, at its sole expense defend itself and Lessor against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof against the Lessor or the Premises, upon the
condition that if Lessor shall require, Lessee shall furnish to Lessor a surety
bond satisfactory to Lessor in an amount equal to such contested lien claim or
demand indemnifying Lessor against liability for the same and holding the
Premises free from the effect of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's attorneys fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
(d) Unless Lessor requires their removal, as set forth in Paragraph
7.3(a), all alterations, improvements, additions and Utility installations
(whether or not such Utility installations constitute trade fixtures of
Lessee), which may be made on the Premises, shall become the property of Lessor
and remain upon and be surrendered with the Premises at the expiration of the
term. Notwithstanding the provisions of this Paragraph 7.3(d), Lessee's
machinery and equipment, other than that which is affixed to the Premises so
that it cannot be removed without material damage to the Premises, shall remain
the property of Lessee and may be removed by Lessee subject to the provisions
of Paragraph 7.2(c).
8. INSURANCE; INDEMNITY.
8.1 LIABILITY INSURANCE - LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of Combined
Single Limit Bodily Injury and Property Damage Insurance insuring Lessee and
Lessor against any liability arising out of the use, occupancy or maintenance of
the Premises and all other areas appurtenant thereto. Such insurance shall be
in an amount not less than $500,000 per occurrence. The policy shall insure
performance by Lessee of the indemnity provisions of this Paragraph 8. The
limits of said insurance shall not, however, limit the liability of Lessee
hereunder.
8.2 LIABILITY INSURANCE - LESSOR. Lessor shall obtain and keep in
force during the term of this Lease a policy of Combined Single Limit Bodily
Injury and Property Damage Insurance, insuring Lessor, but not Lessee against
any liability arising out of the ownership, use, occupancy or maintenance of
the Premises and all areas appurtenant thereto in an amount not less than
$500,000 per occurrence.
8.3 PROPERTY INSURANCE. Lessor shall obtain and keep in force during
the term of this Lease a policy or policies of insurance covering loss or
damage to the Premises, but not Lessee's fixtures, equipment or tenant
improvements in an amount not to exceed the full replacement value thereof, as
the same may exist from time to time, providing protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, flood (in the event same is required by a lender having a
lien on the Premises) special extended perils ("all risk", as such term is used
in the insurance industry) but not plate glass insurance. In addition, the
Lessor shall obtain and keep in force, during the term of this Lease, a policy
of rental value insurance covering a period of one year, with loss payable to
Lessor, which insurance shall also cover all real estate taxes and insurance
costs for said period.
8.4 PAYMENT OF PREMIUM INCREASE.
(a) Lessee shall pay to Lessor, during the term hereof, in addition to
the rent, the amount of any increase in premiums for the insurance required
under Paragraphs 8.2 and 8.3 over and above such premiums paid during the Base
Period as hereinafter defined, whether such premium increase shall be the
result of the nature of Lessee's occupancy, any act or omission of Lessee,
requirements of the holder of a mortgage or deed of trust covering the
Premises, increased valuation of the Premises, or general rate increases. In
the event that the Premises have been occupied previously, the words "Base
Period" shall mean the last twelve months of the prior occupancy. In the event
that the Premises have never been previously occupied, the premiums during the
"Base Period" shall be deemed to be the lowest premiums reasonably obtainable
for said insurance assuming the most nominal use of the Premises. Provided,
however, in lieu of the Base Period, the parties may insert a dollar amount at
the end of this sentence which figure shall be considered as the insurance
premium for the Base Period $ BASE . In no event, however, shall Lessee be
responsible for any portion of the premium cost attributable to liability
insurance coverage in excess of $1,000,000 procured under paragraph 8.2.
(b) Lessee shall pay any such premium increases to Lessor within 30
days after receipt by Lessee of a copy of the premium statement or other
satisfactory evidence of the amount due. If the insurance policies maintained
hereunder cover other improvements in addition to the Premises. Lessor shall
also deliver to Lessee a statement of the amount of such increase attributable
to the Premiums and showing in reasonable detail, the manner in which such
amount was computed. If the term of this Lease shall not expire concurrently
with the expiration of the period covered by such insurance. Lessee's
liability for premium increases shall be prorated on an annual basis.
(c) If the Premises are part of a larger building, then Lessee shall
not be responsible for paying any increase in the property insurance premium
caused by the acts or omissions of any other tenant of the building of which
the Premises are a part.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least B plus, or such
other rating as may be required by a lender having a lien on the Premises, as
set forth in the most current issue of "Best's Insurance Guide". Lessee shall
deliver to Lessor copies of policies of liability insurance required under
Paragraph 8.1 or certificates evidencing the existence and amounts of such
insurance. No such policy shall be cancellable or subject to reduction of
coverage or other modification except after thirty (30) days' prior written
notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with renewals or "binders" thereof,
or Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee upon demand. Lessee shall not do or permit
to be done anything which shall invalidate the insurance policies referred to
in Paragraph 8.3.
8.6 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
under paragraph 8.3, which perils occur in, on or about the Premises, whether
due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. Lessee and Lessor shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in
this Lease.
8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor from
and against any and all claims arising from Lessor's use of the Premises, or
from the conduct of Lessee's business or from any activity, work or things
done, permitted or suffered by Lessee in or about the Premises or elsewhere and
shall further indemnify and hold harmless Lessor from and against any and all
claims arising from any breach or default in the performance of any obligation
on Lessee's part to be performed under the terms of this Lease, or arising from
any negligence of the Lessee, or any of Lessee's agents, contractors, or
employees, and from and against all costs, attorney's fees, expenses and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon, and in case any action or proceeding be brought
against Lessor by reason of any such claim. Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel satisfactory to Lessor.
Lessee, as a material part of the consideration to Lessor, hereby assumes all
risks of damage to property or injury to persons, in, upon or about the
Premises arising from any cause and Lessee hereby waives all claims in respect
thereof against Lessor.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant, if any, of the building in which the Premises are
located.
Initials: /s/ RJA
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<PAGE> 90
9. DAMAGE OR DESTRUCTION.
9.1 Definitions.
(a) "Premises Partial Damage" shall herein mean damage or
destruction to the Premises to [illegible] that the cost of repair is less than
50% of the fair market value of the Premises immediately prior to such damage or
destruction. "Premises Building Partial Damage" shall herein mean damage or
destruction to the building of which the Premises are a part to the extent that
the cost of repair is less than 50% of the fair market value of such building as
a whole immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 50% or
more of the fair market value of the Premises immediately prior to such damage
or destruction. "Premises Building Total Destruction" shall herein mean damage
or destruction to the building of which the Premises are a part to the extent
that the cost of repair is 50% or more of the fair market values of such
building as a whole immediately prior to such damage or destruction.
(c) "Insured Loss" shall herein mean damage or destruction
which was caused by an event required to be covered by the insurance described
in Paragraph 8.
9.2 Partial Damage - Insured Loss. Subject to the provisions of
paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is an Insured Loss and which falls into the classification of
Premises Partial Damage or Premises Building Partial Damage, then Lessor shall,
at Lessor's sole cost, repair such damage, but not Lessee's fixtures, equipment
or tenant improvements, as soon as reasonably possible and this Lease shall
continue in full force and effect.
9.3 Partial Damage - Uninsured Loss. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is not an Insured Loss and which fails within the
classification of Premises Partial Damage or Premises Building Partial Damage,
unless caused by a negligent or willful act of Lessee (in which event Lessee
shall make the repairs at Lessee's expense). Lessor may at Lessor's option
either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after the date of
the occurrence of such damage of Lessor's intention to cancel and terminate
this Lease, as of the date of the occurrence of such damage in the event Lessor
elects to give such notice of Lessor's intention to cancel and terminate this
Lease. Lessee shall have the right within ten (10) days after the receipt of
such notice to give written notice to Lessor of Lessee's intention to repair
such damage at Lessee's expense, without reimbursement from Lessor, in which
event this Lease shall continue in full force and effect, and Lessee shall
proceed to make such repairs as soon as reasonably possible if Lessee does not
give such notice within such 10-day period this Lease shall be cancelled and
terminated as of the date of the occurrence of such damage.
9.4 Total Destruction. If at any time during the term of this
Lease there is damage, whether or not an insured Loss, (including destruction
required by any authorized public authority), which falls into the
classification of Premises Total Destruction or Premises Building Total
Destruction, this Lease shall automatically terminate as of the date of such
total destruction.
9.5 Damage Near End of Term.
(a) If at any time during the last six months of the term of
this Lease there is damage, whether or not an Insured Loss, which falls within
the classification of Premises Partial Damage, Lessor may at Lessor's option
cancel and terminate this Lease as of the date of occurrence of such damage by
giving written notice to Lessee of Lessor's election to do so within 30 days
after the date of occurrence of such damage.
(b) Notwithstanding paragraph 9.5(a), in the event that Lessee
has an option to extend or renew this Lease, and the time within which said
option may be exercised has not yet expired, Lessee shall exercise such option,
if it is to be exercised at all, no later than 20 days after the occurrence of
an Insured Loss falling within the classification of Premises Partial Damage
during the last six months of the term of this Lease. If Lessee duly exercises
such option during said 20 day period, Lessor shall at Lessor's expense, repair
such damage as soon as reasonably possible and this Lease shall continue in full
force and effect. If Lessee fails to exercise such option during said 20 day
period, then Lessor may at Lessor's option terminate and cancel this Lease as of
the expiration of said 20 day period by giving written notice to Lessee of
Lessor's election to do so within 10 days after the expiration of said 20 day
period, notwithstanding any term or provision in the grant of option to the
contrary.
9.6 Abatement of Rent: Lessee's Remedies.
(a) In the event of damage described in paragraph 9.2 or 9.3,
and Lessor or Lessee repairs or restores the Premises pursuant to the provisions
of this Paragraph 9, the rent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired. Except for abatement
of rent, if any, Lessee shall have no claim against Lessor for any damage
suffered by reason of any such damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence such
repair or restoration within 90 days after such obligations shall accrue.
Lessee may at Lessee's option cancel and terminate this Lease by giving Lessor
written notice of Lessee's election to do so at any time prior to the
commencement of such repair or restoration, in such event this Lease shall
terminate as of the date of such notice.
9.7 Termination - Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall,
in addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.8 Waiver. Lessor and Lessee waive the provisions of any statutes
which relate to termination of leases when leased properly is destroyed and
agree that such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 Payment of Tax Increase. Lessor shall pay the real property
tax, as defined in paragraph 10.3 applicable to the Premises; provided,
however, that Lessee shall pay, in addition to rent, the amount, if any, by
which real property taxes applicable to the Premises increase over the fiscal
real estate tax year 1988, 1989. Such payment shall be made by Lessee within
thirty (30) days after receipt of Lessor's written statement setting forth the
amount of such increase and the computation thereof. If the term of this Lease
shall not expire concurrently with the expiration of the tax fiscal year.
Lessee's liability for increased taxes for the last partial lease year shall be
prorated on an annual basis.
10.2 Additional Improvements. Notwithstanding paragraph 10.1
hereof, Lessee shall pay to Lessor upon demand therefor the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.
10.3 Definition of "Real Property Tax". As used herein, the term
"real property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on the Premises by any authority having
the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, as against any legal or equitable interest
of Lessor in the Premises or in the real property of which the Premises are a
part, as against Lessor's right to rent or other income therefrom, and as
against Lessor's business of leasing the Premises. The term "real property tax"
shall also include any tax, fee, levy, assessment or charge (i) in substitution
of partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of "real property tax," or (ii) the nature of
which was hereinbefore included within the definition of "real property tax", or
(iii) which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1, 1978, or (iv) which
is imposed as a result of a transfer either partial or total, of Lessor's
interest in the Premises or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such transfer,
or (v) which is imposed by reason of this transaction, any modifications or
changes hereto, or any transfers hereof.
10.4 Joint Assessment. If the Premises are not separately
assessed, Lessee's liability shall be an equitable proportion of the real
property taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in
good faith, shall be conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere. When
possible, Lessee shall cause said trade fixtures, furnishings, equipment and
all other personal property to be assessed and billed separately from the real
property of Lessor.
(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay Lessor the taxes
attributable to Lessee within 10 days after receipt of a written statement
setting forth the taxes applicable to Lessee's property.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon, if any such services are not separately metered to
Lessee. Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph
12.1 hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by
or is under common control with Lessee, or to any corporation resulting from
the merger or consolidation with Lessee, or to any person or entity which
acquires all the assets of Lessee as a going concern of the business that is
being conducted on the Premises, provided that said assignee assumes, in full,
the obligations of Lessee under this Lease. Any such assignment shall not, in
any way, affect or limit the liability of Lessee under the terms of this Lease
even if after such assignment or subletting the terms of this Lease are
materially changed or altered without the consent of Lessee, the consent of
whom shall be necessary.
12.3 No Release of Lessee. Regardless of Lessor's consent, no
subletting or assignment shall release Lessee of Lessee's obligation or after
the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting. In the event of default by
any assignee of Lessee or any successor of Lessee in the performance of any of
the terms hereof. Lessor may proceed directly against Lessee without the
necessity of exhausting remedies against said assignee. Lessor may consent to
subsequent assignments or subletting of this Lease or amendments or
modifications to this Lease with assignees of Lessee, without notifying Lessee,
or any successor of Lessee, and without obtaining its or their consent thereto
and such action shall not relieve Lessee of liability under this Lease.
12.4 Attorney's Fees. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorney's fees incurred in connection
therewith, such attorneys fees not to exceed $350.00 for each such request.
Initials:
------------------------
------------------------
GROSS
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<PAGE> 91
13. DEFAULTS: REMEDIES.
13.1 Defaults. The occurrence of any one or more of the following
events shall constitute a material default and branch of this Lease by Lessee.
(a) The vacating or abandonment of the premises by Lessee.
(b) The failure by Lessee to make any payment of rent or any
other payment required to be made by Lessee hereunder, [COPY ILLEGIBLE] where
such failure shall continue for a period of three days after written notice
thereof from Lessor to Lessee in the event that Lessor serves [COPY ILLEGIBLE]
with a Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer
statutes such Notice to Pay Rent or Quit shall also constitute [COPY ILLEGIBLE]
required by this subparagraph.
(c) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Lessee, other than described in paragraph (b) [COPY ILLEGIBLE]
(d)(i) The making by Lessee of any general arrangement or
assignment for the benefit of creditors [COPY ILLEGIBLE]
(e) The discovery by Lessor that any financial statement given
to Lessor by Lessee any assignment [COPY ILLEGIBLE] any successor in interest of
Lessee or any guarantor of Lessee's obligations hereunder and any [copy
illegible]
13.2 Remedies. In the event of any such material default or breach
by Lessee, Lessor may at any time thereafter [COPY ILLEGIBLE] without notice of
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default or breach.
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease shall [COPY ILLEGIBLE] immediately
surrender possession of the Premises to Lessor in such event, Lessor shall be
entitled to recover from Lessor all [COPY ILLEGIBLE] Lessor by reason of
Lessee's default including but not limited to, the cost of recovering possession
of the Premises expenses of reletting, including necessary renovation and
alteration of the Premises, reasonable attorney's fees and any real estate
commission [COPY ILLEGIBLE] worth at the time of award by the court having
jurisdiction thereof of the amount by which the unpaid rent for the balance of
the term after the time of such award exceeds the amount of such rental loss
for the same period that Lessee proves could be reasonably avoided, that
portion of the leasing commission paid by Lessor pursuant to paragraph 15
applicable to the unexpired term of this lease.
(b) Maintain Lessee's right to possession in which case
this Lease shall continue in effect whether or not Lessee shall have abandoned
the Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located. Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest from the date due
at the maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless
Lessor fails to perform obligations required of Lessor within a reasonable
time, but in no event later than thirty (30) days after written notice by
Lessee to Lessor and to the holder of any first mortgage or deed of trust
covering the Premises whose name and address shall have theretofore been
furnished to Lessee in writing, specifying wherein Lessor has failed to perform
such obligation provided, however, that if the nature of Lessor's obligation
is such that more than thirty (30) days [COPY ILLEGIBLE] performance then
Lessor shall not be in default if Lessor commences performance within such 30
day period and thereafter [COPY ILLEGIBLE] the same to completion.
13.4 Late Charges. Lessee [COPY ILLEGIBLE]
Lessor to incur costs not [COPY ILLEGIBLE]
not limited to processing and [COPY ILLEGIBLE]
covering the Premises . Accordingly, [COPY ILLEGIBLE]
with ten (10) days after such amount [COPY ILLEGIBLE]
equal to 6% of such overdue amount [COPY ILLEGIBLE]
will incur by reason of late payment by Lessee [COPY ILLEGIBLE]
with respect to such overdue [COPY ILLEGIBLE]
late charge is payable hereunder [COPY ILLEGIBLE]
and payable quarterly in advance [COPY ILLEGIBLE]
13.5 Impounds. [COPY ILLEGIBLE] monetary
obligations of Lessee under the terms [COPY ILLEGIBLE] required under this
Lease [COPY ILLEGIBLE] and insurance expenses on the
[COPY ILLEGIBLE] payment when due before delinquent, of any of [COPY
ILLEGIBLE] Lessee under the provisions of this paragraph are insufficient [COPY
ILLEGIBLE] premiums as the same become due Lessee shall pay to Lessor upon
Lessor's [COPY ILLEGIBLE] such additional sums [COPY ILLEGIBLE] to any such
obligations. All the obligations of lessee to perform under this Lease [COPY
ILLEGIBLE] of this paragraph may at the option of lessor be applied to the
payment of any [COPY ILLEGIBLE] of lessee in [COPY ILLEGIBLE] of reel property
tax and insurance premiums.
14. CONDEMNATION. If the Premises, any portion [COPY ILLEGIBLE] of the
exercise of said power (all of which are hereon called condemnation [COPY
ILLEGIBLE] date the condemning authority takes title or possession which or
first occurs [COPY ILLEGIBLE] more than 25% of the land area of the Premises
which is not occupied by any [COPY ILLEGIBLE] option to be exercised in writing
only with ten (10) days after lessor shall have given Lessee written notice of
such taking (or in the absence of such notice within ten (10) days after the
condemning authority shall have taken possession) terminate this lease as of
the [COPY ILLEGIBLE] condemning authority takes such possession. If Lessee
does not terminate this Lease in accordance with the foregoing, this Lease
shall [COPY ILLEGIBLE] and effect as to the portion of the Premises remaining,
except that the rent shall be reduced in the proportion that the floor area of
the building taken bears to the total floor area of the building situated on
the Premises. No reduction of rent shall occur if the only area taken is that
which does not have a building located thereon. Any award for the taking of
all or any part of the Premises under the power of eminent domain or any payment
made under threat of the exercise of such power shall be the property of
Lessor, whether such award shall be made as compensation for diminution in
value of the leasehold or for the taking of the fee, or as severance damages;
provided, however, that Lessee shall be entitled to any award for loss of or
damage to Lessee's trade fixtures and removable personal property. In the event
that this Lease is not terminated by reason of such condemnation, Lessor shall
to the extent of severance damages received by Lessor in connection with such
condemnation, repair any damage to the Premises caused by such condemnation
except to the extent that Lessee has been reimbursed therefor by the condemning
authority. Lessee shall pay any amount in excess of such severance damages
required to complete such repair.
15. BROKER'S FEE.
(a) Upon execution of this Lease by both parties, Lessor shall pay to
Greystone, A Development Company and authorized brokers. Licensed real estate
broker(s), a fee as set forth in a separate agreement between Lessor and said
broker(s), or in the event there is no separate agreement between Lessor and
said broker(s), the sum of $ as agreed, for brokerage services rendered by said
broker(s) to Lessor in this transaction.
(b) Lessor further agrees that if Lessee exercises any Option as
defined in paragraph 39.1 of this Lease which is granted to Lessee under this
Lease, or any subsequently granted option which is substantially similar to an
Option granted to Lessee under this Lease, or if Lessee acquires any rights to
the Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised or if Lessee remains in possession of the Premises after
the expiration of the term of this Lease after having failed to exercise an
Option, or if said broker(s) are the ????? cause of any other lease or sale
entered into between the parties pertaining to the Premises and/or any adjacent
property in which Lessor has an interest, than as to any of said transactions.
Lessor shall pay said broker(s) a fee in accordance with the schedule of said
broker(s) in effect at the time of execution of the Lease.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but
also on behalf of any person, corporation, association or other entity having
an ownership interest in said real property or any part thereof when such fee
is due hereunder. Any transferee of Lessor's interest in this Lease whether
such transfer is by agreement of by operation ???? shall be deemed to have
assumed Lessor's obligation under this Paragraph 15.
16. ESTOPPED CERTIFICATE.
(a) Lessee shall at any time upon not less than ten (10) days prior
written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified in full force
and effect (or, if modified stating the nature of such modification and
certifying that this Lease as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults
on the part of the Lessor hereunder, or specifying such defaults if any are
claimed. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement
within such time shall be a material breach of this Lease or shall be
conclusive upon Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance or such failure may be considered by
Lessor as a default by Lessee under this Lease.
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<PAGE> 92
(c) If Lessor desires to finance, refinance, or sell the Premises, or
any part thereof, Lessor hereby agrees to [illegible] to any lender or
purchaser designated by Lessor such financial statements of Lessee as may be
reasonably required by such lender or purchaser. Such statements shall include
the past three years financial statements of Lessee. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only the
owner or owners at the time in question of the fee title or a lessee's interest
in a ground lease of the Premises, and except as expressly provided in
Paragraph 15, in the event of any transfer of such title or interest. Lessor
herein named (and in case of any subsequent transfers then the grantor) shall
be relieved from and after the date of such transfer of all liability as
respects Lessor's obligations thereafter to be performed, provided that any
funds in the hands of Lessor or the then grantor at the time of such transfer,
in which Lessee has an interest, shall be delivered to the grantee. The
obligations contained in this Lease to be performed by Lessor shall, subject as
aforesaid, be binding on Lessor's successors and assigns, only during their
respective periods of ownership.
18. SEVERABILITY. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction, shall in no way affect the validity of
any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided,
any amount due to Lessor not paid when due shall bear interest at the maximum
rate then allowable by law from the date due. Payment of such interest shall
not excuse or cure any default by Lessee under this Lease, provided, however,
that interest shall not be payable on late charges incurred by Lessee nor on
any amounts upon which late charges are paid by Lessee.
20. TIME OF ESSENCE. Time is of the essence.
21. ADDITIONAL RENT. Any monetary obligations of Lessee to Lessor under the
terms of this Lease shall be deemed to be rent.
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such mailer shall be
effective. This Lease may be modified in writing only, signed by the parties
in interest at the time of the modification. Except as otherwise stated in
this Lease. Lessee hereby acknowledges that neither the real estate broker
listed in Paragraph 15 hereof nor any cooperating broker on this transaction
nor the Lessor or any employees or agents of any of said persons has made any
oral or written warranties or representations to Lessee relative to the
condition or use by Lessee of said Premises and Lessee acknowledges that Lessee
assumes all responsibility regarding the Occupational Safety Health Act, the
legal use and adaptability of the Premises and the compliance thereof with all
applicable laws and regulations in effect during the term of this Lease except
as otherwise specifically stated in this Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified mail, and if
given personally or by mail, shall be deemed sufficiently given if addressed
to Lessee or to Lessor at the address noted below the signature of the
respective parties, as the case may be. Either party may by notice to the
other specify a different address for notice purposes except that upon Lessee's
taking possession of the Premises, the Premises shall constitute Lessee's
address for notice purposes. A copy of all notices required or permitted to be
given to Lessor hereunder shall be concurrently transmitted to such party or
parties at such addresses as Lessor may from time to time hereafter designate
by notice to Lessee.
24. WAIVERS. No waiver by Lessor or any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of any act,
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent
so accepted, regardless of Lessor's knowledge of such preceding breach at the
time of acceptance of such rent.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short-term" memorandum of this
Lease for recording purposes.
26. HOLDING OVER. See Addendum to lease.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
Paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
wherein the Premises are located.
30. SUBORDINATION.
(a) This Lease, at Lessor's option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the real property of which the Premises are a part and to
any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's failure
to execute such documents within 10 days after written demand shall constitute
a material default by Lessee hereunder, or, at Lessor's option, Lessor shall
execute such documents on behalf of Lessee as Lessee's attorney-in-fact.
Lessee does hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this paragraph 30(b).
31. ATTORNEY'S FEES. If either party or the broker named herein brings an
action to enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, on trial or appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by the
court. The provisions of this paragraph shall inure to the benefit of the
broker named herein who seeks to enforce a right hereunder.
32. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to enter
the Premises at reasonable times for the purpose of inspecting the same,
showing the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first
having obtained Lessor's prior written consent. Notwithstanding anything to
the contrary in this Lease, Lessor shall not be obligated to exercise any
standard of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises without Lessor's
prior written consent except that Lessee shall have the right, without the prior
permission of Lessor to place ordinary and usual for rent or sublet signs
thereon.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.
36. CONSENTS. Except for paragraph 33 hereof, wherever in this Lease the
consent of one party is required to an act of the other party, such consent
shall not be unreasonably withheld.
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Premises.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the word "Options" has the
following meaning (1) the right or option to extend the term of this Lease or to
renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option or right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other property of Lessor or the right of first offer to lease
other property of Lessor, (3) the right or option to purchase the Premises, or
the right of first refusal to purchase the Premises, or the right of first offer
to purchase the Premises or the right or option to purchase other property of
Lessor, or the right of first refusal to purchase other property of Lessor or
the right of first offer to purchase other property of Lessor.
39.2 OPTIONS PERSONAL. Each Option granted to Lessee in this Lease
are personal to Lessee and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Lessee, provided,
however, the Option may be exercised or assigned to any
INITIALS [ILLEGIBLE]
-----------
INITIALS [ILLEGIBLE]
-----------
<PAGE> 93
Lessee Affiliate as defined in paragraph 12.2 of this Lease. The Options herein
granted to Lessee are not assignable separate and apart from this Lease.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
options to extent or renew this Lease a later option cannot be exercised unless
the prior option to extend or renew this Lease has been so exercised.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i)
during the time commencing from the date Lessor gives to Lessee a notice of
default pursuant to paragraph 13 1(b) or 13 1(c) and continuing until the
default alleged in such notice of default is cured, or (ii) during the period
of time commencing on the day after a monetary obligation to Lessor is due from
Lessee and unpaid (without any necessity for notice thereof to Lessee)
continuing until the obligation is paid, or (iii) at any time after an event of
default described in paragraph 13 1(a), 13 1(d), or 13 1(e) (without any
necessity of Lessor to give notice of such default to Lessee) or (iv) in the
event that Lessor has given to Lessee three or more notices of default under
paragraph 13 1(b), where a late charge becomes payable under paragraph 13.4 for
each of such defaults, or paragraph 13 1(c), whether or not the defaults are
cured, during the 12 month period prior to the time that Lessee intends to
exercise the subject Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise
an Option because of the provisions of paragraph 39 4(a).
(c) All rights to Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option. If, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of 30 days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in paragraph 13 1(c) within 30 days after
the date that Lessor gives notice to Lessee of such default and/or Lessee fails
thereafter to diligently prosecute said cure to completion, or (iii) Lessee
commits a default described in paragraph 13 1(a), 13 1(d) or 13 1(e) (without
any necessity of Lessor to give notice of such default to Lessee), or (iv)
Lessor gives to Lessee three or more notices of default under paragraph 13
1(b), where a late charge becomes payable under paragraph 13.4 for each such
default, or paragraph 13.1(c), whether or not the defaults are cured.
40. MULTIPLE TENANT BUILDING. In the event that the Premises are part of a
larger building or group of buildings then Lessee agrees that it will abide by,
keep and observe all reasonable rules and regulations which Lessor may make
from time to time for the management, safety, care, and cleanliness of the
building and grounds, the parking of vehicles and the preservation of good
order therein as well as for the convenience of other occupants and tenants of
the building. The violations of any such rules and the regulations shall be
deemed a material breach of this Lease by Lessee occupants and tenants of the
building. The violations of any such rules and regulations shall be deemed a
material breach of this Lease by Lessee.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of Lessee, its agents and
invitees from acts of third parties.
42. EASEMENTS. Lessor reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so
long as such easements, rights, dedications, Maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall
sign any of the aforementioned documents upon request of Lessor and failure to
do so shall constitute a material breach of this Lease.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment, and there shall survive the right
on the part of said party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said party
to pay such sum or any part thereof, said party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
44. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of said entity. If Lessee is a corporation, trust
or partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. ADDENDUM. Attached hereto is an addendum or addenda containing paragraphs
26 through 51 which constitutes a part of this Lease.
See Addendum to lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO, THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING
THERETO: THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL
COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
The parties hereto have executed this Lease at the place on the dates
specified immediately adjacent to their respective signatures.
<TABLE>
<S> <C>
Executed at San Diego, California GREYSTONE, A DEVELOPMENT COMPANY
----------------------------- ----------------------------------------
on March 23, 1988 By /SIG/
-------------------------------------- -------------------------------------
Address 7940 Silverton Ave., Suite 101 By
--------------------------------- -------------------------------------
San Diego, CA 92126 "LESSOR" (Corporate seal)
---------------------------------
Executed at San Diego, California
------------------------------
on March 23, 1988 By /s/ ROBERT P. AKINS
-------------------------------------- -------------------------------------
Robert P. Akins R.P.A.
Address 7887 Dunbrook Rd., Suite H By
--------------------------------- -------------------------------------
San Diego, CA 92126 "LESSEE" (Corporate seal)
---------------------------------
</TABLE>
For these forms write or call the American Industrial Real Estate Association,
345 South Figueroa St., M-1, Los Angeles, CA 90071
1980 - By American Industrial Real Estate Association. All rights reserved. No
part of these words may be reproduced in any form without permission in writing.
<PAGE> 94
ADDENDUM TO LEASE
LESSEE: Cymer Laser Technologies, A California Corporation
DATE: March 23, 1988
26) HOLDING OVER CLAUSE: If Lessee, with Lessor's consent, remains in
possession of the Premises or any part thereof after the expiration of the term
of lease or term of exercised option(s) hereof, such occupancy shall be a
tenancy from month to month upon all the provisions of this Lease pertaining to
the obligations of Lessee, except that the current monthly rental rate shall
increase by 10%. All options and rights of first refusal, if any, granted
under the terms of this Lease shall be deemed terminated and be of no further
effect during said month to month tenancy.
47) 30 DAY NOTICE CLAUSE. Any lease whether for a specific term, month to
month, or which becomes month to month as a result of holding over pursuant to
paragraph 26 of Lease shall require a 30 day written notice by either Lessee or
Lessor that the tenancy will be terminated in order to allow both Lessee and
Lessor adequate time to make new arrangements.
48) PARKING. Lessee shall have nonexclusive use of 18 parking spaces.
49) RULES AND REGULATIONS: Attached hereto, Exhibit "A".
50) NO RELATIONSHIP WITH SERVICE AGREEMENT. This lease between Lessee and
Lessor is not a part of, related or connected to, or dependent or conditioned
upon the continued existence of any service agreement which may exist between
Lessee and Greystone Business Services, Inc., a California corporation. No
default under this Lease by either party shall constitute a default under the
terms of any such service agreement, nor shall a default under the service
agreement constitute a default under this Lease.
(51) TENANT IMPROVEMENTS. Lessor will provide at Lessor's sole cost and
expense tenant improvements as listed below.
1. Paint Suite G.
2. Clean carpets in Suite G.
3. Add an opening between the two unit G & H.
DATE:3/31/88 DATE:3/31/88
Signed by: Signed by:
[Illegible] ROBERT P. AKINS
- --------------------------- -----------------------
LESSOR LESSOR
<PAGE> 95
EXHIBIT "A"
RULES AND REGULATIONS
1) SIGNS/WINDOWS. All tenant (Lessee) identification signs shall be
provided at the expense of the Lessee and must conform to the size, color and
material as specified by Lessor. No sign, placard, picture, advertisement, name
or notice shall be attached to any part of the outside of any building and if so
placed Lessor shall have the right to remove any such sign, placard, picture,
advertisement, name or notice at Lessee's expense. Lessee shall not place nor
allow anything to be placed near the glass of any window, door, partition or
wall which may appear unsightly from outside the leased premises nor conflict
with the above. Window coverings to be installed by Lessee shall be 1-inch
bronze metal horizontal mini-blinds. Lessee is responsible to keep windows
washed inside. No awning or shade shall be affixed or installed over or in the
windows or the exterior of the premises.
2) COMMON AREA/ROOF. The sidewalks, entrances and exits, hall passages and
stairways, if any, shall not be obstructed or used by Lessee for any purpose
other than for ingress and egress. The hall passages, exits, entrances,
stairways and roofs are not for the use of the ????? at public and Lessor shall
in all cases retain the right to control and prevent such access thereto by all
persons whose presence in the judgement of the Lessor shall be prejudicial
herein contained shall be to the safety character, regulation and interests of
the premises and Tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom Lessee normally deals in
the ordinary course of Lessee's business unless such persons are engaged in
illegal activities. Neither Lessee nor employees or invites of Lessee shall go
upon the roof on any building.
3) ADVERTISING. Lessee shall not use the name of the building in
connection with or in promoting or advertising the business for Lessee except as
to Lessee's address. Lessor shall have the right to prohibit the use of the
name of the project or other publicity Lessee which in Lessor's opinion tends
to impair the reputation of the project or its desirability for the other
Lessees. Lessees will refrain from or discontinue such publicity upon
notification by Lessor.
4) LOCKS. No additional locks or bolts shall be placed upon any of the
doors or windows by Lessee, nor shall any changes be made in existing locks or
the mechanisms thereof. Lessee must upon the termination of Lessee's tenancy
return to Lessor all keys either furnished to or otherwise procured by Lessee.
In the event of the loss of any keys so furnished, Lessee shall pay to Lessor
the cost thereof.
5) SOLICITATIONS. Lessee shall not, except as previously approved by
Lessor, disturb, solicit or canvass any occupant of the project and shall
cooperate to prevent the same.
6) USE OF PREMISES. The premises will not be used for any type of boiler
room operations as the word is commonly used in the telemarketing industry.
The leased premises shall not be used for lodging, sleeping or cooking or for
any immoral or illegal purpose or for any purpose that will damage the premises
or the reputation thereof or for any purpose other than that specified in the
lease covering the premises. Any use other than what is set forth in
Section 6 of Lease must require prior written approval by Landlord.
7) PARKING. The parking areas within the office park complex shall be
used solely for the parking of passenger vehicles during the normal office
hours. The parking of trucks, trailers, recreational vehicles and campers is
specifically prohibited. No vehicle of any type shall be stored in the parking
areas at any time. In the event that a vehicle is disabled, it shall be removed
within 48 hours. There shall be no "For Sale" or other advertising signs on or
about any parked vehicle. All vehicles shall be parked in the designated
parking areas in conformation with all signs and other markings.
8) NUISANCES. Lessee shall not use, keep or permit to be used or kept,
any foul or noxious gas or substance in the premises, or permit or suffer
the premises to be occupied or used in a manner offensive or objectionable to
Lessor or other occupants of the building by reason of noise, odors and/or
vibrations, or interfere in any way with other Lessees or those having business
therein nor shall any animals or birds be brought in or kept in or about the
premises of the project. Lessee shall maintain the leased premises free from
mice, bugs and ants attracted by food, water storage materials. Lessor is
responsible for maintaining the outside area.
9) DANGEROUS ARTICLES. Lessee shall not use or keep on the premises of
the complex any kerosene, gasoline or inflammable or combustible fluid or
material, or any article deemed extra hazardous on account of fire or other
dangerous properties or use any other method of heating or air conditioning
other than supplied by Lessor.
10) IMPROPER CONDUCT. Lessor reserves the right to exclude or expel from
the complex any person who in the judgement of the Lessor, is intoxicated or
under the influence of liquor or drugs or who shall in any manner do any act in
violation of the Rules & Regulations of said project.
11) WIRING. No electric wires, or any other electrical apparatus, or
additional electrical outlets, shall be installed except with written request
to and written approval from Lessor. Any installation of above wiring shall be
removed by Lessor at Lessee's expense. Lessor reserves the right to enter upon
the leased premises for the purpose of installing additional electrical for the
benefit of the Lessee or adjoining tenants. Lessor will direct electricians as
to where and how telephone and telegraph wires are to be introduced. The
location of telephones, call boxes and other equipment affixed to the premises
shall be subject to the approval by Lessor.
12) AUCTION. No auction, public or private will be permitted.
13) EXTERIOR. Lessee shall not place any improvements or movable object
including antennas, outside furniture, etc. in the parking areas, landscaped
area or other areas outside of the leased premises, or on the roof of any
building.
14) SECURITY PRECAUTIONS. All entrance doors shall be closed and securely
locked when the premises are not in use. Lessee must observe strict care and
caution that all water faucets or any other apparatus is shut off before Lessee
or Lessee's employees leave the premises and that all electricity, gas, etc.
shall likewise be carefully shut off so as to prevent waste or damage.
15) REST ROOM FACILITIES. The washrooms and restrooms and appurtenances
thereto shall not used for any other use than those for which they were
constructed. No sweepings, rubbish, rags or other foreign substances shall be
thrown or placed therein. No person shall waste water by interfering or
tampering with the faucets. Any damages resulting in soiled washrooms or
restrooms or appurtenances shall be paid for by the Lessee who, or whose
agents, guests or employees shall cause such damage.
16) DAMAGE. Walls, floors, and ceilings shall not be defaced in any way
and no one shall be permitted to mark, nail, screw or drill in to surfaces,
paint or in any way mar the building surface. Pictures, certificates, licenses
and similar items normally used in Lessee's premises may be carefully attached
to the walls or other surfaces shall be repaired by Lessee.
17) FURNITURE, SAFES/MOVING. Furniture, freight, equipment, safes or other
bulky articles shall be moved in to or out to the complex only in the manner
and at such times as Lessor may direct. Lessee shall not overload the floor of
the premises or in any way deface the premises or any part thereof. Lessor
shall in all cases have the right to determine or limit the weight, size and
position of all safes and other heavy equipment. Lessor will not be
responsible for loss or damage to any safe or other property of Lessee from any
cause. All damage done to the building by moving or maintaining any such safe
or other property shall be repaired at the expense of Lessee.
18) PROPERTY LOSS. Lessor shall not be responsible to Lessee for any loss
of property on the premises, however occurring or for any damage done to the
effect of Lessee by employees or any other person.
19) REQUIREMENTS OF LESSEE. Employees of Lessor shall not perform any work
or do anything outside of their regular duties unless under special instruction
from Lessor. Lessee shall give Lessor prompt notice of any defects in the
water, sewage, gas pipes, fixtures, heating apparatus, or any other service
equipment.
20) TRUCK DOORS. All trucks doors shall not be open more than three feet
except for ingress and egress.
21) CREDIT VERIFICATION. Lessee grants Lessor the right to make credit
inquiries at any time during the term of the Lease.
22) RULES AND REGULATIONS. Rules may be modified, amended or supplements
at any time by Lessor upon notice to Lessee.
<PAGE> 96
CYMER LASER TECHNOLOGIES
SCHEDULE 3.12 Tangible Assets and Equipment
See attached list.
<PAGE> 97
CYMER LASER TECHNOLOGIES
CAPITAL EXPENDITURES
As of March 31, 1988
<TABLE>
<CAPTION>
Asset Date Dept Description Life Price Vendor
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
87-1001 10/16/87 700 AT&T 6300 w/Monitor (s/n 0332921) 36 $2,097.20 DataSource
87-1002 10/16/87 700 Diablo 635 Full Character Printer (s/n) 36 $1,134.20 Computer Club
87-1003 10/16/87 100 HP 7475A Plotter (s/n 2641V03960) 36 $1,551.96 Nitro Micro
87-1004 10/23/87 100 Macintosh SE (s/n F7422NEMO11) 36 $2,846.10 Wabash Computer
87-1005 10/23/87 100 Laserwriter Plus (s/n F742OZNMO198) 36 $4,335.40 Wabash Computer
87-1006 10/23/87 300 Macintosh SE (s/n F713A2HM5011) 36 $2,846.10 Wabash Computer
87-1007 10/23/87 700 Macintosh SE w/Imagewriter II (s/n F7422Z1M5011) 36 $3,343.24 Wabash Computer
87-1008 10/23/87 700 Macintosh SE w/Imagewriter II (s/n F7422Z4M5011) 36 $3,459.84 Wabash Computer
87-1009 10/28/87 700 2-Pen Recorder w/ (2) M5 (s/n 6081194) 36 $1,806.84 Goerz Metrawatt
87-1010 11/12/87 100 50 MB External Hard Drive Jasmine (s/n K001731) 36 $1,291.80 Computerware
87-1011 12/14/87 700 Optical Table w/5 Legs (s/n 2168) 36 $4,237.88 Newport Corp
87-1012 12/23/87 500 Water Chiller Part# 600715 (s/n 87MML61330-1) 36 $3,642.30 Nes Lab
87-1013 12/28/87 500 Water Chiller Model# CH 1000 A 1320 (s/n 1646) 36 $2,936.00 Remcor
87-1014 10/27/87 700 HP 1741A O'scope w/ 197B Camera (s/n 2305A 11537) 36 $3,609.25 Electro Rent
87-1015 10/27/87 700 HP 8013B Pulse Generator (s/n 2110A 13472) 36 $1,118.25 Electro Rent
87-1016 12/12/87 500 Pump D8AC 115/1/50-60 (s/n 1287425077) 36 $2,495.08 Leybold
88-1017 1/10/88 700 Ultraviolet Calorimete - Water Cooled (s/n 113) 36 $2,183.30 Scientech
88-1018 2/18/88 500 ProfitKey Int'l MRP Software Sys 36 $31,550.00 ProfitKey
88-1019 2/18/88 500 NRC Tower - XP w/ Terminals & Printer (s/n 36-16800124) 36 $16,882.10 ProfitKey
88-1020 2/5/88 700 Air-spaced Etalon (FPA-305) 36 $6,267.75 Tec Optics
88-1021 2/23/88 100 FAX Machine Model 60 (s/n 70801099) 36 $2,988.98 CopyLine
88-1022 2/17/88 500 1200 Watt Power Supply for NCR Tower (s/n) 36 $1,623.49 Generator Power
88-1023 2/20/88 700 EG&G Reticon 36 $3,177.70 E G & G Reticon
88-1024 2/26/88 700 Enco Mill Drill w/ Stand 36 $1,180.84 Hammond Machine
88-1025 2/29/88 700 Cylindrical Beam Expander 36 $2,754.00 Rocky Mountain
88-1026 2/29/88 700 Air-spaced Etalon (FPA-3OS) 36 $7,770.10 Tec Optics
88-1027 3/1/88 700 2-Pen Recorder w/ (2) M5 (s/n 8057383) 36 $1,890.21 Goerz Metrawatt
88-1028 3/10/88 500 Gas Leak Detector M7952 Delux Model 36 $1,062.91 M G industries
88-1029 3/22/88 500 Ultrasonic Cleaner(s/n NM1247) 36 $4,049.20 Electrowave
88-1030 3/31/88 500 Pallet Lifter Model# 1518T9 (s/n 324555) 36 $2,660.60 BigJoe California
88-1031 3/31/88 500 Macintosh SE w/ImageWriter II (s/n F7194GSM5011) 36 $3,370.80 Computers Unlim
Total Capital $132,163.42
</TABLE>
<PAGE> 98
Schedule 3.14
Proprietary Rights
Cymer Laser Technologies, Inc. has applied for a patent dated January
15, 1988, U.S. Patent Office Serial No. 144799, entitled "Compact Excimer
Laser".
Cymer is aware of certain patents issued to Mr. Gordon Gould in
October 1977 and July 1979 as well as certain other patent applications of Mr.
Gould believed to be pending before the U.S. Patent Office which relate to
certain elements of basic laser technology. These claims of Mr. Gould have
raised a state of confusion in the laser industry, in that many of these claims
may have been covered by prior patents issued to others and under which many
manufacturers of lasers have paid royalties pursuant to licensing arrangements.
During fiscal 1987 the two courts upheld the Gould patents as valid. However,
neither of these decisions is binding upon Cymer and no determination has been
made as to whether Cymer's products infringe the Gould patents. If the Gould
patent claims are found to be valid and Cymer's products are found to infringe
such patents, such findings could have a significant impact on Cymer's gross
profits. If Gould's patent claims are found to be valid it is likely that the
effect of these findings will be shared among other manufacturers of similar
devices.
The Company received a letter dated July 29, 1987 from Questek, Inc.
relating to United States Patent No. 4,611,270 requesting information regarding
possible patent infringement. The Company responded on August 26, 1987 that it
did not believe that any of its products infringed on the stated patent.
Information regarding matters discussed in the previous two paragraphs
is attached to this schedule.
<PAGE> 99
D- 2109
A S S I G N M E N T
WHEREAS, we, Robert P. Akins
and Donald G. Larson
Uday K. Sengupta and Richard L. Sandstrom
of the County of San Diego State of California
County of San Diego State of California
County of San Diego State of California
County of San Diego State of California
respectively, have invented certain new and useful improvements in
COMPACT EXCIMER LASER for which we have today executed application papers for
United States Letters Patent thereon; and
WHEREAS, CYMER LASER TECHNOLOGIES a corporation of the State of
California, hereinafter called Assignee and having its offices and place of
business at 7887 Dunbrook Road, Suite H, San Diego, California 92126 is
desirous of acquiring the entire right, title and interest in and to the
aforesaid invention and in and to any and all Letters Patent therefor granted
in the United States of America, and in any and all countries foreign thereto;
NOW, THEREFORE, TO WHOM IT MAY CONCERN, be it known that for and in
consideration of the sum of One Dollar ($1.00) to each of us in hand paid by
the said Assignee and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, we Robert P. Akins and
Donald G. Larson, Uday K. Sengupta and Richard L. Sandstrom by these presents do
sell, assign and transfer unto said Assignee, its successors, assigns and legal
representatives, the full and exclusive right, title and interest for the
territory of the United States of America and all countries foreign thereto
(including the right to apply for Letters Patent in foreign countries in its
own name and to claim any priority rights for such foreign applications to
which such applications are entitled under international conventions, treaties,
or otherwise), in and to the said invention as described in said application
and in and to all Letters Patent granted therefor, and all divisions, reissues
and continuations thereof, and we hereby authorize and request the Commissioner
of Patents to issue all Letters Patent on said inventions or resulting
therefrom to said Assignee as assignee of the entire right, title and interest,
and we covenant that we have full right so to do and agree that we will
communicate to said Assignee, or its successors, any and all facts known to us
regarding said invention whenever
<PAGE> 100
requested, and will testify in any legal proceeding, sign all lawful papers,
execute all divisional, reissue and continuation applications, and generally do
everything possible to aid said Assignee, its successors and assigns, to obtain
and enforce proper patent protection for said invention in all countries.
Executed this 14th day of January, 1988
ROBERT P. AKINS
------------------------------
Robert P. Akins
DONALD G. LARSON
------------------------------
Donald G. Larson
UDAY K. SENGUPTA
------------------------------
Uday K. Sengupta
RICHARD L. SANDSTROM
------------------------------
Richard L. Sandstrom
STATE OF_____________________ )
) SS.
COUNTY OF____________________ )
On this 14th day of January 1988, before me personally appeared Robert
P. Akins, Donald G. Larson, Uday K. Sengupta and Richard L. Sandstrom to me
known to be the persons whose names are subscribed to the foregoing instrument
and who acknowledge that they executed said instrument as their free and
voluntary act and for the uses and purposes therein expressed.
BETTY A. REGO
-----------------------------
Notary Public
OFFICIAL SEAL
BETTY A. REGO
[SEAL] NOTARY PUBLIC - CALIFORNIA
SAN DIEGO COUNTY
My comm. expires Feb. 8, 1991
<PAGE> 101
Applicant or Patentee: Robert P. Akins et al Attorney's
Serial or Patent No.: Docket No.: 2109
Filed or Issued:
For: COMPACT EXCIMER LASER
VERIFIED STATEMENT (DECLARATION) CLAIMING SMALL ENTITY STATUS
(37 CFR 1.9(f) and 1.27(c)) - SMALL BUSINESS CONCERN
I hereby declare that I am
[ ] the owner of the small business concern identified below:
[X] an official of the small business concern empowered to act on behalf
of the concern identified below:
NAME OF CONCERN CYMER LASER TECHNOLOGIES
ADDRESS OF CONCERN 7887 Dunbrook Road, Suite H
San Diego, California 92126
I hereby declare that the above identified small business concern qualifies as a
small business concern as defined in 13 CFR 121.3-18, and reproduced in 37 CFR
1.9(d), for purposes of paying reduced fees under section 41(a) and (b) of Title
35, United States Code, in that the number of employees of the concern,
including those of its affiliates, does not exceed 500 persons. For purposes of
this statement, (1) the number of employees of the business concern is the
average over the previous fiscal year of the concern of the persons employed on
a full-time, part-time or temporary basis during each of the pay periods of the
fiscal year, and (2) concerns are affiliates of each other when either, directly
or indirectly, one concern controls or has the power to control the other, or a
third party or parties controls or has the power to control both.
I hereby declare that rights under contract or law have been conveyed to and
remain with the small business concern identified above with regard to the
invention, entitled COMPACT EXCIMER LASER by inventor(s) Robert P. Akins,
Donald G. Larson, Uday K. Sengupta, Richard L. Sandstrom described in
[X] the specification filed herewith
[ ] application serial no. _______________________, filed _______________.
[ ] patent no. ____________________________, issued _____________________.
If the rights held by the above identified small business concern are not
exclusive, each individual, concern or organization having rights to the
invention is listed below* and no rights to the invention are held by any
person, other than the inventor, who could not qualify as a small business
concern under 37 CFR 1.9(d) or by any concern which would not qualify as a
small business concern under 37 CFR 1.9(d) or a nonprofit organization under 37
CFR 1.9(e). *NOTE: Separate verified statements are required from each named
person, concern or organization having rights to the invention averring to
their status as small entities. (37 CFR 1.27) NONE
NAME ___________________________________________________________________________
ADDRESS ________________________________________________________________________
[ ] INDIVIDUAL [ ] SMALL BUSINESS CONCERN [ ] NONPROFIT ORGANIZATION
NAME ___________________________________________________________________________
ADDRESS ________________________________________________________________________
[ ] INDIVIDUAL [ ] SMALL BUSINESS CONCERN [ ] NONPROFIT ORGANIZATION
I acknowledge the duty to file, in this application or patent, notification of
any change in status resulting in loss of entitlement to small entity status
prior to paying, or at the time of paying, the earliest of the issue fee or any
maintenance fee due after the date on which status as a small entity is no
longer appropriate. (37 CFR 1.28(b))
I hereby declare that all statements made herein of my own knowledge are true
and that all statements made on information and belief are believed to be true;
and further that these statements were made with the knowledge that willful
false statements and the like so made are punishable by fine or imprisonment, or
both, under section 1001 of Title 18 of the United States Code, and that such
willful false statements may jeopardize the validity of the application, any
patent issuing thereon, or any patent to which this verified statement is
directed.
NAME OF PERSON SIGNING Robert P. Akins
TITLE OF PERSON OTHER THAN OWNER President
ADDRESS OF PERSON SIGNING 7887 Dunbrook Road, Suite H
San Diego, California 92126
SIGNATURE /s/ Robert P. Akins Date /s/ 1/13/88
<PAGE> 102
- --------------------------------------------------------------------------------
COMBINED DECLARATION FOR PATENT APPLICATION AND | ATTORNEY'S DOCKET NUMBER
POWER OF ATTORNEY | 2109
(Includes Reference to PCT International |
Applications) |
- --------------------------------------------------------------------------------
As a below named inventor, I hereby declare that:
My residence, post office address and citizenship are as stated below next to
my name:
I believe I am the original, first and sole inventor (if only one name is
listed below) or an original, first and joint inventor (if plural names are
listed below) of the subject matter which is claimed and for which a patent is
sought on the invention entitled:
COMPACT EXCIMER LASER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the specification of which (check only one item below):
[X] is attached hereto.
[ ] was filed as United States application
Serial No. _________________________________________________________
on _________________________________________________________________
and was amended
on _________________________________________________(if applicable).
[ ] was filed as PCT international application
Number _____________________________________________________________
on _________________________________________________________________
and was amended under PCT Article 19
on _________________________________________________(if applicable).
I hereby state that I have reviewed and understand the contents of the
above-identified specification, including the claims, as amended by any
amendment referred to above.
I acknowledge the duty to disclose information which is material to the
examination of this application in accordance with Title 37, Code of Federal
Regulations, Section 1.56(a).
I hereby claim foreign priority benefits under Title 35, United States Code,
Section 119 of any foreign application(s) for patent or inventor's certificate
or of any PCT international application(s) designating at least one country
other than the United States of America listed below and have also identified
below any foreign application(s) for patent or inventor's certificate or any
PCT international application(s) designating at least one country other than
the United States of America filed by me on the same subject matter having a
filing date before that of the application(s) of which priority is claimed:
- --------------------------------------------------------------------------------
PRIOR FOREIGN/PCT APPLICATION(S) AND ANY PRIORITY CLAIMS UNDER 35 U.S.C. 119:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COUNTRY APPLICATION NUMBER DATE OF FILING PRIORITY CLAIMED
(If PCT, indicate PCT) (day, month, year) UNDER 35 USC 119
- --------------------------------------------------------------------------------
[ ] YES [ ] NO
- --------------------------------------------------------------------------------
[ ] YES [ ] NO
- --------------------------------------------------------------------------------
[ ] YES [ ] NO
- --------------------------------------------------------------------------------
[ ] YES [ ] NO
- --------------------------------------------------------------------------------
[ ] YES [ ] NO
- --------------------------------------------------------------------------------
</TABLE>
PTO 1391 (REV 10-83) Page 1 of 3 U.S. DEPARTMENT OF COMMERCE
Patent and Trademark Office
<PAGE> 103
- --------------------------------------------------------------------------------
COMBINED DECLARATION FOR PATENT APPLICATION AND | ATTORNEY'S DOCKET NUMBER
POWER OF ATTORNEY (CONTINUED) | 2109
(Includes Reference to PCT International
Applications)
- --------------------------------------------------------------------------------
I hereby claim the benefit under Title 35, United States Code, Section 120 of
any United States application(s) or PCT international application(s) designating
the United States of America that is/are listed below and, insofar as the
subject matter of each of the claims of this application is not disclosed in
that/those prior application(s) in the manner provided by the first paragraph of
Title 35, United States Code, Section 112, I acknowledge the duty to disclose
material information as defined in Title 37, Code of Federal Regulations,
Section 1.56(a) which occurred between the filing date of the prior
application(s) and the national or PCT international filing date of this
application:
- --------------------------------------------------------------------------------
PRIOR U.S. APPLICATIONS OR PCT INTERNATIONAL APPLICATIONS DESIGNATING THE U.S.
FOR BENEFIT UNDER 35 U.S.C. 120:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. APPLICATIONS STATUS (Check One)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. APPLICATION NUMBER U.S. FILING DATE PATENTED PENDING ABANDONED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PCT APPLICATIONS DESIGNATING THE U.S.
- --------------------------------------------------------------------------------
PCT APPLICATION NO. PCT FILING DATE U.S. SERIAL NUMBERS
ASSIGNED (if any)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
POWER OF ATTORNEY: As a named inventor, I hereby appoint the following
attorney(s) and/or agent(s) to prosecute this application and transact all
business in the Patent and Trademark Office connected therewith. (List name
and registration number)
CHARLES H. SCHWARTZ, Registration No. 20,472
ELLSWORTH R. ROSTON, Registration No. 16,310
- --------------------------------------------------------------------------------
Send Correspondence to: Direct Telephone Calls to:
ROSTON & SCHWARTZ (name and telephone number)
5900 Wilshire Boulevard, Suite 1430 CHARLES H. SCHWARTZ and/or
Los Angeles, California 90036 ELLSWORTH R. ROSTON
(213) 938-3657
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
FULL NAME FAMILY NAME FIRST GIVEN NAME SECOND GIVEN NAME
OF INVENTOR AKINS ROBERT P.
------------------------------------------------------------------------------------------
201 RESIDENCE & CITY STATE OR FOREIGN COUNTRY COUNTRY OF CITIZENSHIP
CITIZENSHIP San Diego California U.S.A.
-------------------------------------------------------------------------------------------
POST OFFICE POST OFFICE ADDRESS CITY STATE & ZIP CODE/COUNTRY
ADDRESS 12544 Camarero Court San Diego California 92130
- ------------------------------------------------------------------------------------------------
FULL NAME FAMILY NAME FIRST GIVEN NAME SECOND GIVEN NAME
OF INVENTOR LARSON DONALD G.
-------------------------------------------------------------------------------------------
202 RESIDENCE & CITY STATE OR FOREIGN COUNTRY COUNTRY OF CITIZENSHIP
CITIZENSHIP San Diego California U.S.A.
-------------------------------------------------------------------------------------------
POST OFFICE POST OFFICE ADDRESS CITY STATE & ZIP CODE/COUNTRY
ADDRESS 10650 Oakbend Drive San Diego California 92130
- ------------------------------------------------------------------------------------------------
FULL NAME FAMILY NAME FIRST GIVEN NAME SECOND GIVEN NAME
OF INVENTOR SENGUPTA UDAY K.
-------------------------------------------------------------------------------------------
203 RESIDENCE & CITY STATE OR FOREIGN COUNTRY COUNTRY OF CITIZENSHIP
CITIZENSHIP Del Mar California U.S.A.
-------------------------------------------------------------------------------------------
POST OFFICE POST OFFICE ADDRESS CITY STATE & ZIP CODE/COUNTRY
ADDRESS 14047-H Mango Drive Del Mar California 92014
- ------------------------------------------------------------------------------------------------
</TABLE>
I hereby declare that all statements made herein of my own knowledge are true
and that all statements made on information and belief are believed to be true;
and further that these statements were made with the knowledge that willful
false statements and the like so made are punishable by fine or imprisonment,
or both, under section 1001 of Title 18 of the United States Code, and that
such willful false statements may jeopardize the validity of the application or
any patent issuing thereon.
- --------------------------------------------------------------------------------
SIGNATURE OF INVENTOR 201 SIGNATURE OF INVENTOR 202 SIGNATURE OF INVENTOR 203
/s/ Robert P. Akins /s/ Donald G. Larson /s/ Uday K. Sengupta
- --------------------------------------------------------------------------------
DATE DATE DATE
1/14/88 1/14/88 Jan 14, 1988
- --------------------------------------------------------------------------------
PTO 1391 (REV 10-83) Page 2 of 3 U.S. DEPARTMENT OF COMMERCE
Patent and Trademark Office
<PAGE> 104
- --------------------------------------------------------------------------------
COMBINED DECLARATION FOR PATENT APPLICATION AND | ATTORNEY'S DOCKET NUMBER
POWER OF ATTORNEY (CONTINUED) | 2109
(Includes Reference to PCT International
Applications)
- --------------------------------------------------------------------------------
I hereby claim the benefit under Title 35, United States Code, Section 120 of
any United States application(s) or PCT international application(s) designating
the United States of America that is/are listed below and, insofar as the
subject matter of each of the claims of this application is not disclosed in
that/those prior application(s) in the manner provided by the first paragraph of
Title 35, United States Code, Section 112, I acknowledge the duty to disclose
material information as defined in Title 37, Code of Federal Regulations,
Section 1.56(a) which occurred between the filing date of the prior
application(s) and the national or PCT international filing date of this
application:
- --------------------------------------------------------------------------------
PRIOR U.S. APPLICATIONS OR PCT INTERNATIONAL APPLICATIONS DESIGNATING THE U.S.
FOR BENEFIT UNDER 35 U.S.C. 120:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. APPLICATIONS STATUS (Check One)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. APPLICATION NUMBER U.S. FILING DATE PATENTED PENDING ABANDONED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PCT APPLICATIONS DESIGNATING THE U.S.
- --------------------------------------------------------------------------------
PCT APPLICATION NO. PCT FILING DATE U.S. SERIAL NUMBERS
ASSIGNED (if any)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
POWER OF ATTORNEY: As a named inventor, I hereby appoint the following
attorney(s) and/or agent(s) to prosecute this application and transact all
business in the Patent and Trademark Office connected therewith. (List name
and registration number)
CHARLES H. SCHWARTZ, Registration No. 20,472
ELLSWORTH R. ROSTON, Registration No. 16,310
- --------------------------------------------------------------------------------
Send Correspondence to: Direct Telephone Calls to:
ROSTON & SCHWARTZ (name and telephone number)
5900 Wilshire Boulevard, Suite 1430 CHARLES H. SCHWARTZ and/or
Los Angeles, California 90036 ELLSWORTH R. ROSTON
(213) 938-3657
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
FULL NAME FAMILY NAME FIRST GIVEN NAME SECOND GIVEN NAME
OF INVENTOR SANDSTROM RICHARD L.
------------------------------------------------------------------------------------------
201 RESIDENCE & CITY STATE OR FOREIGN COUNTRY COUNTRY OF CITIZENSHIP
CITIZENSHIP Encinitas California U.S.A.
-------------------------------------------------------------------------------------------
POST OFFICE POST OFFICE ADDRESS CITY STATE & ZIP CODE/COUNTRY
ADDRESS 305 Trailview Encinitas California 92024
- ------------------------------------------------------------------------------------------------
FULL NAME FAMILY NAME FIRST GIVEN NAME SECOND GIVEN NAME
OF INVENTOR
-------------------------------------------------------------------------------------------
202 RESIDENCE & CITY STATE OR FOREIGN COUNTRY COUNTRY OF CITIZENSHIP
CITIZENSHIP
-------------------------------------------------------------------------------------------
POST OFFICE POST OFFICE ADDRESS CITY STATE & ZIP CODE/COUNTRY
ADDRESS
- ------------------------------------------------------------------------------------------------
FULL NAME FAMILY NAME FIRST GIVEN NAME SECOND GIVEN NAME
OF INVENTOR
-------------------------------------------------------------------------------------------
203 RESIDENCE & CITY STATE OR FOREIGN COUNTRY COUNTRY OF CITIZENSHIP
CITIZENSHIP
-------------------------------------------------------------------------------------------
POST OFFICE POST OFFICE ADDRESS CITY STATE & ZIP CODE/COUNTRY
ADDRESS
- ------------------------------------------------------------------------------------------------
</TABLE>
I hereby declare that all statements made herein of my own knowledge are true
and that all statements made on information and belief are believed to be true;
and further that these statements were made with the knowledge that willful
false statements and the like so made are punishable by fine or imprisonment,
or both, under section 1001 of Title 18 of the United States Code, and that
such willful false statements may jeopardize the validity of the application or
any patent issuing thereon.
- --------------------------------------------------------------------------------
SIGNATURE OF INVENTOR 201 SIGNATURE OF INVENTOR 202 SIGNATURE OF INVENTOR 203
/s/ Richard L. Sandstrom
- --------------------------------------------------------------------------------
DATE DATE DATE
1/14/88
- --------------------------------------------------------------------------------
PTO 1391 (REV 10-83) Page 3 of 3 U.S. DEPARTMENT OF COMMERCE
Patent and Trademark Office
<PAGE> 105
CYMER LASER TECHNOLOGIES
SCHEDULE 3.14 Proprietary Rights
See attached list.
<PAGE> 106
CYMER LASER TECHNOLOGIES
SCHEDULE 3.15(a) Contracts and Other Agreements
List of contracts and other Agreements
1) Minolta Copier Lease Agreement
2) Consulting Agreement - Hitech Metallurgical Company
3) Sales Order - GCA Purchase Order #4822
4) Sales Order - GCA Purchase Order #8-288601-EA
5) Purchase Order - Saphikon
6) Purchase Order - E.E.V. Inc.
7) Purchase Order - Accuratus Ceramic Corp
8) Purchase Order - A.L.E. Systems Inc.
9) Employee Stock Option Agreements
10) Founder Stock Option Agreements
11) Founder Stock Purchase Agreements
12) Letter of Agreement - K-SUN, INC.
<PAGE> 107
LETTER OF AGREEMENT
April 27, 1988
This Letter of Agreement sets forth mutual agreements reached by Cymer Laser
Technologies ("CYMER") and K-Sun, Inc. ("K-SUN") in consideration for the
purchase amount of US$500,000 - by K-SUN of shares of Series A Preferred Stock
of CYMER ("Series A") pursuant to the Series A Preferred Stock Purchase
Agreement ("Purchase Agreement").
Upon K-SUN's purchase of shares of Series A, CYMER and K-SUN shall commence
good faith negotiations to finalize and execute (or, as applicable, to cause
execution of), within six months after the commencement of such negotiations, a
Distribution Agreement between CYMER and Shin-Etsu Chemical Co., Ltd.
("Shin-Etsu") or its affiliates for the distribution of CYMER's products. Such
Agreement shall grant Shin-Etsu or its affiliates the exclusive right to
distribute CYMER's products in Japan and in such other countries in Asia as
CYMER and Shin-Etsu may agree, and such right shall have an initial term of
between three and five years.
In the event further investment by K-SUN is agreed upon between CYMER and
K-SUN in the future, CYMER will consider, in good faith, whether such further
investments can be made through a partnership structure.
CYMER confirms that CYMER shall enter into employment agreements in a form
approved by the Board of Directors of CYMER with Dr. R. Akins, Dr. U. Sengupta,
Dr. R. Sandstorm and other engineers involved in CYMER's R&D activities
promptly after K-SUN's purchase of shares of Series A.
This Letter of Agreement shall not be deemed to create any obligation of K-SUN
other than as set forth herein or as specifically provided in the Purchase
Agreement, and in no event shall K-SUN's liability under the Purchase Agreement
exceed the purchase price paid by K-SUN for Series A. Further, in any event
this Letter of Agreement or the Purchase Agreement shall not be deemed to
create any obligation of Shintech, Inc. or Shin-Etsu.
CYMER shall cause appropriate notice of this Agreement to be provided to the
other purchasers of shares of Series A.
CYMER LASER TECHNOLOGIES K-SUN, INC.
By: /s/ Robert P. Akins By: /s/ G. R. Baker
------------------------------- -------------------------------
Name: Robert P. Akins Name: G. R. Baker
---------------------------- ----------------------------
Title: President Title: President
---------------------------- ----------------------------
[NOTARY STAMP]
<PAGE> 108
with paragraph . the Agreement or take all actions necessary to either
purchase the Equipment or extend the lease term on a Fair Market Value basis.
"Fair Market Value" will mean the amount that an informed and willing buyer or
lessee (other than a lessee currently in possession or a used equipment dealer)
and an informed and willing seller or lessor, each under no compulsion to sell,
buy or lease, would be willing to pay or accept following an arm's-length
negotiation. Costs of removal from the location of current use will not be
deducted from such value, and all alternative uses in the hands of such buyer
or user, including, without limitation, the further leasing of the Equipment,
will be taken into account in determining such value.
11. Execution of This Schedule and Any Required Supplement:
By a supplement to this Schedule executed by you and me, you may
require me to maintain maintenance agreements with respect to the Equipment
and/or provide guaranties of my obligations under the Agreement. I will
promptly execute and deliver to you any supplement to this Schedule required by
you in connection with this Schedule and perform any obligations imposed on me
by such supplement. You shall have no obligation under this Schedule nor shall
you be obligated to purchase the Equipment until I have executed and delivered
any required supplement to this Schedule and performed my obligations
thereunder. This Schedule, by its execution by you ("you" being either
PacifiCorp Credit, Inc. or PacifiCorp Business Credit, Inc., whichever signs
this Schedule) and me, is made a part of the Agreement, and if this is the
first Schedule executed by you, by execution of this Schedule you accept and
agree to be bound by the Agreement.
1 800 752-8811
(MINOLTA LOGO)
LEASE
SCHEDULE
????
<PAGE> 109
INSTRUCTIONS
This schedule (illegible)s for a lease option to purchase the equipment or
extend the term of the agreement at the end of the initial lease term for its
"Fair Market Value".
COMPLETING THE SCHEDULE
Fill in lease number from customer's Master Lease.
Fill in the date the master lease was signed.
Item #
1 Equipment - give complete description of each item of equipment.
2 Location of Equipment - show address, including county.
3 Initial Lease Term - number of months.
4 Security deposit - Indicate amount of lease security deposit (only if
applicable).
5 Advance Rent - plus use tax (if applicable).
6 Rent - enter appropriate monthly rental payment. Use tax will be added
monthly where applicable.
Signature:
Lessor Section - will be filled in later.
Lessee Section - fill in company name, obtain signature of authorized
signer (indicate title). Fill in date and indicate address where the final
executed copy should be mailed.
LESSEE:
Biolumen
- -------------------------------------
Lessee (full legal name)
7887 Dunbrook Ste H.
- -------------------------------------
Billing Address
San Diego, S.D. CA 92126
- -------------------------------------
City County State Zip
Uday (619) 549-6760
- -------------------------------------
Contact Area Code Phone
==========================================================================
8-14 19 86
- ---------------------------------- -------------------
Date Executed by the Lessee
The undersigned affirms that he/she is an authorized corporate officer or
partner or proprietor of the above named lessee, and has the authority to
execute this lease schedule on its behalf.
/s/ (illegible)
- --------------------------------------
Signature
Title V.P. Marketing
- --------------------------------------
==========================================================================
LESSOR:
- ---------------------------------------
By
-------------------------------------
Signature and Title
Date Executed by the Lessor
-------------
Address:
- ----------------------------------------
- ----------------------------------------
Completed by Lessor
To Master Lease Agreement No.______________________ between the Lessor named
below (referred to as "you") and the Lessee named below (referred to as "I" or
"me") executed by the Lessee on _________________________________________,
19_______ (the "Agreement").
1. Equipment Description: (Include Quantity, Model and Serial No.)
1 ea EP450Z Minolta Copier System
3. Initial Lease Term:
24 Calendar Months (plus the number of days from the Commencement Date
to the beginning of the first calendar month)
4. Security Deposit: $ 0
---------
5. Advance Rent: $ 0 + $
--------- ---------------------
Tax Applicable to
Advance Rent (if any)
6. Rent: $ 201.03
---------
(plus applicable use tax)
7. Commencement Date: See Certificate of Acceptance
8. Rent Payment Date: The first Rent payment (other than Advance Rent) will
be due:
(a) On the first day of the first full calendar month during the
Initial Lease Term if the Commencement Date is on or before the 15th day of the
month, or
(b) On the first day of the second full calendar month during the
Initial Lease Term if the Commencement Date is after the 15th day of the month.
Each subsequent Rent payment will be due on the first day of each succeeding
calendar month during the Initial Lease Term.
9. Insurance Requirements:
(a) All-risk insurance against loss or damage to the Equipment from
any cause whatsoever for not less than the full replacement value of the
Equipment or such other amount as you may from time to time request which
insurance shall name you as loss payee, and
(b) Single-limit public liability and property damage insurance of not
less than $500,000 per occurrence, or such other amounts as you may from time
to time request, naming me as named insured and you as additional insured.
10. Purchase or Renewal Option (Fair Market Value):
So long as no Default has occurred and is continuing, at the end of the
Initial Lease Term or any extended term with respect to the Equipment
(illegible) may, at my option, (a) purchase the Equipment on an "AS IS, WHERE
(illegible) basis, without representation or warranty, at a price equal to its
Fair Market Value plus applicable sales tax or (b) elect to extend the term of
this Agreement with respect to the Equipment for such period of time,
(illegible) such Fair Market Value rent amount and upon such other terms and
conditions as you and I may agree. This purchase option or extension option will
be available with respect to any Equipment only if I give you at least 60 days'
prior notice of my irrevocable intent to exercise such option, and you and I
agree to all terms and conditions of such purchase or extension prior to the
expiration of the Initial Lease Term or any extended term with respect to the
Equipment. In the event I fail to notify you at least 60 days prior to the
expiration of the Initial Lease Term of my intention to surrender the Equipment
or to exercise my options either to purchase the Equipment or to extend the
lease term, I will hold over with respect to the Equipment at the Rent and on
the terms specified in this Schedule, and the lease term will extend until I
give you at least 60 days' prior notice of (illegible) intention and thereafter
either surrender the Equipment in accordance
(continued on back)
(EL-10 FMS 4/(illegible)
<PAGE> 110
by you or me); and (4) out of my trademark, patent, or copyright infringement.
(b) I represent, warrant and covenant to you, as of my execution of
this Agreement and the returned Lease Application ("Lease Application") and as
of the execution of my Schedule, that (1) I am a corporation or other entity
duly organized, validly existing and in good standing under the laws of the
state of my incorporation or organization and am duly qualified to do business
wherever necessary to carry on my present business and operations, including
each jurisdiction where any of the Equipment is to be located; (2) I HAVE ALL
NECESSARY POWER AND AUTHORITY TO ENTER INTO AND PERFORM MY OBLIGATIONS UNDER
THIS AGREEMENT AND THE LEASE APPLICATION AND HAVE OR WILL AT THE TIME OF
EXECUTION HAVE ALL NECESSARY POWER AND AUTHORITY TO ENTER INTO AND PERFORM MY
OBLIGATIONS UNDER EACH SCHEDULE; (3) the Agreement and the Lease Application
constitute my valid, legal and binding obligations, and each Schedule will at
the time of execution thereof constitute my valid, legal and binding
obligations; (4) no approval or consent is required from any federal, state or
local governmental authority or instrumentality with respect to any entry into
or performance of the Agreement and the Lease Application or any Schedule
(other than any such approval that has already been obtained); (5) you will
receive good and marketable title to the Equipment when you purchase the
Equipment from the Vendor, and the Equipment is and will at all times remain
tangible personal property and, when subjected to use by me, will not be or
become fixtures or real property under applicable law, and (6) since the date
of preparation of any credit information delivered to you, there has been no
material adverse change in my financial or operating condition or of any
consolidated group of companies of which I am a member.
10. Return. Upon the expiration of any Initial Lease Term (or
extended term) with respect to any Equipment, the termination of this Agreement
or a Default, I will promptly, at my own cost and expense, cause all affected
Equipment to be disassembled, inspected, tested, placed in the same condition
as when leased to me (reasonable wear and tear excepted), properly crated for
shipment and delivered by a common carrier specified by you to a storage
facility or other location designated by you within the continental United
States. I will not be relieved of any of my duties, obligations, covenants or
agreements under the Agreement prior to the return of the Equipment in
compliance with this paragraph 10. I understand that return of the Equipment is
of the essence of this Agreement and agree that you may enforce the same by
specific performance.
11. Default and Remedies.
(a) I will be in default (a "Default") if (1) I fail to pay
any Rent within 10 days after the date such Rent is due; (2) I breach or attempt
to breach any other covenant, condition or agreement contained in this
Agreement or any Schedule; (3) I have made any representations or warranty in
this Agreement, in the Lease Application or in any document delivered to you in
connection with this Agreement that is false or misleading when made or that
becomes false or misleading at any time thereunder; (4) I cease doing business
as a going concern; (5) I fail generally to pay my debts as they become due;
(6) I file or have filed against me or consent to the filing against me of any
petition under any bankruptcy or insolvency law of any jurisdiction, or I make
an assignment for the benefit of my creditors or consent to the appointment of
a custodian, receiver or similar official for me or any substantial part of my
property; (7) I suffer a material adverse change in my operating or financial
condition that impair my ability to perform my obligations under the Agreement
or any Schedule or your title to or rights in the Equipment; or (8) the
guarantor ???? any applicable guaranty agreement in the default under
such guaranty.
(b) If I am in default, you will have all rights accorded you
by law or ???, and will be entitled to render any and all remedies available to
you. You may, by written notice, terminate this Agreement. Upon such a
termination, I will return all Equipment insured under any and all Schedules to
you as provided in paragraph 10 and, without further demand, immediately pay
you (1) an amount equal to any unpaid Rent then due, plus (2) as liquidated
damages for loss of a bargain and not as a penalty, an amount equal to the
Stipulated Loan Value of the Equipment determined as of the first Rent Payment
Date following the date of such notice. If I do not return the Equipment to you
within 10 days of the date of such notice, I authorize you at any time
thereafter to enter, with or without legal process, my premises where any of
the Equipment may be and to take possession of the Equipment. Upon
repossession, you may, but will not be required to, sell the Equipment at
private or public sale, in bulk or in parcels, with or without notice, without
having the Equipment present at the place of sale, or you may, but will not be
required to, lease, otherwise dispose of or keep idle all or part of the
Equipment. You may use my premises for any or all the foregoing without
liability for rent, rents, damages or otherwise.
(c) Upon a Default, I will pay all of your costs, charges and
expenses incurred in taking, removing, holding, repairing, selling, leasing or
otherwise disposing of the Equipment (including attorneys' fees). Such amounts
will be Rent immediately payable by me upon notice from you demanding payment.
The proceeds of any sale, lease or other disposition of the Equipment following
a Default will be applied in the following order of priority: (1) to the extent
not previously paid by me, to pay all costs, charges and expenses incurred by
you in taking, removing, holding, repairing, selling, leasing or otherwise
disposing of the Equipment (including attorneys' fees); (2) to the extent not
previously paid by me, to pay you the Stipulated Loan Value for the equipment
and all other amounts, including any Rent, then remaining unpaid hereunder, and
(3) to reimburse me for any sums previously paid by me to you as liquidated
damages. You will be entitled to retain any surplus.
(d) Upon a Default, you may but will not be obligated to cure the
Default in whole or in part. All amounts you expend in curing a Default in
whole or in part, including attorneys' fees and other expenses, will be Rent
immediately payable by me upon notice from you demanding payment. Your cure of
any Default will not constitute a waiver of such Default or any other Default.
Any waiver by you of any default will not in any way be, or be construed to be,
a waiver of any future Default. I will be liable for all costs, charges and
expenses, including legal fees and disbursements at trial and on appeal,
incurred by you by reason of any Default. Such amounts will be Rent immediately
payable by me upon notice from you demanding payment.
12. Purchase or Renewal Option. So long as no default has occurred and
is continuing, I will have such rights to renew a lease of Equipment or to
purchase Equipment at the end of the Initial Lease Term with respect to the
Equipment as are specified in the applicable Schedule.
12. Assignment. You may assign this Agreement or any interest hereto,
and I will, upon notice to me of such assignment, act in accordance with any
instructions contained in such notice with respect to the payment of Rent or
other matters under the Agreement.
14. Governing Law. This Agreement shall be governed by the laws of the
state in which my principal place of business is located, without regard to
choice of law rules.
15. Rights in Equipment; Quiet Enjoyment. Nothing in this Agreement
gives or conveys to me any right, title or interest in and to my Equipment
except as a lessee. I recognize that you will not disturb my quiet and
peaceable possession of the Equipment only for so long as no Default has
occurred.
16. Waiver. Your failure at any time to require strict performance by
me of any provision of this Agreement will not constitute a waiver of such
provision or any other provision. Any variation or modification of the
Agreement and any waiver of any provision or condition of this Agreement will
be valid only if in writing and signed by you.
17. Further Assurances. I will do all things reasonably requested by
you for the protection of your interests under this agreement and in the
Equipment, including without limitation, entering into and assigning purchase
orders for the Equipment to you and executing and causing to be filed at my
expense financing statements, and property waivers and future financing
statements. I will deliver to you upon request, at the time this Agreement is
executed and at any time a Schedule is added, certified resolutions evidencing
my authority to enter into this Agreement or to add Equipment and such other
documents with respect to the transactions contemplated by this Agreement as
you may reasonably request, including, without limitation, copies of any
maintenance agreements required with respect to the Equipment.
18. Notices. All notices given under this Agreement will be deemed
effective when sent by registered or certified mail, return receipt requested,
to my or your address stated in any Schedule, or to such other place as you or I
may have previously designated to the other in writing.
19. Survival. My covenants, representations, warranties and
indemnities contained in this Agreement are made for your benefit and the
benefit of your successors and assigns, and the same shall survive and be
enforceable after the expiration or termination of this Agreement.
20. Integrated Agreement. This Agreement, the Schedules, the Lease
Application and the guaranty agreement (if any) constitute our entire agreement
with respect to the subject matter of this Agreement.
These Terms and Conditions of Lease are binding upon the Lessor
referred to above as "I" or "me," and, upon execution of a Schedule to the
Equipment Lease Agreement having the serial number specified above by either
PacifiCorp Credit, Inc. or PacifiCorp Business Credit, Inc. (either or both of
which may become the Lessor referred to above as "you"), these Terms and
Conditions of Lease shall become binding on the Lessor named in such Schedule.
(MINOLTA LOGO)
MASTER
LEASE
AGREEMENT
<PAGE> 111
A 08750
- ------------------------------
Master Lessor Agreement Number
LESSEE
(The Lessee, referred to in the Terms and Conditions of Lease as "I" or "me")
Biolumen
- -----------------------------
Lessee (full legal name)
7887 Dunbrook
- -----------------------------
Mailing address
San Diego SD, CA 92126
- -----------------------------
City County State Zip
Udayh (619) 549-6760
- -----------------------------
Contact Area Code Phone
This is a non-cancellable lease for the term indicated on supporting schedule(s)
8-14 1986
- ---------------------------
Date Executed by The Lessee
The undersigned affirms that he/she is an authorized corporate officer or
partner or proprietor of the above named lessee, and has the authority to
execute this lease on its behalf.
By /s/
------------------------------------
Signature
Title V.P. Marketing
------------------------------------
Attention Lessee: Detach and send this portion to Lessor. Retain "Terms and
Conditions"
Form EL-1 AM 4/86
A 08750
- ------------------------------- --------------------
Master Lessee Agreement Number Date Executed
TERMS AND CONDITIONS OF LEASE
See Schedules made a part hereof for description of equipment leased and
applicable lease terms.
- ------------------------------------
1. Lease. I will lease from you the equipment ("Equipment") set forth
on each Schedule executed by each of us and by the terms made a part of this
equipment lease agreement ("Schedule"), subject to the terms set forth in this
equipment lease agreement (this "Agreement"). You will evidence your acceptance
of this Agreement by your execution of the first Schedule to this Agreement to
which you are a party.
2. Delivery and Acceptance. I will order the Equipment and cause
the vendor or vendors ("Vendor") of the Equipment to issue an invoice or
invoices to you showing you as the purchaser of the Equipment ("Invoice").
However, unless you have executed a Schedule covering Equipment I propose to
lease under this Agreement and you have received an invoice covering such
Equipment, you will have no obligation to purchase the Equipment and lease it
to me. Equipment will be delivered to and installed at the Location of
Equipment in the applicable Schedule. If I am not in default under this
Agreement or under any other agreement with you, I will be deemed to have
accepted the Equipment for all purposes of this Agreement on the "Commencement
Date" in the Certificate of Acceptance delivered by me to you with respect to
the Equipment ("Certificate of Acceptance"). I will promptly execute and
deliver the Certificate of Acceptance to you upon delivery and installation of
the Equipment covered by a Schedule. You will have no liability whatsoever for
any failure of or delay in the delivery or installation of any Equipment, and
you will not be obligated to purchase any Equipment until a Certificate of
Acceptance has been executed and delivered by me with respect to such Equipment.
3. Disclaimers.
(a) YOU ARE NOT THE VENDOR AND YOU HAVE NOT MADE AND DO NOT NOW
MAKE ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH
RESPECT TO THE DESIGN, OPERATION OR CONDITION OF THE EQUIPMENT OR ANY PART
THEREOF, ITS MERCHANTABILITY, ITS FITNESS FOR A PARTICULAR PURPOSE, OR WITH
RESPECT TO PATENT INFRINGEMENT, TITLE OR THE LIKE.
(b) YOU WILL HAVE NO LIABILITY TO ME, MY CUSTOMERS OR THIRD
PARTIES FOR ANY DIRECT, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND
OR NATURE ARISING OUT OF THIS AGREEMENT OR THE EQUIPMENT, INCLUDING, WITHOUT
LIMITATION, DAMAGES BASED ON STRICT LIABILITY, TORT (INCLUDING YOUR NEGLIGENCE)
OR WARRANTY.
4. Terms, Security Deposit and Rent.
(a) This Agreement will be effective upon your execution of the
first Schedule to this Agreement. However, the initial Lease Term of any lease
of Equipment will commence on the Commencement Date with respect to such
Equipment and will run for the period specified in the applicable Schedule.
(b) When I deliver the Certificate of Acceptance with respect to
Equipment covered by a Schedule, I will pay Advance Rent and a Security Deposit
in the amount in the Schedule. You may apply Advance Rent to the first or last
Rent payments for the Equipment as you determine. Any Security Deposit will be
noninterest bearing and may be held by you as security for your interest in the
Equipment and not as Advance Rent. I will not use a Security Deposit as a
set-off or abatement for any obligation I may have under this Agreement or the
Schedule. In the event of a Default, you may apply the Security Deposit against
any Rent or other amount due under this Agreement or any Schedule. Provided that
no Default has occurred and is outstanding, upon my surrender of the Equipment
or any purchase of the Equipment pursuant to the terms of this Agreement or the
Schedule, you will return the unused portion of the Security Deposit to me
within a reasonable period of time.
(c) I will pay you Rent, in advance, on the Rent Payment Dates and
in the amount or amounts specified in the Schedule. I will pay all Rent to you
at your address in the applicable Schedule or to such other address as you may
direct in writing. If I do not pay any Rent within 10 days after the date due,
I will pay a late charge on, and in addition to, such Rent equal to five cents
per dollar of the amount of such Rent, but not exceeding the lawful maximum, if
any. The term "Rent" as used in this Agreement will mean and include all
amounts payable by me to you under this Agreement or any Schedule, including,
without limitation, costs and expenses you may incur upon any Default.
5. Noncancellable Net Lease. This Agreement is a noncancellable net
lease, and my obligation to pay all Rent and your rights in and to all Rent are
absolute and unconditional. I will not be entitled to any abatement or
reduction of Rent or any use-off against Rent for any reason, including, without
limitation, claims arising or claimed to arise out of strict or absolute tort
liability or your negligence. This Agreement will not terminate and my
obligations will not be affected by any defect in, damage to or loss of
possession or use of any or all of the Equipment. You and I [Illegible] that
all Rent will continue to be payable in all events in the manner and at the
times set forth in this Agreement unless the obligation to do so shall have been
terminated pursuant to the express terms of this Agreement.
6. Use, Operation and Maintenance.
(a) I will be solely responsible for the entire risk of use and
operation of all Equipment and for each and every cause or hazard of loss or
damage of any kind to any Equipment. I will promptly notify you of any loss of
or damage to the Equipment.
(b) I will use the Equipment in the manner for which it was
designed and intended and solely in the conduct of my own business. My use of
the Equipment will comply with all applicable laws and regulations and with all
applicable Vendor and manufacturer requirements, policies, procedures and
instructions. I will not assign, sublet, sell, transfer, permit the sale
of or part with possession of any of the Equipment or any interest in this
Agreement, and may attempt to do so will be null and void. I will keep the
Equipment at the location of Equipment in the applicable Schedule. You or your
agents will have the right (but not the duty) to inspect the Equipment and my
records with respect to the Equipment at all reasonable times.
(c) I will keep all the Equipment free and clear from any direct or
indirect charge, encumbrance, lien, security interest, legal process or claim.
On your request, I will affix and maintain in a prominent position on the
Equipment identifying labels showing your ownership of the Equipment. I will
maintain such records and take such other action with respect to the Equipment
as may be required by law or otherwise deemed necessary by you to protect your
title and ownership interest in and to the Equipment or your rights under this
Agreement.
(d) I will at my sole expense at all times maintain and preserve
the Equipment in good operating order, repair, condition and appearance,
ordinary wear and tear excepted. I will maintain the Equipment in accordance
with maintenance schedules and practices recommended by the manufacturer or
Vendor, keep in effect a maintenance agreement acceptable to you if required by
a supplement to the applicable Schedule and comply with all requirements for
enforcing warranty claims. All replacement parts and repairs at any time made
to or placed upon the Equipment will become your property. No other parts will
be affixed to the Equipment without your prior written consent.
7. Terms. I will make all filings relating to terms on the Equipment
or this Agreement except where the [Illegible] jurisdiction notifies you that
you must make any such filing. I will pay or reimburse you, on a net after-tax
basis (including net income taxes), for all taxes and any penalties, interest or
fines accrued, assessed or levied (other than solely on your [Illegible]) during
the term of this Agreement the [Illegible] to [Illegible] to you by reason of
this Agreement [Illegible] sale, ownership, delivery, [Illegible], possession,
use, operation or [Illegible].
[Illegible]
[Illegible]
[Illegible]
[Illegible]
[Illegible]
COPY RUNNING OFF PAGE
<PAGE> 112
CONSULTING AGREEMENT
pg 1 of 2
This agreement is between Cymer Laser Technologies, Inc. (CLT) and
Kenneth H. Holko, Inc. dba Hitech Metallurgical Company (HMC). CLT and HMC
agree as follows:
1) CLT has provided HMC with proprietary information concerning
use of ceramics in lasers which HMC will not disclose to others without CLT
written permission.
2) CLT has retained Kenneth H. Holko as consultant at $75.00 per
hour to research and develop techniques for bonding or fitting ceramic
components used in CLT lasers. Mr. Holko will spend between 5 and 10 hours per
week in this investigation. All contacts, phone numbers, catalog references
and information sources, and techniques and procedures will be duplicated (in
original rough form) in a pair of 3 ring binders by Mr. Holko on a weekly
basis. One binder will be the property of CLT.
3) Mr. Holko and CLT will meet weekly to discuss progress and
assign priorities for the next 7 day effort.
4) Hourly billings and expenses (not to exceed 20% of hourly
billing without prior agreement) will be invoiced weekly and will be paid on a
net 30 day cycle by CLT. This consulting agreement may be terminated on 1 week
notice by either party, without continuing obligation, except as expressed in
paragraphs 2 and 5.
5) Mr. Holko may use information obtained in this investigation for
other clients or projects not connected to the laser industry, subject to prior
approval of CLT. Mr. Holko and CLT specifically agree that Mr. Holko will
perform no ceramic related work or disclose any ceramic information to any
company or known agent involved in the laser industry without the express
written consent of CLT for a period of five (5) years from this date.
6) CLT will rely on HMC as its primary source for bonded ceramic
laser components provided performance, delivery, and pricing are satisfactory
to CLT.
<PAGE> 113
pg 2 of 2
For Cymer Laser Technologies,
ROBERT AKINS
------------------------------
Robert Akins
For Hitech Metallurgical Company,
KENNETH HOLKO
------------------------------
Kenneth Holko
Dated: April 15, 1988
<PAGE> 114
<TABLE>
<S> <C>
GCA CORPORATION
GCA Tropel Division PURCHASE ORDER NO. 4822
60 O'Connor Road THIS NUMBER MUST APPEAR ON ALL INVOICES,
Fairport, New York 14450 PACKAGES, CORRESPONDENCE AND SHIPPING
Telephone: (714) 377-3200 DOCUMENTS.
TWX: 510-254-1616
Date Ordered 12/23/87
---------------------------
Page 1 of 1 Pages Date Required 2/29/88
--------------------------
TO SHIP TO
Cymer Laser Tech GCA/Tropel Division
7887 Dunbrook Road 60 O'Connor Rd.
Suite H Fairport, NY 14450
San Diego, CA 92126
PLEASE FURNISH THE FOLLOWING MATERIAL SUBJECT TO TERMS AND CONDITIONS BELOW
- ----------------------------------------------------------------------------------------
QUOTATION NO. JOB NO. ACCOUNT NO. SHIP VIA ATT. OF
[ ] NT. [ ] T. 6453620100 Best Way M. Dunn
- ----------------------------------------------------------------------------------------
ITEM QTY UM TROPEL PART NO. DESCRIPTION PRICE AMOUNT
- ----------------------------------------------------------------------------------------
1 1 Excimer Laser Model CX-2 65000.00
Terms: Net 30
GCA(R)
CONFIRMING ORDER
(illegible)
-----------------------
TOTAL 65000.00
========================================================================================
TROPEL DIVISION
</TABLE>
/SIG/
-----------------------------
Authorized Signature
ENCLOSED ACKNOWLEDGEMENT MUST BE SIGNED
AND RETURNED
THIS ORDER IS SUBJECT TO ALL TERMS AND CONDITIONS SET FORTH ON THE FACE AND
REVERSE OF THIS ORDER AND ACCEPTANCE OF THIS ORDER BY EXECUTION OF THE ENCLOSED
ACKNOWLEDGEMENT OR BY COMMENCEMENT OF PERFORMANCE CONSTITUTES ACCEPTANCE OF ALL
SAID TERMS AND CONDITIONS.
- --------------------------------------------------------------------------------
PRICE WARRANTY - THE SELLER WARRANTS THAT THE PRICES CHARGED HEREIN ARE NO
HIGHER THAN THAT CHARGED THE MOST FAVORED CUSTOMERS FOR LIKE
QUANTITIES.
PURCHASE ORDER
<PAGE> 115
<TABLE>
<CAPTION>
<S> <C> <C> <C>
7 SHATTUCK ROAD 7 SHATTUCK ROAD
ANDOVER, MA 01810 GCA ANDOVER, MA 01810 This number must appear on all invoices,
617-975-0000 packages, correspondence and all shipping
TELEX 95-1257 documents.
PAGE 1
- -----------------------------------------------------------------------------------------------------------------------------------
ORDER DATE SHIP VIA CARRIER NAME COLLECT/PREPAY FOB
12/22/87 UPS PREPAY ORIGIN
- -----------------------------------------------------------------------------------------------------------------------------------
ACCOUNT NUMBER PROJECT REQUISITIONER CONFIRMER CONFIRM DATE BUYER
001 622600 6998 TC25000 UDAY 12/21/87 J GANNON
- -----------------------------------------------------------------------------------------------------------------------------------
VENDOR -- ORDER NUMBER CONTRACT NO. TERMS TAX/NON-TAX TAX EXEMPT NO.
N30 NON-TAX 042-241-561
- -----------------------------------------------------------------------------------------------------------------------------------
VEND0R BC0008440 SHIP TO
CYMER LASER TECHNOLOGIES GCA CORPORATION
7887 DUNBROOK ROAD 7 SHATTUCK ROAD
SUITE H
SAN DIEGO CA 92126 ANDOVER MA 01810
- -----------------------------------------------------------------------------------------------------------------------------------
ITEM QUANTITY UOM PART NUMBER REV DESCRIPTION/MFG.PN./DELIVERY QUANTITY DELIVERY DATE NET UNIT PRICE EXTENDED PRICE
- -----------------------------------------------------------------------------------------------------------------------------------
001 1 EA 999999 CXL-2 EXCIMER LASER 03/20/88 95000.000 95000.00
AS PER QUOTE OF 121087 TO PAUL TOMPKINS FROM UDAY SENGUPTA
**** LAST PAGE ****
- -----------------------------------------------------------------------------------------------------------------------------------
ORDER TOTAL 95000.00
------------------
</TABLE>
This order is subject to all the terms and conditions set forth on the face
and on the reverse of this order and acceptance of this order by execution of
the enclosed acknowledgement or by commencement of performance constitutes
acceptance of all said terms and conditions.
This purchase order may be construed as an offer, an acceptance of an offer,
or a confirmation of a contract.
In the event the purchase order is construed as an offer, the offer expressly
limits acceptance to the terms of the offer and constitutes notice of objection
to any additional or different terms in the acceptance so as to preclude the
inclusion of any different or additional items in any resulting contract.
If this purchase order is construed as an acceptance, the acceptance is
expressly conditioned on the seller's consent to any additional or different
terms contained herein.
If this purchase order is construed as a confirmation of an existing contract,
such confirmation is expressly conditioned on the seller's consent to any
additional or different terms contained herein.
All sections of the Uniform Commercial Code which expressly or impliedly
protect the buyer are hereby incorporated by reference in this form, whether it
be construed as an offer, acceptance, or confirmation.
[SIG]
--------------------
AUTHORIZED SIGNATURE
VENDOR COPY
<PAGE> 116
CYMER LASER TECHNOLOGIES REVISION FOR PAGE 1
7887 Dunbrook Road Suite H PURCHASE ORDER NO. 0005164
SAN DIEGO, CALIFORNIA 92126 VENDOR CODE S6450
(619) 549-6760
TO: SHIP TO:
SAPHIKON, INC.
51 POWERS STREET
MILFORD, CA 93055
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
P.O. DATE SHIP VIA F.O.B. TERMS
- --------------------------------------------------------------------------------------------------
04/18/88 NET: 30 DAYS
- --------------------------------------------------------------------------------------------------
BUYER FREIGHT REQ. DATE CONFIRMING TO REMARKS
- --------------------------------------------------------------------------------------------------
01 06/15/88 LINDA BERTHIAUME (603) 673-5831
- --------------------------------------------------------------------------------------------------
QTY. REQ. ITEM NO. DESCRIPTION UNIT COST EXTENDED COST
- --------------------------------------------------------------------------------------------------
10 EA 01-01400-0 SAPHIRE TUBE 329.0000 3,290
DELIVERY BY 05/02/88
C AXIS PARALLEL TO LENGTH
0.250" OD +/-.010
0.030" WALL +/-.005
25.50" LONG +/-.020
AS GROWN O.D. & I.D.
ENDS AS CUT
TUBE TO BE STRAIGHT .043-.047
MAX CAMBER
.030" MAX CHIPSPEC
10 EA 01-01400-1 PLUGGED SAPHIRE TUBE 449.0000 4,490
DELIVERY BY 05/02/88
TUBE SAME AS ABOVE EXCEPT:
PLUGGED, LENGTH = 24.00"
--------------------------------
PRICE INCLUDES $120/PLUG EXTRA
--------------------------------
30 EA 01-01400-0 SAPHIRE TUBE 329.0000 9,870
C AXIS PARALLEL TO LENGTH
0.250" OD +/-.010
0.030" WALL +/-.005
25.50" LONG +/-.020
AS GROWN O.D. & I.D.
ENDS AS CUT
TUBE TO BE STRAIGHT .043-.047
MAX CAMBER
.030" MAX CHIPSPEC
DELIVERY OF 30 PIECES TO BE
DETERMINED.
TOTAL NET: $17,650
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 117
Bill To: Ship To:
- -------------------------------------------------------------------------------
Cymer Laser Technologies Cymer Laser Technologies
7887 Dunbrook Road, Suite H 7887 Dunbrook Road, Suite H
San Diego, CA 92126 San Diego, CA 92126
ATTN: Accounts Payable (619) 549-6760
ATTN: Receiving
- -------------------------------------------------------------------------------
Vendor: --------------------------------
E.E.V., INC. Purchase Order
7 Westchester Plaza P.O. Number:
Elmsford, NY 10523 --------------
1200
--------------
--------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Order Date Ship Via F.O.B. Date Required Terms *** Special Instructions ***
- ---------------------------------------------------------------------------- -----------------------------
12/8/87 UPS Elmsford, NY 30 Days See Below for Delivery
Schedule
- ---------------------------------------------------------------------------- -----------------------------
Vendor Contact Ven Phone # For Resale
- ----------------------------------------------------------------------------
Stuart Hesselson (914) 592-6050 Yes - No Tax
- ----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Quantity Unit
Item No. Description Ordered Price Extension
- ------------------------------------------------------------------------------------------------------------
1 Thyratron, Model CX-15 73 C 12 4 $5,065.00 $60,780.00
Delivery Schedule:
2 - February 15, 1988
3 - March 15, 1988
4 - April 15, 1988
4 - May 15, 1988
CONFIRMATION ONLY
DO NOT DUPLICATE
- ------------------------------------------------------------------------------------------------------------
Cymer Contact ----------------------------------------------
---------------------- TOTAL
Uday Sengupta (excluding applicable
---------------------- shipping charges and tax) $60,780.00
(619) 549-6760 ============
----------------------------------------------
</TABLE>
<PAGE> 118
Bill To: Ship To:
- -------------------------------------- ---------------------------------------
Cymer Laser Technologies Cymer Laser Technologies
7887 Dunbrook Road, Suite H 7887 Dunbrook Road, Suite H
San Diego, CA 92126 San Diego, CA 92126
ATTN: Accounts Payable (619) 549-6760
ATTN: Receiving
- -------------------------------------- ---------------------------------------
Vendor: ------------------------
PURCHASE ORDER
ACCURATUS CERAMIC CORPORATION P.O. Number:
Brass Castle Road, Rd4 --------------
1105
Washington, NJ 07882 --------------
------------------------
<TABLE>
<CAPTION>
Order Date Ship Via F.O.B. Date Required Terms ***Special Instructions***
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------- ---------------------------
11/13/87 UPS Blue 11/20/87 30 Days
- ----------------------------------------------------------------------------
Vendor Contact Ven Phone # For Resale
- ----------------------------------------------------------------------------
Lorraine Simonof (201) 689-0880 No--Taxable
- ---------------------------------------------------------------------------- ---------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Quantity Unit
Item No. Description Ordered Price Extension
- -----------------------------------------------------------------------------------------------------------
1 Main Insulator 36 $299.00 $10,764.00
6 To Be Delivered By 1/31/88
15 To Be Delivered By 2/28/88
15 To Be Delivered By 3/31/88
CONFIRMATION ONLY
DO NOT DUPLICATE
- -----------------------------------------------------------------------------------------------------------
---------------------------------------------------
Cymer Contact TOTAL
------------------------- (excluding applicable $ 1 0 , 7 6 4 . 0 0
Don Larson shipping charges and tax) ===================
------------------------- ---------------------------------------------------
(619) 549-6760
</TABLE>
<PAGE> 119
Bill To: Ship To:
- -------------------------------------- ---------------------------------------
Cymer Laser Technologies Cymer Laser Technologies
7887 Dunbrook Road, Suite H 7887 Dunbrook Road, Suite H
San Diego, CA 92126 San Diego, CA 92126
ATTN: Accounts Payable (619) 549-6760
ATTN: Receiving
- -------------------------------------- ---------------------------------------
Vendor: ------------------------
PURCHASE ORDER
A.L.E. SYSTEMS, INC P.O. Number:
150 Homer Avenue --------------
1012
Ashland, MA 01721 --------------
------------------------
<TABLE>
<CAPTION>
Order Date Ship Via F.O.B. Date Required Terms ***Special Instructions***
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------- ---------------------------
9/21/87 See special instr 30 Days Deliver: -- 1 in November
- ---------------------------------------------------------------------------- -- 3 in January
Vendor Contact Ven Phone # For Resale 16 on hold, deliverable
- ---------------------------------------------------------------------------- before 11/18/88
Ed Erny/George Bees (617) 881-5252 No-Tax
- ---------------------------------------------------------------------------- ---------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Quantity Unit
Item No. Description Ordered Price Extension
- -----------------------------------------------------------------------------------------------------------
1 H.V. Power Supply (Model 102) 20 $3,040.00 $60,800.00
as per Cymer specification
25 KVg charging cap = 0.03 F
- -----------------------------------------------------------------------------------------------------------
---------------------------------------------------
Cymer Contact TOTAL
------------------------- (excluding applicable $ 6 0 , 8 0 0 . 0 0
Uday Sengupta shipping charges and tax) ===================
------------------------- ---------------------------------------------------
(619) 549-6760
</TABLE>
<PAGE> 120
CYMER LASER TECHNOLOGIES
SCHEDULE 3.15(b) Insurance Policies and Claims
See attached list.
<PAGE> 121
CYMER LASER TECHNOLOGIES
AS OF 4/22/88
INSURANCES CURRENTLY IN EFFECT
<TABLE>
<CAPTION>
Policy Policy Annual
INSURANCE DESCRIPTION Number Carrier Period Premium
- --------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Product / Premise Liability PAC880600100 Great American 10/21/87 - 10/21/88 $7,869.00
Group Health N 9607-2465 Principal Mutal Month to Month $17,025.00
Workman's Compensation P0053836 Zenith 10/22/87 - 10/22/88 $5,510.00
Key Man (technical team $25OK each) 1-465-619 First Colony Life 4/7/88 - 4/7/89 $1,217.50
1-465-620
1-465-621
Group Life (1 x salary) 239660-M Guardian Month to Month $1,224.00
Travel/Accident ($500K) ABL650629 INA 3/1/88 - 3/1/89 $125.50
Freight Insurance - Dom/ Int'l ($300K) PAC880600100 Great American 4/15/88 - 4/15/89 $3,500.00
(rider) ----------
TOTAL $36,471.00
</TABLE>
<PAGE> 122
[PRINCIPAL LOGO]
Principal Mutual Life
Insurance Company
(formerly Bankers Life Company)
711 High Street
Des Moines, Iowa 50309
November 3, 1987
CYMER LASER TECHNOLOGIES Acct No: N9607-2465
7887 DUNBROOK RD #H
SAN DIEGO CA 92126
Thank you for applying under the UMEG Plan. Your Group Insurance Plan has been
approved and is effective November 1, 1987.
You will soon receive your first billing and your Administrative Kit which will
include copies of enrollment cards and Certificates of coverage. All claims
incurred on or after the above date will be paid under the terms of your Group
Plan. We hope you and your insured Members will find satisfaction with this
Plan.
Please use your account number on all correspondence with us. Feel free to
contact us any time you have questions.
We welcome this chance to serve you and look forward to working with your firm.
Sincerely
Craig Schipper cc: PAMELA SNYDER
Group Underwriting F DENNIS SULLIVAN
(515) 246-7153
<PAGE> 123
[LOGO] 64-64-11/11/87-PAC8806001-00
GREAT AMERICAN INSURANCE COMPANIES
Subsidiaries of American Financial Corporation ORIGINAL COPY
580 WALNUT STREET, CINCINNATI, OHIO 45202 IL 70 01 (Ed. 11 85)
Policy No. PAC 8-80-60-01 - 00
Renewal Of - 00
<TABLE>
<CAPTION>
BUSINESSPRO POLICY COMMON DECLARATIONS
- -------------------------------------------------------------------------------
<S> <C>
NAMED INSURED AND ADDRESS POLICY PERIOD:
CYMER LASER TECHNOLOGIES
7887 DUNBROOK ROAD, SUITE "H" 12:01 A.M. Standard Time at the address
SAN DIEGO, CALIFORNIA of the Named Insured shown at left.
92126 From 10/21/87 To 10/21/88
- -------------------------------------------------------------------------------
IN RETURN FOR PAYMENT OF THE PREMIUM AGENT'S NAME AND ADDRESS:
AND SUBJECT TO ALL TERMS OF THIS BARNEY & BARNEY U/W AUTHORITY
POLICY. WE AGREE WITH YOU TO PROVIDE PO BOX 85638
THE INSURANCE AS STATED IN THIS SAN DIEGO CA 92138
POLICY.
- -------------------------------------------------------------------------------
Insurance is afforded by company indicated below:
(Each a capital stock corporation)
( X ) GREAT AMERICAN INSURANCE CO. ( ) AMERICAN ALLIANCE INSURANCE CO.
( ) AMERICAN NATIONAL FIRE INS. CO. ( ) AGRICULTURAL INSURANCE COMPANY
( )
- -------------------------------------------------------------------------------
BUSINESS DESCRIPTION DEVELOPMENT & SALES OF EXCIMER LASERS
? policy consists of the following Coverage Premium
?? ts for which a premium is indicated. This
premium may be subject to adjustment
Commercial Property $1738.
Commercial General Liability $6070.
Commercial Crime $
Commercial Inland Marine $ 78.
Commercial Boiler and Machinery $
Commercial Auto $ 80.
TOTAL $7966.*
- -------------------------------------------------------------------------------
Premium shown is payable: $7966.* at inception:
$ *INCLUDES CALIFORNIA GUARANTEE ASSOCIATION SURCHARGE OF $17.
- -------------------------------------------------------------------------------
FORMS AND ENDORSEMENTS applicable to all Coverage Parts and made a part of this
policy at time of issue:
IL7000 CP7200 CM7600 CG7400 CA8002
- -------------------------------------------------------------------------------
Countersigned 1/4/88 By PHYLLIS MARTENS
------------ ---------------------------------------------
Date Authorized Representative
</TABLE>
<PAGE> 124
[LOGO] 64-64-11/02/87-PAC8806001-00
GREAT AMERICAN INSURANCE COMPANIES
Subsidiaries of American Financial Corporation ORIGINAL COPY
580 WALNUT STREET, CINCINNATI, OHIO 45202 CP 72 00 (Ed. 11 85)
Policy No. PAC 8-80-60-01 - 00
<TABLE>
<CAPTION>
BUSINESSPRO PROPERTY COVERAGE PART
DECLARATIONS PAGE
- -------------------------------------------------------------------------------
<S> <C>
NAMED INSURED: CYMER LASER TECHNOLGIES POLICY PERIOD:
7887 DUNBROOK ROAD, SUITE "H" 10/21/87 to 10/21/88
- -------------------------------------------------------------------------------
DESIGNATED PREMISES:
Prem. Bldg.
No. No. Location Occupancy
1 1 7887 DUNBROOK ROAD, SUITE H DEVELOPMENT
SAN DIEGO, CALIF 92126 & SALES
- -------------------------------------------------------------------------------
MORTGAGE CLAUSE: Subject to the provisions of the Mortgage Clause attached
hereto, loss, if any, on building items, shall be payable to
Prem. Bldg.
No. No. Mortgage Holder Name and Mailing Address
- -------------------------------------------------------------------------------
PREMIUM FOR THIS COVERAGE PART IS:
Total Advance Premium: $ INCL.
Payable at inception: $ INCL.
$
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 125
64-64-11/02/87-PAC 8806001-00 ORIGINAL COPY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
For the locations specified below, insurance is provided only for those cover-
ages for which a Limit of Liability is shown:
- -------------------------------------------------------------------------------
PROPERTY COVERAGES
- -------------------------------------------------------------------------------
Prem. Bldg. Coinsurance Limits of
No. No. Coverage % Liability
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 1 BUSINESS PERSONAL PROPERTY 100% 200,000.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
-------------------------------------------------------------
Covered Causes
of Loss (X) Deductible Valuation (X) Infla-
--------------------- Amount --------------------- tion
Basic Broad Special ACV RC Agreed Value Guard
-------------------------------------------------------------
Building(s) $
- -------------------------------------------------------------------------------
Personal Property X $250. X
- -------------------------------------------------------------------------------
*Business Income
- -------------------------------------------------------------------------------
$
- -------------------------------------------------------------------------------
$
- -------------------------------------------------------------------------------
*Applicable to Business Income Options only:
-------------------------------------------------------------
Monthly Limit of Maximum Period Extended Period of
Indemnity (Fraction) of Indemnity (X) Indemnity (Days)
-------------------------------------------------------------
- -------------------------------------------------------------------------------
ADDITIONAL COVERAGE (Specify)
- -------------------------------------------------------------------------------
FORMS AND ENDORSEMENTS Applying to this Coverage Part and Made Part of this
Policy at Time of Issue: CP0090 CP0010 CP0299 CP0186 IL0270
CP1030
- -------------------------------------------------------------------------------
BUSINESSPRO / Reg. U.S. Pat. Off.
</TABLE>
<PAGE> 126
64*64*11/02/87*PAC 8806001-00 ORIGINAL COPY
GREAT AMERICAN INSURANCE COMPANIES CG 74 00 (Ed. 11 85)
[LOGO] Subsidiaries of American Financial Corporation
580 WALNUT STREET, CINCINNATI, OHIO 45202
Policy No. PAC 8-80-60-01 - 00
BUSINESSPRO GENERAL LIABILITY COVERAGE PART
DECLARATIONS PAGE
- --------------------------------------------------------------------------------
NAMED INSURED: CYMER LASER TECHNOLOGIES POLICY PERIOD:
7887 DUNBROOK ROAD, SUITE "H" 10/21/87 TO 10/21/88
- --------------------------------------------------------------------------------
LIMITS OF INSURANCE:
General Aggregate Limit (Other Than Products--
Completed Operations) $ 1,000,000.
Products--Completed Operations Aggregate Limit $ 1,000,000.
Personal and Advertising Injury Limit $ 1,000,000.
Each Occurrence Limit $ 1,000,000.
Fire Damage Limit $ 50,000. Any One Fire
Medical Expense Limit $ 5,000. Any One Person
- --------------------------------------------------------------------------------
RETROACTIVE DATE (CG 00 02 ONLY): Coverage A of this Insurance does not apply
to "bodily injury" or "property damage" which occurs before the Retroactive
Date, if any, shown shere: 10-08-87 (enter date or "none" if does not apply)
- --------------------------------------------------------------------------------
DESCRIPTION OF BUSINESS:
Form of Business: ( ) Individual ( ) Joint Venture ( ) Partnership
(X) Organization (Other than Partnership or Joint Venture)
Business Description: DEVELOPMENT & SALES OF EXCIMER LASERS
Location of All Premises You Own, Rent or Occupy:
7887 DUNBROOK ROAD, SUITE "H"
SAN DIEGO, CALIFORNIA 92126
- --------------------------------------------------------------------------------
PREMIUM:
- --------------------------------------------------------------------------------
Rates Advance Premium
Code Premium ------------------- --------------------
Classification No. Basis Pr / Co All Other Pr / Co All Other
- --------------------------------------------------------------------------------
ELECTRONIC D)500,000. 4.226 7.887 2113. 3944.
COMPONENTS MFG.
52469
CIGA
13.
* (a) Admissions; (b) Area; (c) Each; (d) Gross Sales;
(e) Payroll; (f) Total Cost; (g) Units; (h) Other
- --------------------------------------------------------------------------------
Total Advance Premium $ INCL.
Premium shown is payable: $ INCL. at inception;
$
- --------------------------------------------------------------------------------
TERMS AND ENDORSEMENTS Applying to this Coverage Part and Made Part of this
Policy at Time of Issue: CG0004 IL0021 CG0041 CG0002 CG2011
- --------------------------------------------------------------------------------
<PAGE> 127
64*64*11/02/87*PAC 8806001-00 ORIGINAL COPY
GREAT AMERICAN INSURANCE COMPANIES CG 20 11 (Ed. 11 85)
[LOGO] Subsidiaries of American Financial Corporation
580 WALNUT STREET, CINCINNATI, OHIO 45202
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY
ADDITIONAL INSURED -- MANAGERS OR LESSORS OF PREMISES
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
SCHEDULE
1. Designation of Premises (Part Leased to You):
7887 DUNBROOK ROAD, SUITE "H"
SAN DIEGO, CALIFORNIA 92126
2. Name of Person or Organization (Additional Insured):
GREYSTONE
9235 TRADE PLACE, SUITE A
SAN DIEGO, CALIFORNIA 92126
Additional Premium:
(If no entry appears above, the information required to complete this
endorsement will be shown in the Declarations as applicable to this
endorsement.)
WHO IS INSURED (Section II) is amended to include as an insured the person or
organization shown in the Schedule but only with respect to liability arising
out of the ownership, maintenance or use of that part of the premises leased to
you and shown in the Schedule and subject to the following additional
exclusions:
This insurance does not apply to:
1. Any "occurrence" which takes place after you cease to be a tenant in
that premises.
2. Structural alterations, new construction or demolition operations
performed by or on behalf of the person or organization shown in the
Schedule.
<PAGE> 128
[LOGO] 64-64-11/02/87-PAC 306001-00
GREAT AMERICAN INSURANCE COMPANIES
Subsidiaries of American Financial Corporation ORIGINAL COPY
580 WALNUT STREET, CINCINNATI, OHIO 45202 CM 76 00 (Ed. 11 85)
Policy No. PAC 8-80-60-01 - 00
<TABLE>
<CAPTION>
BUSINESSPRO INLAND MARINE COVERAGE PART
DECLARATIONS PAGE
- -------------------------------------------------------------------------------
<S> <C>
NAMED INSURED: CYMER LASER TECHNOLOGIES POLICY PERIOD:
7887 DUNBROOK ROAD, SUITE "H" 10/21/87 to 10/21/88
- -------------------------------------------------------------------------------
DESCRIPTION OF BUSINESS:
DEVELOPMENT & SALES OF EXCIMER LASER
- -------------------------------------------------------------------------------
PREMIUM:
Premium for this Coverage Part: $ INCL.
Premium shown is payable: $ INCL. at inception;
$
- -------------------------------------------------------------------------------
FORMS AND ENDORSEMENTS Applying to this Coverage Part and Made Part of this
Policy at Time of Issue: CM0001 CM7611 CM0066 CM7610 CM0067
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 129
[LOGO] 64-64-11/02/87-PAC 06001-00
GREAT AMERICAN INSURANCE COMPANIES
Subsidiaries of American Financial Corporation ORIGINAL COPY
580 WALNUT STREET, CINCINNATI, OHIO 45202 CM 76 01 (Ed. 11 85)
Policy No. PAC 8-80-60-01 - 00
<TABLE>
<CAPTION>
BUSINESSPRO VALUABLE PAPERS AND RECORDS DECLARATIONS
- -------------------------------------------------------------------------------
<S> <C>
NAMED INSURED: CYMER LASER TECHNOLOGIES POLICY PERIOD:
7887 DUNBROOK ROAD, SUITE "H" 10/21/87 to 10/21/88
- -------------------------------------------------------------------------------
PREMIUM FOR THIS COVERAGE FORM $ INCL. RATE $ VRS.
- -------------------------------------------------------------------------------
LIMITS OF INSURANCE Limit of
Insurance
A. Property at Your Premises
1. Address
7887 DUNBROOK ROAD, STE. H.
SAN DIEGO, CALIFORNIA 92126
a. Specifically Described Property
$
$
$
Total $
b. All Other Covered Property $ 10,000.
2. Address
a. Specifically Described Property
$
$
$
Total $
b. All Other Covered Property $
B. Property Away From Your Premises $
- -------------------------------------------------------------------------------
DEDUCTIBLE
The Deductible Amount is $100 unless otherwise stated $
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 130
64-64-11/02/87-PAC 806001-00 ORIGINAL COPY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
DESCRIPTION OF RECEPTACLES
<S> <C> <C> <C> <C>
Address Manufacturer Class Label Issuer
- -------------------------------------------------------------------------------
SPECIAL PROVISIONS (if any)
</TABLE>
<PAGE> 131
[LOGO]
<TABLE>
<CAPTION>
64-64-11/02/87-PAC8806001-00 ORIGINAL COPY
GREAT AMERICAN INSURANCE COMPANIES
Subsidiaries of American Financial Corporation CM 76 11 (Ed. 07 87
580 WALNUT STREET, CINCINNATI, OHIO 45202
Policy No. PAC 8-80-60-01 - 00
BUSINESSPRO ACCOUNTS RECEIVABLE DECLARATIONS
- -------------------------------------------------------------------------------------
<S> <C>
NAMED INSURED: CYMER LASER TECHNOLOGIES POLICY PERIOD:
7887 DUNBROOK ROAD, SUITE "H" 10/21/87 to 10/21/88
- -------------------------------------------------------------------------------------
PREMIUM FOR THIS COVERAGE FORM $ INCL.
- -------------------------------------------------------------------------------------
LIMITS OF INSURANCE
Limit of
A. Property At Your Premises Insurance
Address
7887 DUNBROOK ROAD, STE. H. $5,000.
SAN DIEGO, CALIFORNIA 92126 $
B. Property Away From Your Premises
$
$
C. All Covered Property At All Locations $
- -------------------------------------------------------------------------------------
DESCRIPTION OF RECEPTACLES
Address Manufacturer Class Label Issuer
- -------------------------------------------------------------------------------------
RATES AND PREMIUMS
A. Nonreporting
Rate $ VRS Premium $ INCL.
B. Reporting
1. Deposit Premium $
2. Minimum Annual Premium $
3. Reporting Period ( ) Monthly ( ) Annual
4. Premium Adjustment Period ( ) Monthly ( ) Annual
5. Premium Base: Values of Covered Property
6. Rates $
$
- -------------------------------------------------------------------------------------
</TABLE>
BUSINESSPRO (Reg. U.S. Pat Off)
<PAGE> 132
64-64-11/02/87-PAC8806001-00 ORIGINAL COPY
- -------------------------------------------------------------------------------
DUPLICATE RECORDS
If the Duplicate Records endorsement is attached, the following applies:
PREMISES ADDRESS PERCENTAGE DUPLICATED
- -------------------------------------------------------------------------------
SPECIAL PROVISIONS (if any)
- -------------------------------------------------------------------------------
<PAGE> 133
64*64*11/05/87*PAC8806001-00
GREAT AMERICAN INSURANCE COMPANY
[LOGO] Subsidiary of American Financial Corporation
580 WALNUT STREET, CINCINNATI, OHIO 45202 CA 80 02 (Ed. 01 87)
BUSINESSPRO BUSINESS AUTO COVERAGE FORM
DECLARATIONS PAGE
*******************************************************************************
ITEM ONE Policy No. PAC 8-80-60-01 - 00
- -------------------------------------------------------------------------------
NAMED INSURED: CYMER LASER TECHNOLOGIES POLICY PERIOD
7887 DUNBROOK ROAD, SUITE "H" 10/21/87 to 10/21/88
- -------------------------------------------------------------------------------
FORM OF BUSINESS:
(X) Corporation ( ) Individual
( ) Partnership ( ) Other
===============================================================================
ITEM TWO SCHEDULE OF COVERAGES AND COVERED AUTOS
- -------------------------------------------------------------------------------
This policy provides only those coverages where a charge is shown in the premium
column below. Each of these coverages will apply only to those "autos" shown as
covered "autos." "Autos" are shown as covered "autos" for a particular coverage
by the entry of one of more of the symbols from the COVERED AUTO Section of the
Business Auto Coverage Form next to the name of the coverage.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
* LIMIT
Coverages Covered The Most We Will Pay For Premium
Autos Any One Accident or Loss
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITY 8,9 $1,000,000 80.
- --------------------------------------------------------------------------------
PERSONAL INJURY PROTECTION Separately stated in each
(or equivalent No-fault PIP Endorsement MINUS
coverage) $ Ded.
- --------------------------------------------------------------------------------
ADDED PERSONAL INJURY
PROTECTION (or equivalent Separately stated in each
added No-fault coverage) Added PIP Endorsement
- --------------------------------------------------------------------------------
Separately stated in the
PROPERTY PROTECTION INSURANCE P.P.I. Endorsement MINUS
(Michigan only) $ Ded for each
Accident
- --------------------------------------------------------------------------------
AUTO MEDICAL PAYMENTS $
- --------------------------------------------------------------------------------
UNINSURED MOTORISTS $
- --------------------------------------------------------------------------------
UNDERINSURED MOTORISTS
(When not included in $
Uninsured Motorists Coverage
- --------------------------------------------------------------------------------
Actual cash value or cost of
repair, whichever is less,
MINUS $ Ded. for each
PHYSICAL DAMAGE Covered Auto but not deductible
COMPREHENSIVE COVERAGE applies to loss caused by
fire or lightning. See
ITEM FOUR for hired or
borrowed "autos."
- --------------------------------------------------------------------------------
</TABLE>
BUSINESSPRO (Reg. U.S. Pat. Off.)
CA 8002 (Ed. 01/87) PRO (Page 1 of 1) JJ 110287
ORIGINAL COPY
<PAGE> 134
64*64*11/05/87*PAC8806001-00
GREAT AMERICAN INSURANCE COMPANY
[LOGO] Subsidiary of American Financial Corporation
580 WALNUT STREET, CINCINNATI, OHIO 45202
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
* LIMIT
COVERAGES COVERED The Most We Will Pay For PREMIUM
AUTOS Any One Accident or Loss
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Actual cash value or cost of
repair, whichever is less,
PHYSICAL DAMAGE SPECIFIED MINUS $25 Ded. for each
CAUSES OF LOSS COVERAGE Covered Auto for loss caused
by mischief or vandalism.
See ITEM FOUR for hired or
borrowed "autos."
- --------------------------------------------------------------------------------
Actual cash value or cost of
repair, whichever is less,
PHYSICAL DAMAGE MINUS $ Ded. for
COLLISION COVERAGE each Covered Auto. See ITEM
FOUR for hired or borrowed
"autos."
- --------------------------------------------------------------------------------
PHYSICAL DAMAGE $ for each
TOWING AND LABOR disablement of a Private
(Not Available in California) Passenger Auto.
- --------------------------------------------------------------------------------
Premium for Endorsements
----------------------------
Estimated Total Premium 80.
- --------------------------------------------------------------------------------
TERMS AND ENDORSEMENTS Applying to this Coverage Part and Made Part of this
Policy at Time of Issue: CA0143 CA8015 CA0001
================================================================================
</TABLE>
* Entry of one or more of the symbols from the COVERED AUTOS Section of the
Business Auto Coverage Form shows which autos are covered autos.
BUSINESSPRO (Reg. U.S. Pat. Off.)
CA 80 02 (Ed. 01/87) PRO (Page 2 of 2)
ORIGINAL COPY
<PAGE> 135
[LOGO]
<TABLE>
<CAPTION>
64-64-11/05/87-PAC8806001-00
GREAT AMERICAN INSURANCE COMPANIES
Subsidiaries of American Financial Corporation CA 80 02 (Ed. 01 87)
580 WALNUT STREET, CINCINNATI, OHIO 45202
===============================================================================
ITEM FOUR SCHEDULE OF HIRED OR BORROWED
COVERED AUTO COVERAGE AND PREMIUMS
- -------------------------------------------------------------------------------
LIABILITY COVERAGE - RATING BASIS, COST OF HIRE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Factor
Estimated Cost of Rate Per Each $100 If liab. Cov.
State Hire for Each State Cost of Hire is primary Premium
- -------------------------------------------------------------------------------
CALIFORNIA IF ANY 2.020 INCL.
- -------------------------------------------------------------------------------
TOTAL PREMIUM INCL.
- -------------------------------------------------------------------------------
Cost of hire means the total amount you incur for the hire of "autos" you don't
own (not including "autos" you borrow or rent from your partners or employees
or their family members). Cost of hire does not include charges for services
performed by motor carriers of property or passengers.
- -------------------------------------------------------------------------------
PHYSICAL DAMAGE COVERAGE
- -------------------------------------------------------------------------------
Limit of Liability
Coverages (The Most We Will Pay) Rate Premium
Deductible
- -------------------------------------------------------------------------------
Actual cash value, cost of repairs or
$ , whichever is less, MINUS
Comprehensive $ Dec. for each Covered Auto, but
no deductible applies to loss caused by
fire or lightning.
- -------------------------------------------------------------------------------
Actual cash value, cost of repairs or
Specified $ , whichever is less MINUS
Causes of Loss $ 25 Ded for each Covered Auto for Loss
caused by mischief or vandalism.
- -------------------------------------------------------------------------------
Collision Actual cash value, cost of repairs or
$ , whichever is less, MINUS
$ Ded. for each Covered Auto.
- -------------------------------------------------------------------------------
Total Premium
- -------------------------------------------------------------------------------
PHYSICAL DAMAGE COVERAGE for covered "autos" you hire or borrow is excess
unless indicated below by an "( X )".
( ) If this parenthesis is checked, PHYSICAL DAMAGE COVERAGE applies on a
direct primary basis and, for purposes of the condition entitled OTHER
INSURANCE, any covered "auto" you hire or borrow is deemed to be a
covered "auto" you own.
===============================================================================
</TABLE>
BUSINESSPRO (Reg. U.S. Pat. Off.)
CA 80 02 (Ed. 01/87) PRO (Page 1 of 1) JJ 110287
ORIGINAL COPY
<PAGE> 136
[LOGO]
<TABLE>
64-64-11/05/87-PAC8806001-00
GREAT AMERICAN INSURANCE COMPANIES
Subsidiaries of American Financial Corporation
580 WALNUT STREET, CINCINNATI, OHIO 45202
===============================================================================
ITEM FIVE SCHEDULE FOR NON-OWNERSHIP LIABILITY
- -------------------------------------------------------------------------------
<CAPTION>
Named Insured's Business Rating Basis Number Premium
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Other than a Number of Employees 0-25 $ INCL.
Social Service Agency -------------------------------------------------
Number of Partners $
- -------------------------------------------------------------------------------
Number of Employees $
Social Service Agency -------------------------------------------------
Number of Volunteers $
- -------------------------------------------------------------------------------
$ INCL.
-----------
</TABLE>
BUSINESSPRO (Reg. U.S. Pat. Off.)
CA 80 02 (Ed. 01/87) PRO (Page 1 of 1)
ORIGINAL COPY
<PAGE> 137
THE ZENITH
Zenith Insurance Company
Corporate Offices: Woodland Hills
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
INFORMATION PAGE
Company No. 13145
RENEWAL OF: NEW POLICY NUMBER: P 0053836
1. THE INSURED:
CYMER LASER TECHNOLOGIES CORPORATION
7887 DUNBROOK RD., STE. H
SAN DIEGO, CA 92126
2. POLICY PERIOD
The policy is from 10/22/87 to 1/22/88 12:01 AM STANDARD TIME at the
insured's mailing address.
3. COVERAGE
A. Workers Compensation Insurance: PART ONE of the policy applies
to the Workers Compensation Law of the states listed here.
CALIFORNIA
B. Employers Liability Insurance: PART TWO of the policy applies to
work in each state listed in item 3.A. The limits of our
liability under PART TWO are:
Bodily Injury By Accident: $ 1,000,000 Each Accident
Bodily Injury By Disease: $ 1,000,000 Each Employee
Bodily Injury By Disease: $ 1,000,000 Policy Limit
C. Other States Insurance: PART THREE of the policy applies to the
states, if any, listed here:
ALL STATES EXCEPT STATES LISTED IN ITEM 3A AND
OHIO WEST VIRGINIA NORTH DAKOTA
WYOMING NEVADA WASHINGTON
D. This policy includes these endorsements and schedules:
WC000106 WC040303 WC040305 WC940402 WC940406 WC990306
WC990001 WC940301 WC040301 WS000202 WC000105
4. PREMIUM
The premium for this policy will be determined by our manuals of rules,
classifications, rates and rating plans. All information required below
is subject to verification and change by audit.
SEE EXTENSION SCHEDULE ATTACHED
TOTAL ESTIMATED ANNUAL PREMIUM $ 5,510
Minimum Premium $400 Deposit Premium $ 1,929
INTERIM ADJUSTMENT OF PREMIUM SHALL BE MADE QUARTERLY.
Countersigned At: SAN DIEGO, CA On: 11/23/87 By:
Producer: BARNEY & BARNEY /s/ William L. Tentz
P.O. BOX 85638 --------------------
SAN DIEGO, CA 92138
100-03-07347-A Authorized Signature
<PAGE> 138
THE ZENITH
Zenith Insurance Company
Corporate Offices: Woodland Hills
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
INFORMATION PAGE EXTENSION SCHEDULE
PREMIUM SCHEDULE:
<TABLE>
<CAPTION>
PREMIUM BASIS RATE PER NOT
TOTAL ESTIMATED $100 OF READABLE
ST CODE CLASSIFICATION ANNUAL REMUNERATION REMUNERATION
- ------- -------------- ------------------- ------------ -----
10-22-87 TO 10-22-88
<S> <C> <C> <C> <C>
CA 36812 INSTRUMENT MFG. -- PROFESSIONAL OR $ 134,300 2.94 $ 3
SCIENTIFIC--N.O.C.
CA 87421 SALESPERSONS -- OUTSIDE. $ 46,800 1.27 $
CA 88101 CLERICAL OFFICE EMPLOYEES -- N.0.C. $ 93,600 .74 $
CA 0120C PREMIUM FOR CALIFORNIA INCREASED $ 274,700 .10 $
PART TWO LIMITS
TOTAL PREMIUM FOR CALIFORNIA $ 5
</TABLE>
ZENITH INSURANCE COMPANY
Insured CYMER LASER TECHNOLOGIES
Policy No. P 0053836
Policy Ordered 10/22/87 To 10/22/88 [SIG]
Issued On 11/23/87 At SAN DIEGO, CA. ------------------------
WC 99-00-01 SECRETARY
<PAGE> 139
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY [LOGO]
LONGSHOREMEN'S AND HARBOR WORKERS' COMPENSATION ACT COVERAGE ENDORSEMENT
This endorsement applies only to work subject to the Longshoremen's and Harbor
Worker's Compensation Act in a state shown in the Schedule. The policy applies
to that work as though that state were listed in item 3.A of the Information
Page.
The definition workers compensation law includes the Longshoremen's and Harbor
Workers' Compensation Act (33 USC Sections 901-950) and any amendment to that
Act that is in effect during the policy period.
This endorsement does not apply to work subject to the Defense Base Act, the
Outer Continental Shelf Lands Act, or the Nonappropriated Fund
Instrumentalities Act.
Schedule
Longshoremen's and Harbor Workers'
State Compensation Act Coverage Percentage
CALIFORNIA N/A
The rates for classifications with code numbers not followed by the letter "F"
are rates for work not ordinarily subject to the Longshoremen's and Harbor
Workers' Compensation Act. If this policy covers work under such
classifications, and if the work is subject to the Longshoremen's and Harbor
Workers' Compensation Act, those non-F classification rates will be increased
by the Longshoremen's and Harbor Workers' Compensation Act Coverage Percentage
shown in the Schedule. This paragraph does not apply in California.
This endorsement changes the policy to which it is attached and is effective on
the policy effective date unless otherwise stated.
ZENITH INSURANCE COMPANY
Endorsement Effective
Insured CYMER LASER TECHNOLOGIES
Policy No. P 0053836
Policy Period 10/22/87 To 10/22/88 [SIG]
Issued On 11/23/87 At SAN DIEGO, CA.
SECRETARY
WC 00-01-06
(Ed. 4-84)
<PAGE> 140
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY [LOGO]
OFFICERS AND DIRECTORS COVERAGE/EXCLUSION ENDORSEMENT - CALIFORNIA
If the employer named in item 1 of the Information Page is a private
corporation whose officers and directors are the sole shareholders, this policy
covers bodily injury sustained by all such officers and directors except those
named below or in item 4 of the Information Page.
Officers and Directors Not Covered Title
This endorsement changes the policy to which it is attached and is effective on
the policy effective date unless otherwise stated.
ZENITH INSURANCE COMPANY
Endorsement Effective
Insured CYMER LASER TECHNOLOGIES
Policy No. P 0053836
Policy Period 10/22/87 To 10/22/88 [SIG]
Issued On 11/23/87 At SAN DIEGO, CA.
SECRETARY
WC 04-03-03
<PAGE> 141
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
[LOGO]
Zenith Insurance Company
Corporate Offices: Woodland Hills, CA
VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE ENDORSEMENT--CALIFORNIA
If the employer named in item 1 of the Information Page has in his employment
persons not entitled to compensation under Division 4 of the Labor Code of the
State of California, this policy shall operate as an election on the part of
the employer to come under the compensation provisions of Division 4 with
respect to those persons described in the Schedule below.
This policy applies to those persons described in the Schedule below as
employees.
Schedule
ALL EMPLOYEES
This endorsement changes the policy to which it is attached and is effective on
the policy effective date unless otherwise stated.
ZENITH INSURANCE COMPANY
Endorsement Effective
Insured CYMER LASER TECHNOLOGIES
Policy No. P 0053836 [SIG]
Policy Period 10/22/87 To 10/22/88
Issued On 11/23/87 At SAN DIEGO, CA. SECRETARY
WC 04-03-05
(Ed. 1-85)
INSURED COPY Endorsement No.
<PAGE> 142
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
[LOGO]
Zenith Insurance Company
Corporate Offices: Woodland Hills, CA
CALIFORNIA EXECUTIVE OFFICERS, PARTNERS AND RELATIVES PREMIUM ENDORSEMENT
This endorsement applies only to the insurance provided by the policy because
California is shown in item 3.A of the Information Page.
EACH EXECUTIVE OFFICER IF THE EMPLOYER IS A CORPORATION, EACH PARTNER IF THE
EMPLOYER IS A PARTNERSHIP AND EACH RESIDING RELATIVE IF THE EMPLOYER IS AN
INDIVIDUAL ENTITY, WHO IS COVERED UNDER THIS POLICY SHALL BE BASED ON THEIR
ACTUAL REMUNERATION, SUBJECT TO THE MINIMUM AND MAXIMUM AMOUNTS PROVIDED FOR BY
OUR MANUALS, BUT NOT LESS THAN $ 250 PER ANNUM FOR EACH SUCH PERSON.
This endorsement changes the policy to which it is attached and is effective on
the policy effective date unless otherwise stated.
ZENITH INSURANCE COMPANY
Endorsement Effective
Insured CYMER LASER TECHNOLOGIES
Policy No. P 0053836 [SIG]
Policy Period 10/22/87 To 10/22/88
Issued On 11/23/87 At SAN DIEGO, CA. SECRETARY
WC 94-04-02
(Ed. 4-84)
INSURED COPY Endorsement No.
<PAGE> 143
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
[LOGO]
Zenith Insurance Company
Corporate Offices: Woodland Hills, CA
CALIFORNIA CANCELLATION MINIMUM PREMIUM ENDORSEMENT
This endorsement applies only to the insurance provided by the policy because
California is shown in item 3.A of the Information Page.
The following subparagraph 3. is added to Provision E., Final Premium, of Part
Five--Premium:
3. If we cancel because you do not report the remuneration or other data
upon which premium is based or because you do not pay the premium when
due, the final premium will be calculated pro rata based on the time
this policy was in force. Final premium will not be less than the
minimum premium.
This endorsement changes the policy to which it is attached and is effective on
the policy effective date unless otherwise stated.
ZENITH INSURANCE COMPANY
Endorsement Effective
Insured CYMER LASER TECHNOLOGIES
Policy No. P 0053836 [SIG]
Policy Period 10/22/87 To 10/22/88
Issued On 11/23/87 At SAN DIEGO, CA. SECRETARY
WC 94-04-06
(Ed. 4-84)
INSURED COPY Endorsement No.
<PAGE> 144
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
[LOGO]
Zenith Insurance Company
Corporate Offices: Woodland Hills, CA
CHANGE OF CANCELATION CONDITION ENDORSEMENT
Section 2 of the Cancelation Condition of the policy is replaced by the
following:
2. We may cancel this policy. We must mail or deliver to you not less
than 30 days advance written notice stating when the cancelation is to take
effect. Mailing the notice to you at your mailing address shown in item 1 of
the Information Page will be sufficient to prove notice.
This endorsement does not apply in the event we cancel the policy because you
do not pay the premium when due.
This endorsement changes the policy to which it is attached and is effective on
the policy effective date unless otherwise stated.
ZENITH INSURANCE COMPANY
Endorsement Effective
Insured CYMER LASER TECHNOLOGIES
Policy No. P 0053836 [SIG]
Policy Period 10/22/87 To 10/22/88
Issued On 11/23/87 At SAN DIEGO, CA. SECRETARY
WC 99-03-06
(Ed. 4-84)
INSURED COPY Endorsement No.
<PAGE> 145
9888 Genesee Avenue
P.O. Box 28
ScrippsMemorial La Jolla La Jolla, California 92038
[LOGO] Hospital (619) 457-4123
- --------------------------------------------------------------------------------
AFTER CARE INFORMATION (INDUSTRIAL)
- --------------------------------------------------------------------------------
Date Of Date Seen
Injury Time in E.R. Time
- --------------------------------------------------------------------------------
Physician's Diagnosis
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------- ---------------
- ------------------------------- ---------------
[ ] Wound Repair ---------------
[ ] X-Ray ---------------
[ ] Medication ---------------
[ ] Hypertet & Tetanus Booster ---------------
You have had a culture test ?? ---------------
obtain result or have your M?? ---------------
your results. ---------------
- ------------------------------- ---------------
- ------------------------------- SCHEDULE 3.15(B) ---------------
Patient May May Not ---------------
CLAIMS ---------------
Patient is to remain off work/sc ---------------
Patient may then return to work ---------------
for ______________________ days ---------------
- --------------------------------------------------------------------------------
Date M.D. Referral Phone
- --------------------------------------------------------------------------------
Time Address
- --------------------------------------------------------------------------------
PATIENT HOME INSTRUCTION SHEETS GIVEN
- --------------------------------------------------------------------------------
Other Specific Instructions:
[ ] Head Injury ------------------------------------------------
[ ] Fever ------------------------------------------------
[ ] Vomiting and/or diarrhea ------------------------------------------------
[ ] Burns ------------------------------------------------
[ ] Back Pain ------------------------------------------------
[ ] Other: ------------------------------------------------
------------------- ------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ------------------------------------------------------------- -------------------------------------------------------------------
WOUND CARE (Cuts--Abrasions--Burns--Stitches) SPRAIN AND FRACTURE--SEVERE BRUISES
- ------------------------------------------------------------- -------------------------------------------------------------------
[ ] Keep dressing clean and dry. [ ] Elevate the injured part to lessen swelling. If
[ ] Elevate wound to help relieve soreness and to speed pillows flatten, use chair cushions with pillow or blankets
healing. for comfort.
[ ] Keep stitches dry until removed by physician. [ ] Ice packs also help prevent swelling, especially during
[ ] If wound becomes infected, i.e. red, swollen, shows the first few hours. Place ice in plastic or rubber bag,
drainage or red streaks or more sore instead of less cloth cover.
sore as days go by you MUST report to your Doctor right [ ] If you have an elastic bandage, rewrap it if too tight
away. or loose.
[ ] If dressings need to be changed, [ ] If you have a cast keep it perfectly dry at all times.
1. Gently wash wound with 50% H2O and 50% Hydrogen [ ] Wait 48 hours for the cast to become strong before you
Peroxide, dry thoroughly and apply thin film of allow pressure or weight on any part of the cast.
_______ ointment _______ days. [ ] Wiggle toes or fingers to help prevent swelling in the
2. Wound should be kept clean with a dry dressing cast--this should be done often if it does not cause pain.
that can be changed at least every 24 hours.
[ ] Call your physician for dressing changes when instructed.
- ------------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
[ ] IMPORTANT NOTICE: Your X-Ray has been read on a preliminary basis. Final
consultation and review by the radiologist will be made the following day.
Please have your doctor call the X-Ray Department for additional findings.
If you find the need to pick up a copy of your X-Ray please allow 30 minutes
for the processing and completion of your request. X-Rays can be picked up
in the X-Ray Department.
- --------------------------------------------------------------------------------
Physician's Patient's
Signature Signature
- --------------------------------------------------------------------------------
Discharge
Nurse's Legal Guardian
Signature Signature
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
P Patient Name Medical Record No. Date & Time In Pt. Financial No. FC Age Sex Mar.
A
T ---------------------------------------------------------------------------------------------------
I Patient Phone No. Birthdate E.R. Doctor
E
N ---------------------------------------------------------------------------------------------------
T Employer Employer Phone Local Doctor
- -----------------------------------------------------------------------------------------------------------------------------------
Chief Complaint:
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 146
CYMER LASER TECHNOLOGIES
3.16(a) Employment Agreements
- See Section 3.15(a) -
<PAGE> 147
CYMER LASER TECHNOLOGIES
SCHEDULE 3.16(a) Employment Agreements
- None in place -
<PAGE> 148
CYMER LASER TECHNOLOGIES
SCHEDULE 3.16 (b) Employee Compensation
<TABLE>
<CAPTION>
Employee Annual Compensation
- -------------------- --------------------
<S> <C>
Akins, Robert $55,000
Anderson, Stuart $42,000
Campeau, Serge $35,000
Clubine, Cynthia $23,000
Foster, Bette $33,000
Larson, Donald $50,000
Moe, Kevin $23,000
Pedley, Martin $53,000
Sandstrom, Richard $54,000
Sengupta, Uday $54,000
Wilson, J. Daniel $30,000
</TABLE>
<PAGE> 149
CYMER LASER TECHNOLOGIES
3.17 Confidentiality Agreements
Confidentiality Agreements List
1) Employee / Non-disclosure Agreements (form and signature pages)
2) Founders' Confidentiality Agreements
3) Consultants' Confidentiality Agreements
<PAGE> 150
CYMER LASER TECHNOLOGIES
SCHEDULE 3.17(a) Employee Confidentiality Agreement
Form and signature pages of employees attached.
The five founders Employee Confidentiality Agreements will be Federal Expressed
from our law firm.
<PAGE> 151
CYMER LASER TECHNOLOGIES
EMPLOYEE / NON-DISCLOSURE AGREEMENT
In exchange for my becoming employed (or my employment being
continued) by CYMER Laser Technologies, or its subsidiaries, affiliates, or
successors (hereinafter referred to collectively as the "Company"), I hereby
agree as follows:
1. I will perform for the Company such duties as may be
designated by the Company from time to time. During my period of employment by
the Company, I will devote my best efforts to the interests of the Company and
will not engage in other employment or in any activities detrimental to the
best interests of the Company without the prior written consent of the Company.
2. As used in this Agreement, the term "Inventions" means
designs, trademarks, discoveries, formulae, processes, manufacturing
techniques, trade secrets, inventions, improvements, ideas or copyrightable
works, including all rights to obtain, register, perfect and enforce these
proprietary interests.
3. As used in this Agreement, the term "Confidential Information"
means information pertaining to any aspects of the Company's business which is
either information not known by actual or potential competitors of the Company
or is proprietary information of the Company or its customers or suppliers,
whether of a technical nature or otherwise.
4. Without further compensation, I hereby agree promptly to
disclose to the Company, and I hereby assign and agree to assign to the Company
or its designee, my entire right, title, and interest in and to all Inventions
which I may solely or jointly develop or reduce to practice during the period
of my employment with the Company (a) which pertain to any line of business
activity of the Company, (b) which are aided by the use of time, material or
facilities of the Company whether or not during working hours, or (c) which
relate to any of my work during the period of my employment with the Company,
whether or not during normal working hours. No rights are hereby conveyed in
Inventions, if any, made by me prior to my employment with the Company which
are identified in a sheet attached to and made a part of this Agreement, if any
(which attachment contains no confidential information).
<PAGE> 152
5. I agree to perform, during and after my employment, all acts
deemed necessary or desirable by the Company to permit and assist it, at its
expense, in obtaining and enforcing the full benefits, enjoyment, rights and
title throughout the world in the Inventions hereby assigned to the Company as
set forth in paragraph 4 above. Such acts may include, but are not limited to,
execution of documents and assistance or cooperation in legal proceedings.
6. I agree to hold in confidence and not directly or indirectly
to use or disclose, either during or after termination of my employment with
the Company, any Confidential Information I obtain or create during the period
of my employment, whether or not during working hours, except to the extent
authorized by the Company, until such Confidential Information becomes
generally known. I agree not to make copies of such Confidential Information
except as authorized by the Company. Upon termination of my employment or upon
an earlier request of the Company I will return or deliver to the Company all
tangible forms of such Confidential Information in my possession or control,
including but not limited to drawings, specifications, documents, records,
devices, models or any other material and copies or reproductions thereof.
7. I represent that my performance of all the terms of this
Agreement and as an employee of the Company does not and will not breach any
agreement to keep in confidence proprietary information, knowledge or data
acquired by me in confidence or in trust prior to my employment with the
Company, and I will not disclose to the Company, or induce the Company to use,
any confidential or proprietary information or material belonging to any
previous employer or others. I agree not to enter into any agreement either
written or oral in conflict with the provisions of this Agreement.
8. This Agreement (a) shall survive my employment by the Company,
(b) does not in any way restrict my right or the right of the Company to
terminate my employment, (c) inures to the benefit of successors and assigns of
the Company and (d) is binding upon my heirs and legal representatives.
9. This Agreement does not apply to an Invention which qualifies
fully under the provisions of Section 2870 of the Labor Code, a copy of which
is attached hereto as Exhibit A. I agree to disclose all Inventions made by me
in confidence to the Company to permit a determination as to whether or not the
Inventions should be the property of the Company.
<PAGE> 153
10. I certify that, to the best of my information and belief, I am
not a party to any other agreement which will interfere with my full compliance
with this Agreement.
11. I certify and acknowledge that I have carefully read all of
the provisions of this Agreement and that I understand and will fully and
faithfully comply with such provisions.
STUART L. ANDERSON
- ------------------------------ ---------------------------------
Stuart L. Anderson Robert P. Akins
President
CYMER Laser Technologies
Dated: 10/21/87 Dated:
------------------------ ----------------------
<PAGE> 154
ATTACHMENT
LIST OF INVENTIONS
<PAGE> 155
EXHIBIT A
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
(a) Any provision in an employment agreement which provides that
an employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer.
(2) Result from any work performed by the employee for
the employer.
(b) To the extent a provision in an employment agreement purports
to require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
<PAGE> 156
10. I certify that, to the best of my information and belief, I am
not a party to any other agreement which will interfere with my full compliance
with this Agreement.
11. I certify and acknowledge that I have carefully read all of
the provisions of this Agreement and that I understand and will fully and
faithfully comply with such provisions.
SERGE M. CAMPEAU
- ----------------------------------- -----------------------------------
Serge M. Campeau Robert P. Akins
President
CYMER Laser Technologies
Dated: 2/15/88 Dated: 2/23/88
<PAGE> 157
10. I certify that, to the best of my information and belief, I am
not a party to any other agreement which will interfere with my full compliance
with this Agreement.
11. I certify and acknowledge that I have carefully read all of
the provisions of this Agreement and that I understand and will fully and
faithfully comply with such provisions.
J. DANIEL WILSON ROBERT P. AKINS
- ----------------------------------- -----------------------------------
J. Daniel Wilson Robert P. Akins
President
CYMER Laser Technologies
Dated: 2/19/88 Dated: 2/23/88
<PAGE> 158
10. I certify that, to the best of my information and belief, I am
not a party to any other agreement which will interfere with my full compliance
with this Agreement.
11. I certify and acknowledge that I have carefully read all of
the provisions of this Agreement and that I understand and will fully and
faithfully comply with such provisions.
KEVIN W. MOE ROBERT P. AKINS
- ----------------------------------- ---------------------------------
Kevin W. Moe Robert P. Akins
President
CYMER Laser Technologies
Dated: [ILLEGIBLE] Dated: 2/23/88
----------------------------- ---------------------------
<PAGE> 159
10. I certify that, to the best of my information and belief, I am
not a party to any other agreement which will interfere with my full compliance
with this Agreement.
11. I certify and acknowledge that I have carefully read all of
the provisions of this Agreement and that I understand and will fully and
faithfully comply with such provisions.
BETTE L. FOSTER ROBERT P. AKINS
- ----------------------------------- -----------------------------------
Bette L. Foster Robert P. Akins
President
CYMER Laser Technologies
Dated: 2/18/88 Dated: 2/18/88
<PAGE> 160
10. I certify that, to the best of my information and belief, I am
not a party to any other agreement which will interfere with my full compliance
with this Agreement.
11. I certify and acknowledge that I have carefully read all of
the provisions of this Agreement and that I understand and will fully and
faithfully comply with such provisions.
CYNTHIA A. CLUBINE ROBERT P. AKINS
- ----------------------------------- ------------------------------------
Cynthia A. Clubine Robert P. Akins
President
CYMER Laser Technologies
Dated: 2/18/88 Dated: 2/18/88
<PAGE> 161
CYMER LASER TECHNOLOGIES
SCHEDULE 3.17(b) Consultant Confidentiality Agreement
Agreements attached.
<PAGE> 162
NONDISCLOSURE AGREEMENT
THIS AGREEMENT is made on OCTOBER 14, 1987 between CYMER LASER TECHNOLOGIES, a
California corporation (the "Company") and Fine Particles Tech., a
______________________ corporation ("Third Party").
1. Purpose. The Company and Third Party wish to explore a
business possibility and the Company may disclose Confidential Information to
Third Party.
2. Definition. "Confidential Information" means any information,
technical data, or know-how, including, but not limited to, that which relates
to research, product plans, products, services, customers, markets, software,
developments, inventions, processes, designs, drawings, engineering, hardware
configuration information, marketing or finances, which Confidential
Information is designated in writing to be confidential or proprietary, or if
given orally, is confirmed promptly in writing as having been disclosed as
confidential or proprietary. Confidential Information does not include
information, technical data or know-how which (i) is in the possession of the
receiving party at the time of disclosure as shown by the receiving party's
files and records immediately prior to the time of disclosure; or (ii) prior or
after the time of disclosure becomes part of the public knowledge or
literature, not as a result of any inaction or action of the receiving party,
or (iii) is approved by the disclosing party, in writing, for release.
3. Non-Disclosure of Confidential Information. Third Party agrees not
to use any Confidential Information disclosed to it by the Company for its own
use or for any purpose except to carry out discussions concerning, and the
undertaking of, any business relationship between the two. Third Party will
not disclose any Confidential Information of the Company to third parties or to
employees of Third Party except employees who are required to have the
information in order to carry out the discussions of the contemplated business.
Third Party will have or has had employees to whom Confidential Information of
the Company is disclosed or who have access to Confidential Information of the
Company sign a Non-Disclosure Agreement in content substantially similar to
this Agreement and will promptly notify the Company in writing of the names of
each such employee upon the request of the Company at any time. Third Party
agrees that it will take all reasonable measures to protect the secrecy of and
avoid disclosure or use of Confidential Information of the Company in order to
prevent it from falling into the public domain or the possession of persons
other than those persons authorized hereunder to have any such information,
which measures shall include the highest degree of care that Third Party
utilizes to protect its own Confidential Information of a similar nature.
<PAGE> 163
Third Party agrees to notify the Company in writing of any misuse or
misappropriation of Confidential Information of the Company which may come to
Third Party's attention.
4. Return of Materials. Any materials or documents which have
been furnished by the Company to Third Party will be promptly returned,
accompanied by all copies of such documentation, after the business possibility
has been rejected or concluded.
5. Patent or Copyright Infringement. Nothing in this Agreement
is intended to grant any rights to Third Party under any patent or copyright,
nor shall this Agreement grant Third Party any rights in or to the Company's
Confidential information, except the limited right to review such Confidential
Information solely for the purposes of determining whether to enter into the
proposed business relationship with the Company.
6. Term. The foregoing commitments of Third Party shall survive
any termination of discussions between the parties, and shall continue for a
period of five (5) years following the date of this Agreement.
7. Miscellaneous. This Agreement shall be binding upon and for
the benefit of the undersigned parties, their successors and assigns, provided
that Confidential Information of the Company may not be assigned without the
prior written consent of the Company. Failure to enforce any provision of this
Agreement shall not constitute a waiver of any term hereof.
8. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
California, and shall be binding upon the parties hereto in the United States
and worldwide.
9. Remedies. Third Party agrees that the obligations of Third
Party provided herein are necessary and reasonable in order to protect the
Company and its business, and Third Party expressly agrees that monetary
damages would be inadequate to compensate the Company for any breach by Third
Party of its covenants and agreements set forth herein. Accordingly, Third
Party agrees and acknowledges that any such violation or threatened violation
will cause irreparable inquiry to the Company and that, in addition to any
other remedies that may be available, in law, in equity or otherwise, the
Company shall be entitled to obtain injunctive relief
-2-
<PAGE> 164
against the threatened breach of this Agreement or the continuation of any such
breach by Third Party, without the necessity of proving actual damages.
"COMPANY"
CYMER LASER TECHNOLOGIES
By: [ILLEGIBLE]
---------------------
Title: MGR. PRODUCT
ENGINEERING
"THIRD PARTY"
[ILLEGIBLE]
------------------------
By: [ILLEGIBLE]
----------------------
Title: Marketing Manager
-------------------
-3-
<PAGE> 165
NONDISCLOSURE AGREEMENT
THIS AGREEMENT is made on APRIL 13, 1988 between CYMER LASER
TECHNOLOGIES, a California corporation (the "Company") and HIGHTECH
METALLURGICAL CO. ("Third Party").
1. Purpose. The Company and Third Party wish to explore a
business possibility and the Company may disclose Confidential Information to
Third Party.
2. Definition. "Confidential Information" means any information,
technical data, or know-how, including, but not limited to, that which relates
to research, product plans, products, services, customers, markets, software,
developments, inventions, processes, designs, drawings, engineering, hardware
configuration information, marketing or finances, which Confidential
Information is designated in writing to be confidential or proprietary, or if
given orally, is confirmed promptly in writing as having been disclosed as
confidential or proprietary. Confidential Information does not include
information, technical data or know-how which (i) is in the possession of the
receiving party at the time of disclosure as shown by the receiving party's
files and records immediately prior to the time of disclosure; or (ii) prior or
after the time of disclosure becomes part of the public knowledge or
literature, not as a result of any inaction or action of the receiving party,
or (iii) is approved by the disclosing party, in writing, for release.
3. Non-Disclosure of Confidential Information. Third Party
agrees not to use any Confidential Information disclosed to it by the Company
for its own use or for any purpose except to carry out discussions concerning,
and the undertaking of, any business relationship between the two. Third Party
will not disclose any Confidential Information of the Company to third parties
or to employees of Third Party except employees who are required to have the
information in order to carry out the discussions of the contemplated business.
Third Party will have or has had employees to whom Confidential Information of
the Company is disclosed or who have access to Confidential Information of the
Company sign a Non-Disclosure Agreement in content substantially similar to
this Agreement and will promptly notify the Company in writing of the names of
each such employee upon the request of the Company at any time. Third Party
agrees that it will take all reasonable measures to protect the secrecy of and
avoid disclosure or use of Confidential Information of the Company in order to
prevent it from falling into the public domain or the possession of persons
other than those persons authorized hereunder to have any such information,
which measures shall include the highest degree of care that Third Party
utilizes to protect its own Confidential Information of a similar nature.
<PAGE> 166
Third Party agrees to notify the Company in writing of any misuse or
misappropriation of Confidential Information of the Company which may come to
Third Party's attention.
4. Return of Materials. Any materials or documents which have
been furnished by the Company to Third Party will be promptly returned,
accompanied by all copies of such documentation, after the business possibility
has been rejected or concluded.
5. Patent or Copyright Infringement. Nothing in this Agreement
is intended to grant any rights to third Party under any patent or copyright,
nor shall this Agreement grant Third Party any rights in or to the Company's
Confidential information, except the limited right to review such Confidential
Information solely for the purposes of determining whether to enter into the
proposed business relationship with the Company.
6. Term. The foregoing commitments of Third Party shall survive
and termination of discussions between the parties, and shall continue for a
period of five (5) years following the date of this Agreement.
7. Miscellaneous. This Agreement shall be binding upon and for
the benefit of the undersigned parties, their successors and assigns, provided
that Confidential Information of the Company may not be assigned without the
prior written consent of the Company. Failure to enforce any provision of
this Agreement shall not constitute a waiver of any term hereof.
8. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
California, and shall be binding upon the parties hereto in the United States
and worldwide.
9. Remedies. Third Party agrees that the obligations of Third
Party provided herein are necessary and reasonable in order to protect the
Company and its business, and Third Party expressly agrees that monetary
damages would be inadequate to compensate the Company for any breach by Third
Party of its covenants and agreements set forth herein. Accordingly, Third
Party agrees and acknowledges that any such violation or threatened violation
will cause irreparable injury to the Company and that, in addition to any other
remedies that may be available, in law, in equity or otherwise, the Company
shall be entitled to obtain injunctive relief
-2-
<PAGE> 167
against the threatened breach of this Agreement or the continuation of any such
breach by Third Party, without the necessity of proving actual damages.
"COMPANY"
CYMER LASER TECHNOLOGIES
-----------------------------
By: ROBERT P. AKINS
--------------------------
Title: President
-----------------------
"THIRD PARTY"
HITECH METALLURGICAL CO.
-----------------------------
By: K. H. Holks
--------------------------
-3-
<PAGE> 168
NONDISCLOSURE AGREEMENT
THIS AGREEMENT is made on January 4, 1988 between CYMER LASER TECHNOLOGIES,
a California corporation the "Company") and Mr. Stanley Collier, a
___________________________ corporation ("Third Party").
1. Purpose. The Company and Third Party wish to explore a
business possibility and the Company may disclose Confidential Information to
Third Party.
2. Definition. "Confidential Information" means any information,
technical data, or know-how, including, but not limited to, that which relates
to research, product plans, products, services, customers, markets, software,
developments, inventions, processes, designs, drawings, engineering, hardware
configuration information, marketing or finances, which Confidential
Information is designated in writing to be confidential or proprietary, or if
given orally, is confirmed promptly in writing as having been disclosed as
confidential or proprietary. Confidential Information does not include
information, technical data or know-how which (i) is in the possession of the
receiving party at the time of disclosure as shown by the receiving party's
files and records immediately prior to the time of disclosure; or (ii) prior or
after the time of disclosure becomes part of the public knowledge or
literature, not as a result of any inaction or action of the receiving party,
or (iii) is approved by the disclosing party, in writing, for release.
3. Non-Disclosure of Confidential Information. Third Party
agrees not to use any Confidential Information disclosed to it by the Company
for its own use or for any purpose except to carry out discussions concerning,
and the undertaking of, any business relationship between the two. Third Party
will not disclose any Confidential Information of the Company to third parties
or to employees of Third Party except employees who are required to have the
information in order to carry out the discussions of the contemplated business.
Third Party will have or has had employees to whom Confidential Information of
the Company is disclosed or who have access to Confidential Information of the
Company sign a Non-Disclosure Agreement in content substantially similar to
this Agreement and will promptly notify the Company in writing of the names of
each such employee upon the request of the Company at any time. Third Party
agrees that it will take all reasonable measures to protect the secrecy of and
avoid disclosure or use of Confidential Information of the Company in order to
prevent it from falling into the public domain or the possession of persons
other than those persons authorized hereunder to have any such information,
which measures shall include the highest degree of care that Third Party
utilizes to protect its own Confidential Information of a similar nature.
<PAGE> 169
Third Party agrees to notify the Company in writing of any misuse or
misappropriation of Confidential Information of the Company which may come to
Third Party's attention.
4. Return of Materials. Any materials or documents which have
been furnished by the Company to Third Party will be promptly returned,
accompanied by all copies of such documentation, after the business possibility
has been rejected or concluded.
5. Patent or Copyright Infringement. Nothing in this Agreement
is intended to grant any rights to Third Party under any patent or copyright,
nor shall this Agreement grant Third Party any rights in or to the Company's
Confidential Information, except the limited right to review such Confidential
Information solely for the purposes of determining whether to enter into the
proposed business relationship with the Company.
6. Term. The foregoing commitments of Third Party shall survive
any termination of discussions between the parties, and shall continue for a
period of five (5) years following the date of this Agreement.
7. Miscellaneous. This Agreement shall be binding upon and for
the benefit of the undersigned parties, their successors and assigns, provided
that Confidential Information of the Company may not be assigned without the
prior written consent of the Company. Failure to enforce any provision of this
Agreement shall not constitute a waiver of any term hereof.
8. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
California, and shall be binding upon the parties hereto in the United States
and worldwide.
9. Remedies. Third Party agrees that the obligations of Third
Party provided herein are necessary and reasonable in order to protect the
Company and its business, and Third Party expressly agrees that monetary
damages would be inadequate to compensate the Company for any breach by Third
Party of its covenants and agreements set forth herein. Accordingly, Third
Party agrees and acknowledges that any such violation or threatened violation
will cause irreparable inquiry to the Company and that, in addition to any
other remedies that may be available, in law, in equity or otherwise, the
Company shall be entitled to obtain injunctive relief
-2-
<PAGE> 170
against the threatened breach of this Agreement or the continuation of any such
breach by Third Party, without the necessity of proving actual damages.
"COMPANY"
______________________________
By: Robert P. Akins
Title: President
"THIRD PARTY"
STANLEY COLLIER
-----------------------------
By: Stanley Collier
--------------------------
Title:_______________________
-3-
<PAGE> 171
CYMER LASER TECHNOLOGIES
SCHEDULE 3.18 Litigation
- No litigation past or pending -
Legal issues that have come to our attention that could or could not concern
the company in the future are attached.
<PAGE> 172
[QUESTEK LOGO]
July 29, 1987
Cymer Laser Technologies
7887 Dunbrook Road
San Diego, CA 92126
Re: Questek Patent No. 4,611,270
Dear Sir or Madam:
I have enclosed a copy of United States Patent No. 4,611,270 for your review.
All rights to this patent are owned by Questek Incorporated.
I direct your attention to this patent because it has come to my attention that
Cymer manufactures and sells excimer lasers with a control system similar to
that in this patent.
If you believe Cymer is not infringing on this patent, please reply with
supporting information to this effect by registered mail. Failure to do so
within 30 days will be interpreted as an acknowledgement that Cymer is indeed
infringing on this patent, and Questek is prepared to take legal action to
prevent such infringement.
Sincerely yours,
QUESTEK, INC.
GARY K. KLAUMINZER, Ph.D.
Gary K. Klauminzer, Ph.D.
President
QUESTEK INC., 44 MANNING ROAD, BILLERICA, MA 01821 (617) 667-6790
<PAGE> 173
CYMER LASER TECHNOLOGIES
August 26, 1987
Dr. Gary Klauminzer
President
QUESTEK Inc.
44 Manning Road
Billerica, MA 01821
Re: Questek Patent No. 4,611,270
Dear Dr. Klauminzer:
We have carefully reviewed your patent and have no plans to infringe on it.
Thank you for bringing our attention to this subject.
Sincerely,
ROBERT AKINS, Ph.D.
Robert Akins, Ph.D.
President
7887 Dunbrook Road . Suite H . San Diego, California 92126 . (619) 549-6760
<PAGE> 174
LA TIMES, 12/22/87
COURT UPHOLDS
PATLEX RIGHTS TO
3RD LASER PATENT
By BARRY STAVRO,
Times Staff Writer
Patlex Corp. won another legal victory last week by wrapping up the rights
to a third key laser patent, furthering the Chatsworth company's chances for
great riches.
The U.S. District Court in Washington upheld a laser use patent that had
been issued to inventor Gordon Gould, Patlex's vice chairman, in 1979. In 1982,
however, the Patent Office decided to re-examine Gould's patent. But the
District Court concluded that the Patent Office's arguments were not sufficient
to rescind the patent.
The Patent Office has 60 days to appeal the decision.
'A Satisfying Year'
"It's been a very satisfying year," said Richard Samuel, Patlex's chairman.
The company owns 64% of the rights to Gould's various laser patents, in exchange
for which Patlex has been footing the legal bills as it tries to conclude the
lengthy dispute over Gould's inventions. This year alone, Patlex's legal tab is
$1.25 million, Samuel said.
Gould, who owns 20% of the rights to his patents, originally filed for his
laser use patent in 1959.
Gould came up with the acronym laser -- light amplification by stimulated
emission of radiation -- and the powerful beams of light are now used in
everything from eye surgery to computer printers and steel manufacturing.
After years of legal battles, Gould and Patlex have had little to show for
their efforts. For the nine months ended Sept. 30, Patlex lost $2 million on
$9.2 million in sales.
But that will now change. Samuel expects Patlex to close out its year with a
profit, and with Gould and Patlex on the verge of collecting big returns, the
company's stock has surged from $5.75 per share after the stock market crash
Oct. 19 to close at $14 Monday.
The trio of laser patents that Gould holds covers 90% of the estimated
$600-million market in non-military users for lasers. On average, Patlex gets 5%
royalty payments from companies using Gould's laser technology. With a total
market of $600 million, Patlex would take in about $19 million in royalties next
year, and Gould would get an additional $6 million.
"We're guessing like everyone else. It could be half or twice that amount,"
Samuel said.
Contracts Signed
Since last month, Samuel has signed contracts for $4.8 million worth of back
royalties that the companies owed Patlex, plus future laser royalty deals. To
date, Patlex has signed about 20 companies to royalty contracts, including
Motorola, IBM, General Motors and 3M. Samuel said he expects to sign another 50
to 75 firms.
Last month, Patlex won another legal battle when Gould was finally awarded a
patent for his gas-discharge laser. Earlier, Gould had been awarded a patent for
an optically-pumped laser.
The names refer to different power sources used to trigger a laser. Some
lasers use a light charge; others are triggered by an electrical discharge in a
gas.
Those two patents cover the manufacture of lasers. The latest use patent,
however, covers the use of lasers in cutting, welding, drilling and chemical
reactions.
There is a fourth laser invention at stake, called the Brewster Angle
Window, which involves a design used in many gas-discharge lasers. Gould's
patent application is before the Patent Office's Board of Appeals, and Samuel
expects a decision in January.
This last design is not as vital as the other three, Samuel said, but would
further solidify Patlex's claim on royalties from manufacturers of gas-discharge
lasers.
Developed Ideas as Student
Gould, 67, who lives in Kinsale, Va., developed his laser ideas while a
graduate student of physics at Columbia University.
"The basic principle popped into my mind one night when I couldn't get to
sleep, and it was so exciting that I just spent the whole rest of the weekend
writing it down," he said.
Years later, Gould suffered from cataracts, and his sight was saved as a
result of laser surgery.
Although Gould said he feels "immense satisfaction" at having his laser
inventions vindicated in court, the 30-year struggle has been wearying.
"If I had any idea that it could take this kind of time, I would have
dropped it decades ago," he said.
- -------------
VALLEY PEOPLE
- -------------
* Amperif Corp. has named NORMAN R. FARQUHAR to the newly created position
of senior vice president and chief financial officer.
Farquhar, 41, is overseeing the Chatsworth company's financial resources and
its plan to become a publicly traded corporation by the end of 1998.
Amperif is a developer and supplier of storage systems for mainframe
computers.
<PAGE> 175
BUSINESS NEWS/LASERS
PATLEX'S PATH TO PROFITS
By Michael Moretti
In the past several months, Patlex Corp., Chatsworth, Calif., has begun to reap
the benefits of a legal war that it tenaciously waged for nearly a decade. A
string of legal victories in the Gordon Gould patent case (Patlex owns a 64%
interest in the Gould patents) has given this company the momentum and clout to
demand royalties from some 200 laser manufacturers.
After years of toil, Patlex hopes to collect nearly $15 million by 1990 from
those laser companies that are found to be infringing on the Gould patent.
A favorable patent decision recently handed down by the U.S. Court of
Appeals validates Gould's gas laser claim. In September 1986, the same court
ruled in favor of Gould's right to an optically pumped laser patent. In May of
this year, the California courts upheld one of Gould's patents in an
infringement case against Cooper LaserSonics, Palo Alto, Calif. And in the same
month, Lumonics, Kanata, Ontario, settled out of court with Patlex after lengthy
litigation involving three infringement suits.
According to Patlex Chairman Richard Samuel, the licensing agreement his
company signed with Lumonics will serve as a baseline for future settlements.
Patlex has sent similar agreements to 200 companies and is currently negotiating
licensing arrangements with 25 of these manufacturers.
In addition, the company is pursuing infringement suits against Control
Laser, Orlando, Fla., and NEC, Tokyo, Japan. It has also purchased the assets of
General Photonics, Santa Clara, Calif., which sought Chapter 11 to avoid a
Patlex suit.
Beginning in 1976
Samuel's involvement with the Gould patent case began in 1976. At that time,
Samuel was a patent attorney and partner in a law firm that Gould chose to
defend his claims.
In 1979, an investment banking firm brought a group of investors together
with Gould to form Patlex. Samuel, who had purchased a stake in the Gould
patents, left his law firm in 1983 to manage Patlex during what he calls "the
dark years."
"I had to bring the company through the next few years of legal fighting
with no near-term payoff in sight," recounts Samuel.
During this time, Samuel proved his business acumen by raising capital and
diversifying Patlex's interests. As a result, the holding company, which had
three employees and no revenue in 1983, now boasts 300 employees worldwide and
revenues in 1986 of $5.9 million.
The bulk of this revenue is generated by two Israeli manufacturing
companies. Patlex also owns Apollo Lasers, Chatsworth, Calif. -- a company that
has only recently shown a profit.
Samuel estimates 1987 revenue for Patlex at $12 million, with a
[ADVERTISEMENT]
<PAGE> 176
BUSINESS NEWS/LASERS
jump to $20 million by 1988. He attributes this boost in revenues to the
success of his two defense-oriented companies in Israel.
Reflecting these business and legal accomplishments, Patlex stock climbed
from $5 per share in 1985 to a current trading price hovering around $18.
Extreme optimism
Looking to the next few years, Samuel is extremely optimistic regarding the
legal awards and royalty revenues based on the Gould patents. He thinks court
decisions on patent claims are more predictable now than in the past.
"All patent cases now go to one Court of Appeals in Washington, D.C. In the
past, cases went to regional courts which led to an inconsistency of judgements.
Overall, the courts are more consistent in upholding patents and issuing
injunctions now," says Samuel.
Over the years, Patlex spent more than $3 million pursuing patent
litigation. Now the company wants a significant return on its investment. "We're
not willing to settle on the basis of attorney fees," says Samuel. "We want
substantial licensing fees. Based on the Lumonics agreement, we are asking for
5% royalties from all companies."
Samuel advises that laser companies carefully evaluate the ultimate costs of
fighting a court battle to escape patent royalties. "Control Laser spent $1.4
million in legal fees over the last ten years. The company now faces retroactive
license fees and interest in addition to those legal expenditures."
- ---------------------------------------------------------------------
F&S REPORT FORECASTS LASER MARKET TO
GROW 6.7% A YEAR THROUGH 1991
Demand by U.S. end-users for industrial-commercial component lasers reached
$228 million in 1986, and will grow at an annual rate of 6.7% through 1991,
when the market will be worth $315 million, according to a recent Frost &
Sullivan report. The Frost & Sullivan report analyzes and forecasts the
American market for commercial/industrial lasers.
Some highlights of the forecast: CO2, ion, and solid-state lasers are
expected to continue to represent the most popular types of lasers in the U.S.
CO2 laser sales of $52 million in 1986 are projected at $63.3 million in 1991 --
a compounded annual growth rate (CAGR) of 4% for the forecast period.
Solid-state lasers are projected to grow at a CAGR of 8%, with sales of $42
million in 1986 projected at $61.7 million in 1991. This growth expectation is
based upon anticipated expanded sales in therapeutic medical applications and
the projected recovery of what has been a relatively soft microelectronics
industry the past two years.
[ADVERTISEMENT]
<PAGE> 177
BUSINESS NEWS/LASERS
CALIFORNIA JURY FINDS IN FAVOR OF PATLEX IN PATENT LITIGATION
In May, there was more news in regard to what Patlex Corp. calls its "pursuit
of the Gordon Gould Laser Patent properties."
A California jury returned a verdict that will result in an award of "no
less than $161,619" to Gould and the Chatsworth, Calif., company.
The jury found Cooper LaserSonics, Palo Alto, Calif., had "willfully
infringed" Gould's copper-vapor-laser patent.
The award represents back royalties of 6% on a variety of copper-vapor
lasers made and sold by Cooper LaserSonics. According to Patlex, undisputed
sales of such lasers have amounted to about $2.7 million.
Patlex is exclusive licensing agent for the Gould patent properties and
holds a 64% income interest in them.
Richard I. Samuel, Patlex chairman, noted that his firm had tried
negotiating "a concessionary license" with the other company. He said the case
demonstrates that "we are fully prepared to let the courts determine the
appropriate damages if an infringing manufacturer does not enter into a
negotiated license."
Because the jury found the infringement willful, the court can award further
money to Patlex and Gould in connection with attorneys' fees. It can also
increase the damages up to three times.
- --------------------------------------------------------------------------
TEST-EQUIPMENT MARKET IS SUBJECT OF NEW STUDY
U.S. sales of laser and optoelectronic test equipment approached $665 million
in 1986 and will triple to about $2 billion by 1994. Over the eight-year
period, that is equivalent to an average annual increase of more than 14%.
These are among findings reported in a 350-page study recently published by
Corporate Strategic Intelligence (CSI), Middlebush, N.J.
In the course of its research, the market-research firm discovered that the
spectrum analyzer, the interferometer, the microscope, and optical test
equipment dominate the total market for laser and optoelectronic test equipment.
They account for 41% of total sales.
The fastest-growing area is fiber-optic test equipment, which CSI says will
expand at an average annual rate of 33% over the same eight-year period.
CSI's study, "Developments in the Laser and Opto-Electronics Test Equipment
Market" (Report #1120), sells for $895. To order or to request a table of
contents and description, contact CSI at P.O. Box 5204, Middlebush, NJ 08873. Or
phone (201) 873-3792.
[ADVERTISEMENT]
<PAGE> 178
POSTDEADLINE NEWS
from this technique in the future.
The CPA studies have been conducted at the university's Laboratory
for Laser Energetics by P. Maine, D. Strickland, P. Bado, and G. Mourou.
Amplification of a long chirped pulse avoids saturation in the glass
amplifier (see the June 1988 LF/E-O, p. 104). Recompression in a
grating pair creates a joule-level picosecond pulse with the brightness
figure quoted above.
The brightness was determined from measurement of peak power (in the
terawatt regime) and beam divergence (twice the diffraction limit).
Mourou said the measured brightness implies that the pulses could be
focused with an fl lens to a power density of 10(10) W/cm(2).
Through use of larger amplifiers that are already available for
laser fusion studies, together with improved pulse-compression
equipment, the researchers expect to achieve petawatt pulses that can be
focused to a power density of 10(23) W/cm(2).
INDUSTRIAL LASER SYSTEMS GET SMART
Computer-aided laser marking and engraving and three-dimensional
laser measurement and cutting were among the capabilities highlighted at
the May 1987 European Conference on Automated Manufacturing (Automan) in
Birmingham, U.K.
Laser Lines Ltd., Oxford, U.K., displayed two programmable laser
markers. The ALLMARK pulsed CO(2) marker from Alltec GmbH, Lubeck,
F.R.G., creates a complete mark in 1 microsecond. The BLS600 CW
Nd:YAG marker from Carl Baasel Lasertechnik GmbH, Starnberg, F.R.G.
uses vector a marking, controlled by a 16/32-bit processor, to expand
form and content options.
Laser Scientific Services Ltd., Huntingdon, U.K., demonstrated a new
high-power CO(2)-laser machining and cutting system. The company offers
lasers that operate pulsed at up to 2.5-kHz repetition rate with power
ratings of 450, 750, or 1200 W.
Oxbridge Technology, Milton Keynes, U.K., showed its contactless
measurement system known as Lasertrace that determines position in three
dimensions. Applications are foreseen in robotics, vehicle tracking,
midflight refueling, and tunneling and mining.
IMAGE PROCESSING FIRM REPORTS HEALTHY GROWTH
Matrox Electronic Systems Ltd. of Dorval, Quebec, passed the $40
million mark in its most recent fiscal year, which ended March 31, and
enjoyed 35% growth in sales. The eleven-year-old firm has had strong
activity selling display controllers for military, financial, and other
system markets and has offered image processing boards in recent years.
Terry Whalen, imaging product manager, said that the processing
subsystems now represent about 20% of the company's sales. Although
other companies making board-level image processing products have
recently reported flat or low-percentage sales growth. Whalen said that
Matrox's imaging products experienced sales growth of about 30% in the
fiscal year just ended.
PATLEX SIGNS LICENSE AGREEMENTS, DROPS PATENT SUIT AGAINST LUMONICS
Patlex Corp., Chatsworth, Calif., signed two laser patent license
agreements in May with Lumonics Inc., Kanata, Ontario. As part of the
total agreement, Patlex droped all legal actions against Lumonics
including two infringement suits in the U.S. and one in
<PAGE> 179
POSTDEADLINE NEWS
Canada. Patlex's other suits involving infringement on the [illegible]
laser patent properties against Cooper LaserSonics and Control
[illegible] are still in the courts (see p. 48).
One patent agreement with Lumonics, on the Optically Pumped
Laser Amplifier patent, will provide Patlex a minimum royalty income of
$2 million over eight years. The second agreement, on the Gas Discharge
Laser patent, is expected to provide the company with a substantial
royalty stream after that patent is issued.
The Lumonics deal is a big breakthrough for Patlex, which holds
a 64% interest in all Gould laser patent income. Lumonics is the first
major laser manufacturer that Patlex has licensed under the Gould
patents.
For Lumonics, the licensing agreements "affect only 10% of our
business and will have only minimal effect on product prices," according
to Richard Hall, company vice president.
CLARIFICATION
Warren Smith, research scientist with Kaiser Electro-Optics (KEO) in
Carlsbad, Calif., points out that it was not "management changes and
reorganization" (as reported in LF/E-O May 1987, p. 10) that led to his
resignation from Santa Barbara Applied Optics. Smith says he chose his
current position with KEO over several alternatives.
NEW INFORMATION SOURCES FOR MEDICAL AND INDUSTRIAL LASER TECHNOLOGIES
LF/E-O has announced two new publications. The first is the 1987
edition of the Industrial Laser Annual Handbook, and it is now available
from PennWell Books of Tulsa, Okla. The second is the Medical Laser
Buyers' Guide and it will be available in the fall.
The Industrial Laser Annual Handbook includes sections with
laser material processing data, articles reviewing different aspects of
laser processing, a company and product directory, and lists of related
products and services. This 260-page hardbound book is published
jointly by PennWell Books and LF/E-O.
The Medical Laser Buyers' Guide has been launched by Medical
Laser Industry Report, which is a monthly newsletter published by
PennWell Publishing Co. This buyers' guide will be the first dedicated
directory providing information on medical lasers and accessories for
medical laser users. More information on this publication is available
from Michael Moretti, editor, at (213) 371-4003.
O-E/LASE EXPANDS ITS QUARTERS
The SPIE's O-E/LASE symposium, scheduled for Jan. 10-15, 1988, in Los
Angeles, Calif., will occupy four hotels in the vicinity of Los Angeles
airport. The preliminary program groups the conferences as follows:
five on optics and optomechanics; five on optical computing and
holography; four on optical data storage; seven on medical applications
of lasers, fibers, and electro-optics; six on lasers in aerospace; eight
on laser science and engineering; and five on spectroscopy. These
O-E/Lase conferences will run concurrently with two other SPIE-sponsored
symposia: the Electronic Imaging Devices and Systems '88, which includes
nine conferences, and Innovative Science and Technology, which includes
eleven conferences on subjects related to the SDI program. LF/E-O will
manage the exhibit.
<PAGE> 180
COMMENT
LASER ASSOCIATION OF AMERICA SEEKS TO BOLSTER DOMESTIC LASER INDUSTRY
By C. Breck Hitz
- -------------------------------------------------------------------------------
C. BRECK HITZ is executive director of the Laser Association of America, 72 Mars
St., San Francisco, CA 94114; tel: (415)-621-5776. He is also a contributing
editor of LF/E-O.
- -------------------------------------------------------------------------------
Many important issues face the laser industry today--issues like patent
litigation and federal regulation--and they can be addressed much more
effectively if the industry thinks and acts together, rather than separately.
The Laser Association of America (LAA) intends to bring about such coherence.
Its goal, simply stated, is to provide a healthy business environment for the
domestic laser industry.
Initially formed as the Laser Industry Council of the Laser Institute
of America (LIA), the LAA is now an independent trade association for companies
located in the U.S. that develop and manufacture lasers, laser systems, laser
components, and accessories. In fact, member companies manufacture more than
90% of the lasers produced in the U.S. today, and membership is growing.
The LAA probably would not exist today were it not for the support of
the LIA's staff, officers, and board during its early years. But for legal and
organizational reasons, the LAA became a separate corporation in 1985 and this
summer opened its own office in San Francisco. Representatives from the
largest laser manufacturers in the country are serving as officers for 1987:
o President: Len DeBenedictis, vice president and general
manager, Coherent Laser Product Division
o President Elect: Jon Tompkins, senior vice president and
general manager, Spectra-Physics Laser Product Division
o Secretary: Dean Hodges, vice president, Newport Corp.
o Treasurer: William Kern, vice president, Quantronix Corp.
TOO MANY TRADE SHOWS
In an LAA opinion survey last year, the CEOs of many laser companies indicated
that trade-show proliferation was their most immediate concern. It costs a
manufacturer thousands of dollars to ship a booth across the country to a laser
exhibition and thousands of dollars to staff it for several days. As the laser
community itself has grown during recent years, so has the number of trade
shows and conferences and the attendant costs of participating in them.
The LAA is working hard to consolidate the laser conferences scheduled
for 1988 and beyond, and professional societies are taking notice of the
manufacturers' concerns. The LIA has drastically scaled down the exhibit
associated with the 1987 ICALEO. The SPIE, as well as the OSA and LEOS, are
working closely with the LAA in an attempt to schedule fewer conferences that
will better serve the needs of engineers, scientists, and manufacturers.
GORDON GOULD PATENTS
While proliferation of conferences may be the most immediate issue facing the
industry, others may be more significant in the long run. For example, the
Gordon Gould patents, which cover much of the fundamental laser technology,
threaten to have a serious impact on the industry. If the patents are upheld by
the courts, and if the resulting royalties cause a significant price increase
of domestically manufactured lasers, there would probably be two adverse
effects. First, lasers would be less economically competitive with other
technologies. Laserless barcode scanners, for example, might become more
practical in many situations. Second, U.S. manufacturers would be at a
disadvantage, because they, but not foreign manufacturers would be required to
pay royalties on lasers sold outside the U.S.
Although some observers feel the Gould patents have merit, most laser
manufacturers to date have disputed the patents. Patlex Corp., majority owner
of the Gould patents, has brought suit against a number of individual
companies. Litigation during the past decade has not been particularly
beneficial for the laser industry or for Patlex, nor has it done much to
resolve the underlying issues. It is time for the laser industry to close
ranks and deal with the Gould patent issue in a coordinated, cooperative
manner. It may be that the industry should throw its combined resources into
aggressive litigation to defeat the patents, or it may be more constructive to
negotiate a settlement with Patlex. Whichever course of action is more
appropriate, the LAA's crucial role will be to coordinate the industry so it
can act with its full political and economic power.
INTERNATIONAL STANDARDS
Another issue concerns international standards. The International
Electrotechnical Committee (IEC), established in 1904, suggests standards for
electrical equipment to legislative bodies around the world. In many
countries, these suggestions become the law of the land with little or no
<PAGE> 181
COMMENT
modification. The committee is currently drawing up standards for radiation
safety, electrical safety, and radiation measurement of lasers and laser
systems. All European countries are likely to adopt these standards, and Japan
almost certainly will. Perhaps half the lasers and systems manufactured in the
U.S. are exported, so any significant divergence between new IEC standards and
existing U.S. standards would adversely impact U.S. manufacturers.
Dr. Gerry Glen of the LAA acts as Secretariat for the technical
committee of IEC that formulates laser standards. The Secretariat is jointly
supported this year by the LIA and the LAA; in future years the LAA alone will
support this important office, through which it will be able to represent the
views of U.S. laser manufacturers and influence worldwide product standards.
THE EXPORT QUESTION
Few if any laser manufacturers have not had puzzling and frustrating
experiences with export regulations, and most feel they lose sales and have to
bear unnecessary legal costs because of unjustifiable export control. For
example, if a KTP crystal is imported from Italy and built into a laser, the
laser cannot be exported to Italy because it contains the KTP crystal, which is
on the restricted list for export.
The LAA has already tried to reduce the number of snafus during customs
inspections by holding a series of classes for U.S. Customs officials to
explain how current law applies to lasers now being exported. The classes were
very well received and may be repeated.
To address the current export law itself, the LAA will obtain membership
on the Department of Commerce's Electronic Instrumentation Technical Advisory
Committee (EITAC). This committee, composed of members of the electronics
industries and government officials, is charged with advising the Commerce
Department and other federal agencies on matters pertaining to export
regulation. The advice of EITAC can and often does have significant effect on
legislation.
The LAA may also elect to maintain a permanent presence in Washington
by appointing a lobbying firm to monitor daily activities in legislative
committees and regulatory agencies and keep the association posted on
developments that could impact the laser industry. A lobbying firm would also
arrange meetings between industry leaders and government officials and, in
general, reduce the "impedance mismatch" between the laser industry and the
Washington bureaucracy.
GATHERING MARKET DATA
Many trade associations monitor the sales within their industries and make data
available to financial analysts, journalists, investors, and the public.
Except for the annual reviews published by this magazine and others, a few data
are available about the size and nature of the worldwide market for lasers and
laser systems. The information published in the reviews is gathered from
individual laser companies, which are frequently reluctant to divulge exact
sales data.
The industry as a whole would benefit if accurate sales data were
widely available. Stockholders, venture capitalists, and other investors are
more willing to invest in a business field if its broad financial outlines are
generally known. Buyers and users are more willing to purchase equipment from
an industry mature enough to be accurately analyzed. Most important, the laser
industry can operate more profitably and efficiently if it understands itself
and its financial dimensions. The LAA could provide accurate, industry-wide
sales data by accepting and compiling confidential sales figures from its
members.
NEW MEMBERS WELCOME
The LAA seeks the support of all U.S. companies that manufacture lasers and
associated equipment. In this formative period, the officers and staff need
advice and opinions from the laser community about which issues to pursue
first. Membership fees are based on company revenue and range from $500 to
$5000. The fees are substantial, but they accurately reflect the magnitude of
the tasks before the association.
The LAA has already made great strides in improving the business
environment for manufacturers in this country, but many tasks remain. We
invite your participation.
CORPORATE MEMBERSHIP
Apollo Lasers Laser Focus
Allied Laser Machining
Burleigh Instruments Laser Mechanisms
Cascade Optical Coating Laser Photonics
Codman & Shurtleff Laser Power Optics
Coherent Laser Science
Continental Laser Lasers & Optronics
Cryogenic Rare Gas Laurin Publishing
CVD Lumonics
Diaguide Melles Griot
Directed Energy MIRA
EG&G Newport
ESI Omnichrome
Image Engineering Oriel
Institute of Applied Laser Surgery Quantrad
Kontes Glass Quantronix
Koppers Qustek
Laakmann Electro-Optical S.E. Huffman
Labsphere Spectra-Physics
Lambda-Physik Synrad
Lasermetrics Two-Six
Wilson Ventures
<PAGE> 182
BUSINESS NEWS/LASERS
LAA OUTLINES AGENDA
AT O-E/Lase '87 in Los Angeles, the board of trustees of the Laser
Association of America (LAA) outlined key issues the group will be addressing in
coming months. Consolidation of trade shows, export regulations, and
international standards were all identified by the board as issues of importance
to the laser industry trade group. The board also approved the appointment of
well-known industry observer, consultant, lecturer, and author C. Breck Hitz as
executive director of the LAA.
At the January 12 meeting, the board reaffirmed the position of the LAA
to "strongly support the consolidation of trade shows and to discourage trade
show proliferation at the expense of its membership and at the expense of the
attendees," Len DeBenedictis, LAA president, said.
The board also identified the need for the LAA to be neutral in its
relationships with the various industry technical societies. According to
DeBenedictis, the laser trade group will avoid sponsorship of conferences, trade
shows, or other activities unless the specific needs of LAA members would be
served by such a sponsorship or a sponsorship was necessary to bring about trade
show consolidation.
A proposal to fund half of the cost necessary to support U.S.
representation on the International Electro-technical Commission (IEC) on the
International Electro-technical Commission (IEC) was approved by the trustees.
The IEC/TC 76 secretariat will establish international standards for the use of
lasers and equipment incorporating lasers. LAA representation was deemed
necessary to protect U.S. laser industry interests.
The LAA will host a seminar on this matter for members and prospective
members at CLEO in Baltimore, Md., on April 29.
The board also identified the need for a permanent representative on the
Technical Advisory Committee to the Commerce Department to have a stronger voice
in export regulations.
- --------------------------------------------------------------------------------
COMPACT 5-kW CO2 LASER DEVELOPED
A 5-kW CO2 laser developed by the Department of Electronic and
Electrical Engineering at the Loughborough University of Technology in the
English Midlands is claimed to be the most compact in its class.
The university is now seeking licensees to manufacture the laser or
enter into joint venture agreements for the further development of the design.
The university evolved a multiple discharge system to produce a laser
head weighing about 100 kg--light enough to be lifted by two men. According to
sources, the head is said to have a volume about a tenth of that of a
conventional 5-kW CO2 laser head. The discharge length of the unit is 600 mm.
No folding is employed, but is believed that folding could be used to make 10-kW
and 20-kW versions that would occupy little extra space.
Cutting, welding, and heat treatment of metals in the aerospace and
automotive industries are expected to be the main applications of the laser.
The new design is expected to be more economical to manufacture than
conventional 5-kW systems.
- --------------------------------------------------------------------------------
MARKET MANEUVERS COULD HAVE BIG IMPACT ON U.S. FIRMS IN JAPAN
In a move that could have a significant effect on several major U.S.
laser manufacturers, effective January 30, three principals of the large
Japanese firm Leonix, together with other employees, left Leonix to form a new
representative/distribution firm to be known as Autex. Based in Tokyo, the firm
will represent manufacturers of small argonion and He-Ne lasers, large Nd:YAG
lasers, and optical components.
Among the companies moving with Autex is Uniphase Corp., Sunnyvale,
Calif., with the likely addition of Quantel and other laser manufacturers.
Autex principals Ohta, Fukui, and Kurosawa are said to have been largely
responsible for the rapid growth of Leonix. They are also said to have been
responsible for about 70 to 80% of the overall Leonix business.
Leonix client companies likely to be affected by the formation of Autex
include Cooper LaserSonics, Lumonics, JK Lasers, Candela, and Quantronix.
The pricing of U.S. products in the Japanese market, and the resulting
gain or loss of sales in Japan, is a likely motivator behind the move. Japanese
representative companies generally have not readjusted prices in Japan for new
currency rates on the international markets, attempting instead to maximize
profits on U.S. products in Japan. New start-ups such as Autex can position
themselves to take advantage of the start of the fiscal year in Japan--and
entice purchasing agents to buy client products--by passing on lower prices to
customers.
- --------------------------------------------------------------------------------
COURT LIFTS STAY IN PATLEX PATENT DISPUTE
The U.S. District Court in Orlando, Fla., lifted a stay imposed in
October 1982 in the patent infringement case brought by Patlex Corp.,
Chatsworth, Calif., against Control Laser Corp., Orlando.
The action resulted from the September 26, 1986, ruling by the Board of
Appeals of the U.S. Patent and Trademark Office confirming the patentability of
the Gordon Gould Optically Pumped Laser Patent.
Patlex Chairman Richard Samuel said the lifting of the stay enables
Patlex to pursue royalty collection rights from Control dating to 1977. The
company also plans to go forward in requesting that other stays be lifted.
- -----------
Laser industry news is written and compiled by Barbara H. Akerley, associate
editor of LF/E-O and editor of Laser Report.
<PAGE> 183
POSTDEADLINE NEWS
GOULD OBTAINS PATENT AFTER 30-YEAR STRUGGLE
Gordon Gould, vice chairman of Patlex Corp., Chatsworth, Calif., has
received U.S. Patent #4704583 for his gas discharge laser. He patent
covers a significant percentage of the lasers in use in the U.S. Dated
Nov. 3, 1987, it expires in 2004.
Gould is said to have conceived the idea for the gas discharge laser
in 1957 while a graduate student at Columbia University in New York. He
did not apply for a patent at that time due to a misunderstanding of
patent law.
Gould's subsequent 30-year battle to obtain a patent finally was
successful, and he will now be able to collect royalties and to license
the use of his patent. Gould also holds the patent for the optically
pumped laser, issued to him in 1977.
Patlex owns 64% of the interests in the Gould patents. Gould himself
has a 20% interest in the income rights.
PATLEX TAKES CONTROL OF CONTROL LASER
Patlex Corp., Chatsworth, Calif., entered an agreement with Control
Laser Corp., Orlando, Fla., in settlement of the damages awarded from a
patent infringement suit by Patlex. A Federal court jury last month
returned a verdict finding that Control Laser had infringed on the
patent for the optically pumped laser developed by Gordon Gould, vice
chairman and chief scientist of Patlex.
Under terms of the agreement, Control Laser will pay Patlex a 5%
royalty for optically pumped lasers. The company will also pay Patlex
$2.5 million for past damages, to be fulfilled through a convertible
debenture and stock warrants. Topping it all off, the settlement
provides for a change in the board of directors with Patlex gaining
voting control over the company.
DO-IT-YOURSELF PRODUCT TREND COMES TO CPM DYE LASERS
A new company in the Rochester, N.Y., area, Clark Instrumentation Inc.,
will sell femtosecond-dye-laser kits. Each kit will contain instructions
and parts needed to make a laser that operates as a colliding-pulse
mode-locked (CPM) device. Typical performance figures for the laser
include pulse-widths below 100 fs and more than 10 mW of average output
power, when 4 W of argon-laser power pumps the dye.
The kit-marketing approach is the brainchild of company founder Bill
Clark. Clark, formerly technical director at Newport Corp., designed the
laser using Newport components in collaboration with Frank Wise, a
graduate student in C.L. Tang's group at Cornell University. Newport
demonstrated the laser in operation at the 1987 Conference on Lasers and
Electro-Optics (see the June 1987 LF/E-O, p. 8).
Clark will assemble kits in his Pittsford, N.Y., headquarters. He
says that he intends to ship the first kit in January 1988.
ION LASER POWER CLIMBS
Coherent Laser Products Div., Palo Alto, Calif., has announced a 25%
increase in the specified visible power from its largest argon-ion
laser, the Innova 100. The new Innova 100X25 provides 25 W of visible
(multiline) output. A second new model, the Innova UVE25/5, offers 25 W
in the visible and 5 W in the ultraviolet (UV).
Coherent ion-laser product manager Peter Fletcher says that this is
the first real increase in visible-power specification since 1979, when
the 20-W ion laser was introduced. (For a short time, another company
advertised a 30-W ion laser.) According to Fletcher, the power increase
has resulted from
<PAGE> 184
BUSINESS NEWS/LASERS
are small, often with revenues of under $10 million, and several have a shabby
history of profitability. "It was difficult enough for small laser vendors to
make money in the days when all they had to do was ship lasers to scientists,"
says Lawrence Gasman, project manager for the IRD report. "But in today's
multiapplications market, things are getting tougher."
IRD predicts that laser companies will have to specialize to survive, and
that smaller laser companies that can find neither a niche market nor a
purchaser will disappear.
Several companies that now buy lasers from outside suppliers are the giants
of the electronics and telecommunications industries. "Some of the companies in
these two industries could buy a laser company with petty cash," says Gasman.
IRD believes the greater marketing and distribution resources available to
large nonlaser based vendors represent a serious threat to independent laser
companies.
- ------------------------------------------------
PATLEX SIGNS ROYALTY
AGREEMENTS WITH FIVE
MAJOR FIRMS
Patlex Corp., Chatsworth, Calif., signed agreements with five major firms for
the use of laser technologies patented by Dr. Gordon Gould. Patlex has a 64%
interest in the Gould patents.
Four new agreements cover laser use by Eastman Kodak Co., Amdahl Corp.,
Chrysler Corp., and EverReady Battery Co. The fifth agreement authorizes Union
Carbide Corp. to manufacture and sell laser rods to laser manufacturers.
The Kodak agreement is the first license awarded for use with compact or
laser disks and calls for a royalty of one cent per disk to be paid to Patlex.
Possible applications may include use by Kodak's Verbatim subsidiary, which is
reportedly entering the disk market.
In addition to the disk royalty agreement, Kodak will pay Patlex a royalty
of 5% on laser sales, royalty payments totaling $235,000 for internal company
use of lasers, and an additional $280,000 or 6% on future purchases of lasers
from unlicensed manufacturers.
- ---------------------------------------
MARKET CLARIFICATION
The October 1987 issue of LF/E-O presented, without comment, Frost & Sullivan
figures on the commercial and industrial laser market. We want to make it clear
that those figures are not endorsed by us. In fact, our reading of the market
differs in several important respects from that of Frost & Sullivan, as will be
clear with the publication of our January 1988 Annual Laser Market Review and
Forecast -- Ed.
- ---------------------------------------
Lasers and optics business news is written and complied by David Kales, business
editor of LF/E-O and editor of Laser Report.
[ADVERTISEMENT]
<PAGE> 185
POSTDEADLINE NEWS
sensitized Nd:GSGG device with flashlamp pumping that provides up to 10
W of average power. Projected lamp lifetime is 3000 hrs. Other new
lasers included a green diode-pumped Nd:YAG laser from Adlas, Lubeck,
F.R.G.; an industrial excimer laser from Technolas Lasertechnik,
Grafelfing, F.R.G.; and a deep-UV (275- to 300- nm) ion laser from
Spectra-Physics, Mountain View, Calif.
Laser 87 was combined with optoelectronics and microwave exhibitions.
The organizers report a 70% increase in the number of exhibitors (to
440) and 37% increase in the number of visitors (to 11,000) in
comparison with the 1985 event.
FIBER-DELIVERED YAG PULSES SHATTER KIDNEY STONES
Several companies at the 7th Congress of the International Society for
Laser Surgery and Medicine announced development of YAG laser systems
for removing kidney stones and gallstones. The congress took place June
22-26 in Munich, F.R.G., with Laser 87.
Karl Storz, Tuttlingen, F.R.G., and Meditec, Heroldsberg, F.R.G.,
joined forces to create "Calculas," a Nd:YAG-laser lithotropsy system.
Priced at about $100,000, this instrument uses a quartz fiber 600 um in
diameter to deliver 30-50 mJ of energy to the stones in 5- to 20-ns
pulses.
Other YAG lithotropsy systems are under development by Lasag, Thun,
Switzerland, and MBB-Medizintechnik, Munich, F.R.G. The Lasag system
utilizes millisecond-length 0.5- to 2-J pulses, which can be delivered
through fibers only 200 um in diameter.
For more on new technology at this congress, see the Aug. 1987
Medical Laser Industry Report, published by Laser Focus/PennWell.
LUMONICS WILL ACQUIRE LASERDYNE
Lumonics Inc., Kanata, Ontario, signed an agreement with DataCard Corp.,
Minneapolis, Minn., to acquire its wholly owned subsidiary, Laserdyne
Corp., Eden Prairie, Minn. Price of the acquisition has not been
determined yet.
Laserdyne, which employs 40 people, has sales of about $5 million.
The company develops, manufactures, and sells multiaxis,
computer-controlled laser-material-processing systems. Laserdyne also
operates an in-house laser machining center.
This acquisition should strengthen Lumonic's position as a supplier
of industrial lasers and systems for material processing.
HIGHER COURT AFFIRMS DECISION FAVORING PATLEX
The U.S. Court of Appeals for the Federal Circuit affirmed a lower
court's decision that Gordon Gould is legally entitled to a patent for
gas-discharge laser amplifiers. For Patlex Corp., Chatsworth, Calif.,
which is exclusive licensing agent for the Gould Patent Properties and
holds a 64% income interest in them, the decision was a big win. The
gas-discharge patent, when coupled with the Gould patent for the
Optically Pumped Laser Amplifier, covers over 85% of the laser devices
used in the U.S. in a market of over $500 million yearly. Patlex now is
assured a substantial royalty stream.
LIA AND LEOS PLAN POSSIBLE MERGER
Representatives of the Laser Institute of America (LIA) and the IEEE
Lasers & Electro-Optics Society (LEOS) discussed a possible merger in a
June 18 meeting in Los Angeles, Calif. An ad hoc
<PAGE> 186
CYMER LASER TECHNOLOGIES
3.23 Environmental Compliance Matters
We are currently storing acetone, methanol, isopropyl alcohol, paint thinner and
other common cleaning agents in quantities less than four gallons each. All our
cleaning agents are stored in a safety cabinet meeting National Fire Protection
Association Flammable and Combustible Liquid Code #30 and OSHA requirements #'s
3W208, 3W209 and 3W313.
We are also storing compressed gas cylinders used in the testing and
manufacture of gas lasers. Our cylinders are stored in an upright secure
manner.
<PAGE> 187
CYMER LASER TECHNOLOGIES
Schedule 14.7 - Addresses
Cymer Laser Technologies
7887 Dunbrook Road
San Diego, California 92126
Attn: Mr. Martin B. Pedley
Allsop Venture Partners
8700 Monrovia
Suite 212
Lenexa, KS 66215
Attn: Mr. Michael J. Meyer
Shintech Incorporated
c/o K-Sun, Inc.
24 Greenway Plaza
Suite 811
Houston, TX 77046
Attn: Mr. M. Miyajima
WS Investments
Two Palo Alto Square
Suite 900
Palo Alto, CA 94306
Attn: Henry P. Massey, Jr., Esq.
Weeden Capital Partners, L.P.
180 Maiden Lane
New York, New York 10038
Attn: Mr. Thomas L. Flaherty
-54-
<PAGE> 188
Schedule 14.7 - Addresses
(continued)
Clearwater Ventures
180 Maiden Lane
New York, New York 10038
Attn: Mr. Thomas L. Flaherty
Ventana Growth Fund II, L.P.
1660 Hotel Circle North, Suite 730
San Diego, California 92108
Attn: Mr. Duwaine Townsen
Interven II, L.P.
333 South Grand Avenue Suite 4050
Los Angeles, California 90071
Attn: Mr. Kenneth M. Deemer
Larry Hyland
2168 Potomac River Court
Rancho Cordova, California 95670
Utpal Sengupta
General Manager
Hotel Shangrila
Lazimpath
Kathmandu, Nepal
Robert P. Atkins
Stuart Anderson
Martin B. Pedley
Richard L. Sandstrom
Uday Sengupta
c/o Cymer Laser Technologies
7887 Dunbrook Road, Suite H
San Diego, CA 92126
-55-
<PAGE> 189
Schedule 14.7 - Addresses
(continued)
C. Ian Sym-Smith
Convergences Gestion
Fredrik C. Schreuder
c/o Ventana Growth Fund II, L.P.
1660 Hotel Circle North, Suite 730
San Diego, California 92108
Attn: Mr. Duwaine Townsen
Charles E. Sporck
chairman
National Semiconductor
1090 Kifer Road
Sunnyvale, CA 94086
Interven Ventures 1987
333 South Grand Avenue
Suite 4050
Los Angeles, CA 90071
Attn: Mr. Kenneth M. Deemer
Henry P. Massey, Jr.
c/o Wilson, Sonsini,
Goodrich & Rosati
Two Palo Alto Square, Suite 900
Palo Alto, CA 94306
-56-
<PAGE> 190
EXHIBIT A
See Tab 3
for
Restated Articles of Incorporation
As filed with the office of the Secretary of
State
<PAGE> 191
EXHIBIT B
BYLAWS
OF
CYMER LASER TECHNOLOGIES
<PAGE> 192
BYLAWS OF
CYMER LASER TECHNOLOGIES
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I -- CORPORATE OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 PRINCIPAL OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 OTHER OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II -- MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 PLACE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 NOTICE OF SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT . . . . . . . . . . . . . . . . . . . . . 5
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT
A MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING;
GIVING CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.12 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.13 INSPECTORS OF ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III -- DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 NUMBER OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 RESIGNATION AND VACANCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 SPECIAL MEETINGS; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11 NOTICE OF ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . . . . . . . . . . 13
3.13 FEES AND COMPENSATION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.14 APPROVAL OF LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 193
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE IV -- COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 MEETINGS AND ACTION OF COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V -- OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 ELECTION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 SUBORDINATE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 REMOVAL AND RESIGNATION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.5 VACANCIES IN OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.6 CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.7 PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 VICE PRESIDENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.9 SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.10 CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI -- INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 INDEMNIFICATION OF OTHERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII -- RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER . . . . . . . . . . . . . . . . . . . . . . . 19
7.2 MAINTENANCE AND INSPECTION OF BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . 20
7.4 INSPECTION BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.6 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS... . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII -- GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING . . . . . . . . . . . . . . . . . . . 22
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED . . . . . . . . . . . . . . . . . . . . . 22
8.4 CERTIFICATES FOR SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
8.5 LOST CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.6 CONSTRUCTION; DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IX -- AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.1 AMENDMENT BY SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 AMENDMENT BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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BYLAWS
OF
CYMER LASER TECHNOLOGIES
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The board of directors shall fix the location of the principal
executive office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state
and the corporation has one or more business offices in such state, then the
board of directors shall fix and designate a principal business office in the
State of California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the board of directors. In the absence
of any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the first
Friday of May in each year at 2:00 p.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
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2.3 SPECIAL MEETING
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the
general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board, the president, any vice
president or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the shareholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of these
bylaws, that a meeting will be held at the time requested by the person or
persons calling the meeting, so long as that time is not less than thirty-five
(35) nor more than sixty (60) days after the receipt of the request. If the
notice is not given within twenty (20) days after receipt of the request, then
the person or persons requesting the meeting may give the notice. Nothing
contained in this paragraph of this Section 2.3 shall be construed as limiting,
fixing or affecting the time when a meeting of shareholders called by action of
the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10)
(or, if sent by third-class mail pursuant to Section 2.5 of these bylaws,
thirty (30)) nor more than sixty (60) days before the date of the meeting. The
notice shall specify the place, date, and hour of the meeting and (i) in the
case of a special meeting, the general nature of the business to be transacted
(no business other than that specified in the notice may be transacted) or (ii)
in the case of the annual meeting, those matters which the board of directors,
at the time of giving the notice, intends to present for action by the
shareholders (but subject to the provisions of the next paragraph of this
Section 2.4 any proper matter may be presented at the meeting for such action).
The notice of any meeting at which directors are to be elected shall include
the name of any nominee or nominees who, at the time of the notice, the board
intends to present for election.
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If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to
Section 902 of the Code, (iii) a reorganization of the corporation, pursuant to
Section 1201 of the Code, (iv) a voluntary dissolution of the corporation,
pursuant to Section 1900 of the Code, or (v) a distribution in dissolution
other than in accordance with the rights of outstanding preferred shares,
pursuant to Section 2007 of the Code, then the notice shall also state the
general nature of that proposal.
2.5 MANNER OF GIVING NOTICE: AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either
(i) personally or (ii) by first-class mail or (iii) by third-class mail but
only if the corporation has outstanding shares held of record by five hundred
(500) or more persons (determined as provided in section 605 of the Code) on
the record date for the shareholders' meeting, or (iv) by telegraphic or other
written communication. Notices not personally delivered shall be sent charges
prepaid and shall be addressed to the shareholder at the address of that
shareholder appearing on the books of the corporation or given by the
shareholder to the corporation for the purpose of notice. If no such address
appears on the corporation's books or is given, notice shall be deemed to have
been given if sent to that shareholder by mail or telegraphic or other written
communication to the corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other
means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have
been duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
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2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING: NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting
is fixed or if the adjournment is for more than forty-five (45) days from the
date set for the original meeting, then notice of the adjourned meeting shall
be given. Notice of any such adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws. At any adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting.
2.8 VOTING
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 2.11 of these
bylaws, subject to the provisions of Sections 702 through 704 of the Code
(relating to voting shares held by a fiduciary, in the name of a corporation or
in joint ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
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Except as provided in the last paragraph of this Section 2.8, or as
may be otherwise provided in the articles of incorporation, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote of the shareholders. Any shareholder entitled to vote on
any matter may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or, except when the matter is the election of
directors, may vote them against the proposal; but, if the shareholder fails to
specify the number of shares which the shareholder is voting affirmatively, it
will be conclusively presumed that the shareholder's approving vote is with
respect to all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote
by classes is required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder
normally is entitled to cast) if the candidates' names have been placed in
nomination prior to commencement of the voting and the shareholder has given
notice prior to commencement of the voting of the shareholder's intention to
cumulate votes. If any shareholder has given such a notice, then every
shareholder entitled to vote may cumulate votes for candidates in nomination
either (i) by giving one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of votes to which that
shareholder's shares are normally entitled or (ii) by distributing the
shareholder's votes on the same principle among any or all of the candidates,
as the shareholder thinks fit. The candidates receiving the highest number of
affirmative votes, up to the number of directors to be elected, shall be
elected; votes against any candidate and votes withheld shall have no legal
effect.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each person entitled to vote, who was not present
in person or by proxy, signs a written waiver of notice or a consent to the
holding of the meeting or an approval of the minutes thereof. The waiver of
notice or consent or approval need not specify either the business to be
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transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in the second paragraph of Section 2.4 of these bylaws,
the waiver of notice or consent or approval shall state the general nature of
the proposal. All such waivers, consents, and approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be
effective only if signed by the holders of all outstanding shares entitled to
vote for the election of directors. However, a director may be elected at any
time to fill any vacancy on the board of directors, provided that it was not
created by removal of a director and that it has not been filled by the
directors, by the written consent of the holders of a majority of the
outstanding shares entitled to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of
shares required to authorize the proposed action have been filed with the
secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to
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those shareholders entitled to vote who have not consented in writing and shall
be given in the manner specified in Section 2.5 of these bylaws. In the case
of approval of (i) a contract or transaction in which a director has a direct
or indirect financial interest, pursuant to Section 310 of the Code, (ii)
indemnification of a corporate "agent," pursuant to Section 317 of the Code,
(iii) a reorganization of the corporation, pursuant to Section 1201 of the
Code, and (iv) a distribution in dissolution other than in accordance with the
rights of outstanding preferred shares, pursuant to Section 2007 of the Code,
the notice shall be given at least ten (10) days before the consummation of any
action authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled
to notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; and
(b) the record date for determining shareholders entitled
to give consent to corporate action in writing without a meeting, (i) when no
prior action by the board has been taken, shall be the day on which the first
written consent is given, or (ii) when prior action by the board has been
taken, shall be at the close of business on the day on which the board adopts
the resolution relating to that action, or the sixtieth (60th) day before the
date of such other action, whichever is later.
The record date for any other purpose shall be as provided in Article
VIII of these bylaws.
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2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name
is placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) the person who
executed the proxy revokes it prior to the time of voting by delivering a
writing to the corporation stating that the proxy is revoked or by executing a
subsequent proxy and presenting it to the meeting or by voting in person at the
meeting, or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy is
counted; provided, however, that no proxy shall be valid after the expiration
of eleven (11) months from the date of the proxy, unless otherwise provided in
the proxy. The dates contained on the forms of proxy presumptively determine
the order of execution, regardless of the postmark dates on the envelopes in
which they are mailed. The revocability of a proxy that states on its face
that it is irrevocable shall be governed by the provisions of Sections 705(e)
and 705(f) of the Code.
2.13 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its
adjournment. If no inspector of election is so appointed, then the chairman of
the meeting may, and on the request of any shareholder or a shareholder's proxy
shall, appoint an inspector or inspectors of election to act at the meeting.
The number of inspectors shall be either one (1) or three (3). If inspectors
are appointed at a meeting pursuant to the request of one (1) or more
shareholders or proxies, then the holders of a majority of shares or their
proxies present at the meeting shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, then the chairman of the meeting may, and
upon the request of any shareholder or a shareholder's proxy shall, appoint a
person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the
voting power of each, the number of shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect of proxies;
<PAGE> 203
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in
any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than
three (3) nor more than five (5). The exact number of directors shall be five
(5) until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the board of directors or by the shareholders.
The indefinite number of directors may be changed, or a definite number may be
fixed without provision for an indefinite number, by a duly adopted amendment
to the articles of incorporation or by an amendment to this bylaw duly adopted
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote; provided, however, that an amendment reducing the
fixed number or the minimum number of directors to a number less than five (5)
cannot be adopted if the votes cast against its adoption at a meeting, or the
shares not consenting in the case of an action by written consent, are equal to
more than sixteen and two-thirds percent (16-2/3%) of the outstanding shares
entitled to vote thereon. No amendment may change the stated maximum number of
authorized directors to a number greater than two (2) times the stated minimum
number of directors minus one (1).
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No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of shareholders to
hold office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote
or written consent of the shareholders or by court order may be filled only by
the affirmative vote of a majority of the shares represented and voting at a
duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the required quorum), or by the
unanimous written consent of all shares entitled to vote thereon. Each
director so elected shall hold office until the next annual meeting of the
shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or
convicted of a felony, (iii) if the authorized number of directors is
increased, or (iv) if the shareholders fail, at any meeting of shareholders at
which any director or directors are elected, to elect the number of directors
to be elected at that meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal,
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if by written consent, shall require the consent of the holders of a majority
of the outstanding shares entitled to vote thereon.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of California that has been designated in the notice of the meeting or,
if not stated in the notice or if there is no notice, at the principal
executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone
or similar communication equipment, so long as all directors participating in
the meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
if the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
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3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in
Section 3.10 of these bylaws. Every act or decision done or made by a majority
of the directors present at a duly held meeting at which a quorum is present
shall be regarded as the act of the board of directors, subject to the
provisions of Section 310 of the Code (as to approval of contracts or
transactions in which a director has a direct or indirect material financial
interest), Section 311 of the Code (as to appointment of committees), Section
317(e) of the Code (as to indemnification of directors), the articles of
incorporation, and other applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given unless the meeting is adjourned for more than twenty-four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice
of the time and place of the adjourned meeting shall be given before the
adjourned meeting takes place, in the manner specified in Section 3.7 of these
bylaws, to the directors who were not present at the time of the adjournment.
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3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall
not be construed to preclude any director from serving the corporation in any
other capacity as an officer, agent, employee or otherwise and receiving
compensation for those services.
3.14 APPROVAL OF LOANS TO OFFICERS*
The corporation may, upon the approval of the board of directors
alone, make loans of money or property to, or guarantee the obligations of, any
officer of the corporation or its parent or subsidiary, whether or not a
director, or adopt an employee benefit plan or plans authorizing such loans or
guaranties provided that (i) the board of directors determines that such a loan
or guaranty or plan may reasonably be expected to benefit the corporation, (ii)
the corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by
a vote sufficient without counting the vote of any interested director or
directors.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to
______________________________
* This section is effective only if it has been approved by the
shareholders in accordance with Sections 315(b) and 152 of the Code.
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serve at the pleasure of the board. The board may designate one (1) or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. The appointment of members or
alternate members of a committee requires the vote of a majority of the
authorized number of directors. Any committee, to the extent provided in the
resolution of the board, shall have all the authority of the board, except with
respect to:
(a) the approval of any action which, under the Code,
also requires shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or
in any committee;
(c) the fixing of compensation of the directors for
serving on the board or any committee;
(d) the amendment or repeal of these bylaws or the
adoption of new bylaws;
(e) the amendment or repeal of any resolution of the
board of directors which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the
corporation, except at a rate or in a periodic amount or within a price range
determined by the board of directors; or
(g) the appointment of any other committees of the board
of directors or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7
(special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of
notice), Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and
Section 3.12 (action without meeting), with such changes in the context of
those bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may be determined either by resolution of the
board of directors or by resolution of the committee, that special meetings of
committees may also be called by resolution of the board of directors, and that
notice of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee. The
board of directors may adopt rules for the government
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of any committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of
an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and
perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effec-
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tive. Any resignation is without prejudice to the rights, if any, of the
corporation under any contract to which the officer is a party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and
shall, subject to the control of the board of directors, have general
supervision, direction, and control of the business and the officers of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence or nonexistence of a chairman of the board, at all meetings of the
board of directors. He shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform
all the duties of the president and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
these bylaws, the president or the chairman of the board.
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5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the names of those present at
directors' meetings or committee meetings, the number of shares present or
represented at shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names
of all shareholders and their addresses, the number and classes of shares held
by each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law
or by these bylaws. He shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositories as may
be designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the Code, indemnify each of its directors and officers against
expenses (as defined in Section 317(a) of the Code), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding (as defined in Section 317(a) of the Code), arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.1, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other
than directors and officers) against expenses (as defined in Section 317(a) of
the Code), judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with any proceeding (as defined in Section
317(a) of the code), arising by reason of the fact that such person is or was
an agent of the corporation. For purposes of this Section 6.2, an "employee"
or "agent" of the corporation (other than a director or officer) includes any
person (i) who is or was an employee or agent of the corporation, (ii) who is
or was serving at the request of the corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
(iii) who was an employee or agent of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
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ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or
at the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its
shareholders listing the names and addresses of all shareholders and the number
and class of shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least
five percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and
has filed a Schedule 14B with the Securities and Exchange Commission relating
to the election of directors, may (i) inspect and copy the records of
shareholders' names, addresses, and shareholdings during usual business hours
on five (5) days' prior written demand on the corporation, (ii) obtain from the
transfer agent of the corporation, on written demand and on the tender of such
transfer agent's usual charges for such list, a list of the names and addresses
of the shareholders who are entitled to vote for the election of directors, and
their shareholdings, as of the most recent record date for which that list has
been compiled or as of a date specified by the shareholder after the date of
demand. Such list shall be made available to any such shareholder by the
transfer agent on or before the later of five (5) days after the demand is
received or five (5) days after the date specified in the demand as the date as
of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in
person or by an agent or attorney of the shareholder or holder of a voting
trust certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or, if
its principal executive office is not in the State of California, at its
principal business office in California the original or a copy of these bylaws
as amended to date, which bylaws shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the cor-
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poration is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written
form, and the accounting books and records shall be kept either in written form
or in any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time during usual business hours, for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or
by an agent or attorney and shall include the right to copy and make extracts.
Such rights of inspection shall extend to the records of each subsidiary
corporation of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of
the fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal
year and in the manner specified in Section 2.5 of these bylaws for giving
notice to shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of
the fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any
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report of independent accountants or, if there is no such report, the
certificate of an authorized officer of the corporation that the statements
were prepared without audit from the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long
as the shares of the corporation are held by fewer than one hundred (100)
holders of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
chief financial officer, the secretary or assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to
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vote, represent, and exercise on behalf of this corporation all rights incident
to any and all shares of any other corporation or corporations standing in the
name of this corporation. The authority herein granted may be exercised either
by such person directly or by any other person authorized to do so by proxy or
power of attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a
meeting), the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days before any such action. In that case,
only shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except
as otherwise provided in the Code.
If the board of directors does not so fix a record date, then the
record date for determining shareholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable
resolution or the sixtieth (60th) day before the date of that action, whichever
is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders
for payment of money, notes or other evidences of indebtedness that are issued
in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or
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confined to specific instances. Unless so authorized or ratified by the board
of directors or within the agency power of an officer, no officer, agent or
employee shall have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The board
of directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All
certificates shall be signed in the name of the corporation by the chairman of
the board or the vice chairman of the board or the president or a vice
president and by the chief financial officer or an assistant treasurer or the
secretary or an assistant secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any or all of the
signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate ceases to be that
officer, transfer agent or registrar before that certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Code shall govern the construction of
these bylaws. Without limiting the generality of
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this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote; provided, however, that if the articles of
incorporation of the corporation set forth the number of authorized directors
of the corporation, then the authorized number of directors may be changed only
by an amendment of the articles of incorporation.
9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1
of these bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of
directors pursuant to a bylaw providing for a variable number of directors),
may be adopted, amended or repealed by the board of directors.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
CYMER LASER TECHNOLOGIES
Certificate by Secretary of Adoption by Shareholders' vote
The undersigned hereby certifies that he is the duly elected,
qualified, and acting Secretary of CYMER Laser Technologies and that the
foregoing Bylaws, comprising twenty-three (23) pages, were adopted by the
shareholders of the corporation by a Written Consent effective as of
_________________ 19_________.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this ______ day of _______________________ , 19___.
______________________________
Martin B. Pedley, Secretary
<PAGE> 1
EXHIBIT 10.7
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
by and among
CYMER LASER TECHNOLOGIES,
and
THE INVESTORS LISTED ON SCHEDULE 1.2
Dated as of: June 28, 1989
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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1. Sale, Purchase and Delivery of Series B Shares ..................... 1
1.1 Agreement to Sell and Purchase Series B Shares ........... 2
1.2 Delivery of Series B Shares .............................. 2
1.3 Payment of Purchase Price ................................ 2
2. Closing ............................................................ 2
3. Representations and Warranties of the Company ...................... 2
3.1 Organization and Good Standing; Power and Authority ...... 2
3.2 Subsidiaries ............................................. 3
3.3 Capitalization ........................................... 3
3.4 Compliance with Laws ..................................... 5
3.5 Validity of Agreement; Binding Effect .................... 5
3.6 No Breach ................................................ 5
3.7 Financial Information .................................... 6
3.8 Absence of Undisclosed Liabilities and Obligations. ...... 6
3.9 Absence of Certain Changes ............................... 6
3.10 Real Property ............................................ 7
3.11 Tangible Assets and Equipment ............................ 8
3.12 Tax Returns and Audits ................................... 8
3.13 Patents and Trademarks ................................... 9
3.14 Contracts and Other Agreements; Insurance ................ 9
3.15 Employees ................................................ 10
3.16 Confidentiality .......................................... 10
3.17 Litigation ............................................... 11
3.18 ERISA .................................................... 11
3.19 Environmental Compliance Matters ......................... 12
3.20 Use of Proceeds .......................................... 12
3.21 Registration Rights ...................................... 12
3.22 Escrowed Certificates of Founder Common Stock ............ 12
3.23 Other Adverse Information; Disclosure .................... 13
4. Representations and Warranties of the Investors .................... 13
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
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4.1 Organization and Standing ................................................ 13
4.2 Authorization and Approval of and Ability to Carry out This Agreement .... 13
4.3 Investment Representation ................................................ 14
5. Investor Access Prior to Closing ................................................... 15
6. Affirmative Covenants .............................................................. 15
6.1 Corporate Existence ...................................................... 15
6.2 Taxes and Liens .......................................................... 15
6.3 Maintain Property ........................................................ 16
6.4 Financial Statements and Reports ......................................... 16
6.5 Confidentiality .......................................................... 17
6.6 Conversion Shares ........................................................ 17
6.7 Access to Books and Records. ........................................... 17
6.8 Right of First Offer. .................................................... 18
6.9 Right of First Refusal and/or Repurchase Agreement ....................... 20
6.10 Insurance ................................................................ 20
6.11 Notice of Record Dates ................................................... 20
6.12 Employee Stock Purchase Agreement ........................................ 21
6.13 State Securities Law Filings ............................................. 21
6.14 Lapse of Covenants. ...................................................... 21
7. Further Agreements ................................................................. 21
7.1 Right of First Refusal and Repurchase with Respect to Founder Stock. ..... 21
7.2 Co-Sale Agreement on Sale of Founder Stock ............................... 22
7.3 Board Representation ..................................................... 23
8. Restrictions on Transferability of Shares; Compliance with the Act ................. 24
8.1 Restrictions on Transferability. ......................................... 24
8.2 Certain Definitions. ..................................................... 24
8.3 Notice of Proposed Transfers ............................................. 25
8.4 Demand Registration Rights ............................................... 26
8.5 Piggy-Back Registration Rights ........................................... 28
8.6 Registration on Form S-3 ................................................. 29
8.7 Rule 144 Reporting ....................................................... 29
8.8 Expenses of Registration ................................................. 30
8.9 Cutbacks ................................................................. 30
8.10 Additional Covenants Concerning Sale of Shares ........................... 31
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
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8.11 Blue Sky Provisions ..................................................... 31
8.12 Advising the Holders .................................................... 31
8.13 Indemnification ......................................................... 32
8.14 Registration under the Exchange Act ..................................... 33
8.15 Information by Holder ................................................... 33
8.16 Transfer of Registration Rights ......................................... 33
8.17 Standoff Agreement ...................................................... 33
8.18 Termination of Rights ................................................... 34
9. Survival of Representations, Warranties and Covenants ............................. 34
9.1 Survival of Representations, Warranties and Covenants of the Company .... 34
9.2 Survival of Representations and Warranties of the Investors ............. 34
10. Conditions Precedent to Obligations of the Investors .............................. 35
10.1 Representations and Warranties Correct .................................. 35
10.2 Compliance with This Agreement .......................................... 35
10.3 Minimum Purchase ........................................................ 35
10.4 Satisfaction of Investors and Their Counsel ............................. 35
10.5 No Actions or Proceedings ............................................... 35
10.6 Opinion of Company's Counsel ............................................ 35
10.7 No Lapse in Insurance Coverage .......................................... 35
10.8 Employee Agreements and Nondisclosure Agreements ........................ 36
10.9 Officer's Certificate ................................................... 36
10.10 Certificate of Secretary or Assistant Secretary ......................... 36
10.11 Delivery of Documents ................................................... 36
11. Conditions Precedent to the Obligation of the Company ............................. 36
11.1 Representations and Warranties Correct .................................. 37
11.2 Compliance with this Agreement .......................................... 37
11.3 Satisfaction of Company and its Counsel ................................. 37
11.4 No Actions or Proceedings ............................................... 37
12. Documents to be Delivered at Closing .............................................. 37
</TABLE>
<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
12.1 Documents to be Delivered by the Company ............................... 37
12.2 Documents to be Delivered by the Investors ............................. 38
13. Miscellaneous .................................................................... 38
13.1 Definition of Person ................................................... 38
13.2 Definition of Knowledge ................................................ 38
13.3 Additional Actions ..................................................... 38
13.4 Expenses ............................................................... 38
13.5 Counterparts ........................................................... 38
13.6 Binding Effect; No Assignment .......................................... 39
13.7 Notices ................................................................ 39
13.8 Applicable Laws ........................................................ 39
13.9 Entire Agreement ....................................................... 39
13.10 Waivers and Amendments; Noncontractual Remedies; Preservation
of Remedies........................................................... 39
13.11 Table of Contents; Captions ............................................ 40
13.12 Schedules and Exhibits Part of Agreement ............................... 40
13.13 Severability ........................................................... 40
</TABLE>
<PAGE> 6
EXHIBITS
Exhibit Description
A Restated Articles of Incorporation
B By-Laws
C Opinion of Company's Counsel
<PAGE> 7
SCHEDULES
Schedule
Number Description
- -------- -----------
1.
Investors; Number of Series B Shares Purchased; Aggregate 2
Purchase Price
3.
Schedule of Exceptions 0
13.7 Addresses
<PAGE> 8
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This SERIES B PREFERRED STOCK PURCHASE AGREEMENT is made as of June 28,
1989 (this "Agreement"), by and among CYMER LASER TECHNOLOGIES, a California
corporation (the "Company"), and the persons whose names are set forth on
Schedule 1.2 hereto (hereinafter referred to individually as an "Investor", and
collectively as the "Investors").
RECITALS
1. The Company sold shares of its Series A Preferred Stock (the "Series
A Shares") to certain investors pursuant to a Series A Preferred Stock Purchase
Agreement dated May 3, 1988 (the "1988 Stock Purchase Agreement").
2. The Company intends to sell, and the Investors intend to purchase,
an aggregate of One Million Three Hundred Twenty Three Thousand Five Hundred
Thirty One (1,323,531) shares (the "Series B Shares") of the Company's 8%
Non-Cumulative Voting Redeemable Convertible Series B Preferred Stock"), with
such rights, preferences and limitations as are set forth in the Company's
Restated Articles of Incorporation attached hereto as Exhibit A (the "Restated
Articles of Incorporation"), including, without limitation, the right to
convert each Series B Share into one share of the Company's common stock, $.01
par value per share (the "Common Stock"), or an aggregate of One Million Three
Hundred Twenty Three Thousand Five Hundred Thirty One (1,323,531) shares of
Common Stock, subject to adjustment for any dilution event described in the
Restated Articles of Incorporation or similar event (the "Conversion Shares").
3. Certain shareholders of the Company have provided the Company with a
credit facility pursuant to a Credit Agreement dated April 21, 1989 (the "Credit
Agreement"), and such shareholders have agreed to cancel the indebtedness of the
Company under the Credit Agreement in exchange for the Series B Shares upon the
terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual premises and the
representations, warranties and covenants herein contained, and of other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Sale, Purchase and Delivery of Series B Shares.
1..1 Agreement to Sell and Purchase Series B Shares. Subject to the
terms and conditions of this Agreement and in reliance upon the representations,
warranties, covenants and agreements contained herein, at the Closing (as
defined herein), the Company shall issue, sell and deliver to each Investor, and
each Investor, severally and not jointly, shall purchase from the Company, the
number of Series B Shares set forth opposite the name of such Investor on
Schedule 1.2 at the price per Series B Share set forth opposite the name of such
Investor on Schedule 1.2. The aggregate purchase price of the
<PAGE> 9
Series B Shares being purchased by each Investor is set forth opposite the name
of such Investor on Schedule 1.2
1..2 Delivery of Series B Shares. At the Closing, the Company shall
deliver to each Investor against receipt of the respective purchase prices
therefor one or more certificates bearing the appropriate legend in accordance
with Section 4.3 hereof, evidencing ownership of the number of Series B Shares
being purchased hereunder by such Investor in such denominations and registered
in such manner, as is indicated on Schedule 1.2.
1..3 Payment of Purchase Price. Payment of the purchase price for
Series B Shares shall be made at the option of each Investor, in cash, by wire
transfer or by certified or official bank check payable to the order of the
Company or by cancellation of indebtedness.
2. Closing. Subject to the fulfillment of all of the conditions
precedent contained herein, the consummation of the sale and purchase of the
Series B Shares contemplated hereby (the "Closing") shall take place at the
offices of Wilson, Sonsini, Goodrich & Rosati, Two Palo Alto Square, Suite 900
at 3:00 p.m. California time on June ___, 1989, or at such other place, time or
date as the Company and a majority of the Investors shall designate by written
notice delivered to the Company not less than five (5) business days prior to
the Closing Date. The time and date upon which the Closing occurs is hereinafter
referred to as the "Closing Date". All events which shall occur at the Closing
shall be deemed to occur simultaneously.
3. Representations and Warranties of the Company. Except as disclosed
in the attached schedule of exceptions (Schedule 3), the Company represents and
warrants to each of the Investors as follows:
3..1 Organization and Good Standing; Power and Authority. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority and the legal right to transact the business in which it is
presently engaged, to own, lease and operate all of the assets and properties
owned, leased or operated by it, to enter into and perform this Agreement, and
will have at the Closing, all requisite corporate power and authority to sell
the Series B Shares and to issue the Conversion Shares and to otherwise perform
and comply with all other actions and agreements arising hereunder. The Company
does not own or lease any property or engage in any activity in any jurisdiction
which might require its qualification to do business as a foreign corporation in
any such jurisdiction. The Company has furnished each Investor with true,
correct and complete copies (certified by the Secretary or Assistant Secretary
of the Company) of its (a) Restated Articles of Incorporation and (b) By-Laws,
and will make available to each Investor (c) the minute books of the Company
(containing records of all meetings and consents in lieu of meetings of its
stockholders and the Board of Directors of the Company (the "Board") (and any
committees thereof) since the date of its incorporation and (d) the stock
transfer books of the Company. Copies of the Restated Articles of Incorporation
and By-Laws are attached hereto as Exhibits A and B, respectively.
<PAGE> 10
3..2 Subsidiaries. The Company has no subsidiaries and does not own
(of record or beneficially) and has made no commitment to purchase any shares or
securities of, or otherwise make any investment in, any other corporation,
association, partnership or other entity and is not a participant in any joint
venture.
3..3 Capitalization.
(a) Upon the filing of the Restated Articles of Incorporation,
the authorized capital stock of the Company will consist of Eleven Million Five
Hundred Thousand (11,500,000) shares of Common Stock, Nine Hundred Forty
Thousand (940,000) shares of which are issued and outstanding, Three Million
(3,000,000) shares of Series A Preferred Stock, Two Million One Hundred Seven
Thousand Eight Hundred Eighty-Two (2,107,882) of which are issued and
outstanding and One Million Five Hundred Thousand (1,500,000) shares of Series B
Preferred Stock, none of which will be issued and out of standing prior to
closing. All of the outstanding shares of Common Stock and Series A Preferred
Stock are duly authorized and validly issued, fully paid and non-assessable. The
Company has reserved the following shares of Common Stock for issuance: (i)
450,000 shares of Common Stock upon exercise of options granted or to be granted
to the Company's employees; (ii) 162,500 shares of Series A Preferred Stock upon
exercise of the warrants to purchase shares of Series A Preferred Stock
(hereinafter referred to as the "Series A Warrants"); and (iii) 24,632 shares of
Series B Preferred Stock upon exercise of the warrants to purchase shares of
Series B Preferred Stock (hereinafter referred to as the "Series B Warrants").
No other classes of capital stock of the Company are authorized or outstanding.
(b) Except as set forth in this Agreement, Series A Warrants,
Series B Warrants (to be issued upon the Closing) and options to purchase
420,000 shares, as of the date hereof there are no other outstanding rights,
subscriptions, warrants, calls, preemptive rights, options or other agreements
of any kind to purchase or otherwise to receive from or sell to the Company any
of the out standing, authorized but unissued, unauthorized or treasury shares of
the capital stock or any other security of the Company, and there is no security
of any kind convertible into such capital stock. The Company has no obligation
or agreement under any contingency whatsoever to issue any equity, debt or other
security, or to pay, perform, guaranty, be responsible for, or satisfy in whole
or in part any debt, security, obligation or agreement incurred or made by an
individual or entity other than the Company, and the Company has no obligation
under any condition or contingency whatsoever to share its income with anyone,
or to make, accrue or set aside any payment or amount measured in any way by any
part or all of its sales or income. The Company is not indebted to any of its
employees in any amount other than for accrued but unpaid compensation.
(c) Upon issuance pursuant to this Agreement, the Series B
Shares will have the rights and preferences set forth in the Restated Articles
of Incorporation and each Series B Share will be, when issued, initially
convertible into one Conversion Share, subject to adjustment for any dilution
event described in the Restated Articles of Incorporation or similar event. The
Series B Shares delivered to the Investors pursuant to this Agreement, upon
payment of the respective purchase prices therefor,
<PAGE> 11
shall be duly authorized, validly issued, fully paid and non-assessable and the
Conversion Shares issuable upon conversion of the Series B Shares have been duly
and validly reserved and, upon issuance in accordance with the conversion
provisions of the Series B Shares, shall be duly authorized, validly issued,
fully paid and non-assessable. Subject to the provisions of applicable federal
and state securities laws and compliance with the terms of this Agreement, upon
the consummation of the transactions contemplated hereby, the Series B Shares
and the Conversion Shares will be freely transferable and free and clear of all
liens and encumbrances, other than liens, encumbrances or restrictions on
transfer arising hereunder or under agreements entered into or actions taken by
the Investors.
(d) All of the outstanding shares of Common and Series A
Preferred Stock have been, and all Series B Shares to be issued pursuant to this
Agreement and all Conversion Shares to be issued will be, offered, issued and
sold in compliance with all federal and state securities laws.
3..4 Compliance with Laws. The Company is not in violation of (a)
any applicable order, judgment, injunction, award or decree, or (b) to the best
of the Company's knowledge, any federal, state, local or foreign law, ordinance
or regulation or any other requirement of any governmental or regulatory body,
court or arbitrator applicable to the business of the Company except for
violations which could not have a material adverse effect on the business or
properties of the Company and would not be in violation of any such law,
ordinance, regulation or other requirement that has been enacted or adopted but
is not yet effective if it were effective. The Company has obtained all
licenses, permits, orders and approvals of any federal, state, local or foreign
governmental or regulatory body (collectively, "Permits") that are material to
or necessary for the conduct of the business of the Company. All of such Permits
are in full force and effect, no violations are or have been recorded in respect
of any Permit and no proceeding is pending or, to the best of the Company's
knowledge, threatened to revoke or limit any such Permit.
3..5 Validity of Agreement; Binding Effect. To the best of the
Company's knowledge, no approval or consent of any foreign, federal, state,
county, local or other governmental or regulatory body is required in connection
with the execution and delivery by the Company of this Agreement, the issuance
of the Series B Shares or the Conversion Shares and the consummation and
performance by the Company of the transactions contemplated hereby. The
execution, delivery and performance of this Agreement, the issuance of the
Series B Shares and the Conversion Shares and the consummation of the
transactions contemplated herein by the Company have been duly authorized by all
necessary corporate action on the part of the Company, including any action
which may have been required to be taken by the Company's stockholders, and this
Agreement, when executed, will constitute the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms (except insofar as the enforcement hereof may be limited by (a) applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
creditors' rights generally from time to time in effect, (b) equitable
principles of general application and (c) limitations of public policy as
applied to Sections 8.13 and 10 of this Agreement).
<PAGE> 12
3..6 No Breach. The execution and delivery of this Agreement does
not and the issuance of the Series B Shares or Conversion Shares and
consummation of and compliance with the transactions and agreements contemplated
hereby will not conflict with or constitute a violation or breach of (a) the
Restated Articles of Incorporation or By-laws of the Company, (b) to the best of
the Company's knowledge, any provision of any material contract or other
instrument to which the Company is a party or by which the Company may be bound
or by which the business, assets or properties of the Company may be affected or
secured, (c) any order, writ, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against or binding upon the
Company or upon the securities, properties or business of the Company, (d) to
the best of the Company's know ledge, any statute, law, rule or regulation
(including, without limitation, applicable federal and state securities laws) of
any jurisdiction to which the Company is subject or (e) any Permit.
3..7 Financial Information. The Company has furnished each of the
Investors with (a) true copies of its balance sheet dated as of December 31,
1988, together with statements of operations, stockholders' deficit and changes
in financial position of the Company for the year ended December 31, 1988 with
the related opinion of Deloitte, Haskins & Sells, independent public accoun-
tants (collectively, the "Audited Financials"), and (b) an unaudited balance
sheet dated as of April 30, 1989 and an unaudited statement of operations for
the period then ended (the "Unaudited Financials"; the Audited Financials and
the Unaudited Financials are herein referred to collectively as the "Financial
Statements"). The Financial Statements are complete and correct, and present
fairly the financial position and assets and liabilities of the Company at their
respective dates and the results of its operations and changes in financial
position for the periods then ended and cumulative since inception; provided,
however, that the Unaudited Financials are subject to year-end audit adjustments
and do not contain all footnotes required under generally accepted accounting
principles.
3..8 Absence of Undisclosed Liabilities and Obligations. The Company
has no liability or obligation, either accrued, absolute, direct, or to the best
of its knowledge, contingent or indirect, or otherwise, whether as principal,
agent, partner, coventurer, guarantor or in any capacity whatsoever which are
not reflected in the Financial Statements, other than (a) obligations and
liabilities incurred in the ordinary course of business that are not
individually or in the aggregate material and (b) obligations under contracts
made in the ordinary course of business that would not be required to be
reflected in the Financial Statements.
3..9 Absence of Certain Changes. Since April 30, 1989, there has not
been any event or condition of any character which has either singly or in the
aggregate materially adversely affected the Company's business or prospects,
including but not limited to:
(a) Any change in the condition (financial or otherwise),
assets, liabilities or business of the Company from that shown on the Financial
Statements;
(b) Any damage, destruction or loss of any of the properties or
assets of the Company (whether or not covered by insurance) affecting the
business or plans of the Company;
<PAGE> 13
(c) Any declaration, setting aside, payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(d) Any waiver by the Company of any rights of value;
(e) Any purchase, sale or transfer of any assets or properties
of the Company, any satisfaction or cancellation of any mortgage or pledge or
any incurring of any debts or claims, or the subjection of any assets or
property of the Company to any lien, charge, security interest on other
encumbrance or any other transaction entered into by the Company other than in
the ordinary course of business;
(f) Any increase in the compensation of any of the officers,
other employees or agents of the Company, including without limitation, any
increase by means of any bonus or pension plan, contract or other commitment; or
(g) Any labor trouble, or any event or condition of any
character, affecting the business or plans of the Company.
3..10 Real Property. Schedule 3.0 sets forth a list and summary
description of all evidences of ownership of real property by the Company, all
leases, subleases or other agreements under which the Company is lessor or
lessee of any real property, and of all options held by the Company to purchase
or acquire real property. Such leases, subleases and other agreements and all
options are in full force and effect and the Company has not received any notice
of any default thereunder. No approval or consent of any person is needed in
order that the leases, subleases or other agreements and all options under or
pursuant to which the Company is lessor or lessee of any real property continue
in full force and effect after the Closing. The leasehold interests of the
Company are not subject to any liens or encumbrances and such leasehold
interests enjoy a right of quiet possession as against any liens or encumbrances
on the properties. The Company is not subject to any contractual obligation to
purchase or acquire any interest in real property or to sell or dispose of any
interest in real property, and the Company has not granted any options to
purchase or acquire any interest in real property. The Company has good and
marketable title to all the real property held by it outright and none of such
real property or any of the structure or improvements thereon is in violation of
any applicable building, zoning, environmental or other laws, ordinances or
regulations. None of such real property has been condemned or is the subject of
any eminent domain proceeding and the Company has no grounds to believe that any
such condemnation or eminent domain proceeding is threatened or taking place.
3..11 Tangible Assets and Equipment. The Company owns outright and
has good and marketable title to all of its tangible assets and equipment
including all tangible assets and equipment reflected in the Financial
Statements, in each case free and clear of any lien or encumbrance, subject only
to liens and encumbrances set forth on Schedule 3.0 and liens for taxes not yet
due or which are being contested in good faith and by appropriate proceedings
and for which adequate reserves have been set
<PAGE> 14
aside on the books of the Company. To the best of the Company's knowledge, each
tangible asset and piece of equipment of the Company is in good operating
condition, ordinary wear and tear excepted, is being and has been properly
serviced and maintained.
3..12 Tax Returns and Audits.
(a) To the best of the Company's knowledge, (i) the Company
has properly completed and filed or will file within the time prescribed by law
(including extensions of time approved by the appropriate taxing authority) in
correct form all federal, state and other income, profits, franchise, real
property, personal property, sales, use, employment, payroll, excise and other
tax returns and reports required to be filed by the Company, (ii) all taxes
imposed or which may be imposed or asserted by the U.S. Internal Revenue
Service, the State of California, or any other taxing authority, and all
deficiencies, assessments, additions to tax, penalties and interests, which are
due and payable by the Company through December 31, 1988, or which are
attributable to the operations, business, properties or assets of the Company
through that date have been paid in full, and (iii) all monies required to be
withheld by the Company from employees for income taxes, Social Security and
unemployment insurance taxes have been collected or withheld and either paid to
the respective governmental agencies or adequately provided for by reserves on
the books of the Company, other than returns and reports, the non-filing of
which, deficiencies, assessments, additions to tax, penalties and interest, the
non-payment of which, and withholdings, the non-collection or withholding of
which would not either singly or in the aggregate have a material adverse effect
on the Company.
(b) To the best of the Company's knowledge there are (i) no
other tax returns or reports which are required to be filed by the Company which
have not been so filed and (ii) no unpaid assessments for additional taxes for
any fiscal period or any basis therefor. The Company's tax returns have not, to
the best of the Company's knowledge, been audited by the U.S. Internal Revenue
Service, the State of California or any other taxing authority to which the
Company is subject. The Company has not consented to any extensions of time to
assess any tax.
(c) The Company has successfully revoked its election to be
treated as an S corporation and is presently filing tax returns and reports to,
and is recognized by, the U.S. Internal Revenue Service, the State of California
and all other relevant taxing authorities as a C corporation.
3..13 Patents and Trademarks. To the best of the Company's
knowledge, it owns or possesses, has access to, or can become licensed on
reasonable terms under all patents, patent applications, inventions, trademarks,
tradenames, servicemarks, copyrights, and other proprietary intellectual
property rights (collectively referred to as "Proprietary Rights") (a) necessary
for the unlawful conduct of its business as now conducted and as proposed to be
conducted, and the lack of which would materially and adversely affect its
business or properties, and (b) to the best of its knowledge, without any
material infringement of or conflict with the rights of others. All of the
Proprietary Rights are free and clear of any liens or other encumbrances. The
Company has not granted any licenses to its Proprietary Rights and is not aware
of any third parties who are infringing or violating
<PAGE> 15
any of same. To the best of the Company's knowledge, there are no disputes nor
claims regarding the Proprietary Rights.
3..14 Contracts and Other Agreements; Insurance.
(a) Schedule 3.0 sets forth all of the material contracts and
other agreements in excess of fifty thousand dollars ($50,000) to which the
Company is a party or by or to which the Company or its assets or properties are
bound or subject including, without limitation, group life, health and other
employee benefit plans or arrangements and each bonus, stock option, deferred
compensation, pension, profit sharing or other similar plan or arrangement, to
which the Company is a party or pursuant to which it has any obligation or
liability. All of such contracts and other agreements are valid, existing, in
full force and effect and binding upon the parties thereto in accordance with
their terms, and the Company has paid in full or accrued all amounts due
thereunder which are required to be accrued in accordance with generally
accepted accounting principles and has satisfied in full or provided for all of
their current liabilities and obligations thereunder, and are not in default
under any of them, nor to the best of the Company's knowledge (i) is any party
to any such contract or other agreement in default thereunder, or (ii) does any
condition exist that with notice or lapse of time or both would constitute a
default thereunder. Except as separately identified on Schedule 3.0, the
Company is not a party to and is not bound by any contract or other agreement
that adversely affect its assets, properties, business, operations or condition
(financial or otherwise), or that was entered into other than in the ordinary
course of its business. No approval or consent of any person is needed in order
that the contracts and other agreements set forth on Schedule 3.0 or the Permits
continue in full force and effect after the Closing. The Company has delivered
to the Investors or their counsel true and correct copies of all the agreements
listed on Schedule 3.0.
(b) The Company maintains insurance with reputable insurance
companies, on so much of its properties, to such an extent and against such
risks, as reasonably prudent persons engaged in similar businesses would
customarily insure properties of a similar character.
3..15 Employees. To the best of the Company's knowledge, no key
employee of the Company is, or is now expected to be in violation of any term of
any employment contract, patent disclosure agreement, non-competition agreement,
or any other contract or agreement or any restrictive covenant or any other
common law obligation to a former employer relating to the right of any such
employee to be employed by the Company because of the nature of the business
conducted or to be conducted by the Company or to the use of trade secrets or
proprietary information of others, and the employment of the Company's employees
does not subject the Company or any Investors to any material liability. There
is neither pending nor, to the Company's knowledge threatened, any actions,
suits, proceedings or claims, or any basis therefor or thereof with respect to
any contract, agreement, covenant or obligation referred to in the preceding
sentence. The Company is not a party, or subject to, any obligation, liability
or commitment with respect to any written employment, compensation, consulting,
severance pay or similar agreement and any and all oral employment,
compensation, consulting or similar commitments are terminable at will and
without notice by the Company and without payment
<PAGE> 16
or penalty. The Company is not a party to any collective bargaining or other
union contracts and its employees are not represented by any union.
3..16 Confidentiality. Each person employed by the Company who has
access to any Proprietary Rights or other proprietary information of or about
the Company has executed and delivered to the Company an Employee Agreement (an
"Employee Agreement"). Each person hired by the Company as a consultant who has
access to any Proprietary Rights or other proprietary information of or about
the Company has executed and delivered to the Company a Nondisclosure Agreement
(a "Nondisclosure Agreement").
3..17 Litigation.
(a) There are no legal, administrative or other proceedings,
investigations or inquiries, or other asserted claims, judgments, injunctions or
restrictions, pending or outstanding or, to the best knowledge of the Company,
threatened against the Company, any of its properties or business, or against or
involving any of the Company or the officers or directors of the Company, or any
action related to this Agreement, the issuance of the Series B Shares or any of
the transactions contemplated herein that might if determined adversely to the
Company, either singly or in the aggregate, result in any material adverse
change in the business, prospects, operations, properties or condition
(financial or otherwise) of the Company or in any material liability on the part
of the Company. To the best of the Company's knowledge, there is no fact, event
or circumstance that may give rise to any suit, action, claim, investigation or
proceeding that would be required to be set forth on Schedule 3.0 if currently
pending or threatened. There are no actions, suits or claims or legal,
administrative or arbitration proceedings pending or to the best of the
Company's knowledge threatened that would give rise to any right of
indemnification on the part of any director or officer of the Company or the
heirs, executors or administrators of such director of officer against the
Company.
(b) The Company has not admitted in writing its inability to
pay its debt generally as they become due, filed or consented to the filing
against it of a petition in bankruptcy or a petition to take advantage of any
insolvency act, made an assignment for the benefit of creditors, consented to
the appointment of a receiver for itself or for the whole or any substantial
part of its property, or had a petition in bankruptcy filed against it, been
adjudicated a bankrupt, or filed a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other law or statute of the
U.S. or any other jurisdiction.
3..18 ERISA. No employee pension benefit plan, within the meaning of
Section 3(a) of the Employment Retirement Income Security Act of 1974, as
amended ("ERISA"), is currently maintained or sponsored by the Company and the
Company does not contribute to, and is not obligated to contribute to, and none
of the employees of the Company is a participant in, any multiemployer plan
within the meaning of Section 400(a) of ERISA.
<PAGE> 17
3..19 Environmental Compliance Matters.
(a) There is no soil or ground water contamination by any
"Hazardous Material" for which the Company is or may be liable. "Hazardous
Material" shall mean any flammables, asbestos, explosives, radioactive
materials, hazardous wastes, toxic substances or related materials, including
without limitation any substances defined as or included in the definition of
"hazardous substances, "hazardous wastes," "hazardous materials," or "toxic
substances" under any applicable federal, state or local laws, rules,
regulations or orders or which federal, state or local laws, rules, regulations
or orders have designated as potentially dangerous to public health and/or
safety when present in the environment;
(b) No "Hazardous Material" has been stored and the Company
will not store any Hazardous Material; and
(c) There are no (i) enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened against
the Company pursuant to any applicable federal, state or local laws, ordinances
or regulations relating to any Hazardous Material, (ii) claims made or
threatened by any third party against the Company with respect to or because of
its property relating to damage, contribution, cost recovery compensation, loss
or injury resulting from any Hazardous Material or (iii) conditions on any of
the properties of the Company that could cause such properties or any part
thereof to be subject to any restrictions on the ownership, occupancy
transferability or use of any of such properties under any Hazardous Material
law.
3..20 Use of Proceeds. The net proceeds to be paid to the Company at
the Closing are to be used for working capital including for employee
compensation and benefits, materials and miscellaneous expenses associated with
developing products, lease payments, capital expenditures and marketing
expenses.
3..21 Registration Rights. Except as provided for in this Agreement,
Credit Agreement and the 1988 Purchase Agreement, the Company is not under any
obligation to register under the Securities Act of 1933, as amended (the "Act"),
any of its currently outstanding securities or any of its securities which may
hereafter be issued.
3..22 Escrowed Certificates of Founder Common Stock. The
certificates for all shares of Common Stock held by the Founders have been
delivered to Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, in the
form required by, and in accordance with the terms of, the Common Stock
Restriction Agreements (the "Restriction Agreements") executed by and between
the Company and Robert Akins, Martin Pedley, Richard Sandstrom and Uday Sengupta
(collectively referred to as the "Founders").
3..23 Other Adverse Information; Disclosure.
<PAGE> 18
(a) Except as set forth in this Agreement or in the Financial
Statements, certificates, exhibits, schedules or other documents delivered
pursuant hereto (the "Information"), the Company does not have knowledge of any
information of a materially adverse nature with respect to the business,
prospects, operations, properties or condition (financial or otherwise) of the
Company including, without limitation, plans or announcements by any person or
firm to compete with the Company in any area in which such person or firm does
not presently compete with the Company.
(b) All Information delivered by or on behalf of the Company in
connection with this Agreement and the transactions contemplated hereby are
true, complete and authentic. No representation or warranty by the Company
contained in this Agreement, and no other Information furnished or to be
furnished by or on behalf of the Company pursuant hereto, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make any representation or warranty of the Company
or the Information not false or misleading.
4. Representations and Warranties of the Investors. Each Investor,
severally and not jointly, hereby represents and warrants to the Company as
follows:
4..1 Organization and Standing. If the Investor is a corporation, it
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. If the Investor is a partnership, it is
validly existing and in good standing under the laws of the jurisdiction of its
organization.
4..2 Authorization and Approval of and Ability to Carry out This
Agreement. The Investor has duly authorized the execution and delivery of this
Agreement and the transactions contemplated hereby. The Investor, if a
corporation, has all requisite corporate power and authority (and, if a
partnership, is permitted under its partnership agreement) to enter into this
Agreement and to consummate the transactions contemplated herein. This Agreement
constitutes the legal, valid and binding obligation of the Investor, to the
extent provided for herein, enforceable in accordance with its terms (except
insofar as the enforcement hereof may be limited by (a) applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting creditors'
rights generally from time to time in effect, (b) by equitable principles of
general application, and (c) limitations of public policy as applied to Sections
8.13 and 10 of this Agreement).
4..3 Investment Representation. The Investor (and the representation
made under this Section 4.3 is made to each other Investor as well) is
purchasing the Series B Shares (including, for purposes hereof, the Conversion
Shares) for its own account without a view to any distribution thereof in
violation of the Act, subject, nevertheless, to any requirement of law that the
disposition of its property shall at all times be within its control. The
Investor represents that it (a) is an "Accredited Investor" as that term is
defined under Rule 502 under the Act, (b) is experienced in evaluating and
making investments of the type contemplated by this Agreement and (c) is
financially able to bear the risks of the investment. The Investor acknowledges
that the Company is issuing and selling the Series B Shares in reliance upon the
exemption from registration provided in Section 4(2) of the Act and is
<PAGE> 19
relying upon these representations, and agrees that the Series B Shares may only
be transferred if registered under the Act or pursuant to an exemption from such
registration requirements. The Investor understands that Rule 144 promulgated
under the Act is not presently available with respect to the Series B Shares or
Conversion Shares, and that absent registration of the Series B Shares or
Conversion Shares under the Act, compliance with an applicable exemption under
the Act, is required for a sale or other disposition of the Series B Shares or
Conversion Shares. The Investor agrees that the following legend may be placed
on any certificates evidencing its Series B Shares or Conversion Shares and any
other securities issued in respect of Series B Shares or Conversion Shares, upon
any dilution event described in the Restated Articles of Incorporation or
similar event:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares have been acquired for
investment and may not be pledged or hypothecated, and may not be sold
or transferred except in compliance with the registration requirements
of the Securities Act of 1933, or upon delivery to Cymer Laser
Technologies of an opinion of counsel to the shareholder, in form and
substance satisfactory to said corporation and its counsel, that
registration under such Act is not required."
The Investor understands that, so long as the legend remains on the certificates
representing the Series B Shares or Conversion Shares, the Company may maintain
appropriate "stop transfer" orders with respect to the Series B Shares or
Conversion Shares on its books and records and with its registrar and transfer
agent. Notwithstanding the foregoing, such Investor shall be entitled to
replacement certificates without such legend if permitted under Rule 144 or upon
presentation by such Investor to the Company of a favorable written opinion of
counsel reasonably satisfactory in form and substance to the Company and its
counsel that the removal of such legend is not in violation of either the Act
and the rules and regulations thereunder or applicable provisions of state
securities law.
5. Investor Access Prior to Closing. The Investors and their authorized
agents, officers and representatives shall be granted full access to the books,
documents and records, including income tax returns of the Company, to conduct
such examinations and investigations thereof as they deem necessary from the
date hereof to the Closing Date; provided, such examinations shall be conducted
during the usual business hours of the Company. The officers and employees of
the Company will be available for consultation and discussion with the
Investors, its authorized agents, officers and representatives, during usual
business hours. All information, except trade secrets and that which relates to
Proprietary Rights, must be identified as confidential in order to be considered
"Confidential Information" hereunder. All trade secrets and Proprietary Rights
and information relating thereto shall be deemed "Confidential Information"
whether or not designated as such. All Confidential Information obtained by any
Investor shall remain confidential and shall not be disclosed to anyone other
than persons with whom such Investors consult in the ordinary course of
evaluating transactions of the nature of those set forth herein, except (a) to
the extent that disclosure is required pursuant to any applicable law,
regulation, judicial process or order, (b) when the information has been
discovered or developed by the Investor independently of the Company and such
discovery or development has previously been documented in writing, which
documentation shall be provided to the Company upon request, or (c) when the
<PAGE> 20
information is in the public domain at the time of disclosure, as evidenced by
an article or other writing with a publication date prior to the date on which
such Confidential Information was disclosed to the Investor.
6. Affirmative Covenants. Except as hereinafter provided, the Company
hereby covenants that from and after the date of this Agreement and so long as
the Investors or any of them hold bene ficially or of record any of the Series B
Shares or Conversion Shares:
6..1 Corporate Existence. The Company will maintain its corporate
existence and make reasonable efforts to comply with all laws, government
regulations, rules and ordinances and judicial orders, judgments and decrees
applicable and material to the Company, its business and properties.
6..2 Taxes and Liens. The Company will (a) punctually pay and
discharge or cause to be paid and discharged before the same shall become
delinquent (i) all taxes, assessments and governmental charges lawfully imposed
upon the Company, or any of its property, or upon the income and profits
thereof, and (ii) all lawful claims for labor, materials and supplies which, if
unpaid, might be a lien upon the property of the Company, (b) withhold all
monies required to be withheld by the Company from employees for income taxes,
Social Security and unemployment insurance taxes and (c) complete and file, on a
timely basis, all tax returns and reports required to be filed by it (including,
without limitation, returns and reports of the type set forth in Section
3.12(a)(i)).
6..3 Maintain Property. The Company will cause all material
properties used or useful in the conduct of its business to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs as in the judgment of
the Company may be necessary so that business carried on in connection therewith
may be properly and advantageously conducted.
6..4 Financial Statements and Reports.
(a) The Company will keep adequate and accurate books of
account and will prepare the financial statements referred to herein, in
accordance with generally accepted accounting principles, consistently applied.
(b) Until the Initial Public Offering (as herein defined), the
Company shall furnish to each holder of at least 210,788 Series B Shares and/or
Conversion Shares (appropriately adjusted for any dilution event described in
the Restated Articles of Incorporation or other similar event) (a "Series B
Significant Holder"):
(i) As soon as practicable (and in any event at least
thirty (30) days) prior to the beginning of each fiscal year, an annual
projected budget for the following fiscal year, and an annual operating plan and
strategic plan (collectively, the "Plan") as approved by the Board.
<PAGE> 21
(ii) As soon as practicable (and in any event within thirty
(30) days) after the end of each month, a reasonably detailed statement of
revenues, costs, expenses, orders received, backlog, shipments, commitments and
contingencies (including the commencement of any material litigation by or
against the Company), incurred during the month and a comparison of such
statements with the Company's projections as set forth in the Plan, certified by
the Company's Chief Financial Officer to present fairly the data reflected
thereon.
(c) Until the Initial Public Offering, the Company shall
furnish to each holder of Series B Shares or Conversion Shares as soon as
practicable (and in any event within ninety (90) days) after the end of each
fiscal year of the Company, an audited balance sheet of the Company as of the
end of the year and the related statement of operations, retained earnings or
deficit and changes in financial position of the Company as of the end of the
year setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by an audit report
and opinion in respect of such financial statement (consolidated if applicable)
of the independent certified public accountants selected by the Company (which
shall be a "Big Eight" firm of accountants), and such report and opinion shall
be unqualified as to the scope of the audit.
6..5 Confidentiality. The Company shall, after the date hereof,
cause each person employed by, or retained as a consultant to, the Company who
has access to any Proprietary Rights or other proprietary information of or
about the Company to execute an Employee Agreement, in the case of an employee,
and a Nondisclosure Agreement, in the case of a consultant.
6..6 Conversion Shares. The Company shall reserve and keep available
from its authorized shares of Common Stock, solely for the purpose of issuance
upon conversion of the Series B Shares, such number of Conversion Shares as
shall then be issuable upon the conversion of all of the Series B Shares, taking
into account any anti-dilution rights of the holders thereof.
6..7 Access to Books and Records. Until the Initial Public Offering,
each Series B Significant Holder and its agents shall (a) have access upon
reasonable notice to the Company, during usual business hours, and as often as
may reasonably be desired, to the accounts, books and records of the Company
shall be entitled to examine, make copies and extract therefrom, and from any
other items, such information relating to the Company as each such Investor
shall reasonably specify and (b) be permitted, upon reasonable notice to the
Company to visit and inspect any of the properties of the Company; provided,
however, that all Confidential Information obtained by any Series B Significant
Holder shall remain confidential and shall not be disclosed to anyone other than
persons with whom such Series B Significant Holders consult in the ordinary
course of evaluating transactions of the nature of those set forth herein except
(a) to the extent that disclosure is required pursuant to any applicable law,
regulation, judicial process or order, (b) when the information has been
discovered or developed by the Investor independently of the Company and such
discovery or development has previously been documented in writing, which
documentation shall be provided to the Company upon request, or
<PAGE> 22
(c) when the information is in the public domain at the time of disclosure, as
evidenced by an article or other writing with a publication date prior to the
date on which such Confidential Information was disclosed to the Investor.
6..8 Right of First Offer.
(a) The Investors, representing at least two-thirds of the
Series A Shares, hereby (i) amend Sections 6.8, 6.12, 7.1, 7.2, 8, and 14.10 of
the 1988 Purchase Agreement to provide that the provisions of these Sections
6.8, 6.12, 7.1, 7.2, 8 and 13.10 of this Agreement shall supersede Sections 6.8,
6.12, 7.1, 7.2, 8 and 14.10 of the 1988 Purchase Agreement and (ii) waive their
rights of first offer granted pursuant to the 1988 Purchase Agreement with
respect to the Series B Shares issued hereunder, the Series A Warrants and
Series B Warrants. For purposes of Sections 6.8, 6.12, 7.1, 7.2, 8 and 13.10,
the term "Shares" shall mean the Series A Shares and Series B Shares, the term
"Conversion Shares" shall mean the shares of Common Stock issued upon conversion
of the Shares, and the term "Significant Holder" shall mean (i) the Series B
Significant Holder or (ii) a holder of 210,788 Series A Shares (or shares of
Common Stock issued upon conversion of the Series A Shares).
(b) The Company hereby grants to the Significant Holders the
right of first offer to purchase, pro-rata, all (or any part) of New Securities
(as defined in this Section 6.8) which the Company may, from time to time,
propose to sell and issue. A Significant Holder's pro-rata portion, for purposes
of this Agreement, is the ratio of the number of the shares of Common Stock and
Preferred Stock (determined on an as-converted basis) held by such Significant
Holder at the time to the total number of shares of Common Stock and Preferred
Stock (determined on an as-converted basis) of the Company issued and
outstanding at such time. Each Significant Holder shall have a right of
over-allotment such that if any Significant Holder fails to exercise his right
hereunder to purchase his pro-rata portion of New Securities, the other
Significant Holders may purchase the non-purchasing Significant Holder's portion
on a pro-rata basis within five (5) days from the date it receives notice from
the Company that a non-purchasing Significant Holder has failed to exercise its
right hereunder to purchase its pro-rata share of New Securities. This right of
first offer shall be subject to the following provisions:
(c) "New Securities" shall mean any capital stock of the
Company whether now authorized or not, and rights, options or warrants to
purchase capital stock, and securities of any type whatsoever that are, or may
become, convertible into capital stock; provided, however, that the right of
first offer shall apply at the time of issuance of the right, warrant or option
and not to the exercise thereof; provided, further, that the term "New
Securities" does not include: (i) the Shares or Conversion Shares; (ii) shares
of Series A or Series B Preferred Stock issued pursuant to the Series A or
Series B Warrants, respectively (or shares of Common Stock issued upon
conversion of such Preferred Stock or such securities as may be substituted for
the Series A or Series B Preferred Stock pursuant to the terms of the Series A
or Series B Warrants); (iii) securities offered to the public pursuant to a
registration statement filed pursuant to the Act; (iv) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all the assets or other reorganization whereby the
Company owns not less than 51% of the voting power of such corporation; (v) any
<PAGE> 23
borrowings, direct or indirect, from financial institutions or other persons by
the Company, whether or not presently authorized, including any type of loan or
payment evidenced by any type of debt instrument, provided such borrowings do
not have any equity features, including war rants, options or other rights to
purchase capital stock, and are not convertible into capital stock of the
Company; (vi) _________ shares of Common Stock reserved for issuance to Founders
or employees pursuant to the exercise of options granted or to be granted; (vii)
warrants issued in connection with the leasing of equipment by the Company which
have been approved by the Board with the representatives of the Significant
Holders voting in favor of such issuance; or (viii) any shares of Common Stock
and Preferred Stock, and any options or warrants, which issuance has been
approved by the Board.
(d) In the event the Company proposes to issue New Securities,
it shall give each Significant Holder written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Significant Holder shall have
ten (10) days from the date of receipt of any such notice to agree to purchase
the Significant Holder's pro-rata share of such New Securities for the price and
upon the general terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
(e) In the event the Significant Holders fail to exercise the
right of first offer with respect to all of the New Securities proposed to be
sold by the Company within said ten-day period and after the expiration of the
five (5) day period for the exercise of the over-allotment provisions of this
Section 6.8, the Company shall have 120 days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within 120 days from the date of said agreement), to sell the
New Securities respecting which the Significant Holder's options were not
exercised, at a price and upon general terms no more favorable to the purchasers
thereof than specified in the Company's notice. In the event the Company has not
sold within said 120-day period or entered into an agreement to sell the New
Securities within said 120-day period (or sold and issued New Securities in
accordance with the foregoing within 120 days from the date of said agreement),
the Company shall not thereafter issue or sell any New Securities, without first
offering such securities to the Significant Holders in the manner provided
above.
(f) The right of first offer set forth in this Section 6.8 is
nonassignable, except that such right is assignable (i) by each Significant
Holder to any Person (as herein defined) controlling, controlled by or under
common control with such Significant Holder and (ii) between and among any of
the Significant Holders, and (iii) upon the death of a Significant Holder, such
right shall pass to the beneficiaries under the deceased Significant Holder's
last will and testament or to the distributees of the deceased Significant
Holder's estate.
6..9 Right of First Refusal and/or Repurchase Agreement. It shall be
a condition to any issuance of shares of Common Stock (other than shares of
Common Stock issued upon conversion of the Preferred Stock) including, without
limitation, Common Stock to officers or employees of the Company pursuant to an
employee stock purchase, stock option or other benefit or incentive plan
estab-
<PAGE> 24
lished by the Company, that the Company will cause the person to whom the Common
Stock is to be issued to execute and deliver to the Company an appropriate right
of first refusal agreement and/or a repurchase agreement (in the event that the
shares of Common Stock being issued are subject to absolute prohibitions on
transfer that lapse over time) in a form approved by the Board which shall
provide, among other things, that the Significant Holders shall have the right
to exercise the Company's rights thereunder in the event the Company shall fail
to do so.
6..10 Insurance. The Company will insure and keep insured, with
reputable insurance companies, so much of its properties, to such an extent and
against such risks, as reasonably prudent persons engaged in similar businesses
would customarily insure properties of a similar character or as otherwise
approved by the Board.
6..11 Notice of Record Dates.
(a) In the event of any taking by the Company of a record of
the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution,
the Company shall mail to each holder of Series B Shares, at least ten (10) days
prior to such record date, specified herein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend or
distribution.
(b) In the event of (i) any consolidation or merger to which
the Company is a party and for which approval of any shareholders of the Company
is required, (ii) the conveyance or transfer of all, or substantially all, of
the properties and assets of the Company, (iii) any capital reorganization or
any reclassification of the Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or (iv) the voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail to
each holder of Series B Shares, at least ten (10) days prior to the applicable
record date, a notice specifying the date on which such record is to be taken
for the purpose of such transaction.
6..12 Employee Stock Purchase Agreement. The Company will not issue
any of its capital stock, or grant an option to purchase any of its capital
stock, to any Founder, employee, or officer of the Company (other than any
options or grants already made to any Founders or employees of the Company)
except pursuant to a plan adopted or an issuance approved by the Board, with the
representatives of the Investors on the Board having voted in favor thereof.
6..13 State Securities Law Filings. The Company shall make any and
all filings necessary (whether before or after the Closing) in connection with
the offer, issuance and sale of the Series B Shares and the issuance of the
Conversion Shares under the securities or blue sky laws of New York, California
and any other jurisdiction in which such filing is required by law.
<PAGE> 25
6..14 Lapse of Covenants. Except as otherwise specifically provided
in this Section 6, the covenants contained herein and further agreements
contained in Section 7 of this Agreement and the 1988 Purchase Agreement shall
lapse and be of no further force and effect upon the consummation by the Company
of an Initial Public Offering. "Initial Public Offering" for purposes of this
Agreement, shall be defined as the receipt by the Company of the proceeds of a
bona fide firm commitment underwritten public offering registered under the Act,
which offering does not exclusively relate to securities under an employee stock
option, bonus or other compensation plan and at a price of not less than $7.00
per share of Common Stock (as equitably adjusted for any dilutive event set
forth in the Restated Articles of Incorporation or other similar event) and net
proceeds to the Company of not less than $7,000,000.
7. Further Agreements.
7..1 Right of First Refusal and Repurchase with Respect to Founder
Stock. In connection with the exercise of the Incentive Stock Options granted to
each of the Founders and to certain of the Company's employees (the "Optionees")
each of the Founders and the Optionees is required to execute a Restricted Stock
Purchase Agreement (the "Restricted Stock Purchase Agreements"). Pursuant to the
Restricted Stock Purchase Agreements and the Restriction Agreements, the Company
has the right of first refusal in connection with the sale by the Founders and
the Optionees of any vested shares of Common Stock and the right to repurchase
any unvested shares of Common Stock. Pursuant to the assignment provisions
contained in the Restriction Agreements and the Restricted Stock Purchase
Agreements, the Company hereby agrees that if on any occasion it elects not to
exercise any of its rights of first refusal or repurchase under the Restriction
Agreements or the Restricted Stock Purchase Agreements or to exercise such
rights only with respect to a portion of the shares to which they are
applicable, that it shall so notify the Significant Holders in writing (the
"Company Notice") within ten (10) days of all of the details of the notice or
even which triggered the Company's right of first refusal or repurchase and the
Significant Holders shall thereafter have all of the rights of the Company to
exercise on a pro-rata basis the rights of first refusal and repurchase granted
thereunder to the Company with respect to all of the shares of Common Stock to
which the Company's rights apply or with respect to that portion of the shares
of Common Stock that the Company has elected not to purchase on the same terms
granted to the Company pursuant to the Restriction Agreements or Restricted
Stock Purchase Agreements, as applicable. Each Significant Holder shall deliver
a notice to the Company stating the number of shares of Common Stock which the
Significant Holder desires to purchase pursuant to this Section 7.1 or to sell
pursuant to Section 7.2 within ten (10) days of its receipt of the Company
Notice. The Company shall notify the Significant Holders (the "Non-Exercise
Notice") of any Significant Holder's election not to exercise, or to exercise
only in part, its rights under Sections 7.1 or 7.2 and each Significant Holder
shall have a right of over-allotment to purchase the non-exercising Significant
Holder's portion on a pro-rata basis within five (5) days from the date it
receives the Non-Exercise Notice. Notwithstanding anything to the contrary
contained in the Restriction Agreements or in the Restricted Stock Purchase
Agreements, the notice provisions and time periods set forth in Sections 7.1 and
7.2 shall control in the event the Company assigns its rights under the
Restriction Agreements or Restricted Stock Purchase Agreements to the
Significant Holders.
<PAGE> 26
7..2 Co-Sale Agreement on Sale of Founder Stock. Notwithstanding
anything to the contrary contained in the Restriction Agreements or in the
Restricted Stock Purchase Agreements, in the event the Company does not elect to
purchase any or all of a Founder's shares of Common Stock subject to the rights
of first refusal set forth in the Restriction Agreements and in the Restricted
Stock Purchase Agreements apply, and in the event the Significant Holders do not
elect to purchase any or all shares of Common Stock subject to their rights of
first refusal as set forth in Section 7.1 above, then, with respect to any
shares of a Founder's Common Stock not purchased by the Significant Holders the
Founder hereby grants to the Significant Holders the right to participate, pro
rata, in the sale of 50% of such shares in accordance with the following
provisions of this Section 7.2:
(a) Each Significant Holder may elect to participate, pro rata,
in the proposed sale of shares of Common Stock which the selling Founder desires
to sell on the same terms as set forth in the Founder's notice of sale which
triggered the right of first refusal, upon delivery of notice of election to the
selling Founder within the time prescribed for exercising the Significant
Holder's right of first refusal with respect to the selling Founder's shares of
Common Stock.
(b) In the event all of the Significant Holders fail to
exercise the right of co-sale within the time period allotted therefor, the
selling Founder shall have the right to sell the shares of Common Stock which
were subject to the right of co-sale on the same terms as those set forth in the
notice triggering the right of first refusal; provided, however, that the sale
is consummated within the period of time provided for in the Restriction
Agreements or the Restricted Stock Purchase Agreements, as applicable.
(c) In the event any or all of the Significant Holders elect to
exercise their rights of co-sale in a manner consistent with Section 7.2(a), the
selling Founder agrees to reduce the number of shares of Common Stock to be sold
by him, and to sell, for the account of the selling Significant Holders that
amount of Common Stock tendered for sale by the Significant Holders. Each
Significant Holder shall have a right of over-allotment such that if any
Significant Holder fails to exercise his rights hereunder, the other Significant
Holders may sell on a pro-rata basis an amount of Series B Shares equal to the
number of Series B Shares which the non-exercising Significant Holder would have
been permitted to sell. In no event shall the total number of shares of Common
Stock sold by the Significant Holders pursuant to their right of co-sale exceed
fifty percent (50%) of the total number of shares of Common Stock actually being
sold by the selling Founder, other than to Significant Holders pursuant to
Section 7.1, in any given sales transaction.
7..3 Board Representation. The Founders and Investors agree to vote
their Shares and Conversion Shares in such a manner as to maintain the Board at
five (5) members and to vote all of their Shares and Conversion Shares in favor
of the election to the Board of (a) two (2) members to be selected by the
Founders and (b) one (1) member to be selected by each of Weeden, Ventana and
InterVen II, L.P. The Board shall, immediately after the Closing, be comprised
of the following people: Robert P. Akins, Richard P. Abraham, Duwaine Townsen,
Kenneth M. Deemer and one member remaining to be named by the Founders. Allsop
Venture Partners is hereby granted the right to have a representative of
<PAGE> 27
Allsop present at all meetings of the Board as a non-voting observer and notice
of all meetings of the Board shall be given to Allsop at the time notice is
given to the members of the Board.
8. Restrictions on Transferability of Shares; Compliance with the Act.
8..1 Restrictions on Transferability. The Shares and the Conversion
Shares shall not be sold, assigned, transferred or pledged, except upon the
conditions specified in this Section 8, which conditions are intended to insure
compliance with the provisions of the Act and in the case of Conversion Shares
being sold pursuant to a Registration Statement, to assist in an orderly
distribution. Each Investor will cause any proposed purchaser, assignee,
transferee or pledgee of Shares or Conversion Shares held by that Investor to
agree to take and hold those Shares or Conversion Shares subject to the
provisions and upon the conditions specified in this Section 8.
8..2 Certain Definitions. As used in this Section 10, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Act.
"Holder" shall mean any holder of Registrable Securities
(including any Transferee (as herein defined)) which have not been sold to the
public.
"Initiating Holders" shall mean any Holders who in the
aggregate hold 50% or more of the outstanding Registrable Securities.
The terms "register", "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean (a) the Conversion Shares
(whether issued or issuable), (b) any Common Stock or other securities of the
Company issued or issuable in respect of the Conversion Shares (or any other
securities of the Company issued in respect of the Shares) on account of any
stock split, reverse stock split, stock dividend, dilution event described in
the Restated Articles of Incorporation or other similar event, (c) any Common
Stock issuable upon conversion of the Series A Preferred Stock received upon
exercise of the Series A Warrants, (d) any Common Stock issuable upon conversion
of the Series B Preferred Stock received upon exercise of the Series B Warrants,
and (e) any Shares or Conversion Shares or Common Stock acquired pursuant to the
right of first offer set forth in Section 6.8 or the right of first refusal and
repurchase with respect to Founder Stock set forth in Section 7.1 or pursuant to
any right to purchase stock from any employee pursuant to an agreement provided
for by Section 6.9; provided, however, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so long as (i)
they have not been sold to or through a
<PAGE> 28
broker or dealer or underwriter in a public distribution or a public securities
transaction, (ii) they have not been sold in a transaction exempt from the
registration and prospectus delivery requirement of the Act under Section 4(1)
thereof so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of each sale.
"Registration Expenses" shall mean all expenses incurred by the
Company in compliance with Sections 8.4, 8.5 and 8.6 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).
"Restricted Securities" shall mean the securities of the
Company required to bear or bearing the legend set forth in Section 4.3 hereof.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for any Holder.
8..3 Notice of Proposed Transfers. The transferee of each
certificate representing Restricted Securities (a "Transferee") by acceptance
thereof agrees to comply in all respects with the provisions of this Agreement
and shall have all the rights of an Investor hereunder with respect to the
Restricted Shares. Prior to any proposed sale, assignment, transfer or pledge of
any Restricted Securities (other than under circumstances described in Sections
8.4, 8.5 and 8.6 hereof), the Holder thereof shall give written notice to the
Company of such Holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed sale, assignment,
transfer or pledge, in sufficient detail, and shall be accompanied (except in
transactions in compliance with Rule 144) by either (a) a favorable written
opinion of counsel reasonably satisfactory in form and substance to the Company
and its counsel, to the effect that the proposed transfer of the Restricted
Securities may be effected without registration under the Act, or (b) a "no
action" letter from the Commission to the effect that the distribution of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
Holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. Notwithstanding the foregoing, Holders of Restricted
Securities and their transferees shall be permitted to transfer such Restricted
Securities without complying with the provision of this Section to (a) any
Person controlling, controlled by or under common control with such Holder or
(b) to any other Holder of Restricted Securities. Each certificate evidencing
the Restricted Securities transferred as above provided shall, subject to the
provisions of Section 4.3, bear the appropriate restrictive legend set forth
therein.
8..4 Demand Registration Rights.
(a) On two occasions, upon the demand, in writing, of
Initiating Holders that the Company effect a registration with respect to all or
any part of the Registrable Securities, the Company
<PAGE> 29
shall give written notice of such demand within ten (10) days to all other
Holders. The notice shall advise such Holders of their right to participate in
such demand registration, which right may be exercised by each such Holder
giving written notice to the Company of its intention to so participate within
twenty (20) days of receipt of such notice from the Company. The Company will
thereafter use its best efforts to prepare, file and process to effectiveness a
registration statement and any amendments or supplements required to be filed to
insure that such registration statement remains effective under the Act, to
permit the Holders or any of them, or an underwriter on behalf of any of them,
to offer and sell to the public the number of Registrable Securities for which
demand registration rights are exercised hereunder. The Company shall file the
aforesaid registration statement as soon as reasonably practicable, and in any
event, within sixty (60) days following receipt of such written request. The
Company shall use its best efforts to cause such registration statement to
become and remain effective until the earlier of the sale of all of the
Registrable Securities included in the registration statement or one hundred
twenty (120) days from the effective date thereof.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to register the Registrable Securities pursuant to this Section 8.4
(i) during any period within six (6) months following a prior primary or
secondary public offering of the Company's Common Stock, including any
registration of the Registrable Securities but excluding a "shelf" or continuing
registration, (ii) during any period in which the Company has commenced
preparation of a registration statement of securities and pursuant to which it
has notified the Holders of their "piggy-back" registration rights pursuant to
Section 8.4 hereof, (iii) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act, (iv) if the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith and judgment of
the Board of Directors it would be seriously detrimental to the Company or its
shareholders for a registration to be filed in the near future, then the
Company's obligation to use its best efforts to register under this Section 8.4
shall be deferred for a period not to exceed ninety (90) days from the receipt
of the request to file such Registration Statement by Initiating Holders;
provided, however, that the Company shall not exercise the right to defer
registration granted by this subsection (iv) more than once in any twelve-month
period.
(c) The right of any Holder to registration pursuant to Section
8.4 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 8.4 and the inclusion of such Holder's
registrable securities in the underwriting to the extent requested and to the
extent provided herein. The Company shall (together with all Holders proposing
to distribute their securities through such an underwriting) enter into an
underwriting agreement in customary form with the managing underwriters selected
for such underwriting by a majority in interest of the Initiating Holders (which
managing underwriters shall be reasonably acceptable to the Company). The
Holders agree to be bound by the provisions of Section 8.9 herein regarding
cutbacks. If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such persons may elect to withdraw therefrom by written notice
to the Company, the Managing Underwriter and the Holders participating in the
registration. The Registrable Securities and/or other securities so withdrawn
shall
<PAGE> 30
also be withdrawn from registration, and such registrable securities shall not
be transferred in a public distribution prior to ninety (90) days after the
effective date of such registration.
8..5 Piggy-Back Registration Rights.
(a) On each occasion, if any, following the date hereof that
the Company contemplates filing with the Commission a registration statement
under the Act relating in whole or in part to the primary offer and sale of
shares of its Common Stock, other than a registration statement which
exclusively relates to the registration of securities under (i) an employee
stock option, bonus or other compensation plan, or (ii) a registration relating
solely to a transaction under Rule 145 promulgated by the Commission, the
Company shall so notify the Holders in writing of its intention to do so at
least thirty (30) days prior to the filing of each such registration statement.
Each Holder who gives written notice to the Company, within twenty (20) days of
receipt of such notice from the Company, of such Holder's desire to have any of
its Registrable Securities included in such registration statement, may, subject
to the provisions of this Section 8.5, have its Registrable Securities so
included. The Company shall file any required amendments of or supplements to
any registration statement filed pursuant to this Section 8.5 and otherwise use
its best efforts to insure that such registration statement remains in effect
under the Act until the earlier of the sale of all of the Registrable Securities
included in the registration or the expiration of one hundred twenty (120) days
from the effective date thereof.
(b) If the registration of which the Company gives notices is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
8.5(a). In such event the right of any Holder to registration pursuant to
Section 8.5 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities in the underwriting to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company (or by the Holders who have demanded such
registration). The Holders agree to be bound by the terms and conditions of
Section 8.9 hereof regarding cutbacks.
(c) The Company shall have the right to terminate or withdraw
any registration initiated by it under this Section 8.5 prior to the
effectiveness of such registration whether or not any Holder has elected to
include securities in such registration.
8..6 Registration on Form S-3.
(a) The Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form. After the Company
has qualified for the use of Form S-3, in addition to the rights contained in
Sections 8.4 and 8.5, the Holders of Registrable Securities shall have the right
to demand that the Company promptly use its best efforts to effect one
registration per annum on Form S-3, provided, such request shall be made by
Holders of at least 25% of the outstanding
<PAGE> 31
Registrable Securities and with respect to an amount of Registrable Securities
which have a reasonably anticipated aggregate price to the public of not less
than $500,000.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 8.6 (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act, (ii) during the period starting with the date sixty (60) days prior to
the filing of and, ending on a date six (6) months following the effective date
of a registration statement (other than with respect to a registration statement
relating to a Rule 145 transaction, and offered solely to employees, provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective, or (iii) if the Company
shall furnish to Holder a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company or its shareholders for a registration
statement to be filed in the near future, then the Company's obligation to use
its beset efforts to file a registration statement shall be deferred for a
period not to exceed ninety (90) days from the receipt of the request to file
such registration by the Holders; provided, however, that the Company shall not
exercise the right to defer registration granted by this subsection (iii) more
than once in any twelve-month period.
8..7 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) Make and keep public information available as those terms
are understood and defined in Rule 144 under the Act, at all times from and
after 90 days following the effective date of the first registration under the
Act filed by the Company for an offering of its securities to the general
public;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") at
any time after it has become subject to such reporting requirements; and
(c) So long as a Holder owns any Restricted Securities, furnish
to the Holder forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 (at any time from and
after 90 days following the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed as a Holder
may reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without registration.
<PAGE> 32
8..8 Expenses of Registration. Subject to any Blue Sky requirements
with respect to the allocation of expenses, all Registration Expenses incurred
in connection with registration statements under Section 8.5 and the first two
registration statements filed by the Company pursuant to Sections 8.4 and 8.6,
shall be borne by the Company, and all Selling Expenses shall be borne by the
holders of the Registrable Securities so registered pro rata on the basis of the
number of their shares of Registrable Securities so registered; provided,
however, that the Company shall not be required to pay any Registration Expenses
if, as a result of the withdrawal of a request for registration by Initiating
Holders (unless in response to a material adverse change in the Company), the
registration statement does not become effective, in which case the Holders
requesting registration shall bear such Registration Expenses pro-rata on the
basis of the number of their shares of Registrable Securities so included in the
registration request; provided, further, that such registration shall not be
counted as a registration pursuant to Section 8.4, 8.5 or 8.6.
8..9 Cutbacks. In the event the underwriter for a registration
statement filed pursuant to Sections 8.4, 8.5 or 8.6 advises the Company in
writing that the number of Registrable Securities proposed to be sold in any
such offering or sale is greater than the number of shares which the underwriter
believes feasible to sell at that time at the price and upon the terms approved
by or on behalf of the Company with respect to a registration statement filed
under Section 8.5 or on behalf of the Holders holding a majority of the
Registrable Securities to be included in such registration statement with
respect to a registration statement to be filed under Section 8.4 or 8.6, then
the number of Registrable Securities which the underwriter believes may be sold
shall (a) in the case of a registration statement filed under Section 8.5, first
be allocated to the Company and the remaining Registrable Securities shall be
allocated among the Holders in proportion to the Registrable Securities each
first proposed for inclusion in the registration statement and (b) in the case
of a registration statement filed under Sections 8.4 or 8.6, be allocated to the
Holders in proportion to the number of Registrable Securities each first
proposed for inclusion in the registration statement.
8..10 Additional Covenants Concerning Sale of Shares. In connection
with any registration statement referred to in Section 8 of this Agreement, the
Company shall furnish to each Holder whose shares of Registrable Securities are
included therein (or to any broker or other person at its request) a reasonable
number of copies of such registration statement, each amendment and supplement
thereto and each document included therein, such number of copies of the then
current prospectus included therein as they may from time to time reasonably
request, and a copy of the opinion of counsel to the Company and a copy of the
Company's accountants' "cold comfort letter" which are delivered to the
underwriter, if such counsel or accountants, as the case may be, so consent.
8..11 Blue Sky Provisions. Except in those jurisdictions in which
the Company would be required to execute a general consent to service of
process, the company, at its expense, shall endeavor to cause any of the
Registrable Securities included in a registration statement referred to herein
to be qualified under the laws of such number of jurisdictions as the Holders,
or the managing underwriter named herein, may reasonably designate, and the
Company will continue such qualification in effect so long as may be necessary
to comply with all applicable laws regulating sales of securities.
<PAGE> 33
8..12 Advising the Holders. In connection with any registration
statement referred to in Section 8 hereof, the Company will promptly advise each
Holder whose Registrable Securities are included therein, and confirm such
advice in writing (a) when the registration statement has become effective, (b)
upon the filing of any amendment or supplement to the registration statement,
(c) when any post-effective amendment to the registration statement becomes
effective, and (d) of any request by the Commission for any amendment or
supplement to the registration statement or prospectus or for additional
information. If at any time the Commission should institute or threaten to
institute any proceeding for the purpose of issuing, or should issue, a stop
order suspending the effectiveness of the registration statement, the Company
will promptly notify the Holders whose Registrable Securities are included in
such registration statement, and will use its best efforts to prevent the
issuance of any such stop order or to obtain the withdrawal thereof as soon as
possible; and the Company will advise the Holders promptly of any order or
communication of any public board or body addressed to the Company suspending or
threatening to suspend the qualification of any shares of Common Stock for sale
in any jurisdiction.
8..13 Indemnification.
(a) With respect to the registration rights described in
Section 8 hereof, the Company hereby agrees to indemnify, hold harmless and
defend each Holder and each Person who controls, is controlled by or under
common control of any such Holder within the meaning of the Act, against any and
all losses, claims, damages, liabilities and expenses (including reasonable
legal and other expenses incurred in investigating and defending against the
same), to which they, or any of them, may become subject under the Act or other
statute or common law, arising out of or based upon (i) any alleged untrue
statement of a material fact contained in any registration statement or
prospectus included therein, or any amendment thereof or supplement thereto, or
(ii) the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements contained therein not misleading;
provided, however, that the indemnity contained in this Section 8.13(a) shall
not apply to any such alleged untrue statement or omission made in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such Holder. As soon as practicable after the receipt by any Holder of
notice of any claim or action against any of the Holders in respect of which
indemnity may be sought from the Company hereunder, such Holder shall notify the
Company thereof in writing, and the Company shall assume the defense of such
claim or action (and the cost thereof) by counsel of its own choosing, who shall
be reasonably satisfactory to a majority in interest of the Holders.
(b) Each Holder whose Registrable Securities are included in a
registration statement, severally but not jointly, hereby agrees, to indemnify,
hold harmless and defend the Company, its directors and officers, and each
Person who controls, is controlled by or under common control of the Company
within the meaning of the Act, and each other Holder against any and all losses,
claims, damages, liabilities and expenses (including reasonable legal or other
expenses incurred in investigating and defending against the same), to which
they or any of them may become subject under the Act or other statute or common
law, arising out of or based upon (i) any alleged untrue statement of a material
fact contained in any such registration statement or prospectus included
therein, or any amendment thereof or supplement thereto, or (ii) the alleged
omission to state therein a material fact
<PAGE> 34
required to be stated therein or necessary to make the statements contained
therein not misleading; provided, however, that the indemnity contained in this
Section 8.13(a) shall apply in each case only to the extent such statement or
omission was made solely in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder in
connection with the preparation of the registration statement. The Company, and
any other person in respect of which indemnity may be sought from a Holder
hereunder, shall, as soon as practicable after the receipt of notice of any
claim or action against the Company or such other person or entity, notify such
Holder thereof in writing and such Holder shall assume the defense of any such
claim or action (and the cost thereof) by counsel of its own choosing, who shall
be reasonably satisfactory to the Company and a majority in interest of any
Holders claiming indemnity hereunder.
8..14 Registration under the Exchange Act. If the Company shall at
any time have completed a public offering of shares of its Common Stock, it
shall thereafter take such steps as may be necessary to register its Common
Stock under Section 12 of the Exchange Act (whether or not required by law to do
so), to maintain such status, and to file with the Commission all current
reports and other information as may be necessary to enable the Investors or the
Transferees to effect sales of their Conversion Shares in reliance upon Rule 144
under the Act.
8..15 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the company such
information regarding such Holder or Holders, the registrable securities held by
them and the distribution proposed by such Holder or Holders as the Company may
reasonably request in writing and as shall be required in connection with any
registration referred to in this Section 8.
8..16 Transfer of Registration Rights. The rights to cause the
Company to register securities granted to Holders under Sections 8.4, 8.5 and
8.6 may be assigned to a transferee or assignee in connection with any transfer
or assignment by a Holder of at least Ten Thousand (10,000) Shares of
Registrable Securities, subject to adjustment for any dilution event described
in the Certificate of Determination or similar event; provided, however, that
the Company is given written notice by the Holder effecting such transfer or
assignment.
8..17 Standoff Agreement. Each Holder agrees in connection with any
registration of the Company's securities that, upon request of the Company or
the underwriters managing any under written offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration statement) without the prior written consent
of the Company or such underwriters, as the case may be, for such period of time
(not to exceed 120 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters; provided, however, that
(all officers and directors) of the Company have entered into substantially
similar agreements. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
<PAGE> 35
8..18 Termination of Rights. The rights of any particular Holder to
cause the Company to register securities under Sections 8.4, 8.5 and 8.6 shall
terminate with respect to such Holder following a bona fide, firmly underwritten
public offering of shares of Common Stock registered under the Act at such time
as such Holder is able to dispose of all of his Registrable Securities in one
three-month period, pursuant to the provisions of Rule 144.
9. Survival of Representations, Warranties and Covenants.
9..1 Survival of Representations, Warranties and Covenants of the
Company. The Investors shall have the right to rely fully upon the
representations, warranties and covenants of the Company contained in this
Agreement (notwithstanding any knowledge of facts determined or determinable by
the Investors). All such representations and warranties shall survive the
execution and delivery hereof and the Closing, and, except as otherwise
specifically provided in this Agreement, shall thereafter terminate and expire
on the earlier of (a) the second anniversary of the Closing Date and (b) the
consummation of the Initial Public Offering by the Company. The covenants of the
Company contained herein shall continue until they lapse in accordance with the
provisions of this Agreement.
9..2 Survival of Representations and Warranties of the Investors.
The Company shall have the right to rely fully upon the representations and
warranties of the Investors contained in this Agreement (notwithstanding any
knowledge of facts determined or determinable by the Company). All such
representations, warranties, covenants and agreements shall survive the
execution and delivery hereof and the Closing and, except as otherwise
specifically provided in this Agreement, shall thereafter terminate and expire
on the earlier of (a) the second anniversary of the Closing Date and (b) the
consummation of the Initial Public Offering by the Company. The covenant made by
the Investors in Section 4.3 hereof shall survive indefinitely, unless a lesser
period is prescribed by an applicable statute.
10. Conditions Precedent to Obligations of the Investors. Except as may
be waived in writing by any Investor (but only as to himself or itself), the
obligations of each Investor to consummate the purchase of the Shares set forth
on Schedule 1.2 hereto shall be conditioned on the following:
10..1 Representations and Warranties Correct. Each of the
representations and warranties of the Company contained in this Agreement and in
any certificate delivered to the Investors pursuant hereto shall in all material
respects be true and correct when made and as of the Closing Date, with the same
effect as if made at the Closing Date (or the date to which it relates in the
case of any representation or warranty which specifically relates to an earlier
date).
10..2 Compliance with This Agreement. The Company shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by the Company on or prior to the Closing Date.
10..3 Minimum Purchase. At least ______ Series B Shares shall have
been purchased in the aggregate by all of the Investors for an aggregate
purchase price of not less than $___________.
<PAGE> 36
10..4 Satisfaction of Investors and Their Counsel. All corporate
proceedings taken in connection with the transactions contemplated by this
Agreement, and all documents incident thereto, shall be reasonably satisfactory
in form to each Investor and its counsel, Gray, Cary, Aimes & Frye.
10..5 No Actions or Proceedings. No action, suit or proceeding by or
before any court, agency or other governmental body shall have been asserted,
instituted or threatened by any party to restrain, prohibit or invalidate the
transactions contemplated by this Agreement.
10..6 Opinion of Company's Counsel. The Company shall have delivered
to the Investors an opinion of Wilson, Sonsini, Goodrich & Rosati, counsel for
the Company, addressed to the Investors and dated as of the Closing Date in
substantially the form attached hereto as Exhibit C.
10..7 No Lapse in Insurance Coverage. No lapse shall have occurred
prior to the Closing Date in the coverage provided under any of the policies of
insurance of the Company, including any liability policies, which relate to the
business, assets, properties or employees of the Company.
10..8 Employee Agreements and Nondisclosure Agreements. The Employee
Agreements and Nondisclosure Agreements shall continue to be in full force and
effect.
10..9 Officer's Certificate. The Investors shall have received a
certificate dated the Closing Date and signed by the President certifying the
fulfillment of the conditions by the Company specified in this Section 10 and
that he does not have any knowledge of any facts which have not been disclosed
to the Investors in writing which will or may reasonably be expected to have any
material adverse effect on the value of the assets, properties, business,
goodwill or prospects of the Company. General economic conditions shall not be
deemed a fact within the meaning or application of this paragraph.
10..10 Certificate of Secretary or Assistant Secretary. The
Investors shall have received a certificate dated the Closing Date and signed by
the Secretary or Assistant Secretary of the Company certifying as to:
(a) the Restated Articles of Incorporation in the form
attached as Exhibit A hereto;
(b) the By-Laws of the Company in the form attached as
Exhibit B hereto;
(c) resolutions of the Board authorizing and approving the
execution and delivery of this Agreement and all documents required to be
delivered pursuant hereto by the Company, and the performance of its obligations
hereunder and that such resolutions are in full force and effect on and as of
the Closing Date;
<PAGE> 37
(d) resolutions of the shareholders of the Company approving
the Restated Articles of Incorporation and amended By-Laws of the Company and
that such resolutions are in full force and effect on and as of the Closing
Date; and
(e) the incumbency and signature of each of the officers of
the Company signing this Agreement and any of the documents delivered hereunder.
10..11 Delivery of Documents. All of the documents and resolutions
required to be delivered by the Company to the Investors at closing shall have
been delivered.
11. Conditions Precedent to the Obligation of the Company. Except as may
be waived in writing by the Company, the obligations of the Company to
consummate the sale of the Shares herein provided for shall be conditioned upon
the following:
11..1 Representations and Warranties Correct. Each of the
representations and warranties of each Investor in this Agreement and in any
certificate delivered to the Company pursuant hereto certifying the fulfillment
of the conditions by such Investor specified in this Section 11 shall in all
material respects be true and correct when made and as of the Closing Date (or
on the date to which it relates in the case of any representation or warranty
which specifically relates to an earlier date).
11..2 Compliance with this Agreement. Each Investor shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by such Investor on or prior to the Closing Date.
11..3 Satisfaction of Company and its Counsel. All corporate,
partnership and other proceedings taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form to the Company and its counsel, Wilson, Sonsini,
Goodrich & Rosati.
11..4 No Actions or Proceedings. No action, suit or proceeding by or
through any court, agency or other governmental body shall have been asserted,
instituted or threatened by any party to restrain, prohibit or invalidate the
transactions contemplated by this Agreement.
12. Documents to be Delivered at Closing.
12..1 Documents to be Delivered by the Company. At the Closing the
Company shall deliver to each of the Investors:
(a) the Restated Articles of Incorporation, in the form
attached as Exhibit A hereto, certified by the Secretary of State of the State
of California;
<PAGE> 38
(b) an opinion, dated the Closing Date, of Wilson, Sonsini,
Goodrich & Rosati, counsel to the Company, in substantially the form attached as
Exhibit C hereto;
(c) a certificate of the President certifying as to the
matters set forth in Section 10.9;
(d) a certificate of the Secretary or Assistant Secretary
certifying as to the matters set forth in Section 10.10;
(e) a Good Standing Certificate certified by the Secretary of
State of the State of California as to the good standing of the company in
California;
(f) a Tax Certificate from the Franchise Tax Board stating
that the Company does not owe any franchise taxes to the State of California;
(g) certificates representing the Series B Shares being
purchased by such Investor;
12..2 Documents to be Delivered by the Investors. At the Closing,
the Investors shall deliver to the Company:
(a) the sum of at least $__________ in the manner set forth in
Section 1.2 hereof; and
(b) such other documents as the Company or its counsel shall
have reasonably requested.
13. Miscellaneous.
13..1 Definition of Person. "Person" for purposes of the Agreement
means an individual, partnership, corporation, business trust, joint stock
company, trust, unincorporated association, joint venture or other entity of
whatever nature.
13..2 Definition of Knowledge. "To the best of the Company's
knowledge" and "to the best of the Founder's knowledge" shall mean the actual
knowledge of the Company or the Founders or information which they should have
obtained after due inquiry into the conduct of the Company's business and
matters related thereto.
13..3 Additional Actions. The parties shall execute and deliver such
other and further instruments and perform such other and further acts as may
reasonably be required fully to consummate the transactions contemplated hereby.
<PAGE> 39
13..4 Expenses. The Company agrees that at the Closing, it will pay
the reasonable legal fees and disbursements of Gray, Cary, Aimes & Frye, counsel
to the Investors, incurred in connection with the review of this Agreement,
other ancillary documents called for in this Agreement and the consummation of
the transactions contemplated hereby upon presentation of statements or other
reasonable evidence thereof.
13..5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
13..6 Binding Effect; No Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
legal representatives. This Agreement is not assignable by any party hereto
without the prior written consent of the other parties.
13..7 Notices. All notices or other communications hereunder shall
be in writing and shall be mailed, certified or registered mail, return receipt
requested, or shall be sent by messenger or by electronic transmission,
addressed to such party at the address indicated on Schedule 13.7 or to any such
other address as any such party shall specify in a notice to the Company, with a
copy in the case of a notice to any Investor, to Gray, Cary, Aimes & Frye, and,
if intended for the Company, with a copy to Wilson, Sonsini, Goodrich & Rosati,
Two Palo Alto Square, Suite 900, Palo Alto, California 94306, Attention: Henry
P. Massey, Jr., Esq.
13..8 Applicable Laws. This Agreement shall be construed and
governed by the laws of the State of California applicable to contracts made and
to be performed within such state.
13..9 Entire Agreement. This Agreement constitutes the entire
Agreement between the parties hereto, and no party hereto shall be bound by any
communications between them on the subject matter hereof unless such
communications are in writing and bear a date contemporaneous with or subsequent
to the date hereof. Any prior written agreements or letters of intent between
the parties shall, upon execution of this Agreement, be null and void.
13..10 Waivers and Amendments; Noncontractual Remedies; Preservation
of Remedies. This Agreement (except for sections 6.8, 6.12, 7.1, 7.2, 8 and
13.10) may be amended, superseded, cancelled, renewed or extended, and the terms
hereof may be waived, only by a written instrument duly executed and
acknowledged with the same formality as this Agreement, and signed by the
Investors (or their Transferees) holding at least two-thirds of the Series B
Shares or shares of Common Stock issued upon conversion of the Series B Shares;
and sections 6.8, 6.12, 7.1, 7.2, 8 and 13.10 of this Agreement may be amended,
superseded, cancelled, renewed or extended, and the terms hereof may be waived,
only by a written instrument duly executed and acknowledged with the same
formality as this Agreement, and signed by the Investors (or their Transferees)
holding at least two-thirds of the Shares or Conversion Shares. No delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any such right, power or
<PAGE> 40
privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
13..11 Table of Contents; Captions. The Table of Contents and the
captions of the various sections of this Agreement are inserted for convenience
of reference only, and shall not constitute a part hereof.
13..12 Schedules and Exhibits Part of Agreement. The Schedules and
Exhibits referred to herein and delivered pursuant hereto, including any
amendments thereto or changes therein prior to the Closing Date, shall be deemed
part of this Agreement as fully and effectively as if set forth at length
herein.
13..13 Severability. If any provision of this Agreement or the
application thereof shall for any reason be invalid or unenforceable, that
provision shall be limited only to ____________________________________________
<PAGE> 41
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date and year first above written.
"COMPANY"
CYMER LASER TECHNOLOGIES
By:
---------------------------------------
Name: Robert P. Akins
Title: President
"INVESTORS"
-------------------------------------------
(Name)
-------------------------------------------
(Signature)
-------------------------------------------
(Title)
"FOUNDERS" (as to sections 6.8(a), 7.2 and
7.3 only)
-------------------------------------------
(Name)
-------------------------------------------
(Signature)
<PAGE> 42
-------------------------------------------
(Title)
THNO1R.R1(C3)
06/03/89
<PAGE> 43
EXHIBIT 10.7
SCHEDULE 1.1
Founders
Robert Akins
Martin Pedley
Richard Sandstrom
Uday Sengupta
<PAGE> 44
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
List of Investors
<TABLE>
<CAPTION>
SERIES B
NAME DOLLARS SHARES
- ---- ------- ------
<S> <C> <C>
FIRST CLOSING
Weeden Capital Partners, L.P. $95,016.40 27,946
Ventana Growth Fund II, L.P. $95,383.60 28,054
Interven II, L.P. $600,001.40 176,471
Interven Ventures 1987 $2,998.80 882
Allsop Venture Partners, $350,002.80 102,942
III, L.P.
K-Sun, Inc. $565,508.40 166,326
Xerox Venture capital $1,000,001.20 294,118
C. Ian Sym-Smith $100,000.80 29,412
Convergences Gestion $100,000.80 29,412
Fredrik C. Schreuder $68,000.00 20,000
VentimCo., Ltd. $25,000.20 7,353
Anglo American Partnership #1 $100,000.80 29,412
Paxton AB $50,000.40 14,706
Hagglof & Ponsbach $666,077.00 195,905
Fondkommission AB
Gerania AB $51,000.00 15,000
Scandinavian Merchant Group AB $ 102,000.00 30,000
TOTAL FIRST CLOSING: $3,970,992.60 1,167,939
------------- ---------
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
SERIES B
DOLLARS SHARES
NAME
<S> <C> <C>
SECOND CLOSING
Weeden Capital Partners, L.P. $154,982.20 45,583
Clearwater Ventures $150,001.20 44,118
TOTAL SECOND CLOSING: $304,983.40 $89,701
TOTAL FIRST AND SECOND CLOSING: $4,275,976.00 1,257,640
Additional Series B Shares* $224,029.40 65,891
------------- ---------
TOTAL FINANCING: $4,500,005.40 1,323,531
</TABLE>
*To be purchased in accordance with Section 1.1 of the Agreement.
- 2 -
<PAGE> 46
SCHEDULE 4.0
Exceptions to Representations and Warranties
Set forth below are exceptions to the representations and warranties
of the Company made in Section 4.0 of the attached Agreement. All disclosures
and exceptions are intended to modify all of the Company's representations and
warranties, and the section headings used below are for convenience only.
4.1 Organization and Standing; Articles and Bylaws
The Company is in the process of qualifying to do business in the
state of Massachusetts.
4.8 Absence of Undisclosed Liabilities and Obligations
See Section 4.13 below.
4.10 Real Property
The Company currently leases property at the following locations:
Units E, F, G and H
7887 Dunbrook Rd.
San Diego, California
Units C, D, E and F
7867 Dunbrook Rd.
San Diego, California
Suite 150L
1 Longfellow Center
526 Boston Post Rd.
Wayland, Massachusetts
1-22-6 Ichikawa
Ichikawa
Chiba, Japan 272
4.11 Tangible Assets and Equipment
The Company currently leases:
two Nuclecel Static Eliminators
two Propylene Nozzle
one Ricoh 6620 Copier
two Ricoh Fax 75
one Canon S-40 Shredder
<PAGE> 47
4.13 Patent and Trademarks
Cymer Laser Technologies, Inc. has applied for a patent dated January
15, 1988, U.S. Patent Office Serial No. 144799, entitled "Compact Excimer
Laser".
Cymer is aware of certain patents issued to Mr. Gordon Gould in
October 1977 and July 1979 as well as certain other patent applications of Mr.
Gould believed to be pending before the U.S. Patent Office which relate to
certain elements of basic laser technology. These claims of Mr. Gould have
raised a state of confusion in the laser industry, in that many of these claims
may have been covered by prior patents issued to others and under which many
manufacturers of lasers have paid royalties pursuant to licensing arrangements.
During fiscal 1987 two courts upheld the Gould patents as valid. However,
neither of these decisions is binding upon Cymer and no determination has been
made as to whether Cymer's products infringe the Gould patents. If the Gould
patent claims are found to be valid and Cymer's products are found to infringe
such patents, such findings could have a significant impact on Cymer's gross
profits. If Gould's patent claims are found to be valid it is likely that the
effect of these findings will be shared among other manufacturers of similar
devices. All rights to the Gould Patents have since been transferred to
Patlex. The Company received a letter dated May 10, 1989 from Patlex, and the
Company is currently discussing a possible license from Patlex. No assurance
can be given that such licensing will not be required in the future or that
retroactive royalty payment on sales of the Company's lasers will not be
demanded by Patlex. Should this occur, the Company's net sales and
profitability may be adversely affected.
The Company received a letter dated July 29, 1987 from Questek, Inc.
relating to United States Patent No. 4,611,270 requesting information regarding
possible patent infringement. The Company responded on August 26, 1987 that it
did not believe that any of its products infringed on the stated patent.
4.14(a) Contract and Other Agreements
(1) Lease with RIC Trade Center Ltd. for the San Diego Property
listed in 4.11.
(2) Purchase Order - Purchase of Specialty gas products from Alpha
Gas - Specialty Division dated 30 March 1989.
(3) Purchase Order - Custom Machined Parts from Pyramid Precision
Machine dated 22 March 1989.
(4) Sales Order - Laser and Laser Support Equipment to Nikon.
-2-
<PAGE> 48
(5) Agreement with Mitsubishi dated January 27, 1989 for the sale
of the Company's products.
(6) Employee Stock Option Agreements
(7) Founder Stock Option Agreements
(8) Founder Stock Purchase Agreements
(9) Letter Agreement dated April 27, 1988 with K-Sun, Inc., an
affiliate of Shin-Etsu Chemical Co., Ltd. ("Shin-Etsu"). In
connection with the Letter Agreement, the Company is currently
discussing a distribution agreement with Shin-Etsu.
(10) Certain employees of the Company (as indicated in the schedule
of stock options delivered to counsel for the Investors) have
salaries or other compensation in excess of $50,000.
(11) Certain health and other benefit programs, none of which are
subject to ERISA.
(12) Series A Preferred Stock Purchase Agreement dated May 3, 1988.
4.17 Litigation
See Section 4.13 above.
4.19 Environmental Compliance Matters
The Company is currently storing acetone, methanol, isopropyl alcohol,
paint thinner and other common cleaning agents in quantities less than four
gallons each. All of the Company's cleaning agents are stored in a safety
cabinet meeting National Fire Protection Association Flammable and Combustible
Liquid Code #30 and OSHA requirements #'s 3W208, #2W209 and 3W313. The Company
has contracted with a third party to remove the wastes.
The Company is also storing compressed gas cylinders used in the
testing and manufacture of gas lasers. The Company's cylinders are stored in
an upright secure manner.
-3-
<PAGE> 49
14.7 Addresses
Cymer Laser Technologies
7887 Dunbrook Road
San Diego, California 92126
Attn: Dr. Robert Akins
Mr. Martin B. Pedley
Allsop Venture Partners
8700 Monrovia
Suite 212
Lenexa, KS 66215
Attn: Mr. Michael J. Meyer
Shintech Incorporated
c/o K-Sun, Inc.
24 Greenway Plaza
Suite 811
Houston, TX 77046
Attn: Mr. M. Miyajima
Weeden Capital Partners, L.P.
180 Maiden Lane
New York, New York 10038
Attn: Mr. Thomas L. Flaherty
Clearwater Ventures
180 Maiden Lane
New York, New York 10038
Attn: Mr. Thomas L. Flaherty
Ventana Growth Fund II, L.P.
1660 Hotel Circle North, Suite 730
San Diego, California 92108
Attn: Mr. Duwaine Townsen
C. Ian Sym-Smith
Convergences Gestion
Fredrik C. Schreuder
c/o Ventana Growth Fund II, L.P.
1660 Hotel Circle North, Suite 730
San Diego, California 92108
Attn: Mr. Duwaine Townsen
Interven II, L.P.
333 South Grand Avenue
Suite 4050
Los Angeles, California 90071
Attn: Mr. Kenneth M. Deemer
-4-
<PAGE> 50
Interven Ventures 1987
333 South Grand Avenue
Suite 4050
Los Angeles, CA 90071
Attn: Mr. Kenneth M. Deemer
Xerox Venture Capital
3000 Sand Hill Road
Building 3
Suite 140
Menlo Park, CA 94025
Attn: Mr. Harold Shattuck
Xerox Venture Capital
800 Long Ridge Rd.
Mail Stop 2-4D
Stamford, CT 06904
Attn: Ms. Lucille Harris
C. Ian Sym-Smith
Ducal R 121
Marina Baie Des Anges
Villeneuve-Loubet 06270
France
Convergences Gestion
60 Rue du Rendez vous
75012 Paris, France
Fredrik C. Schreuder
Holmendammen Terrasse 24
0387 Oslo 3, Norway
VentimCo, Ltd.
94 Gloucester Place
London W1H 3DA
United Kingdom
Anglo American Partnership #1
2 Century Plaza, Suite 620
2049 Century Park East
Los Angeles, CA 90067
Paxton AB
Grev Turegatan 13A
S-114 46 Stockholm, Sweden
*Hagglof & Ponsbach Fondkommission AB
Kungsgatan 57 A
S-103 15 Stockholm, Sweden
-5-
<PAGE> 51
Gerania AB
c/o Scandinavian Merchant Group AB
Norrmalmstrog 14
S-111 46 Stockholm, Sweden
Scandinavian Merchant Group AB
Norrmalmstorg 14
S-111 46 Stockholm Sweden
with copies to:
Wilson, Sonsini, Goodrich & Rosati
Two Palo Alto Square, Suite 900
Palo Alto, CA 94306
Attn: Henry P. Massey, Jr., Esq.
Gray, Cary, Ames & Frye
401 B Street
San Diego, CA 92101
Attn: Cameron Jay Rains, Esq.
-6-
<PAGE> 52
E N D O R S E D
F I L E
In the office of the
Secretary of State
of the State of California
JUN 23 1989
MARCH FONG EU, Secretary of State
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
OF
CYMER LASER TECHNOLOGIES
Robert Akins and Martin Pedley certify that:
1. They are the President and the Secretary, respectively, of
CYMER LASER TECHNOLOGIES, a California corporation (the "Company").
2. The articles of incorporation of the Company, as amended to
the date of the filing of this certificate, including amendments set forth
herein but not separately filed (and with the omissions required by Section 910
of the California General Corporations Law) are restated as follows
(hereinafter referred to as the "Restated Articles of Incorporation"):
"I.
The name of this corporation is: CYMER LASER TECHNOLOGIES (the
"Company").
II.
The purpose of the Company is to engage in any lawful act or activity
for which a corporation may be organized under the California General
Corporation Law, other than the banking business, the trust company business,
or the practice of a profession permitted to be incorporated by the California
General Corporation Law.
III.
The Company is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares of Common Stock authorized to be issued is
Eleven Million Five Hundred Thousand (11,500,000), $.01 par value per share.
The total number of shares of Preferred Stock authorized to be issued is Four
Million Five Hundred Thousand (4,500,000), $.01 par value per share. The
Preferred Stock shall be issued in two series. The first series of Preferred
Stock shall be designated as 8% Non-Cumulative Voting Redeemable Convertible
Series A Preferred Stock (the "Series A Preferred Stock") and shall consist of
Three Million (3,000,000) shares with the rights,
<PAGE> 53
preferences, privileges and restrictions set forth below. The second series of
Preferred Stock shall be designated as 8% NonCumulative Voting Redeemable
Convertible Series B Preferred Stock (the "Series B Preferred Stock") and shall
consist of One Million Five Hundred Thousand (1,500,000) shares with the
rights, preferences, privileges and restrictions set forth below. The rights,
preferences, privileges and restrictions granted to and imposed upon the Series
A and Series B Preferred Stock are as follows:
A. Dividend Rate. The holders of record of shares of Series A
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors of the Company (the "Board") out of any assets of the Company
legally available therefor, an annual cash dividend at the rate per share of 8%
of the Series A Liquidation Value (as hereinafter defined), which shall be
payable on the payment dates fixed from time to time by the Board or a duly
authorized committee thereof. The holders of record of shares of Series B
Preferred Stock shall be entitled to receive, when and as declared by the Board
out of any assets of the Company legally available therefor, an annual cash
dividend at the rate per share of 8% of the Series B Liquidation Value (as
hereinafter defined), which shall be payable on the payment dates fixed from
time to time by the Board or a duly authorized committee thereof. "Series A
Liquidation Value" and "Series B Liquidation Value" shall mean $1.60 and $3.40
per share, respectively. No dividends (other than those payable solely in
Common Stock) shall be declared or paid or set aside for payment or other
distribution made with respect to the Common Stock during any fiscal year of
the Company nor shall any shares of Common Stock be redeemed, purchased or
otherwise acquired by the Company until a dividend equal to 8% per annum of the
applicable Liquidation Value per share of Series A and Series B Preferred Stock
has been paid or declared and set apart during the fiscal year. Any reference
in these Restated Articles of Incorporation to Common Stock includes any other
class or series of Common Stock that may be authorized from time to time. The
foregoing restriction on redemption, repurchase or acquisition of Common Stock
shall be inapplicable to (i) the redemption provisions of these Restated
Articles of Incorporation, (ii) any payments in lieu of issuance of fractional
shares thereof whether upon any merger, conversion, stock dividend or
otherwise, (iii) repurchases of Common Stock by the Company pursuant to the
terms of the Company's Incentive Stock Option Plan or the Common Stock
Restriction Agreements entered into by the Company with each of Robert P.
Akins, Uday Sengupta, Richard L. Sandstrom, Martin B. Pedley and Donald G.
Larson and any other repurchases by the Company under circumstances comparable
to those contemplated by the Company's Incentive Stock Option Plan or the
Common Stock Restriction Agreements or (iv) the rescission of any acquisition
by the Company pursuant to which such stock was issued. Dividends on the
Series A Preferred Stock shall not be cumulative and no rights
-2-
<PAGE> 54
to dividends shall accrue to the holders of Series A Preferred Stock in the
event that the Company shall fail to declare or pay dividends in whole or in
part on the Series A Preferred Stock in any previous fiscal year of the
Company, whether or not the earnings of the Company in that previous fiscal
year were sufficient to pay such dividends in whole or in part. Dividends on
the Series B Preferred Stock shall not be cumulative and no rights to dividends
shall accrue to the holders of Series B Preferred Stock in the event that the
Company shall fail to declare or pay dividends in whole or in part on the
Series B Preferred Stock in any previous fiscal year of the Company, whether or
not the earnings of the Company in that previous fiscal year were sufficient to
pay such dividends in whole or in part. After dividends in the amount of 8%
per annum of the Liquidation Value per share on the Series A Preferred Stock
and Series B Preferred Stock have been paid or declared and set aside in any
one fiscal year of the Company, if the Board shall elect to declare additional
dividends out of funds legally available therefor in that fiscal year, such
additional dividends shall be paid on the Common Stock and on the Series A
Preferred Stock and Series B Preferred Stock as if the Series A and Series B
Preferred Stock had been converted prior to the payment of the additional
dividends.
B. Voting.
(i) Subject to subsection (ii) hereof, each holder of the Series A
Preferred Stock and Series B Preferred Stock shall be entitled to vote on all
matters submitted to a vote (or to give their written consent in lieu of a
vote) of stockholders of the Company and, with respect to such vote, shall be
entitled to cast the number of votes he would have been entitled to cast had he
converted all of his shares of Series A Preferred Stock or Series B Preferred
Stock into Common Stock immediately prior to such vote. Except as otherwise
provided herein or required by law, the holders of shares of Series A Preferred
Stock, Series B Preferred Stock and Common Stock shall vote together and not as
separate classes or series.
(ii) The holders of shares of Common Stock voting separately as a
class shall elect two members of the Board of Directors of the Company, the
holders of shares of Series A Preferred Stock voting separately as a class
shall elect two members of the Board of Directors of the Company, and the
holders of shares of Series B Preferred Stock voting separately as a class
shall elect one member of the Board of Directors. Additional members of the
Board of Directors, if any, shall be elected by the holders of shares of Common
Stock, Series A Preferred Stock and Series B Preferred Stock, voting together
as a single class. If a vacancy on the Board of Directors is to be filled by
the Board of Directors, only a director or directors elected by the same class
-3-
<PAGE> 55
of stockholders as those who would be entitled to vote to fill such vacancy, if
any, shall vote to fill such vacancy. No action by members of the Board of
Directors filling a vacancy on the Board of Directors shall be effective until
10 days after all Board members who do not have a right to vote on such
appointment have received notice thereof. A majority of the Board members
entitled to receive such notice may waive such notice requirement on behalf of
all such Board members.
C. Protective Provisions.
(i) The Company shall not, without the consent of persons
holding greater than sixty-six and two-thirds percent (66-2/3%) of the
outstanding shares of Series A Preferred Stock:
(a) Amend or restate the Restated Articles of
Incorporation in a manner which would adversely alter or change the rights,
preferences, privileges or restrictions of the Series A Preferred Stock;
(b) Establish any class or series of capital
stock which would rank senior to or on a parity with the Series A Preferred
Stock with respect to the right to receive dividends or any distribution upon
the liquidation, dissolution, Liquidating Merger (as defined) or winding up of
the Company;
(c) Effect or permit any sale, lease,
encumbrance, assignment, transfer or conveyance of all or substantially all of
the assets of the Company, or any reclassification or other change of any
stock, or the merger or consolidation of the Company;
(d) Increase or decrease (other than by permitted
repurchase, redemption or conversion) the total number of authorized shares of
capital stock or reduce the stated capital of the Company; or
(e) Obligate itself to do any of the foregoing.
(ii) The Company shall not, without the consent of persons
holding greater than sixty-six and two-thirds percent (66-2/3%) of the
outstanding shares of Series B Preferred Stock:
(a) Amend or restate the Restated Articles of
Incorporation in a manner which would adversely alter or change the rights,
preferences, privileges or restrictions of the Series B Preferred Stock;
-4-
<PAGE> 56
(b) Establish any class or series of capital
stock which would rank senior to the Series B Preferred Stock with respect to
the right to receive dividends or any distribution upon the liquidation,
dissolution, Liquidating Merger (as defined) or winding up of the Company;
(c) Create or issue any debt securities which are
convertible into, or issued in conjunction with warrants exercisable for,
capital stock of the Company, except for warrants issued in connection with
financings (such as lease financings) where both (x) the aggregate exercise
price of the warrants issued in a financing does not exceed ten percent (10%)
of the aggregate value of such financing and (y) the exercise price is at least
equal to the Series B Conversion Price;
(d) Effect or permit any sale, lease,
encumbrance, assignment, transfer or conveyance of all or substantially all of
the assets of the Company, or any reclassification or other change of any
stock, or the merger or consolidation of the Company;
(e) Amend the By-Laws of the Company to increase
the authorized number of members of the Board of Directors in excess of seven;
(f) Obligate itself to do any of the foregoing.
(iii) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series A and
Series B Preferred Stock, voting together as a class, increase the number of
shares of Common Stock reserved for issuance to employees, consultants and
directors beyond 700,000 shares; provided, however, that this subsection (iii)
shall not apply to shares of Common Stock issued to employees, consultants or
directors which are outstanding on the Original Issue Date (as defined).
D. Mandatory Redemption and Sinking Fund.
(i) So long as any Preferred Stock remains outstanding,
the Company shall, on each of the dates set forth in the following schedule
(each a "Sinking Fund Payment Date"), set aside as and for a sinking fund for
the redemption of the Preferred Stock (hereinafter called the "Sinking Fund")
in cash out of any funds legally available therefor, a sum equal to the product
of (a) the applicable Mandatory Redemption Price (as hereinafter defined)
multiplied by (b) the number of shares of Preferred Stock set forth below
opposite such Sinking Fund Payment Date:
-5-
<PAGE> 57
<TABLE>
<CAPTION>
Sinking Fund Number of Shares of Preferred
Payment Date Stock to be Redeemed
------------- -----------------------------
<S> <C>
June 23, 1994 One third of shares of Series A Preferred Stock
and one third of shares of Series B Preferred
Stock then outstanding.
June 23, 1995 One half of shares of Series A Preferred Stock and
one half of shares of Series B Preferred Stock
then outstanding.
June 23, 1996 Remainder of shares of Series A and Series B
Preferred Stock then outstanding.
</TABLE>
(ii) The Series A Mandatory Redemption Price for each
share of series A Preferred Stock shall be an amount in cash equal to the sum
of the Series A Liquidation Value plus 8% per annum of the Liquidation Value
from date of original issuance less any dividends actually paid on such share
of Series A Preferred Stock to the date of redemption. The Series B Mandatory
Redemption Price for each share of Series B Preferred Stock shall be an amount
in cash equal to the sum of the such share of Series B Liquidation Value plus
8% per annum of the Liquidation Value from the date of original issuance less
any dividends actually paid on Series B Preferred Stock to the date of
redemption.
(iii) If on any Sinking Fund Payment Date the funds of the
Company legally available therefor shall be insufficient to discharge such
Sinking Fund requirement in full, funds to the extent legally available for
such purpose shall be set aside for the Sinking Fund. Such Sinking Fund
requirements shall be cumulative, so that if for any year or years such
requirements shall not be fully discharged as they accrue, funds legally
available therefor, after such payment or provisions for dividends, for each
year thereafter shall be applied thereto until such requirements are fully
discharged.
(iv) On or before the fifth day (the "Mandatory Redemption
Date") next following each Sinking Fund Payment Date, the cash in the Sinking
Fund shall be used to acquire by redemption, in the manner provided below, the
number of shares of Series A and Series B Preferred Stock specified opposite
the Sinking Fund Payment Date in the schedule appearing in clause (i) above.
-6-
<PAGE> 58
(v) In the event of the redemption of only a part of the
outstanding shares of Series A or Series B Preferred Stock, the Company shall
effect such redemption pro rata according to the number of shares held by each
holder of Series A or Series B Preferred Stock.
(vi) At least 30 days but not more than 60 days prior to a
Mandatory Redemption Date, written notice (a "Mandatory Redemption Notice"),
shall be mailed, postage pre-paid, to each holder of record of the Series A and
Series B Preferred Stock to be redeemed at his address last shown on the
records of the Company. The Mandatory Redemption Notice shall state:
(a) Whether all or less than all of the
outstanding shares of Series A or Series B Preferred Stock are to be redeemed
and the total number of shares being redeemed;
(b) The number of shares of Series A or Series B
Preferred Stock held by the holder that the Company intends to redeem;
(c) The Mandatory Redemption Date and the
Mandatory Redemption Price for each series;
(d) The date upon which the holder's rights to
convert such shares of Series A or Series B Preferred Stock into Common Stock
will terminate; and
(e) That the holder is to surrender to the
Company, in the manner and at the place designated, his certificate or
certificates representing the shares of Series A or Series B Preferred Stock to
be redeemed.
(vii) On or before the Mandatory Redemption Date, each
holder of Series A or Series B Preferred Stock to be redeemed, unless such
holder has exercised his right to convert the shares as provided in Section E
hereof, shall surrender the certificate or certificates representing such
shares to the Company, in the manner and at the place designated in the
Mandatory Redemption Notice, and thereupon the Mandatory Redemption Price for
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof, and each surrendered
certificate shall be cancelled and retired. In the event less than all of the
shares represented by such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(viii) If the Mandatory Redemption Notice shall have been
duly given, and if on the Mandatory Redemption Date the Mandatory Redemption
Price is either paid or made available for payment
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through the deposit arrangement specified in clause (ix) below, then
notwithstanding that the certificates evidencing any of the shares of Series A
or Series B Preferred Stock so called for redemption shall not have been
surrendered, the dividends with respect to such shares shall cease to accrue
after the Mandatory Redemption Date and all rights with respect to such shares
shall forthwith after the Mandatory Redemption Date terminate, except only the
right of the holders to receive the Mandatory Redemption Price without interest
upon surrender of their certificate or certificates therefor.
(ix) On or prior to the Mandatory Redemption Date, the
Company shall deposit with any bank or trust company in the State of
California, having a capital and surplus of at least $100,000,000 as a trust
fund, a sum equal to the aggregate Mandatory Redemption Price of all shares of
Series A and Series B Preferred Stock called for redemption and not yet
redeemed, with irrevocable instructions and authority to the bank or trust
company to pay, on or after the Mandatory Redemption Date or prior thereto, the
Mandatory Redemption Price to the respective holders upon the surrender of
their share certificates. From and after the later of the date of such deposit
or the applicable Mandatory Redemption Date, the shares so called for
redemption shall be redeemed. The deposit shall constitute full payment of the
shares to their holders, and from and after the later of the date of the
deposit or the applicable Mandatory Redemption Date, the shares shall be deemed
to be no longer outstanding, and the holders thereof shall cease to be
shareholders of the Company with respect to such shares and shall have no
rights with respect thereto except the rights to receive from the bank or trust
company payment of the Mandatory Redemption Price of the shares, without
interest, upon surrender of their certificates therefor, and the right to
convert such shares as provided in Section E hereof. Any funds so deposited
and unclaimed at the end of one year from the Mandatory Redemption Date shall
be released or repaid to the Company, after which the holders of shares called
for redemption shall be entitled to receive payment of the Mandatory Redemption
Price only from the Company.
(x) The Company may elect to redeem all or a portion of
any series of Preferred Stock at any time, provided, that it shall have
received the prior written consent of persons holding two-thirds (2/3) of the
outstanding shares of Series A and Series B Preferred Stock, each voting
separately as a class.
E. Conversion.
(i) In General. Subject to clause (v) below, the Series
A and Series B Preferred Stock shall be convertible at the option of the holder
at any time into fully paid and nonassessable shares of Common Stock of the
Company initially at the Conversion
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Rate for each series (as defined herein) of one (1) share of Common Stock for
each share of Series A or Series B Preferred Stock; provided, however, that in
case of the redemption of any shares of Series A or Series B Preferred Stock,
such right of conversion shall cease and terminate as to the shares called
pursuant to a Mandatory Redemption, at the close of business on the day next
prior to the Mandatory Redemption Date for those shares, notwithstanding any
earlier deposit by the Company of funds sufficient for such redemption, unless
default shall be made in the payment of the Mandatory Redemption Price, in
which case the rights of conversion granted hereby shall survive.
(ii) The number of shares of Common Stock which shall be
deliverable in exchange for a share of Series A and Series B Preferred Stock
upon conversion thereof is hereinafter referred to as the "Conversion Rate" for
each such series. The Conversion Rate of each series shall be subject to
adjustment from time to time in certain instances as hereinafter provided.
(iii) An irrevocable notice of conversion shall be mailed
by each holder of shares of Series A and Series B Preferred Stock electing to
convert his shares addressed to the Company at its offices at 7887 Dunbrook
Road, Suite H, San Diego, California 92126 (or such other address as the
Company shall designate and notify the holders of Series A and Series B
Preferred Stock in writing). If less than all of the shares of the Series A or
Series B Preferred Stock owned by such holder are to be converted, the notice
shall specify the number of shares thereof which are to be converted. Two days
after the mailing of such notice, notwithstanding that no certificate for the
shares of Common Stock into which the Series A and Series B Preferred Stock was
converted shall have been received by the holder so electing to convert and
notwithstanding that no certificate for shares of the Series A or Series B
Preferred Stock converted into the Common Stock shall have been surrendered to
the Company, the conversion of the Series A or Series B Preferred Stock shall
be deemed effective and the certificate or certificates representing the shares
of Series A and Series B Preferred Stock for which notice of conversion was
mailed shall be deemed to evidence the shares of Common Stock into which they
were converted until such time as they are exchanged for a new certificate
representing the shares of Common Stock into which they were converted.
(iv) Exchange of Certificates. As soon as possible after
the holder mails its notice of conversion to the Company, but in no event later
than five (5) business days thereafter; (a) the holder shall surrender the
certificate or certificates for such Series A and Series B Preferred Stock at
the office of any duly appointed transfer agent for the Series A and Series B
Preferred Stock or the Company's offices at 7887 Dunbrook Road, Suite H, San
Diego,
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California 92126 (or such other office or offices of the Company, if any, as
the Board may determine and notify the holders of Series A and Series B
Preferred Stock in writing). Such certificate or certificates shall be duly
endorsed to the Company or in blank or accompanied by proper instruments of
transfer to the Company or in blank, unless the Company shall waive such
requirement, and shall state in writing therein the name or names in which the
holder wishes the certificate or certificates for Common Stock issued; and (b)
the Company will issue and deliver to the person for whose account such Series
A or Series B Preferred Stock was so surrendered, or to his nominee or
nominees, certificates for the number of full shares of Common Stock to which
he shall be entitled as aforesaid, together with a cash adjustment for any
fraction of a share as hereinafter stated, if the shares of Series A or Series
B Preferred Stock surrendered for conversion are not in the aggregate evenly
convertible into a number of full shares of Common Stock. In the event of any
liquidation, dissolution, Liquidating Merger or winding up of the affairs of
the Company, all conversion rights of the holders of Series A and Series B
Preferred Stock shall terminate on the date fixed by resolutions of the Board
of Directors of the Company, which date shall not be later than ten (10) days
nor earlier than twenty (20) days prior to such liquidation, dissolution,
Liquidating Merger or winding-up.
(v) Automatic Conversion.
(a) All shares of Series A and Series B Preferred
Stock outstanding shall be converted automatically and without the requirement
of any election on the part of any holder of such shares of Series A or Series
B Preferred Stock at the applicable Conversion Rate in effect immediately prior
to the closing by the Company of a bona fide firm commitment underwritten
public offering registered under the Securities Act of 1933, as amended, of
its Common Stock at a public offering price of not less than $10.20 per share
of Common Stock (as adjusted for any stock dividend, stock split or
combination) with net proceeds to the Company of not less than $10,000,000 (an
"Automatic Conversion Event").
(b) Written notice shall be given to the holders
of the Series A and Series B Preferred Stock immediately upon the occurrence of
an Automatic Conversion Event. On and after the date of mailing of such
notice, and notwithstanding that any certificates for the Series A or Series B
Preferred Stock shall not have been surrendered for conversion, the shares of
Series A and Series B Preferred Stock evidenced thereby shall be deemed to be
no longer outstanding, and all rights with respect thereto shall forthwith
cease and terminate, except any rights of the holder (1) to receive the shares
of Common Stock to which he shall be entitled upon conversion thereof, (2) to
receive the amount of cash payable in respect of any fractional share of Common
Stock to which
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he shall be entitled and (3) to receive any dividends declared but unpaid on
such Series A and Series B Preferred Stock prior to the Automatic Conversion
Event. No adjustments with respect to the Conversion Rate for each series
shall be made on account of any holder's rights to dividends that have been
declared but are unpaid prior to the Automatic Conversion Event; provided,
however, that no dividends shall thereafter be paid on the Common Stock unless
dividends have first been paid to the holders of Series A and Series B
Preferred Stock entitled to payment prior to the Automatic Conversion Event.
As soon as practicable after such Automatic Conversion Event, but in no event
later than ten (10) business days after a holder of Series A or Series B
Preferred Stock shall have received notice from the Company of such Automatic
Conversion Event: (1) such holder shall surrender the certificate or
certificates for such Series A or Series B Preferred Stock at the office and in
the manner provided for such purpose pursuant to Section E (iii) above; and (2)
the Company shall issue and deliver to the person for whose account such Series
A or Series B Preferred Stock was so surrendered, or to his nominee or nominees,
certificates for the number of full shares of Common Stock to which he shall be
entitled as aforesaid, together with a cash adjustment for any fraction of a
share as hereinafter stated, if the shares of Series A or Series B Preferred
Stock automatically converted are not in the aggregate evenly convertible into
a number of full shares of Common Stock.
F. Anti-Dilution Protection. The Conversion Rates for the Series
A and Series B Preferred Stock shall be subject to adjustment from time to time
as set forth below.
(i) Certain Definitions and Assumptions. For purposes of
Section F, the following definitions and assumptions shall apply:
(a) "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities.
(b) "Convertible Securities" shall mean any
evidence of indebtedness, shares (other than the Series A or Series B Preferred
Stock) or other securities convertible into or exchangeable for Common Stock.
(c) "Original Issue Date" shall mean the date on
which the first share of Series B Preferred Stock was issued.
(d) "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued (or pursuant to this clause (i), deemed
to be issued) by the Company subsequent to the Original
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Issue Date, other than shares of Common Stock issued or issuable (or pursuant
to this clause (i), deemed to be issued) at any time:
(1) upon conversion of the Series A or
Series B Preferred Stock (including any such shares of Series A or Series B
Preferred stock issued on or issuable upon conversion or exercise of
Convertible Securities or Options);
(2) pursuant to Options to purchase an
aggregate of 700,000 shares of Common Stock reserved for issuance or
outstanding on the Original Issue Date, or Options to purchase shares of Series
B Preferred Stock outstanding or issued on the Original Issue Date;
(3) to employees, consultants, agents or
directors of the Company as approved by the Board of Directors; and
(4) by way of dividend or distribution
pursuant to clause (ii) or (iii) below or a dividend or distribution on Series
A or Series B Preferred Stock.
(e) "Conversion Price" for Series A Preferred
Stock and Series B Preferred Stock shall mean $1.60 and $3.40, respectively,
divided by the applicable Conversion Rate in effect at the time of any such
determination.
(f) The issuance of Options or Convertible
Securities of the Company shall be deemed the issuance of the shares of
Common Stock which may be acquired upon the exercise of the Options or the
exchange or conversion of the Convertible Securities for a consideration equal
to the consideration for which such Options were issued, plus the exercise
price of any such Options or the consideration equal to the consideration for
which the Convertible Securities were issued, plus any additional consideration
to be received on exchange or conversion thereof. Such shares of Common Stock
shall be deemed outstanding for the purposes of this Section F.
(g) Once an adjustment has been made to the
applicable Conversion Rate by reason of the deemed issuance of Additional
Shares of Common Stock, no further adjustment in the Conversion Rate for each
series shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such options or conversion or
exchange of such Convertible Securities.
(h) If such Option or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company upon exercise, exchange or
conversion thereof or increase or decrease in the number of shares of Common
Stock issuable, upon
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the exercise, conversion or exchange thereof, the Conversion Rate for each
series shall, upon any such increase or decrease becoming effective, be
equitably adjusted to reflect such increase or decrease.
(i) Upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Rate for each series computed
upon the original issue thereof and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:
(1) in the case of Convertible
Securities or Options for Common Stock, the only Additional Shares of Common
Stock issued were shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Company for the issue of all such Options, whether or
not exercised, plus the consideration actually received by the Company upon
such exercise, or for the issue of all such Convertible Securities which were
actually converted or exchanged, plus the additional consideration, if any,
actually received by the Company upon such conversion or exchange, and
(2) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of issue of such
Options, and the consideration received by the Company for Additional Shares of
Common Stock deemed to have been then issued was the consideration actually
received by the Company for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the Company
upon the issue of the Convertible Securities with respect to which such Options
were actually exercised.
(ii) Dividends. If at any time the Company pays a
dividend on Common Stock payable in Common Stock or Convertible Securities,
subdivides its outstanding shares of Common Stock into a larger number of
shares or combines the outstanding shares of Common Stock into a smaller number
of shares by reclassification or otherwise (each, a "Dilutive Event"), the
Conversion Rate for each series in effect immediately prior to such Dilutive
Event shall be adjusted by multiplying such Conversion Rate by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such Dilutive Event (assuming exercise or conversion of all
outstanding Options and Convertible Securities) and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such Dilutive Event (assuming exercise or conversion of all outstanding
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Options and Convertible Securities). An adjustment made pursuant to this
subparagraph (ii), shall become effective retroactively to the record date in
the case of a dividend and shall become effective on the effective date in the
case of a subdivision or combination.
(iii) Distribution of Assets. If the Company shall
distribute to holders of shares of Common Stock any assets (other than any
regular quarterly cash dividend out of earned surplus), any evidence of
indebtedness or other securities of the Company or any rights to subscribe
thereto (the "Assets") then in each such case the Conversion Rate for each
series shall be increased by multiplying the applicable Conversion Rate in
effect on the record date for the determination of the stockholders entitled to
receive such distribution, and prior to such distribution, by the absolute
value of a fraction the numerator of which shall be the product of (a) the fair
value per share (determined as provided in clause (vi) below) of the Common
Stock on such record date (assuming exercise or conversion of all Options and
Convertible Securities) and (b) the number of shares of Common Stock
outstanding on such record date (assuming exercise or conversion of all Options
and Convertible Securities) prior to such distribution and the denominator of
which shall be the remainder of (c) the numerator and (d) the fair value (as
determined in a resolution adopted by the Board of Directors of the Company,
which shall be conclusive evidence of such fair value) of all of the Assets
distributed by the Company to holders of shares of Common Stock on such record
date. Such adjustment to the Conversion Rate for each series shall become
effective retroactively immediately after the record date.
(iv) Issuance or Sale Below the Conversion Price for
Series A Preferred Stock. If at any time the Company shall issue or sell, or
shall, pursuant to clause (i), be deemed to have issued and sold Additional
Shares of Common Stock without consideration or at a price per share less than
the Conversion Price for the Series A Preferred Stock, then, in each such case,
the Conversion Rate for the Series A Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount determined by multiplying
the Conversion Rate for such series in effect on the date of and immediately
prior to such issuance or sale by a fraction the numerator of which shall be
the number of shares of Common Stock outstanding immediately after such
issuance or sale (assuming exercise or conversion of all outstanding Options
and Convertible Securities) and the denominator of which shall be the sum of
(a) the number of shares of Common Stock outstanding (assuming exercise or
conversion of all outstanding Options and Convertible Securities) on the date
immediately preceding the date on which the Additional Shares of Common Stock
were issued or sold and (b) the number of shares of Common Stock which the
aggregate consideration to be received by the Company in respect of such
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Additional Shares of Common Stock would have purchased at the Conversion Price
of such series in effect immediately prior to such issuance or sale.
(v) Issuance or Sale Below the Conversion Price for
Series B Preferred Stock.
(a) Sales not exceeding $1,000,000 at prices in
excess of $2.40 per share. If (x) at any time after the Original Issue Date
the Company shall issue or sell, or shall, pursuant to clause (i), be deemed to
have issued and sold Additional Shares of Common Stock at a price per share
less than the Conversion Price for the Series B Preferred Stock and in excess
of $2.40 (as adjusted for any stock dividend, stock split or combination) and
(y) the aggregate consideration of all such sales or deemed sales from the
Original Issue Date does not exceed $1,000,000, then, in each such case, the
Conversion Rate for the Series B Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount determined by multiplying
the Conversion Rate for such series in effect on the date of and immediately
prior to such issuance or sale by a fraction the numerator of which shall be
the number of shares of Common Stock outstanding immediately after such
issuance or sale (assuming exercise or conversion of all outstanding Options
and Convertible Securities) and the denominator of which shall be the sum of
(a) the number of shares of Common Stock outstanding (assuming exercise or
conversion of all outstanding Options and Convertible Securities) on the date
immediately preceding the date on which the Additional Shares of Common Stock
were issued or sold and (b) the number of shares of Common Stock which the
aggregate consideration to be received by the Company in respect of such
Additional Shares of Common Stock would have purchased at the Conversion Price
of such series in effect immediately prior to such issuance or sale.
(b) Sales, in excess of $1,000,000, occurring
within 24 months after the Original Issue Date and while the Series B
Conversion Price exceeds $2.40. If (x) at any time after the Original Issue
Date and within twenty-four (24) months of the Original Issue Date the Company
shall issue or sell, or shall, pursuant to clause (i), be deemed to have issued
and sold Additional Shares of Common Stock without consideration or at a price
per share less than the Conversion Price for the Series B Preferred Stock, (y)
either (A) the aggregate consideration of all such sales or deemed sales
exceeds $1,000,000 or (B) the Additional Shares of Common Stock are issued or
sold without consideration or at a price per share less than $2.40 (as adjusted
for any stock dividend, stock split or combination), and (z) the Conversion
Price for the Series B Preferred Stock immediately prior to such issuance or
sale is in excess of $2.40 (as adjusted for any stock dividend, stock split or
combination), then, in each such case, the
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Conversion Rate for the Series B Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount determined by multiplying
the Conversion Rate for such series in effect on the date of and immediately
prior to such issuance or sale by a fraction the numerator of which shall be
the Conversion Price of the Series B Preferred Stock in effect on the date of
such issuance and the denominator of which shall be the per share consideration
received by the Company for the Additional Shares of Common Stock so issued;
provided, however, in no event shall the Conversion Price of the Series B
Preferred Stock be reduced to less than $2.40 (as adjusted for any stock
dividend, stock split or combination) pursuant to this subsection b.
(c) Sales occurring 24 months after the Original
Issue Date or after the Conversion Price for the Series B Preferred Stock is
reduced below $2.40. If the Company shall issue or sell, or shall, pursuant to
clause (i), be deemed to have issued and sold Additional Shares of Common Stock
without consideration or at a price per share less than the Conversion Price
for the Series B Preferred Stock (x) at any time after twenty-four (24) months
from the Original Issue Date or (y) at any time after the Conversion Price for
the Series B Preferred Stock immediately prior to such issuance or sale does
not exceed $2.40 (as adjusted for any stock dividend, stock split or
combination), then, in each such case, the Conversion Rate for the Series B
Preferred Stock shall be increased, concurrently with such issuance or sale, to
an amount determined by multiplying the Conversion Rate for such series in
effect on the date of and immediately prior to such issuance or sale by a
fraction the numerator of which shall be the number of shares of Common Stock
outstanding immediately after such issuance or sale (assuming exercise or
conversion of all outstanding Options and Convertible Securities) and the
denominator of which shall be the sum of (a) the number of shares of Common
Stock outstanding (assuming exercise or conversion of all outstanding Options
and Convertible Securities) on the date immediately preceding the date on which
the Additional Shares of Common Stock were issued or sold and (b) the number of
shares of Common Stock which the aggregate consideration to be received by the
Company in respect of such Additional Shares of Common Stock would have
purchased at the Conversion Price of such series in effect immediately prior to
such issuance or sale.
(vi) Fair Value. For the purpose of any computation under
clause (iii), the "fair value" on any date shall be as mutually agreed upon by
the Board of Directors of the Company with the representatives of the holders
of the shares of Series A and Series B Preferred Stock voting in favor of such
valuation; provided, however, that if the Common Stock is listed or admitted to
trading on a national securities exchange, the fair value on any date shall be
equal to the average of the daily closing prices for
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the thirty (30) consecutive trading days commencing forty-five (45) trading
days before the date in question. The closing price for each day shall be the
last sales price regular way, or if no such sale takes place, the average of
the closing bid and asked prices regular way on the principal national
securities exchange on which such class of Common Stock is listed or admitted
to trading, or if not listed on such an exchange, the average of the closing
bid and asked prices for a share of Common Stock on the over-the-counter
market, as reported by the National Association of Securities Dealer's
Automated Quotation System at the close of business on such date.
(vii) Capital Reorganization. In the case of any capital
reorganization or any reclassification of the capital stock of the Company or
in case of the consolidation or merger of the Company with another corporation
(other than a merger not involving any reclassification, conversion or exchange
of Common Stock, in which, subject to clause (viii), the Company is the
surviving corporation), each share of Series A and Series B Preferred Stock
shall thereafter be convertible into the number of shares of stock (or of any
class or classes) or other securities or property receivable upon such capital
reorganization, reclassification of capital stock, consolidation or merger as
the case may be, by a holder of the number of shares of Common Stock into which
such share of Series A and Series B Preferred Stock was convertible immediately
prior to such capital reorganization, reclassification of capital stock,
consolidation or merger; and, in any case, appropriate adjustment (as
determined by the Board) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of the Series A and Series B Preferred Stock, to the end that the
provisions set forth herein (including the specified changes in and other
adjustments of the Conversion Rate for each series) shall thereafter be
applicable, as near as reasonably practical, in relation to any shares of stock
or other securities or other property thereafter deliverable upon the
conversion of the Series A and Series B Preferred Stock.
(viii) Liquidating Merger. If, as a result of (a) a sale or
conveyance of all or substantially all of the assets of the Company, or (b) the
merger, reorganization or consolidation of the Company with or into another
corporation or of another corporation into it, the beneficial owners of all of
the equity interest in the Company (assuming conversion of all options and
Convertible Securities outstanding at the time of such merger or consolidation)
immediately prior to any such merger or consolidation will not beneficially own
a majority of the equity interest of the entity surviving such merger or
consolidation immediately after such merger or consolidation (each such event
being hereinafter referred to as a "Liquidating Merger"), such sale,
conveyance, merger,
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reorganization or consolidation shall be deemed a liquidation and shall be
subject to the provisions of Section G.
(ix) Transfer Agents. Whenever the Conversion Rate of a
series of Preferred Stock is adjusted as herein provided, the Company shall (a)
forthwith file with any transfer agent or agents for such series of Preferred
Stock a certificate signed by the President or one of the Vice Presidents of
the Company and by its Treasurer or an Assistant Treasurer, stating the
adjusted Conversion Rate for such series determined as provided in this Section
F, and in reasonable detail the facts requiring such adjustment and (b) cause a
notice to be mailed to the respective holders of record of such series of
Preferred Stock setting forth the adjustment and the Conversion Rate for such
series, as adjusted. Any such transfer agents shall be under no duty to make
any inquiry or investigation as to the statements contained in any such
certificate or as to the manner in which any computation was made, but may
accept such certificates as conclusive evidence of the statements therein
contained, and each transfer agent shall be fully protected with respect to any
and all acts done or action taken or suffered by it in reliance thereon. No
transfer agent in its capacity as transfer agent shall be deemed to have any
knowledge with respect to any change of capital structure of the Company unless
and until it receives a notice thereof pursuant to the provisions of this
clause (ix) and in default of any such notice each transfer agent may
conclusively assume that there has been no such change.
(x) Availability of Authorized Shares. The Company shall
at all times reserve and keep available, out of its authorized and unissued or
treasury shares of Common Stock, or other stock or securities deliverable upon
conversion, solely for the purpose of effecting the conversion of the Series A
and Series B Preferred Stock, such number of shares as shall from time to time
be sufficient to effect the conversion of all shares of Series A and Series B
Preferred Stock from time to time outstanding. The Company shall from time to
time, in accordance with the laws of the State of California, increase the
authorized amount of its Common Stock and/or securities issuable upon
conversion of the Series A and Series B Preferred Stock if at any time the
number of shares of Common Stock (or such other securities) remaining unissued
or treasury shares of Common Stock (or such other securities) shall not be
sufficient to permit the conversion of all the then outstanding Series A and
Series B Preferred Stock.
(xi) No Fractional Shares. No fractions of shares of
Common Stock are to be issued upon conversion of Preferred Stock, but in lieu
thereof the Company will pay therefor in cash an amount determined by
multiplying the fraction of a share by the applicable Liquidation Value.
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(xii) Delivery Of Common Stock. The Company will pay all
issue and other taxes that may be payable in respect of any issue on delivery
of shares of Common Stock on conversion of shares of Series A and Series B
Preferred Stock pursuant hereto. The Company shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of Common Stock in a name other than that in which the
Series A or Series B Preferred Stock so converted was registered, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Company the tax so required.
G. Liquidation Rights.
(i) In the event of any liquidation, dissolution,
Liquidating Merger or winding up of the Company, whether voluntary or
involuntary, before any distribution or payment shall be made to the holders of
Common Stock and Series A Preferred Stock, the holders of the Series B
Preferred Stock shall be entitled to receive from the assets of the Company
available for distribution to its stockholders an amount per share of Series B
Preferred Stock in cash equal to the Series B Liquidation Value per share of
the Series B Preferred Stock. If upon the occurrence of such event, the assets
thus distributed among the holders of Series B Preferred Stock shall be
insufficient to permit the payment to such holders of the full Series B
Liquidation Value, then the entire assets of the Company legally available for
distribution shall be distributed ratably among the holders of the Series B
Preferred Stock.
(ii) Upon completion of the distribution required by
subparagraph (i), if any assets remain in the Company, before any distribution
or payment shall be made to the holders of Common Stock or any further
distribution shall be made to the holders of Series B Preferred Stock, the
holders of the Series A Preferred Stock shall be entitled to receive from the
assets of the Company available for distribution to its stockholders an amount
in cash equal to the Series A Liquidation Value per share of the Series A
Preferred Stock. If upon the occurrence of such event, the assets thus
distributed among the holders of Series A Preferred Stock shall be insufficient
to permit the payment to such holders of the full Series A Liquidation Value,
then the entire remaining assets of the Company legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred stock.
(iii) Upon completion of the distributions required by
subparagraphs (i) and (ii), if any assets remain in the Company, before any
distribution or payment shall be made to the holders of Common Stock, the
holders of the Series A and Series B Preferred Stock shall be entitled to
receive from the assets of the Company available for distribution to its
stockholders an amount in cash
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<PAGE> 71
equal to 8% per annum of the applicable Liquidation Value per share from the
date of original issuance, less any dividends that have actually been paid on
such share of Series A or Series B Preferred Stock, since it was issued. If
upon the occurrence of such event, the assets thus distributed among the
holders of Series A and Series B Preferred Stock shall be insufficient to
permit the payment to such holders of the full preferential amount aforesaid,
then the entire assets of the Company legally available for distribution shall
be distributed in proportion to the respective unpaid dividends among the
holders of the Series A and Series B Preferred Stock.
(iv) Upon completion of the distribution required by
subparagraphs (i), (ii) and (iii), if any assets remain in the Company, the
remaining assets of the Company shall be distributed to the holders of Common
Stock. Written notice of such liquidation, dissolution, Liquidating Merger or
winding up, stating a payment date, the amount of the payment and the place
where the amounts distributable shall be payable, shall be mailed or caused to
be mailed by the Company by certified or registered mail, return receipt
requested, not less than sixty (60) days prior to the date stated therein, to
each holder of record of any share of the Series A and Series B Preferred Stock
at his address as the same appears on the books of record of the Company. No
consolidation or merger of the Company or sale or transfer by the Company of
its assets which does not qualify as a Liquidating Merger, nor the reduction of
the authorized number of shares of any class or series of capital stock of the
Company, shall be deemed to be a liquidation, dissolution, Liquidating Merger
or winding up of the corporation within the meaning of any of the provisions of
this Section G.
H. Status of Redeemed or Converted Shares. Any shares of the
Series A or Series B Preferred Stock which at any time shall have been redeemed
pursuant or converted hereto shall after such redemption or conversion be
cancelled and no longer be available for issuance by the Company.
I. Notice. The holders of shares of the Series A and Series B
Preferred Stock shall receive notice of certain events as follows:
(i) not less than thirty (30) days before the occurrence
of any of the following: (a) any distributions of capital stock to holders of
shares of the Company's Common Stock including without limitation, any stock
splits, stock dividends, stock reclassifications, or the issuance of any rights
or warrants, (b) the declaration of any record date or (c) any meeting of the
holders of shares of the Company's capital stock called by the Company's Board
of Directors (which notice must set forth in reasonable detail the business to
be transacted at such meeting); (ii) not more than ten
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<PAGE> 72
(10) days after the occurrence of an Automatic Conversion Event, that such
event has occurred; and (iii) not less than twenty (20) days prior to the date
fixed by the Board of Directors for the termination of the conversion rights of
the Series A or Series B Preferred Stock as a result of any liquidation,
dissolution, Liquidating Merger or winding up of the affairs of the Company
that such event will occur.
IV.
The liability of the directors of the Company for monetary damages
shall be eliminated to the fullest extent permissible under California law.
The Company is authorized to provide indemnification of agents (as
defined in Section 317 of the California General Corporation Law) for breach of
duty to the Company and its shareholders through bylaw provisions, through
resolutions of the board of directors or shareholders, or through agreements
with the agents, or through any of the foregoing means, in excess of the
indemnification otherwise permitted by Section 317 of the California General
Corporation Law, subject to the limits on such excess indemnification set forth
in Section 204 of the California General Corporation Law.
Any repeal or modification of the foregoing provisions of this Article
IV by the shareholders of the Company shall not adversely affect any right or
protection of a director of the Company existing at the time of such repeal of
modification."
3. The Restated Articles of Incorporation have been duly approved
by the Board of Directors.
4. The article amendments as included in the Restated Articles of
Incorporation (other than omissions required by Section 910 of the California
General Corporation Law) have been duly approved by the required vote of the
shareholders in accordance with Section 902 of the California General
Corporation Law. The total number of outstanding shares of Common Stock and
Series A Preferred Stock of this corporation is 940,000 and 2,107,882,
respectively. The number of shares voting in favor of the Restated Articles of
Incorporation equaled or exceeded the vote required. The percentage vote
required for the approval of the Restated Articles of Incorporation was more
than 50% of the Common Stock and 66-2/3% of the Series A Preferred Stock.
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<PAGE> 73
IN WITNESS WHEREOF, the Restated Articles of Incorporation has been
executed by the undersigned on June 23, 1989.
/s/ ROBERT AKINS
- -------------------------
Robert Akins, President
/s/ MARTIN PEDLEY
- -------------------------
Martin Pedley, Secretary
ROBERT AKINS and MARTIN PEDLEY declare under penalty of perjury under
the laws of the State of California that each has read the foregoing
certificate and knows the contents thereof and that the same is true of his own
knowledge.
/s/ ROBERT AKINS Dated: June 23, 1989
- ------------------------- -------------------------
Robert Akins, President
/s/ MARTIN PEDLEY Dated: June 23, 1989
- ------------------------- -------------------------
Martin Pedley, Secretary
<PAGE> 74
EXHIBIT B
WILSON, SONSINI, GOODRICH & ROSATI
PROFESSIONAL CORPORATION
TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
TELEPHONE (415) 493-9300
FACSIMILE (415) 493-6811
TELEX: 345500 WILSON PLA
June 28, 1989
To the Investors in
CYMER Laser Technologies
Series B Preferred Stock Listed on
Schedule 1.2 to that Certain Agreement.
dated June 28, 1989
Ladies and Gentlemen:
We have acted as counsel for CYMER Laser Technologies, a California
corporation (the "Company"), in connection with the sale by the Company to you
of 1,257,640 shares of the Company's 8% Non-Cumulative Voting Redeemable
Convertible Series B Preferred Stock (the "Series B Shares") pursuant to the
CYMER Laser Technologies Series B Preferred Stock Purchase Agreement (the
"Agreement") dated June 28, 1989, among the Company, and the individuals and
organizations listed on Schedule 1.2 to the Agreement (the "Investors"). This
opinion is given to you in compliance with Section 11.6 of the Agreement.
Unless defined herein, capitalized terms have the meaning given them in the
Agreement.
In connection with this opinion, we have examined and relied upon the
originals or copies, certified to our satisfaction, of such records, documents,
certificates, memoranda and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below. As used in
this opinion, the expression "to our knowledge" with reference to matters of
fact means that, after an examination of documents in our files and documents
made available to us by the Company and after inquiries of officers of the
Company, we find no reason to believe that the opinions expressed herein are
factually incorrect; but beyond that we have made no independent factual
investigation for the purpose of rendering an opinion to our knowledge.
For the purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary corporate
or partnership action, to execute and deliver the Agreement, and we are
assuming that the representations and warranties made by the Investors in
Section 5 of the Agreement are true and correct.
<PAGE> 75
WILSON, SONSINI, GOODRICH, & ROSATI
We are admitted to practice law only in the State of California, and we
express no opinion herein concerning any laws other than the laws of the State
of California, the securities laws of the States of Connecticut, New York, Texas
and Kansas, and the federal laws of the United States. With respect to the
securities laws of the States of Connecticut, Texas and Kansas, we have based
our opinion upon our examination of such laws and the rules and regulations of
the authorities as set forth in unofficial compilations. Special rulings of
such authorities or opinions of other counsel have not been obtained.
The opinions hereinafter expressed are subject to the following
qualifications, as to which we render no opinion: (a) the effect of applicable
bankruptcy and other similar laws affecting the rights of creditors generally;
(b) the effect of rules of law governing specific performance, injunctive
relief and other equitable remedies; and (c) the compliance or noncompliance
with applicable state and federal anti-fraud statutes, rules and regulations
concerning the issuance of securities.
On the basis of the foregoing and in reliance thereon, except as
disclosed in Sections 4.13 and 4.19 of Schedule 4.0 of the Agreement, and with
the foregoing qualifications, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has all
requisite corporate power and authority and the legal right to transact the
business in which it is presently engaged, to own, lease and operate all of the
assets and properties owned, leased or operated by it, to enter into and
perform the Agreement, to sell the Series B Shares and to issue the Conversion
Shares and to otherwise perform and comply with all other actions and
agreements arising under the Agreement. The Company is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions
which require such qualification except to the extent that failure to so
qualify would not have a material adverse effect on the Company and except that
we note that the Company is in the process of qualifying to do business in
Massachusetts and except that we make no opinion with respect to the Company's
activities in Japan.
2. The execution, delivery and performance of the Agreement, the
issuance of the Series B Shares and the Conversion Shares and the consummation
of the transactions contemplated in the Agreement by the Company have been duly
authorized by all necessary corporate action on the part of the Company,
including any action required to be taken by the Company's shareholders. The
Agreement constitutes the legal, valid and binding obligation
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<PAGE> 76
WILSON, SONSINI, GOODRICH, & ROSATI
of the Company, enforceable against the Company in accordance with its terms
(except insofar as the enforcement of Section 9.13 of the Agreement may be
limited by limitations of public policy).
3. The Company has no subsidiaries and does not own (of record or
beneficially) and has made no commitment to purchase any shares or securities
of, or otherwise make any investment in, any other corporation, association,
partnership or other entity and is not a participant in any joint venture.
4. Neither the issuance or sale of the Series B Shares (including
the Conversion Shares) nor the execution and delivery by the Company of the
Agreement, nor the consummation of or compliance with the transactions and
agreements contemplated by the Agreement will conflict with or constitute a
violation or breach of (i) the Restated Articles of Incorporation or Bylaws of
the Company, (ii) to our knowledge, any provision of any of the contracts or
instruments listed on Section 4.14 of Schedule 4.0 of the Agreement (all of
which we have reviewed), which to our knowledge are all of the material
contracts or other material instruments to which the Company is a party or by
which the Company is bound or by which the business or material assets or
properties of the Company may be affected or secured, (iii) to our knowledge,
any order, writ, injunction, award or decree of any court, arbitrator or
governmental or regulatory body against or binding upon the Company or upon the
securities, properties or business of the Company, in each case that is
specifically directed to the Company, its securities, properties or business,
(iv) any statute, law, rule or regulation (including, without limitation,
applicable federal and state securities laws) of any jurisdiction to which the
Company is subject to and (v) to our knowledge, any license, permit, order or
approval of any federal, state, local or foreign governmental or regulatory
body that is material to or necessary for the conduct of the business of the
Company.
5. At the Closing, upon payment of the purchase price therefor,
each Investor will receive good and valid title to the Series B Shares and the
Series B Shares (including the conversion Shares issuable upon conversion
thereof (when and if issued in accordance with the Agreement and the Restated
Articles of Incorporation)) will be duly authorized, validly issued, fully
paid, non-assessable, free and clear of all liens and encumbrances other than
liens, encumbrances or restrictions on transfer arising under the Agreement or
under agreements entered into or actions taken by the Investors.
6. As of the date hereof (but prior to the execution and delivery
of the Agreement and the consummation of the transactions contemplated
therein), the Company will have an
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<PAGE> 77
WILSON, SONSINI, GOODRICH, & ROSATI
authorized capitalization of (i) Eleven Million Five Hundred Thousand
(11,500,000) shares of Common Stock, no par value, of which Nine Hundred Forty
Thousand (940,000) shares are issued and outstanding; (ii) Three Million
(3,000,000) shares of Series A Preferred Stock, 2,107,882 of which are issued
and outstanding and one Million Five Hundred Thousand (1,500,000) shares of
series B Preferred Stock, One Million Two Hundred Fifty-Seven Thousand Six
Hundred Forty (1,257,640) of which are being issued to you pursuant to the
Agreement. All of the outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and non-assessable. In addition, the Company has
reserved the following shares of Common Stock and Preferred Stock for issuance:
(i) 450,000 shares of Common Stock upon exercise of options granted or to be
granted to the Company's employees; (ii) 162,500 shares of Series A Preferred
Stock upon exercise of warrants to purchase shares of Series A Preferred Stock;
and (iii) 18,382 shares of Series B Preferred Stock upon exercise of the
warrants to purchase shares of Series B Preferred Stock. All outstanding
shares of Series A Preferred Stock and shares of common Stock purchased by the
Founders were issued in compliance with exemptions from registration and
qualification requirements of applicable federal and state securities laws.
7. To our knowledge, there are no legal, administrative or other
proceedings, investigations or inquiries, or other asserted claims, judgments,
injunctions or restrictions, pending or outstanding or threatened against the
Company, any of its properties or business, or against or involving the Company
or any of the Founders or the officers or directors of the Company, or any
action related to the Agreement, the issuance of the Series B Shares or any of
the transactions contemplated in the Agreement that might, if determined
adversely to the Company, either singly or in the aggregate, result in any
material adverse change in the business, prospects, operations, properties or
condition (financial or otherwise) of the Company or in any material liability
on the part of the company. To our knowledge, there are no actions, suits or
claims or legal, administrative or arbitration proceedings pending or
threatened that would give rise to any right of indemnification on the part of
any director or officer of the Company or the heirs, executors or
administrators of such director or officer against the Company.
8. To our knowledge, neither the Company nor any other party is
in default under any material contract, agreement or lease to which the Company
is a party or by which it is or may be bound nor does any condition exist that
with notice or lapse of time or both would constitute a default thereunder.
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<PAGE> 78
WILSON, SONSINI, GOODRICH, & ROSATI
This opinion is intended solely for your use in connection with your
purchase of Series B Shares and is not to be made available to or relied upon
by other persons or entities without our prior written consent.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
/s/ WILSON, SONSINI, GOODRICH & ROSATI
-5-
<PAGE> 1
EXHIBIT 10.8
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
by and among
CYMER LASER TECHNOLOGIES,
THE FOUNDERS LISTED ON SCHEDULE 1.1
and
THE INVESTORS LISTED ON SCHEDULE 1.2
Dated as of: April 16, 1990
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
1. Sale, Purchase and Delivery of Series C Shares ............................................................... 2
1.1 Sale and Issuance of Series C Preferred Stock ................................................... 2
1.2 Delivery of Series C Shares ..................................................................... 2
1.3 Payment of Purchase Price ....................................................................... 2
2. Certain Definitions. ......................................................................................... 3
3. Representations and Warranties of the Company ................................................................ 3
3.1 Organization and Good Standing; Power
and Authority ................................................................................. 3
3.2 Subsidiaries .................................................................................... 4
3.3 Capitalization .................................................................................. 4
3.4 Compliance with Laws ............................................................................ 5
3.5 Validity of Agreement; Binding Effect ........................................................... 6
3.6 No Breach ....................................................................................... 6
3.7 Financial Information ........................................................................... 6
3.8 Absence of Undisclosed Liabilities
and Obligations. .............................................................................. 7
3.9 Absence of Certain Changes ...................................................................... 7
3.10 Real Property ................................................................................... 8
3.11 Tangible Assets and Equipment ................................................................... 8
3.12 Tax Returns and Audits .......................................................................... 9
3.13 Patents and Trademarks .......................................................................... 9
3.14 Employees ....................................................................................... 10
3.15 Confidentiality ................................................................................. 10
3.16 Litigation ...................................................................................... 10
3.17 ERISA ........................................................................................... 11
3.18 Environmental Compliance Matters ................................................................ 11
3.19 Use of Proceeds ................................................................................. 12
3.20 Registration Rights ............................................................................. 12
3.21 Escrowed Certificates of Founder Common Stock ................................................... 12
3.22 Other Adverse Information; Disclosure ........................................................... 12
3.23 No Other Agreements. .......................................................................... 13
3.24 Claims of the Founders .......................................................................... 13
3.25 Insurance ....................................................................................... 13
4. Representations and Warranties of the Investors .............................................................. 13
4.1 Organization and Standing ....................................................................... 13
4.2 Authorization and Approval of and Ability
to Carryout This Agreement .................................................................... 13
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
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<S> <C> <C>
4.3 Investment Representation ....................................................................... 14
5. Company's Affirmative Covenants .............................................................................. 15
5.1 Corporate Existence ............................................................................. 15
5.2 Taxes and Liens ................................................................................. 15
5.3 Maintain Property ............................................................................... 15
5.4 Financial Statements and Reports ................................................................ 16
5.5 Confidentiality ................................................................................. 16
5.6 Conversion Shares ............................................................................... 16
5.7 Access to Books and Records. .................................................................. 16
5.8 Right of First Offer ............................................................................ 17
5.9 Right of First Refusal and/or
Repurchase Agreement .......................................................................... 19
5.10 Insurance ....................................................................................... 19
5.11 Notice of Record Dates .......................................................................... 19
5.12 Employee Stock Purchase Agreement ............................................................... 20
5.13 State Securities Law Filings .................................................................... 20
5.14 Lapse of Covenants. ............................................................................. 20
5.15 Information as to Competitors and
Proprietary Information ....................................................................... 20
5.16 Technological Expertise. ........................................................................ 21
6. Investor's Affirmative Covenants ............................................................................. 21
6.1 No Solicitation of Employees .................................................................... 21
6.2 Certain Definitions. ............................................................................ 21
6.3 Limitation on Ownership of Voting Stock. ........................................................ 21
6.4 Notice of Voting Stock Purchases ................................................................ 22
6.5 Voting Trust, etc. .............................................................................. 22
6.6 Solicitation of Proxies ......................................................................... 23
6.7 Acts in Concert with Others ..................................................................... 23
6.8 Agreement Not to Control ........................................................................ 23
6.9 Restrictions on Transfer of Voting Stock ........................................................ 23
7. Further Agreements ........................................................................................... 24
7.1 Right of First Refusal and Repurchase with
Respect to Founder Stock. ..................................................................... 24
7.2 Co-Sale Agreement on Sale of Founder Stock ...................................................... 25
8. Company's Right of First Refusal ................................................................................. 26
8.1 Right of First Refusal .......................................................................... 26
8.2 Tender Offer Sale ............................................................................... 27
8.3 Assignment of Rights ............................................................................ 29
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
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9. Restrictions on Transferability of Shares;
<S> <C>
Compliance with the Act .................................................................................... 29
9.1 Restrictions on Transferability. ................................................................ 29
9.2 Certain Definitions. ............................................................................ 29
9.3 Notice of Proposed Transfers .................................................................... 30
9.4 Demand Registration Rights ...................................................................... 31
9.5 Piggy-Back Registration Rights .................................................................. 33
9.6 Registration on Form S-3 ........................................................................ 34
9.7 Rule 144 Reporting .............................................................................. 34
9.8 Expenses of Registration ........................................................................ 35
9.9 Cutbacks ........................................................................................ 35
9.10 Additional Covenants Concerning Sale of Shares .................................................. 36
9.11 Blue Sky Provisions ............................................................................. 36
9.12 Advising the Holders ............................................................................ 36
9.13 Indemnification ................................................................................. 37
9.14 Registration under the Exchange Act ............................................................. 38
9.15 Information by Holder ........................................................................... 38
9.16 Transfer of Registration Rights ................................................................. 38
9.17 Standoff Agreement .............................................................................. 38
9.18 Termination of Rights ........................................................................... 39
10. Survival of Representations, Warranties and Covenants ........................................................ 39
10.1 Survival of Representations, Warranties and
Covenants of the Company ...................................................................... 39
10.2 Survival of Representations and Warranties of
the Investors ................................................................................. 39
11. Conditions Precedent to Obligations of the Investors ......................................................... 39
11.1 Representations and Warranties Correct .......................................................... 40
11.2 Compliance with This Agreement .................................................................. 40
11.3 Satisfaction of Investors and Their Counsel ..................................................... 40
11.4 No Actions or Proceedings ....................................................................... 40
11.5 Opinion of Company's Counsel .................................................................... 40
11.6 Officer's Certificate ........................................................................... 40
11.7 Certificate of Secretary or Assistant Secretary ................................................. 40
11.8 Delivery of Documents ........................................................................... 41
11.9 Other Investors ................................................................................. 41
11.10 No Lapse in Insurance Coverage .................................................................. 41
11.11 Employee Agreements and Nondisclosure Agreements ................................................ 41
</TABLE>
<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
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<S> <C> <C>
11.12 Government Approvals ............................................................................ 41
12. Conditions Precedent to the Obligation of the Company ........................................................ 42
12.1 Representations and Warranties Correct .......................................................... 42
12.2 Compliance with this Agreement .................................................................. 42
12.3 Satisfaction of Company and its Counsel ......................................................... 42
12.4 No Actions or Proceedings ....................................................................... 42
12.5 Other Investors ................................................................................. 42
12.6 Government Approvals ............................................................................ 42
13. Documents to be Delivered at Closing ......................................................................... 42
13.1 Documents to be Delivered by the Company at
the Closing ................................................................................... 42
13.2 Documents to be Delivered by the Investors at
the Closing ................................................................................... 43
14. Miscellaneous ................................................................................................ 43
14.1 Definition of Person ............................................................................ 43
14.2 Definition of Knowledge ......................................................................... 44
14.3 Additional Actions .............................................................................. 44
14.4 Expenses ........................................................................................ 44
14.5 Counterparts .................................................................................... 44
14.6 Binding Effect; No Assignment ................................................................... 44
14.7 Notices ......................................................................................... 44
14.8 Applicable Laws ................................................................................. 44
14.9 Entire Agreement ................................................................................ 44
14.10 Waivers and Amendments; Noncontractual
Remedies; Preservation of Remedies ............................................................ 45
14.11 Table of Contents; Captions ..................................................................... 45
14.12 Schedules and Exhibits Part of Agreement ........................................................ 45
14.13 Severability .................................................................................... 45
14.14 Obligation of the Company to Indemnify .......................................................... 45
14.15 Obligation of the Investors to Indemnify ........................................................ 46
14.16 Notice and Opportunity to Defend ................................................................ 46
14.17 Limitation and Exclusive Remedy ................................................................. 47
</TABLE>
<PAGE> 6
SCHEDULES
1.1 Founders
1.2 Closing Shares; Investors; Purchase Price; Total
1.3 Secured Promissory Note
3.0 Schedule of Exceptions
14.7 Addresses
EXHIBITS
Exhibit Description
A Restated Articles of Incorporation
B Opinion of Company's Counsel
<PAGE> 7
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This SERIES C PREFERRED STOCK PURCHASE AGREEMENT is made as of April
16, 1990 (this "Agreement"), by and among CYMER LASER TECHNOLOGIES, a California
corporation (the "Company"), the persons whose names are set forth on Schedule
1.1 hereto (hereinafter referred to individually as a "Founder" and collectively
as the "Founders") and the persons whose names are set forth on Schedule 1.2
hereto (hereinafter referred to individually as an "Investor", and collectively
as the "Investors").
RECITALS
1. The Company sold shares of its Series A Preferred Stock (the "Series
A Shares") to certain investors (the "Series A Investors") pursuant to a Series
A Preferred Stock Purchase Agreement dated May 3, 1988 (the "1988 Purchase
Agreement").
2. The Company sold shares of its Series B Preferred Stock (the "Series
B Shares") to certain investors (the "Series B Investors" and, collectively,
with the Series A Investors, the "Prior Investors" or "Prior Investor", as the
case may be), pursuant to a Series B Preferred Stock Purchase Agreement dated
June 28, 1989 (the "1989 Purchase Agreement").
3. The Company intends to sell, and the Investors intend to purchase,
up to an aggregate of Nine Hundred Thousand (900,000) shares (the "Series C
Shares") of the Company's 8% Non-Cumulative Voting Redeemable Convertible Series
C Preferred Stock, with such rights, preferences and limitations as are set
forth in the Company's First Amended and Restated Articles of Incorporation
attached hereto as Exhibit A (the "Restated Articles of Incorporation"),
including, without limitation, the right to convert each Series C Share into one
share of the Company's common stock, $.01 par value per share (the "Common
Stock"), an aggregate of Nine Hundred Thousand (900,000) shares of Common Stock,
subject to adjustment for any dilution event described in the Restated Articles
of Incorporation or similar event (the "Conversion Shares").
NOW, THEREFORE, in consideration of the mutual premises and the
representations, warranties and covenants herein contained, and of other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Sale, Purchase and Delivery of Series C Shares.
1..1 Sale and Issuance of Series C Preferred Stock.
(a) Sale and Issuance. Subject to the terms and conditions of
this Agreement, each Investor agrees, severally, to purchase at the Closing (as
defined herein), and the Company agrees to sell and issue to each Investor at
the Closing, that number of Series C Shares set forth opposite each Investor's
name under the heading entitled "Closing Shares" on Schedule 1.2 hereto (the
"Closing Shares") for the aggregate purchase price set forth opposite such
Investor's name under the heading entitled "Purchase Price" on Schedule 1.2
hereto (the "Purchase Price"). Each Investor agrees to invest
<PAGE> 8
a total of at least $700,000 and not more than U.S. $2,100,000; provided, at
least fifty percent of each Investor's respective Purchase Price on Schedule 1.2
shall be payable at the Closing in cash, by wire transfer, or by certified or
official bank check payable to the order of the Company and that the remainder
of the Purchase Price shall be payable by a secured promissory note as set forth
in Section 1.3 hereof. The price per share of the Closing Shares will be $7.00.
(b) Closing Date. The purchase and sale of the Series C Shares
described in Section 1.1(a) shall take place at the offices of Wilson, Sonsini,
Goodrich & Rosati, Two Palo Alto Square, Palo Alto, California, at 2:00 P.M., on
April 16, 1990, or at such other time and place as the Company and each
Investor, severally, may mutually agree upon in writing (which time and place
are designated as the "Closing" or "Closing Date"); provided, however, that the
Closing must occur by May 16, 1990.
1..2 Delivery of Series C Shares. At the Closing, the Company
shall deliver to each Investor against receipt of the respective Purchase Price
therefor one or more certificates bearing the appropriate legend in accordance
with Section 4.3 hereof, evidencing ownership of the number of Series C Shares
being purchased hereunder by such Investor in such denominations and registered
in such manner, as is indicated on Schedule 1.2. All events which shall occur at
such Closing shall be deemed to occur simultaneously.
1..3 Payment of Purchase Price. Payment of at least fifty
percent of each Investor's respective Purchase Price for Series C Shares as set
forth on Schedule 1.2 shall be made at the option of each Investor in cash, by
wire transfer, or by certified or official bank check payable to the order of
the Company. The remainder of each Investor's Purchase Price shall be payable by
a secured promissory note in the form attached hereto as Schedule 1.3 (the
"Promissory Note"), in the principal amount of the Investor's Purchase Price
less such amount delivered by the Investor in cash, wire transfer or check. The
principal of promissory note shall earn interest at the rate of ten percent
(10%) per annum based on a 365 day year. Interest and principal shall be payable
in full no later than December 31, 1990, provided that Investor may prepay
interest and principal without penalty.
2. Certain Definitions. For purposes of Sections 5.8, 7.1, 7.2, 9 and
14.10 of this Agreement, the term "Shares" shall mean the Series A Shares,
Series B Shares and Series C Shares, the term "Conversion Shares" shall mean the
shares of Common Stock issued upon conversion of the Shares, and the term
"Significant Holder" shall mean (i) the Series C Significant Holder (as defined
below), (ii) a holder of at least 210,788 Series A Shares or (iii) a holder of
at least 132,353 Series B Shares (or shares of Common Stock issued upon
conversion of the Series A Shares or the Series B Shares). The term "Series C
Significant Holder" shall mean a holder of at least 100,000 Series C Shares (or
shares of Common Stock issued upon conversion of the Series C Shares)
3. Representations and Warranties of the Company. Except as disclosed
in the attached schedule of exceptions (Schedule 3.0), the Company represents
and warrants to each of the Investors as follows:
<PAGE> 9
3..1 Organization and Good Standing; Power and Authority. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority and the legal right to transact the business in which it is
presently engaged, to own, lease and operate all of the assets and properties
owned, leased or operated by it, to enter into and perform this Agreement, and
will have at the Closing, all requisite corporate power and authority to sell
and issue the Series C Shares and to issue the Conversion Shares and to
otherwise perform and comply with all other actions and agreements arising
hereunder. The Company does not own or lease any property or engage in any
activity in any jurisdiction which might require its qualification to do
business as a foreign corporation in any such jurisdiction. The Company has
furnished each Investor or its counsel with true, correct and complete copies
(certified by the Secretary or Assistant Secretary of the Company) of its (a)
Restated Articles of Incorporation and (b) By-Laws, and will make available to
each Investor (c) the minute books of the Company (containing records of all
meetings and consents in lieu of meetings of its stockholders and the Board of
Directors of the Company (the "Board") (and any committees thereof) since the
date of its incorporation and (d) the stock transfer books of the Company. A
copy of the Restated Articles of Incorporation is attached hereto as Exhibit A.
3..2 Subsidiaries. The Company has no subsidiaries and does
not own (of record or beneficially) and has made no commitment to purchase any
shares or securities of, or otherwise make any investment in, any other
corporation, association, partnership or other entity and is not a participant
in any joint venture.
3..3 Capitalization.
(a) Upon the filing of the Restated Articles of
Incorporation, the authorized capital stock of the Company will consist of
12,500,000 shares of Common Stock, 940,625 shares of which are issued and
outstanding, 3,000,000 shares of Series A Preferred Stock, 2,107,882 of which
are issued and outstanding, 1,500,000 shares of Series B Preferred Stock, of
which 1,294,939 and 1,000,000 shares of Series C Preferred Stock, none of which
will be issued and outstanding prior to the Closing. All of the outstanding
shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock
are duly authorized and validly issued, fully paid and non-assessable. The
Company has reserved the fol lowing shares of Common Stock for issuance: (i)
700,000 shares of Common Stock upon exercise of options granted or to be granted
to the Company's employees; (ii) 162,500 shares of Series A Preferred Stock upon
exercise of the warrants to purchase shares of Series A Preferred Stock
(hereinafter referred to as the "Series A Warrants"); (iii) 18,382 shares of
Series B Preferred Stock upon exercise of the warrants to purchase shares of
Series B Preferred Stock (hereinafter referred to as the "Series B Warrants");
and (iv) 5,500,000 shares of Common Stock for issuance upon conversion of the
Preferred Stock. No other classes of capital stock of the Company are authorized
or outstanding.
(b) Except as set forth in this Agreement, the Series A
Warrants, the Series B Warrants and the options to purchase 411,150 shares of
Common Stock, as of the date hereof there are no other outstanding rights,
subscriptions, warrants, calls, preemptive rights, options or other agreements
of any kind to purchase or otherwise to receive from or sell to the Company any
of the
<PAGE> 10
outstanding, authorized but unissued, unauthorized or treasury shares of the
capital stock or any other security of the Company, and there is no security of
any kind convertible into such capital stock. The Company has no obligation or
agreement under any contingency whatsoever to issue any equity, debt or other
security, or to pay, perform, guaranty, be responsible for, or satisfy in whole
or in part any debt, security, obligation or agreement incurred or made by an
individual or entity other than the Company, and the Company has no obligation
under any condition or contingency whatsoever to share its income with anyone,
or to make, accrue or set aside any payment or amount measured in any way by any
part or all of its sales or income. The Company is not indebted to any of its
employees in any amount other than for accrued but unpaid compensation.
(c) Upon issuance pursuant to this Agreement, the Series C
Shares will have the rights and preferences set forth in the Restated Articles
of Incorporation and each Series C Share will be, when issued, initially
convertible into one Conversion Share, subject to adjustment for any dilution
event described in the Restated Articles of Incorporation or similar event. The
Series C Shares delivered to the Investors pursuant to this Agreement, upon
payment of the respective purchase prices therefor, shall be duly authorized,
validly issued, fully paid and non-assessable and the Conversion Shares issuable
upon conversion of the Series C Shares have been duly and validly reserved and,
upon issuance in accor dance with the conversion provisions of the Series C
Shares and the Restated Articles of Incorporation, shall be duly authorized,
validly issued, fully paid and non-assessable. Subject to the provisions of
applicable federal and state securities laws and compliance with the terms of
this Agreement, upon the consummation of the transactions contemplated hereby,
the Series C Shares and the Conversion Shares will be freely transferable and
free and clear of all liens and encumbrances, other than liens, encumbrances or
restrictions on transfer arising hereunder or under agreements entered into or
actions taken by the Investors.
(d) All of the outstanding shares of Common Stock, Series
A Shares and Series B Shares have been, and all Series C Shares to be issued
pursuant to this Agreement and all Conversion Shares to be issued will be,
offered, issued and sold in compliance with all federal and state securities
laws.
3..4 Compliance with Laws. The Company is not in violation of
(a) any applicable order, judgment, injunction, award or decree, or (b) to the
best of the Company's knowledge, any federal, state, local or foreign law,
ordinance or regulation or any other requirement of any governmental or
regulatory body, court or arbitrator applicable to the business of the Company
except for violations which could not have a material adverse effect on the
business or properties of the Company and would not be in violation of any such
law, ordinance, regulation or other requirement that has been enacted or adopted
but is not yet effective if it were effective. The Company has obtained all
licenses, permits, orders and approvals of any federal, state, local or foreign
governmental or regulatory body (collectively, "Permits") that are material to
or necessary for the conduct of the business of the Company. All of such Permits
are in full force and effect, no violations are or have been recorded in respect
of any Permit and no proceeding is pending or, to the best of the Company's
knowledge, threatened to revoke or limit any such Permit.
<PAGE> 11
3..5 Validity of Agreement; Binding Effect. To the best of the
Company's knowledge, no approval or consent of any foreign, federal, state,
county, local or other governmental or regulatory body is required in connection
with the execution and delivery by the Company of this Agreement, the issuance
of the Series C Shares or the Conversion Shares and the consummation and
performance by the Company of the transactions contemplated hereby. The
execution, delivery and performance of this Agreement, the issuance of the
Series C Shares and the Conversion Shares and the consummation of the
transactions contemplated herein by the Company have been duly authorized by all
necessary corporate action on the part of the Company, including any action
which may have been required to be taken by the Company's stockholders, and this
Agreement, when executed, will constitute the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms (except insofar as the enforcement hereof may be limited by (a) applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
creditors' rights generally from time to time in effect, (b) equitable
principles of general application and (c) limitations of public policy as
applied to Section 9.13 of this Agreement).
3..6 No Breach. The execution and delivery of this Agreement
does not and the issuance of the Series C Shares or Conversion Shares and
consummation of and compliance with the transactions and agreements contemplated
hereby will not conflict with or constitute a violation or breach of (a) the
Restated Articles of Incorporation or By-laws of the Company, (b) any provision
of any material contract or other instrument to which the Company is a party or
by which the Company may be bound or by which the business, assets or properties
of the Company may be affected or secured, (c) any order, writ, injunction,
award or decree of any court, arbitrator or governmental or regulatory body
against or binding upon the Company or upon the securities, properties or
business of the Company, (d) to the best of the Company's knowledge, any
statute, law, rule or regulation (including, without limitation, applicable
federal and state securities laws) of any jurisdiction to which the Company is
subject or (e) any Permit.
3..7 Financial Information. The Company has furnished each of
the Investors with (a) true copies of its balance sheet dated as of December 31,
1989, together with statements of opera tions, stockholders' equity and changes
in financial position of the Company for the year ended December 31, 1989, with
the related opinion of Deloitte & Touche, independent public accountants (col
lectively, the "Audited Financials"), and (b) an unaudited balance sheet dated
as of January 31, 1990, and an unaudited statement of operations for the period
then ended (the "Unaudited Financials"; the Audited Financials and the Unaudited
Financials are herein referred to collectively as the "Financial Statements").
The Financial Statements are complete and correct, and present fairly the
financial position and assets and liabilities of the Company at their respective
dates and the results of its operations and changes in financial position for
the periods then ended and cumulative since inception; provided, however, that
the Unaudited Financials are subject to year-end audit adjustments and do not
contain all footnotes required under generally accepted accounting principles.
3..8 Absence of Undisclosed Liabilities and Obligations. The
Company has no liability or obligation, either accrued, absolute, direct, or to
the best of its knowledge, contingent or indirect, or otherwise, whether as
principal, agent, partner, coventurer, guarantor or in any capacity whatsoever
<PAGE> 12
which are not reflected in the Financial Statements, other than (a) obligations
and liabilities incurred in the ordinary course of business that are not
individually or in the aggregate material and (b) obligations under contracts
made in the ordinary course of business that would not be required to be
reflected in the Financial Statements.
3..9 Absence of Certain Changes. Since January 31, 1990, there
has not been any event or condition of any character which has either singly or
in the aggregate materially adversely affected the Company's business or
prospects, including but not limited to:
(a) Any change in the condition (financial or
otherwise), assets, liabilities or business of the Company from that shown on
the Financial Statements;
(b) Any damage, destruction or loss of any of the
properties or assets of the Company (whether or not covered by insurance)
affecting the business or plans of the Company;
(c) Any declaration, setting aside, payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(d) Any waiver by the Company of any rights of value;
(e) Any purchase, sale or transfer of any assets or
properties of the Company, any satisfaction or cancellation of any mortgage or
pledge or any incurring of any debts or claims, or the subjection of any assets
or property of the Company to any lien, charge, security interest on other
encumbrance or any other transaction entered into by the Company other than in
the ordinary course of business;
(f) Any increase in the compensation of any of the
officers, other employees or agents of the Company, including without
limitation, any increase by means of any bonus or pension plan, contract or
other commitment; or
(g) Any labor trouble, or any event or condition of
any character, affecting the business or plans of the Company.
3..10 Real Property. Schedule 3.0 sets forth a list and
summary description of all evidences of ownership of real property by the
Company, all leases, subleases or other agreements under which the Company is
lessor or lessee of any real property, and of all options held by the Company to
purchase or acquire real property. Such leases, subleases and other agreements
and all options are in full force and effect and the Company has not received
any notice of any default thereunder. No approval or consent of any person is
needed in order that the leases, subleases or other agreements and all options
under or pursuant to which the Company is lessor or lessee of any real property
continue in full force and effect after the Closing. The leasehold interests of
the Company are not subject to any liens or encumbrances and such leasehold
interests enjoy a right of quiet possession as against any liens or
<PAGE> 13
encumbrances on the properties. The Company is not subject to any contractual
obligation to purchase or acquire any interest in real property or to sell or
dispose of any interest in real property, and the Company has not granted any
options to purchase or acquire any interest in real property. The Company has
good and marketable title to all the real property held by it outright and none
of such real property or any of the structure or improvements thereon is in
violation of any applicable building, zoning, environmental or other laws,
ordinances or regulations. None of such real property has been condemned or is
the subject of any eminent domain proceeding and the Company has no grounds to
believe that any such condemnation or eminent domain proceeding is threatened or
taking place.
3..11 Tangible Assets and Equipment. The Company owns outright
and has good and marketable title to all of its tangible assets and equipment
including all tangible assets and equipment reflected in the Financial
Statements, in each case free and clear of any lien or encumbrance, subject only
to liens for taxes not yet due or which are being contested in good faith and by
appropriate proceedings and for which adequate reserves have been set aside on
the books of the Company and reflected in the Financial Statements. To the best
of the Company's knowledge, each tangible asset and piece of equipment of the
Company is in good operating condition, ordinary wear and tear excepted, is
being and has been properly serviced and maintained.
3..12 Tax Returns and Audits.
(a) To the best of the Company's knowledge, (i) the
Company has properly completed and filed or will file within the time prescribed
by law (including extensions of time approved by the appropriate taxing
authority) in correct form all federal, state and other income, profits,
franchise, real property, personal property, sales, use, employment, payroll,
excise and other tax returns and reports required to be filed by the Company,
(ii) all taxes imposed or which may be imposed or asserted by the U.S. Internal
Revenue Service, the State of California, or any other taxing authority, and all
deficiencies, assessments, additions to tax, penalties and interests, which are
due and payable by the Company through December 31, 1989, or which are
attributable to the operations, business, properties or assets of the Company
through that date have been paid in full, and (iii) all monies required to be
withheld by the Company from employees for income taxes, Social Security and
unemployment insurance taxes have been collected or withheld and either paid to
the respective governmental agencies or adequately provided for by reserves on
the books of the Company and reflected in the Financial Statements, other than
(x) returns and reports, the non-filing of which, (y) deficiencies, assessments,
additions to tax, penalties and interest, the non-payment of which, and (z)
withholdings, the non-collection or withholding of which would not either singly
or in the aggregate have a material adverse effect on the Company.
(b) To the best of the Company's knowledge there are
(i) no other tax returns or reports which are required to be filed by the
Company which have not been so filed and (ii) no unpaid assessments for
additional taxes for any fiscal period or any basis therefor. The Company's tax
returns have not been audited by the U.S. Internal Revenue Service, the State of
California or any other taxing authority to which the Company is subject. The
Company has not consented to any extensions of time to assess any tax.
<PAGE> 14
(c) The Company has successfully revoked its election
to be treated as an S corporation and is presently filing tax returns and
reports to, and is recognized by, the U.S. Internal Revenue Service, the State
of California and all other relevant taxing authorities as a C corporation.
3..13 Patents and Trademarks. To the best of the Company's
knowledge, it owns or possesses, has access to, or can become licensed on
reasonable terms under all patents, patent applications, inventions, trademarks,
tradenames, servicemarks, copyrights, and other proprietary intellectual
property rights (collectively referred to as "Proprietary Rights") (a) necessary
for the lawful conduct of its business as now conducted and as proposed to be
conducted, and the lack of which would materially and adversely affect its
business or properties, and (b) to the best of its knowledge, without any
material infringement of or conflict with the rights of others. All of the
Proprietary Rights are free and clear of any liens or other encumbrances. The
Company has not granted any licenses to its Proprietary Rights and is not aware
of any third parties who are infringing or violating any of same. To the best of
the Company's knowledge, there are no disputes nor claims regarding the
Proprietary Rights.
3..14 Employees. To the best of the Company's knowledge, no
key employee of the Company is, or is now expected to be, in violation of any
term of any employment contract, patent disclosure agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant or any
other common law obligation to a former employer relating to the right of any
such employee to be employed by the Company because of the nature of the
business conducted or to be conducted by the Company or to the use of trade
secrets or proprietary information of others, and the employment of the
Company's employees does not subject the Company or any Investors to any
material liability. There is neither pending nor, to the Company's knowledge
threatened, any actions, suits, proceedings or claims, or any basis therefor or
thereof with respect to any contract, agreement, covenant or obligation referred
to in the preceding sentence. The Company is not a party to, or subject to, any
obligation, liability or commitment with respect to any written employment,
compensation, consulting, severance pay or similar agreement and any and all
oral employment, compensation, consulting or similar commitments are terminable
at will and without notice by the Company and without payment or penalty. The
Company is not a party to any collective bargaining or other union contracts and
its employees are not represented by any union.
3..15 Confidentiality. Each person employed by the Company who
has access to any Proprietary Rights or other proprietary information of or
about the Company has executed and delivered to the Company an Employee
Agreement substantially in the form provided to the Investors' counsel (an
"Employee Agreement"). Each person hired by the Company as a consultant who has
access to any Proprietary Rights or other proprietary information of or about
the Company has executed and delivered to the Company a Nondisclosure Agreement
substantially in the form provided to the Investors' counsel (a "Nondisclosure
Agreement").
3..16 Litigation.
(a) There are no legal, administrative or other
proceedings, investigations or inquiries, or other asserted claims, judgments,
injunctions or restrictions, pending or outstanding or, to
<PAGE> 15
the best knowledge of the Company, threatened against the Company, any of its
properties or business, or against or involving any of the Company or the
officers or directors of the Company, or any action related to this Agreement,
the issuance of the Series C Shares or any of the transactions contemplated
herein that might if determined adversely to the Company, either singly or in
the aggregate, result in any material adverse change in the business, prospects,
operations, properties or condition (financial or other wise) of the Company or
in any material liability on the part of the Company. To the best of the
Company's knowledge, there is no fact, event or circumstance that may give rise
to any suit, action, claim, investigation or proceeding that would be required
to be set forth on Schedule 3.0 if currently pending or threatened. There are no
actions, suits or claims or legal, administrative or arbitration proceedings
pending or to the best of the Company's knowledge threatened that would give
rise to any right of indemnification on the part of any director or officer of
the Company or the heirs, executors or administrators of such director or
officer against the Company.
(b) The Company has not admitted in writing its
inability to pay its debts generally as they become due, filed or consented to
the filing against it of a petition in bankruptcy or a petition to take
advantage of any insolvency act, made an assignment for the benefit of
creditors, consented to the appointment of a receiver for itself or for the
whole or any substantial part of its property, or had a petition in bankruptcy
filed against it, been adjudicated a bankrupt, or filed a petition or answer
seeking reorganization or arrangement under the federal bankruptcy laws or any
other law or statute of the U.S. or any other jurisdiction.
3..17 ERISA. No employee pension benefit plan, within the
meaning of Section 3(a) of the Employment Retirement Income Security Act of
1974, as amended ("ERISA"), is currently maintained or sponsored by the Company
and the Company does not contribute to, and is not obligated to contribute to,
and none of the employees of the Company is a participant in, any multiemployer
plan within the meaning of Section 400(a) of ERISA.
3..18 Environmental Compliance Matters.
(a) There is no soil or ground water contamination by
any "Hazardous Material" for which the Company is or may be liable. "Hazardous
Material" shall mean any flammables, asbestos, explosives, radioactive
materials, hazardous wastes, toxic substances or related materials, including
without limitation any substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," or "toxic
substances" under any applicable federal, state or local laws, rules,
regulations or orders or which federal, state or local laws, rules, regulations
or orders have designated as potentially dangerous to public health and/or
safety when present in the environment;
(b) No "Hazardous Material" has been stored by the
Company and the Company will not store any Hazardous Material; and
(c) There are no (i) enforcement, cleanup, removal or
other governmental or regulatory actions instituted, completed or threatened
against the Company pursuant to any applicable
<PAGE> 16
federal, state or local laws, ordinances or regulations relating to any
Hazardous Material, (ii) claims made or threatened by any third party against
the Company with respect to or because of its property relating to damage,
contribution, cost recovery compensation, loss or injury resulting from any
Hazardous Material or (iii) conditions on any of the properties of the Company
that could cause such properties or any part thereof to be subject to any
restrictions on the ownership, occupancy transferability or use of any of such
properties under any Hazardous Material law.
3..19 Use of Proceeds. The net proceeds to be paid to the
Company at the Closing are to be used for working capital including for employee
compensation and benefits, materials and miscellaneous expenses associated with
developing products, lease payments, capital expenditures and marketing
expenses.
3..20 Registration Rights. Except as provided for in this
Agreement, the Credit Agreement dated April 21, 1989 between certain
shareholders and the Company, the 1988 Purchase Agreement and the 1989 Purchase
Agreement, the Company is not under any obligation to register under the
Securities Act of 1933, as amended (the "Act"), any of its currently outstanding
securities or any of its securities which may hereafter be issued.
3..21 Escrowed Certificates of Founder Common Stock. The
certificates for all shares of Common Stock held by the Founders have been
delivered to Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, in the
form required by, and in accordance with the terms of, the Common Stock
Restriction Agreements (the "Restriction Agreements") executed by and between
the Company and the Founders.
3..22 Other Adverse Information; Disclosure.
(a) Except as set forth in this Agreement or in the
Financial Statements, certificates, exhibits, schedules or other documents
delivered pursuant hereto (the "Information"), the Company does not have
knowledge of any information of a materially adverse nature with respect to the
business, prospects, operations, properties or condition (financial or
otherwise) of the Company including, without limitation, plans or announcements
by any person or firm to compete with the Company in any area in which such
person or firm does not presently compete with the Company.
(b) All information delivered by or on behalf of the
Company in connection with this Agreement and the transactions contemplated
hereby is true, complete and authentic. No representation or warranty by the
Company contained in this Agreement, and no other information furnished or to be
furnished by or on behalf of the Company pursuant hereto, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make any representation or warranty of the Company
or the Information not false or misleading.
3..23 No Other Agreements. The Company has not entered into any
agreement with an Investor regarding the investment by such Investor in the
Company, except as contemplated hereby.
<PAGE> 17
3..24 Claims of the Founders. Each of the Founders, jointly and
severally, represents and warrants to each of the Investors that they have
transferred to the Company all of their rights with respect to any of the
Company's Proprietary Rights (and have not retained as their own property any
invention or technology pertaining to the business of the Company) and they
hereby relinquish all claims to and agree that they shall have no rights,
including without limitation, any rights to any payments, other than their
rights as shareholders of the Company, with respect to any Proprietary Rights.
3..25 Insurance. The Company maintains insurance with reputable
insurance companies, on so much of its properties, to such an extent and against
such risks, as reasonably prudent persons engaged in similar businesses would
customarily insure properties of a similar character.
4. Representations and Warranties of the Investors. Each Investor,
severally and not jointly, hereby represents and warrants to the Company as
follows:
4..1 Organization and Standing. If the Investor is a
corporation, it is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. If the Investor is a
partnership, it is validly existing and in good standing under the laws of the
jurisdiction of its organization.
4..2 Authorization and Approval of and Ability to Carryout
This Agreement. The Investor has duly authorized the execution and delivery of
this Agreement and the transactions contemplated hereby. The Investor, if a
corporation, has all requisite corporate power and authority (and, if a
partnership, is permitted under its partnership agreement) to enter into this
Agreement and to consummate the transactions contemplated herein. This Agreement
constitutes the legal, valid and binding obligation of the Investor, to the
extent provided for herein, enforceable in accordance with its terms (except
insofar as the enforcement hereof may be limited by (a) applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting creditors'
rights generally from time to time in effect, (b) by equitable principles of
general application, and (c) limitations of public policy as applied to Section
9.13 of this Agreement).
4..3 Investment Representation. The Investor (and the
representation made under this Section 4.3 is made to each other Investor as
well) is purchasing the Series C Shares (including, for purposes hereof, the
Conversion Shares) for its own account without a view to any distribution
thereof in violation of the Act, subject, nevertheless, to any requirement of
law that the disposition of its property shall at all times be within its
control. The Investor represents that it (a) is an "Accredited Investor" as that
term is defined under Rule 502 under the Act, (b) is experienced in evaluating
and making investments of the type contemplated by this Agreement and (c) is
financially able to bear the risks of the investment. The Investor acknowledges
that the Company is issuing and selling the Series C Shares in reliance upon the
exemption from registration provided in Section 4(2) of the Act and is relying
upon these representations, and agrees that the Series C Shares may only be
transferred if registered under the Act or pursuant to an exemption from such
registration requirements. The Investor understands that Rule 144 promulgated
under the Act is not presently available with respect to the Series C Shares or
Conversion Shares, and that absent registration of the Series C Shares or
Conversion Shares under the
<PAGE> 18
Act, compliance with an applicable exemption under the Act, is required for a
sale or other disposition of the Series C Shares or Conversion Shares. The
Investor agrees that the following legend may be placed on any certificates
evidencing its Series C Shares or Conversion Shares and any other securities
issued in respect of Series C Shares or Conversion Shares, upon any dilution
event described in the Restated Articles of Incorporation or similar event:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares have been acquired for
investment and may not be pledged or hypothecated, and may not be sold
or transferred except in compliance with the registration requirements
of the Securities Act of 1933, or upon delivery to Cymer Laser
Technologies of an opinion of counsel to the shareholder, in form and
substance satisfactory to said corporation and its counsel, that
registration under such Act is not required."
The Investor understands that, so long as the legend remains on the certificates
representing the Series C Shares or Conversion Shares, the Company may maintain
appropriate "stop transfer" orders with respect to the Series C Shares or
Conversion Shares on its books and records and with its registrar and transfer
agent. Notwithstanding the foregoing, such Investor shall be entitled to
replacement certificates without such legend if permitted under Rule 144 or upon
presentation by such Investor to the Company of a favorable written opinion of
counsel reasonably satisfactory in form and substance to the Company and its
counsel that the removal of such legend is not in violation of either the Act
and the rules and regulations thereunder or applicable provisions of state
securities law.
5. Company's Affirmative Covenants. Except as hereinafter provided, the
Company hereby covenants that from and after the date of this Agreement and so
long as the Investors or any of them hold beneficially or of record any of the
Series C Shares or Conversion Shares:
5..1 Corporate Existence. The Company will maintain its
corporate existence and use best efforts to comply with all laws, government
regulations, rules and ordinances and judicial orders, judgments and decrees
applicable and material to the Company, its business and properties.
5..2 Taxes and Liens. The Company will (a) punctually pay and
discharge or cause to be paid and discharged before the same shall become
delinquent (i) all taxes, assessments and govern mental charges lawfully imposed
upon the Company, or any of its property, or upon the income and profits
thereof, and (ii) all lawful claims for labor, materials and supplies which, if
unpaid, might be a lien upon the property of the Company, (b) withhold all
monies required to be withheld by the Company from employees for income taxes,
Social Security and unemployment insurance taxes and (c) complete and file, on a
timely basis, all tax returns and reports required to be filed by it (including,
without limitation, returns and reports of the type set forth in Section
3.12(a)(i)).
5..3 Maintain Property. The Company will cause all material
properties used or useful in the conduct of its business to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs as in the judgment
<PAGE> 19
of the Company may be necessary so that business carried on in connection
therewith may be properly and advantageously conducted.
5..4 Financial Statements and Reports.
(a) The Company will keep adequate and accurate books
of account and will prepare the financial statements referred to herein, in
accordance with generally accepted accounting principles, consistently applied.
(b) Until the Initial Public Offering (as herein
defined), the Company shall furnish to each Series C Significant Holder, as soon
as practicable (and in any event at least thirty (30) days) prior to the
beginning of each fiscal year, an annual projected budget for the following
fiscal year, and an annual operating plan and strategic plan (collectively, the
"Plan") as approved by the Board.
(c) Until the Initial Public Offering, the Company
shall furnish to each holder of Series C Shares or Conversion Shares as soon as
practicable (and in any event within ninety (90) days) after the end of each
fiscal year of the Company, an audited balance sheet of the Company as of the
end of the year and the related statement of operations, retained earnings or
deficit and changes in financial position of the Company as of the end of the
year setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by an audit report
and opinion in respect of such financial statement (consolidated if applicable)
of the independent certified public accountants selected by the Company (which
shall be a materially recognized firm of accountants), and such report and
opinion shall be unqualified as to the scope of the audit.
5..5 Confidentiality. The Company shall, after the date
hereof, cause each person employed by, or retained as a consultant to, the
Company who has access to any Proprietary Rights or other proprietary
information of or about the Company to execute an Employee Agreement, in the
case of an employee, and a Nondisclosure Agreement, in the case of a consultant.
5..6 Conversion Shares. The Company shall reserve and keep
available from its authorized shares of Common Stock, solely for the purpose of
issuance upon conversion of the Series C Shares, such number of Conversion
Shares as shall then be issuable upon the conversion of all of the Series C
Shares, taking into account any anti-dilution rights of the holders thereof.
5..7 Access to Books and Records. Until the Initial Public
Offering, and subject to the provisions of Section 5.15 and 6.10, each Series C
Significant Holder and its agents shall (a) have access upon reasonable notice
to the Company, during usual business hours, and as often as may reasonably be
desired, to the accounts, books and records of the Company shall be entitled to
examine, make copies and extract therefrom, and from any other items, such
information relating to the Company as each such Investor shall reasonably
specify and (b) be permitted, upon reasonable notice to the Company to visit and
inspect any of the properties of the Company.
<PAGE> 20
5..8 Right of First Offer.
(a) The Company hereby grants to the Significant
Holders the right of first offer to purchase, pro-rata, all (or any part) of New
Securities (as defined in this Section 5.8) which the Company may, from time to
time, propose to sell and issue. A Significant Holder's pro-rata portion, for
purposes of this Agreement, is the ratio of (x) the number of the shares of
Common Stock and Series A, Series B and Series C Preferred Stock, determined on
an as-converted basis, held by such Significant Holder at the time to (y) the
total number of shares of Common Stock and Preferred Stock (determined on an
as-converted basis) of the Company issued and outstanding at such time. Each
Significant Holder shall have a right of over-allotment such that if any
Significant Holder fails to exercise his right hereunder to purchase his
pro-rata portion of New Securities, the other Significant Holders may purchase
the non- purchasing Significant Holder's portion on a pro-rata basis within five
(5) days from the date it receives notice from the Company that a non-purchasing
Significant Holder has failed to exercise its right hereunder to purchase its
pro-rata share of New Securities. This right of first offer shall be subject to
the following provisions:
(b) "New Securities" shall mean any capital stock of
the Company whether now authorized or not, and rights, options or warrants to
purchase capital stock, and securities of any type whatsoever that are, or may
become, convertible into capital stock; provided, however, that the right of
first offer shall apply at the time of issuance of the right, warrant or option
and not to the exercise thereof; provided, further, that the term "New
Securities" does not include: (i) the Shares or Conversion Shares; (ii) shares
of Series A or Series B Preferred Stock issued pursuant to the Series A or
Series B Warrants, respectively (or shares of Common Stock issued upon
conversion of such Preferred Stock or such securities as may be substituted for
the Series A or Series B Preferred Stock pursuant to the terms of the Series A
or Series B Warrants); (iii) securities offered to the public pursuant to a
registration statement filed pursuant to the Act; (iv) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all the assets or other reorganization whereby the
Company owns not less than 51% of the voting power of such corporation; (v) any
borrowings, direct or indirect, from financial institutions or other persons by
the Company, whether or not presently authorized, including any type of loan or
payment evidenced by any type of debt instrument, provided such borrowings do
not have any equity features, including warrants, options or other rights to
purchase capital stock, and are not convertible into capital stock of the
Company; (vi) 700,000 shares of Common Stock reserved for issuance to Founders
or employees pursuant to the exercise of options granted or to be granted; (vii)
warrants issued in connection with the leasing of equipment by the Company which
have been approved by the Board; (viii) any security if holders of at least
sixty-six and two thirds percent (66 2/3%) of the outstanding Shares of
Preferred Stock, voting as a single class, (or the Common Stock issued in
respect thereof, or any combination of such Preferred Stock Shares and such
Common Stock) consent in writing that the right of first offer shall not apply
to such securities; or (ix) issuances of up to a cumulative number of 50,000
shares of Common Stock or Preferred Stock from the date of this Agreement which
are not excluded by any of the foregoing exceptions.
(c) In the event the Company proposes to issue New
Securities, it shall give each Significant Holder written notice of its
intention, describing the type of New Securities, the price
<PAGE> 21
and the general terms upon which the Company proposes to issue the same. Each
Significant Holder shall have thirty (30) days from the date of receipt of any
such notice to agree to purchase the Significant Holder's pro-rata share of such
New Securities for the price and upon the general terms specified in the notice
by giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
(d) In the event the Significant Holders fail to
exercise the right of first offer with respect to all of the New Securities
proposed to be sold by the Company within said ten-day period and after the
expiration of the five (5) day period for the exercise of the over-allotment
provisions of this Section 5.8, the Company shall have 120 days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within 120 days from the date of
said agreement), to sell the New Securities respecting which the Significant
Holder's options were not exercised, at a price and upon general terms no more
favorable to the purchasers thereof than specified in the Company's notice. In
the event the Company has not sold within said 120-day period or entered into an
agreement to sell the New Securities within said 120-day period (or sold and
issued New Securities in accordance with the foregoing within 120 days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such securities to the Significant Holders in
the manner provided above.
(e) The right of first offer set forth in this
Section 5.8 is nonassignable, except that such right is assignable (i) by each
Significant Holder to any Person (as herein defined) controlling, controlled by
or under common control with such Significant Holder and (ii) between and among
any of the Significant Holders, and (iii) upon the death of a Significant
Holder, such right shall pass to the beneficiaries under the deceased
Significant Holder's last will and testament or to the distributees of the
deceased Significant Holder's estate.
5..9 Right of First Refusal and/or Repurchase Agreement. It
shall be a condition to any issuance of shares of Common Stock (other than
shares of Common Stock issued upon conversion of the Preferred Stock) including,
without limitation, Common Stock to officers or employees of the Company
pursuant to an employee stock purchase, stock option or other benefit or
incentive plan estab lished by the Company, that the Company will cause the
person to whom the Common Stock is to be issued to execute and deliver to the
Company an appropriate right of first refusal agreement and/or a repurchase
agreement (in the event that the shares of Common Stock being issued are subject
to absolute prohibitions on transfer that lapse over time) in a form approved by
the Board which shall provide, among other things, that the Significant Holders
shall have the right to exercise the Company's rights thereunder in the event
the Company shall fail to do so.
5..10 Insurance. The Company will insure and keep insured,
with reputable insurance companies, so much of its properties, to such an extent
and against such risks, as reasonably prudent persons engaged in similar
businesses would customarily insure properties of a similar character or as
otherwise approved by the Board.
5..11 Notice of Record Dates.
<PAGE> 22
(a) In the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, the Company shall mail to each holder of Series C Shares, at least
ten (10) days prior to such record date, specified herein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend or distribution.
(b) In the event of (i) any consolidation or merger
to which the Company is a party and for which approval of any shareholders of
the Company is required, (ii) the conveyance or transfer of all, or
substantially all, of the properties and assets of the Company, (iii) any
capital reorganization or any reclassification of the Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or (iv) the
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the Company shall mail to each holder of Series C Shares, at least ten (10) days
prior to the applicable record date, a notice specifying the date on which such
record is to be taken for the purpose of such transaction.
5..12 Employee Stock Purchase Agreement. The Company will not
issue any of its capital stock, or grant an option to purchase any of its
capital stock, to any Founder, employee, or officer of the Company (other than
any options or grants already made to any Founders or employees of the Company)
except pursuant to a plan adopted or an issuance approved by the Board.
5..13 State Securities Law Filings. The Company shall make any
and all filings necessary (whether before or after the Closing) in connection
with the offer, issuance and sale of the Series C Shares and the issuance of the
Conversion Shares under the securities or blue sky laws of California.
5..14 Lapse of Covenants. Except as otherwise specifically
provided in this Section 5, the covenants contained herein and further
agreements contained in Section 7 of this Agreement shall lapse and be of no
further force and effect upon the consummation by the Company of an Initial
Public Offering. "Initial Public Offering" for purposes of this Agreement, shall
be defined as the receipt by the Company of the proceeds of a bona fide firm
commitment underwritten public offering registered under the Act, which offering
does not exclusively relate to securities under an employee stock option, bonus
or other compensation plan and at a price of not less than $10.20 per share of
Common Stock (as equit ably adjusted for any dilutive event set forth in the
Restated Articles of Incorporation or other similar event) and net proceeds to
the Company of not less than $10,000,000.
5..15 Information as to Competitors and Proprietary
Information. Notwithstanding anything to the contrary, the Company may refrain
from disclosing to the Investor, or providing the Investor access to, any of the
Company's books, records, documents or other information which the Company in
its sole discretion reasonably believes would pertain to trade secrets, patents,
copyrights, designs, blueprints or other proprietary information of the Company
or could pertain to a competitor of the Investor or the relationship between the
Company and the Investor. The Investor, to the extent permissible, waives all
rights to such disclosure or access. Furthermore, the Company shall not provide
<PAGE> 23
to any Investor any confidential information concerning the affairs of any other
Investor disclosed to the Company prior to or subsequent to the execution of
this Agreement.
5..16 Technological Expertise. The Company shall use its best
commercial efforts to maintain and improve its current level of technological
expertise through appropriate research and devel opment and use its reasonable
commercial efforts to retain key employees.
6. Investor's Affirmative Covenants.
6..1 No Solicitation of Employees. So long as the provisions
of Section 6.3 hereof with respect to the Investor's limitation on ownership of
Voting Stock remains in effect, the Investors agree not to solicit, jointly or
severally, for itself or any other entity, any employee of the Company to leave
the employ of the Company. The Investors further agree not to otherwise
interfere, or solicit others to interfere, with the Company's relationships with
current or prospective employees.
6..2 Certain Definitions. As used in this Section 6:
(i) The term "Total Voting Power of the Company"
means the total number of votes which may be cast in the election of directors
of the Company at any meeting of stockholders of the Company if all securities
entitled to vote in the election of directors of the Company were present and
voted at such meeting, other than votes that may be cast only upon the happening
of a contingency.
(ii) The term "Voting Stock" means the Common Stock,
Preferred Stock and any other securities issued by the Company having the
ordinary power to vote in the election of directors of the Company (other than
securities having such power only upon the happening of a contingency).
6..3 Limitation on Ownership of Voting Stock. Each Investor
shall not, directly or indirectly, acquire beneficial ownership of any Voting
Stock, any securities convertible into or exchangeable for Voting Stock, or any
other right to acquire Voting Stock (except, in any case, by way of stock
dividends or other distributions or offerings made available to holders of any
Voting Stock generally) without the consent of the majority vote of the Board of
Directors of the Company at a properly-noticed meeting of the Board of
Directors, if the effect of such acquisition would be to increase the Voting
Power of all Voting Stock then owned by such Investor or which it has a right to
acquire to more than 10% of the Total Voting Power of the Company at the time in
effect; provided that such Investor may acquire Voting Stock without regard to
the foregoing limitation if:
(i) a bona fide offer is made by another person or
group (not affiliated with such Investor or any Prior
Investor) to purchase or exchange for cash or other con
sideration any Voting Stock which, if successful, would result
in such person or group owning or having the right to acquire
shares of Voting Stock with aggregate Voting Power of more
than 40% of the Total Voting Power of the Company then in
effect and such offer is not withdrawn or terminated prior to
such Investor making an offer to acquire Voting Stock or
acquiring Voting Stock in response thereto (the "Offer"),
<PAGE> 24
(ii) it is publicly disclosed or Investor otherwise learns
that another person or group (not affiliated with such
Investor or any Prior Investor) has acquired any Voting Stock
which results in such person or group owning or having the
right to acquire Voting Stock with aggregate Voting Power of
more than 40% of the Total Voting Power of the Company then in
effect,
(iii) The acquisition of more than 10% of the Total Voting
Power occurs after the second yearly anniversary of the
consummation of the Company's Initial Public Offering, or
Notwithstanding the foregoing, if the Company repurchases any of its shares and
such repurchases result in Investor owning more than 10% of the Total Voting
Power of the Company at the effective time of such repurchases, the Investor
shall not be obligated to divest itself of shares of the Voting Stock to meet
the foregoing 10% limitation, but shall not acquire any additional Voting Stock
unless such acquisition would otherwise be permitted under this Section 6.3.
6..4 Notice of Voting Stock Purchases. So long as the
provisions of Section 6.3 hereof with respect to the Investor's limitation on
ownership of Voting Stock remains in effect, the Investor shall advise
management of the Company as to the Investor's plans to acquire additional
shares of Voting Stock, or rights thereto, reasonably in advance of any such
acquisition. All purchases of Voting Stock of the Company by the Investor shall
be made in compliance with applicable laws and regulations.
6..5 Voting Trust, etc. So long as the provisions of Section
6.3 hereof with respect to the Investor's limitation on ownership of Voting
Stock remains in effect, the Investor shall not deposit any shares of Voting
Stock in a voting trust or, except as otherwise provided herein, subject any
Voting Stock to any arrangement or agreement with respect to the voting of such
Voting Stock.
6..6 Solicitation of Proxies. So long as the provisions of
Section 6.3 hereof with respect to the Investor's limitation on ownership of
Voting Stock remains in effect, the Investor shall not solicit proxies with
respect to any Voting Stock, nor shall it become a "participant" in any
"election contest" (as such terms are used in Rule 14(a)-11 of Regulation 14(A)
under the Securities Exchange Act of 1934, as amended, (the "Exchange Act")
relating to the election of directors of the Company), without the Company's
prior written consent; provided, however, that the Investor shall not be deemed
to be a "participant" by reason of the membership of its designee on the
Company's Board of Directors.
6..7 Acts in Concert with Others. So long as the provisions of
Section 6.3 hereof with respect to the Investor's limitation on ownership of
Voting Stock remains in effect, the Investor shall not join a partnership,
limited partnership, syndicate or other group, or otherwise act in concert with
any third person, for the purpose of acquiring, holding, or disposing of Voting
Stock.
6..8 Agreement Not to Control. So long as the provisions of
Section 6.3 hereof with respect to the Investor's limitation on ownership of
Voting Stock remains in effect, the Investor shall not seek to control the
Company's management, Board of Directors or policies. Notwithstanding the
<PAGE> 25
foregoing, the Investor may give advice to the Company's Board of Directors and
management from time to time regarding research and development of technology.
6..9 Restrictions on Transfer of Voting Stock. So long as the
provisions of Section 6.3 hereof with respect to the Investor's limitation on
ownership of Voting Stock remains in effect, the Investor shall not, directly or
indirectly, sell or transfer any Voting Stock except (i) to the Company or any
person or group approved by the Company; or (ii) to a corporation of which the
Investor owns not less than 80% of the voting power entitled to be cast in the
election of directors (a "Controlled Corporation"), so long as such Controlled
Corporation agrees to hold such Voting Stock subject to all provisions of this
Agreement, including this Section 6.9; or (iii) pursuant to a bona fide public
offering registered under the Act of either Voting Stock or securities
exchangeable or exercisable for Voting Stock or pursuant to a rights offering or
a dividend or other distribution to stockholders of the Investor; or (iv)
pursuant to Rule 144 under the Act; or (v) subject to the Company's right of
first refusal as set forth in Section 8.1 hereof, in transactions not described
in (i), (ii), (iii), (iv) or (vi) hereof so long as such transactions do not,
directly or indirectly, result in any single person or group owning or having
the right to acquire or intent to acquire Voting Stock with aggregate Voting
Power of 1% or more of the Total Voting Power of the Company; or (vi) in
response to (1) a tender offer to purchase or exchange for cash or other
consideration any Voting Stock which is made by another person or group and is
not opposed by the Board of Directors of the Company within the time such Board
is required, pursuant to regulations under the Exchange Act, to advise Company
stockholders of such Board's position on such offer, or (2) subject to the
Company's right of first refusal as set forth in Section 7.1 hereof, any other
offer made by another person or group (except by an affiliate of the Investors)
purchase or exchange for cash or other consideration any Voting Stock which, if
successful, would result in such person or group owning or having the right to
acquire Voting Stock with aggregate Voting Power of more than 40% of the Total
Voting Power of the Company then in effect.
6..10 Confidentiality. Each Investor agrees to maintain in
confidence all books, records, documents or other information received from the
Company under this Agreement, not to disclose the same to third parties, not to
use such information other than for the purposes of this Agreement and to
obligate all of its personnel having access to such information to adhere to
this obligation of confidentiality; provided, however, that such information may
be (a) disclosed to the extent that disclosure is required pursuant to any
applicable law, regulation, judicial process or order, (b) disclosed or used
when the information has been discovered or developed by the Investor
independently of the Company and such discovery or development is documented in
writing concurrently with such discovery or development, which documentation
shall be provided to the Company upon request, or (c) disclosed or used when the
information is in the public domain through no fault of such Investor.
7. Further Agreements.
7..1 Right of First Refusal and Repurchase with Respect to
Founder Stock. In connection with the exercise of the Incentive Stock Options
granted to each of the Founders and to certain of the Company's employees (the
"Optionees") each of the Founders and the Optionees is required to execute a
Restricted Stock Purchase Agreement in substantially the form provided to
Investor's
<PAGE> 26
counsel (the "Restricted Stock Purchase Agreements"). Pursuant to the Restricted
Stock Purchase Agreements and the Restriction Agreements, the Company has the
right of first refusal in connection with the sale by the Founders and the
Optionees of any vested shares of Common Stock and the right to repurchase any
unvested shares of Common Stock. Pursuant to the assignment provisions contained
in the Restriction Agreements and the Restricted Stock Purchase Agreements, the
Company hereby agrees that if on any occasion it elects not to exercise any of
its rights of first refusal or repurchase under the Restriction Agreements or
the Restricted Stock Purchase Agreements or to exercise such rights only with
respect to a portion of the shares to which they are applicable, that it shall
so notify the Significant Holders in writing (the "Company Notice") within ten
(10) days of all of the details of the notice or even which triggered the
Company's right of first refusal or repurchase and the Significant Holders shall
thereafter have all of the rights of the Company to exercise on a pro-rata basis
the rights of first refusal and repurchase granted thereunder to the Company
with respect to all of the shares of Common Stock to which the Company's rights
apply or with respect to that portion of the shares of Common Stock that the
Company has elected not to purchase on the same terms granted to the Company
pursuant to the Restriction Agreements or Restricted Stock Purchase Agreements,
as applicable. A Significant Holder's pro rata portion, for the purposes of this
Section 7.1, is the ratio of (x) the number of shares of Preferred Stock
(determined on an as converted basis) held by such Significant Holder at the
time to (y) the total number of shares of Preferred Stock (determined on an as
converted basis) of the Company held by all Significant Holders. Each
Significant Holder shall deliver a notice to the Company stating the number of
shares of Common Stock which the Significant Holder desires to purchase pursuant
to this Section 7.1 or to sell pursuant to Section 7.2 within ten (10) days of
its receipt of the Company Notice. The Company shall notify the Significant
Holders (the "Non-Exercise Notice") of any Significant Holder's election not to
exercise, or to exercise only in part, its rights under Sections 7.1 or 7.2 and
each Significant Holder shall have a right of over-allotment to purchase the
non-exercising Significant Holder's portion on a pro-rata basis within five (5)
days from the date it receives the Non-Exercise Notice. Notwithstanding anything
to the contrary contained in the Restriction Agreements or in the Restricted
Stock Purchase Agreements, the notice provisions and time periods set forth in
Sections 7.1 and 7.2 shall control in the event the Company assigns its rights
under the Restriction Agreements or Restricted Stock Purchase Agreements to the
Significant Holders.
7..2 Co-Sale Agreement on Sale of Founder Stock.
Notwithstanding anything to the contrary contained in the Restriction Agreements
or in the Restricted Stock Purchase Agreements, in the event the Company does
not elect to purchase any or all of a Founder's shares of Common Stock subject
to the rights of first refusal set forth in the Restriction Agreements and in
the Restricted Stock Purchase Agreements apply, and in the event the Significant
Holders do not elect to purchase any or all shares of Common Stock subject to
their rights of first refusal as set forth in Section 7.1 above, then, with
respect to any shares of a Founder's Common Stock not purchased by the
Significant Holders the Founder hereby grants to the Significant Holders the
right to participate, pro rata (based upon the relative aggregate cost of each
holder's Preferred Stock), in the sale of 50% of such shares in accordance with
the following provisions of this Section 7.2:
(a) Each Significant Holder may elect to participate,
pro rata, in the proposed sale of shares of Common Stock which the selling
Founder desires to sell on the same terms as set forth
<PAGE> 27
in the Founder's notice of sale which triggered the right of first refusal, upon
delivery of notice of election to the selling Founder within the time prescribed
for exercising the Significant Holder's right of first refusal with respect to
the selling Founder's shares of Common Stock.
(b) In the event all of the Significant Holders fail
to exercise the right of co-sale within the time period allotted therefor, the
selling Founder shall have the right to sell the shares of Common Stock which
were subject to the right of co-sale on the same terms as those set forth in the
notice triggering the right of first refusal; provided, however, that the sale
is consummated within the period of time provided for in the Restriction
Agreements or the Restricted Stock Purchase Agreements, as applicable.
(c) In the event any or all of the Significant
Holders elect to exercise their rights of co-sale in a manner consistent with
Section 7.2(a), the selling Founder agrees to reduce the number of shares of
Common Stock to be sold by him, and to sell, for the account of the selling
Significant Holders that amount of Common Stock tendered for sale by the
Significant Holders. Each Significant Holder shall have a right of
over-allotment such that if any Significant Holder fails to exercise his rights
hereunder, the other Significant Holders may sell on a pro-rata basis an amount
of Shares equal to the number of Shares which the non-exercising Significant
Holder would have been permitted to sell. In no event shall the total number of
shares of Common Stock sold by the Significant Holders pursuant to their right
of co-sale exceed fifty percent (50%) of the total number of shares of Common
Stock actually being sold by the selling Founder, other than to Significant
Holders pursuant to Section 7.1, in any given sales transaction.
8. Company's Right of First Refusal.
8..1 Right of First Refusal. So long as the provisions of
Section 6.3 hereof with respect to the Investor's limitation on ownership of
Voting Stock remains in effect, prior to making any sale or transfer of Voting
Stock of the Company pursuant to Section 6.9(v), the Investor shall give the
Company the opportunity to purchase such Voting Stock in the following manner:
(i) The Investor shall give notice (the "Transfer
Notice") to the Company in writing of such intention, specifying the amount of
Voting Stock proposed to be sold or transferred, the proposed price per share
therefor (the "Transfer Price") and the other material terms upon which such
disposition is proposed to be made.
(ii) The Company shall have the right, exercisable by
written notice given by the Company to the Investor within thirty days after
receipt of such Transfer Notice, to purchase all of the Voting Stock specified
in such Notice for cash per share equal to the Transfer Price.
(iii) If the Company exercises its right of first
refusal hereunder, the closing of the purchase of the Voting Stock with respect
to which such right has been exercised shall take place within ninety (90)
calendar days after the Company gives notice of such exercise, which period of
time shall be extended in order to comply with applicable laws and regulations.
Upon exercise of its right of first
<PAGE> 28
refusal, the Company and the Investor shall be legally obligated to consummate
the purchase contemplated thereby and shall use their best efforts to secure any
approvals required in connection therewith.
(iv) If the Company does not exercise its right of
first refusal hereunder within the time specified for such exercise, the
Investor shall be free, during the period of 90 calendar days following the
expiration of such time for exercise, to sell the Voting Stock specified in such
Transfer Notice on terms no less favorable to the Investor than the terms
specified in such Notice.
8..2 Tender Offer Sale. Prior to making any sale or exchange
of Voting Stock pursuant to Section 6.9(vi)(2) in response to a tender or
exchange offer, the Investor shall give the Company the opportunity to purchase
such Voting Stock in the following manner:
(i) The Investor shall give notice (the "Tender
Notice") to the Company in writing of such intention no later than 10 calendar
days prior to the latest time by which Voting Stock must be tendered in order to
be accepted pursuant to such offer or to qualify for any proration applicable to
such offer (the "Tender Date"), specifying the amount of Voting Stock proposed
to be tendered. For purposes hereof, a tender offer to purchase Voting Stock
shall be deemed to be an offer at the price specified therein, without regard to
any provisions thereof with respect to proration or conditions to the offeror's
obligation to purchase (assuming such conditions are not impossible of
performance when the offering is made, without giving effect to the Company's
right of first refusal).
(ii) If the Tender Notice is given, the Company shall
have the right, exercisable by giving notice to the Investor at least two
calendar days prior to the Tender Date, to purchase all or any part of the
Voting Stock specified in the Tender Notice for cash. If the Company exercises
such right by giving such notice, the closing of the purchase of such Voting
Stock shall take place within ninety (90) days after the Company gives notice of
the exercise of its right of first refusal hereunder; provided, how ever, that
if the purchase price specified in the tender offer includes any property other
than cash, the value of any property included in the purchase price shall be
jointly determined by a nationally recognized investment banking firm selected
by the Company and a nationally recognized investment banking firm selected by
the Investor or, in the event such firms are unable to agree, a third nationally
recognized investment banking firm to be selected by such two firms. For this
purpose:
(x) The parties shall use their best efforts to cause
any determination of the value of any securities included in the purchase price
to be made within three business days after the date of delivery of the Tender
Notice. If the firms selected by the Investor and the Company are unable to
agree upon the value of any such securities within such three-day period, the
firms shall promptly select a third firm whose determination shall be
conclusive.
(y) The parties shall use their best efforts to cause
any determination of the value of property other than securities to be made
within seven business days after the date of delivery of the Tender Notice. If
the firms selected by the Investor and the Company are unable to agree
<PAGE> 29
upon a value within such seven-day period, the firms shall promptly select a
third firm whose determination shall be conclusive.
The purchase price to be paid by the Company pursuant to this Section 8.2 shall
be (x) if such tender offer is consummated, the purchase price that the Investor
would have received if it had tendered the Voting Stock purchased by the Company
and all such Voting Stock had been purchased in such tender offer, including any
increases in the price paid by the tender offeror, after exercise by the Company
of its right of first refusal hereunder, or (y) if such tender offer is not
consummated, the highest price offered pursuant thereto, in each case with
property, if any, to be valued as aforesaid.
(iii) If the Company does not exercise such right by
giving such notice, then the Investor shall be free to accept for all its Voting
Stock the tender offer with respect to which the Tender Notice was given.
8..3 Assignment of Rights. In the event that the Company
elects to exercise a right of first refusal under this Section 8, the Company
may specify in its notice of intention to exercise such right another person as
its designee to purchase the Voting Stock to which such notice relates. If the
Company shall designate another person as the purchaser pursuant to this Section
8, the giving of notice of acceptance of the right of first refusal by the
Company shall constitute a legally binding obligation of the Company to complete
such purchase if such person shall fail to do so.
9. Restrictions on Transferability of Shares; Compliance with the Act.
9..1 Restrictions on Transferability. In addition to the
restrictions on transfer set forth in Sections 6, 7 and 8, the Shares and the
Conversion Shares shall not be sold, assigned, transferred or pledged, except
upon the conditions specified in this Section 9, which conditions are intended
to insure compliance with the provisions of the Act and in the case of
Conversion Shares being sold pursuant to a Registration Statement, to assist in
an orderly distribution. Each Investor will cause any proposed pur chaser,
assignee, transferee or pledgee of Shares or Conversion Shares held by that
Investor to agree to take and hold those Shares or Conversion Shares subject to
the provisions and upon the conditions specified in this Section 9.
9..2 Certain Definitions. As used in this Section 9, the
following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act.
"Holder" shall mean any holder of Registrable
Securities (including any Transferee (as herein defined)) which have not been
sold to the public.
"Initiating Holders" shall mean any Holders who in
the aggregate hold 50% or more of the outstanding Registrable Securities.
<PAGE> 30
The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean (a) the
Conversion Shares (whether issued or issuable), (b) any Common Stock or other
securities of the Company issued or issuable in respect of the Conversion Shares
(or any other securities of the Company issued in respect of the Shares) on
account of any stock split, reverse stock split, stock dividend, dilution event
described in the Restated Articles of Incorporation or other similar event, (c)
any Common Stock issuable upon conversion of the Series A Preferred Stock
received upon exercise of the Series A Warrants, (d) any Common Stock issuable
upon conversion of the Series B Preferred Stock received upon exercise of the
Series B Warrants, and (e) any Shares or Conversion Shares or Common Stock
acquired pursuant to the right of first offer set forth in Section 5.8 or the
right of first refusal and repurchase with respect to Founder Stock set forth in
Section 7.1 or pursuant to any right to purchase stock from any employee
pursuant to an agreement provided for by Section 5.9; provided, however, that
shares of Common Stock or other securities shall only be treated as Registrable
Securities if and so long as (i) they have not been sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction, (ii) they have not been sold in a transaction exempt from the
registration and prospectus delivery requirement of the Act under Section 4(1)
thereof so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of each sale.
"Registration Expenses" shall mean all expenses
incurred by the Company in compliance with Sections 9.4, 9.5 and 9.6 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of
the Company required to bear or bearing the legend set forth in Section 4.3
hereof.
"Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities and all fees and disbursements of counsel for any Holder.
9..3 Notice of Proposed Transfers. The transferee of each
certificate representing Restricted Securities (a "Transferee") by acceptance
thereof agrees to comply in all respects with the provisions of this Agreement
and shall have all the rights of an Investor hereunder with respect to the
Restricted Shares. Prior to any proposed sale, assignment, transfer or pledge of
any Restricted Securities (other than under circumstances described in Sections
9.4, 9.5 and 9.6 hereof), the Holder thereof shall give written notice to the
Company of such Holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed sale, assignment,
transfer or pledge, in sufficient detail, and shall be accompanied (except in
transactions in compliance with Rule 144) by either (a) a favorable written
opinion of counsel reasonably satisfactory in form and substance to the Company
<PAGE> 31
and its counsel, to the effect that the proposed transfer of the Restricted
Securities may be effected without registration under the Act, or (b) a "no
action" letter from the Commission to the effect that the distribution of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
Holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. Notwithstanding the foregoing, Holders of Restricted
Securities and their transferees shall be permitted to transfer such Restricted
Securities without complying with the provision of this Section to (a) any
Person controlling, controlled by or under common control with such Holder or
(b) to any other Holder of Restricted Securities. Each certificate evidencing
the Restricted Securities transferred as above provided shall, subject to the
provisions of Section 4.3, bear the appropriate restrictive legend set forth
therein.
9..4 Demand Registration Rights.
(a) On two occasions, upon the demand, in writing, of
Initiating Holders that the Company effect a registration with respect to all or
any part of the Registrable Securities, the Company shall give written notice of
such demand within ten (10) days to all other Holders. The notice shall advise
such Holders of their right to participate in such demand registration, which
right may be exercised by each such Holder giving written notice to the Company
of its intention to so participate within twenty (20) days of receipt of such
notice from the Company. The Company will thereafter use its best efforts to
prepare, file and process to effectiveness a registration statement and any
amendments or supplements required to be filed to insure that such registration
statement remains effective under the Act, to permit the Holders or any of them,
or an underwriter on behalf of any of them, to offer and sell to the public the
number of Registrable Securities for which demand registration rights are
exercised hereunder. The Company shall file the aforesaid registration statement
as soon as reasonably practicable, and in any event, within sixty (60) days
following receipt of such written request. The Company shall use its best
efforts to cause such registration statement to become and remain effective
until the earlier of the sale of all of the Registrable Securities included in
the registration statement or one hundred twenty (120) days from the effective
date thereof.
(b) Notwithstanding the foregoing, the Company shall
not be obligated to register the Registrable Securities pursuant to this Section
9.4, (i) during any period within six (6) months following a prior primary or
secondary public offering of the Company's Common Stock, including any
registration of the Registrable Securities but excluding a "shelf" or continuing
registration, (ii) during any period in which the Company has commenced
preparation of a registration statement of securities and pursuant to which it
has notified the Holders of their "piggy-back" registration rights pursuant to
Section 9.4 hereof, (iii) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act, (iv) if the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith and judgment of
the Board of Directors it would be seriously detrimental to the Company or its
shareholders for a registration to be filed in the near future, then the
Company's obligation to use its best efforts to register under this Section 9.4
shall be deferred for a period not to
<PAGE> 32
exceed ninety (90) days from the receipt of the request to file such
Registration Statement by Initiating Holders; provided, however, that the
Company shall not exercise the right to defer registration granted by this
subsection (iv) more than once in any twelve-month period.
(c) The right of any Holder to registration pursuant
to Section 9.4 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 9.4 and the inclusion of such
Holder's registrable securities in the underwriting to the extent requested and
to the extent provided herein. The Company shall (together with all Holders
proposing to distribute their securities through such an underwriting) enter
into an underwriting agreement in customary form with the managing underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders (which managing underwriters shall be reasonably acceptable to the
Company). The Holders agree to be bound by the provisions of Section 9.9 herein
regarding cutbacks. If any Holder of Registrable Securities disapproves of the
terms of the underwriting, such persons may elect to withdraw therefrom by
written notice to the Company, the Managing Underwriter and the Holders
participating in the registration. The Registrable Securities and/or other
securities so withdrawn shall also be withdrawn from registration, and such
registrable securities shall not be transferred in a public distri bution prior
to ninety (90) days after the effective date of such registration.
9..5 Piggy-Back Registration Rights.
(a) On each occasion, if any, following the date
hereof that the Company contemplates filing with the Commission a registration
statement under the Act relating in whole or in part to the primary offer and
sale of shares of its Common Stock, other than a registration statement which
exclusively relates to the registration of securities under (i) an employee
stock option, bonus or other compensation plan, or (ii) a registration relating
solely to a transaction under Rule 145 promulgated by the Commission, the
Company shall so notify the Holders in writing of its intention to do so at
least thirty (30) days prior to the filing of each such registration statement.
Each Holder who gives written notice to the Company, within twenty (20) days of
receipt of such notice from the Company, of such Holder's desire to have any of
its Registrable Securities included in such registration statement, may, subject
to the provisions of this Section 9.5, have its Registrable Securities so
included. The Company shall file any required amendments of or supplements to
any registration statement filed pursuant to this Section 9.5 and otherwise use
its best efforts to insure that such registration statement remains in effect
under the Act until the earlier of the sale of all of the Registrable Securities
included in the registration or the expiration of one hundred twenty (120) days
from the effective date thereof.
(b) If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 9.5(a). In such event the right of any Holder to
registration pursuant to Section 9.5 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the
<PAGE> 33
Company (or by the Holders who have demanded such registration). The Holders
agree to be bound by the terms and conditions of Section 9.9 hereof regarding
cutbacks.
(c) The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 9.5 prior to the
effectiveness of such registration whether or not any Holder has elected to
include securities in such registration.
9..6 Registration on Form S-3.
(a) The Company shall use its best efforts to qualify
for registration on Form S-3 or any comparable or successor form. After the
Company has qualified for the use of Form S-3, in addition to the rights
contained in Sections 9.4 and 9.5, the Holders of Registrable Securities shall
have the right to demand that the Company promptly use its best efforts to
effect one registration per annum on Form S-3, provided, such request shall be
made with respect to an amount of Registrable Securities which have a reasonably
anticipated aggregate price to the public of not less than $750,000.
(b) Notwithstanding the foregoing, the Company shall
not be obligated to take any action pursuant to this Section 9.6 (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Act, (ii) during the period starting with the date sixty (60)
days prior to the filing of and, ending on a date six (6) months following the
effective date of a registration statement (other than with respect to a
registration statement relating to a Rule 145 transaction, or with respect to
securities offered solely to employees), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective, or (iii) if the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed ninety (90)
days from the receipt of the request to file such registration by the Holders;
provided, however, that the Company shall not exercise the right to defer
registration granted by this subsection (iii) more than once in any twelve-month
period.
9..7 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) Make and keep public information available as
those terms are understood and defined in Rule 144 under the Act, at all times
from and after 90 days following the effective date of the first registration
under the Act filed by the Company for an offering of its securities to the
general public;
<PAGE> 34
(b) Use its best efforts to file with the Commission
in a timely manner all reports and other documents required of the Company under
the Act and the Exchange Act at any time after it has become subject to such
reporting requirements; and
(c) So long as a Holder owns any Restricted
Securities, furnish to the Holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of Rule 144 (at
any time from and after 90 days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
9..8 Expenses of Registration. Subject to any Blue Sky
requirements with respect to the allocation of expenses, all Registration
Expenses incurred in connection with registration statements under Section 9.5
and the first two registration statements filed by the Company pursuant to
Sections 9.4 and 9.6, shall be borne by the Company, and all Selling Expenses
shall be borne by the holders of the Registrable Securities so registered pro
rata on the basis of the number of their shares of Registrable Securities so
registered; provided, however, that the Company shall not be required to pay any
Registration Expenses if, as a result of the withdrawal of a request for
registration by Initiating Holders (unless in response to a material adverse
change in the Company), the registration statement does not become effective, in
which case the Holders requesting registration shall bear such Registration
Expenses pro-rata on the basis of the number of their shares of Registrable
Securities so included in the registration request; provided, further, that such
registration shall not be counted as a registration pursuant to Sections 9.4,
9.5 or 9.6.
9..9 Cutbacks. In the event the underwriter for a registration
statement filed pursuant to Sections 9.4, 9.5 or 9.6 advises the Company in
writing that the number of Registrable Securities proposed to be sold in any
such offering or sale is greater than the number of shares which the underwriter
believes feasible to sell at that time at the price and upon the terms approved
by or on behalf of the Company with respect to a registration statement filed
under Section 9.5 or on behalf of the Holders holding a majority of the
Registrable Securities to be included in such registration statement with
respect to a registration statement to be filed under Section 9.4 or 9.6, then
the number of Registrable Securities which the underwriter believes may be sold
shall (a) in the case of a registration statement filed under Section 9.5, first
be allocated to the Company and the remaining Registrable Securities shall be
allocated among the Holders in proportion to the Registrable Securities each
first proposed for inclusion in the registration statement and (b) in the case
of a registration statement filed under Sections 9.4 or 9.6, be allocated to the
Holders in proportion to the number of Registrable Securities each first
proposed for inclusion in the registration statement.
9..10 Additional Covenants Concerning Sale of Shares. In
connection with any registration statement referred to in Section 9 of this
Agreement, the Company shall furnish to each Holder whose shares of Registrable
Securities are included therein (or to any broker or other person at
<PAGE> 35
its request) a reasonable number of copies of such registration statement, each
amendment and supple ment thereto and each document included therein, such
number of copies of the then current prospectus included therein as they may
from time to time reasonably request, and a copy of the opinion of counsel to
the Company and a copy of the Company's accountants' "cold comfort letter" which
are delivered to the underwriter, if such counsel or accountants, as the case
may be, so consent.
9..11 Blue Sky Provisions. Except in those jurisdictions in
which the Company would be required to execute a general consent to service of
process, the Company, at its expense, shall endeavor to cause any of the
Registrable Securities included in a registration statement referred to herein
to be qualified under the laws of such number of jurisdictions as the Holders,
or the managing underwriter named herein, may reasonably designate, and the
Company will continue such qualification in effect so long as may be necessary
to comply with all applicable laws regulating sales of securities.
9..12 Advising the Holders. In connection with any
registration statement referred to in Section 9 hereof, the Company will
promptly advise each Holder whose Registrable Securities are included therein,
and confirm such advice in writing (a) when the registration statement has
become effective, (b) upon the filing of any amendment or supplement to the
registration statement, (c) when any post-effective amendment to the
registration statement becomes effective, and (d) of any request by the
Commission for any amendment or supplement to the registration statement or
prospectus or for additional information. If at any time the Commission should
institute or threaten to institute any proceeding for the purpose of issuing, or
should issue, a stop order suspending the effectiveness of the registration
statement, the Company will promptly notify the Holders whose Registrable
Securities are included in such registration statement, and will use its best
efforts to prevent the issuance of any such stop order or to obtain the
withdrawal thereof as soon as possible; and the Company will advise the Holders
promptly of any order or communication of any public board or body addressed to
the Company suspending or threatening to suspend the qualification of any shares
of Common Stock for sale in any jurisdiction.
9..13 Indemnification.
(a) With respect to the registration rights described
in Section 9 hereof, the Company hereby agrees to indemnify, hold harmless and
defend each Holder and each Person who controls, is controlled by or under
common control of any such Holder within the meaning of the Act, against any and
all losses, claims, damages, liabilities and expenses (including reasonable
legal and other expenses incurred in investigating and defending against the
same), to which they, or any of them, may become subject under the Act or other
statute or common law, arising out of or based upon (i) any alleged untrue
statement of a material fact contained in any registration statement or
prospectus included therein, or any amendment thereof or supplement thereto, or
(ii) the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements contained therein not misleading;
provided, however, that the indemnity contained in this Section 9.13(a) shall
not apply to any such alleged untrue statement or omission made in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such Holder. As soon as practicable after the receipt by any Holder of
notice of any claim or action against any of the Holders in respect of which
<PAGE> 36
indemnity may be sought from the Company hereunder, such Holder shall notify the
Company thereof in writing, and the Company shall assume the defense of such
claim or action (and the cost thereof) by counsel of its own choosing, who shall
be reasonably satisfactory to a majority in interest of the Holders.
(b) Each Holder whose Registrable Securities are
included in a registration statement, severally but not jointly, hereby agrees,
to indemnify, hold harmless and defend the Company, its directors and officers,
and each Person who controls, is controlled by or under common control of the
Company within the meaning of the Act, and each other Holder against any and all
losses, claims, damages, liabilities and expenses (including reasonable legal or
other expenses incurred in investigating and defending against the same), to
which they or any of them may become subject under the Act or other statute or
common law, arising out of or based upon (i) any alleged untrue statement of a
material fact contained in any such registration statement or prospectus
included therein, or any amendment thereof or supplement thereto, or (ii) the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements contained therein not misleading; provided,
however, that the indemnity contained in this Section 9.13(b) shall apply in
each case only to the extent such statement or omission was made solely in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder in connection with the preparation of the
registration statement. The Company, and any other person in respect of which
indemnity may be sought from a Holder hereunder, shall, as soon as practicable
after the receipt of notice of any claim or action against the Company or such
other person or entity, notify such Holder thereof in writing and such Holder
shall assume the defense of any such claim or action (and the cost thereof) by
counsel of its own choosing, who shall be reasonably satisfactory to the Company
and a majority in interest of any Holders claiming indemnity hereunder.
9..14 Registration under the Exchange Act. If the Company
shall at any time have completed a public offering of shares of its Common
Stock, it shall thereafter take such steps as may be necessary to register its
Common Stock under Section 12 of the Exchange Act (whether or not required by
law to do so), to maintain such status, and to file with the Commission all
current reports and other information as may be necessary to enable the
Investors or the Transferees to effect sales of their Conversion Shares in
reliance upon Rule 144 under the Act.
9..15 Information by Holder. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Holder or Holders, the registrable securities
held by them and the distribution proposed by such Holder or Holders as the
Company may reasonably request in writing and as shall be required in connection
with any registration referred to in this Section 9.
9..16 Transfer of Registration Rights. The rights to cause the
Company to register securities granted to Holders under Sections 9.4, 9.5 and
9.6 may be assigned to a transferee or assignee in connection with any transfer
or assignment by a Holder of at least Ten Thousand (10,000) Shares of
Registrable Securities, subject to adjustment for any dilution event described
in the Certificate of Determination or similar event; provided, however, that
the Company is given written notice by the Holder effecting such transfer or
assignment.
<PAGE> 37
9..17 Standoff Agreement. Each Holder agrees in connection
with any registration of the Company's securities that, upon request of the
Company or the underwriters managing any under written offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration statement) without the prior written consent
of the Company or such underwriters, as the case may be, for such period of time
(not to exceed 120 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters; provided, however, that
all officers and directors of the Company have entered into substantially
similar agreements. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
9..18 Termination of Rights. The rights of any particular
Holder to cause the Company to register securities under Sections 9.4, 9.5 and
9.6 shall terminate with respect to such Holder following a bona fide, firmly
underwritten public offering of shares of Common Stock registered under the Act
at such time as such Holder is able to dispose of all of his Registrable
Securities in one three-month period, pursuant to the provisions of Rule 144.
10. Survival of Representations, Warranties and Covenants.
10..1 Survival of Representations, Warranties and Covenants of
the Company. The Investors shall have the right to rely fully upon the
representations, warranties and covenants of the Company contained in this
Agreement (notwithstanding any knowledge of facts determined or determinable by
the Investors). All such representations and warranties shall survive the
execution and delivery hereof and the Closing, and, except as otherwise
specifically provided in this Agreement, shall thereafter terminate and expire
on the earlier of (a) the second anniversary of the Closing Date and (b) the
consummation of the Initial Public Offering by the Company. The covenants of the
Company contained herein shall continue until they lapse in accordance with the
provisions of this Agreement.
10..2 Survival of Representations and Warranties of the
Investors. The Company shall have the right to rely fully upon the
representations and warranties of the Investors contained in this Agreement
(notwithstanding any knowledge of facts determined or determinable by the
Company). All such representations, warranties, covenants and agreements shall
survive the execution and delivery hereof and the Closing and, except as
otherwise specifically provided in this Agreement, shall thereafter terminate
and expire on the earlier of (a) the second anniversary of the Closing Date and
(b) the consummation of the Initial Public Offering by the Company. The covenant
made by the Investors in Section 4.3 hereof shall survive indefinitely, unless a
lesser period is prescribed by an applicable statute.
11. Conditions Precedent to Obligations of the Investors. The
obligations of each Investor to consummate the purchase of the Shares in the
Closing shall be conditioned on the following:
11..1 Representations and Warranties Correct. Each of the
representations and warranties of the Company contained in this Agreement and in
any certificate delivered to the Investors
<PAGE> 38
pursuant hereto shall in all material respects be true and correct when made and
as of the Closing Date, with the same effect as if made at the Closing Date (or
the date to which it relates in the case of any representation or warranty which
specifically relates to an earlier date).
11..2 Compliance with This Agreement. The Company shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by the Company on or prior to the Closing Date.
11..3 Satisfaction of Investors and Their Counsel. All
corporate proceedings taken in connection with the transactions contemplated by
this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form to each Investor and its counsel.
11..4 No Actions or Proceedings. No action, suit or proceeding
by or before any court, agency or other governmental body shall have been
asserted, instituted or threatened by any party to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
11..5 Opinion of Company's Counsel. The Company shall have
delivered to the Investors an opinion of Wilson, Sonsini, Goodrich & Rosati,
counsel for the Company, addressed to the Investors and dated as of the Closing
Date in substantially the form attached hereto as Exhibit B.
11..6 Officer's Certificate. The Investors shall have received
a certificate dated the Closing Date and signed by the President certifying the
fulfillment of the conditions by the Company specified in this Section 11 and
that he does not have any knowledge of any facts which have not been disclosed
to the Investors in writing which will or may reasonably be expected to have any
material adverse effect on the value of the assets, properties, business,
goodwill or prospects of the Company. General economic conditions shall not be
deemed a fact within the meaning or application of this paragraph.
11..7 Certificate of Secretary or Assistant Secretary. The
Investors or their counsel shall have received a certificate dated the Closing
Date and signed by the Secretary or Assistant Secretary of the Company
certifying as to:
(a) the Restated Articles of Incorporation in the
form attached as Exhibit A hereto;
(b) the By-Laws of the Company;
(c) resolutions of the Board authorizing and
approving the execution and delivery of this Agreement and all documents
required to be delivered pursuant hereto by the Company, and the performance of
its obligations hereunder and that such resolutions are in full force and effect
on and as of the Closing Date;
<PAGE> 39
(d) resolutions of the shareholders of the Company
approving the Restated Articles of Incorporation of the Company and that such
resolutions are in full force and effect on and as of the Closing Date; and
(e) the incumbency and signature of each of the
officers of the Company signing this Agreement and any of the documents
delivered hereunder.
11..8 Delivery of Documents. All of the documents and
resolutions required to be delivered by the Company to the Investors at closing
shall have been delivered.
11..9 Other Investors. No sale to any Investor of Series C
Shares shall be consummated unless at least two Investors shall have agreed to
purchase its respective Closing Shares upon the terms set forth herein.
11..10 No Lapse in Insurance Coverage. No lapse shall have occurred
prior to the Closing Date in the coverage provided under any of the policies of
insurance of the Company, including any liability policies, which relate to the
business, assets, properties or employees of the Company.
11..11 Employee Agreements and Nondisclosure Agreements. The
Employee Agreements and Nondisclosure Agreements shall continue to be in full
force and effect.
11..12 Government Approvals. All filings, consents, approvals,
qualifications, registrations or expirations of waiting periods required or
imposed by any governmental agency or ministry necessary for the sale, delivery
or purchase of the Series C Shares, including such requirements under applicable
state securities laws and Japanese law, shall have been filed, occurred or been
obtained.
12. Conditions Precedent to the Obligation of the Company. Except as
may be waived in writing by the Company, the obligations of the Company to
consummate the sale of the Shares herein provided for shall be conditioned upon
the following:
12..1 Representations and Warranties Correct. Each of the
representations and warranties of each Investor in this Agreement and in any
certificate delivered to the Company pursuant hereto certifying the fulfillment
of the conditions by such Investor specified in this Section 12 shall in all
material respects be true and correct when made and as of the Closing Date (or
on the date to which it relates in the case of any representation or warranty
which specifically relates to an earlier date).
12..2 Compliance with this Agreement. Each Investor shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by such Investor on or prior to the Closing Date.
12..3 Satisfaction of Company and its Counsel. All corporate,
partnership and other proceedings taken in connection with the transactions
contemplated by this Agreement, and all documents
<PAGE> 40
incident thereto, shall be reasonably satisfactory in form to the Company and
its counsel, Wilson, Sonsini, Goodrich & Rosati.
12..4 No Actions or Proceedings. No action, suit or proceeding
by or through any court, agency or other governmental body shall have been
asserted, instituted or threatened by any party to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
12..5 Other Investors. No sale to any Investor of Series C Shares
shall be consummated unless at least two Investors shall have agreed to purchase
its respective Closing Shares upon the terms set forth herein.
12..6 Government Approvals. All filings, consents, approvals,
qualifications, registrations or expirations of waiting periods required or
imposed by any governmental agency or ministry necessary for the sale, delivery
or purchase of the Series C Shares, including such requirements under applicable
state securities laws and Japanese law, shall have been filed, occurred or been
obtained.
13. Documents to be Delivered at Closing.
13..1 Documents to be Delivered by the Company at the Closing.
At the Closing the Company shall deliver to each of the Investors:
(a) the Restated Articles of Incorporation, in the
form attached as Exhibit A hereto, certified by the Secretary of State of the
State of California;
(b) an opinion, dated the Closing Date, of Wilson,
Sonsini, Goodrich & Rosati, counsel to the Company, in substantially the form
attached as Exhibit B hereto;
(c) a certificate of the President certifying as to
the matters set forth in Section 11.6;
(d) a certificate of the Secretary or Assistant
Secretary certifying as to the matters set forth in Section 11.7;
(e) a Good Standing Certificate certified by the
Secretary of State of the State of California as to the good standing of the
company in California;
(f) a Tax Certificate from the Franchise Tax Board
stating that the Company does not owe any franchise taxes to the State of
California;
(g) certificates representing the Series C Shares
being purchased by such Investor; and
<PAGE> 41
(h) such other documents as any Investor or its
counsel shall have reasonably requested.
13..2 Documents to be Delivered by the Investors at the
Closing. At the Closing, each Investor shall deliver to the Company:
(a) the Purchase Price for such Investor as set forth
opposite that Investor's name on Schedule 1.2 upon the terms of payment provided
for in Section 1.3;
(b) such other documents as the Company or its
counsel shall have reasonably requested.
14. Miscellaneous.
14..1 Definition of Person. "Person" for purposes of the
Agreement means an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture or other entity
of whatever nature.
14..2 Definition of Knowledge. "To the best of the Company's
knowledge" shall mean the actual knowledge of the Company or information which
it should have obtained after due inquiry into the conduct of the Company's
business and matters related thereto.
14..3 Additional Actions. The parties shall execute and
deliver such other and further instruments and perform such other and further
acts as may reasonably be required fully to consummate the transactions
contemplated hereby.
14..4 Expenses. Each party to this Agreement agrees to pay its
expenses and the expenses of its agents, employees and attorneys, incurred in
connection with the negotiation, review and execution of this Agreement and
other ancillary documents called for in this Agreement and the consummation of
the transactions contemplated hereby.
14..5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
14..6 Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable by any
party hereto without the prior written consent of the other parties.
14..7 Notices. All notices or other communications hereunder
shall be in writing and shall be mailed, certified or registered mail, return
receipt requested, or shall be sent by messenger or by electronic transmission,
addressed to such party at the address indicated on Schedule 14.7 or to any such
other address as any such party shall specify in a notice to the Company, and,
if intended for the
<PAGE> 42
Company, with a copy to Wilson, Sonsini, Goodrich & Rosati, Two Palo Alto
Square, Suite 900, Palo Alto, California 94306, Attention: Henry P. Massey, Jr.,
Esq.
14..8 Applicable Laws. This Agreement shall be construed and
governed by the laws of the State of California applicable to contracts made and
to be performed within such state.
14..9 Entire Agreement. This Agreement constitutes the entire
Agreement between the parties hereto, and no party hereto shall be bound by any
communications between them on the subject matter hereof unless such
communications are in writing and bear a date contemporaneous with or subsequent
to the date hereof. Any prior written agreements or letters of intent between
the parties shall, upon execution of this Agreement, be null and void.
14..10 Waivers and Amendments; Noncontractual Remedies;
Preservation of Remedies. This Agreement (except for sections 2, 5.8, 7.1, 7.2,
9 and 14.10) may be amended, superseded, cancelled, renewed or extended, and the
terms hereof may be waived, only by a written instrument duly executed and
acknowledged with the same formality as this Agreement, and signed by the
Investors (or their Transferees) holding at least two-thirds of the Series C
Shares or shares of Common Stock issued upon conversion of the Series C Shares;
and sections 2, 5.8, 7.1, 7.2, 9 and 14.10 of this Agreement may be amended,
superseded, cancelled, renewed or extended, and the terms hereof may be waived,
only by a written instrument duly executed and acknowledged with the same
formality as this Agreement, and signed by the holders (or their Transferees)
holding at least two thirds of each of the Series A Shares, the Series B Shares
and the Series C Shares (and shares of Common Stock issued upon conversion of
the Series A Shares, the Series B Shares and the Series C Shares). No delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege.
14..11 Table of Contents; Captions. The Table of Contents and the
captions of the various sections of this Agreement are inserted for convenience
of reference only, and shall not constitute a part hereof.
14..12 Schedules and Exhibits Part of Agreement. The Schedules and
Exhibits referred to herein and delivered pursuant hereto, including any
amendments thereto or changes therein prior to the Closing Date, shall be deemed
part of this Agreement as fully and effectively as if set forth at length
herein.
14..13 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
<PAGE> 43
14..14 Obligation of the Company to Indemnify. The Company hereby
agrees to indemnify, defend and hold harmless each Investor (and any of such
Investor's directors, officers, employees, affiliates and assigns) from and
against any and all actual losses, liabilities, damages, deficiencies, costs or
expenses (including interest, penalties and reasonable attorneys' fees and
disburse ments,) ("Losses") which it has incurred arising solely out of any
material inaccuracy in or any material breach of any material representation,
warranty, covenant or agreement of the Company contained in this Agreement.
14..15 Obligation of the Investors to Indemnify. Each Investor,
severally and not jointly, agrees to indemnify, defend and hold harmless the
Company (and its directors, officers, employees, affiliates and assigns) from
and against any Losses which it may incur arising solely out of any material
inaccuracy in or material breach of any material representation, warranty,
covenant or agreement of such Investor contained in this Agreement.
14..16 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after
receipt by any party hereto (the "Indemnitee") of notice of any demand, claim or
circumstances which, with the lapse of time, would give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party
(or parties) obligated to provide indemnification pursuant to Sec tion 14.14
(the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated, if
necessary) of the Loss that has been or may be suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may
elect to compromise or defend, at its own expense and by its own counsel, any
Asserted Liability. If the Indemnifying party elects to compromise or defend
such Asserted Liability, it shall, within 30 days (or sooner, if the nature of
the Asserted Liability so requires) notify the Indemnitee of its intent to do
so, and the Indemnitee shall reasonably cooperate, at the expense of the
Indemnifying Party, in the compromise of or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may consent to settlement or compromise of any such Asserted Liability over the
objection of the other; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld, and provided further that the
Indemnifying Party shall not be liable to the Indemnitee for more than the
Indemnifying Party could have settled any Asserted Liability but for the
objection of the Indemnitee. In any event, the Indemnitee and the Indemnifying
Party may participate, at their own expense, in the defense of such Asserted
Liability.
14..17 Limitation and Exclusive Remedy. IN NO EVENT WILL
INDEMNIFICATION BE MADE BY THE COMPANY OR BY AN INVESTOR, AS THE CASE MAY BE,
ARISING OUT
<PAGE> 44
OF THIS AGREEMENT, REGARDLESS OF THE FORM IN WHICH ANY LEGAL OR EQUITABLE ACTION
MAY BE BROUGHT, EXCEED THE INVESTOR'S PURCHASE PRICE OR BE MADE FOR ANY SPECIAL,
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED EVEN IF THE
INVESTOR OR THE COMPANY, AS THE CASE MAY BE, HAS KNOWLEDGE OF THE POSSIBILITY OF
THE POTENTIAL LOSS OR DAMAGE, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL
PURPOSE OF ANY LIMITED REMEDY.
Sections 14.14, 14.15 and 14.16 shall be the exclusive remedy for an Indemnitee
with respect to matters set forth in this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date and year first above written.
"COMPANY"
CYMER LASER TECHNOLOGIES
By:
Name: Robert P. Akins
Title: President
"INVESTORS"
--------------------------------
(Name)
--------------------------------
(Signature)
--------------------------------
(Title)
"FOUNDERS"
--------------------------------
(Name)
<PAGE> 45
--------------------------------
(Signature)
<PAGE> 46
SCHEDULE 1.1
Founders
Robert Akins
Martin Pedley
Richard Sandstrom
Uday Sengupta
<PAGE> 47
SCHEDULE 1.2
Investors
Per Share
Name Price Closing Shares Purchase Price
*
Canon Inc. $7.00
Nikon Corporation $7.00
GCA Corporation $7.00
--------
* The parties agree that the Purchase Price must be at least 50% paid in
cash, wire transfer or bank check. The parties further agree that the
Purchase Price per investor must be at least U.S. $700,000 and may not
exceed U.S. $2,100,000.
<PAGE> 48
SCHEDULE 1.3
Secured Promissory Note
$___________________ April 16, 1990
San Diego, California
FOR VALUE RECEIVED, _____________________ ("Maker") promises to pay to
CYMER Laser Technologies ("Creditor"), at the Creditor's principal office, or
order, ($________), together with interest from the date of this note on the
unpaid principal balance at a rate equal to ten percent (10%) per annum,
compounded annually.
This note shall become immediately due and payable on December 31,
1990.
Payment shall be made in lawful tender of the United States and shall
be credited first to the accrued interest then due and payable and the remainder
applied to principal. Prepayment of principal, together with accrued interest,
may be made at any time without penalty.
Payment of this note is secured by a Security Agreement executed by the
Maker and Creditor, dated April 16, 1990 ("Security Agreement"). Additional
rights of the holder of this note are set forth in the Security Agreement.
If action is instituted to collect this note, the Maker promises to pay
all costs and expenses, including reasonable attorneys' fees, incurred in
connection with such action. The Maker hereby waives notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor
and all other notices or demands relative to this instrument.
This note shall be construed in accordance with the internal laws of
the State of California.
MAKER
By:____________________________
Title:_________________________
<PAGE> 49
SCHEDULE 3.0
Exceptions to Representations and Warranties
Set forth below are exceptions to the representations and warranties of
the Company made in Section 3.0 of the attached Agreement. All disclosures and
exceptions are intended to modify all of the Company's representations and
warranties, and the section headings used below are for convenience only.
3.1 Organization and Standing; Articles and Bylaws
The Company is in the process of qualifying to do business in the state
of Massachusetts.
3.8 Absence of Undisclosed Liabilities and Obligations
See Section 3.13 below.
3.10 Real Property
The Company currently leases property at the following locations:
Units E, F, G and H
7887 Dunbrook Rd.
San Diego, California
Units B, C, D, E and F
7867 Dunbrook Rd.
San Diego, California
Suite 150L
1 Longfellow Center
526 Boston Post Rd.
Wayland, Massachusetts
1-22-6 Ichikawa
Ichikawa
Chiba, Japan 272
3.11 Tangible Assets and Equipment
The Company currently leases:
two Nuclecel Static Eliminators
two Propylene Nozzle
one Ricoh 6620 Copier
two Ricoh Fax 75
<PAGE> 50
3.13 Patent and Trademarks
Cymer Laser Technologies has applied for a patent dated January 15,
1988, U.S. Patent Office Serial No. 144799, entitled "Compact Excimer Laser".
Cymer is aware of certain patents issued to Mr. Gordon Gould in October
1977 and July 1979 as well as certain other patent applications of Mr. Gould
believed to be pending before the U.S. Patent Office which relate to certain
elements of basic laser technology. These claims of Mr. Gould have raised a
state of confusion in the laser industry, in that many of these claims may have
been covered by prior patents issued to others and under which many
manufacturers of lasers have paid royalties pursuant to licensing arrangements.
During fiscal 1987 two courts upheld the Gould patents as valid. However,
neither of these decisions is binding upon Cymer and no determination has been
made as to whether Cymer's products infringe the Gould patents. All rights to
the Gould Patents have since been transferred to Patlex Corporation. On October
11, 1989 the Company signed a patent license agreement with Patlex, with the
effective date of such agreement retroactive to January 1988. The Company has
agreed to pay Patlex a royalty of five percent of the portion of the net selling
price relevant to the licensed patents on shipments to customers in the United
States and Canada. On sales to customers in other than the U.S. and Canada the
royalty will be two percent. In signing the license agreement, the Company
settled with Patlex on the complete payment of all royalties for past shipments
dating from January 1988 to January 31, 1990. There were no shipments by the
Company prior to January 1988.
The Company received a letter dated July 29, 1987 from Questek, Inc.
relating to United States Patent No. 4,611,270 requesting information regarding
possible patent infringement. The Company responded on August 26, 1987 that it
did not believe that any of its products infringed on the stated patent.
3.16 Litigation
See Section 3.13 above.
3.18 Environmental Compliance Matters
The Company is currently storing acetone, methanol, isopropyl alcohol,
paint thinner and other common cleaning agents in quantities less than four
gallons each. All of the Company's cleaning agents are stored in a safety
cabinet meeting National Fire Protection Association Flammable and Combustible
Liquid Code #30 and OSHA requirements #'s 3W208, #2W209 and 3W313. the Company
has contracted with a third party to remove the wastes.
The Company is also storing compressed gas cylinders used in the
testing and manufacture of gas lasers. The Company's cylinders are stored in an
upright secure manner.
14.7 Addresses
<PAGE> 51
Cymer Laser Technologies
7887 Dunbrook Road
San Diego, California 92126
Attn: Dr. Robert Akins
Mr. Martin B. Pedley
Nikon Corporation
Tokio Kaijo Building
Shinkun 1 of 2-1
Maruhouchi 1-chome
Chiyoda-ku
Tokyo 100, Japan
Canon, Inc.
Legal Department
Shinjuku Dai-ichi Seimei Building
7-1, Nishi-Shinjuku-ku, 2-chome
Tokyo 163, Japan
GCA Corporation
7 Shattuck Road
Andover, MA 01810
with copies to:
Wilson, Sonsini, Goodrich & Rosati
Two Palo Alto Square, Suite 900
Palo Alto, CA 94306
Attn: Henry P. Massey, Jr., Esq.
<PAGE> 52
FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CYMER LASER TECHNOLOGIES
Robert Akins and Martin Pedley certify that:
1. They are the President and the Secretary, respectively, of CYMER
LASER TECHNOLOGIES, a California corporation (the "Company").
2. The articles of incorporation of the Company, as amended to the
date of the filing of this certificate, including amendments set forth herein
but not separately filed (and with the omissions required by Section 910 of the
California General Corporations Law) are restated as follows (hereinafter
referred to as the "First Amended and Restated Articles of Incorporation"):
I.
The name of this corporation is: CYMER LASER TECHNOLOGIES (the
"Company").
II.
The purpose of the Company is to engage in any lawful act or activity
for which a corporation may be organized under the California General
Corporation Law, other than the banking business, the trust company business, or
the practice of a profession permitted to be incorporated by the California
General Corporation Law.
III.
The Company is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares of Common Stock authorized to be issued is Twelve
Million Five Hundred Thousand (12,500,000), $.01 par value per share. The total
number of shares of Preferred Stock authorized to be issued is Five Million Five
Hundred Thousand (5,500,000), $.01 par value per share. The Preferred Stock
shall be issued in three series. The first series of Preferred Stock shall be
designated as 8% Non-Cumulative Voting Redeemable Convertible Series A Preferred
Stock (the "Series A
<PAGE> 53
Preferred Stock") and shall consist of Three Million (3,000,000) shares with the
rights, preferences, privileges and restrictions set forth below. The second
series of Preferred Stock shall be designated as 8% Non-Cumulative Voting
Redeemable Convertible Series B Preferred Stock (the "Series B Preferred Stock")
and shall consist of One Million Five Hundred Thousand (1,500,000) shares with
the rights, preferences, privileges and restrictions set forth below. The third
series of Preferred Stock shall be designated as 8% Non-Cumulative Voting
Redeemable Convertible Series C Preferred Stock (the "Series C Preferred Stock")
and shall consist of One Million (1,000,000) shares with the rights, prefer
ences, privileges and restrictions set forth below. The rights, preferences,
privileges and restrictions granted to and imposed upon the Preferred Stock are
as follows:
A. Dividend Rate. The holders of record of shares of Series A, Series
B and Series C Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors of the Company (the "Board") out of any
assets of the Company legally available therefor, an annual cash dividend at the
rate per share of 8% of the Liquidation Value (as hereinafter defined) of the
respective series, which shall be payable on the payment dates fixed from time
to time by the Board or a duly autho rized committee thereof. "Series A
Liquidation Value," "Series B Liquidation Value" and "Series C Liquidation
Value" shall mean $1.60, $3.40 and $7.00 per share, respectively. No dividends
(other than those payable solely in Common Stock) shall be declared or paid or
set aside for payment or other distribution made with respect to the Common
Stock during any fiscal year of the Company nor shall any shares of Common Stock
be redeemed, purchased or otherwise acquired by the Company until a dividend
equal to 8% per annum of the applicable Liquidation Value per share of Series A,
Series B and Series C Preferred Stock has been paid or declared and set apart
during the fiscal year. If in the event of the declaration of a dividend, the
assets and funds thus distributed among the holders of Series A, Series B and
Series C Preferred Stock shall be insufficient to permit the payment to such
holders of the full dividend, then such assets and funds shall be distributed
ratably among the holders of the Series A, Series B and Series C Preferred Stock
(in proportion to the applicable Liquidation Values). Any reference in these
First Amended and Restated Articles of Incorporation to Common Stock includes
any other class or series of Common Stock that may be authorized from time to
time. The foregoing restriction on redemption, repurchase or acquisition of
Common Stock shall be inapplicable to (i) the redemption provisions of these
First Amended and Restated Articles of Incorporation, (ii) any payments in lieu
of issuance of fractional shares thereof whether upon any merger, conversion,
stock dividend or otherwise, (iii) repurchases of Common Stock by the Company
pursuant to the terms of the Company's Incentive Stock Option Plan or the Common
Stock Restriction Agreements entered into by the Company with each of Robert P.
Akins, Uday Sengupta, Richard L. Sandstrom, Martin B. Pedley and Donald G.
Larson and any other repurchases by the Company under circumstances comparable
to those contemplated by the Company's Incentive Stock Option Plan or the Common
Stock Restriction Agreements or (iv) the rescission of any acquisition by the
Company pursuant to which such stock was issued. Dividends on the Series A,
Series B and Series C Preferred Stock shall not be cumulative and no rights to
dividends shall accrue to the holders of Series A, Series B and Series C
Preferred Stock in the event that the Company shall fail to declare or pay
dividends in whole or in part on the Series A, Series B and Series C Preferred
Stock, respectively, in any previous fiscal year of the Company, whether or not
the earnings of the Company in that previous fiscal year were sufficient to pay
such dividends in whole or
<PAGE> 54
in part. After dividends in the amount of 8% per annum of the Liquidation Value
per share on the Series A, Series B and Series C Preferred Stock have been paid
or declared and set aside in any one fiscal year of the Company, if the Board
shall elect to declare additional dividends out of funds legally available
therefor in that fiscal year, such additional dividends shall be paid on the
Common Stock and on the Series A, Series B and Series C Preferred Stock as if
the Series A, Series B and Series C Preferred Stock had been converted prior to
the payment of the additional dividends.
B. Voting.
(i) Subject to subsection (ii) hereof, each holder of the Series
A, Series B and Series C Preferred Stock shall be entitled to vote on all
matters submitted to a vote (or to give their written consent in lieu of a vote)
of stockholders of the Company and, with respect to such vote, shall be entitled
to cast the number of votes he would have been entitled to cast had he converted
all of his shares of Series A, Series B and Series C Preferred Stock into Common
Stock immediately prior to such vote. Except as otherwise provided herein or
required by law, the holders of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Common Stock shall vote together
and not as separate classes or series.
(ii) The holders of shares of Common Stock voting separately as a
class shall elect two members of the Board of Directors of the Company, the
holders of shares of Series A Preferred Stock voting separately as a class shall
elect two members of the Board of Directors of the Company, and the holders of
shares of Series B Preferred Stock voting separately as a class shall elect one
member of the Board of Directors. Additional members of the Board of Directors,
if any, shall be elected by the holders of shares of Common Stock and Series A,
Series B and Series C Preferred Stock voting together as a single class. If a
vacancy on the Board of Directors is to be filled by the Board of Directors,
only a director or directors elected by the same class of stockholders as those
who would be entitled to vote to fill such vacancy, if any, shall vote to fill
such vacancy. No action by members of the Board of Directors filling a vacancy
on the Board of Directors shall be effective until 10 days after all Board
members who do not have a right to vote on such appointment have received notice
thereof. A majority of the Board members entitled to receive such notice may
waive such notice requirement on behalf of all such Board members.
C. Protective Provisions.
(i) The Company shall not, without the consent of persons holding
greater than a majority of the outstanding shares of Series A, Series B and
Series C Preferred Stock, voting together as a class:
(a) Amend or restate the First Amended and Restated Articles
of Incorporation in a manner which would adversely alter or change the rights,
preferences, privileges or restrictions of the Series A, Series B or Series C
Preferred Stock;
<PAGE> 55
(b) Establish any class or series of capital stock which
would rank senior to or on a parity with the Series A, Series B or Series C
Preferred Stock with respect to the right to receive dividends or any
distribution upon the liquidation, dissolution, Liquidating Merger (as defined)
or winding up of the Company;
(c) Effect or permit any sale, lease, encumbrance,
assignment, transfer or conveyance of all or substantially all of the assets of
the Company, or any reclassification or other change of any stock, or the merger
or consolidation of the Company;
(d) Increase or decrease (other than by permitted
repurchase, redemption or conversion) the total number of authorized shares of
capital stock or reduce the stated capital of the Company;
(e) Amend the Articles of Incorporation or the By-Laws of
the Company to increase the authorized number of members of the Board of
Directors in excess of seven; or
(f) Obligate itself to do any of the foregoing.
(ii) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series C Preferred
Stock:
(a) Amend or restate the First Amended and Restated Articles
of Incorporation in a manner which would adversely alter or change the rights,
preferences, privileges or preferences of the Series C Preferred Stock, provided
the Series C Preferred Stock is adversely affected by such amendment or
restatement in a different manner than the Series A or Series B Preferred Stock;
(b) Establish any class or series of capital stock which
would rank senior to or on a parity with Series C Preferred Stock with respect
to the right to receive dividends or any distri bution upon the liquidation,
dissolution, Liquidating Merger (as defined) or winding up of the Company,
provided the Series C Preferred Stock is adversely affected by such
establishment in a different manner than the Series A or Series B Preferred
Stock; or
(c) Obligate itself to do any of the foregoing.
D. Redemption and Sinking Fund.
(i) So long as any Series A, Series B or Series C Preferred
Stock remains outstanding, the Company shall, on each of the dates set forth in
the following schedule (each a "Sinking Fund Payment Date"), set aside as and
for a sinking fund for the redemption of the Series A, Series B and Series C
Preferred Stock (hereinafter called the "Sinking Fund") in cash out of any funds
legally available therefor, a sum equal to the product of (a) the applicable
Redemption Price (as hereinafter defined) multiplied by (b) the number of shares
of Series A, Series B and Series C Preferred Stock to
<PAGE> 56
be redeemed as determined pursuant to subsection (vii) herein, a maximum number
of shares as set forth below opposite such Sinking Fund Payment Date:
<TABLE>
<CAPTION>
Sinking Fund Number of Shares of Preferred
Payment Date Stock Offered to be Redeemed
------------ -----------------------------
<S> <C>
April 15, 1995 One third of the shares of each series of Series A,
Series B and Series C Preferred Stock then
outstanding.
April 15, 1996 One third of the shares of each series of Series A,
Series B and Series C Preferred Stock outstanding as
of April 15, 1995.
April 15, 1997 One third of the shares of each series of Series A,
Series B and Series C Preferred Stock outstanding as
of April 15, 1995.
</TABLE>
(ii) The Redemption Price for each share of Series A, Series B
or Series C Preferred Stock shall be an amount in cash equal to the sum of the
Liquidation Value of such series plus 8% per annum of the Liquidation Value from
date of original issuance of such series less any dividends actually paid on
such share of Series A, Series B or Series C Preferred Stock to the date of
redemption.
(iii) If on any Sinking Fund Payment Date the funds of the
Company legally available therefor shall be insufficient to discharge such
Sinking Fund requirement in full, funds to the extent legally available for such
purpose shall be set aside for the Sinking Fund. Such Sinking Fund requirements
shall be cumulative, so that if for any year or years such requirements shall
not be fully discharged as they accrue, funds legally available therefor, after
such payment or provisions for dividends, for each year thereafter shall be
applied thereto until such requirements are fully discharged.
(iv) On or before the fifth day (the "Redemption Date") next
following each Sinking Fund Payment Date, the cash in the Sinking Fund shall be
used to acquire by redemption, in the manner provided below, the number of
shares of Series A, Series B and Series C Preferred Stock to be redeemed as
determined in subsection (vii) below.
(v) In the event of the redemption of only a part of the
outstanding shares of Series A, Series B or Series C Preferred Stock, the
Company shall effect such redemption pro rata among the total of all series of
Series A, Series B and Series C Preferred Stock according to the number of
shares to be redeemed by the Company for each holder of Series A, Series B or
Series C Preferred Stock.
<PAGE> 57
(vi) At least 30 days but not more than 60 days prior to the
Redemption Date, a written offer (a "Offer to Redeem"), shall be mailed, postage
pre-paid, to each holder of record of the Series A, Series B and Series C
Preferred Stock offered to be redeemed at his address last shown on the records
of the Company. The Offer to Redeem shall state:
(a) Whether all or less than all of the outstanding
shares of Series A, Series B or Series C Preferred Stock are offered to be
redeemed and the total number of shares offered for redemption;
(b) The number of shares of Series A, Series B or Series
C Preferred Stock held by the holder that the Company intends to redeem;
(c) The Redemption Date and the Redemption Price for each
series;
(d) The date upon which the holder's rights to convert
such shares of Series A, Series B or Series C Preferred Stock into Common Stock
will terminate; and
(e) That the holder is to surrender to the Company, in
the manner and at the place designated, his certificate or certificates
representing the shares of Series A, Series B or Series C Preferred Stock to be
redeemed.
(vii) If a holder of Series A, Series B or Series C Preferred
Stock elects to accept the Offer to Redeem on or before the applicable
Redemption Date (unless such holder has exercised his right to convert the
shares as provided in Section E hereof), such holder shall (i) deliver to the
principal offices of the Company a written statement accepting the Offer to
Redeem and setting forth the number of shares of Preferred Stock such holder
desires to have redeemed and identifying the series of such shares and (ii)
surrender the certificate or certificates representing such shares to the
Company, in the manner and at the place designated in the Offer to Redeem, and
thereupon the Redemption Price for such shares shall be payable to the order of
the person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be cancelled and retired. In the
event less than all of the shares represented by such certificate are redeemed,
a new certificate shall be issued representing the unredeemed shares.
(viii) If the Offer to Redeem shall have been duly given, and if
on the Redemption Date the Redemption Price is either paid or made available for
payment through the deposit arrangement specified in clause (ix) below, then
notwithstanding that the certificates evidencing any of the shares of Series A,
Series B or Series C Preferred Stock so called for redemption shall not have
been surrendered, the dividends with respect to such shares shall cease to
accrue after the Redemption Date and all rights with respect to such shares
shall forthwith after the Redemption Date terminate, except only the right of
the holders to receive the Redemption Price without interest upon surrender of
their certificate or certificates therefor.
<PAGE> 58
(ix) On or prior to the Redemption Date, the Company shall
deposit with any bank or trust company in the State of California, having a
capital and surplus of at least $100,000,000 as a trust fund, a sum equal to the
aggregate Redemption Price of all shares of Series A, Series B or Series C
Preferred Stock offered for redemption and not yet redeemed, with irrevocable
instructions and authority to the bank or trust company to pay, on or after the
Redemption Date or prior thereto, the Redemption Price to the respective holders
upon the surrender of their share certificates. From and after the later of the
date of such deposit or the applicable Redemption Date, the shares so called for
redemption shall be redeemed. The deposit shall constitute full payment of the
shares to their holders, and from and after the later of the date of the deposit
or the applicable Redemption Date, the shares shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be shareholders of the
Company with respect to such shares and shall have no rights with respect
thereto except the rights to receive from the bank or trust company payment of
the Redemption Price of the shares, without interest, upon surrender of their
certificates therefor, and the right to convert such shares as provided in
Section E hereof. Any funds so deposited and unclaimed at the end of one year
from the Redemption Date shall be released or repaid to the Company, after which
the holders of shares called for redemption shall be entitled to receive payment
of the Redemption Price only from the Company.
(x) The Company may elect to redeem all or a portion of any
series of Series A, Series B or Series C Preferred Stock at any time, provided,
that it shall have received the prior written consent of persons holding
two-thirds (2/3) of the outstanding shares of each series of Preferred Stock,
with each series voting separately as a class.
E. Conversion.
(i) In General. Subject to clause (v) below, the Series A,
Series B and Series C Preferred Stock shall be convertible at the option of the
holder at any time into fully paid and nonassessable shares of Common Stock of
the Company initially at the Conversion Rate for each series (as defined herein)
of one (1) share of Common Stock for each share of Series A, Series B or Series
C Preferred Stock; provided, however, that in case of the redemption of any
shares of Series A, Series B or Series C Pre ferred Stock, such right of
conversion shall cease and terminate as to the shares which the holder thereof
has accepted the Company's Offer to Redeem, at the close of business on the day
next prior to the Redemption Date for those shares, notwithstanding any earlier
deposit by the Company of funds sufficient for such redemption, unless default
shall be made in the payment of the Redemption Price, in which case the rights
of conversion granted hereby shall survive.
(ii) The number of shares of Common Stock which shall be
deliverable in exchange for a share of Series A, Series B and Series C Preferred
Stock upon conversion thereof is hereinafter referred to as the "Conversion
Rate" for each such series. The Conversion Rate of each series shall be subject
to adjustment from time to time in certain instances as hereinafter provided.
(iii) An irrevocable notice of conversion shall be mailed by each
holder of shares of Series A, Series B and Series C Preferred Stock electing to
convert his shares addressed to the Company
<PAGE> 59
at its offices at 7887 Dunbrook Road, Suite H, San Diego, California 92126 (or
such other address as the Company shall designate and notify the holders of
Series A, Series B and Series C Preferred Stock in writing). If less than all of
the shares of the Series A, Series B or Series C Preferred Stock owned by such
holder are to be converted, the notice shall specify the number of shares
thereof which are to be con verted. Two days after the mailing of such notice,
notwithstanding that no certificate for the shares of Common Stock into which
the Series A, Series B or Series C Preferred Stock was converted shall have been
received by the holder so electing to convert and notwithstanding that no
certificate for shares of the Series A, Series B or Series C Preferred Stock
converted into the Common Stock shall have been surrendered to the Company, the
conversion of the Series A, Series B or Series C Preferred Stock shall be deemed
effective and the certificate or certificates representing the shares of Series
A, Series B and Series C Preferred Stock for which notice of conversion was
mailed shall be deemed to evidence the shares of Common Stock into which they
were converted until such time as they are exchanged for a new certificate
representing the shares of Common Stock into which they were converted.
(iv) Exchange of Certificates. As soon as possible after the
holder mails its notice of conversion to the Company, but in no event later than
five (5) business days thereafter; (a) the holder shall surrender the
certificate or certificates for such Series A, Series B or Series C Preferred
Stock at the office of any duly appointed transfer agent for such Preferred
Stock or the Company's offices at 7887 Dunbrook Road, Suite H, San Diego,
California 92126 (or such other office or offices of the Company, if any, as the
Board may determine and notify the holders of Series A, Series B and Series C
Preferred Stock in writing). Such certificate or certificates shall be duly
endorsed to the Company or in blank or accompanied by proper instruments of
transfer to the Company or in blank, unless the Company shall waive such
requirement, and shall state in writing therein the name or names in which the
holder wishes the certificate or certificates for Common Stock issued; and (b)
the Company will issue and deliver to the person for whose account such Series
A, Series B or Series C Preferred Stock was so surrendered, or to his nominee or
nominees, certificates for the number of full shares of Common Stock to which he
shall be entitled as aforesaid, together with a cash adjustment for any fraction
of a share as hereinafter stated, if the shares of Series A, Series B or Series
C Preferred Stock surrendered for conversion are not in the aggregate evenly
convertible into a number of full shares of Common Stock. In the event of any
liquidation, dissolution, Liquidating Merger or winding up of the affairs of the
Company, all conversion rights of the holders of Series A, Series B and Series C
Preferred Stock shall terminate on the date fixed by resolutions of the Board of
Directors of the Company, which date shall not be later than ten (10) days nor
earlier than twenty (20) days prior to such liquidation, dissolution,
Liquidating Merger or winding-up.
(v) Automatic Conversion.
(a) All shares of Series A, Series B and Series C
Preferred Stock outstanding shall be converted automatically and without the
requirement of any election on the part of any holder of such shares of Series
A, Series B or Series C Preferred Stock at the applicable Conversion Rate in
effect immediately prior to the closing by the Company of a bona fide firm
commitment underwritten public offering registered under the Securities Act of
1933, as amended, of its Common Stock at a public
<PAGE> 60
offering price of not less than $10.20 per share of Common Stock (as adjusted
for any stock dividend, stock split or combination) with net proceeds to the
Company of not less than $10,000,000 (an "Automatic Conversion Event").
(b) Written notice shall be given to the holders of the
Series A, Series B and Series C Preferred Stock immediately upon the occurrence
of an Automatic Conversion Event. On and after the date of mailing of such
notice, and notwithstanding that any certificates for the Series A, Series B or
Series C Preferred Stock shall not have been surrendered for conversion, the
shares of Series A, Series B and Series C Preferred Stock evidenced thereby
shall be deemed to be no longer outstanding, and all rights with respect thereto
shall forthwith cease and terminate, except any rights of the holder (1) to
receive the shares of Common Stock to which he shall be entitled upon conversion
thereof, (2) to receive the amount of cash payable in respect of any fractional
share of Common Stock to which he shall be entitled and (3) to receive any
dividends declared but unpaid on such Series A, Series B and Series C Preferred
Stock prior to the Automatic Conversion Event. No adjustments with respect to
the Conversion Rate for each series shall be made on account of any holder's
rights to dividends that have been declared but are unpaid prior to the
Automatic Conversion Event; provided, however, that no dividends shall
thereafter be paid on the Common Stock unless dividends have first been paid to
the holders of Series A, Series B and Series C Preferred Stock entitled to
payment prior to the Automatic Conversion Event. As soon as practicable after
such Automatic Conversion Event, but in no event later than ten (10) business
days after a holder of Series A, Series B or Series C Preferred Stock shall have
received notice from the Company of such Automatic Conversion Event: (1) such
holder shall surrender the certificate or certificates for such Series A, Series
B or Series C Preferred Stock at the office and in the manner provided for such
purpose pursuant to Section E (iii) above; and (2) the Company shall issue and
deliver to the person for whose account such Series A, Series B or Series C Pre
ferred Stock was so surrendered, or to his nominee or nominees, certificates for
the number of full shares of Common Stock to which he shall be entitled as
aforesaid, together with a cash adjustment for any fraction of a share as
hereinafter stated, if the shares of Series A, Series B or Series C Preferred
Stock automatically converted are not in the aggregate evenly convertible into a
number of full shares of Common Stock.
F. Anti-Dilution Protection. The Conversion Rates for the Series A,
Series B and Series C Preferred Stock shall be subject to adjustment from time
to time as set forth below.
(i) Certain Definitions and Assumptions. For purposes of Section
F, the following definitions and assumptions shall apply:
(a) "Options" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities.
<PAGE> 61
(b) "Convertible Securities" shall mean any evidence of
indebtedness, shares (other than the Series A, Series B or Series C Preferred
Stock) or other securities convertible into or exchangeable for Common Stock.
(c) "Original Issue Date" shall mean the date on which the
first share of Series C Preferred Stock was issued.
(d) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or pursuant to this clause (i), deemed to be
issued) by the Company subsequent to the Original Issue Date, other than shares
of Common Stock issued or issuable (or pursuant to this clause (i), deemed to be
issued) at any time:
(1) upon conversion of the Series A, Series B or Series
C Preferred Stock (including any such shares of Series A, Series B or Series C
Preferred stock issued on or issuable upon conversion or exercise of Convertible
Securities or Options);
(2) pursuant to Options to purchase an aggregate of
700,000 shares of Common Stock reserved for issuance or outstanding on the
Original Issue Date, or Options to purchase shares of Series A or Series B
Preferred Stock outstanding or issued on the Original Issue Date;
(3) to employees, consultants, agents or directors of
the Company as approved by the Board of Directors;
(4) by way of dividend or distribution pursuant to
clause (ii) or (iii) below or a dividend or distribution on Series A, Series B
or Series C Preferred Stock; and
(5) up to a total of 50,000 shares of Common Stock or
Preferred Stock issued since the Original Issue Date at a purchase price less
than the then applicable Conversion Price and which are not excluded pursuant to
clauses (1-4) above.
(e) "Conversion Price" for Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock shall mean $1.60, $3.40 and
$7.00, respectively, divided by the applicable Conversion Rate in effect at the
time of any such determination.
(f) The issuance of Options or Convertible Securities of the
Company shall be deemed the issuance of the shares of Common Stock which may be
acquired upon the exercise of the Options or the exchange or conversion of the
Convertible Securities for a consideration equal to the consideration for which
such Options were issued, plus the exercise price of any such Options or the
consideration equal to the consideration for which the Convertible Securities
were issued, plus any additional consideration to be received on exchange or
conversion thereof. Such shares of Common Stock shall be deemed outstanding for
the purposes of this Section F.
<PAGE> 62
(g) Once an adjustment has been made to the applicable
Conversion Rate by reason of the deemed issuance of Additional Shares of Common
Stock, no further adjustment in the Conversion Rate for each series shall be
made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities.
(h) If such Option or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Company upon exercise, exchange or conversion
thereof or increase or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the Conversion Rate
for each series shall, upon any such increase or decrease becoming effective, be
equitably adjusted to reflect such increase or decrease.
(i) Upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not have
been exercised, the Conversion Rate for each series computed upon the original
issue thereof and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(1) in the case of Convertible Securities or Options
for Common Stock, the only Additional Shares of Common Stock issued were shares
of Common Stock, if any, actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Company for the
issue of all such Options, whether or not exercised, plus the consideration
actually received by the Company upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Company upon such
conversion or exchange, and
(2) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the Company for Additional Shares of Common Stock deemed to have
been then issued was the consideration actually received by the Company for the
issue of all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Company upon the issue of the Convertible
Securities with respect to which such Options were actually exercised.
(ii) Dividends. If at any time the Company pays a dividend on
Common Stock payable in Common Stock or Convertible Securities, subdivides its
outstanding shares of Common Stock into a larger number of shares or combines
the outstanding shares of Common Stock into a smaller number of shares by
reclassification or otherwise (each, a "Dilutive Event"), the Conversion Rate
for each series in effect immediately prior to such Dilutive Event shall be
adjusted by multiplying such Conversion Rate by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding immediately
after such Dilutive Event (assuming exercise or conversion of all outstanding
Options and Convertible Securities) and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such Dilutive
Event (assuming exercise or conversion of all outstanding Options and
<PAGE> 63
Convertible Securities). An adjustment made pursuant to this subparagraph (ii),
shall become effective retroactively to the record date in the case of a
dividend and shall become effective on the effective date in the case of a
subdivision or combination.
(iii) Distribution of Assets. If the Company shall distribute
to holders of shares of Common Stock any assets (other than any regular
quarterly cash dividend out of earned surplus), any evidence of indebtedness or
other securities of the Company or any rights to subscribe thereto (the
"Assets") then in each such case the Conversion Rate for each series shall be
increased by multiplying the applicable Conversion Rate in effect on the record
date for the determination of the stockholders entitled to receive such
distribution, and prior to such distribution, by the absolute value of a
fraction the numerator of which shall be the product of (a) the fair value per
share (determined as provided in clause (vi) below) of the Common Stock on such
record date (assuming exercise or conversion of all Options and Convertible
Securities) and (b) the number of shares of Common Stock outstanding on such
record date (assuming exercise or conversion of all Options and Convertible
Securities) prior to such distribution and the denominator of which shall be the
remainder of (c) the numerator and (d) the fair value (as determined in a
resolution adopted by the Board of Directors of the Company, which shall be
conclusive evidence of such fair value) of all of the Assets distributed by the
Company to holders of shares of Common Stock on such record date. Such
adjustment to the Conversion Rate for each series shall become effective
retroactively immediately after the record date.
(iv) Issuance or Sale Below the Conversion Price for Series A
Preferred Stock. If at any time the Company shall issue or sell, or shall,
pursuant to clause (i), be deemed to have issued and sold Additional Shares of
Common Stock without consideration or at a price per share less than the
Conversion Price for the Series A Preferred Stock, then, in each such case, the
Conversion Rate for the Series A Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount determined by multiplying
the Conversion Rate for such series in effect on the date of and immediately
prior to such issuance or sale by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such issuance or
sale (assuming exercise or conversion of all outstanding Options and Convertible
Securities) and the denominator of which shall be the sum of (a) the number of
shares of Common Stock outstanding (assuming exercise or conversion of all
outstand ing Options and Convertible Securities) on the date immediately
preceding the date on which the Additional Shares of Common Stock were issued or
sold and (b) the number of shares of Common Stock which the aggregate
consideration to be received by the Company in respect of such Additional Shares
of Common Stock would have purchased at the Conversion Price of such series in
effect immediately prior to such issuance or sale.
(v) Issuance or Sale Below the Conversion Price for Series B
Preferred Stock.
(a) Sales not exceeding $1,000,000 at prices in excess of
$2.40 per share. If (x) at any time after the Original Issue Date, the Company
shall issue or sell, or shall, pursuant to
<PAGE> 64
clause (i), be deemed to have issued and sold Additional Shares of Common Stock
at a price per share less than the Conversion Price for the Series B Preferred
Stock and in excess of $2.40 (as adjusted for any stock dividend, stock split or
combination) and (y) the aggregate consideration of all such sales or deemed
sales from the Original Issue Date does not exceed $1,000,000, then, in each
such case, the Conversion Rate for the Series B Preferred Stock shall be
increased, concurrently with such issuance or sale, to an amount determined by
multiplying the Conversion Rate for such series in effect on the date of and
immediately prior to such issuance or sale by a fraction the numerator of which
shall be the number of shares of Common Stock outstanding immediately after such
issuance or sale (assuming exercise or conversion of all outstanding Options and
Convertible Securities) and the denominator of which shall be the sum of (a) the
number of shares of Common Stock outstanding (assuming exercise or conversion of
all outstanding Options and Convertible Securities) on the date immediately
preceding the date on which the Additional Shares of Common Stock were issued or
sold and (b) the number of shares of Common Stock which the aggregate
consideration to be received by the Company in respect of such Additional Shares
of Common Stock would have purchased at the Conversion Price of such series in
effect immediately prior to such issuance or sale.
(b) Sales, in excess of $1,000,000, occurring before June
21, 1991 while the Series B Conversion Price exceeds $2.40. If (x) at any time
after the Original Issue Date but before June 21, 1991 and while the Series B
Conversion Price exceeds $2.40, the Company shall issue or sell, or shall,
pursuant to clause (i), be deemed to have issued and sold Additional Shares of
Common Stock without consideration or at a price per share less than the
Conversion Price for the Series B Preferred Stock, (y) either (A) the aggregate
consideration of all such sales or deemed sales exceeds $1,000,000 or (B) the
Additional Shares of Common Stock are issued or sold without consideration or at
a price per share less than $2.40 (as adjusted for any stock dividend, stock
split or combination), and (z) the Conversion Price for the Series B Preferred
Stock immediately prior to such issuance or sale is in excess of $2.40 (as
adjusted for any stock dividend, stock split or combination), then, in each such
case, the Conversion Rate for the Series B Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount determined by multiplying
the Conversion Rate for such series in effect on the date of and immediately
prior to such issuance or sale by a fraction the numerator of which shall be the
Conversion Price of the Series B Preferred Stock in effect on the date of such
issuance and the denominator of which shall be the per share consideration
received by the Company for the Additional Shares of Common Stock so issued;
provided, however, in no event shall the Conversion Price of the Series B
Preferred Stock be reduced to less than $2.40 (as adjusted for any stock
dividend, stock split or combination) pursuant to this subsection b.
(c) Sales after June 21, 1991 or after the Conversion Price
for the Series B Preferred Stock is reduced below $2.40. If the Company shall
issue or sell, or shall, pursuant to clause (i), be deemed to have issued and
sold Additional Shares of Common Stock without consideration or at a price per
share less than the Conversion Price for the Series B Preferred Stock (x) at any
time after June 21, 1991 or (y) at any time after the Conversion Price for the
Series B Preferred Stock immediately prior to such issuance or sale does not
exceed $2.40 (as adjusted for any stock dividend, stock split or combination),
then, in each such case, the Conversion Rate for the Series B Preferred Stock
<PAGE> 65
shall be increased, concurrently with such issuance or sale, to an amount
determined by multiplying the Conversion Rate for such series in effect on the
date of and immediately prior to such issuance or sale by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issuance or sale (assuming exercise or conversion of all
outstanding Options and Convertible Securities) and the denominator of which
shall be the sum of (a) the number of shares of Common Stock outstanding
(assuming exercise or conversion of all outstanding Options and Convertible
Securities) on the date immediately preceding the date on which the Additional
Shares of Common Stock were issued or sold and (b) the number of shares of
Common Stock which the aggregate consideration to be received by the Company in
respect of such Additional Shares of Common Stock would have purchased at the
Conversion Price of such series in effect immediately prior to such issuance or
sale.
(vi) Issuance or Sale Below the Conversion Price for Series C
Preferred Stock. If at any time the Company shall issue or sell, or shall,
pursuant to clause (i), be deemed to have issued and sold Additional Shares of
Common Stock without consideration or at a price per share less than the
Conversion Price for the Series C Preferred Stock, then, in each such case, the
Conversion Rate for the Series C Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount determined by multiplying
the Conversion Rate for such series in effect on the date of and immediately
prior to such issuance or sale by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such issuance or
sale (assuming exercise or conversion of all outstanding Options and Convertible
Securities) and the denominator of which shall be the sum of (a) the number of
shares of Common Stock outstanding (assuming exercise or conversion of all
outstand ing Options and Convertible Securities) on the date immediately
preceding the date on which the Additional Shares of Common Stock were issued or
sold and (b) the number of shares of Common Stock which the aggregate
consideration to be received by the Company in respect of such Additional Shares
of Common Stock would have purchased at the Conversion Price of such series in
effect immediately prior to such issuance or sale. Notwithstanding the
foregoing, no adjustment to the Conversion Price for the Series C Preferred
Stock shall occur pursuant to this Section F(vi) unless the purchase price per
share of the Additional Shares of Common Stock is less than $3.40 per share
(provided, the $3.40 per share shall be replaced with $5.00 per share if the
aggregate consideration from sales of all Series C Preferred Stock is $5,000,000
or more).
(vii) Fair Value. For the purpose of any computation under clause
(iii), the "fair value" on any date shall be as mutually agreed upon by the
Board of Directors of the Company with the representatives of the holders of the
shares of Preferred Stock voting in favor of such valuation; provided, however,
that if the Common Stock is listed or admitted to trading on a national
securities exchange, the fair value on any date shall be equal to the average of
the daily closing prices for the thirty (30) con secutive trading days
commencing forty-five (45) trading days before the date in question. The closing
price for each day shall be the last sales price regular way, or if no such sale
takes place, the average of the closing bid and asked prices regular way on the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading, or if not listed on such an exchange, the average
of the closing bid and asked prices for a share of Common Stock on the
over-the-counter
<PAGE> 66
market, as reported by the National Association of Securities Dealer's Automated
Quotation System at the close of business on such date.
(viii) Capital Reorganization. In the case of any capital
reorganization or any reclassification of the capital stock of the Company or in
case of the consolidation or merger of the Company with another corporation
(other than a merger not involving any reclassification, conversion or exchange
of Common Stock, in which, subject to clause (viii), the Company is the
surviving corpora tion), each share of Series A, Series B and Series C Preferred
Stock shall thereafter be convertible into the number of shares of stock (or of
any class or classes) or other securities or property receivable upon such
capital reorganization, reclassification of capital stock, consolidation or
merger as the case may be, by a holder of the number of shares of Common Stock
into which such share of Series A, Series B and Series C Preferred Stock was
convertible immediately prior to such capital reorganization, reclassification
of capital stock, consolidation or merger; and, in any case, appropriate
adjustment (as determined by the Board) shall be made in the application of the
provisions herein set forth with respect to the rights and interests thereafter
of the holders of the Series A, Series B and Series C Preferred Stock, to the
end that the provisions set forth herein (including the specified changes in and
other adjustments of the Conversion Rate for each series) shall thereafter be
applicable, as near as reasonably practical, in relation to any shares of stock
or other securities or other property thereafter deliverable upon the conversion
of the Series A, Series B and Series C Preferred Stock.
(ix) Liquidating Merger. If, as a result of (a) a sale or
conveyance of all or substantially all of the assets of the Company, or (b) the
merger, reorganization or consolidation of the Company with or into another
corporation or of another corporation into it, the beneficial owners of all of
the equity interest in the Company (assuming conversion of all options and
Convertible Securities outstanding at the time of such merger or consolidation)
immediately prior to any such merger or consolidation will not beneficially own
a majority of the equity interest of the entity surviving such merger or
consolidation immediately after such merger or consolidation (each such event
being hereinafter referred to as a "Liquidating Merger"), such sale, conveyance,
merger, reorganization or consolidation shall be deemed a liquidation and shall
be subject to the provisions of Section G.
(x) Transfer Agents. Whenever the Conversion Rate of a series
of Preferred Stock is adjusted as herein provided, the Company shall (a)
forthwith file with any transfer agent or agents for such series of Preferred
Stock a certificate signed by the President or one of the Vice Presidents of the
Company and by its Treasurer or an Assistant Treasurer, stating the adjusted
Conversion Rate for such series determined as provided in this Section F, and in
reasonable detail the facts requiring such adjust ment and (b) cause a notice to
be mailed to the respective holders of record of such series of Preferred Stock
setting forth the adjustment and the Conversion Rate for such series, as
adjusted. Any such trans fer agents shall be under no duty to make any inquiry
or investigation as to the statements contained in any such certificate or as to
the manner in which any computation was made, but may accept such certi ficates
as conclusive evidence of the statements therein contained, and each transfer
agent shall be fully protected with respect to any and all acts done or action
taken or suffered by it in reliance thereon. No transfer agent in its capacity
as transfer agent shall be deemed to have any knowledge with respect to
<PAGE> 67
any change of capital structure of the Company unless and until it receives a
notice thereof pursuant to the provisions of this clause (ix) and in default of
any such notice each transfer agent may conclusively assume that there has been
no such change.
(xi) Availability of Authorized Shares. The Company shall at all
times reserve and keep available, out of its authorized and unissued or treasury
shares of Common Stock, or other stock or securities deliverable upon
conversion, solely for the purpose of effecting the conversion of the Series A,
Series B and Series C Preferred Stock, such number of shares as shall from time
to time be sufficient to effect the conversion of all shares of Series A, Series
B and Series C Preferred Stock from time to time outstanding. The Company shall
from time to time, in accordance with the laws of the State of California,
increase the authorized amount of its Common Stock and/or securities issuable
upon con version of the Series A, Series B and Series C Preferred Stock if at
any time the number of shares of Common Stock (or such other securities)
remaining unissued or treasury shares of Common Stock (or such other securities)
shall not be sufficient to permit the conversion of all the then outstanding
Series A, Series B and Series C Preferred Stock.
(xii) No Fractional Shares. No fractions of shares of Common
Stock are to be issued upon conversion of Preferred Stock, but in lieu thereof
the Company will pay therefor in cash an amount determined by multiplying the
fraction of a share by the applicable Liquidation Value.
(xiii) Delivery of Common Stock. The Company will pay all issue
and other taxes that may be payable in respect of any issue on delivery of
shares of Common Stock on conversion of shares of Series A, Series B and Series
C Preferred Stock pursuant hereto. The Company shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of Common Stock in a name other than that in which the Series
A, Series B or Series C Preferred Stock so converted was registered, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Company the tax so required.
G. Liquidation Rights.
(i) In the event of any liquidation, dissolution, Liquidating
Merger or winding up of the Company, whether voluntary or involuntary, before
any distribution or payment shall be made to the holders of Common Stock, the
holders of the Preferred Stock shall be entitled to receive from the assets of
the Company available for distribution to its stockholders an amount per share
in cash equal to the Liquidation Value of the respective series of Preferred
Stock plus 8% per annum of the applicable Liquidation Value per share from the
date of original issuance of such series, less any dividends that have actually
been paid on such series, since it was issued (the "Liquidation Preference
Amount"). If upon the occurrence of such event, the assets thus distributed
among the holders of Series A, Series B and Series C Preferred Stock shall be
insufficient to permit the payment to such holders of the full Liquidation
Preference Amount of the respective series of Preferred Stock, then the entire
assets of the Company legally available for distribution shall be distributed
ratably among the among the holders of
<PAGE> 68
the Series A, Series B and Series C Preferred Stock in proportion to the
applicable Liquidation Preference Amounts.
(ii) Upon completion of the distribution required by
subparagraph (i), if any assets remain in the Company, the remaining assets of
the Company shall be distributed to the holders of Common Stock. Written notice
of such liquidation, dissolution, Liquidating Merger or winding up, stating a
payment date, the amount of the payment and the place where the amounts
distributable shall be payable, shall be mailed or caused to be mailed by the
Company by certified or registered mail, return receipt requested, not less than
sixty (60) days prior to the date stated therein, to each holder of record of
any share of the Series A, Series B and Series C Preferred Stock at his address
as the same appears on the books of record of the Company. No consolidation or
merger of the Company or sale or transfer by the Company of its assets which
does not qualify as a Liquidating Merger, nor the reduction of the authorized
number of shares of any class or series of capital stock of the Company, shall
be deemed to be a liquidation, dissolution, Liquidating Merger or winding up of
the corporation within the meaning of any of the provisions of this Section G.
H. Status of Redeemed or Converted Shares. Any shares of the Series
A, Series B or Series C Preferred Stock which at any time shall have been
redeemed pursuant or converted hereto shall after such redemption or conversion
be cancelled and no longer be available for issuance by the Company.
I. Notice. The holders of shares of the Preferred Stock shall
receive notice of certain events as follows:
(i) not less than thirty (30) days before the occurrence of any
of the following: (a) any distributions of capital stock to holders of shares of
the Company's Common Stock including without limitation, any stock splits, stock
dividends, stock reclassifications, or the issuance of any rights or warrants,
(b) the declaration of any record date or (c) any meeting of the holders of
shares of the Company's capital stock called by the Company's Board of Directors
(which notice must set forth in reasonable detail the business to be transacted
at such meeting); (ii) not more than ten (10) days after the occurrence of an
Automatic Conversion Event, that such event has occurred; and (iii) not less
than twenty (20) days prior to the date fixed by the Board of Directors for the
termination of the conversion rights of the Preferred Stock as a result of any
liquidation, dissolution, Liquidating Merger or winding up of the affairs of the
Company that such event will occur.
IV.
The liability of the directors of the Company for monetary damages
shall be eliminated to the fullest extent permissible under California law.
The Company is authorized to provide indemnification of agents (as
defined in Section 317 of the California General Corporation Law) for breach of
duty to the Company and its shareholders through bylaw provisions, through
resolutions of the board of directors or shareholders, or through agreements
<PAGE> 69
with the agents, or through any of the foregoing means, in excess of the
indemnification otherwise permitted by Section 317 of the California General
Corporation Law, subject to the limits on such excess indemnification set forth
in Section 204 of the California General Corporation Law.
Any repeal or modification of the foregoing provisions of this Article
IV by the shareholders of the Company shall not adversely affect any right or
protection of a director of the Company existing at the time of such repeal of
modification."
3. The First Amended and Restated Articles of Incorporation have been
duly approved by the Board of Directors.
4. The article amendments as included in the First Amended and
Restated Articles of Incorporation (other than omissions required by Section 910
of the California General Corporation Law) have been duly approved by the
required vote of the shareholders in accordance with Section 902 of the
California General Corporation Law. The total number of outstanding shares of
Common Stock of this corporation is 940,625. The total number of outstanding
shares of Series A and Series B Preferred stock are 2,107,882 and 1,294,934,
respectively. The number of shares voting in favor of the First Amended and
Restated Articles of Incorporation equaled or exceeded the vote required. The
percentage vote required for the approval of the First Amended and Restated
Articles of Incorporation was more than 50% of the Common Stock, 66-2/3% of the
Series A Preferred Stock and 66-2/3% of the Series B Preferred Stock.
<PAGE> 70
IN WITNESS WHEREOF, the First Amended and Restated Articles of
Incorporation has been executed by the undersigned on April ___, 1990.
_____________________________
Robert Akins, President
_____________________________
Martin Pedley, Secretary
ROBERT AKINS and MARTIN PEDLEY declare under penalty of perjury under
the laws of the State of California that each has read the foregoing certificate
and knows the contents thereof and that the same is true of his own knowledge.
___________________ Dated:_________
Robert Akins, President
___________________ Dated:_________
Martin Pedley, Secretary
<PAGE> 71
EXHIBIT 10.8
EXHIBIT B
April _____, 1990
To the Investors in
CYMER Laser Technologies
Series C Preferred Stock Listed on
Schedule 1.2 to that Certain Agreement
dated March ___, 1990
Ladies and Gentlemen:
We have acted as counsel for CYMER Laser Technologies, a California
corporation (the "Company"), in connection with the sale by the Company to you
of ____________ shares of the Company's 8% Non-Cumulative Voting Redeemable
Convertible Series C Preferred Stock (the "Series C Shares") pursuant to the
CYMER Laser Technologies Series C Preferred Stock Purchase Agreement (the
"Agreement") dated March _, 1990, among the Company, certain individuals listed
on Schedule 1.1 to the Agreement and the individuals and organizations listed
on Schedule 1.2 to the Agreement (the "Investors"). This opinion is given to
you in compliance with Section 11.5 of the Agreement. Unless defined herein,
capitalized terms have the meaning given them in the Agreement.
In connection with this opinion, we have examined and relied upon the
originals or copies, certified to our satisfaction, of such records, documents,
certificates, memoranda and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below. As used in
this opinion, the expression "to our knowledge" with reference to matters of
fact means that, after an examination of documents in our files and documents
made available to us by the Company and after inquiries of officers of the
Company, we find no reason to believe that the opinions expressed herein are
factually incorrect; but beyond that we have made no independent factual
investigation for the purpose of rendering an opinion to our knowledge.
For the purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary corporate
or partnership action, to execute and deliver the Agreement, and we are
assuming that the representations and warranties made by the Investors in
Section 4 of the Agreement are true and correct.
Our opinion is expressed only with respect to the federal laws of the
United States of America and the laws of the State of California. We express
no opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof. We express no
opinion with respect to the applicability to the Agreement of the Exon-Florio
Amendment to the Defense Production Act of 1950.
<PAGE> 72
The opinions hereinafter expressed are subject to the following
qualifications, as to which we render no opinion: (a) the effect of applicable
bankruptcy and other similar laws affecting the rights of creditors generally;
(b) the effect of rules of law governing specific performance, injunctive
relief and other equitable remedies; (c) the compliance or noncompliance with
applicable state and federal anti-fraud statutes, rules and regulations
concerning the issuance of securities; and (d) the enforceability of the
indemnification provisions of Section 9.13 of the Agreement.
On the basis of the foregoing and in reliance thereon, except as
disclosed in Schedule 3.0 of the Agreement, and with the foregoing
qualifications, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has all
requisite corporate power and authority and the legal right to transact the
business in which it is presently engaged, to own, lease and operate all of the
assets and properties owned, leased or operated by it, to enter into and
perform the Agreement, to issue and sell the Series C Shares and to issue the
Conversion Shares and to otherwise perform and comply with all other actions
and agreements arising under the Agreement. The Company is duly qualified to
do business as a foreign corporation in good standing in all other
jurisdictions which require such qualification except to the extent that
failure to so qualify would not have a material adverse effect on the Company
and except that we note that the Company is in the process of qualifying to do
business in Massachusetts and except that we make no opinion with respect to
the Company's activities in Japan.
2. The execution, delivery and performance of the Agreement, the
issuance of the Series C Shares and the Conversion Shares and the consummation
of the transactions contemplated in the Agreement by the Company have been duly
authorized by all necessary corporate action on the part of the Company,
including any action required to be taken by the Company's shareholders. The
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms (except insofar as
the enforcement of Section 9.13 of the Agreement may be limited by limitations
of public policy). The certificates representing the Series C Shares are in
due and proper form and have been validly executed by the officers of the
Company named thereon.
3. The Company has no subsidiaries and does not own (of record or
beneficially) and has made no commitment to purchase any shares or securities
of, or otherwise make any investment in, any other corporation, association,
partnership or other entity and is not a participant in any joint venture.
4. Neither the issuance or sale of the Series C Shares (including
the Conversion Shares) nor the execution and delivery by
-2-
<PAGE> 73
the Company of the Agreement, nor the consummation of or compliance with the
transactions and agreements contemplated by the Agreement will conflict with or
constitute a violation or breach of (i) the Restated Articles of Incorporation
or Bylaws of the Company, (ii) to our knowledge, any material contracts or
other material instruments to which the Company is a party or by which the
Company is bound or by which the business or material assets or properties of
the Company may be materially affected or secured, (iii) to our knowledge, any
order, writ. injunction, award or decree of any court, arbitrator or
governmental or regulatory body against or binding upon the Company or upon the
securities, properties or business of the Company, in each case that is
specifically directed to the Company, its securities, properties or business,
(iv) to our knowledge, any statute, law, rule or regulation of any jurisdiction
to which the Company is subject, (v) to our knowledge, any license, permit,
order or approval of any federal, state or local governmental or regulatory
body that is material to or necessary for the conduct of the business of the
Company and (vi) the laws of the State of California and the federal laws of
the United States applicable therein, where such conflict, breach or violation
of such laws would be materially adverse to the Company.
5. At the Closing, upon payment of the full purchase price in
cash therefor, each Investor will receive good and valid title to the Series C
Shares and the Series C Shares (including the conversion Shares issuable upon
conversion thereof when and if issued in accordance with the Agreement and the
Restated Articles of Incorporation) will be duly authorized, validly issued,
fully paid, non-assessable, free and clear of all liens and encumbrances, other
than liens, encumbrances or restrictions on transfer arising under the
Agreement, applicable securities laws or under agreements entered into or
actions taken by the Investors.
6. As of the date hereof (but prior to the execution and delivery
of the Agreement and the consummation of the transactions contemplated
therein), the Company will have an authorized capitalization of (i) Twelve
Million Five Hundred Thousand (12,500,000) shares of Common Stock, no par
value, of which Nine Hundred Forty Thousand Six Hundred Twenty-Five (940,625)
shares are issued and outstanding; (ii) Three Million (3,000,000) shares of
Series A Preferred Stock, 2,107,882 of which are issued and outstanding and One
Million Five Hundred Thousand (1,500,000) shares of Series B Preferred Stock,
One Million Two Hundred Ninety-Four Thousand Six Hundred Thirty-Nine
(1,294,939) of which are issued and outstanding and 1,000,000 shares of Series
C Preferred Stock of which shares are being issued to you pursuant to the
Agreement. In addition, the Company has reserved the following shares of
Common Stock and Preferred Stock for issuance: (i) 700,000 shares of Common
Stock upon exercise of options granted or to be granted to the Company's
employees; (ii) 162,500 shares of Series A Preferred Stock upon exercise of
warrants to purchase shares of Series A Preferred Stock; and (iii) 18,382
shares of Series B Preferred Stock upon exercise of the warrants to purchase
shares of Series B Preferred Stock.
-3-
<PAGE> 74
7. Subject to the accuracy of the Investors' representations in
Section 4 of the Agreement, the offer, sale and issuance of the Series C Shares
to be issued in conformity with the terms of this Agreement, and the issuance
of the Common Stock to be issued upon conversion of the Series C Shares,
constitute transactions exempt from the registration requirements of Section 5
of the Securities Act.
8. No consent, approval or authorization of or designation,
declaration or filing with, any governmental authority on the part of the
Company is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the Series C Shares, or the
consummation of any other transaction contemplated by the Agreement, except
the notice filings required by Section 25102 (f) of the California Corporate
Securities Law of 1968 and Regulation D under the Securities Act of 1933, as
amended (the "Securities Act"), as promulgated by the Securities and Exchange
Commission. The filings referred to in this paragraph have been accomplished
and are effective or will be accomplished on a timely basis following the
Closing, and to our knowledge there are no proceedings or threat thereof which
question the validity of such filings.
9. To our knowledge, there are no legal, administrative or other
proceedings, investigations or inquiries, or other asserted claims, judgments,
injunctions or restrictions, pending or outstanding or threatened against the
Company, any of its properties or business, or against or involving the Company
or the officers or directors of the Company, or any action related to the
Agreement, the issuance of the Series C Shares or any of the transactions
contemplated in the Agreement that might, if determined adversely to the
Company, either singly or in the aggregate, result in any material adverse
change in the business of the Company or in any material liability on the part
of the Company.
This opinion is intended solely for your use in connection with your
purchase of Series C Shares and is not to be made available to or relied upon
by other persons or entities without our prior written consent.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
-4-
<PAGE> 1
EXHIBIT 10.9
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
BY AND AMONG
CYMER LASER TECHNOLOGIES,
THE FOUNDERS LISTED ON SCHEDULE 1.1,
MITSUBISHI CORPORATION
AND
THE ADDITIONAL INVESTORS
LISTED ON SCHEDULE 1.2
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
1. Sale, Purchase and Delivery of Series D Shares .................. 2
1.1 Sale and Issuance of Series D Preferred Stock ................... 2
1.2 Delivery of Series D Shares ..................................... 3
2. Certain Definitions. ............................................ 3
3. Representations and Warranties of the Company ................... 3
3.1 Organization and Good Standing; Power and
Authority ..................................................... 3
3.2 Subsidiaries .................................................... 4
3.3 Capitalization .................................................. 4
3.4 Compliance with Laws ............................................ 5
3.5 Validity of Agreement; Binding Effect ........................... 6
3.6 No Breach ....................................................... 6
3.7 Financial Information ........................................... 7
3.8 Absence of Undisclosed Liabilities and
Obligations.................................................... 7
3.9 Absence of Certain Changes ...................................... 7
3.10 Real Property ................................................... 8
3.11 Tangible Assets and Equipment ................................... 8
3.12 Tax Returns and Audits .......................................... 9
3.13 Patents and Trademarks .......................................... 10
3.14 Employees ....................................................... 10
3.15 Confidentiality ................................................. 10
3.16 Litigation ...................................................... 11
3.17 ERISA ........................................................... 11
3.18 Environmental Compliance Matters ................................ 12
3.19 Use of Proceeds ................................................. 12
3.20 Registration Rights ............................................. 12
3.21 Escrowed Certificates of Founder Common Stock ................... 12
3.22 Disclosure ...................................................... 13
3.23 No Other Agreements. .......................................... 13
3.24 Claims of the Founders .......................................... 13
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.25 Insurance ....................................................... 13
4. Representations and Warranties of the Investor .................. 13
4.1 Organization and Standing ....................................... 14
4.2 Authorization and Approval of and Ability to Carry
Out This Agreement ............................................ 14
4.3 Investment Representation ....................................... 14
5. Company's Affirmative Covenants ................................. 15
5.1 Corporate Existence ............................................. 15
5.2 Taxes and Liens ................................................. 15
5.3 Maintain Property ............................................... 16
5.4 Financial Statements and Reports ................................ 16
5.5 Confidentiality ................................................. 16
5.6 Conversion Shares ............................................... 17
5.7 Access to Books and Records...................................... 17
5.8 Right of First Offer ............................................ 17
5.9 Right of First Refusal and/or Repurchase Agreement .............. 19
5.10 Insurance ....................................................... 19
5.11 Notice of Record Dates .......................................... 19
5.12 Employee Stock Purchase Agreement ............................... 20
5.13 State Securities Law Filings .................................... 20
5.14 Lapse of Covenants. ............................................. 20
5.15 Information as to Competitors and Proprietary
Information ................................................... 21
5.16 Technological Expertise. ........................................ 21
6. Investor's Affirmative Covenants ................................ 21
6.1 Certain Definitions. ............................................ 21
6.2 Restrictions on Transfer of Voting Stock ........................ 21
6.3 Confidentiality ................................................. 22
7. Further Agreements .............................................. 22
7.1 Right of First Refusal and Repurchase with Respect
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
to Founder Stock. ............................................... 22
7.2 Co-Sale Agreement on Sale of Founder Stock ....................... 23
8. Company's Right of First Refusal ................................. 24
8.1 Right of First Refusal ........................................... 24
8.2 Tender Offer Sale ................................................ 25
8.3 Assignment of Rights ............................................. 27
9. Restrictions on Transferability of Shares; Compliance
with the Act .................................................... 27
9.1 Restrictions on Transferability. ................................. 27
9.2 Certain Definitions. ............................................. 27
9.3 Notice of Proposed Transfers ..................................... 28
9.4 Demand Registration Rights ....................................... 29
9.5 Piggy-Back Registration Rights ................................... 31
9.6 Registration on Form S-3 ......................................... 32
9.7 Rule 144 Reporting ............................................... 32
9.8 Expenses of Registration ......................................... 33
9.9 Cutbacks ......................................................... 33
9.10 Additional Covenants Concerning Sale of Shares ................... 34
9.11 Blue Sky Provisions .............................................. 34
9.12 Advising the Holders ............................................. 34
9.13 Indemnification .................................................. 35
9.14 Registration under the Exchange Act .............................. 36
9.15 Information by Holder ............................................ 36
9.16 Transfer of Registration Rights .................................. 36
9.17 Standoff Agreement ............................................... 36
9.18 Termination of Rights ............................................ 37
10. Survival of Representations, Warranties and Covenants ............ 37
10.1 Survival of Representations, Warranties and
</TABLE>
<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Covenants of the Company ......................................... 37
10.2 Survival of Representations and Warranties of the Investor ....... 37
11. Conditions Precedent to Obligations of the Investor .............. 38
11.1 Representations and Warranties Correct ........................... 38
11.2 Compliance with This Agreement ................................... 38
11.3 Satisfaction of Investor and Its Counsel ......................... 38
11.4 No Actions or Proceedings ........................................ 38
11.5 Opinion of Company's Counsel ..................................... 38
11.6 Officer's Certificate ............................................ 38
11.7 Certificate of Secretary or Assistant Secretary .................. 38
11.8 Delivery of Documents ............................................ 39
11.9 No Lapse in Insurance Coverage ................................... 39
11.10 Employee Agreements and Nondisclosure Agreements ................. 39
11.11 Government Approvals ............................................. 39
12. Conditions Precedent to the Obligation of the Company ............ 39
12.1 Representations and Warranties Correct ........................... 40
12.2 Compliance with this Agreement ................................... 40
12.3 Satisfaction of Company and its Counsel .......................... 40
12.4 No Actions or Proceedings ........................................ 40
12.5 Government Approvals ............................................. 40
13. Documents to be Delivered at Closing ............................. 40
13.1 Documents to be Delivered by the Company at the
Closing ........................................................ 40
13.2 Documents to be Delivered by the Investor at the
Closing ........................................................ 41
14. Miscellaneous .................................................... 41
</TABLE>
<PAGE> 6
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
14.1 Definition of Person ............................................. 41
14.2 Definition of Knowledge .......................................... 41
14.3 Additional Actions ............................................... 41
14.4 Expenses ......................................................... 41
14.5 Counterparts ..................................................... 42
14.6 Binding Effect; No Assignment .................................... 42
14.7 Notices .......................................................... 42
14.8 Applicable Laws .................................................. 42
14.9 Entire Agreement ................................................. 42
14.10 Waivers and Amendments; Noncontractual Remedies;
Preservation of Remedies ....................................... 42
14.11 Table of Contents; Captions ...................................... 43
14.12 Schedules and Exhibits Part of Agreement ......................... 43
14.13 Severability ..................................................... 43
14.14 Obligation of the Company to Indemnify ........................... 43
14.15 Obligation of the Investor to Indemnify .......................... 43
14.16 Notice and Opportunity to Defend ................................. 44
14.17 Limitation and Exclusive Remedy .................................. 44
</TABLE>
SCHEDULES
1.1
FOUNDERS
1.2
ADDITIONAL INVESTORS
3.0
SCHEDULE OF EXCEPTIONS
14.7
ADDRESSES
EXHIBITS
<PAGE> 7
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
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<S> <C>
A
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
B
OPINION OF THE COMPANY'S COUNSEL
</TABLE>
<PAGE> 8
EXHIBIT 10.9
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
This SERIES D PREFERRED STOCK PURCHASE AGREEMENT is made as of
_________ ___, 1991 (this "Agreement"), by and among CYMER LASER TECHNOLOGIES, a
California corporation (the "Company"), the persons whose names are set forth on
Schedule 1.1 hereto (hereinafter referred to individually as a "Founder" and
collectively as the "Founders"), Mitsubishi Corporation (hereinafter referred to
as the "Original Investor") and each additional investor that becomes a
signatory hereto pursuant Section 1.1 of this Agreement (an "Additional
Investor" as defined in Section 1.1) (each Original Investor and Additional
Investor is herein referred to as an "Investor").
RECITALS
1. The Company sold shares of its Series A Preferred Stock (the
"Series A Shares") to certain investors (the "Series A Investors") pursuant to a
Series A Preferred Stock Purchase Agreement dated May 3, 1988 (the "1988
Purchase Agreement").
2. The Company sold shares of its Series B Preferred Stock (the
"Series B Shares") to certain investors (the "Series B Investors") pursuant to a
Series B Preferred Stock Purchase Agreement dated June 28, 1989 (the "1989
Purchase Agreement").
3. The Company sold shares of its Series C Preferred Stock (the
"Series C Shares") to certain investors (the "Series C Investors" and
collectively with Series A Investors and Series B Investors, the "Prior
Investors" or "Prior Investor" as the case may be), pursuant to the Series C
Preferred Stock Purchase Agreement dated April 16, 1990 (the "1990 Purchase
Agreement").
4. The Company intends to sell, and the Original Investor intends to
purchase, an aggregate of Two Hundred Thirty-Five Thousand Two Hundred and
Ninety-Five (235,295) shares (the "Original Series D Shares") and the Additional
Investors may purchase up to One Hundred and Fifty-Two Thousand Three Hundred
and Ninety-Six (152,396) additional shares (the "Additional Series D Shares")
(the Original Series D Shares and the Additional Series D Shares shall be
referred to collectively as the "Series D Shares") of the Company's 8%
Non-Cumulative Voting Redeemable Convertible Series D Preferred Stock, with such
rights, preferences and limitations as are set forth in the Company's Second
Amended and Restated Articles of Incorporation attached hereto as EXHIBIT A (the
"Restated Articles of Incorporation"), including, without limitation, the right
to convert each Series D Share into one share of the Company's common stock,
$.01 par value per share (the "Common Stock"), an aggregate of Three Hundred and
Eighty Seven Thousand Six Hundred and Ninety One (387,691) shares of Common
Stock, subject to adjustment for any dilution event described in the Restated
Articles of Incorporation or similar event (the "Conversion Shares").
NOW, THEREFORE, in consideration of the mutual promises and the
representations, warranties and covenants herein contained, and of other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE> 9
1. Sale, Purchase and Delivery of Series D Shares.
1..1 Sale and Issuance of Series D Preferred Stock.
(a) Sale and Issuance to Original Investor. Subject to
the terms and conditions of this Agreement, the Original Investor agrees to
purchase at the Initial Closing (as defined herein), and the Company agrees to
sell and issue to the Original Investor at the Initial Closing, the Original
Series D Shares for the aggregate purchase price of $2,000,007.50. The Original
Investor's purchase price shall be payable at the Initial Closing in cash, by
wire transfer, or by certified or official bank check payable to the order of
the Company. The price per share of the Original Series D Shares is $8.50 (the
"Purchase Price").
(b) Sale and Issuance to Additional Investors. The
Company shall be entitled to include investors in addition to the Original
Investor as parties to this Agreement (each, an "Additional Investor") to
purchase the Additional Series D Shares and each Additional Investor shall be
deemed to be an "Investor" for the purposes of this Agreement, provided that (i)
the Company, the Founders and each Additional Investor execute signature pages
of this Agreement and complete the Subsequent Closing (as defined below) of
Additional Series D Shares on or prior to March 30, 1991 and (ii) the sale of
Additional Series D Shares to Additional Investors shall be effected in
accordance with all state and federal securities laws. The Additional Investor's
purchase price shall be payable at the Subsequent Closing in cash, by wire
transfer or by certified or official bank check payable to the order of the
Company. The price per share of the Additional Series D Shares is the Purchase
Price ($8.50). The aggregate number of shares of Series D Preferred Stock sold
at the Subsequent Closing shall not exceed the Additional Series D Shares. The
Additional Investors, if any, shall be set forth on a Schedule 1.2 to be
attached to this Agreement.
(c) Closing Date. The purchase and sale of the
Original Series D Shares described in Section 1.1(a) shall take place at the
offices of Wilson, Sonsini, Goodrich & Rosati, Two Palo Alto Square, Palo Alto,
California, at 2:00 P.M., on March 15, 1991, or at such other time and place as
the Company and the Original Investor, may mutually agree upon in writing (which
time and place are designated as the "Initial Closing" or "Initial Closing
Date"); provided, however, that the Initial Closing must occur by March 15,
1991. The purchase and sale of the Additional Series D Shares described in
Section 1.1(b) shall take place at the offices of Wilson, Sonsini, Goodrich &
Rosati, Two Palo Alto Square, Palo Alto, California at 2:00 p.m. on March 30,
1991 or at such other time and place as the Company and the purchaser of a
majority of the Additional Series D Shares may mutually agree upon in writing
(which time and place are designated as the "Subsequent Closing" or the
"Subsequent Closing Date") (collectively, the Initial Closing and the Subsequent
Closing shall be referred to as the "Closing" or "Closing Date"); provided,
however, that the Subsequent Closing must occur on or before March 30, 1991.
1..2 Delivery of Series D Shares. At the Closing, the Company
shall deliver to the Investor against receipt of the Purchase Price therefor one
or more certificates bearing the appropriate
<PAGE> 10
legends in accordance with Section 4.3 hereof, evidencing ownership of the
number of Series D Shares being purchased hereunder by the Investor in the
denomination indicated in Sections 1.1(a) and 1.1(b) and registered in the name
of the Investor. All events which shall occur at such Closing shall be deemed to
occur simultaneously.
2. Certain Definitions. For purposes of Sections 5.8, 7.1, 7.2, 9 and
14.10 of this Agreement, the term "Shares" shall mean the Series A Shares,
Series B Shares, Series C Shares and Series D Shares, the term "Conversion
Shares" shall mean the shares of Common Stock issued upon conversion of the
Shares, and the term "Significant Holder" shall mean (i) the Series D
Significant Holder (as defined below), (ii) a holder of at least 210,788 Series
A Shares, (iii) a holder of at least 132,353 Series B Shares or (iv) a holder of
at least 100,000 Series C Shares (or shares of Common Stock issued upon
conversion of the Series A Shares, the Series B Shares or the Series C Shares).
The term "Series D Significant Holder" shall mean a holder of at least 100,000
Series D Shares (or shares of Common Stock issued upon conversion of the Series
D Shares).
3. Representations and Warranties of the Company. Except as
disclosed in the attached schedule of exceptions (Schedule 3.0), the Company
represents and warrants to the Investor as follows:
3..1 Organization and Good Standing; Power and Authority. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority and the legal right to transact the business in which it is
presently engaged, to own, lease and operate all of the assets and properties
owned, leased or operated by it, to enter into and perform this Agreement, and
will have at the Closing, all requisite corporate power and authority to sell
and issue the Series D Shares and to issue the Conversion Shares and to
otherwise perform and comply with all other actions and agreements arising
hereunder. The Company does not own or lease any property or engage in any
activity in any jurisdiction which might require its qualification to do
business as a foreign corporation in any such jurisdiction. The Company has
furnished the Investor or its counsel with true, correct and complete copies
(certified by the Secretary or Assistant Secretary of the Company) of its (a)
Restated Articles of Incorporation and (b) By-Laws, and will make available to
each Investor (c) the minute books of the Company (containing records of all
meetings and consents in lieu of meetings of its stockholders and the Board of
Directors of the Company (the "Board") (and any committees thereof) since the
date of its incorporation and (d) the stock transfer books of the Company. A
copy of the Restated Articles of Incorporation is attached hereto as EXHIBIT A.
3..2 Subsidiaries. Except for Cymer Japan, Inc., a Japanese
corporation and a wholly-owned subsidiary of the Company, the Company has no
subsidiaries and does not own (of record or beneficially) and has made no
commitment to purchase any shares or securities of, or otherwise make any
investment in, any other corporation, association, partnership or other entity
and is not a participant in any joint venture.
3..3 Capitalization.
<PAGE> 11
(a) Upon the filing of the Restated Articles of
Incorporation, the authorized capital stock of the Company will consist of
13,000,000 shares of Common Stock, 957,063 shares of which are issued and
outstanding, 3,000,000 shares of Series A Preferred Stock, 2,107,882 of which
are issued and outstanding, 1,500,000 shares of Series B Preferred Stock, of
which 1,294,939 are issued and outstanding, and 1,000,000 shares of Series C
Preferred Stock, 200,000 of which are issued and outstanding, and 500,000 shares
of Series D Preferred Stock, none of which will be issued and outstanding prior
to the Closing. All of the outstanding shares of Common Stock, Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are duly
authorized and validly issued, fully paid and non-assessable. The Company has
reserved the following shares of Common Stock for issuance: (i) 700,000 shares
of Common Stock upon exercise of options granted or to be granted to the
Company's employees; (ii) 162,500 shares of Series A Preferred Stock upon
exercise of the warrants to purchase shares of Series A Preferred Stock
(hereinafter referred to as the "Series A Warrants"); (iii) 18,382 shares of
Series B Preferred Stock upon exercise of the warrants to purchase shares of
Series B Preferred Stock (hereinafter referred to as the "Series B Warrants");
and (iv) 6,000,000 shares of Common Stock for issuance upon conversion of the
Preferred Stock. No other classes of capital stock of the Company are authorized
or outstanding.
(b) Except as set forth in this Agreement, the Series A
Warrants, the Series B Warrants and the options to purchase 494,650 shares of
Common Stock, as of the date hereof there are no other outstanding rights,
subscriptions, warrants, calls, preemptive rights, options or other agreements
of any kind to purchase or otherwise to receive from or sell to the Company any
of the outstanding, authorized but unissued, unauthorized or treasury shares of
the capital stock or any other security of the Company, and there is no security
of any kind convertible into such capital stock. The Company has no obligation
or agreement under any contingency whatsoever to issue any equity, debt or other
security, or to pay, perform, guaranty, be responsible for, or satisfy in whole
or in part any debt, security, obligation or agreement incurred or made by an
individual or entity other than the Company, and the Company has no obligation
under any condition or contingency whatsoever to share its income with anyone,
or to make, accrue or set aside any payment or amount measured in any way by any
part or all of its sales or income. The Company is not indebted to any of its
employees in any amount other than for accrued but unpaid compensation.
(c) Upon issuance pursuant to this Agreement, the
Series D Shares will have the rights and preferences set forth in the Restated
Articles of Incorporation and each Series D Share will be, when issued,
initially convertible into one Conversion Share, subject to adjustment for any
dilution event described in the Restated Articles of Incorporation or similar
event. The Series D Shares delivered to the Investor pursuant to this Agreement,
upon payment of the respective purchase prices therefor, shall be duly
authorized, validly issued, fully paid and non-assessable and the Conversion
Shares issuable upon conversion of the Series D Shares have been duly and
validly reserved and, upon issuance in accordance with the conversion provisions
of the Series D Shares and the Restated Articles of Incorporation, shall be duly
authorized, validly issued, fully paid and non-assessable. Subject to the
provisions of applicable federal and state securities laws and compliance with
the terms of this Agreement, upon the consummation of the transactions
contemplated hereby, the Series D Shares and the Conversion
<PAGE> 12
Shares will be freely transferable and free and clear of all liens and
encumbrances, other than liens, encumbrances or restrictions on transfer arising
hereunder or under agreements entered into or actions taken by the Investor.
(d) All of the outstanding shares of Common Stock,
Series A Shares, Series B Shares and Series C Shares have been, and all Series D
Shares to be issued pursuant to this Agreement and all Conversion Shares to be
issued will be, offered, issued and sold in compliance with all federal and
state securities laws.
3..4 Compliance with Laws. The Company is not in violation of
(a) any applicable order, judgment, injunction, award or decree, or (b) to the
best of the Company's knowledge, any federal, state, local or foreign law,
ordinance or regulation or any other requirement of any governmental or
regulatory body, court or arbitrator applicable to the business of the Company
except for violations which could not have a material adverse effect on the
business or properties of the Company and would not be in violation of any such
law, ordinance, regulation or other requirement that has been enacted or adopted
but is not yet effective if it were effective. The Company has obtained all
licenses, permits, orders and approvals of any federal, state, local or foreign
governmental or regulatory body (collectively, "Permits") that are material to
or necessary for the conduct of the business of the Company. All of such Permits
are in full force and effect, no violations are or have been recorded in respect
of any Permit and no proceeding is pending or, to the best of the Company's
knowledge, threatened to revoke or limit any such Permit.
3..5 Validity of Agreement; Binding Effect. To the best of the
Company's knowledge, no approval or consent of any foreign, federal, state,
county, local or other governmental or regulatory body is required in connection
with the execution and delivery by the Company of this Agreement, the issuance
of the Series D Shares or the Conversion Shares and the consummation and
performance by the Company of the transactions contemplated hereby. The
execution, delivery and performance of this Agreement, the issuance of the
Series D Shares and the Conversion Shares and the consummation of the
transactions contemplated herein by the Company have been duly authorized by all
necessary corporate action on the part of the Company, including any action
which may have been required to be taken by the Company's stockholders, and this
Agreement, when executed, will constitute the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms (except insofar as the enforcement hereof may be limited by (a) applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
creditors' rights generally from time to time in effect, (b) equitable
principles of general application and (c) limitations of public policy as
applied to Section 9.13 of this Agreement).
3..6 No Breach. The execution and delivery of this Agreement
does not and the issuance of the Series D Shares or Conversion Shares and
consummation of and compliance with the transactions and agreements contemplated
hereby will not conflict with or constitute a violation or breach of (a) the
Restated Articles of Incorporation or By-laws of the Company, (b) any provision
of any material contract or other instrument to which the Company is a party or
by which the Company may
<PAGE> 13
be bound or by which the business, assets or properties
of the Company may be affected or secured, (c) any order, writ, injunction,
award or decree of any court, arbitrator or governmental or regulatory body
against or binding upon the Company or upon the securities, properties or
business of the Company, (d) to the best of the Company's knowledge, any
statute, law, rule or regulation (including, without limitation, applicable
federal and state securities laws) of any jurisdiction to which the Company is
subject or (e) any Permit.
3..7 Financial Information. The Company has furnished the
Investor with (a) true copies of its balance sheet dated as of December 31,
1989, together with statements of operations, stockholders' equity and changes
in financial position of the Company for the year ended December 31, 1989, with
the related opinion of Deloitte & Touche, independent public accountants
(collectively, the "Audited Financials"), and (b) an unaudited balance sheet
dated as of December 31, 1990, and an unaudited statement of operations for the
period then ended (the "Unaudited Financials"; the Audited Financials and the
Unaudited Financials are herein referred to collectively as the "Financial
Statements"). The Financial Statements are complete and correct, and present
fairly the financial position and assets and liabilities of the Company at their
respective dates and the results of its operations and changes in financial
position for the periods then ended; provided, however, that the Unaudited
Financials are subject to year-end audit adjustments and do not contain all
footnotes required under generally accepted accounting principles.
3..8 Absence of Undisclosed Liabilities and Obligations. The
Company has no liability or obligation, either accrued, absolute, direct, or to
the best of its knowledge, contingent or indirect, or otherwise, whether as
principal, agent, partner, coventurer, guarantor or in any capacity whatsoever
which are not reflected in the Financial Statements, other than (a) obligations
and liabilities incurred in the ordinary course of business that are not
individually or in the aggregate material and (b) obligations under contracts
made in the ordinary course of business that would not be required to be
reflected in the Financial Statements.
3..9 Absence of Certain Changes. Since December 31, 1990, there
has not been any event or condition of any character which has either singly or
in the aggregate materially adversely affected the Company's business or
prospects, including but not limited to:
(a) Any change in the condition (financial or
otherwise), assets, liabilities or business of the Company from that shown on
the Financial Statements;
(b) Any damage, destruction or loss of any of the
properties or assets of the Company (whether or not covered by insurance)
affecting the business or plans of the Company;
(c) Any declaration, setting aside, payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
<PAGE> 14
(d) Any waiver by the Company of any rights of value;
(e) Any purchase, sale or transfer of any assets or
properties of the Company, any satisfaction or cancellation of any mortgage or
pledge or any incurring of any debts or claims, or the subjection of any assets
or property of the Company to any lien, charge, security interest on other
encumbrance or any other transaction entered into by the Company other than in
the ordinary course of business;
(f) Any increase in the compensation of any of the
officers, other employees or agents of the Company, including without
limitation, any increase by means of any bonus or pension plan, contract or
other commitment; or
(g) Any labor trouble, or any event or condition of any
character, affecting the business or plans of the Company.
3..10 Real Property. Schedule 3.0 sets forth a list and summary
description of all evidences of ownership of real property by the Company, all
leases, subleases or other agreements under which the Company is lessor or
lessee of any real property, and of all options held by the Company to purchase
or acquire real property. Such leases, subleases and other agreements and all
options are in full force and effect and the Company has not received any notice
of any default thereunder. No approval or consent of any person is needed in
order that the leases, subleases or other agreements and all options under or
pursuant to which the Company is lessor or lessee of any real property continue
in full force and effect after the Closing. The leasehold interests of the
Company are not subject to any liens or encumbrances and such leasehold
interests enjoy a right of quiet possession as against any liens or encumbrances
on the properties. The Company is not subject to any contractual obligation to
purchase or acquire any interest in real property or to sell or dispose of any
interest in real property, and the Company has not granted any options to
purchase or acquire any interest in real property. The Company has good and
marketable title to all the real property held by it outright and none of such
real property or any of the structure or improvements thereon is in violation of
any applicable building, zoning, environmental or other laws, ordinances or
regulations. None of such real property has been condemned or is the subject of
any eminent domain proceeding and the Company has no grounds to believe that any
such condemnation or eminent domain proceeding is threatened or taking place.
3..11 Tangible Assets and Equipment. The Company owns outright
and has good and marketable title to all of its tangible assets and equipment
including all tangible assets and equipment reflected in the Financial
Statements, in each case free and clear of any lien or encumbrance, subject only
to liens for taxes not yet due or which are being contested in good faith and by
appropriate proceedings and for which adequate reserves have been set aside on
the books of the Company and reflected in the Financial Statements. To the best
of the Company's knowledge, each tangible asset and piece of equipment of the
Company is in good operating condition, ordinary wear and tear excepted, is
being and has been properly serviced and maintained.
<PAGE> 15
3..12 Tax Returns and Audits.
(a) To the best of the Company's knowledge, (i) the
Company has properly completed and filed or will file within the time prescribed
by law (including extensions of time approved by the appropriate taxing
authority) in correct form all federal, state and other income, profits,
franchise, real property, personal property, sales, use, employment, payroll,
excise and other tax returns and reports required to be filed by the Company,
(ii) all taxes imposed or which may be imposed or asserted by the U.S. Internal
Revenue Service, the State of California, or any other taxing authority, and all
deficiencies, assessments, additions to tax, penalties and interests, which are
due and payable by the Company through December 31, 1989, or which are
attributable to the operations, business, properties or assets of the Company
through that date have been paid in full, and (iii) all monies required to be
withheld by the Company from employees for income taxes, Social Security and
unemployment insurance taxes have been collected or withheld and either paid to
the respective governmental agencies or adequately provided for by reserves on
the books of the Company and reflected in the Financial Statements, other than
(x) returns and reports, the non-filing of which, (y) deficiencies, assessments,
additions to tax, penalties and interest, the non-payment of which, and (z)
withholdings, the non-collection or withholding of which would not either singly
or in the aggregate have a material adverse effect on the Company.
(b) To the best of the Company's knowledge there are
(i) no other tax returns or reports which are required to be filed by the
Company which have not been so filed and (ii) no unpaid assessments for
additional taxes for any fiscal period or any basis therefor. The Company's tax
returns have not been audited by the U.S. Internal Revenue Service, the State of
California or any other taxing authority to which the Company is subject. The
Company has not consented to any extensions of time to assess any tax.
(c) The Company has successfully revoked its election
to be treated as an S corporation and is presently filing tax returns and
reports to, and is recognized by, the U.S. Internal Revenue Service, the State
of California and all other relevant taxing authorities as a C corporation.
3..13 Patents and Trademarks. To the best of the Company's
knowledge, it owns or possesses, has access to, or can become licensed on
reasonable terms under all patents, patent applications, inventions, trademarks,
tradenames, servicemarks, copyrights, and other proprietary intellectual
property rights (collectively referred to as "Proprietary Rights") (a) necessary
for the lawful conduct of its business as now conducted and as proposed to be
conducted, and the lack of which would materially and adversely affect its
business or properties, and (b) to the best of its knowledge, without any
material infringement of or conflict with the rights of others. All of the
Proprietary Rights are free and clear of any liens or other encumbrances. The
Company has not granted any licenses to its Proprietary Rights and is not aware
of any third parties who are infringing or violating any of same. To the best of
the Company's knowledge, there are no disputes nor claims regarding the
Proprietary Rights.
<PAGE> 16
3..14 Employees. To the best of the Company's knowledge, no key
employee of the Company is, or is now expected to be, in violation of any term
of any employment contract, patent disclosure agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant or any
other common law obligation to a former employer relating to the right of any
such employee to be employed by the Company because of the nature of the
business conducted or to be conducted by the Company or to the use of trade
secrets or proprietary information of others, and the employment of the
Company's employees does not subject the Company or the Investor to any material
liability. There is neither pending nor, to the Company's knowledge threatened,
any actions, suits, proceedings or claims, or any basis therefor or thereof with
respect to any contract, agreement, covenant or obligation referred to in the
preceding sentence. The Company is not a party to, or subject to, any
obligation, liability or commitment with respect to any written employment,
compensation, consulting, severance pay or similar agreement and any and all
oral employment, compensation, consulting or similar commitments are terminable
at will and without notice by the Company and without payment or penalty. The
Company is not a party to any collective bargaining or other union contracts and
its employees are not represented by any union.
3..15 Confidentiality. Each person employed by the Company who
has access to any Proprietary Rights or other proprietary information of or
about the Company has executed and delivered to the Company an Employee
Agreement substantially in the form provided to the Investor's counsel (an
"Employee Agreement"). Each person hired by the Company as a consultant who has
access to any Proprietary Rights or other proprietary information of or about
the Company has executed and delivered to the Company a Nondisclosure Agreement
substantially in the form provided to the Investor's counsel (a "Nondisclosure
Agreement").
3..16 Litigation.
(a) There are no legal, administrative or other
proceedings, investigations or inquiries, or other asserted claims, judgments,
injunctions or restrictions, pending or outstanding or, to the best knowledge of
the Company, threatened against the Company, any of its properties or business,
or against or involving any of the Company or the officers or directors of the
Company, or any action related to this Agreement, the issuance of the Series D
Shares or any of the transactions contemplated herein that might if determined
adversely to the Company, either singly or in the aggregate, result in any
material adverse change in the business, prospects, operations, properties or
condition (financial or otherwise) of the Company or in any material liability
on the part of the Company. To the best of the Company's knowledge, there is no
fact, event or circumstance that may give rise to any suit, action, claim,
investigation or proceeding that would be required to be set forth on Schedule
3.0 if currently pending or threatened. There are no actions, suits or claims or
legal, administrative or arbitration proceedings pending or to the best of the
Company's knowledge threatened that would give rise to any right of
indemnification on the part of any director or officer of the Company or the
heirs, executors or administrators of such director or officer against the
Company.
<PAGE> 17
(b) The Company has not admitted in writing its
inability to pay its debts generally as they become due, filed or consented to
the filing against it of a petition in bankruptcy or a petition to take
advantage of any insolvency act, made an assignment for the benefit of
creditors, consented to the appointment of a receiver for itself or for the
whole or any substantial part of its property, or had a petition in bankruptcy
filed against it, been adjudicated a bankrupt, or filed a petition or answer
seeking reorganization or arrangement under the federal bankruptcy laws or any
other law or statute of the U.S. or any other jurisdiction.
3..17 ERISA. No employee pension benefit plan, within the
meaning of Section 3(a) of the Employment Retirement Income Security Act of
1974, as amended ("ERISA"), is currently maintained or sponsored by the Company
and the Company does not contribute to, and is not obligated to contribute to,
and none of the employees of the Company is a participant in, any multiemployer
plan within the meaning of Section 400(a) of ERISA.
3..18 Environmental Compliance Matters.
(a) To the best of the Company's knowledge, there is no
soil or ground water contamination by any "Hazardous Material" for which the
Company is or may be liable. "Hazardous Material" shall mean any flammables,
asbestos, explosives, radioactive materials, hazardous wastes, toxic substances
or related materials, including without limitation any substances defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," or "toxic substances" under any applicable federal, state
or local laws, rules, regulations or orders or which federal, state or local
laws, rules, regulations or orders have designated as potentially dangerous to
public health and/or safety when present in the environment;
(b) The Company has stored, used and disposed of
"Hazardous Material" in material compliance with applicable laws; and
(c) The Company has no notice of any (i) enforcement,
cleanup, removal or other governmental or regulatory actions instituted,
completed or threatened against the Company pursuant to any applicable federal,
state or local laws, ordinances or regulations relating to any Hazardous
Material, (ii) claims made or threatened by any third party against the Company
with respect to or because of its property relating to damage, contribution,
cost recovery compensation, loss or injury resulting from any Hazardous Material
or (iii) conditions on any of the properties of the Company that could cause
such properties or any part thereof to be subject to any restrictions on the
ownership, occupancy transferability or use of any of such properties under any
Hazardous Material law.
3..19 Use of Proceeds. The net proceeds to be paid to the
Company at the Closing are to be used for working capital including for employee
compensation and benefits, materials and miscellaneous expenses associated with
developing products, lease payments, capital expenditures and marketing
expenses.
<PAGE> 18
3..20 Registration Rights. Except as provided for in this
Agreement, the Credit Agreement dated April 21, 1989 between certain
shareholders and the Company, the 1988 Purchase Agreement, the 1989 Purchase
Agreement, and the 1990 Purchase Agreement, the Company is not under any
obligation to register under the Securities Act of 1933, as amended (the "Act"),
any of its currently outstanding securities or any of its securities which may
hereafter be issued.
3..21 Escrowed Certificates of Founder Common Stock. The
certificates for all shares of Common Stock held by the Founders have been
delivered to Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, in the
form required by, and in accordance with the terms of, the Common Stock
Restriction Agreements (the "Restriction Agreements") executed by and between
the Company and the Founders.
3..22 Disclosure. The Company has fully provided the Investor
with all the information which such Investor has requested for deciding whether
to purchase the Series D Shares and all information which the Company believes
is reasonably necessary to enable such Investor to make such decision. Neither
this Agreement nor the Financial Statements, any other statements, exhibits,
schedules or certificates made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading, except that with
respect to the Financial Projections of the Company (the "Financial
Projections"), and any projections, forecasts, and expressions of opinions or
predictions contained therein, the Company represents only that such
projections, forecasts, and expressions of opinions or predictions were made in
good faith and that the Company believes there is a reasonable basis therefor.
The Company does not represent or warrant that the results, sales or orders set
forth in the Financial Projections will be achieved.
3..23 No Other Agreements. The Company has not entered into any
agreement with the Investor regarding the investment by the Investor in the
Company, except as contemplated hereby.
3..24 Claims of the Founders. Each of the Founders, jointly and
severally, represents and warrants to the Investor that they have transferred to
the Company all of their rights with respect to any of the Company's Proprietary
Rights (and have not retained as their own property any invention or technology
pertaining to the business of the Company) and they hereby relinquish all claims
to and agree that they shall have no rights, including without limitation, any
rights to any payments, other than their rights as shareholders of the Company,
with respect to any Proprietary Rights.
3..25 Insurance. The Company maintains insurance with reputable
insurance companies, on so much of its properties, to such an extent and against
such risks, as reasonably prudent persons engaged in similar businesses would
customarily insure properties of a similar character.
4. Representations and Warranties of the Investor. The
Investor hereby represents and warrants to the Company as follows:
<PAGE> 19
4..1 Organization and Standing. The Investor is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
4..2 Authorization and Approval of and Ability to Carry Out
This Agreement. The Investor has duly authorized the execution and delivery of
this Agreement and the transactions contemplated hereby. The Investor has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated herein. This Agreement constitutes the
legal, valid and binding obligation of the Investor, to the extent provided for
herein, enforceable in accordance with its terms (except insofar as the
enforcement hereof may be limited by (a) applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors' rights generally
from time to time in effect, (b) by equitable principles of general application,
and (c) limitations of public policy as applied to Section 9.13 of this
Agreement).
4..3 Investment Representation. The Investor is purchasing the
Series D Shares (including, for purposes hereof, the Conversion Shares) for its
own account without a view to any dis tribution thereof in violation of the Act,
subject, nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. The Investor represents that
it (a) is an "Accredited Investor" as that term is defined under Rule 501 under
the Act, (b) is experienced in evaluating and making investments of the type
contemplated by this Agreement and (c) is financially able to bear the risks of
the investment. The Investor acknowledges that the Company is issuing and
selling the Series D Shares in reliance upon the exemption from registration
provided in Section 4(2) of the Act and is relying upon these representations,
and agrees that the Series D Shares may only be transferred if registered under
the Act or pursuant to an exemption from such registration requirements. The
Investor understands that Rule 144 promulgated under the Act is not presently
available with respect to the Series D Shares or Conversion Shares, and that
absent registration of the Series D Shares or Conversion Shares under the Act,
compliance with an applicable exemption under the Act, is required for a sale or
other disposition of the Series D Shares or Conversion Shares. The Investor
agrees that the following legend may be placed on any certificates evidencing
its Series D Shares or Conversion Shares and any other securities issued in
respect of Series D Shares or Conversion Shares, upon any dilution event
described in the Restated Articles of Incorporation or similar event:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares have been acquired for
investment and may not be pledged or hypothecated, and may not be sold
or transferred except in compliance with the registration requirements
of the Securities Act of 1933, or upon delivery to Cymer Laser
Technologies of an opinion of counsel to the shareholder, in form and
substance satisfactory to said corporation and its counsel, that
registration under such Act is not required."
"The shares represented by this certificate are subject to certain
restrictions upon transfer and rights of first refusal as set forth in
an agreement between the corporation and the registered holder, a copy
of which is on file at the principal office of the corporation."
<PAGE> 20
The Investor understands that, so long as the legend remains on the certificates
representing the Series D Shares or Conversion Shares, the Company may maintain
appropriate "stop transfer" orders with respect to the Series D Shares or
Conversion Shares on its books and records and with its registrar and transfer
agent. Notwithstanding the foregoing, such Investor shall be entitled to
replacement certificates without such legend if permitted under Rule 144 or upon
presentation by such Investor to the Company of a favorable written opinion of
counsel reasonably satisfactory in form and substance to the Company and its
counsel that the removal of such legend is not in violation of either the Act
and the rules and regulations thereunder or applicable provisions of state
securities law.
5. Company's Affirmative Covenants. Except as hereinafter provided,
the Company hereby covenants that from and after the date of this Agreement
and so long as the Investor holds beneficially or of record any of the
Series D Shares or Conversion Shares:
5..1 Corporate Existence. The Company will maintain its corporate
existence and use best efforts to comply with all laws, government regulations,
rules and ordinances and judicial orders, judgments and decrees applicable and
material to the Company, its business and properties.
5..2 Taxes and Liens. The Company will (a) punctually pay and
discharge or cause to be paid and discharged before the same shall become
delinquent (i) all taxes, assessments and governmental charges lawfully imposed
upon the Company, or any of its property, or upon the income and profits
thereof, and (ii) all lawful claims for labor, materials and supplies which, if
unpaid, might be a lien upon the property of the Company, (b) withhold all
monies required to be withheld by the Company from employees for income taxes,
Social Security and unemployment insurance taxes and (c) complete and file, on a
timely basis, all tax returns and reports required to be filed by it (including,
without limitation, returns and reports of the type set forth in Section
3.12(a)(i)).
5..3 Maintain Property. The Company will cause all material
properties used or useful in the conduct of its business to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs as in the judgment of
the Company may be necessary so that business carried on in connection therewith
may be properly and advantageously conducted.
5..4 Financial Statements and Reports.
(a) The Company will keep adequate and accurate books of
account and will prepare the financial statements referred to herein, in
accordance with generally accepted accounting principles, consistently applied.
(b) Until the Initial Public Offering (as herein
defined), the Company shall furnish to the Series D Significant Holder, as soon
as practicable (and in any event at least thirty (30) days) prior to the
beginning of each fiscal year, an annual projected budget for the following
fiscal year, and an annual operating plan and strategic plan (collectively, the
"Plan") as approved by the Board.
<PAGE> 21
(c) Until the Initial Public Offering, the Company shall
furnish to each holder of Series D Shares or Conversion Shares as soon as
practicable (and in any event within ninety (90) days) after the end of each
fiscal year of the Company, an audited balance sheet of the Company as of the
end of the year and the related statement of operations, retained earnings or
deficit and changes in financial position of the Company as of the end of the
year setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by an audit report
and opinion in respect of such financial statement (consolidated if applicable)
of the independent certified public accountants selected by the Company (which
shall be a materially recognized firm of accountants), and such report and
opinion shall be unqualified as to the scope of the audit.
5..5 Confidentiality. The Company shall, after the date hereof,
cause each person employed by, or retained as a consultant to, the Company who
has access to any Proprietary Rights or other proprietary information of or
about the Company to execute an Employee Agreement, in the case of an employee,
and a Nondisclosure Agreement, in the case of a consultant.
5..6 Conversion Shares. The Company shall reserve and keep
available from its authorized shares of Common Stock, solely for the purpose of
issuance upon conversion of the Series D Shares, such number of Conversion
Shares as shall then be issuable upon the conversion of all of the Series D
Shares, taking into account any anti-dilution rights of the holders thereof.
5..7 Access to Books and Records. Until the Initial Public
Offering, and subject to the provisions of Section 6.3, the Series D Significant
Holder and its agents shall (a) have access upon reasonable notice to the
Company, during usual business hours, and as often as may reasonably be desired,
to the accounts, books and records of the Company shall be entitled to examine,
make copies and extract therefrom, and from any other items, such information
relating to the Company as each such Investor shall reasonably specify and (b)
be permitted, upon reasonable notice to the Company to visit and inspect any of
the properties of the Company.
5..8 Right of First Offer.
(a) The Company hereby grants to the Significant Holders
the right of first offer to purchase, pro-rata, all (or any part) of New
Securities (as defined in this Section 5.8) which the Company may, from time to
time, propose to sell and issue. A Significant Holder's pro-rata portion, for
purposes of this Agreement, is the ratio of (x) the number of the shares of
Common Stock and Series A, Series B, Series C and Series D Preferred Stock,
determined on an as-converted basis, held by such Significant Holder at the time
to (y) the total number of shares of Common Stock and Preferred Stock
(determined on an as-converted basis) of the Company issued and outstanding at
such time. Each Significant Holder shall have a right of over-allotment such
that if any Significant Holder fails to exercise his right hereunder to purchase
his pro-rata portion of New Securities, the other Significant Holders may
purchase the non-purchasing Significant Holder's portion on a pro-rata basis
within five (5) days from the date it receives notice from the Company that a
non-purchasing Significant Holder has
<PAGE> 22
failed to exercise its right hereunder to purchase its pro-rata share of New
Securities. This right of first offer shall be subject to the following
provisions:
(b) "New Securities" shall mean any capital stock of
the Company whether now authorized or not, and rights, options or warrants to
purchase capital stock, and securities of any type whatsoever that are, or may
become, convertible into capital stock; provided, however, that the right of
first offer shall apply at the time of issuance of the right, warrant or option
and not to the exercise thereof; provided, further, that the term "New
Securities" does not include: (i) the Shares or Conversion Shares; (ii) shares
of Series A or Series B Preferred Stock issued pursuant to the Series A or
Series B Warrants, respectively (or shares of Common Stock issued upon
conversion of such Preferred Stock or such securities as may be substituted for
the Series A or Series B Preferred Stock pursuant to the terms of the Series A
or Series B Warrants); (iii) securities offered to the public pursuant to a
registration statement filed pursuant to the Act; (iv) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all the assets or other reorganization whereby the
Company owns not less than 51% of the voting power of such corporation; (v) any
borrowings, direct or indirect, from financial institutions or other persons by
the Company, whether or not presently authorized, including any type of loan or
payment evidenced by any type of debt instrument, provided such borrowings do
not have any equity features, including warrants, options or other rights to
purchase capital stock, and are not convertible into capital stock of the
Company; (vi) 700,000 shares of Common Stock reserved for issuance to Founders
or employees pursuant to the exercise of options granted or to be granted; (vii)
warrants issued in connection with the leasing of equipment by the Company which
have been approved by the Board; (viii) any security if holders of at least
sixty-six and two thirds percent (66 2/3%) of the outstanding Shares of
Preferred Stock, voting as a single class, (or the Common Stock issued in
respect thereof, or any combination of such Preferred Stock Shares and such
Common Stock) consent in writing that the right of first offer shall not apply
to such securities; (ix) the Additional Series D Shares; or (x) issuances of up
to a cumulative number of 50,000 shares of Common Stock or Preferred Stock from
the date of this Agreement which are not excluded by any of the foregoing
exceptions.
(c) In the event the Company proposes to issue New
Securities, it shall give each Significant Holder written notice of its
intention, describing the type of New Securities, the price and the general
terms upon which the Company proposes to issue the same. Each Significant Holder
shall have thirty (30) days from the date of receipt of any such notice to agree
to purchase the Significant Holder's pro-rata share of such New Securities for
the price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
(d) In the event the Significant Holders fail to
exercise the right of first offer with respect to all of the New Securities
proposed to be sold by the Company within said thirty (30) day period and after
the expiration of the five (5) day period for the exercise of the over-allotment
provisions of this Section 5.8, the Company shall have 120 days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within 120 days
<PAGE> 23
from the date of said agreement), to sell the New Securities respecting which
the Significant Holder's options were not exercised, at a price and upon general
terms no more favorable to the purchasers thereof than specified in the
Company's notice. In the event the Company has not sold within said 120-day
period or entered into an agreement to sell the New Securities within said
120-day period (or sold and issued New Securities in accordance with the
foregoing within 120 days from the date of said agreement), the Company shall
not thereafter issue or sell any New Securities, without first offering such
securities to the Significant Holders in the manner provided above.
(e) The right of first offer set forth in this Section
5.8 is nonassignable, except that such right is assignable (i) by each
Significant Holder to any Person (as herein defined) controlling, controlled by
or under common control with such Significant Holder, (ii) between and among any
of the Significant Holders and (iii) upon the death of a Significant Holder,
such right shall pass to the beneficiaries under the deceased Significant
Holder's last will and testament or to the distributees of the deceased
Significant Holder's estate.
5..9 Right of First Refusal and/or Repurchase Agreement. It
shall be a condition to any issuance of shares of Common Stock (other than
shares of Common Stock issued upon conversion of the Preferred Stock) including,
without limitation, Common Stock to officers or employees of the Company
pursuant to an employee stock purchase, stock option or other benefit or
incentive plan established by the Company, that the Company will cause the
person to whom the Common Stock is to be issued to execute and deliver to the
Company an appropriate right of first refusal agreement and/or a repurchase
agreement (in the event that the shares of Common Stock being issued are subject
to absolute prohibitions on transfer that lapse over time) in a form approved by
the Board which shall provide, among other things, that the Significant Holders
shall have the right to exercise the Company's rights thereunder in the event
the Company shall fail to do so.
5..10 Insurance. The Company will insure and keep insured, with
reputable insurance companies, so much of its properties, to such an extent and
against such risks, as reasonably prudent persons engaged in similar businesses
would customarily insure properties of a similar character or as otherwise
approved by the Board.
5..11 Notice of Record Dates.
(a) In the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, the Company shall mail to each holder of Series D Shares, at least
ten (10) days prior to such record date, specified herein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend or distribution.
(b) In the event of (i) any consolidation or merger to
which the Company is a party and for which approval of any shareholders of the
Company is required, (ii) the conveyance or transfer of all, or substantially
all, of the properties and assets of the Company, (iii) any capital
<PAGE> 24
reorganization or any reclassification of the Common Stock (other than a change
in par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or (iv) the voluntary or
involuntary dissolution, liquidation or winding up of the Company, the Company
shall mail to each holder of Series D Shares, at least ten (10) days prior to
the applicable record date, a notice specifying the date on which such record is
to be taken for the purpose of such transaction.
5..12 Employee Stock Purchase Agreement. The Company will not
issue any of its capital stock, or grant an option to purchase any of its
capital stock, to any Founder, employee, or officer of the Company (other than
any options or grants already made to any Founders or employees of the Company)
except pursuant to a plan adopted or an issuance approved by the Board.
5..13 State Securities Law Filings. The Company shall make any
and all filings necessary (whether before or after the Closing) in connection
with the offer, issuance and sale of the Series D Shares and the issuance of the
Conversion Shares under the securities or blue sky laws of California.
5..14 Lapse of Covenants. Except as otherwise specifically
provided in this Section 5, the covenants contained herein and further
agreements contained in Section 7 of this Agreement shall lapse and be of no
further force and effect upon the consummation by the Company of an Initial
Public Offering. "Initial Public Offering" for purposes of this Agreement, shall
be defined as the receipt by the Company of the proceeds of a bona fide firm
commitment underwritten public offering registered under the Act, which offering
does not exclusively relate to securities under an
<PAGE> 25
employee stock option, bonus or other compensation plan and at a price of not
less than $10.20 per share of Common Stock (as equitably adjusted for any
dilutive event set forth in the Restated Articles of Incorporation or other
similar event) and net proceeds to the Company of not less than $10,000,000.
5..15 Information as to Competitors and Proprietary Information.
The Company shall not provide to the Investor or any Prior Investor any
confidential information concerning the affairs of any other Investor or Prior
Investor disclosed to the Company prior to or subsequent to the execution of
this Agreement.
5..16 Technological Expertise. The Company shall use its best
commercial efforts to maintain and improve its current level of technological
expertise through appropriate research and development and use its reasonable
commercial efforts to retain key employees.
6. Investor's Affirmative Covenants.
6..1 Certain Definitions. As used in this Section 6:
(i) The term "Total Voting Power of the Company" means
the total number of votes which may be cast in the election of directors of the
Company at any meeting of stockholders of the Company if all securities entitled
to vote in the election of directors of the Company were present and voted at
such meeting, other than votes that may be cast only upon the happening of a
contingency.
(ii) The term "Voting Stock" means the Common Stock,
Preferred Stock and any other securities issued by the Company having the
ordinary power to vote in the election of directors of the Company (other than
securities having such power only upon the happening of a contingency).
6..2 Restrictions on Transfer of Voting Stock. The Investor
shall not, directly or indirectly, sell or transfer any Voting Stock except (i)
to the Company or any person or group approved by the Company; or (ii) to a
corporation of which the Investor owns not less than 80% of the voting power
entitled to be cast in the election of directors (a "Controlled Corporation"),
so long as such Controlled Corporation agrees to hold such Voting Stock subject
to all provisions of this Agreement including this Section 6.2; or (iii)
pursuant to a bona fide public offering registered under the Act of either
Voting Stock or securities exchangeable or exercisable for Voting Stock or
pursuant to a rights offering or a dividend or other distribution to
stockholders of the Investor; or (iv) under an exemption provided by SEC Release
No. 33-4708 or Regulation S, provided that the Investor complies with the volume
limitations under Rule 144 of the Act; or (v) subject to the Company's right of
first refusal as set forth
<PAGE> 26
in Section 8.1 hereof, in transactions not described in (i), (ii), (iii), (iv)
or (vi) hereof so long as such transactions do not, directly or indirectly,
result in any single person or group owning or having the right to acquire or
intent to acquire Voting Stock with aggregate Voting Power of 1% or more of the
Total Voting Power of the Company; or (vi) in response to (1) a tender offer to
purchase or exchange for cash or other consideration any Voting Stock which is
made by another person or group and is not opposed by the Board of Directors of
the Company within the time such Board is required, pursuant to regulations
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to
advise Company stockholders of such Board's position on such offer, or (2)
subject to the Company's right of first refusal as set forth in Section 8.1
hereof, any other offer made by another person or group (except by an affiliate
of the Investor) purchase or exchange for cash or other consideration any Voting
Stock which, if successful, would result in such person or group owning or
having the right to acquire Voting Stock with aggregate Voting Power of more
than 40% of the Total Voting Power of the Company then in effect. The
restrictions set forth in this Section 6.2 shall lapse and be of no further
force and effect upon the consummation by the Company of an Initial Public
Offering (as defined in Section 5.14).
6..3 Confidentiality. The Investor agrees to maintain in
confidence all books, records, documents or other information received from the
Company under this Agreement, not to disclose the same to third parties, not to
use such information other than for the purposes of this Agreement and to
obligate all of its personnel having access to such information to adhere to
this obligation of confidentiality; provided, however, that such information may
be (a) disclosed to the extent that disclosure is required pursuant to any
applicable law, regulation, judicial process or order, (b) disclosed or used
when the information has been discovered or developed by the Investor
independently of the Company and such discovery or development is documented in
writing concurrently with such discovery or development, which documentation
shall be provided to the Company upon request, or (c) disclosed or used when the
information is in the public domain through no fault of the Investor.
7. Further Agreements.
7..1 Right of First Refusal and Repurchase with Respect to
Founder Stock. In connection with the exercise of the Incentive Stock Options
granted to each of the Founders and to certain of the Company's employees (the
"Optionees") each of the Founders and the Optionees is required to execute a
Restricted Stock Purchase Agreement in substantially the form provided to
Investor's counsel (the "Restricted Stock Purchase Agreements"). Pursuant to the
Restricted Stock Purchase Agreements and the Restriction Agreements, the Company
has the right of first refusal in connection with the sale by the Founders and
the Optionees of any vested shares of Common Stock and the right to repurchase
any unvested shares of Common Stock. Pursuant to the assignment provisions
contained in the Restriction Agreements and the Restricted Stock Purchase
Agreements, the Company hereby agrees that if on any occasion it elects not to
exercise any of its rights of first refusal or repurchase under the Restriction
Agreements or the Restricted Stock Purchase Agreements or to exercise such
rights only with respect to a portion of the shares to which they are
applicable, that it shall so notify the Significant Holders in writing (the
"Company Notice") within ten (10) days of all of the details of the notice or
even which triggered the Company's right of first refusal or repurchase and the
Significant
<PAGE> 27
Holders shall thereafter have all of the rights of the Company to exercise on a
pro-rata basis the rights of first refusal and repurchase granted thereunder to
the Company with respect to all of the shares of Common Stock to which the
Company's rights apply or with respect to that portion of the shares of Common
Stock that the Company has elected not to purchase on the same terms granted to
the Company pursuant to the Restriction Agreements or Restricted Stock Purchase
Agreements, as applicable. A Significant Holder's pro rata portion, for the
purposes of this Section 7.1, is the ratio of (x) the number of shares of
Preferred Stock (determined on an as converted basis) held by such Significant
Holder at the time to (y) the total number of shares of Preferred Stock
(determined on an as converted basis) of the Company held by all Significant
Holders. Each Significant Holder shall deliver a notice to the Company stating
the number of shares of Common Stock which the Significant Holder desires to
purchase pursuant to this Section 7.1 or to sell pursuant to Section 7.2 within
ten (10) days of its receipt of the Company Notice. The Company shall notify the
Significant Holders (the "Non-Exercise Notice") of any Significant Holder's
election not to exercise, or to exercise only in part, its rights under Sections
7.1 or 7.2 and each Significant Holder shall have a right of over-allotment to
purchase the non-exercising Significant Holder's portion on a pro-rata basis
within five (5) days from the date it receives the Non-Exercise Notice.
Notwithstanding anything to the contrary contained in the Restriction Agreements
or in the Restricted Stock Purchase Agreements, the notice provisions and time
periods set forth in Sections 7.1 and 7.2 shall control in the event the Company
assigns its rights under the Restriction Agreements or Restricted Stock Purchase
Agreements to the Significant Holders.
7..2 Co-Sale Agreement on Sale of Founder Stock. Notwithstanding
anything to the contrary contained in the Restriction Agreements or in the
Restricted Stock Purchase Agreements, in the event the Company does not elect to
purchase any or all of a Founder's shares of Common Stock subject to the rights
of first refusal set forth in the Restriction Agreements and in the Restricted
Stock Purchase Agreements apply, and in the event the Significant Holders do not
elect to purchase any or all shares of Common Stock subject to their rights of
first refusal as set forth in Section 7.1 above, then, with respect to any
shares of a Founder's Common Stock not purchased by the Significant Holders the
Founder hereby grants to the Significant Holders the right to participate, pro
rata (based upon the relative aggregate cost of each holder's Preferred Stock),
in the sale of 50% of such shares in accordance with the following provisions of
this Section 7.2:
(a) Each Significant Holder may elect to participate, pro
rata, in the proposed sale of shares of Common Stock which the selling Founder
desires to sell on the same terms as set forth in the Founder's notice of sale
which triggered the right of first refusal, upon delivery of notice of election
to the selling Founder within the time prescribed for exercising the Significant
Holder's right of first refusal with respect to the selling Founder's shares of
Common Stock.
(b) In the event all of the Significant Holders fail to
exercise the right of co-sale within the time period allotted therefor, the
selling Founder shall have the right to sell the shares of Common Stock which
were subject to the right of co-sale on the same terms as those set forth in the
notice triggering the right of first refusal; provided, however, that the sale
is consummated within the
<PAGE> 28
period of time provided for in the Restriction Agreements or the Restricted
Stock Purchase Agreements, as applicable.
(c) In the event any or all of the Significant Holders
elect to exercise their rights of co-sale in a manner consistent with Section
7.2(a), the selling Founder agrees to reduce the number of shares of Common
Stock to be sold by him, and to sell, for the account of the selling Significant
Holders that amount of Common Stock tendered for sale by the Significant
Holders. Each Significant Holder shall have a right of over-allotment such that
if any Significant Holder fails to exercise his rights hereunder, the other
Significant Holders may sell on a pro-rata basis an amount of Shares equal to
the number of Shares which the non-exercising Significant Holder would have been
permitted to sell. In no event shall the total number of shares of Common Stock
sold by the Significant Holders pursuant to their right of co-sale exceed fifty
percent (50%) of the total number of shares of Common Stock actually being sold
by the selling Founder, other than to Significant Holders pursuant to Section
7.1, in any given sales transaction.
8. Company's Right of First Refusal.
8..1 Right of First Refusal. Prior to making any sale or
transfer of Voting Stock of the Company pursuant to Section 6.2(v), the Investor
shall give the Company the opportunity to purchase such Voting Stock in the
following manner:
(i) The Investor shall give notice (the "Transfer
Notice") to the Company in writing of such intention, specifying the amount of
Voting Stock proposed to be sold or transferred, the proposed price per share
therefor (the "Transfer Price") and the other material terms upon which such
disposition is proposed to be made.
(ii) The Company shall have the right, exercisable by
written notice given by the Company to the Investor within thirty days after
receipt of such Transfer Notice, to purchase all of the Voting Stock specified
in such Notice for cash per share equal to the Transfer Price.
(iii) If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the Voting Stock with respect to which
such right has been exercised shall take place within ninety (90) calendar days
after the Company gives notice of such exercise, which period of time shall be
extended in order to comply with applicable laws and regulations. Upon exercise
of its right of first refusal, the Company and the Investor shall be legally
obligated to consummate the purchase contemplated thereby and shall use their
best efforts to secure any approvals required in connection therewith.
(iv) If the Company does not exercise its right of first
refusal hereunder within the time specified for such exercise, the Investor
shall be free, during the period of 90 calendar days following the expiration of
such time for exercise, to sell the Voting Stock specified in such Transfer
Notice on terms no less favorable to the Investor than the terms specified in
such Notice.
<PAGE> 29
The restrictions set forth in this Section 8.1 shall lapse and be of no further
force and effect upon the consummation by the Company of an Initial Public
Offering (as defined in Section 5.14).
8..2 Tender Offer Sale. Prior to making any sale or exchange
of Voting Stock pursuant to Section 6.2(vi) in response to a tender or exchange
offer, the Investor shall give the Company the opportunity to purchase such
Voting Stock in the following manner:
(i) The Investor shall give notice (the "Tender Notice")
to the Company in writing of such intention no later than 10 calendar days prior
to the latest time by which Voting Stock must be tendered in order to be
accepted pursuant to such offer or to qualify for any proration applicable to
such offer (the "Tender Date"), specifying the amount of Voting Stock proposed
to be tendered. For purposes hereof, a tender offer to purchase Voting Stock
shall be deemed to be an offer at the price specified therein, without regard to
any provisions thereof with respect to proration or conditions to the offeror's
obligation to purchase (assuming such conditions are not impossible of
performance when the offering is made, without giving effect to the Company's
right of first refusal).
(ii) If the Tender Notice is given, the Company shall
have the right, exercisable by giving notice to the Investor at least two
calendar days prior to the Tender Date, to purchase all or any part of the
Voting Stock specified in the Tender Notice for cash. If the Company exercises
such right by giving such notice, the closing of the purchase of such Voting
Stock shall take place within ninety (90) days after the Company gives notice of
the exercise of its right of first refusal hereunder; provided, how ever, that
if the purchase price specified in the tender offer includes any property other
than cash, the value of any property included in the purchase price shall be
jointly determined by a nationally recognized investment banking firm selected
by the Company and a nationally recognized investment banking firm selected by
the Investor or, in the event such firms are unable to agree, a third nationally
recognized investment banking firm to be selected by such two firms. For this
purpose:
(x) The parties shall use their best efforts to
cause any determination of the value of any securities included in the purchase
price to be made within three business days after the date of delivery of the
Tender Notice. If the firms selected by the Investor and the Company are unable
to agree upon the value of any such securities within such three-day period, the
firms shall promptly select a third firm whose determination shall be
conclusive.
(y) The parties shall use their best efforts to
cause any determination of the value of property other than securities to be
made within seven business days after the date of delivery of the Tender Notice.
If the firms selected by the Investor and the Company are unable to agree upon a
value within such seven-day period, the firms shall promptly select a third firm
whose determination shall be conclusive.
The purchase price to be paid by the Company pursuant to this Section 8.2 shall
be (x) if such tender offer is consummated, the purchase price that the Investor
would have received if it had tendered the Voting Stock purchased by the Company
and all such Voting Stock had been purchased in such tender
<PAGE> 30
offer, including any increases in the price paid by the tender offeror, after
exercise by the Company of its right of first refusal hereunder, or (y) if such
tender offer is not consummated, the highest price offered pursuant thereto, in
each case with property, if any, to be valued as aforesaid.
(iii) If the Company does not exercise such right by
giving such notice, then the Investor shall be free to accept for all its Voting
Stock the tender offer with respect to which the Tender Notice was given.
8..3 Assignment of Rights. In the event that the Company elects
to exercise a right of first refusal under this Section 8, the Company may
specify in its notice of intention to exercise such right another person as its
designee to purchase the Voting Stock to which such notice relates. If the
Company shall designate another person as the purchaser pursuant to this Section
8, the giving of notice of acceptance of the right of first refusal by the
Company shall constitute a legally binding obligation of the Company to complete
such purchase if such person shall fail to do so.
9. Restrictions on Transferability of Shares; Compliance with the Act.
9..1 Restrictions on Transferability. In addition to the
restrictions on transfer set forth in Sections 6, 7 and 8, the Shares and the
Conversion Shares shall not be sold, assigned, transferred or pledged, except
upon the conditions specified in this Section 9, which conditions are intended
to insure compliance with the provisions of the Act and in the case of
Conversion Shares being sold pursuant to a Registration Statement, to assist in
an orderly distribution. Each Investor will cause any proposed purchaser,
assignee, transferee or pledgee of Shares or Conversion Shares held by that
Investor to agree to take and hold those Shares or Conversion Shares subject to
the provisions and upon the conditions specified in this Section 9.
9..2 Certain Definitions. As used in this Section 9, the
following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act.
"Holder" shall mean any holder of Registrable Securities
(including any Transferee (as herein defined)) which have not been sold to the
public.
"Initiating Holders" shall mean any Holders who in the
aggregate hold 50% or more of the outstanding Registrable Securities.
The terms "register", "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
<PAGE> 31
"Registrable Securities" shall mean (a) the Conversion
Shares (whether issued or issuable), (b) any Common Stock or other securities of
the Company issued or issuable in respect of the Conversion Shares (or any other
securities of the Company issued in respect of the Shares) on account of any
stock split, reverse stock split, stock dividend, dilution event described in
the Restated Articles of Incorporation or other similar event, (c) any Common
Stock issuable upon conversion of the Series A Preferred Stock received upon
exercise of the Series A Warrants, (d) any Common Stock issuable upon conversion
of the Series B Preferred Stock received upon exercise of the Series B Warrants,
and (e) any Shares or Conversion Shares or Common Stock acquired pursuant to the
right of first offer set forth in Section 5.8 or the right of first refusal and
repurchase with respect to Founder Stock set forth in Section 7.1 or pursuant to
any right to purchase stock from any employee pursuant to an agreement provided
for by Section 5.9; provided, however, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so long as (i)
they have not been sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, (ii) they have not been
sold in a transaction exempt from the registration and prospectus delivery
requirement of the Act under Section 4(1) thereof so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of each sale.
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Sections 9.4, 9.5 and 9.6 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses, and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of the
Company required to bear or bearing the legend set forth in Section 4.3 hereof.
"Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for any Holder.
9..3 Notice of Proposed Transfers. The transferee of each
certificate representing Restricted Securities (a "Transferee") by acceptance
thereof agrees to comply in all respects with the provisions of this Agreement
and shall have all the rights of an Investor hereunder with respect to the
Restricted Shares. Prior to any proposed sale, assignment, transfer or pledge of
any Restricted Securities (other than under circumstances described in Sections
9.4, 9.5 and 9.6 hereof), the Holder thereof shall give written notice to the
Company of such Holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed sale, assignment,
transfer or pledge, in sufficient detail, and shall be accompanied (except in
transactions in compliance with Rule 144) by either (a) a favorable written
opinion of counsel reasonably satisfactory in form and substance to the Company
and its counsel, to the effect that the proposed transfer of the Restricted
Securities may be effected without registration under the Act, or (b) a "no
action" letter from the Commission to the effect that the distribution of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
Holder of such
<PAGE> 32
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Notwithstanding the foregoing, Holders of Restricted Securities and
their transferees shall be permitted to transfer such Restricted Securities
without complying with the provision of this Section to (a) any Person
controlling, controlled by or under common control with such Holder or (b) to
any other Holder of Restricted Securities. Each certificate evidencing the
Restricted Securities transferred as above provided shall, subject to the
provisions of Section 4.3, bear the appropriate restrictive legend set forth
therein.
9..4 Demand Registration Rights.
(a) On two occasions, upon the demand, in writing, of
Initiating Holders that the Company effect a registration with respect to all or
any part of the Registrable Securities, the Company shall give written notice of
such demand within ten (10) days to all other Holders. The notice shall advise
such Holders of their right to participate in such demand registration, which
right may be exercised by each such Holder giving written notice to the Company
of its intention to so participate within twenty (20) days of receipt of such
notice from the Company. The Company will thereafter use its best efforts to
prepare, file and process to effectiveness a registration statement and any
amendments or supplements required to be filed to insure that such registration
statement remains effective under the Act, to permit the Holders or any of them,
or an underwriter on behalf of any of them, to offer and sell to the public the
number of Registrable Securities for which demand registration rights are
exercised hereunder. The Company shall file the aforesaid registration statement
as soon as reasonably practicable, and in any event, within sixty (60) days
following receipt of such written request. The Company shall use its best
efforts to cause such registration statement to become and remain effective
until the earlier of the sale of all of the Registrable Securities included in
the registration statement or one hundred twenty (120) days from the effective
date thereof.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to register the Registrable Securities pursuant to this Section
9.4, (i) during any period within six (6) months following a prior primary or
secondary public offering of the Company's Common Stock, including any
registration of the Registrable Securities but excluding a "shelf" or continuing
registration, (ii) during any period in which the Company has commenced
preparation of a registration statement of securities and pursuant to which it
has notified the Holders of their "piggy-back" registration rights pursuant to
Section 9.5 hereof, (iii) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act, (iv) if the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith and judgment of
the Board of Directors it would be seriously detrimental to the Company or its
shareholders for a registration to be filed in the near future, then the
Company's obligation to use its best efforts to register under this Section 9.4
shall be deferred for a period not to exceed ninety (90) days from the receipt
of the request to file such Registration Statement by Initiating Holders;
provided, however, that the Company shall not exercise the right to defer
registration granted by this subsection (iv) more than once in any twelve-month
period.
<PAGE> 33
(c) The right of any Holder to registration pursuant to
this Section 9.4 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 9.4 and the inclusion of such
Holder's registrable securities in the underwriting to the extent requested and
to the extent provided herein. The Company shall (together with all Holders
proposing to distribute their securities through such an underwriting) enter
into an underwriting agreement in customary form with the managing underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders (which managing underwriters shall be reasonably acceptable to the
Company). The Holders agree to be bound by the provisions of Section 9.9 herein
regarding cutbacks. If any Holder of Registrable Securities disapproves of the
terms of the underwriting, such persons may elect to withdraw therefrom by
written notice to the Company, the Managing Underwriter and the Holders
participating in the registration. The Registrable Securities and/or other
securities so withdrawn shall also be withdrawn from registration, and such
registrable securities shall not be transferred in a public distri bution prior
to ninety (90) days after the effective date of such registration.
9..5 Piggy-Back Registration Rights.
(a) On each occasion, if any, following the date hereof
that the Company contemplates filing with the Commission a registration
statement under the Act relating in whole or in part to the primary offer and
sale of shares of its Common Stock, other than a registration statement which
exclusively relates to the registration of securities under (i) an employee
stock option, bonus or other compensation plan, or (ii) a registration relating
solely to a transaction under Rule 145 promulgated by the Commission, the
Company shall so notify the Holders in writing of its intention to do so at
least thirty (30) days prior to the filing of each such registration statement.
Each Holder who gives written notice to the Company, within twenty (20) days of
receipt of such notice from the Company, of such Holder's desire to have any of
its Registrable Securities included in such registration statement, may, subject
to the provisions of this Section 9.5, have its Registrable Securities so
included. The Company shall file any required amendments of or supplements to
any registration statement filed pursuant to this Section 9.5 and otherwise use
its best efforts to insure that such registration statement remains in effect
under the Act until the earlier of the sale of all of the Registrable Securities
included in the registration or the expiration of one hundred twenty (120) days
from the effective date thereof.
(b) If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company shall
so advise the Holders as a part of the written notice given pursuant to Section
9.5(a). In such event the right of any Holder to registration pursuant to
Section 9.5 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities in the underwriting to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company (or by the Holders who have demanded such
registration). The Holders agree to be bound by the terms and conditions of
Section 9.9 hereof regarding cutbacks.
<PAGE> 34
(c) The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 9.5 prior to the
effectiveness of such registration whether or not any Holder has elected to
include securities in such registration.
9..6 Registration on Form S-3.
(a) The Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form. After the Company
has qualified for the use of Form S-3, in addition to the rights contained in
Sections 9.4 and 9.5, the Holders of Registrable Securities shall have the right
to demand that the Company promptly use its best efforts to effect one
registration per annum on Form S-3, provided, such request shall be made with
respect to an amount of Registrable Securities which have a reasonably
anticipated aggregate price to the public of not less than $750,000.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this Section 9.6 (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Act, (ii) during the period starting with the date sixty (60)
days prior to the filing of and, ending on a date six (6) months following the
effective date of a registration statement (other than with respect to a
registration statement relating to a Rule 145 transaction, or with respect to
securities offered solely to employees), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective, or (iii) if the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed ninety (90)
days from the receipt of the request to file such registration by the Holders;
provided, however, that the Company shall not exercise the right to defer
registration granted by this subsection (iii) more than once in any twelve-month
period.
9..7 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) Make and keep public information available as those
terms are understood and defined in Rule 144 under the Act, at all times from
and after 90 days following the effective date of the first registration under
the Act filed by the Company for an offering of its securities to the general
public;
<PAGE> 35
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Act and the Exchange Act at any time after it has become subject to such
reporting requirements; and
(c) So long as a Holder owns any Restricted Securities,
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any time
from and after 90 days following the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as a Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Holder to sell any such securities without
registration.
9..8 Expenses of Registration. Subject to any Blue Sky
requirements with respect to the allocation of expenses, all Registration
Expenses incurred in connection with registration statements under Section 9.5
and the first two registration statements filed by the Company pursuant to
Sections 9.4 and 9.6, shall be borne by the Company, and all Selling Expenses
shall be borne by the holders of the Registrable Securities so registered pro
rata on the basis of the number of their shares of Registrable Securities so
registered; provided, however, that the Company shall not be required to pay any
Registration Expenses if, as a result of the withdrawal of a request for
registration by Initiating Holders (unless in response to a material adverse
change in the Company), the registration statement does not become effective, in
which case the Holders requesting registration shall bear such Registration
Expenses pro-rata on the basis of the number of their shares of Registrable
Securities so included in the registration request; provided, further, that such
registration shall not be counted as a registration pursuant to Sections 9.4,
9.5 or 9.6.
9..9 Cutbacks. In the event the underwriter for a registration
statement filed pursuant to Sections 9.4, 9.5 or 9.6 advises the Company in
writing that the number of Registrable Securities proposed to be sold in any
such offering or sale is greater than the number of shares which the underwriter
believes feasible to sell at that time at the price and upon the terms approved
by or on behalf of the Company with respect to a registration statement filed
under Section 9.5 or on behalf of the Holders holding a majority of the
Registrable Securities to be included in such registration statement with
respect to a registration statement to be filed under Section 9.4 or 9.6, then
the number of Registrable Securities which the underwriter believes may be sold
shall (a) in the case of a registration statement filed under Section 9.5, first
be allocated to the Company and the remaining Registrable Securities shall be
allocated among the Holders in proportion to the Registrable Securities each
first proposed for inclusion in the registration statement and (b) in the case
of a registration statement filed under Sections 9.4 or 9.6, be allocated to the
Holders in proportion to the number of Registrable Securities each first
proposed for inclusion in the registration statement.
9..10 Additional Covenants Concerning Sale of Shares. In
connection with any registration statement referred to in Section 9 of this
Agreement, the Company shall furnish to each
<PAGE> 36
Holder whose shares of Registrable Securities are included therein (or to any
broker or other person at its request) a reasonable number of copies of such
registration statement, each amendment and supplement thereto and each document
included therein, such number of copies of the then current prospectus included
therein as they may from time to time reasonably request, and a copy of the
opinion of counsel to the Company and a copy of the Company's accountants' "cold
comfort letter" which are delivered to the underwriter, if such counsel or
accountants, as the case may be, so consent.
9..11 Blue Sky Provisions. Except in those jurisdictions in which
the Company would be required to execute a general consent to service of
process, the Company, at its expense, shall endeavor to cause any of the
Registrable Securities included in a registration statement referred to herein
to be qualified under the laws of such number of jurisdictions as the Holders,
or the managing underwriter named herein, may reasonably designate, and the
Company will continue such qualification in effect so long as may be necessary
to comply with all applicable laws regulating sales of securities.
9..12 Advising the Holders. In connection with any registration
statement referred to in Section 9 hereof, the Company will promptly advise each
Holder whose Registrable Securities are included therein, and confirm such
advice in writing (a) when the registration statement has become effective, (b)
upon the filing of any amendment or supplement to the registration statement,
(c) when any post-effective amendment to the registration statement becomes
effective, and (d) of any request by the Commission for any amendment or
supplement to the registration statement or prospectus or for additional
information. If at any time the Commission should institute or threaten to
institute any proceeding for the purpose of issuing, or should issue, a stop
order suspending the effectiveness of the registration statement, the Company
will promptly notify the Holders whose Registrable Securities are included in
such registration statement, and will use its best efforts to prevent the
issuance of any such stop order or to obtain the withdrawal thereof as soon as
possible; and the Company will advise the Holders promptly of any order or
communication of any public board or body addressed to the Company suspending or
threatening to suspend the qualification of any shares of Common Stock for sale
in any jurisdiction.
9..13 Indemnification.
(a) With respect to the registration rights described in
Section 9 hereof, the Company hereby agrees to indemnify, hold harmless and
defend each Holder and each Person who controls, is controlled by or under
common control of any such Holder within the meaning of the Act, against any and
all losses, claims, damages, liabilities and expenses (including reasonable
legal and other expenses incurred in investigating and defending against the
same), to which they, or any of them, may become subject under the Act or other
statute or common law, arising out of or based upon (i) any alleged untrue
statement of a material fact contained in any registration statement or
prospectus included therein, or any amendment thereof or supplement thereto, or
(ii) the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements contained therein not misleading;
provided, however, that the indemnity contained in this Section 9.13(a) shall
not apply to any such alleged untrue statement or omission made in reliance upon
and in conformity with information
<PAGE> 37
furnished in writing to the Company by or on behalf of such Holder. As soon as
practicable after the receipt by any Holder of notice of any claim or action
against any of the Holders in respect of which indemnity may be sought from the
Company hereunder, such Holder shall notify the Company thereof in writing, and
the Company shall assume the defense of such claim or action (and the cost
thereof) by counsel of its own choosing, who shall be reasonably satisfactory to
a majority in interest of the Holders.
(b) Each Holder whose Registrable Securities are included
in a registration statement, severally but not jointly, hereby agrees, to
indemnify, hold harmless and defend the Company, its directors and officers, and
each Person who controls, is controlled by or under common control of the
Company within the meaning of the Act, and each other Holder against any and all
losses, claims, damages, liabilities and expenses (including reasonable legal or
other expenses incurred in investigating and defending against the same), to
which they or any of them may become subject under the Act or other statute or
common law, arising out of or based upon (i) any alleged untrue statement of a
material fact contained in any such registration statement or prospectus
included therein, or any amendment thereof or supplement thereto, or (ii) the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements contained therein not misleading; provided,
however, that the indemnity contained in this Section 9.13(b) shall apply in
each case only to the extent such statement or omission was made solely in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder in connection with the preparation of the
registration statement. The Company, and any other person in respect of which
indemnity may be sought from a Holder hereunder, shall, as soon as practicable
after the receipt of notice of any claim or action against the Company or such
other person or entity, notify such Holder thereof in writing and such Holder
shall assume the defense of any such claim or action (and the cost thereof) by
counsel of its own choosing, who shall be reasonably satisfactory to the Company
and a majority in interest of any Holders claiming indemnity hereunder.
9..14 Registration under the Exchange Act. If the Company shall
at any time have completed a public offering of shares of its Common Stock, it
shall thereafter take such steps as may be necessary to register its Common
Stock under Section 12 of the Exchange Act (whether or not required by law to do
so), to maintain such status, and to file with the Commission all current
reports and other information as may be necessary to enable the Holders or the
Transferees to effect sales of the Conversion Shares in reliance upon Rule 144
under the Act.
9..15 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the registrable securities held by
them and the distribution proposed by such Holder or Holders as the Company may
reasonably request in writing and as shall be required in connection with any
registration referred to in this Section 9.
9..16 Transfer of Registration Rights. The rights to cause the
Company to register securities granted to Holders under Sections 9.4, 9.5 and
9.6 may be assigned to a transferee or assignee in connection with any transfer
or assignment by a Holder of at least Ten Thousand (10,000) Shares of
<PAGE> 38
Registrable Securities, subject to adjustment for any dilution event described
in the Certificate of Determination or similar event; provided, however, that
the Company is given written notice by the Holder effecting such transfer or
assignment.
9..17 Standoff Agreement. Each Holder agrees in connection with
any registration of the Company's securities that, upon request of the Company
or the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration statement) without the prior written consent
of the Company or such underwriters, as the case may be, for such period of time
(not to exceed 120 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters; provided, however, that
all officers and directors of the Company have entered into substantially
similar agreements. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
9..18 Termination of Rights. The rights of any particular Holder
to cause the Company to register securities under Sections 9.4, 9.5 and 9.6
shall terminate with respect to such Holder following a bona fide, firmly
underwritten public offering of shares of Common Stock registered under the Act
at such time as such Holder is able to dispose of all of his Registrable
Securities in one three-month period, pursuant to the provisions of Rule 144.
10. Survival of Representations, Warranties and Covenants.
10..1 Survival of Representations, Warranties and Covenants of
the Company. The Investor shall have the right to rely fully upon the
representations, warranties and covenants of the Company contained in this
Agreement (notwithstanding any knowledge of facts determined or determinable by
the Investor). All such representations and warranties shall survive the
execution and delivery hereof and the Closing, and, except as otherwise
specifically provided in this Agreement, shall thereafter terminate and expire
on the earlier of (a) the second anniversary of the Closing Date and (b) the
consummation of the Initial Public Offering by the Company. The covenants of the
Company contained herein shall continue until they lapse in accordance with the
provisions of this Agreement.
10..2 Survival of Representations and Warranties of the Investor.
The Company shall have the right to rely fully upon the representations and
warranties of the Investor contained in this Agreement (notwithstanding any
knowledge of facts determined or determinable by the Company). All such
representations, warranties, covenants and agreements shall survive the
execution and delivery hereof and the Closing and, except as otherwise
specifically provided in this Agreement, shall thereafter terminate and expire
on the earlier of (a) the second anniversary of the Closing Date and (b) the
consummation of the Initial Public Offering by the Company. The covenant made by
the Investor in Section 4.3 hereof shall survive indefinitely, unless a lesser
period is prescribed by an applicable statute.
<PAGE> 39
11. Conditions Precedent to Obligations of the Investor. The
obligations of the Investor to consummate the purchase of the Shares in the
Closing shall be conditioned on the following:
11..1 Representations and Warranties Correct. Each of the
representations and warranties of the Company contained in this Agreement and in
any certificate delivered to the Investor pursuant hereto shall in all material
respects be true and correct when made and as of the Closing Date, with the same
effect as if made at the Closing Date (or the date to which it relates in the
case of any representation or warranty which specifically relates to an earlier
date).
11..2 Compliance with This Agreement. The Company shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by the Company on or prior to the Closing Date.
11..3 Satisfaction of Investor and Its Counsel. All corporate
proceedings taken in connection with the transactions contemplated by this
Agreement, and all documents incident thereto, shall be reasonably satisfactory
in form to each Investor and its counsel.
11..4 No Actions or Proceedings. No action, suit or proceeding
by or before any court, agency or other governmental body shall have been
asserted, instituted or threatened by any party to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
11..5 Opinion of Company's Counsel. The Company shall have
delivered to the Investor an opinion of Wilson, Sonsini, Goodrich & Rosati,
counsel for the Company, addressed to the Investor and dated as of the Closing
Date in substantially the form attached hereto as EXHIBIT B.
11..6 Officer's Certificate. The Investor shall have received a
certificate dated the Closing Date and signed by the President certifying the
fulfillment of the conditions by the Company specified in this Section 11 and
that he does not have any knowledge of any facts which have not been disclosed
to the Investor in writing which will or may reasonably be expected to have any
material adverse effect on the value of the assets, properties, business,
goodwill or prospects of the Company. General economic conditions shall not be
deemed a fact within the meaning or application of this paragraph.
11..7 Certificate of Secretary or Assistant Secretary. The
Investor or it's counsel shall have received a certificate dated the Closing
Date and signed by the Secretary or Assistant Secretary of the Company
certifying as to:
(a) the Restated Articles of Incorporation in the form
attached as EXHIBIT A hereto;
(b) the By-Laws of the Company;
<PAGE> 40
(c) resolutions of the Board authorizing and approving
the execution and delivery of this Agreement and all documents required to be
delivered pursuant hereto by the Company, and the performance of its obligations
hereunder and that such resolutions are in full force and effect on and as of
the Closing Date;
(d) resolutions of the shareholders of the Company
approving the Restated Articles of Incorporation of the Company and that such
resolutions are in full force and effect on and as of the Closing Date; and
(e) the incumbency and signature of each of the officers
of the Company signing this Agreement and any of the documents delivered
hereunder.
11..8 Delivery of Documents. All of the documents and resolutions
required to be delivered by the Company to the Investor at the Closing shall
have been delivered.
11..9 No Lapse in Insurance Coverage. No lapse shall have
occurred prior to the Closing Date in the coverage provided under any of the
policies of insurance of the Company, including any liability policies, which
relate to the business, assets, properties or employees of the Company.
11..10 Employee Agreements and Nondisclosure Agreements. The
Employee Agreements and Nondisclosure Agreements shall continue to be in full
force and effect.
11..11 Government Approvals. All filings, consents, approvals,
qualifications, registrations or expirations of waiting periods required or
imposed by any governmental agency or ministry necessary for the sale, delivery
or purchase of the Series D Shares, including such requirements under applicable
state securities laws and Japanese law, shall have been filed, occurred or been
obtained.
12. Conditions Precedent to the Obligation of the Company. Except as
may be waived in writing by the Company, the obligations of the Company to
consummate the sale of the Shares herein provided for shall be conditioned upon
the following:
12..1 Representations and Warranties Correct. Each of the
representations and warranties of each Investor in this Agreement and in any
certificate delivered to the Company pursuant hereto certifying the fulfillment
of the conditions by such Investor specified in this Section 12 shall in all
material respects be true and correct when made and as of the Closing Date (or
on the date to which it relates in the case of any representation or warranty
which specifically relates to an earlier date).
12..2 Compliance with this Agreement. Each Investor shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by such Investor on or prior to the Closing Date.
<PAGE> 41
12..3 Satisfaction of Company and its Counsel. All corporate,
partnership and other proceedings taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form to the Company and its counsel, Wilson, Sonsini,
Goodrich & Rosati.
12..4 No Actions or Proceedings. No action, suit or proceeding by
or through any court, agency or other governmental body shall have been
asserted, instituted or threatened by any party to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
12..5 Government Approvals. All filings, consents, approvals,
qualifications, registrations or expirations of waiting periods required or
imposed by any governmental agency or ministry necessary for the sale, delivery
or purchase of the Series D Shares, including such requirements under applicable
state securities laws and Japanese law, shall have been filed, occurred or been
obtained.
13. Documents to be Delivered at Closing.
13..1 Documents to be Delivered by the Company at the Closing.
At the Closing the Company shall deliver to the Investor:
(a) the Restated Articles of Incorporation, in the form
attached as Exhibit A hereto, certified by the Secretary of State of the State
of California;
(b) an opinion, dated the Closing Date, of Wilson,
Sonsini, Goodrich & Rosati, counsel to the Company, in substantially the form
attached as Exhibit B hereto;
(c) a certificate of the President certifying as to the
matters set forth in Section 11.6;
(d) a certificate of the Secretary or Assistant
Secretary certifying as to the matters set forth in Section 11.7;
(e) a Good Standing Certificate certified by the
Secretary of State of the State of California as to the good standing of the
company in California;
(f) a Tax Certificate from the Franchise Tax Board
stating that the Company does not owe any franchise taxes to the State of
California;
(g) certificates representing the Series D Shares being
purchased by the Investor; and
(h) such other documents as the Investor or its counsel
shall have reasonably requested.
<PAGE> 42
13..2 Documents to be Delivered by the Investor at the Closing.
At the Closing, the Investor shall deliver to the Company:
(a) the Purchase Price for the Investor upon the terms
of payment provided for in Section 1.1(a);
(b) such other documents as the Company or its counsel
shall have reasonably requested.
14. Miscellaneous.
14..1 Definition of Person. "Person" for purposes of the
Agreement means an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture or other entity
of whatever nature.
14..2 Definition of Knowledge. "To the best of the Company's
knowledge" shall mean the actual knowledge of the Company or information which
it should have obtained after due inquiry into the conduct of the Company's
business and matters related thereto.
14..3 Additional Actions. The parties shall execute and deliver
such other and further instruments and perform such other and further acts as
may reasonably be required fully to consummate the transactions contemplated
hereby.
14..4 Expenses. Each party to this Agreement agrees to pay its
expenses and the expenses of its agents, employees and attorneys, incurred in
connection with the negotiation, review and execution of this Agreement and
other ancillary documents called for in this Agreement and the consummation of
the transactions contemplated hereby.
14..5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
14..6 Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable by any
party hereto without the prior written consent of the other parties.
14..7 Notices. All notices or other communications hereunder
shall be in writing and shall be mailed, certified or registered mail, return
receipt requested, or shall be sent by messenger or by electronic transmission,
addressed to such party at the address indicated on Schedule 14.7 or to any such
other address as any such party shall specify in a notice to the Company, and,
if intended for the Company, with a copy to Wilson, Sonsini, Goodrich & Rosati,
Two Palo Alto Square, Suite 900, Palo Alto, California 94306, Attention: Henry
P. Massey, Jr., Esq.
<PAGE> 43
14..8 Applicable Laws. This Agreement shall be construed and
governed by the laws of the State of California applicable to contracts made and
to be performed within such state.
14..9 Entire Agreement. This Agreement constitutes the entire
Agreement between the parties hereto, and no party hereto shall be bound by any
communications between them on the subject matter hereof unless such
communications are in writing and bear a date contemporaneous with or subsequent
to the date hereof. Any prior written agreements or letters of intent between
the parties shall, upon execution of this Agreement, be null and void.
14..10 Waivers and Amendments; Noncontractual Remedies;
Preservation of Remedies. This Agreement (except for sections 2, 5.8, 7.1, 7.2,
9 and 14.10) may be amended, superseded, cancelled, renewed or extended, and the
terms hereof may be waived, only by a written instrument duly executed and
acknowledged with the same formality as this Agreement, and signed by the
Investor (or the Investor's Transferees) holding at least two-thirds of the
Series D Shares or shares of Common Stock issued upon conversion of the Series D
Shares; and sections 2, 5.8, 7.1, 7.2, 9 and 14.10 of this Agreement may be
amended, superseded, cancelled, renewed or extended, and the terms hereof may be
waived, only by a written instrument duly executed and acknowledged with the
same formality as this Agreement, and signed by the Holders (or their
Transferees) holding at least two-thirds of the Series A Shares, the Series B
Shares, the Series C Shares and the Series D Shares (and shares of Common Stock
issued upon conversion of the Series A Shares, the Series B Shares, the Series C
Shares and the Series D Shares), voting together as a class. No delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege.
14..11 Table of Contents; Captions. The Table of Contents and the
captions of the various sections of this Agreement are inserted for convenience
of reference only, and shall not constitute a part hereof.
14..12 Schedules and Exhibits Part of Agreement. The Schedules and
Exhibits referred to herein and delivered pursuant hereto, including any
amendments thereto or changes therein prior to the Closing Date, shall be deemed
part of this Agreement as fully and effectively as if set forth at length
herein.
14..13 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
14..14 Obligation of the Company to Indemnify. The Company hereby
agrees to indemnify, defend and hold harmless the Investor (and any of the
Investor's directors, officers,
<PAGE> 44
employees, affiliates and assigns) from and against any and all actual losses,
liabilities, damages, deficiencies, costs or expenses (including interest,
penalties and reasonable attorneys' fees and disbursements,) ("Losses") which it
has incurred arising solely out of any material inaccuracy in or any material
breach of any material representation, warranty, covenant or agreement of the
Company contained in this Agreement.
14..15 Obligation of the Investor to Indemnify. The Investor
agrees to indemnify, defend and hold harmless the Company (and its directors,
officers, employees, affiliates and assigns) from and against any Losses which
it may incur arising solely out of any material inaccuracy in or material breach
of any material representation, warranty, covenant or agreement of such Investor
contained in this Agreement.
14..16 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after
receipt by any party hereto (the "Indemnitee") of notice of any demand, claim or
circumstances which, with the lapse of time, would give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party
(or parties) obligated to provide indemnification pursuant to Sec tion 14.14 or
14.15 (the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated, if
necessary) of the Loss that has been or may be suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may
elect to compromise or defend, at its own expense and by its own counsel, any
Asserted Liability. If the Indemnifying party elects to compromise or defend
such Asserted Liability, it shall, within 30 days (or sooner, if the nature of
the Asserted Liability so requires) notify the Indemnitee of its intent to do
so, and the Indemnitee shall reasonably cooperate, at the expense of the
Indemnifying Party, in the compromise of or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may consent to settlement or compromise of any such Asserted Liability over the
objection of the other; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld, and provided further that the
Indemnifying Party shall not be liable to the Indemnitee for more than the
Indemnifying Party could have settled any Asserted Liability but for the
objection of the Indemnitee. In any event, the Indemnitee and the Indemnifying
Party may participate, at their own expense, in the defense of such Asserted
Liability.
14..17 Limitation and Exclusive Remedy. IN NO EVENT WILL
INDEMNIFICATION BE MADE BY THE COMPANY OR BY THE INVESTOR, AS THE CASE MAY BE,
ARISING OUT OF THIS AGREEMENT, REGARDLESS OF THE FORM IN WHICH ANY LEGAL OR
<PAGE> 45
EQUITABLE ACTION MAY BE BROUGHT, EXCEED THE INVESTOR'S PURCHASE PRICE OR BE MADE
FOR ANY SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED.
Sections 14.14, 14.15 and 14.16 shall be the exclusive remedy for an Indemnitee
with respect to matters set forth in this Agreement.
<PAGE> 46
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date and year first above written.
"COMPANY"
CYMER LASER TECHNOLOGIES
By:
--------------------------------------
Name: Robert P. Akins
Title: President
"INVESTOR"
MITSUBISHI CORPORATION
-----------------------------------------
(Signature)
-----------------------------------------
(Title)
"FOUNDERS"
-----------------------------------------
(Name)
-----------------------------------------
(Signature)
<PAGE> 47
SCHEDULE 1.1
Founders
Robert Akins
Richard Sandstrom
Uday Sengupta
<PAGE> 48
SCHEDULE 1.2
Additional Purchasers
<PAGE> 49
SCHEDULE 3.0
Exceptions to Representations and Warranties
Set forth below are exceptions to the representations and warranties of
the Company made in Section 3.0 of the attached Agreement. All disclosures and
exceptions are intended to modify all of the Company's representations and
warranties, and the section headings used below are for convenience only.
3.1 Organization and Standing; Articles and Bylaws
The Company is in the process of qualifying to do business in the state
of Massachusetts.
3.3 Capitalization
The Company may issue up to 152,396 additional shares of Series D
Preferred Stock pursuant to the right of first offer set forth in Section 5.8 of
the 1990 Purchase Agreement. The right of first offer applies to "Significant
Holders," as that term is defined in the 1990 Purchase Agreement.
3.8 Absence of Undisclosed Liabilities and Obligations
See Section 3.13 below. See Section 3.3 above.
3.10 Real Property
The Company currently leases property at the following locations:
Units E, F, G and H
7887 Dunbrook Rd.
San Diego, California
Units B, C, D, E and F
7867 Dunbrook Rd.
San Diego, California
Suite 157
1 Longfellow Center
526 Boston Post Rd.
Wayland, Massachusetts
<PAGE> 50
1-22-6 Ichikawa
Ichikawa
Chiba, Japan 272
3.11 Tangible Assets and Equipment
The Company currently leases:
two Nuclecel Static Eliminators
two Propylene Nozzle
one Ricoh 6620 Copier
two Ricoh Fax 75
3.13 Patent and Trademarks
Cymer Laser Technologies was awarded on April 10, 1990 a patent dated
January 15, 1988, U.S. Patent Office Serial No. 144799, entitled "Compact
Excimer Laser".
Cymer has applied for a patent dated November 22, 1989, U.S. Patent
Office Serial No. 440,605, entitled "System for, and Method of, Regulating the
Wavelength of a Light Beam."
Cymer is aware of certain patents issued to Mr. Gordon Gould in October
1977 and July 1979 as well as certain other patent applications of Mr. Gould
believed to be pending before the U.S. Patent Office which relate to certain
elements of basic laser technology. These claims of Mr. Gould have raised a
state of confusion in the laser industry, in that many of these claims may have
been covered by prior patents issued to others and under which many
manufacturers of lasers have paid royalties pursuant to licensing arrangements.
During fiscal 1987 two courts upheld the Gould patents as valid. However,
neither of these decisions is binding upon Cymer and no determination has been
made as to whether Cymer's products infringe the Gould patents. All rights to
the Gould Patents have since been transferred to Patlex Corporation. On October
11, 1989 the Company signed a patent license agreement with Patlex, with the
effective date of such agreement retroactive to January 1988. The Company has
agreed to pay Patlex a royalty of five percent of the portion of the net selling
price relevant to the licensed patents on shipments to customers in the United
States and Canada. On sales to customers in other than the U.S. and Canada the
royalty will be two percent. In signing the license agreement, the Company
settled with Patlex on the complete payment of all royalties for past shipments
dating from January 1988 to January 31, 1990. There were no shipments by the
Company prior to January 1988.
The Company received a letter dated July 29, 1987 from Questek, Inc.
relating to United States Patent No. 4,611,270 requesting information regarding
possible patent infringement. The Company responded on August 26, 1987 that it
did not believe that any of its products infringed on the stated patent.
<PAGE> 51
3.16 Litigation
See Section 3.13 above.
14.7 Addresses
Cymer Laser Technologies
7887 Dunbrook Road
San Diego, California 92126
Attn: Dr. Robert Akins
Mr. William Angus
with copies to:
Wilson, Sonsini, Goodrich & Rosati
Two Palo Alto Square, Suite 900
Palo Alto, CA 94306
Attn: Henry P. Massey, Jr., Esq.
Mitsubishi Corporation
New Project Team
Industrial Electronics Business Dept.
6-3, Marunouchi 2-Chome
Chiyoda-Ku
Tokyo, Japan
<PAGE> 52
EXHIBIT 10.9
EXHIBIT A
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CYMER LASER TECHNOLOGIES
Robert Akins and William Angus, III, certify that:
1. They are the President and the Secretary, respectively, of
CYMER LASER TECHNOLOGIES, a California corporation (the "Company").
2. The articles of incorporation of the Company, as amended to
the date of the filing of this certificate, including amendments set forth
herein but not separately filed (and with the omissions required by Section 910
of the California General Corporations Law) are restated as follows
(hereinafter referred to as the "Second Amended and Restated Articles of
Incorporation"):
I.
The name of this corporation is: CYMER LASER TECHNOLOGIES (the
"Company").
II.
The purpose of the Company is to engage in any lawful act or activity
for which a corporation may be organized under the California General
Corporation Law, other than the banking business, the trust company business,
or the practice of a profession permitted to be incorporated by the California
General Corporation Law.
III.
The Company is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares of Common Stock authorized to be issued is Thirteen Million
(13,000,000), $.01 par value per share. The total number of shares of
Preferred Stock authorized to be issued
<PAGE> 53
is Six Million (6,000,000), $.01 par value per share. The Preferred Stock
shall be issued in four series. The first series of Preferred Stock shall be
designated as 8% Non-Cumulative Voting Redeemable Convertible Series A
Preferred Stock (the "Series A Preferred Stock") and shall consist of Three
Million (3,000,000) shares with the rights, preferences, privileges and
restrictions set forth below. The second series of Preferred Stock shall be
designated as 8% Non-Cumulative Voting Redeemable Convertible Series B
Preferred Stock (the "Series B Preferred Stock") and shall consist of One
Million Five Hundred Thousand (1,500,000) shares with the rights, preferences,
privileges and restrictions set forth below. The third series of Preferred
Stock shall be designated as 8% Non-Cumulative Voting Redeemable Convertible
Series C Preferred Stock (the "Series C Preferred Stock") and shall consist of
One Million (1,000,000) shares with the rights, preferences, privileges and
restrictions set forth below. The fourth series of Preferred Stock shall be
designated as 8% Non-Cumulative Voting Convertible Series D Preferred Stock
(the "Series D Preferred Stock") and shall consist of Five Hundred Thousand
(500,000) shares with the rights, preferences, privileges and restrictions set
forth below. The rights, preferences, privileges and restrictions granted to
and imposed upon the Preferred Stock are as follows:
A. Dividend Rate. The holders of record of shares of Series A,
Series B, Series C and Series D Preferred Stock shall be entitled to receive,
when, if and as declared by the Board of Directors of the Company (the "Board")
out of any assets of the Company legally available therefor, an annual cash
dividend at the rate per share of 8% of the Liquidation Value (as hereinafter
defined) of the respective series, which shall be payable on the payment dates
fixed from time to time by the Board or a duly authorized committee thereof.
"Series A Liquidation Value," "Series B Liquidation Value," "Series C
Liquidation Value" and "Series D Liquidation Value" shall mean $1.60, $3.40,
$7.00 and $8.50 per share, respectively. No dividends (other than those
payable solely in Common Stock) shall be declared or paid or set aside for
payment or other distribution made with respect to the Common Stock during any
fiscal year of the Company nor shall any shares of Common Stock be redeemed,
purchased or otherwise acquired by the Company until a dividend equal to 8% per
annum of the applicable Liquidation Value per share of Series A, Series B,
Series C and Series D Preferred Stock has been paid or declared and set apart
during the fiscal year. If in the event of the declaration of a dividend, the
assets and funds thus distributed among the holders of Series A, Series B,
Series C and Series D Preferred Stock shall be insufficient to permit the
payment to such holders of the full dividend, then such assets and funds shall
be distributed ratably among the holders of the Series A, Series B, Series C
and Series D Preferred Stock (in proportion to the applicable Liquidation
Values). Any reference in these Second Amended and Restated Articles of
-2-
<PAGE> 54
Incorporation to Common Stock includes any other class or series of Common
Stock that may be authorized from time to time. The foregoing restriction on
redemption, repurchase or acquisition of Common Stock shall be inapplicable to
(i) the redemption provisions of these Second Amended and Restated Articles of
Incorporation, (ii) any payments in lieu of issuance of fractional shares
thereof whether upon any merger, conversion, stock dividend or otherwise, (iii)
repurchases of Common Stock by the Company pursuant to the terms of the
Company's Incentive Stock Option Plan or the Common Stock Restriction
Agreements entered into by the Company with each of Robert P. Akins, Uday
Sengupta, Richard L. Sandstrom and Donald G. Larson and any other repurchases
by the Company under circumstances comparable to those contemplated by the
Company's Incentive Stock Option Plan or the Common Stock Restriction
Agreements or (iv) the rescission of any acquisition by the Company pursuant to
which such stock was issued. Dividends on the Series A, Series B, Series C and
Series D Preferred Stock shall not be cumulative and no rights to dividends
shall accrue to the holders of Series A, Series B, Series C and Series D
Preferred Stock in the event that the Company shall fail to declare or pay
dividends in whole or in part on the Series A, Series B, Series C and Series D
Preferred Stock, respectively, in any previous fiscal year of the Company,
whether or not the earnings of the Company in that previous fiscal year were
sufficient to pay such dividends in whole or in part. After dividends in the
amount of 8% per annum of the Liquidation Value per share on the Series A,
Series B, Series C and Series D Preferred Stock have been paid or declared and
set aside in any one fiscal year of the Company, if the Board shall elect to
declare additional dividends out of funds legally available therefor in that
fiscal year, such additional dividends shall be paid on the Common Stock and on
the Series A, Series B, Series C and Series D Preferred Stock as if the Series
A, Series B, Series C and Series D Preferred Stock had been converted to Common
Stock prior to the payment of the additional dividends.
B. Voting.
(i) Subject to subsection B (ii) hereof, each holder of the Series A
Series B, Series C and Series D Preferred Stock shall be entitled to vote on
all matters submitted to a vote (or to give their written consent in lieu of a
vote) of stockholders of the Company and, with respect to such vote, shall be
entitled to cast the number of votes he would have been entitled to cast had he
converted all of his shares of Series A, Series B, Series C and Series D
Preferred Stock into Common Stock immediately prior to such vote. Except as
otherwise provided herein or required by law, the holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Common Stock shall vote together and not as separate
classes or series.
-3-
<PAGE> 55
(ii) The holders of shares of Common Stock voting
separately as a class shall elect two members of the Board of Directors of the
Company, the holders of shares of Series A Preferred Stock voting separately
as a class shall elect two members of the Board of Directors of the Company,
and the holders of shares of Series B Preferred Stock voting separately as a
class shall elect one member of the Board of Directors. Additional members of
the Board of Directors, if any, shall be elected by the holders of shares of
Common Stock and Series A, Series B, Series C and Series D Preferred Stock
voting together as a single class. If a vacancy on the Board of Directors is
to be filled by the Board of Directors, only a director or directors elected by
the same class of stockholders as those who would be entitled to vote to fill
such vacancy, if any, shall vote to fill such vacancy. No action by members of
the Board of Directors filling a vacancy on the Board of Directors shall be
effective until 10 days after all Board members who do not have a right to
vote on such appointment have received notice thereof. A majority of the Board
members entitled to receive such notice may waive such notice requirement on
behalf of all such Board members.
C. Protective Provisions.
(i) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series A, Series
B, Series C and Series D Preferred Stock, voting together as a class:
(a) Amend or restate the Second Amended and
Restated Articles of Incorporation in a manner which would adversely alter or
change the rights, preferences, privileges or restrictions of the Series A,
Series B, Series C or Series D Preferred Stock;
(b) Establish any class or series of capital
stock which would rank senior to or on a parity with the Series A, Series B,
Series C or Series D Preferred Stock with respect to the right to receive
dividends or any distribution upon the liquidation, dissolution, Liquidating
Merger (as defined below) or winding up of the Company;
(c) Effect or permit any sale, lease,
encumbrance, assignment, transfer or conveyance of all or substantially all of
the assets of the Company, or any reclassification or other change of any
stock, or the merger or consolidation of the Company;
-4-
<PAGE> 56
(d) Increase or decrease (other than by permitted
repurchase, redemption or conversion) the total number of authorized shares of
capital stock or reduce the stated capital of the Company;
(e) Amend the Articles of Incorporation or the
By-Laws of the Company to increase the authorized number of members of the
Board of Directors in excess of seven; or
(f) Obligate itself to do any of the foregoing.
(ii) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series C Preferred
Stock:
(a) Amend or restate the Second Amended and
Restated Articles of Incorporation in a manner which would adversely alter or
change the rights, preferences, or privileges of the Series C Preferred Stock,
provided the Series C Preferred Stock is adversely affected by such amendment
or restatement in a different manner than the Series A, Series B or Series D
Preferred Stock;
(b) Establish any class or series of capital
stock which would rank senior to or on a parity with Series C Preferred Stock
with respect to the right to receive dividends or any distribution upon the
liquidation, dissolution, Liquidating Merger (as defined) or winding up of the
Company, provided the Series C Preferred Stock is adversely affected by such
establishment in a different manner than the Series A, Series B or Series D
Preferred Stock; or
(c) Obligate itself to do any of the foregoing.
(iii) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series D Preferred
Stock:
(a) Amend or restate the Second Amended and
Restated Articles of Incorporation in a manner which would adversely alter or
change the rights, preferences, or privileges of the Series D Preferred Stock,
provided the Series D Preferred Stock is adversely affected by such amendment
or restatement in a different manner than the Series A, Series B or Series C
Preferred Stock;
(b) Establish any class or series of capital
stock which would rank senior to or on a parity with Series D Preferred Stock
with respect to the right to receive dividends or any distribution upon the
liquidation, dissolution, Liquidating Merger (as
-5-
<PAGE> 57
defined) or winding up of the Company, provided the Series D Preferred Stock is
adversely affected by such establishment in a different manner than the Series
A, Series B or Series C Preferred Stock; or
(c) obligate itself to do any of the foregoing.
D. Redemption and Sinking Fund.
(i) So long as any Series A, Series B, Series C or Series
D Preferred Stock remains outstanding, the Company shall, on each of the dates
set forth in the following schedule (each a "Sinking Fund Payment Date"), set
aside as and for a sinking fund for the redemption of the Series A, Series B,
Series C and Series D Preferred Stock (hereinafter called the "Sinking Fund")
in cash out of any funds legally available therefor, a sum equal to the product
of (a) the applicable Redemption Price (as hereinafter defined) multiplied by
(b) the number of shares of Series A, Series B, Series C and Series D Preferred
Stock to be redeemed as determined pursuant to subsection D (vii) hereof, a
maximum number of shares as set forth below opposite such Sinking Fund Payment
Date:
<TABLE>
<CAPTION>
Sinking Fund Number of Shares of Preferred
Payment Date Stock Offered to be Redeemed
- ------------ ----------------------------
<S> <C>
March 15, 1996 One third of the shares of each series of Series A,
Series B, Series C and Series D Preferred Stock then
outstanding.
March 15, 1997 One third of the shares of each series of Series A,
series B, Series C and Series D Preferred Stock
outstanding as of March 15, 1996.
March 15, 1998 One third of the shares of each series of Series A,
Series B, Series C and Series D Preferred Stock
outstanding as of March 15, 1996.
</TABLE>
(ii) The Redemption Price for each share of Series A, Series
B, Series C and Series D Preferred Stock shall be an amount in cash equal to
the sum of the Liquidation Value of such series Plus 8% per annum. of the
Liquidation Value from date of original issuance of such series less any
dividends actually paid on such
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share of Series A, Series B, Series C or Series D Preferred Stock to the date
of redemption.
(iii) If on any Sinking Fund Payment Date the funds of the
Company legally available therefor shall be insufficient to discharge such
Sinking Fund requirement in full, funds to the extent legally available for
such purpose shall be set aside for the Sinking Fund. Such Sinking Fund
requirements shall be cumulative, so that if for any year or years such
requirements shall not be fully discharged as they accrue, funds legally
available therefor, after such payment or provisions for dividends, for each
year thereafter shall be applied thereto until such requirements are fully
discharged.
(iv) On or before the fifth day (the "Redemption Date")
next following each Sinking Fund Payment Date, the cash in the Sinking Fund
shall be used to acquire by redemption, in the manner provided below, the
number of shares of Series A, Series B, Series C and Series D Preferred Stock
to be redeemed as determined in subsection D(vii) hereof.
(v) In the event of the redemption of only a part of the
outstanding shares of Series A, Series B, Series C or Series D Preferred Stock,
the Company shall effect such redemption pro rata among the total of all series
of Series A, Series B, Series C and Series D Preferred Stock according to the
number of shares to be redeemed by the Company for each holder of Series A,
Series B, Series C or Series D Preferred Stock.
(vi) At least 30 days but not more than 60 days prior to
the Redemption Date, a written offer (a "Offer to Redeem"), shall be mailed,
postage pre-paid, to each holder of record of the Series A, Series B, Series C
and Series D Preferred Stock offered to be redeemed at his address last shown
an the records of the Company. The Offer to Redeem shall state:
(a) Whether all or less than all of the
outstanding shares of Series A, Series B, Series C or Series D Preferred Stock
are offered to be redeemed and the total number of shares offered for
redemption;
(b) The number of shares of Series A, Series B,
Series C or Series D Preferred Stock held by the holder that the Company
intends to redeem;
(c) The Redemption Date and the Redemption Price
for each series;
(d) The date upon which the holder's rights to
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convert such shares of Series A, Series B, Series C or Series D Preferred Stock
into Common Stock will terminate; and
(e) That the holder is to surrender to the
Company, in the manner and at the place designated, his certificate or
certificates representing the shares of Series A, Series B, Series C or Series
D Preferred Stock to be redeemed.
(vii) If a holder of Series A, Series B, Series C or Series
D Preferred Stock elects to accept the Offer to Redeem on or before the
applicable Redemption Date (unless such holder has exercised his right to
convert the shares as provided in Section E hereof), such holder shall (i)
deliver to the principal offices of the Company a written statement accepting
the offer to Redeem and setting forth the number of shares of Preferred Stock
such holder desires to have redeemed and identifying the series of such shares
and (ii) surrender the certificate or certificates representing such shares to
the Company, in the manner and at the place designated in the Offer to Redeem,
and thereupon the Redemption Price for such shares shall be payable to the
order of the person whose name appears on such certificate or certificates as
the owner thereof, and each surrendered certificate shall be cancelled and
retired. In the event less than all of the shares represented by such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(viii) If the Offer to Redeem shall have been duly given,
and if on the Redemption Date the Redemption Price is either paid or made
available for payment through the deposit arrangement specified in subsection D
(ix) below, then notwithstanding that the certificates evidencing any of the
shares of Series A, Series B, Series C or Series D Preferred Stock so called
for redemption shall not have been surrendered, the dividends with respect to
such shares shall cease to accrue after the Redemption Date and all rights with
respect to such shares shall forthwith after the Redemption Date terminate,
except only the right of the holders to receive the Redemption Price without
interest upon surrender of their certificate or certificates therefor.
(ix) On or prior to the Redemption Date, the Company shall
deposit with any bank or trust company in the State of California, having a
capital and surplus of at least $100,000,000 as a trust fund, a sum equal to
the aggregate Redemption Price of all shares of Series A, Series B, Series C or
Series D Preferred Stock offered for redemption and not yet redeemed, with
irrevocable instructions and authority to the bank or trust company to pay, on
or after the Redemption Date or prior thereto, the Redemption Price to the
respective holders upon the surrender of their share Certificates. From and
after the later of the date of such deposit or the applicable Redemption Date,
the shares so called for
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redemption shall be redeemed. The deposit shall constitute full payment of the
shares to their holders, and from and after the later of the date of the
deposit or the applicable Redemption Date, the shares shall be deemed to be no
longer outstanding, and the holders thereof shall cease to be shareholders of
the Company with respect to such shares and shall have no rights with respect
thereto except the rights to receive from the bank or trust company payment of
the Redemption Price of the shares, without interest, upon surrender of their
certificates therefor, and the right to convert such shares as provided in
Section E hereof. Any funds so deposited and unclaimed at the end of one year
from the Redemption Date shall be released or repaid to the Company, after
which the holders of shares called for redemption shall be entitled to receive
payment of the Redemption Price only from the Company.
(x) The Company may elect to redeem all or a portion of
any series of Series A, Series B, Series C or Series D Preferred Stock at any
time, provided, that it shall have received the prior written consent of
persons holding two-thirds (2/3) of the outstanding shares of each series of
Preferred Stock, with each series voting separately as a class.
E. Conversion.
(i) In General. Subject to subsection E(v) below, the
Series A, Series B, Series C and Series D Preferred Stock shall be convertible
at the option of the holder at any time into fully paid and nonassessable
shares of Common Stock of the Company initially at the Conversion Rate for each
series (as defined herein) of one (1) share of Common Stock for each share of
Series A, Series B, Series C or Series D Preferred Stock; provided, however,
that in case of the redemption of any shares of Series A, Series B, Series C or
Series D Preferred Stock, such right of conversion shall cease and terminate as
to the shares which the holder thereof has accepted the Company's Offer to
Redeem, at the close of business on the day next prior to the Redemption Date
for those shares, notwithstanding any earlier deposit by the Company of funds
sufficient for such redemption, unless default shall be made in the payment of
the Redemption Price, in which case the rights of conversion granted hereby
shall survive.
(ii) The number of shares of Common Stock which shall be
deliverable in exchange for a share of Series A, Series B, Series C and Series
D Preferred Stock upon conversion thereof is hereinafter referred to as the
"Conversion Rate" for each such series. The Conversion Rate of each series
shall be subject to adjustment from time to time in certain instances as
hereinafter provided.
(iii) An irrevocable notice of conversion shall be mailed
by each holder of shares of Series A, Series B, Series C and Series
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D Preferred Stock electing to convert his shares addressed to the Company at
its offices at 7887 Dunbrook Road, Suite H, San Diego, California 92126 (or
such other address as the Company shall designate and notify the holders of
Series A, Series B, Series C and Series D Preferred Stock in writing). If less
than all of the shares of the Series A, Series B, Series C or Series D
Preferred Stock owned by such holder are to be converted, the notice shall
specify the number of shares thereof which are to be converted. Two days after
the mailing of such notice, notwithstanding that no certificate for the shares
of Common Stock into which the Series A, Series B, Series C or Series D
Preferred Stock was converted shall have been received by the holder so
electing to convert and notwithstanding that no certificate for shares of the
Series A, Series B, Series C or Series D Preferred Stock converted into the
Common Stock shall have been surrendered to the Company, the conversion of the
Series A, Series B, Series C or Series D Preferred Stock shall be deemed
effective and the certificate or certificates representing the shares of Series
A, Series B, Series C and Series D Preferred Stock for which notice of
conversion was mailed shall be deemed to evidence the shares of Common Stock
into which they were converted until such time as they are exchanged for a new
certificate representing the shares of Common Stock into which they were
converted.
(iv) Exchange of Certificates. As soon as possible after
the holder mails its notice of conversion to the Company, but in no event later
than five (5) business days thereafter; (a) the holder shall surrender the
certificate or certificates for such Series A, Series B, Series C or Series D
Preferred Stock at the office of any duly appointed transfer agent for such
Preferred Stock or the Company's offices at 7887 Dunbrook Road, Suite H, San
Diego, California 92126 (or such other office or offices of the Company, if
any, as the Board may determine and notify the holders of Series A, Series B,
Series C and Series D Preferred Stock in writing). Such certificate or
certificates shall be duly endorsed to the Company or in blank or accompanied
by proper instruments of transfer to the Company or in blank, unless the
Company shall waive such requirement, and shall state in writing herein the
name or names in which the holder wishes the certificate or certificates for
Common Stock issued; and (b) the Company will issue and deliver to the person
for whose account such Series A, Series B, Series C or Series D Preferred Stock
was so surrendered, or to his nominee or nominees, certificates for the number
of full shares of Common Stock to which he shall be entitled as aforesaid,
together with a cash adjustment for any fraction of a share as hereinafter
stated, if the shares of Series A, Series B, Series C or Series D Preferred
Stock surrendered for conversion are not in the aggregate evenly convertible
into a number of full shares of Common Stock. in the event of any liquidation,
dissolution, Liquidating Merger (as hereinafter defined) or winding up of the
affairs of the Company, all
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<PAGE> 62
conversion rights of the holders of Series A, Series B, Series C and Series D
Preferred Stock shall terminate on the date fixed by resolutions of the Board
of Directors of the Company, which date shall not be later than ten (10) days
nor earlier than twenty (20) days prior to such liquidation, dissolution,
Liquidating Merger or winding up.
(v) Automatic Conversion.
(a) All shares of Series A, Series B, Series C
and Series D Preferred Stock outstanding shall be converted automatically and
without the requirement of any election on the part of any holder of such
shares of Series A, Series B, Series C or Series D Preferred Stock at the
applicable Conversion Rate in effect immediately prior to the closing by the
Company of a bona fide firm commitment underwritten public offering registered
under the Securities Act of 1933, as amended, of its Common Stock at a public
offering price of not less than $10.20 per share of common Stock (as adjusted
for any stock dividend, stock split or combination) with net proceeds to the
company of not less than $10,000,000 (an "Automatic Conversion Event").
(b) Written notice shall be given to the holders
of the Series A, Series B, Series C and Series D Preferred Stock immediately
upon the occurrence of an Automatic Conversion Event. On and after the date of
mailing of such notice, and notwithstanding that any certificates for the
Series A, Series B, Series C or Series D Preferred Stock shall not have been
surrendered for conversion, the shares of Series A, Series B, Series C and
Series D Preferred Stock evidenced thereby shall be deemed to be no longer
outstanding, and all rights with respect thereto shall forthwith cease and
terminate, except any rights of the holder (1) to receive the shares of Common
Stock to which he shall be entitled upon conversion thereof, (2) to receive the
amount of cash payable in respect of any fractional share of Common Stock to
which he shall be entitled and (3) to receive any dividends declared but unpaid
on such Series A, Series B, Series C and Series D Preferred Stock prior to the
Automatic Conversion Event. No adjustments with respect to the Conversion Rate
for each series shall be made on account of any holder's rights to dividends
that have been declared but are unpaid prior to the Automatic Conversion Event;
provided, however, that no dividends shall thereafter be paid an the Common
Stock unless dividends have first been paid to the holders of Series A, Series
B, Series C and Series D Preferred Stock entitled to payment prior to the
Automatic Conversion Event. As soon as practicable after such Automatic
Conversion Event, but in no event later than ten (10) business days after a
holder of Series A, Series B, Series C or Series D Preferred Stock shall have
received notice from the Company of such Automatic Conversion Event: (1) such
holder shall surrender the certificate or certificates for
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such Series A, Series B, Series C or Series D Preferred Stock at the office and
in the manner provided for such purpose pursuant to subsection E (iii) above;
and (2) the Company shall issue and deliver to the person for whose account
such Series A, Series B, Series C or Series D Preferred Stock was so
surrendered, or to his nominee or nominees, certificates for the number of full
shares of Common Stock to which he shall be entitled as aforesaid, together
with a cash adjustment for any fraction of a share as hereinafter stated, if
the shares of Series A, Series B, Series C or Series D Preferred Stock
automatically converted are not in the aggregate evenly convertible into a
number of full shares of Common Stock.
F. Anti-Dilution Protection. The Conversion Rates for the Series
A, Series B, Series C and Series D Preferred Stock shall be subject to
adjustment from time to time as set forth below.
(i) Certain Definitions and Assumptions. Far purposes of
this Section F, the following definitions and assumptions shall apply:
(a) "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities.
(b) "Convertible Securities" shall mean any
evidence of indebtedness, shares (other than the Series A, Series B, Series C
or Series D Preferred Stock) or other securities convertible into or
exchangeable for Common Stock.
(c) "Original Issue Date" shall mean the date on
which the first share of Series D Preferred Stock was issued.
(d) "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued (or pursuant to this subsection F(i),
deemed to be issued) by the Company subsequent to the Original Issue Date,
other than shares of Common Stock issued or issuable (or pursuant to this
subsection F(i), deemed to be issued) at any time:
(1) upon conversion of the Series A,
Series B, Series C or Series D Preferred Stock (including any such shares of
Series A, Series B, Series C or Series D Preferred stock issued on or issuable
upon conversion or exercise of Convertible Securities or Options);
(2) pursuant to Options to purchase an
aggregate of 700,000 shares of Common Stock reserved for issuance or
outstanding on the Original Issue Date, or Options to purchase shares of Series
A or Series B Preferred Stock outstanding or issued on the Original Issue Date;
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(3) to employees, consultants, agents or
directors of the Company as approved by the Board of Directors;
(4) by way of dividend or distribution
pursuant to subsection F(ii) or F(iii) below or a dividend or distribution on
Series A, Series B, Series C or Series D Preferred Stock; and
(5) up to a total of 50,000 shares of
Common Stock or Preferred Stock issued since the Original Issue Date at a
purchase price less than the then applicable Conversion Price and which are not
excluded pursuant to clauses (1-4) of this subsection F(i)(d).
(e) "Conversion Price" for Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall mean $1.60, $3.40, $7.00 and $8.50, respectively, divided
by the applicable Conversion Rate in effect at the time of any such
determination.
(f) The issuance of options or Convertible
Securities of the Company shall be deemed the issuance of the shares of Common
Stock which may be acquired upon the exercise of the Options or the exchange or
conversion of the Convertible Securities for a consideration equal to the
consideration for which such options were issued, plus the exercise price of
any such options or the consideration equal to the consideration for which the
Convertible Securities were issued, plus any additional consideration to be
received on exchange or conversion thereof. Such shares of Common Stock shall
be deemed outstanding for the purposes of this Section F.
(g) Once an adjustment has been made to the
applicable Conversion Rate by reason of the deemed issuance of Additional
Shares of Common Stock, no further adjustment in the Conversion Rate for each
series shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such options or conversion or
exchange of such Convertible Securities.
(h) If such option or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company upon exercise, exchange or
conversion thereof or increase or decrease in the number of shares of Common
Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Rate for each series shall, upon any such increase or decrease
becoming effective, be equitably adjusted to reflect such increase or decrease.
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<PAGE> 65
(i) Upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Rate for each series computed
upon the original issue thereof and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:
(1) in the case of Convertible
Securities or Options for Common Stock, the only Additional Shares of Common
Stock issued were shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Company for the issue of all such Options, whether or
not exercised, plus the consideration actually received by the Company upon
such exercise, or for the issue of all such Convertible Securities which were
actually converted or exchanged, plus the additional consideration, if any,
actually received by the Company upon such conversion or exchange, and
(2) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of issue of such
Options, and the consideration received by the Company for Additional Shares of
Common Stock deemed to have been then issued was the consideration actually
received by the Company for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the Company
upon the issue of the Convertible Securities with respect to which such Options
were actually exercised.
(ii) Dividends. If at any time the Company pays a
dividend on Common Stock payable in Common Stock or Convertible Securities,
subdivides its outstanding shares of Common Stock into a larger number of
shares or combines the outstanding shares of Common Stock into a smaller number
of shares by reclassification or otherwise (each, a "Dilutive Event"), the
Conversion Rate for each series in effect immediately prior to such Dilutive
Event shall be adjusted by multiplying such Conversion Rate by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such Dilutive Event (assuming exercise or conversion of all
outstanding Options and Convertible Securities) and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such Dilutive Event (assuming exercise or conversion of all outstanding Options
and Convertible Securities). An adjustment made pursuant to this subsection
F(ii), shall become effective retroactively to the record date in the case of a
dividend and shall become
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effective on the effective date in the case of a subdivision or combination.
(iii) Distribution of Assets. If the Company shall
distribute to holders of shares of Common Stock any assets (other than any
regular quarterly cash dividend out of earned surplus), any evidence of
indebtedness or other securities of the Company or any rights to subscribe
thereto (the "Assets") then in each such case the Conversion Rate for each
series shall be increased by multiplying the applicable Conversion Rate in
effect on the record date for the determination of the stockholders entitled to
receive such distribution, and prior to such distribution, by the absolute
value of a fraction the numerator of which shall be the product of (a) the fair
value per share (determined as provided in subsection F(viii) below) of the
Common Stock on such record date (assuming exercise or conversion of all
Options and Convertible Securities) and (b) the number of shares of Common
Stock outstanding on such record date (assuming exercise or conversion of all
Options and Convertible Securities) prior to such distribution and the
denominator of which shall be the remainder of (c) the numerator and (d) the
fair value (as determined in a resolution adopted by the Board of Directors of
the Company, which shall be conclusive evidence of such fair value) of all of
the Assets distributed by the Company to holders of shares of Common Stock on
such record date. Such adjustment to the Conversion Rate for each series shall
become effective retroactively immediately after the record date.
(iv) Issuance or Sale Below the Conversion Price for
Series A Preferred Stock. If at any time the Company shall issue or sell, or
shall, pursuant to subsection F(i), be deemed to have issued and sold
Additional Shares of Common Stock without consideration or at a price per share
less than the Conversion Price for the Series A Preferred Stock, then, in each
such case, the Conversion Rate for the Series A Preferred Stock shall be
increased, concurrently with such issuance or sale, to an amount determined by
multiplying the Conversion Rate for such series in effect on the date of and
immediately prior to such issuance or sale by a fraction the numerator of which
shall be the number of shares of Common Stock outstanding immediately after
such issuance or sale (assuming exercise or conversion of all outstanding
actions and Convertible Securities) and the denominator of which shall be the
sum of (a) the number of shares of Common Stock outstanding (assuming exercise
or conversion of all outstanding Options and Convertible Securities) on the
date immediately preceding the date an which the Additional Shares of Common
Stock were issued or sold and (b) the number of shares of Common Stock which
the aggregate consideration to be received by the Company in respect of such
Additional Shares of Common Stock would have purchased at the Con-
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<PAGE> 67
version Price of such series in effect immediately prior to such issuance or
sale.
(v) Issuance or Sale Below the Conversion Price for
Series B Preferred Stock.
(a) Sales not exceeding $1,000,000 at prices in
excess of $2.40 per share. If (x) at any time after the Original Issue Date,
the Company shall issue or sell, or shall, pursuant to subsection F(i), be
deemed to have issued and sold Additional Shares of Common Stock at a price per
share less than the Conversion Price for the Series B Preferred Stock and in
excess of $2.40 (as adjusted for any stock dividend, stock split or
combination) and (y) the aggregate consideration of all such sales or deemed
sales from the Original Issue Date does not exceed $1,000,000, then, in each
such case, the Conversion Rate for the Series B Preferred Stock shall be
increased, concurrently with such issuance or sale, to an amount determined by
multiplying the Conversion Rate for such series in effect on the date of and
immediately prior to such issuance or sale by a fraction the numerator of which
shall be the number of shares of Common Stock outstanding immediately after
such issuance or sale (assuming exercise or conversion of all outstanding
Options and Convertible Securities) and the denominator of which shall be the
sum of (a) the number of shares of Common Stock outstanding (assuming exercise
or conversion of all outstanding options and Convertible Securities) on the
date immediately preceding the date on which the Additional Shares of Common
Stock were issued or sold and (b) the number of shares of Common Stock which
the aggregate consideration to be received by the Company in respect of such
Additional Shares of Common Stock would have purchased at the Conversion Price
of such series in effect immediately prior to such issuance or sale.
(b) Sales, in excess of $1,000,000, occurring
before June 21, 1991 while the Series B Conversion Price exceeds $2.40. If (x)
at any time after the Original Issue Date but before June 21, 1991 and while
the Series B Conversion Price exceeds $2.40, the Company shall issue or sell,
or shall, pursuant to subsection F(i), be deemed to have issued and sold
Additional Shares of Common Stock without consideration or at a price per share
less than the Conversion Price for the Series B Preferred Stock, (y) either (A)
the aggregate consideration of all such sales or deemed sales exceeds
$1,000,000 or (B) the Additional Shares of Common Stock are issued or sold
without consideration or at a price per share less than $2.40 (as adjusted for
any stock dividend, stock split or combination), and (z) the Conversion Price
for the Series B Preferred Stock immediately prior to such issuance or sale is
in excess of $2.40 (as adjusted for any stock dividend, stock split or
combination), then, in each such case, the Conversion Rate for the Series B
Preferred stock shall be increased, concurrently
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with such issuance or sale, to an amount determined by multiplying the
Conversion Rate for such series in effect on the date of and immediately prior
to such issuance or sale by a fraction the numerator of which shall be the
Conversion Price of the Series B Preferred Stock in effect on the date of such
issuance and the denominator of which shall be the per share consideration
received by the Company for the Additional Shares of Common Stock so issued;
provided, however, in no event shall the Conversion Price of the Series B
Preferred Stock be reduced to less than $2.40 (as adjusted for any stock
dividend, stock split or combination) pursuant to this subsection F(v)(b).
(c) Sales after June 21, 1991 or after the
Conversion Price for the Series B Preferred is reduced below $2.40. If the
Company shall issue or sell, or shall, pursuant to subsection F(i), be deemed to
have issued and sold Additional Shares of Common Stock without consideration or
at a price per share less than the Conversion Price for the Series B Preferred
Stock (x) at any time after June 21, 1991 or (y) at any time after the
Conversion Price for the Series B Preferred Stock immediately prior to such
issuance or sale does not exceed $2.40 (as adjusted for any stock dividend,
stock split or combination), then, in each such case, the Conversion Rate for
the Series B Preferred Stock shall be increased, concurrently with such issuance
or sale, to an amount determined by multiplying the Conversion Rate for such
series in effect on the date of and immediately prior to such issuance or sale
by a fraction the numerator of which shall be the number of shares of Common
Stock outstanding immediately after such issuance or sale (assuming exercise or
conversion of all outstanding Options and Convertible Securities) and the
denominator of which shall be the sum of (a) the number of shares of Common
Stock outstanding (assuming exercise or conversion of all outstanding Options
and Convertible Securities) on the date immediately preceding the date on which
the Additional Shares of Common Stock were issued or sold and (b) the number of
shares of Common Stock which the aggregate consideration to be received by the
Company in respect of such Additional Shares of Common Stock would have
purchased at the Conversion Price of such series in effect immediately prior to
such issuance or sale.
(vi) Issuance or Sale Below the Conversion Price for Series C
Preferred Stock. If at any time the Company shall issue or sell, or shall,
pursuant to subsection F(i), be deemed to have issued and sold Additional
Shares of Common Stock without consideration or at a price per share less than
the Conversion Price for the Series C Preferred Stock, then, in each such case,
the Conversion Rate for the Series C Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount determined by multiplying
the Conversion Rate for such series in effect on the date of and immediately
prior to such issuance or
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sale by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding immediately after such issuance or sale (assuming
exercise or conversion of all outstanding options and Convertible Securities)
and the denominator of which shall be the sum of (a) the number of shares of
Common Stock outstanding (assuming exercise or conversion of all outstanding
Options and Convertible Securities) on the date immediately preceding the date
on which the Additional Shares of Common Stock were issued or sold and (b) the
number of shares of Common Stock which the aggregate consideration to be
received by the Company in respect of such Additional Shares of Common Stock
would have purchased at the Conversion Price of such series in effect
immediately prior to such issuance or sale. Notwithstanding the foregoing, no
adjustment to the Conversion Price for the Series C Preferred Stock shall occur
pursuant to this subsection F(vi) unless the purchase price per share of the
Additional Shares of Common Stock is less than $3.40 per share.
(vii) Issuance or Sale Below the Conversion Price for
Series D Preferred Stock. If at any time the Company shall issue or sell, or
shall, pursuant to subsection F(i), be deemed to have issued and sold
Additional Shares of Common Stock without consideration or at a price per share
less than the Conversion Price for the Series D Preferred Stock, then, in each
such case, the Conversion Rate for the Series D Preferred Stock shall be
increased, concurrently with such issuance or sale, to an amount determined by
multiplying the Conversion Rate for such series in effect on the date of and
immediately prior to such issuance or sale by a fraction the numerator of which
shall be the number of shares of Common Stock outstanding immediately after
such issuance or sale (assuming exercise or conversion of all outstanding
options and Convertible Securities) and the denominator of which shall be the
sum of (a) the number of shares of Common Stock outstanding (assuming exercise
or conversion of all outstanding options and Convertible Securities) on the
date immediately preceding the date on which the Additional Shares of Common
Stock were issued or sold and (b) the number of shares of Common Stock which
the aggregate consideration to be received by the Company in respect of such
Additional Shares of Common Stock would have purchased at the Conversion Price
of such series in effect immediately prior to such issuance or sale.
Notwithstanding the foregoing, no adjustment to the Conversion Price for the
Series D Preferred Stock shall occur pursuant to this subsection F(vii) unless
the purchase price per share of the Additional Shares of Common Stock is less
than $3.40 per share.
(viii) Fair Value. For the purpose of any computation under
subsection F(iii), the "fair value" on any date shall be as mutually agreed
upon by the Board of Directors of the Company with the representatives of the
holders of the shares of Preferred
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<PAGE> 70
Stock voting in favor of such valuation; provided, however, that if the Common
Stock is listed or admitted to trading on a national securities exchange, the
fair value on any date shall be equal to the average of the daily closing
prices for the thirty (30) consecutive trading days commencing forty-five (45)
trading days before the date in question. The closing price for each day shall
be the last sales price regular way, or if no such sale takes place, the
average of the closing bid and asked prices regular way on the principal
national securities exchange on which such class of Common Stock is listed or
admitted to trading, or if not listed on such an exchange, the average of the
closing bid and asked prices for a share of Common Stock an the
over-the-counter market, as reported by the National Association of Securities
Dealer's Automated Quotation System at the close of business on such date.
(ix) Capital Reorganization. In the case of any capital
reorganization or any reclassification of the capital stock of the Company or
in case of the consolidation or merger of the Company with another corporation
(other than a merger not involving any reclassification, conversion or exchange
of Common Stock, in which, subject to subsection F(x), the Company is the
surviving corporation), each share of Series A, Series B, Series C and Series D
Preferred Stock shall thereafter be convertible into the number of shares of
stock (or of any class or classes) or other securities or property receivable
upon such capital reorganization, reclassification of capital stock,
consolidation or merger as the case may be, by a holder of the number of shares
of Common Stock into which such share of Series A, Series B, Series C and
Series D Preferred Stock was convertible immediately prior to such capital
reorganization, reclassification of capital stock, consolidation or merger;
and, in any case, appropriate adjustment (as determined by the Board) shall be
made in the application of the provisions herein set forth with respect to the
rights and interests thereafter of the holders of the Series A, Series B,
Series C and Series D Preferred Stock, to the end that the provisions set forth
herein (including the specified changes in and other adjustments of the
Conversion Rate for each series) shall thereafter be applicable, as near as
reasonably practical, in relation to any shares of stock or other securities or
other property thereafter deliverable upon the conversion of the Series A,
Series B, Series C and Series D Preferred Stock.
(x) Liquidating Merger. If, as a result of (a) a sale or
conveyance of all or substantially all of the assets of The Company, or (b)
the merger, reorganization or consolidation of the Company with or into another
corporation or of another corporation into it, the beneficial owners of all of
the equity interest in the Company (assuming conversion of all options and
Convertible Securities outstanding at the time of such merger or consolidation)
immediately prior to any such merger or consolidation will not
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<PAGE> 71
beneficially own a majority of the equity interest of the entity surviving such
merger or consolidation immediately after such merger or consolidation (each
such event being hereinafter referred to as a "Liquidating Merger"), such sale,
conveyance, merger, reorganization or consolidation shall be deemed a
liquidation and shall be subject to the provisions of Section G.
(xi) Transfer Agents. Whenever the Conversion Rate of a
series of Preferred Stock is adjusted as herein provided, the Company shall (a)
forthwith file with any transfer agent or agents for such series of Preferred
Stock a certificate signed by the President or one of the Vice Presidents of
the Company and by its Treasurer or an Assistant Treasurer, stating the
adjusted Conversion Rate for such series determined as provided in this Section
F, and in reasonable detail the facts requiring such adjustment and (b) cause a
notice to be mailed to the respective holders of record of such series of
Preferred Stock setting forth the adjustment and the Conversion Rate for such
series, as adjusted. Any such transfer agents shall be under no duty to make
any inquiry or investigation as to the statements contained in any such
certificate or as to the manner in which any computation was made, but may
accept such certificates as conclusive evidence of the statements therein
contained, and each transfer agent shall be fully protected with respect to any
and all acts done or action taken or suffered by it in reliance thereon. No
transfer agent in its capacity as transfer agent shall be deemed to have any
knowledge with respect to any change of capital structure of the Company unless
and until it receives a notice thereof pursuant to the provisions of this
subsection F(xi) and in default of any such notice each transfer agent may
conclusively assume that there has been no such change.
(xii) Availability of Authorized Shares. The Company shall
at all times reserve and keep available, out of its authorized and unissued or
treasury shares of Common Stock, or other stock or securities deliverable upon
conversion, solely for the purpose of effecting the conversion of the Series A,
Series B, Series C and Series D Preferred Stock, such number of shares as shall
from time to time be sufficient to effect the conversion of all shares of
Series A, Series B, Series C and Series D Preferred Stock from time to time
outstanding. The Company shall from time to time, in accordance with the laws
of the State of California, increase the authorized amount of its Common Stock
and/or securities issuable upon conversion of the Series A, Series B, Series C
and Series D Preferred Stock if at any time the number of shares of Common
Stock (or such other securities) remaining unissued or treasury shares of
Common Stock (or such other securities) shall not be sufficient to permit the
conversion of all the then outstanding Series A, Series B, Series C and Series
D Preferred Stock.
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<PAGE> 72
(xiii) No Fractional Shares. No fractions of shares of Common Stock
are to be issued upon conversion of Preferred Stock, but in lieu thereof the
Company will pay therefor in cash an amount determined by multiplying the
fraction of a share by the applicable Liquidation Value.
(xiv) Delivery of Common Stock. The Company will pay all issue and
other taxes that may be payable in respect of any issue on delivery of shares
of Common Stock on conversion of shares of Series A, Series B, Series C and
Series D Preferred Stock pursuant hereto. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of Common Stock in a name other than that in
which the Series A, Series B, Series C or Series D Preferred Stock so converted
was registered, and no such issue or delivery shall be made unless and until
the person requesting such issue has paid to the Company the tax so required.
G. Liquidation Rights.
(i) In the event of any liquidation, dissolution, Liquidating
Merger or winding up of the Company, whether voluntary or involuntary, before
any distribution or payment shall be made to the holders of Common Stock, the
holders of the Preferred Stock shall be entitled to receive from the assets of
the Company available for distribution to its stockholders an amount per share
in cash equal to the Liquidation Value of the respective series of Preferred
Stock plus 8% per annum of the applicable Liquidation Value per share from the
date of original issuance of such series, less any dividends that have actually
been paid on such series, since it was issued (the "Liquidation Preference
Amount"). If upon the occurrence of such event, the assets thus distributed
among the holders of Series A, Series B, Series C and Series D Preferred Stock
shall be insufficient to permit the payment to such holders of the full
Liquidation Preference Amount of the respective services of Preferred Stock,
then the entire assets of the Company legally available for distribution shall
be distributed ratably among the holders of the Series A, Series B, Series C
and Series D Preferred Stock in proportion to the applicable Liquidation
Preference Amounts.
(ii) Upon completion of the distribution required by subsection
G(i), if any assets remain in the Company, the remaining assets of the Company
shall be distributed to the holders of Common Stock. Written notice of such
liquidation, dissolution, Liquidating Merger or winding up, stating a payment
date, the amount of the payment and the place where the amounts distributable
shall be payable, shall be mailed or caused to be mailed by the Company by
certified or registered mail, return receipt requested, not less than sixty
(60) days prior to the date stated therein, to
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<PAGE> 73
each holder of record of any share of the Series A, Series B, Series C and
Series D Preferred Stock at his address as the same appears on the books of
record of the Company. No consolidation or merger of the Company or sale or
transfer by the Company of its assets which does not qualify as a Liquidating
Merger, nor the reduction of the authorized number of shares of any class or
series of capital stock of the Company, shall be deemed to be a liquidation,
dissolution, Liquidating Merger or winding up of the corporation within the
meaning of any of the provisions of this Section G.
H. Status of Redeemed or Converted Shares. Any shares of the
Series A, Series B, Series C or Series D Preferred Stock which at any time
shall have been redeemed pursuant or converted hereto shall after such
redemption or conversion be cancelled and no longer be available for issuance
by the Company.
I. Notice. The holders of shares of the Preferred Stock shall
receive notice of certain events as follows:
(i) not less than thirty (30) days before the occurrence
of any of the following: (a) any distributions of capital stock to holders of
shares of the Company's Common Stock including without limitation, any stock
splits, stock dividends, stock reclassifications, or the issuance of any rights
or warrants, (b) the declaration of any record date or (c) any meeting of the
holders of shares of the Company's capital stock called by the Company's Board
of Directors (which notice must set forth in reasonable detail the business
to be transacted at such meeting); (ii) not more than ten (10) days after the
occurrence of an Automatic Conversion Event, that such event has occurred; and
(iii) not less than twenty (20) days prior to the date fixed by the Board of
Directors for the termination of the conversion rights of the Preferred Stock
as a result of any liquidation, dissolution, Liquidating Merger or winding up
of the affairs of the Company that such event will occur.
J. Consent for Certain Repurchases of Common Stock Deemed to be
Distributions. Each holder of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock shall be deemed to
have consented, for the purposes of Sections 502, 503 and 506 of the California
Corporations Code, to distributions made by the Company in connection with the
repurchase of shares of Common Stock issued to or held by employees or
consultants upon termination of their employment or services pursuant to
agreements providing for such right of repurchase between the Company and such
persons.
IV.
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<PAGE> 74
The liability of the directors of the Company for monetary damages
shall be eliminated to the fullest extent permissible under California law.
The Company is authorized to indemnify its agents for breach of duty
to the Company and its shareholders in excess of the indemnification otherwise
permitted by Section 317 of the California Corporations Code, subject to the
limits on such indemnification set forth in paragraphs (a)(10) and (a)(11) of
Section 204 of the California Corporations Code. The Company may obligate
itself in advance, through an agreement or a bylaw provision, to indemnify the
agent in all cases when the applicable standard of conduct has been satisfied
or may authorize indemnification of the agent by vote of disinterested
directors, by written opinion of independent legal counsel if a quorum of
disinterested directors is not obtainable, or by majority vote of the shares
voting, excluding shares owned by the agent.
Any repeal or modification of the foregoing provisions of this Article
IV by the shareholders of the Company shall not adversely affect any right or
protection of a director of the Company existing at the time of such repeal of
modification."
3. The Second Amended and Restated Articles of Incorporation have
been duly approved by the Board of Directors.
4. The article amendments as included in the Second Amended and
Restated Articles of Incorporation (other than omissions required by Section
910 of the California General Corporation Law) have been duly approved by the
required vote of the shareholders in accordance with Sections 902 and 903 of
the California General Corporation Law. The total number of outstanding shares
of Common Stock of this corporation is 957,063. The total number of
outstanding shares of Series A, Series B and Series C Preferred stock are
2,107,882, 1,294,939 and 200,000, respectively. The number of shares voting in
favor of the Second Amended and Restated Articles of Incorporation equaled or
exceeded the vote required.
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<PAGE> 75
The percentage vote required for the approval of the Second Amended and
Restated Articles of Incorporation was more than 50% of the Common Stock and
more than 50% of the Preferred Stock.
IN WITNESS WHEREOF, the Second Amended and Restated Articles of
Incorporation has been executed by the undersigned on ________, 1991.
- ----------------------------------
Robert Akins, President
- ----------------------------------
William Angus, III, Secretary
ROBERT AKINS and WILLIAM ANGUS, III, declare under penalty of perjury
under the laws of the State of California that each has read the foregoing
certificate and knows the contents thereof and that the same is true of his
own knowledge.
- ------------------------------ Dated: -------------------------
Robert Akins, President
- ------------------------------ Dated: -------------------------
William Angus, III, Secretary
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<PAGE> 76
EXHIBIT B
March _____, 1991
Mitsubishi Corporation
Ladies and Gentlemen:
We have acted as counsel for CYMER Laser Technologies, a California
corporation (the "Company"), in connection with the sale by the Company to you
of 235,295 shares of the Company's 8% NonCumulative Voting Redeemable
Convertible Series D Preferred Stock (the "Series D Shares") pursuant to the
CYMER Laser Technologies Series D Preferred Stock Purchase Agreement (the
"Agreement") dated March ______, 1991, among the Company, certain individuals
listed on Schedule 1.1 to the Agreement and Mitsubishi Corporation (the
"Investor"). This opinion is given to you in compliance with Section 11.5 of
the Agreement. Unless defined herein, capitalized terms have the meaning given
them in the Agreement.
In connection with this opinion, we have examined and relied upon the
originals or copies, certified to our satisfaction, of such records, documents,
certificates, memoranda and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below. In such
examination we have assumed the genuineness of all signatures on original
documents, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all copies submitted to us as copies
thereof, the legal capacity of natural persons, and the due execution and
delivery of all documents (except as to due execution and delivery by the
Company) where due execution and delivery are a prerequisite to the
effectiveness thereof.
As used in this opinion, the expression "to our knowledge" with
reference to matters of fact means that, after an examination of documents made
available to us by the Company, and after inquiries of officers of the Company,
but without any further independent factual investigation, we find no reason to
believe that the opinions expressed herein are factually incorrect. Further,
the expression "to our knowledge" with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreement and the
transactions
<PAGE> 77
Mitsubishi Corporation
March 15, 1991
contemplated thereby. Except to the extent expressly set forth herein or as we
otherwise believe to be necessary to our opinion, we have not undertaken any
independent investigation to determine the existence or absence of any fact,
and no inference as to our knowledge of the existence or absence of any fact
should be drawn from our representation of the Company or the rendering of the
opinion set forth below.
For the purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary corporate
or partnership action, to execute and deliver the Agreement, and we are
assuming that the representations and warranties made by the Investor in
Section 4 of the Agreement are true and correct. We are also assuming that the
Investor has purchased the Shares for value, in good faith and without notice
of any adverse claims within the meaning of the California Uniform Commercial
Code.
Our opinion is expressed only with respect to the federal laws of the
United States of America and the laws of the State of California. We express
no opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof.
The opinions hereinafter expressed are subject to the following
qualifications, as to which we render no opinion:
(a) the effect of applicable bankruptcy and other similar
laws affecting the rights of creditors generally;
(b) the effect of rules of law governing specific
performance, injunctive relief and other equitable remedies;
(c) the compliance or noncompliance with applicable state
and federal anti-fraud statutes, rules and regulations concerning the issuance
of securities;
(d) the enforceability of the indemnification provisions
of Section 9.13 of the Agreement;
(e) the applicability to the Agreement of the Exon-Florio
Amendment to the Defense Production Act of 1950;
(f) the enforceability of the stock repurchase provisions
set forth in Sections 7.1 and 8.1 of the Agreement due to the restrictions set
forth in Sections 500 and 501 of the California Corporations Code; and
(g) the anti-apartheid disclosure requirements under
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Mitsubishi corporation
March 15, 1991
California Government Code Sections 12261 through 12269 or the regulations
promulgated thereunder.
On the basis of the foregoing and in reliance thereon, except as
disclosed in Schedule 3.0 of the Agreement, and with the foregoing
qualifications, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has all
requisite corporate power and authority and the legal right to transact the
business in which it is presently engaged, to own, lease and operate all of the
assets and properties owned, leased or operated by it, to enter into and
perform the Agreement, to issue and sell the Series D Shares and to issue the
Conversion Shares and to otherwise perform and comply with all other actions
and agreements arising under the Agreement. The Company is duly qualified to
do business as a foreign corporation in good standing in all other
jurisdictions which require such qualification except to the extent that
failure to so qualify would not have a material adverse effect on the Company.
We note that the Company is in the process of qualifying to do business in
Massachusetts. We express no opinion with respect to the Company's activities
in Japan, or the formation or activities of Cymer Japan, Inc., a Japanese
corporation and a wholly-owned subsidiary of the Company ("Cymer Japan").
2. The execution, delivery and performance of the Agreement, the
issuance of the Series D Shares and the Conversion Shares and the consummation
of the transactions contemplated in the Agreement by the Company have been duly
authorized by all necessary corporate action on the part of the Company,
including any action required to be taken by the Company's shareholders. The
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms (except insofar as
the enforcement of Section 9.13 of the Agreement may be limited by limitations
of public policy). The certificates representing the Series D Shares are in
due and proper form and have been validly executed by the officers of the
Company named thereon.
3. Except for Cymer Japan, the Company has no subsidiaries and,
to our knowledge, does not own (of record or beneficially) and has made no
commitment to purchase any shares or securities of, or otherwise make any
investment in, any other corporation, association, partnership or other entity
and is not a participant in any joint venture.
4. Neither the issuance or sale of the Series D Shares (including
the Conversion Shares) nor the execution and delivery by the Company of the
Agreement, nor the consummation of or compliance with the transactions and
agreements contemplated by the Agreement will conflict with or constitute a
violation or breach of (i) the
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<PAGE> 79
Mitsubishi Corporation
March 15, 1991
Restated Articles of Incorporation or Bylaws of the Company, (ii) to our
knowledge, any material contracts or other material instruments to which the
Company is a party or by which the Company is bound or by which the business or
material assets or properties of the Company may be materially affected or
secured, (iii) to our knowledge, any order, writ, injunction, award or decree
of any court, arbitrator or governmental or regulatory body against or binding
upon the Company or upon the securities, properties or business of the Company,
in each case that is specifically directed to the Company, its securities,
properties or business, (iv) to our knowledge, any statute, law, rule or
regulation of any jurisdiction to which the Company is subject, (v) to our
knowledge, any license, permit, order or approval of any federal, state or
local governmental or regulatory body that is material to or necessary for the
conduct of the business of the Company and (vi) to our knowledge, the laws of
the State of California and the federal laws of the United States applicable
therein, where such conflict, breach or violation of such laws would be
materially adverse to the Company.
5. At the Closing, upon payment of the full purchase price in
cash therefor, the Investor will receive good and valid title to the Series D
Shares and the Series D Shares (including the Conversion Shares issuable upon
conversion thereof when and if issued in accordance with the Agreement and the
Restated Articles of Incorporation) will be duly authorized, validly issued,
fully paid, non-assessable, free and clear of all liens and encumbrances, other
than liens, encumbrances or restrictions on transfer arising under the
Agreement, applicable securities laws or under agreements entered into or
actions taken by the Investor.
6. As of the date hereof (but prior to the execution and delivery
of the Agreement and the consummation of the transactions contemplated
therein), the Company will have an authorized capitalization of (i) Thirteen
Million (13,000,000) shares of Common Stock, $.01 par value, of which Nine
Hundred Fifty-Seven Thousand and Sixty-Three (957,063) shares are issued and
outstanding ; (ii) Three Million (3,000,000) shares of Series A Preferred
Stock, $.01 par value, 2,107,882 of which are issued and outstanding and One
Million Five Hundred Thousand (1,500,000) shares of Series B Preferred Stock,
$.01 par value, of which One Million Two Hundred Fifty-Seven Thousand Six
Hundred and Forty (1,257,640) are issued and outstanding; (iii) One Million
(1,000,000) shares of Series C Preferred Stock, $.01 par value, of which
200,000 shares are issued and outstanding; and (iv) Five Hundred Thousand
(500,000) shares of Series D Preferred Stock, $.01 par value, none of which are
issued or outstanding prior to the Closing and Two Hundred Thirty-Five Thousand
Two Hundred and Ninety-Five (235,295) of which are being issued to you pursuant
to the Agreement. In addition, the Company has reserved the following shares
of Common Stock and Preferred Stock for issuance: (i) 700,000 shares of Common
Stock upon
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<PAGE> 80
Mitsubishi Corporation
March 15, 1991
exercise of options granted or to be granted to the Company's employees; (ii)
162,500 shares of Series A Preferred Stock upon exercise of warrants to
purchase shares of Series A Preferred Stock; (iii) 18,382 shares of Series B
Preferred Stock upon exercise of the warrants to purchase shares of Series B
Preferred Stock and (iv) up to 152,396 shares of Series D Preferred Stock which
the Company may issue to Significant Holders (as defined in Section 2 of the
Series C Preferred Stock Purchase Agreement dated April 16, 1990) pursuant to
their right of first offer.
7. Subject to the accuracy of the Investor's representations in
Section 4 of the Agreement, the offer, sale and issuance of the Series D Shares
to be issued in conformity with the terms of this Agreement, and the issuance
of the Common Stock to be issued upon conversion of the Series D Shares,
constitute transactions exempt from the registration requirements of Section 5
of the securities Act.
8. No consent, approval or authorization of or designation,
declaration or filing with, any governmental authority on the part of the
Company is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the Series D Shares, or the
consummation of any other transaction contemplated by the Agreement, except the
notice filings required by Section 25102(f) of the California Corporate
Securities Law of 1968 and Regulation D under the Securities Act of 1933, as
amended (the "Securities Act"), as promulgated by the Securities and Exchange
Commission. The filings referred to in this paragraph have been accomplished
and are effective or will be accomplished on a timely basis following the
Closing, and to our knowledge there are no proceedings or threat thereof which
question the validity of such filings.
9. To our knowledge, there are no legal, administrative or other
proceedings, investigations or inquiries, or other asserted claims, judgments,
injunctions or restrictions, pending or outstanding or threatened against the
Company, any of its properties or business, or against or involving the Company
or the officers or directors of the Company, or any action related to the
Agreement, the issuance of the Series D Shares or any of the transactions
contemplated in the Agreement that might, if determined adversely to the
Company, either singly or in the aggregate, result in any material adverse
change in the business of the Company or in any material liability on the part
of the Company.
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<PAGE> 81
Mitsubishi Corporation
March 15, 1991
This opinion is intended solely for your use in connection with your
purchase of Series D Shares and is not to be made available to or relied upon
by other persons or entities without our prior written consent.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
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<PAGE> 1
EXHIBIT 10.10
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
BY AND AMONG
CYMER LASER TECHNOLOGIES,
THE FOUNDERS LISTED ON SCHEDULE 1.1,
AND
THE INVESTORS LISTED ON SCHEDULE 1.2
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Sale, Purchase and Delivery of Series E Shares............................................................. 2
1.1 Sale and Issuance of Series E Preferred Stock..................................................... 2
1.2 Delivery of Series E Shares....................................................................... 2
2. Certain Definitions........................................................................................ 2
3. Representations and Warranties of the Company.............................................................. 3
3.1 Organization and Good Standing; Power and Authority............................................... 3
3.2 Subsidiaries...................................................................................... 3
3.3 Capitalization.................................................................................... 3
3.4 Compliance with Laws.............................................................................. 5
3.5 Validity of Agreement; Binding Effect............................................................. 6
3.6 No Breach......................................................................................... 6
3.7 Financial Information............................................................................. 6
3.8 Absence of Undisclosed Liabilities and Obligations................................................ 7
3.9 Absence of Certain Changes........................................................................ 7
3.10 Real Property..................................................................................... 8
3.11 Tangible Assets and Equipment..................................................................... 8
3.12 Tax Returns and Audits............................................................................ 8
3.13 Patents and Trademarks............................................................................ 9
3.14 Employees......................................................................................... 9
3.15 Confidentiality................................................................................... 10
3.16 Litigation........................................................................................ 10
3.17 ERISA............................................................................................. 11
3.18 Environmental Compliance Matters.................................................................. 11
3.19 Use of Proceeds................................................................................... 12
3.20 Registration Rights............................................................................... 12
3.21 Escrowed Certificates of Founder Common Stock..................................................... 12
3.22 Disclosure........................................................................................ 12
3.23 No Other Agreements............................................................................... 12
3.24 Claims of the Founders............................................................................ 12
3.25 Insurance......................................................................................... 13
4. Representations and Warranties of the Investor............................................................. 13
</TABLE>
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<PAGE> 3
<TABLE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
<S> <C> <C>
4.1 Organization and Standing........................................................................ 13
4.2 Authorization and Approval of and Ability to Carry
Out This Agreement............................................................................... 13
4.3 Investment Representation........................................................................ 13
5. Company's Affirmative Covenants........................................................................... 14
5.1 Corporate Existence.............................................................................. 14
5.2 Taxes and Liens.................................................................................. 14
5.3 Maintain Property................................................................................ 15
5.4 Financial Statements and Reports................................................................. 15
5.5 Confidentiality.................................................................................. 15
5.6 Conversion Shares................................................................................ 16
5.7 Access to Books and Records...................................................................... 16
5.8 Right of First Offer............................................................................. 16
5.9 Right of First Refusal and/or Repurchase Agreement............................................... 18
5.10 Insurance........................................................................................ 18
5.11 Notice of Record Dates........................................................................... 18
5.12 Employee Stock Purchase Agreement................................................................ 19
5.13 State Securities Law Filings..................................................................... 19
5.14 Lapse of Covenants............................................................................... 19
5.15 Information as to Competitors and Proprietary
Information...................................................................................... 19
5.16 Technological Expertise.......................................................................... 20
6. Investor's Affirmative Covenants.......................................................................... 20
6.1 Confidentiality.................................................................................. 20
6.2 Amendment of Series C Agreement.................................................................. 20
7. Further Agreements........................................................................................ 20
7.1 Right of First Refusal and Repurchase with Respect
to Founder Stock................................................................................. 20
7.2 Co-Sale Agreement on Sale of Founder Stock....................................................... 21
8. Company's Right of First Refusal.......................................................................... 22
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
8.1 Right of First Refusal............................................................................ 22
8.2 Tender Offer Sale................................................................................. 23
8.3 Assignment of Rights.............................................................................. 24
9. Restrictions on Transferability of Shares; Compliance
with the Act............................................................................................... 25
9.1 Restrictions on Transferability................................................................... 25
9.2 Certain Definitions............................................................................... 25
9.3 Notice of Proposed Transfers...................................................................... 26
9.4 Demand Registration Rights........................................................................ 27
9.5 Piggy-Back Registration Rights.................................................................... 28
9.6 Registration on Form S-3.......................................................................... 29
9.7 Rule 144 Reporting................................................................................ 30
9.8 Expenses of Registration.......................................................................... 30
9.9 Cutbacks.......................................................................................... 31
9.10 Additional Covenants Concerning Sale of Shares.................................................... 31
9.11 Blue Sky Provisions............................................................................... 31
9.12 Advising the Holders.............................................................................. 32
9.13 Indemnification................................................................................... 32
9.14 Registration under the Exchange Act............................................................... 33
9.15 Information by Holder............................................................................. 33
9.16 Transfer of Registration Rights................................................................... 33
9.17 Standoff Agreement................................................................................ 34
9.18 Termination of Rights............................................................................. 34
10. Survival of Representations, Warranties and Covenants...................................................... 34
10.1 Survival of Representations, Warranties and Covenants of the Company.............................. 34
10.2 Survival of Representations and Warranties of the
Investor.......................................................................................... 34
11. Conditions Precedent to Obligations of the Investor........................................................ 35
11.1 Representations and Warranties Correct............................................................ 35
11.2 Compliance with This Agreement.................................................................... 35
11.3 Satisfaction of Investor and Its Counsel.......................................................... 35
</TABLE>
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(CONTINUED)
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11.4 No Actions or Proceedings......................................................................... 35
11.5 Opinion of Company's Counsel...................................................................... 35
11.6 Officer's Certificate............................................................................. 35
11.7 Certificate of Secretary or Assistant Secretary................................................... 36
11.8 Delivery of Documents............................................................................. 36
11.9 No Lapse in Insurance Coverage.................................................................... 36
11.10 Employee Agreements and Nondisclosure Agreements.................................................. 36
11.11 Government Approvals.............................................................................. 36
12. Conditions Precedent to the Obligation of the Company...................................................... 36
12.1 Representations and Warranties Correct............................................................ 37
12.2 Compliance with this Agreement.................................................................... 37
12.3 Satisfaction of Company and its Counsel........................................................... 37
12.4 No Actions or Proceedings......................................................................... 37
12.5 Government Approvals.............................................................................. 37
13. Documents to be Delivered at Closing....................................................................... 37
13.1 Documents to be Delivered by the Company at the
Closing........................................................................................... 37
13.2 Documents to be Delivered by the Investor at the
Closing........................................................................................... 38
14. Miscellaneous.............................................................................................. 38
14.1 Definition of Person.............................................................................. 38
14.2 Definition of Knowledge........................................................................... 38
14.3 Additional Actions................................................................................ 38
14.4 Expenses.......................................................................................... 38
14.5 Counterparts...................................................................................... 39
14.6 Binding Effect; No Assignment..................................................................... 39
14.7 Notices........................................................................................... 39
14.8 Applicable Laws................................................................................... 39
14.9 Entire Agreement.................................................................................. 39
14.10 Waivers and Amendments; Noncontractual Remedies;
Preservation of Remedies.......................................................................... 39
14.11 Table of Contents; Captions....................................................................... 40
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14.12 Schedules and Exhibits Part of Agreement............................................................ 40
14.13 Severability........................................................................................ 40
14.14 Obligation of the Company to Indemnify.............................................................. 40
14.15 Obligation of the Investor to Indemnify............................................................. 40
14.16 Notice and Opportunity to Defend.................................................................... 40
14.17 Limitation and Exclusive Remedy..................................................................... 41
SCHEDULES
1.1 FOUNDERS
1.2 INVESTORS
3.0 SCHEDULE OF EXCEPTIONS
EXHIBITS
A THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION
B OPINION OF THE COMPANY'S COUNSEL
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Exhibit 10.10
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
This SERIES E PREFERRED STOCK PURCHASE AGREEMENT is made as of February
___, 1994 (this "Agreement"), by and among CYMER LASER TECHNOLOGIES, a
California corporation (the "Company"), the persons whose names are set forth on
Schedule 1.1 hereto (hereinafter referred to individually as a "Founder" and
collectively as the "Founders"), and the purchasers of Series E Preferred Stock
set forth on Schedule 1.2 hereto (hereinafter referred to individually as an
"Investor" and collectively as the "Investors").
RECITALS
1. The Company sold shares of its Series A Preferred Stock (the "Series
A Shares") to certain investors (the "Series A Investors") pursuant to a Series
A Preferred Stock Purchase Agreement dated May 3, 1988 (the "1988 Purchase
Agreement").
2. The Company sold shares of its Series B Preferred Stock (the "Series
B Shares") to certain investors (the "Series B Investors") pursuant to a Series
B Preferred Stock Purchase Agreement dated June 28, 1989 (the "1989 Purchase
Agreement").
3. The Company sold shares of its Series C Preferred Stock (the "Series
C Shares") to certain investors (the "Series C Investors"), pursuant to the
Series C Preferred Stock Purchase Agreement dated April 16, 1990 (the "1990
Purchase Agreement").
4. The Company sold 470,590 shares of its Series D Preferred Stock (the
"Series D Shares") to certain investors (the "Series D Investors") pursuant to
the terms of the Series D Preferred Stock Purchase Agreements dated March 15,
1991 (the "1991 Series D Agreement") and August 28, 1992 (the "1992 Series D
Agreement"). Series A Investors, Series B Investors, Series C Investors and the
Series D Investors shall collectively by referred to as the "Prior Investors" or
"Prior Investor" as the case may be.
5. The Company intends to sell, and the Investors intend to purchase,
an aggregate of up to Two Million (2,000,000) shares (the "Series E Shares") of
the Company's 8% Non-Cumulative Voting Redeemable Convertible Series E Preferred
Stock, with such rights,
<PAGE> 8
preferences and limitations as are set forth in the Company's Third Amended and
Restated Articles of Incorporation attached hereto as EXHIBIT A (the "Restated
Articles of Incorporation"), including, without limitation, the right to convert
each Series E Share into one share of the Company's common stock, $.01 par value
per share (the "Common Stock"), for an aggregate of Two Million (2,000,000)
shares of Common Stock, subject to adjustment for any dilution event described
in the Restated Articles of Incorporation or similar event (the "Conversion
Shares").
NOW, THEREFORE, in consideration of the mutual promises and the
representations, warranties and covenants herein contained, and of other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Sale, Purchase and Delivery of Series E Shares.
1.1 Sale and Issuance of Series E Preferred Stock.
(a) Sale and Issuance to Investor. Subject to the
terms and conditions of this Agreement, each Investor agrees to purchase at the
Closing (as defined herein), and the Company agrees to sell and issue to each
Investor at the Closing, the Series E Shares listed opposite such Investor's
name on Schedule 1.2 for the aggregate purchase price set forth on Schedule 1.2.
The Investor's purchase price shall be payable at the Closing in cash, by wire
transfer, by certified or official bank check payable to the order of the
Company or by surrender for cancellation of promissory notes previously issued
for cash by the Company to certain Prior Investors. The price per share of the
Series E Shares is $5.00 (the "Purchase Price").
(b) Closing Date. The purchase and sale of the
Series E Shares described in Section 1.1(a) shall take place at the offices of
Wilson, Sonsini, Goodrich & Rosati, Two Palo Alto Square, Palo Alto, California,
at 2:00 P.M., on February ___, 1994, or at such other time and place as the
Company and the Investor, may mutually agree upon in writing (which time and
place are designated as the "Closing" or "Closing Date").
1.2 Delivery of Series E Shares. At the Closing, the
Company shall deliver to the Investor against receipt of the
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<PAGE> 9
Purchase Price therefor one or more certificates bearing the appropriate
legends in accordance with Section 4.3 hereof, evidencing ownership of the
number of Series E Shares being purchased here under by the Investor in the
denomination indicated in Sections 1.1(a) and recorded on the stock transfer
books of the Company in the name of the Investor. All events which shall occur
at such Closing shall be deemed to occur simultaneously.
2. Certain Definitions. For purposes of Sections 5.8, 7.1,
7.2, 9 and 14.10 of this Agreement, the term "Shares" shall mean the Series A
Shares, Series B Shares, Series C Shares, Series D Shares and the Series E
Shares, the term "Conversion Shares" shall mean the shares of Common Stock
issued upon conversion of the Shares, and the term "Significant Holder" shall
mean (i) a holder of at least 210,788 Series A Shares, (ii) a holder of at least
132,353 Series B Shares, (iii) a holder of at least 100,000 Series C Shares,
(iv) a holder of at least 100,000 Series D Shares, or (v) a Series E Significant
Holder (as defined below) (or shares of Common Stock issued upon conversion of
the Series A Shares, the Series B Shares, the Series C Shares, the Series D
Shares, or the Series E Shares). The term "Series E Significant Holder" shall
mean a holder of at least 36,000 Series E Shares (or shares of Common Stock
issued upon conversion of the Series E Shares).
3. Representations and Warranties of the Company. Except as
disclosed in the attached schedule of exceptions (Schedule 3.0),
the Company represents and warrants to the Investor as follows:
3.1 Organization and Good Standing; Power and Authority. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority and the legal right to transact the business in which it is
presently engaged, to own, lease and operate all of the assets and properties
owned, leased or operated by it, to enter into and perform this Agreement, and
will have at the Closing, all requisite corporate power and authority to sell
and issue the Series E Shares and to issue the Conversion Shares and to
otherwise perform and comply with all other actions and agreements arising
hereunder. The Company does not own or lease any property or engage in any
activity in any jurisdiction which might require its qualification to do
business as a foreign corporation in any such jurisdiction. The Company has
furnished the Investor or its counsel with true, correct and complete copies
(certified by the Secretary or Assistant Secretary of the Company)
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<PAGE> 10
of its (a) Restated Articles of Incorporation and (b) By-Laws, and will make
available to each Investor (c) the minute books of the Company (containing
records of all meetings and consents in lieu of meetings of its stockholders and
the Board of Directors of the Company (the "Board") (and any committees thereof)
since the date of its incorporation and (d) the stock transfer books of the
Company. A copy of the Restated Articles of Incorporation is attached hereto as
EXHIBIT A.
3.2 Subsidiaries. Except for Cymer Japan, Inc., a Japanese
corporation and a wholly-owned subsidiary of the Company, the Company has no
subsidiaries and does not own (of record or beneficially) and has made no
commitment to purchase any shares or securities of, or otherwise make any
investment in, any other corporation, association, partnership or other entity
and is not a participant in any joint venture.
3.3 Capitalization.
(a) The authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock, 1,060,963 shares of which are
issued and outstanding, 3,000,000 shares of Series A Preferred Stock, 2,264,133
of which are issued and outstanding, 1,500,000 shares of Series B Preferred
Stock, of which 1,294,939 are issued and outstanding, 1,000,000 shares of Series
C Preferred Stock, 200,000 of which are issued and outstanding, 500,000 shares
of Series D Preferred Stock, 470,590 of which are issued and outstanding prior
to the Closing and 2,150,000 shares of Series E Preferred Stock of which none
are issued and outstanding prior to the Closing. All of the outstanding shares
of Common Stock and Preferred Stock are duly authorized and validly issued,
fully paid and non-assessable. The Company has reserved the following shares of
Common Stock for issuance: (i) 1,000,000 shares of Common Stock upon exercise of
options granted or to be granted to the Company's employees; (ii) 6,248 shares
of Series A Preferred Stock upon exercise of the warrants to purchase shares of
Series A Preferred Stock (hereinafter referred to as the "Series A Warrants");
(iii) 18,382 shares of Series B Preferred Stock upon exercise of the warrants to
purchase shares of Series B Preferred Stock (hereinafter referred to as the
"Series B Warrants"); (iv) 15,000 shares of Series D Preferred Stock to be
issued pursuant to the exercise of an outstanding warrant (the "Series D
Warrant"); (v) up to 13,333 shares of Series E Preferred Stock to be issued in
connection with outstanding warrants (the "Series E Bridge Warrants") granted in
connection with the issuance of convertible promissory notes pursuant to a Note
and Warrant Purchase Agreement with Prior Investors (the "Convertible Note
Agreement"); (vi) up to 3,780 shares of Series E Preferred Stock issued pursuant
to warrants to purchase Series E Preferred Stock granted to the Company's
placement agent in connection with the Closing (the "Series E Placement
Warrants"); and (vii) 4,382,625 shares of Common Stock for issuance upon
conversion of the Preferred Stock and upon conversion of Preferred Stock issued
pursuant to the Series A, Series B, Series D, Series E Bridge
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<PAGE> 11
Warrants and Series E Placement Warrants. No other classes of capital stock of
the Company are authorized or outstanding. Under the Convertible Note Agreement
the Company issued Subordinated Convertible Promissory Notes in the principal
amount not exceeding $600,000 (the "Convertible Notes") to certain Prior
Investors, a portion of which shall be converted into the Series E Shares at the
Closing as set forth on Schedule 1.2. The exercise price of the Series E Bridge
Warrants shall be discounted 10% from the price of the Series E Shares if the
Closing occurs after December 15, 1993. The exercise price of the Series E
Placement Warrants is 120% of the purchase price of Series E Preferred Stock
under this Agreement.
(b) Except as set forth in this Agreement, the
Series A Warrants, the Series B Warrants, the Series D Warrant, the Series E
Bridge Warrants and the Series E Placement Warrants and options to purchase up
to 1,000,000 shares of Common Stock granted or to be granted under the Company's
Stock Option Plan, as of the date hereof there are no other outstanding rights,
subscriptions, warrants, calls, preemptive rights, options or other agreements
of any kind to purchase or otherwise to receive from or sell to the Company any
of the outstanding, authorized but unissued, unauthorized or treasury shares of
the capital stock or any other security of the Company, and there is no security
of any kind convertible into such capital stock. The Company has no obligation
or agreement under any contingency whatsoever to issue any equity, debt or
other security, or to pay, perform, guaranty, be responsible for, or satisfy in
whole or in part any debt, security, obligation or agreement incurred or made by
an individual or entity other than the Company, and the Company has no
obligation under any condition or contingency whatsoever to share its income
with anyone, or to make, accrue or set aside any payment or amount measured in
any way by any part or all of its sales or income. The Company is not indebted
to any of its employees in any amount other than for accrued but unpaid
compensation.
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<PAGE> 12
(c) Upon issuance pursuant to this Agreement,
the Series E Shares will have the rights and preferences set forth in the
Restated Articles of Incorporation and each Series E Share will be, when issued,
initially convertible into one Conversion Share, subject to adjustment for any
dilution event described in the Restated Articles of Incorporation or similar
event. The Series E Shares delivered to the Investor pursuant to this Agreement,
upon payment of the respective purchase prices therefor, shall be duly
authorized, validly issued, fully paid and non-assessable and the Conversion
Shares issuable upon conversion of the Series E Shares have been duly and
validly reserved and, upon issuance in accordance with the conversion
provisions of the Series E Shares and the Restated Articles of Incorporation,
shall be duly authorized, validly issued, fully paid and non-assessable. Subject
to the provisions of applicable federal and state securities laws and
compliance with the terms of this Agreement, upon the consummation of the
transactions contemplated hereby, the Series E Shares and the Conversion Shares
will be freely transferable and free and clear of all liens and encumbrances,
other than liens, encumbrances or restrictions on transfer arising hereunder or
under agreements entered into or actions taken by the Investor.
(d) All of the outstanding shares of Common
Stock and Preferred Stock have been, and all Series E Shares to be issued
pursuant to this Agreement and all Conversion Shares to be issued will be,
offered, issued and sold in compliance with all federal and state securities
laws.
3.4 Compliance with Laws. The Company is not in violation of
(a) any applicable order, judgment, injunction, award or decree, or (b) to the
best of the Company's knowledge, any federal, state, local or foreign law,
ordinance or regulation or any other requirement of any governmental or
regulatory body, court or arbitrator applicable to the business of the Company
except for violations which could not have a material adverse effect on the
business or properties of the Company and would not be in violation of any such
law, ordinance, regulation or other requirement that has been enacted or adopted
but is not yet effective if it were effective. The Company has obtained all
licenses, permits, orders and approvals of any federal, state, local or foreign
governmental or regulatory body (collectively, "Permits") that are material to
or necessary for the conduct of the business of the Company. All of such Permits
are in full force and effect, no violations are or have been recorded in respect
of any Permit and no proceeding is
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<PAGE> 13
pending or, to the best of the Company's knowledge, threatened to revoke or
limit any such Permit.
3.5 Validity of Agreement; Binding Effect. To the best of the
Company's knowledge, no approval or consent of any foreign, federal, state,
county, local or other governmental or regulatory body is required in connection
with the execution and delivery by the Company of this Agreement, the issuance
of the Series E Shares or the Conversion Shares and the consummation and
performance by the Company of the transactions contemplated hereby. The
execution, delivery and performance of this Agreement, the issuance of the
Series E Shares and the Conversion Shares and the consummation of the
transactions contemplated herein by the Company have been duly authorized by all
necessary corporate action on the part of the Company, including any action
which may have been required to be taken by the Company's stockholders, and this
Agreement, when executed, will constitute the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms (except insofar as the enforcement hereof may be limited by (a) applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
creditors' rights generally from time to time in effect, (b) equitable
principles of general application and (c) limitations of public policy as
applied to Section 9.13 of this Agreement).
3.6 No Breach. The execution and delivery of this Agreement
does not and the issuance of the Series E Shares or Conversion Shares and
consummation of and compliance with the transactions and agreements contemplated
hereby will not conflict with or constitute a violation or breach of (a) the
Restated Articles of Incorporation or By-laws of the Company, (b) any provision
of any material contract or other instrument to which the Company is a party or
by which the Company may be bound or by which the business, assets or properties
of the Company may be affected or secured, (c) any order, writ, injunction,
award or decree of any court, arbitrator or governmental or regulatory body
against or binding upon the Company or upon the securities, properties or
business of the Company or (d) to the best of the Company's knowledge, any
statute, law, rule, permit or regulation (including, without limitation,
applicable federal and state securities laws) of any jurisdiction to which the
Company is subject.
3.7 Financial Information. The Company has furnished the
Investor with (a) true copies of its balance sheet dated as of
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<PAGE> 14
December 31, 1992, together with statements of operations, stockholders' equity
and changes in financial position of the Company for the year ended December 31,
1992, with the related opinion of Deloitte & Touche, independent public
accountants (collectively, the "Audited Financials"), and (b) an unaudited
balance sheet dated as of December 31, 1993, and an unaudited statement of
operations for the period then ended (the "Unaudited Financials"; the Audited
Financials and the Unaudited Financials are herein referred to collectively as
the "Financial Statements"). The Financial Statements are complete and correct,
and present fairly the financial position and assets and liabilities of the
Company at their respective dates and the results of its operations and changes
in financial position for the periods then ended; provided, however, that the
Unaudited Financials are subject to year-end audit adjustments and do not
contain all footnotes required under generally accepted accounting principles.
3.8 Absence of Undisclosed Liabilities and Obligations. The
Company has no liability or obligation, either accrued, absolute, direct, or to
the best of its knowledge, contingent or indirect, or otherwise, whether as
principal, agent, partner, coventurer, guarantor or in any capacity whatsoever
which are not reflected in the Financial Statements, other than (a) obligations
and liabilities incurred in the ordinary course of business that are not
individually or in the aggregate material and (b) obligations under contracts
made in the ordinary course of business that would not be required to be
reflected in the Financial Statements.
3.9 Absence of Certain Changes. Since December 31, 1993, there
has not been any event or condition of any character which has either singly or
in the aggregate materially adversely affected the Company's business or
prospects, including but not limited to:
(a) Any change in the condition (financial or
otherwise), assets, liabilities or business of the Company from
that shown on the Financial Statements;
(b) Any damage, destruction or loss of any of
the properties or assets of the Company (whether or not covered by insurance)
affecting the business or plans of the Company;
(c) Any declaration, setting aside, payment or
other distribution in respect of any of the Company's capital
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<PAGE> 15
stock, or any direct or indirect redemption, purchase or other acquisition of
any of such stock by the Company;
(d) Any waiver by the Company of any rights of
value;
(e) Any purchase, sale or transfer of any assets
or properties of the Company, any satisfaction or cancellation of any mortgage
or pledge or any incurring of any debts or claims, or the subjection of any
assets or property of the Company to any lien, charge, security interest on
other encumbrance or any other transaction entered into by the Company other
than in the ordinary course of business;
(f) Any increase in the compensation of any of
the officers, other employees or agents of the Company, including without
limitation, any increase by means of any bonus or pension plan, contract or
other commitment; or
(g) Any labor trouble, or any event or condition
of any character, affecting the business or plans of the Company.
3.10 Real Property. Schedule 3.0 sets forth a list and summary
description of all evidences of ownership of real property by the Company, all
leases, subleases or other agreements under which the Company is lessor or
lessee of any real property, and of all options held by the Company to purchase
or acquire real property. Such leases, subleases and other agreements and all
options are in full force and effect and the Company has not received any notice
of any default thereunder. No approval or consent of any person is needed in
order that the leases, subleases or other agreements and all options under or
pursuant to which the Company is lessor or lessee of any real property continue
in full force and effect after the Closing. The leasehold interests of the
Company are not subject to any liens or encumbrances and such leasehold
interests enjoy a right of quiet possession as against any liens or encumbrances
on the properties. The Company is not subject to any contractual obligation to
purchase or acquire any interest in real property or to sell or dispose of any
interest in real property, and the Company has not granted any options to
purchase or acquire any interest in real property. The Company has good and
marketable title to all the real property held by it outright and none of such
real property or any of the structure or improvements thereon is in violation of
any applicable building,
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<PAGE> 16
zoning, environmental or other laws, ordinances or regulations. None of such
real property has been condemned or is the subject of any eminent domain
proceeding and the Company has no grounds to believe that any such condemnation
or eminent domain proceeding is threatened or taking place.
3.11 Tangible Assets and Equipment. The Company owns outright
and has good and marketable title to all of its tangible assets and equipment
including all tangible assets and equipment reflected in the Financial
Statements, in each case free and clear of any lien or encumbrance, subject only
to liens for taxes not yet due or which are being contested in good faith and by
appropriate proceedings and for which adequate reserves have been set aside on
the books of the Company and reflected in the Financial Statements. To the best
of the Company's knowledge, each tangible asset and piece of equipment of the
Company is in good operating condition, ordinary wear and tear excepted, is
being and has been properly serviced and maintained.
3.12 Tax Returns and Audits.
(a) To the best of the Company's knowledge, (i)
the Company has properly completed and filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) in correct form all federal, state and other income, profits,
franchise, real property, personal property, sales, use, employment, payroll,
excise and other tax returns and reports required to be filed by the Company,
(ii) all taxes imposed or which may be imposed or asserted by the U.S. Internal
Revenue Service, the State of California, or any other taxing authority, and all
deficiencies, assessments, additions to tax, penalties and interests, which are
due and payable by the Company through December 31, 1992, or which are
attributable to the operations, business, properties or assets of the Company
through that date have been paid in full, and (iii) all monies required to be
withheld by the Company from employees for income taxes, Social Security and
unemployment insurance taxes have been collected or withheld and either paid to
the respective governmental agencies or adequately provided for by reserves on
the books of the Company and reflected in the Financial Statements, other than
(x) returns and reports, the non-filing of which, (y) deficiencies, assessments,
additions to tax, penalties and interest, the non-payment of which, and (z)
withholdings, the non-collection or withholding of which
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<PAGE> 17
would not either singly or in the aggregate have a material adverse effect on
the Company.
(b) To the best of the Company's knowledge there
are (i) no other tax returns or reports which are required to be filed by the
Company which have not been so filed and (ii) no unpaid assessments for
additional taxes for any fiscal period or any basis therefor. The Company's tax
returns have not been audited by the U.S. Internal Revenue Service, the State of
California or any other taxing authority to which the Company is subject. The
Company has not consented to any extensions of time to assess any tax.
(c) The Company has successfully revoked its
election to be treated as an S corporation and is presently filing tax returns
and reports to, and is recognized by, the U.S. Internal Revenue Service, the
State of California and all other relevant taxing authorities as a C
corporation.
3.13 Patents and Trademarks. To the best of the Company's
knowledge, it owns or possesses, has access to, or can become licensed on
reasonable terms under all patents, patent applications, inventions, trademarks,
tradenames, servicemarks, copyrights, and other proprietary intellectual
property rights (collectively referred to as "Proprietary Rights") (a) necessary
for the lawful conduct of its business as now conducted and as proposed to be
conducted, and the lack of which would materially and adversely affect its
business or properties, and (b) to the best of its knowledge, without any
material infringement of or conflict with the rights of others. All of the
Proprietary Rights are free and clear of any liens or other encumbrances. The
Company has not granted any licenses to its Proprietary Rights and is not aware
of any third parties who are infringing or violating any of same. To the best of
the Company's knowledge, there are no disputes nor claims regarding the
Proprietary Rights.
3.14 Employees. To the best of the Company's knowledge, no key
employee of the Company is, or is now expected to be, in violation of any term
of any employment contract, patent disclosure agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant or any
other common law obligation to a former employer relating to the right of any
such employee to be employed by the Company because of the nature of the
business conducted or to be conducted by the Company or to the use
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of trade secrets or proprietary information of others, and the employment of the
Company's employees does not subject the Company or the Investor to any material
liability. There is neither pending nor, to the Company's knowledge threatened,
any actions, suits, proceedings or claims, or any basis therefor or thereof with
respect to any contract, agreement, covenant or obligation referred to in the
preceding sentence. The Company is not a party to, or subject to, any
obligation, liability or commitment with respect to any written employment,
compensation, consulting, severance pay or similar agreement and any and all
oral employment, compensation, consulting or similar commitments are terminable
at will and without notice by the Company and without payment or penalty. The
Company is not a party to any collective bargaining or other union contracts and
its employees are not represented by any union.
3.15 Confidentiality. Each person employed by the Company who
has access to any Proprietary Rights or other proprietary information of or
about the Company has executed and delivered to the Company an Employee
Agreement substantially in the form provided to the Investor's counsel (an
"Employee Agreement"). Each person hired by the Company as a consultant who has
access to any Proprietary Rights or other proprietary information of or about
the Company has executed and delivered to the Company a Nondisclosure Agreement
substantially in the form provided to the Investor's counsel (a "Nondisclosure
Agreement").
3.16 Litigation.
(a) There are no legal, administrative or other
proceedings, investigations or inquiries, or other asserted claims, judgments,
injunctions or restrictions, pending or outstanding or, to the best knowledge of
the Company, threatened against the Company, any of its properties or business,
or against or involving any of the Company or the officers or directors of the
Company, or any action related to this Agreement, the issuance of the Series E
Shares or any of the transactions contemplated herein that might if determined
adversely to the Company, either singly or in the aggregate, result in any
material adverse change in the business, prospects, operations, properties or
condition (financial or otherwise) of the Company or in any material liability
on the part of the Company. To the best of the Company's knowledge, there is no
fact, event or circumstance that may give rise to any suit, action, claim,
investigation or proceeding that would be required to be set forth on Schedule
3.0 if currently pending or threatened. There
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are no actions, suits or claims or legal, administrative or arbitration
proceedings pending or to the best of the Company's knowledge threatened that
would give rise to any right of indemnification on the part of any director or
officer of the Company or the heirs, executors or administrators of such
director or officer against the Company.
(b) The Company has not admitted in writing its
inability to pay its debts generally as they become due, filed or consented to
the filing against it of a petition in bankruptcy or a petition to take
advantage of any insolvency act, made an assignment for the benefit of
creditors, consented to the appointment of a receiver for itself or for the
whole or any substantial part of its property, or had a petition in bankruptcy
filed against it, been adjudicated a bankrupt, or filed a petition or answer
seeking reorganization or arrangement under the federal bankruptcy laws or any
other law or statute of the U.S. or any other jurisdiction.
3.17 ERISA. No employee pension benefit plan, within the
meaning of Section 3(a) of the Employment Retirement Income Security Act of
1974, as amended ("ERISA"), is currently maintained or sponsored by the Company
and the Company does not contribute to, and is not obligated to contribute to,
and none of the employees of the Company is a participant in, any multiemployer
plan within the meaning of Section 400(a) of ERISA.
3.18 Environmental Compliance Matters.
(a) To the best of the Company's knowledge,
there is no soil or ground water contamination by any "Hazardous Material" for
which the Company is or may be liable. "Hazardous Material" shall mean any
flammables, asbestos, explosives, radioactive materials, hazardous wastes,
toxic substances or related materials, including without limitation any
substances defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," or "toxic substances" under any
applicable federal, state or local laws, rules, regulations or orders or which
federal, state or local laws, rules, regulations or orders have designated as
potentially dangerous to public health and/or safety when present in the
environment;
(b) The Company has stored, used and disposed of
"Hazardous Material" in material compliance with applicable laws;
and
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<PAGE> 20
(c) The Company has no notice of any (i)
enforcement, cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened against the Company pursuant to any
applicable federal, state or local laws, ordinances or regulations relating to
any Hazardous Material, (ii) claims made or threatened by any third party
against the Company with respect to or because of its property relating to
damage, contribution, cost recovery compensation, loss or injury resulting from
any Hazardous Material or (iii) conditions on any of the properties of the
Company that could cause such properties or any part thereof to be subject to
any restrictions on the ownership, occupancy transferability or use of any of
such properties under any Hazardous Material law.
3.19 Use of Proceeds. The net proceeds to be paid to the
Company at the Closing are to be used (i) for working capital including for
employee compensation and benefits, materials and miscellaneous expenses
associated with developing products, lease payments, capital expenditures and
marketing expenses, (ii) to pay down loans drawn to pay for the foregoing and
(iii) to expand the operations and activities of the Company and its subsidiary
in Japan.
3.20 Registration Rights. Except as provided for in this
Agreement and the Credit Agreement dated April 21, 1989 the Company is not under
any obligation to register under the Securities Act of 1933, as amended (the
"Act"), any of its currently outstanding securities or any of its securities
which may hereafter be issued.
3.21 Escrowed Certificates of Founder Common Stock. The
certificates for all shares of Common Stock held by the Founders have been
delivered to Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, in the
form required by, and in accordance with the terms of, the Common Stock
Restriction Agreements (the "Restriction Agreements") executed by and between
the Company and the Founders.
3.22 Disclosure. The Company has fully provided the Investor
with all the information which such Investor has requested for deciding whether
to purchase the Series E Shares and all information which the Company believes
is reasonably necessary to enable such Investor to make such decision. Neither
this Agreement nor the Financial Statements, any other statements, exhibits,
schedules or certificates made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a
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<PAGE> 21
material fact necessary to make the statements herein or therein not misleading,
except that with respect to the Financial Projections of the Company (the
"Financial Projections"), and any projections, forecasts, and expressions of
opinions or predictions contained therein, the Company represents only that such
projections, forecasts, and expressions of opinions or predictions were made in
good faith and that the Company believes there is a reasonable basis therefor.
The Company does not represent or warrant that the results, sales or orders set
forth in the Financial Projections will be achieved.
3.23 No Other Agreements. The Company has not entered
into any agreement with the Investor regarding the investment by the Investor in
the Company, except as contemplated hereby.
3.24 Claims of the Founders. Each of the Founders, jointly and
severally, represents and warrants to the Investor that they have transferred to
the Company all of their rights with respect to any of the Company's Proprietary
Rights (and have not retained as their own property any invention or technology
pertaining to the business of the Company) and they hereby relinquish all
claims to and agree that they shall have no rights, including without
limitation, any rights to any payments, other than their rights as shareholders
of the Company, with respect to any Proprietary Rights.
3.25 Insurance. The Company maintains insurance with
reputable insurance companies, on so much of its properties, to such an extent
and against such risks, as reasonably prudent persons engaged in similar
businesses would customarily insure properties of a similar character.
4. Representations and Warranties of the Investor. Each
Investor severally and not jointly hereby represents and warrants to the Company
as follows:
4.1 Organization and Standing. The Investor is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 Authorization and Approval of and Ability to Carry
Out This Agreement. The Investor has duly authorized the execution and delivery
of this Agreement and the transactions contemplated hereby. The Investor has all
requisite corporate power and autho-
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<PAGE> 22
rity to enter into this Agreement and to consummate the transactions
contemplated herein. This Agreement constitutes the legal, valid and binding
obligation of the Investor, to the extent provided for herein, enforceable in
accordance with its terms (except insofar as the enforcement hereof may be
limited by (a) applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting creditors' rights generally from time to time in effect,
(b) by equitable principles of general application, and (c) limita tions of
public policy as applied to Section 9.13 of this Agreement).
4.3 Investment Representation. The Investor is purchasing the
Series E Shares (including, for purposes hereof, the Conversion Shares) for its
own account without a view to any dis tribution thereof in violation of the Act,
subject, nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. The Investor represents that
it (a) is an "Accredited Investor" as that term is defined under Rule 501 under
the Act, (b) is experienced in evaluating and making investments of the type
contemplated by this Agreement and (c) is financially able to bear the risks of
the investment. The Investor acknowledges that the Company is issuing and
selling the Series E Shares in reliance upon the exemption from registration
provided in Section 4(2) of the Act and is relying upon these representations,
and agrees that the Series E Shares may only be transferred if registered under
the Act or pursuant to an exemption from such registration requirements. The
Investor understands that Rule 144 promulgated under the Act is not presently
available with respect to the Series E Shares or Conversion Shares, and that
absent registration of the Series E Shares or Conversion Shares under the Act,
compliance with an applicable exemption under the Act, is required for a sale or
other disposition of the Series E Shares or Conversion Shares. The Investor
agrees that the following legend may be placed on any certificates evidencing
its Series E Shares or Conversion Shares and any other securities issued in
respect of Series E Shares or Conversion Shares, upon any dilution event
described in the Restated Articles of Incorporation or similar event:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares have been acquired for
investment and may not be pledged or hypothecated, and may not be sold
or transferred except in compliance with the registration requirements
of the Securities Act
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<PAGE> 23
of 1933, or upon delivery to Cymer Laser Technologies of an opinion of
counsel to the shareholder, in form and substance satisfactory to said
corporation and its counsel, that registration under such Act is not
required."
"The shares represented by this certificate are subject to certain
restrictions upon transfer and rights of first refusal as set forth in
an agreement between the corporation and the registered holder, a copy
of which is on file at the principal office of the corporation."
The Investor understands that, so long as the legend remains on the certificates
representing the Series E Shares or Conversion Shares, the Company may maintain
appropriate "stop transfer" orders with respect to the Series E Shares or
Conversion Shares on its books and records and with its registrar and transfer
agent. Notwithstanding the foregoing, such Investor shall be entitled to
replacement certificates without such legend if permitted under Rule 144 or
upon presentation by such Investor to the Company of a favorable written opinion
of counsel reasonably satisfactory in form and substance to the Company and its
counsel that the removal of such legend is not in violation of either the Act
and the rules and regulations thereunder or applicable provisions of state
securities law.
5. Company's Affirmative Covenants. Except as hereinafter
provided, the Company hereby covenants that from and after the date of this
Agreement and so long as the Investor holds beneficially or of record any of the
Series E Shares or Conversion Shares:
5.1 Corporate Existence. The Company will maintain its
corporate existence and use best efforts to comply with all laws, government
regulations, rules and ordinances and judicial orders, judgments and decrees
applicable and material to the Company, its business and properties.
5.2 Taxes and Liens. The Company will (a) punctually pay and
discharge or cause to be paid and discharged before the same shall become
delinquent (i) all taxes, assessments and governmental charges lawfully imposed
upon the Company, or any of its property, or upon the income and profits
thereof, and (ii) all lawful claims for labor, materials and supplies which, if
unpaid, might be a lien upon the property of the Company, (b) withhold all
monies required to be withheld by the Company from employees for
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<PAGE> 24
income taxes, Social Security and unemployment insurance taxes and (c) complete
and file, on a timely basis, all tax returns and reports required to be filed by
it (including, without limitation, returns and reports of the type set forth in
Section 3.12(a)(i)).
5.3 Maintain Property. The Company will cause all material
properties used or useful in the conduct of its business to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs as in the judgment of
the Company may be necessary so that business carried on in connection therewith
may be properly and advantageously conducted.
5.4 Financial Statements and Reports.
(a) The Company will keep adequate and accurate
books of account and will prepare the financial statements referred to herein,
in accordance with generally accepted accounting principles, consistently
applied.
(b) Until the Initial Public Offering (as herein
defined), the Company shall furnish to each Series E Significant Holder, as soon
as practicable (and in any event at least thirty (30) days) prior to the
beginning of each fiscal year, an annual projected budget for the following
fiscal year, and an annual operating plan and strategic plan (collectively, the
"Plan") as approved by the Board.
(c) Until the Initial Public Offering, the
Company shall furnish to each holder of Series E Shares or Conversion Shares as
soon as practicable (and in any event within ninety (90) days) after the end of
each fiscal year of the Company, an audited balance sheet of the Company as of
the end of the year and the related statement of operations, retained earnings
or deficit and changes in financial position of the Company as of the end of the
year setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by an audit report
and opinion in respect of such financial statement (consolidated if applicable)
of the independent certified public accountants selected by the Company (which
shall be a materially recognized firm of accountants), and such report and
opinion shall be unqualified as to the scope of the audit.
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<PAGE> 25
5.5 Confidentiality. The Company shall, after the date
hereof, cause each person employed by, or retained as a consultant to, the
Company who has access to any Proprietary Rights or other proprietary
information of or about the Company to execute an Employee Agreement, in the
case of an employee, and a Nondisclosure Agreement, in the case of a consultant.
5.6 Conversion Shares. The Company shall reserve and keep
available from its authorized shares of Common Stock, solely for the purpose of
issuance upon conversion of the Series E Shares, such number of Conversion
Shares as shall then be issuable upon the conversion of all of the Series E
Shares, taking into account any anti-dilution rights of the holders thereof.
5.7 Access to Books and Records. Until the Initial Public
Offering, and subject to the provisions of Section 6.3, each Series E
Significant Holder and its agents shall (a) have access upon reasonable notice
to the Company, during usual business hours, and as often as may reasonably be
desired, to the accounts, books and records of the Company shall be entitled to
examine, make copies and extract therefrom, and from any other items, such
information relating to the Company as each such Investor shall reasonably
specify and (b) be permitted, upon reasonable notice to the Company to visit and
inspect any of the properties of the Company. Notwithstanding any provision to
the contrary, this Section 5.7 shall not supercede any prior confidentiality
agreement or restriction on access between the Company and any Investor and such
restrictions shall remain in full force and effort.
5.8 Right of First Offer.
(a) The Company hereby grants to the Significant
Holders the right of first offer to purchase, pro-rata, all (or any part) of New
Securities (as defined in this Section 5.8) which the Company may, from time to
time, propose to sell and issue. A Significant Holder's pro-rata portion, for
purposes of this Agreement, is the ratio of (x) the number of the shares of
Common Stock and Series A, Series B, Series C, Series D and Series E Preferred
Stock, determined on an as-converted basis, held by such Significant Holder at
the time to (y) the total number of shares of Common Stock and Preferred Stock
(determined on an as-converted basis) of the Company issued and outstanding at
such time. Each Significant Holder shall have a right of over-allotment such
that if any Significant Holder fails to exercise his right hereunder to pur-
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<PAGE> 26
chase his pro-rata portion of New Securities, the other Significant Holders may
purchase the non-purchasing Significant Holder's portion on a pro-rata basis
within five (5) days from the date it receives notice from the Company that a
non-purchasing Significant Holder has failed to exercise its right hereunder to
purchase its pro-rata share of New Securities. This right of first offer shall
be subject to the following provisions:
(b) "New Securities" shall mean any capital
stock of the Company whether now authorized or not, and rights, options or
warrants to purchase capital stock, and securities of any type whatsoever that
are, or may become, convertible into capital stock; provided, however, that the
right of first offer shall apply at the time of issuance of the right, warrant
or option and not to the exercise thereof; provided, further, that the term "New
Securities" does not include: (i) the Shares or Conversion Shares; (ii) shares
of Series A, Series B Preferred or Series D Stock issued pursuant to the Series
A Warrants, Series B Warrants, Series D Warrant, Series E Bridge Warrants or
Series E Placement Warrants, respectively (or shares of Common Stock issued upon
conversion of such Preferred Stock or such securities as may be substituted for
the such warrants); (iii) securities offered to the public pursuant to a
registration statement filed pursuant to the Act; (iv) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all the assets or other reorganization whereby the
Company owns not less than 51% of the voting power of such corporation; (v) any
borrowings, direct or indirect, from financial institutions or other persons by
the Company, whether or not presently authorized, including any type of loan or
payment evidenced by any type of debt instrument, provided such borrowings do
not have any equity features, including warrants, options or other rights to
purchase capital stock, and are not convertible into capital stock of the
Company; (vi) 1,000,000 shares of Common Stock reserved for issuance to Founders
or employees pursuant to the exercise of options granted or to be granted; (vii)
warrants issued in connection with the leasing of equipment by the Company which
have been approved by the Board; (viii) any security if holders of at least
sixty-six and two thirds percent (66 2/3%) of the outstanding Shares of
Preferred Stock, voting as a single class, (or the Common Stock issued in
respect thereof, or any combination of such Preferred Stock Shares and such
Common Stock) consent in writing that the right of first offer shall not apply
to such securities; or (ix) issuances of up to a cumulative number of 50,000
shares of
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<PAGE> 27
Common Stock or Preferred Stock from the date of this Agreement which are not
excluded by any of the foregoing exceptions.
(c) In the event the Company proposes to issue
New Securities, it shall give each Significant Holder written notice of its
intention, describing the type of New Securities, the price and the general
terms upon which the Company proposes to issue the same. Each Significant Holder
shall have thirty (30) days from the date of receipt of any such notice to agree
to purchase the Significant Holder's pro-rata share of such New Securities for
the price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
(d) In the event the Significant Holders fail to
exercise the right of first offer with respect to all of the New Securities
proposed to be sold by the Company within said thirty (30) day period and after
the expiration of the five (5) day period for the exercise of the over-allotment
provisions of this Section 5.8, the Company shall have 120 days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within 120 days from the date of
said agreement), to sell the New Securities respecting which the Significant
Holders' options were not exer cised, at a price and upon general terms no more
favorable to the purchasers thereof than specified in the Company's notice. In
the event the Company has not sold within said 120-day period or entered into an
agreement to sell the New Securities within said 120-day period (or sold and
issued New Securities in accordance with the foregoing within 120 days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such securities to the Significant Holders in
the manner provided above.
(e) The right of first offer set forth in this
Section 5.8 is nonassignable, except that such right is assignable (i) by each
Significant Holder to any Person (as defined in Section 14.1) controlling,
controlled by or under common control with such Significant Holder, (ii) between
and among any of the Significant Holders and (iii) upon the death of a
Significant Holder, such right shall pass to the beneficiaries under the
deceased Significant Holder's last will and testament or to the distributees of
the deceased Significant Holder's estate.
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<PAGE> 28
5.9 Right of First Refusal and/or Repurchase Agreement. It
shall be a condition to any issuance of shares of Common Stock (other than
shares of Common Stock issued upon conversion of the Preferred Stock) including,
without limitation, Common Stock to officers or employees of the Company
pursuant to an employee stock purchase, stock option or other benefit or
incentive plan established by the Company, that the Company will cause the
person to whom the Common Stock is to be issued to execute and deliver to the
Company an appropriate right of first refusal agreement and/or a repurchase
agreement (in the event that the shares of Common Stock being issued are subject
to absolute prohibitions on transfer that lapse over time) in a form approved by
the Board which shall provide, among other things, that the Significant Holders
shall have the right to exercise the Company's rights thereunder in the event
the Company shall fail to do so.
5.10 Insurance. The Company will insure and keep insured, with
reputable insurance companies, so much of its proper ties, to such an extent and
against such risks, as reasonably prudent persons engaged in similar businesses
would customarily insure properties of a similar character or as otherwise
approved by the Board.
5.11 Notice of Record Dates.
(a) In the event of any taking by the Company of
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, the Company shall mail to each holder of Series E Shares, at
least ten (10) days prior to such record date, specified herein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution.
(b) In the event of (i) any consolidation or
merger to which the Company is a party and for which approval of any
shareholders of the Company is required, (ii) the conveyance or transfer of all,
or substantially all, of the properties and assets of the Company, (iii) any
capital reorganization or any reclassifi cation of the Common Stock (other than
a change in par value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination), or (iv) the
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the Company shall mail to each holder of Series E Shares,
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<PAGE> 29
at least ten (10) days prior to the applicable record date, a notice specifying
the date on which such record is to be taken for the purpose of such
transaction.
5.12 Employee Stock Purchase Agreement. The Company will not
issue any of its capital stock, or grant an option to purchase any of its
capital stock, to any Founder, employee, or officer of the Company (other than
any options or grants already made to any Founders or employees of the Company)
except pursuant to a plan adopted or an issuance approved by the Board.
5.13 State Securities Law Filings. The Company shall make any
and all filings necessary (whether before or after the Closing) in connection
with the offer, issuance and sale of the Series E Shares and the issuance of the
Conversion Shares under the securities or blue sky laws of California.
5.14 Lapse of Covenants. Except as otherwise specifically
provided in this Section 5, the covenants contained herein and further
agreements contained in Section 7 of this Agreement shall lapse and be of no
further force and effect upon the consummation by the Company of an Initial
Public Offering. "Initial Public Offering" for purposes of this Agreement, shall
be defined as the receipt by the Company of the proceeds of a bona fide firm
commitment underwritten public offering registered under the Act, which offering
does not exclusively relate to securities under an employee stock option, bonus
or other compensation plan and at a price of not less than $6.00 per share of
Common Stock (as equitably adjusted for any dilutive event set forth in the
Restated Articles of Incorporation or other similar event) and net proceeds to
the Company of not less than $10,000,000.
5.15 Information as to Competitors and Proprietary
Information. The Company shall not provide to the Investor or any Prior Investor
any confidential information concerning the affairs of any other Investor or
Prior Investor disclosed to the Company prior to or subsequent to the execution
of this Agreement.
5.16 Technological Expertise. The Company shall use its best
commercial efforts to maintain and improve its current level of technological
expertise through appropriate research and development and use its reasonable
commercial efforts to retain key employees.
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6. Investor's Affirmative Covenants.
6.1 Confidentiality. The Investor agrees to maintain in
confidence all books, records, documents or other information received from the
Company under this Agreement, not to disclose the same to third parties, not to
use such information other than for the purposes of this Agreement and to
obligate all of its personnel having access to such information to adhere to
this obligation of confidentiality; provided, however, that such information may
be (a) disclosed to the extent that disclosure is required pursuant to any
applicable law, regulation, judicial process or order, (b) disclosed or used
when the information has been discovered or developed by the Investor
independently of the Company and such discovery or development is documented in
writing concurrently with such discovery or development, which documentation
shall be provided to the Company upon request, or (c) disclosed or used when
the information is in the public domain through no fault of the Investor.
6.2 Amendment of Series C Agreement. The parties agree the Series C
Preferred Stock Purchase Agreement dated April 16, 1990 (the "Series C
Agreement") shall be hereby amended by deleting the second sentence of Section
5.14 of the Series C Agreement and adding the second sentence of Section 5.14 of
this Agreement in its place. The covenants set forth in Section 6 of the Series
C Agreement, as amended by this Section 6.2, shall continue with full force and
effect except that with respect to the application of Section 6.3(iii) of the
Series C Agreement to Section 6.9 thereof, the effective date shall be the
consummation of the Company's Initial Public Offering instead of the two year
anniversary of the Company's Initial Public Offering.
7. Further Agreements.
7.1 Right of First Refusal and Repurchase with Respect to
Founder Stock. In connection with the exercise of the Incentive Stock Options
granted to each of the Founders and to certain of the Company's employees (the
"Optionees") each of the Founders and the Optionees is required to execute a
Restricted Stock Purchase Agreement in substantially the form provided to
Investor's counsel (the "Restricted Stock Purchase Agreements"). Pursuant to the
Restricted Stock Purchase Agreements and the Restriction Agreements, the
Company has the right of first refusal in connection with the sale by the
Founders and the Optionees of any vested
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<PAGE> 31
shares of Common Stock and the right to repurchase any unvested shares of Common
Stock. Pursuant to the assignment provisions contained in the Restriction
Agreements and the Restricted Stock Purchase Agreements, the Company hereby
agrees that if on any occasion it elects not to exercise any of its rights of
first refusal or repurchase under the Restriction Agreements or the Restricted
Stock Purchase Agreements or to exercise such rights only with respect to a
portion of the shares to which they are applicable, that it shall so notify the
Significant Holders in writing (the "Company Notice") within ten (10) days of
all of the details of the notice or even which triggered the Company's right of
first refusal or repurchase and the Significant Holders shall thereafter have
all of the rights of the Company to exercise on a pro-rata basis the rights of
first refusal and repurchase granted thereunder to the Company with respect to
all of the shares of Common Stock to which the Company's rights apply or with
respect to that portion of the shares of Common Stock that the Company has
elected not to purchase on the same terms granted to the Company pursuant to the
Restriction Agreements or Restricted Stock Purchase Agreements, as applicable. A
Significant Holder's pro rata portion, for the purposes of this Section 7.1, is
the ratio of (x) the number of shares of Preferred Stock (determined on an as
converted basis) held by such Significant Holder at the time to (y) the total
number of shares of Preferred Stock (determined on an as converted basis) of the
Company held by all Significant Holders. Each Significant Holder shall deliver a
notice to the Company stating the number of shares of Common Stock which the
Significant Holder desires to purchase pursuant to this Section 7.1 or to sell
pursuant to Section 7.2 within ten (10) days of its receipt of the Company
Notice. The Company shall notify the Significant Holders (the "Non-Exercise
Notice") of any Significant Holder's election not to exercise, or to exercise
only in part, its rights under Sections 7.1 or 7.2 and each Significant Holder
shall have a right of over-allotment to purchase the non-exercising Significant
Holder's portion on a pro-rata basis within five (5) days from the date it
receives the Non-Exercise Notice. Notwithstanding anything to the contrary
contained in the Restriction Agreements or in the Restricted Stock Purchase
Agreements, the notice provisions and time periods set forth in Sections 7.1 and
7.2 shall control in the event the Company assigns its rights under the
Restriction Agreements or Restricted Stock Purchase Agreements to the
Significant Holders.
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<PAGE> 32
7.2 Co-Sale Agreement on Sale of Founder Stock.
Notwithstanding anything to the contrary contained in the Restriction Agreements
or in the Restricted Stock Purchase Agreements, in the event the Company does
not elect to purchase any or all of a Founder's shares of Common Stock subject
to the rights of first refusal set forth in the Restriction Agreements and in
the Restricted Stock Purchase Agreements apply, and in the event the Significant
Holders do not elect to purchase any or all shares of Common Stock subject to
their rights of first refusal as set forth in Section 7.1 above, then, with
respect to any shares of a Founder's Common Stock not purchased by the
Significant Holders the Founder hereby grants to the Significant Holders the
right to participate, pro rata (based upon the relative aggregate cost of each
holder's Preferred Stock), in the sale of 50% of such shares in accordance with
the following provisions of this Section 7.2:
(a) Each Significant Holder may elect to
participate, pro rata, in the proposed sale of shares of Common Stock which the
selling Founder desires to sell on the same terms as set forth in the Founder's
notice of sale which triggered the right of first refusal, upon delivery of
notice of election to the selling Founder within the time prescribed for
exercising the Significant Holder's right of first refusal with respect to the
selling Founder's shares of Common Stock.
(b) In the event all of the Significant Holders
fail to exercise the right of co-sale within the time period allotted therefor,
the selling Founder shall have the right to sell the shares of Common Stock
which were subject to the right of co-sale on the same terms as those set forth
in the notice triggering the right of first refusal; provided, however, that the
sale is consummated within the period of time provided for in the Restriction
Agreements or the Restricted Stock Purchase Agreements, as applicable.
(c) In the event any or all of the Significant
Holders elect to exercise their rights of co-sale in a manner consistent with
Section 7.2(a), the selling Founder agrees to reduce the number of shares of
Common Stock to be sold by him, and to sell, for the account of the selling
Significant Holders that amount of Common Stock tendered for sale by the
Significant Holders. Each Significant Holder shall have a right of
over-allotment such that if any Significant Holder fails to exercise his rights
hereunder, the other Significant Holders may sell on a pro-
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<PAGE> 33
rata basis an amount of Shares equal to the number of Shares which the
non-exercising Significant Holder would have been permitted to sell. In no event
shall the total number of shares of Common Stock sold by the Significant Holders
pursuant to their right of co-sale exceed fifty percent (50%) of the total
number of shares of Common Stock actually being sold by the selling Founder,
other than to Significant Holders pursuant to Section 7.1, in any given sales
transaction.
8. Company's Right of First Refusal.
8.1 Right of First Refusal. Prior to making any sale
or transfer of Voting Stock of the Company pursuant to Section 6.2(v), the
Investor shall give the Company the opportunity to purchase such Voting Stock
in the following manner:
(i) The Investor shall give notice (the
"Transfer Notice") to the Company in writing of such intention, specifying the
amount of Voting Stock proposed to be sold or transferred, the proposed price
per share therefor (the "Transfer Price") and the other material terms upon
which such disposition is proposed to be made.
(ii) The Company shall have the right,
exercisable by written notice given by the Company to the Investor within thirty
(30) days after receipt of such Transfer Notice, to purchase all of the Voting
Stock specified in such Notice for cash per share equal to the Transfer Price.
(iii) If the Company exercises its right
of first refusal hereunder, the closing of the purchase of the Voting Stock with
respect to which such right has been exercised shall take place within ninety
(90) calendar days after the Company gives notice of such exercise, which period
of time shall be extended in order to comply with applicable laws and
regulations. Upon exercise of its right of first refusal, the Company and the
Investor shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
(iv) If the Company does not exercise its
right of first refusal hereunder within the time specified for such exercise,
the Investor shall be free, during the period of 90 calendar days following the
expiration of such time for exercise, to sell
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the Voting Stock specified in such Transfer Notice on terms no less favorable to
the Investor than the terms specified in such Notice.
The restrictions set forth in this Section 8.1 shall lapse and be of no further
force and effect upon the consummation by the Company of an Initial Public
Offering (as defined in Section 5.14).
8.2 Tender Offer Sale. Prior to making any sale or exchange of
Voting Stock pursuant to Section 6.2(vi) in response to a tender or exchange
offer, the Investor shall give the Company the opportunity to purchase such
Voting Stock in the following manner:
(i) The Investor shall give notice (the
"Tender Notice") to the Company in writing of such intention no later than 10
calendar days prior to the latest time by which Voting Stock must be tendered in
order to be accepted pursuant to such offer or to qualify for any proration
applicable to such offer (the "Tender Date"), specifying the amount of Voting
Stock proposed to be tendered. For purposes hereof, a tender offer to purchase
Voting Stock shall be deemed to be an offer at the price specified therein,
without regard to any provisions thereof with respect to proration or conditions
to the offeror's obligation to purchase (assuming such conditions are not
impossible of performance when the offering is made, without giving effect to
the Company's right of first refusal).
(ii) If the Tender Notice is given, the
Company shall have the right, exercisable by giving notice to the Investor at
least two calendar days prior to the Tender Date, to purchase all or any part of
the Voting Stock specified in the Tender Notice for cash. If the Company
exercises such right by giving such notice, the closing of the purchase of such
Voting Stock shall take place within ninety (90) days after the Company gives
notice of the exercise of its right of first refusal hereunder; provided,
however, that if the purchase price specified in the tender offer includes any
property other than cash, the value of any property included in the purchase
price shall be jointly determined by a nationally recognized investment banking
firm selected by the Company and a nationally recognized investment banking firm
selected by the Investor or, in the event such firms are unable to agree, a
third nationally recognized investment banking firm to be selected by such two
firms. For this purpose:
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(x) The parties shall use their
best efforts to cause any determination of the value of any securities included
in the purchase price to be made within three business days after the date of
delivery of the Tender Notice. If the firms selected by the Investor and the
Company are unable to agree upon the value of any such securities within such
three-day period, the firms shall promptly select a third firm whose
determination shall be conclusive.
(y) The parties shall use their
best efforts to cause any determination of the value of property other than
securities to be made within seven business days after the date of delivery of
the Tender Notice. If the firms selected by the Investor and the Company are
unable to agree upon a value within such seven-day period, the firms shall
promptly select a third firm whose determination shall be conclusive.
The purchase price to be paid by the Company pursuant to this Section 8.2 shall
be (x) if such tender offer is consummated, the purchase price that the Investor
would have received if it had tendered the Voting Stock purchased by the
Company and all such Voting Stock had been purchased in such tender offer,
including any increases in the price paid by the tender offeror, after exercise
by the Company of its right of first refusal hereunder, or (y) if such tender
offer is not consummated, the highest price offered pursuant thereto, in each
case with property, if any, to be valued as aforesaid.
(iii) If the Company does not exercise
such right by giving such notice, then the Investor shall be free to accept for
all its Voting Stock the tender offer with respect to which the Tender Notice
was given.
8.3 Assignment of Rights. In the event that the Company elects
to exercise a right of first refusal under this Section 8, the Company may
specify in its notice of intention to exercise such right another person as its
designee to purchase the Voting Stock to which such notice relates. If the
Company shall designate another person as the purchaser pursuant to this Section
8, the giving of notice of acceptance of the right of first refusal by the
Company shall constitute a legally binding obligation of the Company to complete
such purchase if such person shall fail to do so.
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9. Restrictions on Transferability of Shares; Compliance
with the Act.
9.1 Restrictions on Transferability. In addition to the
restrictions on transfer set forth in Sections 6, 7 and 8, the Shares and the
Conversion Shares shall not be sold, assigned, transferred or pledged, except
upon the conditions specified in this Section 9, which conditions are intended
to insure compliance with the provisions of the Act and in the case of
Conversion Shares being sold pursuant to a Registration Statement, to assist in
an orderly distribution. Each Investor will cause any proposed purchaser,
assignee, transferee or pledgee of Shares or Conversion Shares held by that
Investor to agree to take and hold those Shares or Conversion Shares subject to
the provisions and upon the conditions specified in this Section 9.
9.2 Certain Definitions. As used in this Section 9, the
following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act.
"Holder" shall mean any holder of Registrable
Securities (including any Transferee (as herein defined)) which have not been
sold to the public.
"Initiating Holders" shall mean any Holders who in
the aggregate hold 50% or more of the outstanding Registrable Securities.
The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean (a) the
Conversion Shares (whether issued or issuable), (b) any Common Stock or other
securities of the Company issued or issuable in respect of the Conversion Shares
(or any other securities of the Company issued in respect of the Shares) on
account of any stock split, reverse stock split, stock dividend, dilution event
described in the Restated Articles of Incorporation or other similar event,
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(c) any Common Stock issuable upon conversion of the Series A Preferred Stock
received upon exercise of the Series A Warrants, (d) any Common Stock issuable
upon conversion of the Series B Preferred Stock received upon exercise of the
Series B Warrants, (e) any Common Stock issuable upon conversion of the Series D
Preferred Stock received upon exercise of the Series D Warrant, (f) any Common
Stock issuable upon conversion of the Series E Preferred Stock received upon
exercise of the Series E Bridge Warrants or Series E Placement Warrants and (g)
any Shares or Conversion Shares or Common Stock acquired pursuant to the right
of first offer set forth in Section 5.8 or the right of first refusal and
repurchase with respect to Founder Stock set forth in Section 7.1 or pursuant to
any right to purchase stock from any employee pursuant to an agreement provided
for by Section 5.9; provided, however, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so long as (i)
they have not been sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, (ii) they have not been
sold in a transaction exempt from the registration and prospectus delivery
requirement of the Act under Section 4(1) thereof so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of each sale.
"Registration Expenses" shall mean all expenses
incurred by the Company in compliance with Sections 9.4, 9.5 and 9.6 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of
the Company required to bear or bearing the legend set forth in
Section 4.3 hereof.
"Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities and all fees and disbursements of counsel for any Holder.
9.3 Notice of Proposed Transfers. The transferee of each
certificate representing Restricted Securities (a "Trans-
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feree") by acceptance thereof agrees to comply in all respects with the
provisions of this Agreement and shall have all the rights of an Investor
hereunder with respect to the Restricted Shares. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than under
circumstances described in Sections 9.4, 9.5 and 9.6 hereof), the Holder thereof
shall give written notice to the Company of such Holder's intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed sale, assignment, transfer or pledge, in sufficient detail, and
shall be accompanied (except in transactions in compliance with Rule 144) by
either (a) a favorable written opinion of counsel reasonably satisfactory in
form and substance to the Company and its counsel, to the effect that the
proposed transfer of the Restricted Securities may be effected without
registration under the Act, or (b) a "no action" letter from the Commission to
the effect that the distribution of such securities without registration will
not result in a recommendation by the staff of the Commission that action be
taken with respect thereto, whereupon the Holder of such Restricted Securities
shall be entitled to transfer such Restricted Securities in accordance with the
terms of the notice delivered by the holder to the Company. Notwithstanding the
foregoing, Holders of Restricted Securities and their transferees shall be
permitted to transfer such Restricted Securities without complying with the
provision of this Section to (a) any Person controlling, controlled by or under
common control with such Holder or (b) to any other Holder of Restricted
Securities. Each certificate evidencing the Restricted Securities transferred as
above provided shall, subject to the provisions of Section 4.3, bear the
appropriate restrictive legend set forth therein.
9.4 Demand Registration Rights.
(a) On two occasions, upon the demand, in
writing, of Initiating Holders that the Company effect a registration with
respect to all or any part of the Registrable Securities, the Company shall give
written notice of such demand within ten (10) days to all other Holders. The
notice shall advise such Holders of their right to participate in such demand
registration, which right may be exercised by each such Holder giving written
notice to the Company of its intention to so participate within twenty (20) days
of receipt of such notice from the Company. The Company will use its best
efforts to prepare, file and process a registration statement and any amendments
or supplements required to be filed to
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ensure that such registration statement is declared effective and remains
effective under the Act, to permit the Holders or any of them, or an underwriter
on behalf of any of them, to offer and sell to the public the number of
Registrable Securities for which demand registration rights are exercised
hereunder. The Company shall file the aforesaid registration statement as soon
as reasonably practicable, and in any event, within sixty (60) days following
receipt of such written request. The Company shall use its best efforts to cause
such registration statement to become and remain effective until the earlier of
the sale of all of the Registrable Securities included in the registration
statement or one hundred twenty (120) days from the effective date thereof.
(b) Notwithstanding the foregoing, the Company
shall not be obligated to register the Registrable Securities pursuant to this
Section 9.4, (i) during any period within six (6) months following a prior
primary or secondary public offering of the Company's Common Stock, including
any registration of the Registrable Securities but excluding a "shelf" or
continuing registration, (ii) during any period in which the Company has
commenced preparation of a registration statement of securities and pursuant to
which it has notified the Holders of their "piggy-back" registration rights
pursuant to Section 9.5 hereof, (iii) in any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Act, (iv) if the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good faith and
judgment of the Board of Directors it would be seriously detrimental to the
Company or its shareholders for a registration to be filed in the near future,
then the Company's obligation to use its best efforts to register under this
Section 9.4 shall be deferred for a period not to exceed ninety (90) days from
the receipt of the request to file such Registration Statement by Initiating
Holders; provided, however, that the Company shall not exercise the right to
defer registration granted by this subsection (iv) more than once in any
twelve-month period.
(c) The right of any Holder to registration
pursuant to this Section 9.4 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 9.4 and
the inclusion of such Holder's registrable securities in the underwriting to
the extent requested and to the extent
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provided herein. The Company shall (together with all Holders proposing to
distribute their securities through such an underwriting) enter into an
underwriting agreement in customary form with the managing underwriters selected
for such underwriting by a majority in interest of the Initiating Holders (which
managing underwriters shall be reasonably acceptable to the Company). The
Holders agree to be bound by the provisions of Section 9.9 herein regarding
cutbacks. If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such persons may elect to withdraw therefrom by written notice
to the Company, the Managing Underwriter and the Holders participating in the
registration. The Registrable Securities and/or other securities so withdrawn
shall also be withdrawn from registration, and such registrable securities shall
not be transferred in a public distribution prior to ninety (90) days after the
effective date of such registration.
9.5 Piggy-Back Registration Rights.
(a) On each occasion, if any, following the date
hereof that the Company contemplates filing with the Commission a registration
statement under the Act relating in whole or in part to the primary offer and
sale of shares of its Common Stock, other than a registration statement which
exclusively relates to the registration of securities under (i) an employee
stock option, bonus or other compensation plan, or (ii) a registration relating
solely to a transaction under Rule 145 promulgated by the Commission, the
Company shall so notify the Holders in writing of its intention to do so at
least thirty (30) days prior to the filing of each such registration statement.
Each Holder who gives written notice to the Company, within twenty (20) days of
receipt of such notice from the Company, of such Holder's desire to have any of
its Registrable Securities included in such registration statement, may, subject
to the provisions of this Section 9.5, have its Registrable Securities so
included. The Company shall file any required amendments of or supplements to
any registration statement filed pursuant to this Section 9.5 and otherwise use
its best efforts to insure that such registration statement remains in effect
under the Act until the earlier of the sale of all of the Registrable Securities
included in the registration or the expiration of one hundred twenty (120) days
from the effective date thereof.
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(b) If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 9.5(a). In such event the right of any Holder to
registration pursuant to Section 9.5 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
Holders who have demanded such registration). The Holders agree to be bound by
the terms and conditions of Section 9.9 hereof regarding cutbacks.
(c) The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 9.5
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.
9.6 Registration on Form S-3.
(a) The Company shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in Sections 9.4 and 9.5, the Holders of Registrable Securities shall
have the right to demand that the Company promptly use its best efforts to
effect one registration per annum on Form S-3, provided, such request shall be
made with respect to an amount of Registrable Securities which have a reasonably
anticipated aggregate price to the public of not less than $750,000.
(b) Notwithstanding the foregoing, the Company
shall not be obligated to take any action pursuant to this Section 9.6 (i) in
any particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Act, (ii) during the period starting with the date sixty (60)
days prior to the filing of and, ending on a date six (6) months following the
effective date of a registration statement (other than with respect to a
registration statement
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relating to a Rule 145 transaction, or with respect to securities offered solely
to employees), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective, or
(iii) if the Company shall furnish to Holder a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Company or its shareholders
for a registration statement to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed ninety (90) days from the receipt of the
request to file such registration by the Holders; provided, however, that the
Company shall not exercise the right to defer registration granted by this
subsection (iii) more than once in any twelve-month period.
9.7 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) Make and keep public information available
as those terms are understood and defined in Rule 144 under the Act, at all
times from and after 90 days following the effective date of the first
registration under the Act filed by the Company for an offering of its
securities to the general public;
(b) Use its best efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Act and the Exchange Act at any time after it has become
subject to such reporting requirements; and
(c) So long as a Holder owns any Restricted
Securities, furnish to the Holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of Rule 144 (at
any time from and after 90 days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
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9.8 Expenses of Registration. Subject to any Blue Sky
requirements with respect to the allocation of expenses, all Registration
Expenses incurred in connection with registration statements under Section 9.5
and the first two registration statements filed by the Company pursuant to
Sections 9.4 and 9.6, shall be borne by the Company, and all Selling Expenses
shall be borne by the holders of the Registrable Securities so registered pro
rata on the basis of the number of their shares of Registrable Securities so
registered; provided, however, that the Company shall not be required to pay any
Registration Expenses if, as a result of the withdrawal of a request for
registration by Initiating Holders (unless in response to a material adverse
change in the Company), the registration statement does not become effective, in
which case the Holders requesting registration shall bear such Registration
Expenses pro-rata on the basis of the number of their shares of Registrable
Securities so included in the registration request; provided, further, that such
registration shall not be counted as a registration pursuant to Sections 9.4,
9.5 or 9.6.
9.9 Cutbacks. In the event the underwriter for a registration
statement filed pursuant to Sections 9.4, 9.5 or 9.6 advises the Company in
writing that the number of Registrable Securities proposed to be sold in any
such offering or sale is greater than the number of shares which the underwriter
believes feasible to sell at that time at the price and upon the terms approved
by or on behalf of the Company with respect to a registration statement filed
under Section 9.5 or on behalf of the Holders holding a majority of the
Registrable Securities to be included in such registration statement with
respect to a registration statement to be filed under Section 9.4 or 9.6, then
the number of Registrable Securities which the underwriter believes may be sold
shall (a) in the case of a registration statement filed under Section 9.5, first
be allocated to the Company and the remaining Registrable Securities shall be
allocated among the Holders in proportion to the Registrable Securities each
first proposed for inclusion in the registration statement and (b) in the case
of a registration statement filed under Sections 9.4 or 9.6, be allocated to
the Holders in proportion to the number of Registrable Securities each first
proposed for inclusion in the registration statement.
9.10 Additional Covenants Concerning Sale of Shares. In
connection with any registration statement referred to in Section 9 of this
Agreement, the Company shall furnish to each Holder whose shares of Registrable
Securities are included therein (or to any
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broker or other person at its request) a reasonable number of copies of such
registration statement, each amendment and supplement thereto and each document
included therein, such number of copies of the then current prospectus included
therein as they may from time to time reasonably request, and a copy of the
opinion of counsel to the Company and a copy of the Company's accountants' "cold
comfort letter" which are delivered to the underwriter, if such counsel or
accountants, as the case may be, so consent.
9.11 Blue Sky Provisions. Except in those jurisdictions in
which the Company would be required to execute a general consent to service of
process, the Company, at its expense, shall endeavor to cause any of the
Registrable Securities included in a registration statement referred to herein
to be qualified under the laws of such number of jurisdictions as the Holders,
or the managing under writer named herein, may reasonably designate, and the
Company will continue such qualification in effect so long as may be necessary
to comply with all applicable laws regulating sales of securities.
9.12 Advising the Holders. In connection with any regis-
tration statement referred to in Section 9 hereof, the Company will promptly
advise each Holder whose Registrable Securities are included therein, and
confirm such advice in writing (a) when the registration statement has become
effective, (b) upon the filing of any amendment or supplement to the
registration statement, (c) when any post-effective amendment to the
registration statement becomes effective, and (d) of any request by the
Commission for any amendment or supplement to the registration statement or
prospectus or for additional information. If at any time the Commission should
institute or threaten to institute any proceeding for the purpose of issuing, or
should issue, a stop order suspending the effectiveness of the registration
statement, the Company will promptly notify the Holders whose Registrable
Securities are included in such registration statement, and will use its best
efforts to prevent the issuance of any such stop order or to obtain the
withdrawal thereof as soon as possible; and the Company will advise the Holders
promptly of any order or communication of any public board or body addressed to
the Company suspending or threatening to suspend the qualification of any shares
of Common Stock for sale in any jurisdiction.
9.13 Indemnification.
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(a) With respect to the registration rights
described in Section 9 hereof, the Company hereby agrees to indemnify, hold
harmless and defend each Holder and each Person who controls, is controlled by
or under common control of any such Holder within the meaning of the Act,
against any and all losses, claims, damages, liabilities and expenses (including
reasonable legal and other expenses incurred in investigating and defending
against the same), to which they, or any of them, may become subject under the
Act or other statute or common law, arising out of or based upon (i) any alleged
untrue statement of a material fact contained in any registration statement or
prospectus included therein, or any amendment thereof or supplement thereto, or
(ii) the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements contained therein not misleading;
provided, however, that the indemnity contained in this Section 9.13(a) shall
not apply to any such alleged untrue statement or omission made in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such Holder. As soon as practicable after the receipt by any Holder of
notice of any claim or action against any of the Holders in respect of which
indemnity may be sought from the Company hereunder, such Holder shall notify the
Company thereof in writing, and the Company shall assume the defense of such
claim or action (and the cost thereof) by counsel of its own choosing, who shall
be reasonably satisfactory to a majority in interest of the Holders.
(b) Each Holder whose Registrable Securities are
included in a registration statement, severally but not jointly, hereby agrees,
to indemnify, hold harmless and defend the Company, its directors and officers,
and each Person who controls, is controlled by or under common control of the
Company within the meaning of the Act, and each other Holder against any and all
losses, claims, damages, liabilities and expenses (including reasonable legal or
other expenses incurred in investigating and defending against the same), to
which they or any of them may become subject under the Act or other statute or
common law, arising out of or based upon (i) any alleged untrue statement of a
material fact contained in any such registration statement or prospectus
included therein, or any amendment thereof or supplement thereto, or (ii) the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements contained therein not misleading; provided,
however, that the indemnity contained in this Section 9.13(b) shall apply in
each
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case only to the extent such statement or omission was made solely in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Holder in connection with the preparation of the registration
statement. The Company, and any other person in respect of which indemnity may
be sought from a Holder hereunder, shall, as soon as practicable after the
receipt of notice of any claim or action against the Company or such other
person or entity, notify such Holder thereof in writing and such Holder shall
assume the defense of any such claim or action (and the cost thereof) by counsel
of its own choosing, who shall be reasonably satisfactory to the Company and a
majority in interest of any Holders claiming indemnity hereunder.
9.14 Registration under the Exchange Act. If the Company shall
at any time have completed a public offering of shares of its Common Stock, it
shall thereafter take such steps as may be necessary to register its Common
Stock under Section 12 of the Exchange Act (whether or not required by law to do
so), to maintain such status, and to file with the Commission all current
reports and other information as may be necessary to enable the Holders or the
Transferees to effect sales of the Conversion Shares in reliance upon Rule 144
under the Act.
9.15 Information by Holder. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Holder or Holders, the registrable securities
held by them and the distribution proposed by such Holder or Holders as the
Company may reasonably request in writing and as shall be required in connection
with any registration referred to in this Section 9.
9.16 Transfer of Registration Rights. The rights to cause the
Company to register securities granted to Holders under Sections 9.4, 9.5 and
9.6 may be assigned to a transferee or assignee in connection with any transfer
or assignment by a Holder of at least Ten Thousand (10,000) Shares of
Registrable Securities, subject to adjustment for any dilution event described
in the Certificate of Determination or similar event; provided, however, that
the Company is given written notice by the Holder effecting such transfer or
assignment.
9.17 Standoff Agreement. Each Holder agrees in connection
with any registration of the Company's securities that, upon request of the
Company or the underwriters managing any under-
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written offering of the Company's securities, not to sell, make any short sale
of, loan, grant any option for the purchase of, or otherwise dispose of any
Registrable Securities (other than those included in the registration statement)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 120 days) from the effective
date of such registration as may be requested by the Company or such managing
underwriters; provided, however, that all officers and directors of the Company
have entered into substantially similar agreements. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to the Registrable Securities of each Holder (and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such period.
9.18 Termination of Rights. The rights of any particular
Holder to cause the Company to register securities under Sections 9.4, 9.5 and
9.6 shall terminate with respect to such Holder following a bona fide, firmly
underwritten public offering of shares of Common Stock registered under the Act
at such time as such Holder is able to dispose of all of his Registrable
Securities in one three-month period, pursuant to the provisions of Rule 144.
10. Survival of Representations, Warranties and Covenants.
10.1 Survival of Representations, Warranties and Covenants of
the Company. The Investor shall have the right to rely fully upon the
representations, warranties and covenants of the Company contained in this
Agreement (notwithstanding any knowledge of facts determined or determinable by
the Investor). All such representations and warranties shall survive the
execution and delivery hereof and the Closing, and, except as otherwise
specifically provided in this Agreement, shall thereafter terminate and expire
on the earlier of (a) the second anniversary of the Closing Date and (b) the
consummation of the Initial Public Offering by the Company. The covenants of the
Company contained herein shall continue until they lapse in accordance with the
provisions of this Agreement.
10.2 Survival of Representations and Warranties of the
Investor. The Company shall have the right to rely fully upon the
representations and warranties of the Investor contained in this Agreement
(notwithstanding any knowledge of facts determined or determinable by the
Company). All such representations, warran-
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<PAGE> 48
ties, covenants and agreements shall survive the execution and delivery hereof
and the Closing and, except as otherwise specifically provided in this
Agreement, shall thereafter terminate and expire on the earlier of (a) the
second anniversary of the Closing Date and (b) the consummation of the Initial
Public Offering by the Company. The covenant made by the Investor in Section 4.3
hereof shall survive indefinitely, unless a lesser period is prescribed by an
applicable statute.
11. Conditions Precedent to Obligations of the Investor. The
obligations of the Investor to consummate the purchase of the Shares in the
Closing shall be conditioned on the following:
11.1 Representations and Warranties Correct. Each of the
representations and warranties of the Company contained in this Agreement and in
any certificate delivered to the Investor pursuant hereto shall in all material
respects be true and correct when made and as of the Closing Date, with the same
effect as if made at the Closing Date (or the date to which it relates in the
case of any representation or warranty which specifically relates to an earlier
date).
11.2 Compliance with This Agreement. The Company shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by the Company on or prior to the Closing Date.
11.3 Satisfaction of Investor and Its Counsel. All corporate
proceedings taken in connection with the transactions contemplated by this
Agreement, and all documents incident thereto, shall be reasonably satisfactory
in form to each Investor and its counsel.
11.4 No Actions or Proceedings. No action, suit or proceeding
by or before any court, agency or other governmental body shall have been
asserted, instituted or threatened by any party to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
11.5 Opinion of Company's Counsel. The Company shall have
delivered to the Investor an opinion of Wilson, Sonsini, Goodrich & Rosati,
counsel for the Company, addressed to the Investor and dated as of the Closing
Date in substantially the form attached hereto as EXHIBIT B.
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<PAGE> 49
11.6 Officer's Certificate. The Investor shall have received a
certificate dated the Closing Date and signed by the President certifying the
fulfillment of the conditions by the Company specified in this Section 11 and
that he does not have any knowledge of any facts which have not been disclosed
to the Investor in writing which will or may reasonably be expected to have any
material adverse effect on the value of the assets, properties, business,
goodwill or prospects of the Company. General economic conditions shall not be
deemed a fact within the meaning or application of this paragraph.
11.7 Certificate of Secretary or Assistant Secretary.
The Investor or it's counsel shall have received a certificate dated the Closing
Date and signed by the Secretary or Assistant Secretary of the Company
certifying as to:
(a) the Restated Articles of Incorporation in
the form attached as EXHIBIT A hereto;
(b) the By-Laws of the Company;
(c) resolutions of the Board authorizing and
approving the execution and delivery of this Agreement and all documents
required to be delivered pursuant hereto by the Company, and the performance of
its obligations hereunder and that such resolutions are in full force and effect
on and as of the Closing Date;
(d) resolutions of the shareholders of the
Company approving the Restated Articles of Incorporation of the Company and that
such resolutions are in full force and effect on and as of the Closing Date; and
(e) the incumbency and signature of each of the
officers of the Company signing this Agreement and any of the
documents delivered hereunder.
11.8 Delivery of Documents. All of the documents and
resolutions required to be delivered by the Company to the Investor at the
Closing shall have been delivered.
11.9 No Lapse in Insurance Coverage. No lapse shall have
occurred prior to the Closing Date in the coverage provided under any of the
policies of insurance of the Company, including any
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<PAGE> 50
liability policies, which relate to the business, assets, properties or
employees of the Company.
11.10 Employee Agreements and Nondisclosure Agreements.
The Employee Agreements and Nondisclosure Agreements shall continue to be in
full force and effect.
11.11 Government Approvals. All filings, consents, approvals,
qualifications, registrations or expirations of waiting periods required or
imposed by any governmental agency or ministry necessary for the sale, delivery
or purchase of the Series E Shares, including such requirements under applicable
state securi ties laws and Japanese law, shall have been filed, occurred or been
obtained.
12. Conditions Precedent to the Obligation of the Company. Except
as may be waived in writing by the Company, the obligations of the Company to
consummate the sale of the Shares herein provided for shall be conditioned upon
the following:
12.1 Representations and Warranties Correct. Each of the
representations and warranties of each Investor in this Agreement and in any
certificate delivered to the Company pursuant hereto certifying the fulfillment
of the conditions by such Investor specified in this Section 12 shall in all
material respects be true and correct when made and as of the Closing Date (or
on the date to which it relates in the case of any representation or warranty
which specifically relates to an earlier date).
12.2 Compliance with this Agreement. Each Investor shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by such Investor on or prior to the Closing Date.
12.3 Satisfaction of Company and its Counsel. All corporate,
partnership and other proceedings taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form to the Company and its counsel, Wilson, Sonsini,
Goodrich & Rosati.
12.4 No Actions or Proceedings. No action, suit or proceeding
by or through any court, agency or other governmental body shall have been
asserted, instituted or threatened by any
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<PAGE> 51
party to restrain, prohibit or invalidate the transactions contemplated by this
Agreement.
12.5 Government Approvals. All filings, consents,
approvals, qualifications, registrations or expirations of waiting periods
required or imposed by any governmental agency or ministry necessary for the
sale, delivery or purchase of the Series E Shares, including such requirements
under applicable state securities laws and Japanese law, shall have been filed,
occurred or been obtained.
13. Documents to be Delivered at Closing.
13.1 Documents to be Delivered by the Company at the
Closing. At the Closing the Company shall deliver to the Investor:
(a) the Restated Articles of Incorporation, in
the form attached as Exhibit A hereto, certified by the Secretary of State of
the State of California;
(b) an opinion, dated the Closing Date, of
Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, in substantially the
form attached as Exhibit B hereto;
(c) a certificate of the President certifying as
to the matters set forth in Section 11.6;
(d) a certificate of the Secretary or Assistant
Secretary certifying as to the matters set forth in Section 11.7;
(e) a Good Standing Certificate certified by the
Secretary of State of the State of California as to the good standing of the
company in California;
(f) a Tax Certificate from the Franchise Tax
Board stating that the Company does not owe any franchise taxes to the State of
California;
(g) certificates representing the Series E
Shares being purchased by the Investor; and
(h) such other documents as the Investor or its
counsel shall have reasonably requested.
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<PAGE> 52
13.2 Documents to be Delivered by the Investor at the
Closing. At the Closing, the Investor shall deliver to the Company:
(a) the Purchase Price for the Investor upon the
terms of payment provided for in Section 1.1(a);
(b) such other documents as the Company or its
counsel shall have reasonably requested.
14. Miscellaneous.
14.1 Definition of Person. "Person" for purposes of the
Agreement means an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture or other entity
of whatever nature.
14.2 Definition of Knowledge. "To the best of the Company's
knowledge" shall mean the actual knowledge of the Company or information which
it should have obtained after due inquiry into the conduct of the Company's
business and matters related thereto.
14.3 Additional Actions. The parties shall execute and deliver
such other and further instruments and perform such other and further acts as
may reasonably be required fully to consummate the transactions contemplated
hereby.
14.4 Expenses. Each party to this Agreement agrees to pay its
expenses and the expenses of its agents, employees and attorneys, incurred in
connection with the negotiation, review and execution of this Agreement and
other ancillary documents called for in this Agreement and the consummation of
the transactions contemplated hereby.
14.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
14.6 Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable by any
party hereto without the prior written consent of the other parties.
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<PAGE> 53
14.7 Notices. All notices or other communications hereunder
shall be in writing and shall be mailed, certified or registered mail, return
receipt requested, or shall be sent by messenger or by electronic transmission,
addressed to such party at the address indicated on Schedule 1.2 for an Investor
or to any such other address as any such party shall specify in a notice to the
Company, and, if intended for the Company to Cymer Laser Technologies, 16275
Technology Drive, San Diego, California 92127-1815 Attn: Dr. Robert Akins and
Mr. William Angus, with a copy to Wilson, Sonsini, Goodrich & Rosati, Two Palo
Alto Square, Suite 900, Palo Alto, California 94306, Attention: Henry P. Massey,
Jr., Esq.
14.8 Applicable Laws. This Agreement shall be construed and
governed by the laws of the State of California applicable to contracts made and
to be performed within such state.
14.9 Entire Agreement. Except as specifically provided in this
Agreement, this Agreement constitutes the entire Agreement between the parties
hereto, and no party hereto shall be bound by any communications between them on
the subject matter hereof unless such communications are in writing and bear a
date contemporaneous with or subsequent to the date hereof. Any prior written
agreements or letters of intent between the parties concerning the purchase or
sale of Series E Preferred Stock shall, upon execution of this Agreement, be
null and void.
14.10 Waivers and Amendments; Noncontractual Remedies;
Preservation of Remedies. This Agreement (except for Sections 2, 5.8, 7.1, 7.2,
9 and 14.10) may be amended, superseded, canceled, renewed or extended, and the
terms hereof may be waived, only by a written instrument duly executed and
acknowledged with the same formality as this Agreement, and signed by Investors
(or the Investors' Transferees) holding at least two-thirds of the Series E
Shares or shares of Common Stock issued upon conversion of the Series E Shares;
and Sections 2, 5.8, 7.1, 7.2, 9 and 14.10 of this Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument duly executed and acknowledged with the same
formality as this Agreement, and signed by the Holders (or their Transferees)
holding at least two-thirds of the Series A Shares, the Series B Shares,
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<PAGE> 54
the Series C Shares, the Series D Shares and the out standing Series E Preferred
Stock (and shares of Common Stock issued upon conversion of the Series A Shares,
the Series B Shares, the Series C Shares, the Series D Shares and the
outstanding Series E Preferred Stock), voting together as a class. No delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege.
14.11 Table of Contents; Captions. The Table of Contents and
the captions of the various sections of this Agreement are inserted for
convenience of reference only, and shall not constitute a part hereof.
14.12 Schedules and Exhibits Part of Agreement. The Schedules
and Exhibits referred to herein and delivered pursuant hereto, including any
amendments thereto or changes therein prior to the Closing Date, shall be deemed
part of this Agreement as fully and effectively as if set forth at length
herein.
14.13 Severability. In the event that any provision of
this Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
14.14 Obligation of the Company to Indemnify. The Company
hereby agrees to indemnify, defend and hold harmless the Investor (and any of
the Investor's directors, officers, employees, affiliates and assigns) from and
against any and all actual losses, liabilities, damages, deficiencies, costs or
expenses (including interest, penalties and reasonable attorneys' fees and
disbursements,) ("Losses") which it has incurred arising solely out of any
material inaccuracy in or any material breach of any material representation,
warranty, covenant or agreement of the Company contained in this Agreement.
14.15 Obligation of the Investor to Indemnify. The Investor
agrees to indemnify, defend and hold harmless the Company (and its directors,
officers, employees, affiliates and assigns) from and against any Losses which
it may incur arising solely out of any material inaccuracy in or material breach
of any material
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<PAGE> 55
representation, warranty, covenant or agreement of such Investor contained in
this Agreement.
14.16 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after
receipt by any party hereto (the "Indemnitee") of notice of any demand, claim or
circumstances which, with the lapse of time, would give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party
(or parties) obligated to provide indemnification pursuant to Section 14.14 or
14.15 (the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated, if
necessary) of the Loss that has been or may be suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying
Party may elect to compromise or defend, at its own expense and by its own
counsel, any Asserted Liability. If the Indemnifying party elects to compromise
or defend such Asserted Liability, it shall, within 30 days (or sooner, if the
nature of the Asserted Liability so requires) notify the Indemnitee of its
intent to do so, and the Indemnitee shall reasonably cooperate, at the expense
of the Indemnifying Party, in the compromise of or defense against, such
Asserted Liability. If the Indemnifying Party elects not to compromise or defend
the Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may consent to settlement or compromise of any such Asserted Liability over the
objection of the other; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld, and provided further that the
Indemnifying Party shall not be liable to the Indemnitee for more than the
Indemnifying Party could have settled any Asserted Liability but for the
objection of the Indemnitee. In any event, the Indemnitee and the Indemnifying
Party may participate, at their own expense, in the defense of such Asserted
Liability.
14.17 Limitation and Exclusive Remedy. IN NO EVENT WILL
INDEMNIFICATION BE MADE BY THE COMPANY OR BY THE INVESTOR, AS THE
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<PAGE> 56
CASE MAY BE, ARISING OUT OF THIS AGREEMENT, REGARDLESS OF THE FORM IN WHICH ANY
LEGAL OR EQUITABLE ACTION MAY BE BROUGHT, EXCEED THE INVESTOR'S PURCHASE PRICE
OR BE MADE FOR ANY SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES,
HOWEVER CAUSED. Sections 14.14, 14.15 and 14.16 shall be the exclusive remedy
for an Indemnitee with respect to matters set forth in this Agreement.
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<PAGE> 57
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date and year first above written.
"COMPANY"
CYMER LASER TECHNOLOGIES
By:_____________________________
Name: Robert P. Akins
Title: President
"INVESTOR"
________________________________
Printed Name
________________________________
(Signature)
________________________________
(Title)
"FOUNDER"
________________________________
Robert Akins
"FOUNDER"
________________________________
Richard Sandstrom
"FOUNDER"
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<PAGE> 58
_______________________________
Uday Sengupta
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<PAGE> 59
Schedule 1.1
Founders
Robert Akins
Richard Sandstrom
Uday Sengupta
<PAGE> 60
Schedule 1.2
Investors
<TABLE>
<CAPTION>
Name Purchase Price No. of Shares
- ---- -------------- -------------
<S> <C> <C>
Canon, Inc. $189,000.00 37,800
Nikon Corporation $189,000.00 37,800
</TABLE>
<PAGE> 61
Schedule 1.2
Investors
<TABLE>
<CAPTION>
Name Purchase Price No. of Shares
- ---- -------------- -------------
<S> <C> <C>
Canon, Inc. $180,000.00 36,000
Nikon Corporation $180,000.00 36,000
</TABLE>
<PAGE> 62
Schedule 3.0
Exceptions to Representations and Warranties
Set forth below are exceptions to the representations and warranties of
the Company made in Section 3.0 of the attached Agreement. All disclosures and
exceptions are intended to modify all of the Company's representations and
warranties, and the section headings used below are for convenience only.
3.1 Organization and Standing; Articles and Bylaws
The Company is qualified to do business in the state of Massachusetts.
3.3 Capitalization
"Significant Holders," as that term is defined in the Series D Purchase
Agreement, were granted a right of first refusal with respect to the Series E
Shares to be issued to the Investors pursuant to this Agreement. As of the
Closing, the Company will have taken appropriate action to ensure such rights,
effective against all Significant Holders have expired, have been waived or have
been accepted by such Significant Holder and included on Schedule 1.2 hereof.
3.8 Absence of Undisclosed Liabilities and Obligations
See Section 3.13 below. See Section 3.3 above. See Section
3.22 below.
3.10 Real Property
The Company or its subsidiary currently lease property at the following
locations:
16275 Technology Drive
San Diego, California 92127-1815
Suite 150L
1 Longfellow Center
526 Boston Post Rd.
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<PAGE> 63
Wayland, Massachusetts
1-22-6 Ichikawa
Ichikawa
Chiba, Japan 272
3.11 Tangible Assets and Equipment
No material leases other than for real property.
3.13 Patent and Trademarks
Cymer is aware of certain patents issued to Mr. Gordon Gould in October
1977 and July 1979 as well as certain other patent applications of Mr. Gould
believed to be pending before the U.S. Patent Office which relate to certain
elements of basic laser technology. These claims of Mr. Gould have raised a
state of confusion in the laser industry, in that many of these claims may have
been covered by prior patents issued to others and under which many
manufacturers of lasers have paid royalties pursuant to licensing arrangements.
During fiscal 1987 two courts upheld the Gould patents as valid. However,
neither of these decisions is binding upon Cymer and no determination has been
made as to whether Cymer's products infringe the Gould patents. All rights to
the Gould Patents have since been transferred to Patlex Corporation. On October
11, 1989 the Company signed a patent license agreement with Patlex, with the
effective date of such agreement retroactive to January 1988. The Company has
agreed to pay Patlex a royalty of five percent of the portion of the net selling
price relevant to the licensed patents on shipments to customers in the United
States and Canada. On sales to customers in other than the U.S. and Canada the
royalty will be two percent. In signing the license agreement, the Company
settled with Patlex on the complete payment of all royalties for past shipments
dating from January 1988 to January 31, 1990. There were no shipments by the
Company prior to January 1988.
The Company received a letter dated July 29, 1987 from Questek, Inc.
relating to United States Patent No. 4,611,270 requesting information regarding
possible patent infringement. The Company responded on August 26, 1987 that it
did not believe that any of its products infringed on the stated patent.
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<PAGE> 64
PATENTS
Cymer Laser Technologies has been awarded the following U.S.
patents:
<TABLE>
<CAPTION>
Date Date of
Patent No. Title Filed Patent
- ---------- ----- ----- ------
<S> <C> <C> <C>
4,959,840 Compact Excimer Laser 01/15/88 09/25/90
including an Electrode
Mounted in Insulating
Relationship to Wall of
the Laser
5,018,161 Compact Excimer Laser 07/10/90 05/21/91
5,018,162 Compact Excimer Laser 01/15/88 ---
(a division of 4,959,840
filed 01/15/88)
</TABLE>
-3-
<PAGE> 65
<TABLE>
<CAPTION>
Date Date of
Patent No. Title Filed Patent
- ---------- ----- ----- ------
<S> <C> <C> <C>
5,023,884 Compact Excimer Laser 07/10/90 06/11/91
5,025,445 System for, and Method 11/22/89 06/18/91
of, Regulating the Wave-
length of a Light Beam
5,027,366 Compact Excimer Laser 07/10/90 06/25/91
5,029,177 Compact Excimer Laser 07/10/90 07/02/91
5,033,055 Compact Excimer Laser 07/10/90 07/16/91
5,048,041 Compact Excimer Laser 07/10/90 09/10/91
5,095,492 Spectral Narrowing 07/17/90 03/10/92
Technique
</TABLE>
Cymer Laser Technologies has applied for the following U.S.
patents:
<TABLE>
<CAPTION>
Patent Title Filing Date
------------ -----------
<S> <C>
Pre-ionizer for a Laser Oct. 1992
Apparatus for and Method of Main- Nov. 1992
taining a Clean Window in Laser
Power Laser System Jan. 1993
Gas Replenishment Method and July 1993
Apparatus for Excimer Lasers
Method and Apparatus for Calibrating July 1993
a Laser Wavelength Control Mechanism
Temperature Compensation Method and July 1993
Apparatus for Wave Meters and Tunable
Lasers Controlled thereby
</TABLE>
-4-
<PAGE> 66
<TABLE>
<S> <C>
Full Field Mask Illumination Enchance- Oct. 1993
ment Methods and Apparatus
Method and Apparatus for Symetric Oct. 1993
Divergence Excimer Laser Cavity Design
</TABLE>
TRADEMARKS
Cymer Laser Technologies has registered "CYMER" as a trademark in the following
countries:
<TABLE>
<CAPTION>
Country Registration No. Date
- ------- ---------------- ----
<S> <C> <C>
USA 1,622,222 11/13/90
Benelux 480,693 02/01/91
</TABLE>
"CYMER" as a trademark is applied for and is pending in the following countries:
<TABLE>
<CAPTION>
File No.
--------
<S> <C>
Canada 662,500
Korea 90-22583
Germany C 40772-9
Japan Z-85870
</TABLE>
3.16 Litigation
See Section 3.13 above.
3.22 Disclosure
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<PAGE> 67
a. Loan Facility. The Company has drawn $1,000,000 on the Loan
Facility described in footnote 3 of the Financial Statements. The Company
intends to pay the entire amount of this facility upon closing of the sale of
Series E Preferred Stock.
b. Service Agreement. Since December 31, 1992, commissions have
been earned and are payable by the Company under the Service Agreement described
in footnote 7 to the Financial Statements according to the terms set forth
therein.
c. Silicon Valley Bank Agreement. The Company has a Loan and
Security Agreement with Silicon Valley Bank by which a loan facility of up to
$1,500,000 is available to the Company. As of September 30, 1993 no amount was
outstanding under the this loan facility, although the Company intends to draw
upon it as business needs arise.
d. Rofin Sinar Distribution Agreement. The Company has entered
into a Distribution Agreement with Rofin/Sinar with respect to the laser being
developed as described in footnote 9 to the Financial Statements. The
distribution agreement provides for the exclusive distribution of the
non-lithography high-power laser in Europe and the non-exclusive distribution
right worldwide for such laser, if it is incorporated into a system by which the
laser constitutes less than 2/3 of the value of the system.
e. Bridge Loan. Certain prior investors have made a bridge loan
to the Company in the principal amount of $474,010, which may be converted into
Series E Preferred Stock at the Closing. The conversion price shall be the price
at which the Series E Preferred Stock is sold. In connection with the loan, the
Company issued warrants exercisable for 10,533 shares of Series E Preferred
Stock. The warrant exercise price is the sale price of Series E Preferred Stock,
except that if the Closing occurs after December 15, 1993, the exercise price
per share shall be discounted 10% from the sale price of Series E Preferred
Stock. In the event the Closing is not completed or completed after June 30,
1994, the warrants shall be exercisable at $3.40 per share for 13,941 shares of
Series B Preferred Stock.
f. Placement Agreement. In September 1993 the Company entered
into a Letter Agreement (the "Letter Agreement") with James
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<PAGE> 68
Capel Incorporated and Midland Bank plc. to act as exclusive financial advisors
and placement agents of the sale of Series E Preferred Stock. The Letter
Agreement provides that the financial advisors shall receive an aggregate of the
following remuneration:
(a) $75,000 retainer to be applied towards any success
fee;
(b) a success fee for the placement of Series E
Preferred Stock equal to the greater $300,000 or 7%
of the aggregate gross proceeds of the securities
sold;
(c) Warrants to purchase Series E Preferred Stock at an
exercise price of 120% of the price at which Series E
Preferred Stock is sold equal to 5% of the aggregate
number of Series E Preferred Stock sold.
(d) Out of pocket, legal and printing expenses not to
exceed $75,000
(e) Series E Preferred Stock sold to existing
shareholders shall only receive a Success Fee of 50%
of the amount otherwise due
(f) if sales of Series E Preferred Stock are consummated,
for a period of two years from the Closing of the
sale, Capel will have the right of first refusal to
act as exclusive financial advisor and global
coordinator of an initial public offering with a US
investment bank selected as lead manager of the
offering in the U.S.
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<PAGE> 69
EXHIBIT 10.10
State of California
OFFICE OF THE SECRETARY OF STATE
A442906
I, TONY MILLER, Acting Secretary of State of the State of California,
hereby certify.
That the annexed transcript has been compared with the record on file
in this office, of which it purports to be a copy, and that same is full, true
and correct.
IN WITNESS WHEREOF, I execute this certificate and affix the Great
Seal of the State of California this 18th day of February, 1994.
[SIG]
- -------------------------
Acting Secretary of State
<PAGE> 70
THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CYMER LASER TECHNOLOGIES
FILED
in the office of the Secretary of State
of the State of California
FEB 16 1994
MARCH FONG EU, Secretary of California
Robert Akins and William Angus, III, certify that:
1. They are the President and the Secretary, respectively, of
CYMER LASER TECHNOLOGIES, a California corporation (the "Company").
2. The articles of incorporation of the Company, as amended to
the date of the filing of this certificate, including amendments set forth
herein but not separately filed (and with the omissions required by Section 910
of the California General Corporations Law) are restated as follows
(hereinafter referred to as the "Third Amended and Restated Articles of
Incorporation"):
I.
The name of this corporation is: CYMER LASER TECHNOLOGIES (the
"Company") .
II.
The purpose of the Company is to engage in any lawful act or activity
for which a corporation may be organized under the California General
Corporation Law, other than the banking business, the trust company business,
or the practice of a profession permitted to be incorporated by the California
General Corporation Law.
III.
The Company is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares of Common Stock authorized to be issued is Fifteen Million
(15,000,000), $.01 par value per share. The
<PAGE> 71
total number of shares of Preferred Stock authorized to be issued is Eight
Million One Hundred and Fifty Thousand (8,150,000), $.01 par value per share.
The Preferred Stock shall be issued in five series. The first series of
Preferred Stock shall be designated as 8% Non-Cumulative Voting Redeemable
Convertible Series A Preferred Stock (the "Series A Preferred Stock") and shall
consist of Three Million (3,000,000) shares with the rights, preferences,
privileges and restrictions set forth below. The second series of Preferred
Stock shall be designated as 8% Non-Cumulative Voting Redeemable Convertible
Series B Preferred Stock (the "Series B Preferred Stock") and shall consist of
One Million Five Hundred Thousand (1,500,000) shares with the rights,
preferences, privileges and restrictions set forth below. The third series of
Preferred Stock shall be designated as 8% Non-Cumulative Voting Redeemable
Convertible Series C Preferred Stock (the "Series C Preferred Stock") and shall
consist of One Million (1,000,000) shares with the rights, preferences,
privileges and restrictions set forth below. The fourth series of Preferred
Stock shall be designated as 8% Non-Cumulative Voting Redeemable Convertible
Series D Preferred Stock (the "Series D Preferred Stock") and shall consist of
Five Hundred Thousand (500,000) shares with the rights, preferences, privileges
and restrictions set forth below. The fifth series of Preferred Stock shall be
designated as 8% Non-Cumulative Voting Redeemable Convertible Series E
Preferred Stock (the "Series E Preferred Stock") and shall consist of Two
Million One Hundred and Fifty Thousand (2,150,000) shares with the rights,
preferences, privileges and restrictions set forth below. The rights,
preferences, privileges and restrictions granted to and imposed upon the
Preferred Stock are as follows:
A. Dividend Rate. The holders of record of shares of Series A,
Series B, Series C, Series D and Series E Preferred Stock shall be entitled to
receive, when, if and as declared by the Board of Directors of the Company (the
"Board") out of any assets of the Company legally available therefor, an annual
cash dividend at the rate per share of 8% of the Liquidation Value (as
hereinafter defined) of the respective series, which shall be payable on the
payment dates fixed from time to time by the Board or a duly authorized
committee thereof. "Series A Liquidation Value," "Series B Liquidation Value,"
"Series C Liquidation Value," "Series D Liquidation Value" and "Series E
Liquidation Value" shall mean $1.60, $3.40, $7.00, $8.50 and $5.00 per share,
respectively. No dividends (other than those payable solely in Common Stock)
shall be declared or paid or set aside for payment or other distribution made
with respect to the Common Stock during any fiscal year of the Company nor
shall any shares of Common Stock be redeemed, purchased or otherwise acquired
by the Company until a dividend equal to 8% per annum of the applicable
Liquidation Value per share of Series A, Series B, Series C, Series D and
Series E Preferred Stock has been paid or declared and set apart during the
fiscal year. If in the event of the declaration of a dividend, the assets and
funds
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thus distributed among the holders of Series A, Series B, Series C, Series D
and Series E Preferred Stock shall be insufficient to permit the payment to
such holders of the full dividend, then such assets and funds shall be
distributed ratably among the holders of the Series A, Series B, Series C,
Series D and Series E Preferred Stock (in proportion to the applicable
Liquidation Values). Any reference in these Third Amended and Restated
Articles of Incorporation to Common Stock includes any other class or series of
Common Stock that may be authorized from time to time. The foregoing
restriction on redemption, repurchase or acquisition of Common Stock shall be
inapplicable to (i) the redemption provisions of these Third Amended and
Restated Articles of Incorporation, (ii) any payments in lieu of issuance of
fractional shares thereof whether upon any merger, conversion, stock dividend
or otherwise, (iii) repurchases of Common Stock by the Company pursuant to the
terms of the Company's Incentive Stock Option Plan or the Common Stock
Restriction Agreements entered into by the Company with each of Robert P.
Akins, Uday Sengupta, Richard L. Sandstrom and Donald G. Larson and any other
repurchases by the Company under circumstances comparable to those contemplated
by the Company's Incentive Stock Option Plan or the Common Stock Restriction
Agreements or (iv) the rescission of any acquisition by the Company pursuant to
which such stock was issued. Dividends on the series A, Series B, Series C,
Series D and Series E Preferred Stock shall not be cumulative and no rights to
dividends shall accrue to the holders of Series A, Series B, Series C, Series D
and Series E Preferred Stock in the event that the Company shall fail to
declare or pay dividends in whole or in part on the Series A, Series B, Series
C, Series D and Series E Preferred Stock, respectively, in any previous fiscal
year of the Company, whether or not the earnings of the Company in that
previous fiscal year were sufficient to pay such dividends in whole or in part.
After dividends in the amount of 8% per annum of the Liquidation Value per
share on the Series A, Series B, Series C, Series D and Series E Preferred
Stock have been paid or declared and set aside in any one fiscal year of the
Company, if the Board shall elect to declare additional dividends out of funds
legally available therefor in that fiscal year, such additional dividends shall
be paid on the Common Stock and on the Series A, Series B, Series C, Series D
and Series E Preferred Stock as if the Series A, Series B, Series C, Series D
and Series E Preferred Stock had been converted to Common Stock prior to the
payment of the additional dividends.
B. Voting.
(i) Subject to subsection B(ii) hereof, each holder of the
Series A, Series B, Series C, Series D and Series E Preferred Stock shall be
entitled to vote on all matters submitted to a vote (or to give their written
consent in lieu of a vote) of stockholders of the Company and, with respect to
such vote, shall be entitled to cast the number of votes he would have been
entitled
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to cast had he converted all of his shares of Series A, Series B, Series C,
Series D and Series E Preferred Stock into Common Stock immediately prior to
such vote. Except as otherwise provided herein or required by law, the holders
of shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Common
Stock shall vote together and not as separate classes or series.
(ii) The holders of shares of Common Stock voting separately
as a class shall elect two members of the Board of Directors of the Company, the
holders of shares of Series A Preferred Stock voting separately as a class shall
elect two members of the Board of Directors of the Company, and the holders of
shares of Series B Preferred Stock voting separately as a class shall elect one
member of the Board of Directors. Additional members of the Board of Directors,
if any, shall be elected by the holders of shares of Common Stock and Series A,
Series B, Series C, Series D and Series E Preferred Stock voting together as a
single class. If a vacancy on the Board of Directors is to be filled by the
Board of Directors, only a director or directors elected by the same class of
stockholders as those who would be entitled to vote to fill such vacancy, if
any, shall vote to fill such vacancy. No action by members of the Board of
Directors filling a vacancy on the Board of Directors shall be effective until
10 days after all Board members who do not have a right to vote on such
appointment have received notice thereof. A majority of the Board members
entitled to receive such notice may waive such notice requirement on behalf of
all such Board members.
C. Protective Provisions.
(i) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series A, Series B,
Series C, Series D and Series E Preferred Stock, voting together as a class:
(a) Amend or restate the Third Amended and Restated
Articles of Incorporation in a manner which would adversely alter or change the
rights, preferences, privileges or restrictions of the Series A, Series B,
Series C, Series D or Series E Preferred Stock;
(b) Establish any class or series of capital stock which
would rank senior to or on a parity with the Series A, Series B, Series C,
Series D or Series E Preferred Stock with respect to the right to receive
dividends or any distribution upon the liquidation, dissolution, Liquidating
Merger (as defined below) or winding up of the Company;
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(c) Effect or permit any sale, lease, encumbrance, assignment,
transfer or conveyance of all or substantially all of the assets of the
Company, or any reclassification or other change of any stock, or the merger or
consolidation of the Company;
(d) Increase or decrease (other than by permitted repurchase,
redemption or conversion) the total number of authorized shares of capital
stock or reduce the stated capital of the Company;
(e) Amend the Articles of Incorporation or the By-Laws of the
Company to increase the authorized number of members of the Board of Directors
in excess of seven; or
(f) Obligate itself to do any of the foregoing.
(ii) The Company shall not, without the consent of persons holding
greater than a majority of the outstanding shares of Series C Preferred Stock:
(a) Amend or restate the Third Amended and Restated Articles of
Incorporation in a manner which would adversely alter or change the rights,
preferences, or privileges of the Series C Preferred Stock, provided the Series
C Preferred Stock is adversely affected by such amendment or restatement in a
different manner than the Series A, Series B, Series D or Series E Preferred
Stock;
(b) Establish any class or series of capital stock which would
rank senior to or on a parity with Series C Preferred Stock with respect to the
right to receive dividends or any distribution upon the liquidation,
dissolution, Liquidating Merger (as defined) or winding up of the Company,
provided the Series C Preferred Stock is adversely affected by such
establishment in a different manner than the Series A, Series B, Series D or
Series E Preferred Stock; or
(c) Obligate itself to do any of the foregoing.
(iii) The Company shall not, without the consent of persons holding
greater than a majority of the outstanding shares of Series D Preferred Stock:
(a) Amend or restate the Third Amended and Restated Articles of
Incorporation in a manner which would adversely alter or change the rights,
preferences, or privileges of the Series D Preferred Stock, provided the Series
D Preferred Stock is adversely affected by such amendment or restatement in a
different manner than the Series A, Series B, Series C or Series E Preferred
Stock;
(b) Establish any class or series of capital stock which would
rank senior to or on a parity with Series D Preferred
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Stock with respect to the right to receive dividends or any distribution upon
the liquidation, dissolution, Liquidating Merger (as defined) or winding up of
the Company, provided the Series D Preferred Stock is adversely affected by
such establishment in a different manner than the Series A, Series B, Series C
or Series E Preferred Stock; or
(c) Obligate itself to do any of the foregoing.
(iv) The Company shall not, without the consent of persons holding
greater than a majority of the outstanding shares of Series E Preferred Stock:
(a) Amend or restate the Third Amended and Restated Articles of
Incorporation in a manner which would adversely alter or change the rights,
preferences, or privileges of the Series E Preferred Stock, provided the Series
E Preferred Stock is adversely affected by such amendment or restatement in a
different manner than the Series A, Series B, Series C or Series D Preferred
Stock;
(b) Establish any class or series of capital stock which would
rank senior to or on a parity with Series E Preferred Stock with respect to the
right to receive dividends or any distribution upon the liquidation,
dissolution, Liquidating Merger (as defined) or winding up of the Company,
provided the Series E Preferred Stock is adversely affected by such
establishment in a different manner than the Series A, Series B, Series C or
Series D Preferred Stock; or
(c) Obligate itself to do any of the foregoing.
D. Redemption and Sinking Fund.
(i) So long as any Series A, Series B, Series C, Series D or
Series E Preferred Stock remains outstanding, the Company shall, on each of the
dates set forth in the following schedule (each a "Sinking Fund Payment Date"),
set aside as and for a sinking fund for the redemption of the Series A, Series
B, Series C, Series D and Series E Preferred Stock (hereinafter called the
"Sinking Fund") in cash out of any funds legally available therefor, a sum
equal to the product of (a) the applicable Redemption Price (as hereinafter
defined) multiplied by (b) the number of shares of Series A, Series B, Series
C, Series D and Series E Preferred Stock to be redeemed as determined pursuant
to subsection D(vii) hereof, a maximum number of shares as set forth below
opposite such Sinking Fund Payment Date:
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<PAGE> 76
<TABLE>
<CAPTION>
Sinking Fund Number of Shares of Preferred
Payment Date Stock Offered to be Redeemed
-------------- -------------------------------
<S> <C>
March 15, 1996 One third of the shares of each series
of Series A, series B, Series C,
Series D and Series E Preferred Stock
then outstanding.
March 15, 1997 One third of the shares of each series
of Series A, Series B, Series C,
Series D and Series E Preferred Stock
outstanding as of March 15, 1996.
March 15, 1998 One third of the shares of each series
of Series A, Series B, Series C,
Series D and Series E Preferred Stock
outstanding as of March 15, 1996.
</TABLE>
(ii) The Redemption Price for each share of Series A, Series B,
Series C, Series D and Series E Preferred Stock shall be an amount in cash
equal to the sum of the Liquidation Value of such series plus 8% per annum of
the Liquidation Value from date of original issuance of such series less any
dividends actually paid on such share of Series A, Series B, Series C, Series D
or Series E Preferred Stock to the date of redemption.
(iii) If on any Sinking Fund Payment Date the funds of the Company
legally available therefor shall be insufficient to discharge such Sinking Fund
requirement in full, funds to the extent legally available for such purpose
shall be set aside for the Sinking Fund. Such Sinking Fund requirements shall
be cumulative, so that if for any year or years such requirements shall not be
fully discharged as they accrue, funds legally available therefor, after such
payment or provisions for dividends, for each year thereafter shall be applied
thereto until such requirements are fully discharged.
(iv) On or before the fifth day (the "Redemption Date") next
following each Sinking Fund Payment Date, the cash in the Sinking Fund shall be
used to acquire by redemption, in the manner provided below, the number of
shares of Series A, Series B, Series C, Series D and Series E Preferred Stock
to be redeemed as determined in subsection D(vii) hereof.
(v) In the event of the redemption of only a part of the
outstanding shares of Series A, Series B, Series C, Series D or Series E
Preferred Stock, the Company shall effect such redemption pro rata among the
total of all series of Series A, Series B,
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Series C, Series D and Series E Preferred Stock according to the number of
shares to be redeemed by the Company for each holder of Series A, Series B,
Series C, Series D or Series E Preferred Stock.
(vi) At least 30 days but not more than 60 days prior to the
Redemption Date, a written offer (a "Offer to Redeem"), shall be mailed,
postage pre-paid, to each holder of record of the Series A, Series B, Series C,
Series D and Series E Preferred Stock offered to be redeemed at his address
last shown on the records of the Company. The Offer to Redeem shall state:
(a) Whether all or less than all of the outstanding shares of
Series A, Series B, Series C, Series D or Series E Preferred Stock are offered
to be redeemed and the total number of shares offered for redemption;
(b) The number of shares of Series A, Series B, Series C, Series D
or Series E Preferred Stock held by the holder that the Company intends to
redeem;
(c) The Redemption Date and the Redemption Price for each series;
(d) The date upon which the holder's rights to convert such shares
of Series A, Series B, Series C, Series D or Series E Preferred Stock into
Common Stock will terminate; and
(e) That the holder is to surrender to the Company, in the manner
and at the place designated, his certificate or certificates representing the
shares of Series A, Series B, Series C, Series D or Series E Preferred Stock to
be redeemed.
(vii) If a holder of Series A, Series B, Series C, Series D or
Series E Preferred Stock elects to accept the Offer to Redeem on or before the
applicable Redemption Date (unless such holder has exercised his right to
convert the shares as provided in Section E hereof), such holder shall (i)
deliver to the principal offices of the Company a written statement accepting
the Offer to Redeem and setting forth the number of shares of Preferred Stock
such holder desires to have redeemed and identifying the series of such shares
and (ii) surrender the certificate or certificates representing such shares to
the Company, in the manner and at the place designated in the Offer to Redeem,
and thereupon the Redemption Price for such shares shall be payable to the
order of the person whose name appears on such certificate or certificates as
the owner thereof, and each surrendered certificate shall be cancelled and
retired. In the event less than all of the shares represented by such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
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(viii) If the offer to Redeem shall have been duly given, and if on
the Redemption Date the Redemption Price is either paid or made available for
payment through the deposit arrangement specified in subsection D(ix) below,
then notwithstanding that the certificates evidencing any of the shares of
Series A, Series B, Series C, Series D or Series E Preferred Stock so called
for redemption shall not have been surrendered, the dividends with respect to
such shares shall cease to accrue after the Redemption Date and all rights with
respect to such shares shall forthwith after the Redemption Date terminate,
except only the right of the holders to receive the Redemption Price without
interest upon surrender of their certificate or certificates therefor.
(ix) On or prior to the Redemption Date, the Company shall deposit
with any bank or trust company in the State of California, having a capital and
surplus of at least $100,000,000 as a trust fund, a sum equal to the aggregate
Redemption Price of all shares of Series A, Series B, Series C, Series D or
Series E Preferred Stock which the holder thereof has accepted the Company's
offer to redeem and not yet redeemed, with irrevocable instructions and
authority to the bank or trust company to pay, on or after the Redemption Date
or prior thereto, the Redemption Price to the respective holders upon the
surrender of their share certificates. From and after the later of the date of
such deposit or the applicable Redemption Date, the shares so called for
redemption shall be redeemed. The deposit shall constitute full payment of the
shares to their holders, and from and after the later of the date of the
deposit or the applicable Redemption Date, the shares shall be deemed to be no
longer outstanding, and the holders thereof shall cease to be shareholders of
the Company with respect to such shares and shall have no rights with respect
thereto except the rights to receive from the bank or trust company payment of
the Redemption Price of the shares, without interest, upon surrender of their
certificates therefor, and the right to convert such shares as provided in
Section E hereof. Any funds so deposited and unclaimed at the end of one year
from the Redemption Date shall be released or repaid to the Company, after
which the holders of shares called for redemption shall be entitled to receive
payment of the Redemption Price only from the Company.
(x) The company may elect to redeem all or a portion of any series
of series A, Series B, Series C, Series D or Series E Preferred Stock at any
time, provided, that it shall have received the prior written consent of
persons holding two-thirds (2/3) of the outstanding shares of each series of
Preferred Stock, with each series voting separately as a class.
E. Conversion.
(i) In General. Subject to subsection E(v) below, the series A,
Series B, Series C, Series D and Series E Preferred Stock
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shall be convertible at the option of the holder at any time into fully paid
and nonassessable shares of Common Stock of the Company initially at the
Conversion Rate for each series (as defined herein) of one (1) share of Common
Stock for each share of Series A, Series B, Series C, Series D or Series E
Preferred Stock; provided, however, that in case of the redemption of any
shares of Series A, Series B, Series C, series D or Series E Preferred Stock,
such right of conversion shall cease and terminate as to the shares which the
holder thereof has accepted the Company's Offer to Redeem, at the close of
business on the day next prior to the Redemption Date for those shares,
notwithstanding any earlier deposit by the Company of funds sufficient for such
redemption, unless default shall be made in the payment of the Redemption
Price, in which case the rights of conversion granted hereby shall survive.
(ii) The number of shares of Common Stock which shall be deliverable in
exchange for a share of Series A, Series B, Series C, Series D and Series E
Preferred Stock upon conversion thereof is hereinafter referred to as the
"Conversion Rate" for each such series. The Conversion Rate of each series
shall be subject to adjustment from time to time in certain instances as
hereinafter provided.
(iii) An irrevocable notice of conversion shall be mailed by each holder
of shares of Series A, Series B, Series C, Series D and Series E Preferred
Stock electing to convert his shares addressed to the Company at its offices at
16275 Technology Drive, San Diego, California 92127-1815 (or such other address
as the Company shall designate and notify the holders of Series A, Series B,
Series C, Series D and Series E Preferred Stock in writing). If less than all
of the shares of the Series A, Series B, Series C, Series D or Series E
Preferred Stock owned by such holder are to be converted, the notice shall
specify the number of shares thereof which are to be converted. Two days after
the mailing of such notice, notwithstanding that no certificate for the shares
of Common Stock into which the Series A, series B, Series C, Series D or Series
E Preferred Stock was converted shall have been received by the holder so
electing to convert and notwithstanding that no certificate for shares of the
series A, Series B, Series C, Series D or Series E Preferred Stock converted
into the Common Stock shall have been surrendered to the Company, the
conversion of the Series A, Series B, Series C, Series D or Series E Preferred
Stock shall be deemed effective and the certificate or certificates
representing the shares of Series A, Series B, Series C, Series D and Series E
Preferred Stock for which notice of conversion was mailed shall be deemed to
evidence the shares of Common Stock into which they were converted until such
time as they are exchanged for a new certificate representing the shares of
Common Stock into which they were converted.
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<PAGE> 80
(iv) Exchange of Certificates. As soon as possible after the
holder mails its notice of conversion to the Company, but in no event later
than five (5) business days thereafter; (a) the holder shall surrender the
certificate or certificates for such Series A, series B, series C, Series D or
Series E Preferred Stock at the office of any duly appointed transfer agent for
such Preferred Stock or the Company's offices at 16275 Technology Drive, San
Diego, California 92127-1815 (or such other office or offices of the Company,
if any, as the Board may determine and notify the holders of Series A, Series
B, Series C, series D and Series E Preferred Stock in writing). Such
certificate or certificates shall be duly endorsed to the Company or in blank
or accompanied by proper instruments of transfer to the Company or in blank,
unless the Company shall waive such requirement, and shall state in writing
therein the name or names in which the holder wishes the certificate or
certificates for Common Stock issued; and (b) the Company will issue and
deliver to the person for whose account such Series A, Series B, Series C,
Series D or Series E Preferred Stock was so surrendered, or to his nominee or
nominees, certificates for the number of full shares of Common Stock to which
he shall be entitled as aforesaid, together with a cash adjustment for any
fraction of a shake as hereinafter stated, if the shares of Series A, Series B,
Series C, Series D or Series E Preferred Stock surrendered for conversion are
not in the aggregate evenly convertible into a number of full shares of Common
Stock. In the event of any liquidation, dissolution, Liquidating Merger (as
hereinafter defined) or winding up of the affairs of the Company, all
conversion rights of the holders of Series A, Series B, Series C, Series D and
Series E Preferred Stock shall terminate on the date fixed by resolutions of
the Board of Directors of the Company, which date shall not be later than ten
(10) days nor earlier than twenty (20) days prior to such liquidation,
dissolution, Liquidating Merger or winding up.
(v) Automatic conversion.
(a) All shares of Series A, Series B, Series C, Series D and
Series E Preferred Stock outstanding shall be converted automatically and
without the requirement of any election on the part of any holder of such
shares of Series A, Series B, Series C, Series D or Series E Preferred Stock at
the applicable Conversion Rate in effect immediately prior to the closing by
the Company of a bona fide firm commitment underwritten public offering
registered under the Securities Act of 1933, as amended, of its Common Stock at
a public offering price of not less than $6.00 per share of Common Stock (as
adjusted for any stock dividend, stock split or combination) with net proceeds
to the Company of not less than $10,000,000 (an "Automatic Conversion Event").
(b) Written notice shall be given to the holders of the Series A,
Series B, Series C, Series D and Series E Preferred
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Stock immediately upon the occurrence of an Automatic Conversion Event. On and
after the date of mailing of such notice, and notwithstanding that any
certificates for the Series A, Series B, Series C, Series D or Series E
Preferred Stock shall not have been surrendered for conversion, the shares of
Series A, Series B, Series C, Series D and Series E Preferred Stock evidenced
thereby shall be deemed to be no longer outstanding, and all rights with
respect thereto shall forthwith cease and terminate, except any rights of the
holder (1) to receive the shares of Common Stock to which he shall be entitled
upon conversion thereof, (2) to receive the amount of cash payable in respect
of any fractional share of Common Stock to which he shall be entitled and (3)
to receive any dividends declared but unpaid on such Series A, Series B, Series
C, Series D and Series E Preferred Stock prior to the Automatic Conversion
Event. No adjustments with respect to the Conversion Rate for each series
shall be made on account of any holder's rights to dividends that have been
declared but are unpaid prior to the Automatic Conversion Event; provided,
however, that no dividends shall thereafter be paid on the Common Stock unless
dividends have first been paid to the holders of Series A, Series B, Series C,
Series D and Series E Preferred Stock entitled to payment prior to the
Automatic Conversion Event. As soon as practicable after such Automatic
Conversion Event, but in no event later than ten (10) business days after a
holder of Series A, Series B, Series C, Series D or Series E Preferred Stock
shall have received notice from the Company of such Automatic conversion Event:
(1) such holder shall surrender the certificate or certificates for such Series
A, Series B, Series C, Series D or Series E Preferred Stock at the office and
in the manner provided for such purpose pursuant to subsection E(iii) above;
and (2) the Company shall issue and deliver to the person for whose account
such Series A, Series B, Series C, Series D or Series E Preferred Stock was so
surrendered, or to his nominee or nominees, certificates for the number of full
shares of Common Stock to which he shall be entitled as aforesaid, together
with a cash adjustment for any fraction of a share as hereinafter stated, if
the shares of Series A, Series B, Series C, Series D or Series E Preferred
Stock automatically converted are not in the aggregate evenly convertible into
a number of full shares of Common Stock.
F. Anti-Dilution Protection. The Conversion Rates for the Series
A, Series B, Series C, Series D and Series E Preferred Stock shall be subject
to adjustment from time to time as set forth below.
(i) Certain Definitions and Assumptions. For purposes of this
Section F, the following definitions and assumptions shall apply:
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(a) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock or Convertible Securities.
(b) "Convertible Securities" shall mean any evidence of
indebtedness, shares (other than the Series A, Series B, Series C, Series D or
Series E Preferred Stock) or other securities convertible into or exchangeable
for Common Stock.
(c) "Original Issue Date" shall mean the date on which the first
share of Series E Preferred Stock was issued.
(d) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or pursuant to this subsection F(i), deemed to be issued)
by the Company subsequent to the Original Issue Date, other than shares of
Common Stock issued or issuable (or pursuant to this subsection F(i), deemed to
be issued) at any time:
(1) upon conversion of the Series A, Series B, Series C,
Series D or Series E Preferred Stock (including any such shares of Series A,
Series B, Series C, Series D or Series E Preferred stock issued on or issuable
upon conversion or exercise of Convertible Securities or options);
(2) pursuant to Options to purchase an aggregate of
1,000,000 shares of Common Stock reserved for issuance or outstanding an the
Original Issue Date, or Options to purchase shares of Series A, Series B, Series
D or Series E Preferred Stock outstanding or issued on the original Issue Date;
(3) to employees, consultants, agents or directors of the
Company as approved by the Board of Directors after the Original Issue Date;
(4) by way of dividend or distribution pursuant to
subsection F(ii) or F(iii) below or a dividend or distribution on Series A,
Series B, Series C, Series D or Series E Preferred Stock; and
(5) up to a total of 50,000 shares of Common Stock or
Preferred Stock issued since the Original Issue Date at a purchase price less
than the then applicable Conversion Price and which are not excluded pursuant to
clauses (1-4) of this subsection F(i)(d).
(e) "Conversion Price" for Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series
E Preferred Stock shall mean $1.60, $3.40, $7.00, $8.50 and $5.00,
respectively, divided by the applicable Conversion Rate in effect at the time
of any such determination
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(f) The issuance of Options or Convertible Securities of the
Company shall be deemed the issuance of the shares of Common Stock which may be
acquired upon the exercise of the Options or the exchange or conversion of the
Convertible Securities for a consideration equal to the consideration for which
such Options were issued, plus the exercise price of any such Options or the
consideration equal to the consideration for which the Convertible Securities
were issued, plus any additional consideration to be received on exchange or
conversion thereof. Such shares of Common Stock shall be deemed outstanding
for the purposes of this Section F.
(g) Once an adjustment has been made to the applicable Conversion
Rate by reason of the deemed issuance of Additional Shares of Common Stock, no
further adjustment in the Conversion Rate for each series shall be made upon
the subsequent issue of Convertible Securities or shares of Common Stock upon
the exercise of such Options or conversion or exchange of such Convertible
Securities.
(h) If such Option or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Company upon exercise, exchange or conversion
thereof or increase or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the Conversion
Rate for each series shall, upon any such increase or decrease becoming
effective, be equitably adjusted to reflect such increase or decrease.
(i) Upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Conversion Rate for each series computed upon the original
issue thereof and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(1) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Company for the issue of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, or for the
issue of all such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually received by the
Company upon such conversion or exchange, and
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(2) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the Company for Additional Shares of Common Stock deemed to have
been then issued was the consideration actually received by the Company for the
issue of all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Company upon the issue of the Convertible
Securities with respect to which such Options were actually exercised.
(ii) Dividends. If at any time the Company pays a dividend on
Common Stock payable in Common Stock or Convertible Securities, subdivides its
outstanding shares of Common Stock into a larger number of shares or combines
the outstanding shares of Common Stock into a smaller number of shares by
reclassification or otherwise (each, a "Dilutive Event"), the Conversion Rate
for each series in effect immediately prior to such Dilutive Event shall be
adjusted by multiplying such Conversion Rate by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding immediately
after such Dilutive Event (assuming exercise or conversion of all outstanding
options and Convertible Securities) and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such Dilutive
Event (assuming exercise or conversion of all outstanding Options and
Convertible Securities). An adjustment made pursuant to this subsection F(ii),
shall become effective retroactively to the record date in the case of a
dividend and shall become effective on the effective date in the case of a
subdivision or combination.
(iii) Distribution of Assets. If the company shall distribute to
holders of shares of Common Stock any assets (other than any regular quarterly
cash dividend out of earned surplus), any evidence of indebtedness or other
securities of the Company or any rights to subscribe thereto (the "Assets")
then in each such case the Conversion Rate for each series shall be increased
by multiplying the applicable Conversion Rate in effect on the record date for
the determination of the stockholders entitled to receive such distribution,
and prior to such distribution, by the absolute value of a fraction the
numerator of which shall be the product of (a) the fair value per share
(determined as provided in subsection F(ix) below) of the Common Stock on such
record date (assuming exercise or conversion of all Options and Convertible
Securities) and (b) the number of shares of Common Stock outstanding on such
record date (assuming exercise or conversion of all Options and Convertible
Securities) prior to such distribution and the denominator of which shall be
the remainder of (c) the numerator and (d) the fair value (as determined in a
resolution adopted by the Board of Directors of the Company, which shall be
conclusive evidence of such fair value) of all of the Assets distributed by
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the Company to holders of shares of Common Stock on such record date. Such
adjustment to the Conversion Rate for each series shall become effective
retroactively immediately after the record date.
(iv) Issuance or Sale Below the Conversion Price for Series A
Preferred Stock. If at any time the Company shall issue or sell, or shall,
pursuant to subsection F(i), be deemed to have issued and sold Additional
Shares of Common Stock without consideration or at a price per share less than
the Conversion Price for the Series A Preferred Stock, then, in each such case,
the Conversion Rate for the Series A Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount determined by multiplying
the Conversion Rate for such series in effect on the date of and immediately
prior to such issuance or sale by a fraction the numerator of which shall be
the number of shares of Common Stock outstanding immediately after such
issuance or sale (assuming exercise or conversion of all outstanding options
and Convertible Securities) and the denominator of which shall be the sum of
(a) the number of shares of Common Stock outstanding (assuming exercise or
conversion of all outstanding Options and Convertible Securities) on the date
immediately preceding the date on which the Additional Shares of Common Stock
were issued or sold and (b) the number of shares of Common Stock which the
aggregate consideration to be received by the Company in respect of such
Additional Shares of Common Stock would have purchased at the Conversion Price
of such series in effect immediately prior to such issuance or sale.
(v) Issuance or Sale Below the Conversion Price for Series B
Preferred Stock.
(a) Sales not exceeding $1,000,000 at prices in excess of
$2.40 per share. If (x) at any time after the Original Issue Date, the Company
shall issue or sell, or shall, pursuant to subsection F(i), be deemed to have
issued and sold Additional Shares of Common Stock at a price per share less than
the Conversion Price for the Series B Preferred Stock and in excess of $2.40 (as
adjusted for any stock dividend, stock split or combination) and (y) the
aggregate consideration of all such sales or deemed sales from the Original
Issue Date does not exceed $1,000,000, then, in each such case, the Conversion
Rate for the Series B Preferred Stock shall be increased, concurrently with such
issuance or sale, to an amount determined by multiplying the Conversion Rate for
such series in effect on the date of and immediately prior to such issuance or
sale by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding immediately after such issuance or sale (assuming
exercise or conversion of all outstanding Options and Convertible Securities)
and the denominator of which shall be the sum of (a) the number of shares of
Common Stock outstanding (assuming exercise or conversion of all outstanding
Options and Convertible
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Securities) on the date immediately preceding the date on which the Additional
Shares of Common Stock were issued or sold and (b) the number of shares of
Common Stock which the aggregate consideration to be received by the Company in
respect of such Additional Shares of Common Stock would have purchased at the
Conversion Price of such series in effect immediately prior to such issuance or
sale.
(b) Sales after June 21, 1991 or after the Conversion Price for
the Series B Preferred Stock is reduced below $2.40. If the Company shall
issue or sell, or shall, pursuant to subsection F(i), be deemed to have issued
and sold Additional Shares of Common Stock without consideration or at a price
per share less than the Conversion Price for the Series B Preferred Stock (x)
at any time after June 21, 1991 or (y) at any time after the Conversion Price
for the Series B Preferred Stock immediately prior to such issuance or sale
does not exceed $2.40 (as adjusted for any stock dividend, stock split or
combination), then, in each such case, the Conversion Rate for the Series B
Preferred Stock shall be increased, concurrently with such issuance or sale, to
an amount determined by multiplying the Conversion Rate for such series in
effect an the date of and immediately prior to such issuance or sale by a
fraction the numerator of which shall be the number of shares of Common Stock
outstanding immediately after such issuance or sale (assuming exercise or
conversion of all outstanding Options and Convertible Securities) and the
denominator of which shall be the sum of (a) the number of shares of Common
Stock outstanding (assuming exercise or conversion of all outstanding Options
and Convertible Securities) on the date immediately preceding the date on which
the Additional Shares of Common Stock were issued or sold and (b) the number of
shares of Common Stock which the aggregate consideration to be received by the
Company in respect of such Additional Shares of Common Stock would have
purchased at the Conversion Price of such series in effect immediately prior to
such issuance or sale.
(vi) Issuance or Sale Below the Conversion Price for Series C
Preferred Stock. If at any time the Company shall issue or sell, or shall,
pursuant to subsection F(i), be deemed to have issued and sold Additional
Shares of Common Stock without consideration or at a price per share less than
the Conversion Price for the Series C Preferred Stock, then, in each such case,
the Conversion Rate for the Series C Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount determined by multiplying
the Conversion Rate for such series in effect on the date of and immediately
prior to such issuance or sale by a fraction the numerator of which shall be
the number of shares of Common Stock outstanding immediately after such
issuance or sale (assuming exercise or conversion of all outstanding Options
and Convertible Securities) and the denominator of which shall be the sum of
(a) the number of shares of Common Stock outstanding (assuming exercise or
conversion of all outstanding Options and
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Convertible Securities) on the date immediately preceding the date on which the
Additional Shares of Common Stock were issued or sold and (b) the number of
shares of Common Stock which the aggregate consideration to be received by the
Company in respect of such Additional Shares of Common Stock would have
purchased at the Conversion Price of such series in effect immediately prior to
such issuance or sale. Notwithstanding the foregoing, no adjustment to the
Conversion Price for the Series C Preferred Stock shall occur pursuant to this
subsection F(vi) unless the purchase price per share of the Additional Shares
of Common Stock is less than $3.40 per share.
(vii) Issuance or Sale Below the Conversion Price for Series D Preferred
Stock. If at any time the Company shall issue or sell, or shall, pursuant to
subsection F(i), be deemed to have issued and sold Additional Shares of Common
Stock without consideration or at a price per share less than the Conversion
Price for the Series D Preferred Stock, then, in each such case, the Conversion
Rate for the Series D Preferred Stock shall be increased, concurrently with
such issuance or sale, to an amount determined by multiplying the Conversion
Rate for such series in effect on the date of and immediately prior to such
issuance or sale by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding immediately after such issuance or sale
(assuming exercise or conversion of all outstanding Options and Convertible
Securities) and the denominator of which shall be the sum of (a) the number of
shares of Common Stock outstanding (assuming exercise or conversion of all
outstanding options and Convertible Securities) on the date immediately
preceding the date on which the Additional Shares of Common Stock were issued
or sold and (b) the number of shares of Common Stock which the aggregate
consideration to be received by the Company in respect of such Additional
Shares of Common Stock would have purchased at the Conversion Price of such
series in effect immediately prior to such issuance or sale. Notwithstanding
the foregoing, no adjustment to the Conversion Price for the Series D Preferred
Stock shall occur pursuant to this subsection F(vii) unless the purchase price
per share of the Additional Shares of Common Stock is less than $3.40 per
share.
(viii) Issuance or Sale Below the Conversion Price for Series E Preferred
Stock.
(a) Issuances After the Original Issue Date Aggregating Less than
$9,622,000. If at any time the Company shall issue or sell, or shall, pursuant
to subsection F(i), be deemed to have issued and sold Additional Shares of
Common Stock without consideration or at a price per share less than the
Conversion Price for the Series E Preferred Stock, then, in each such case, the
Conversion Rate for the Series E Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount
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determined by multiplying the Conversion Rate for such series in effect on the
date of and immediately prior to such issuance or sale by a fraction the
numerator of which shall be the Conversion Price of the Series E Preferred
Stock in effect on the date of such issuance and the denomination of which
shall be the per share consideration received by the Company for the Additional
Shares of Common Stock so issued. Notwithstanding any provision to the
contrary, this subsection (F)(viii)(a) shall be applicable until such time that
the Company has raised an aggregate of $9,622,000 from the sale of Additional
Shares of Common Stock.
(b) Issuance or Sale Below the Conversion Price. In the event that
subsection F(viii)(a) is not applicable, and if at any time the Company shall
issue or sell, or shall, pursuant to subsection F(i), be deemed to have issued
and sold Additional Shares of Common Stock without consideration or at a price
per share less than the Conversion Price for the Series E Preferred Stock then
in effect, then, in each such case, the Conversion Rate for the Series E
Preferred Stock shall be increased, concurrently with such issuance or sale, to
an amount determined by multiplying the Conversion Rate for such series in
effect on the date of and immediately prior to such issuance or sale by a
fraction the numerator of which shall be the number of shares of Common Stock
outstanding immediately after such issuance or sale (assuming exercise or
conversion of all outstanding Options and Convertible Securities) and the
denominator of which shall be the sum of (a) the number of shares of Common
Stock outstanding (assuming exercise or conversion of all outstanding Options
and Convertible Securities) on the date immediately preceding the date on which
the Additional Shares of Common Stock were issued or sold and (b) the number of
shares of Common Stock which the aggregate consideration to be received by the
Company in respect of such Additional Shares of Common Stock would have
purchased at the Conversion Price of such series in effect immediately prior to
such issuance or sale.
(ix) Fair Value. For the purpose of any computation under subsection
F(iii), the "fair value" on any date shall be as mutually agreed upon by the
Board of Directors of the Company with the representatives of the holders of
the shares of Preferred Stock voting in favor of such valuation; provided,
however, that if the Common Stock is listed or admitted to trading on a
national securities exchange, the fair value on any date shall be equal to the
average of the daily closing prices for the thirty (30) consecutive trading
days commencing forty-five (45) trading days before the date in question. The
closing price for each day shall be the last sales price regular way, or if no
such sale takes place, the average of the closing bid and asked prices regular
way on the principal national securities exchange on which such class of Common
Stock is listed or admitted to trading, or if not listed on such an exchange,
the average of the closing bid and asked prices for a share of Common Stock on
the over-the-counter-market,
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as reported by the National Association of Securities Dealer's Automated
Quotation System at the close of business on such date.
(x) Capital Reorganization. In the case of any capital
reorganization or any reclassification of the capital stock of the Company or
in case of the consolidation or merger of the Company with another corporation
(other than a merger not involving any reclassification, conversion or exchange
of Common Stock, in which, subject to subsection F(xi), the Company is the
surviving corporation), each share of Series A, Series B, Series C, Series D
and Series E Preferred Stock shall thereafter be convertible into the number of
shares of stock (or of any class or classes) or other securities or property
receivable upon such capital reorganization, reclassification of capital stock,
consolidation or merger as the case may be, by a holder of the number of shares
of Common Stock into which such share of Series A, Series B, Series C, Series D
and Series E Preferred Stock was convertible immediately prior to such capital
reorganization, reclassification of capital stock, consolidation or merger;
and, in any case, appropriate adjustment (as determined by the Board) shall be
made in the application of the provisions herein set forth with respect to the
rights and interests thereafter of the holders of the Series A, Series B,
Series C, Series D and Series E Preferred Stock, to the end that the provisions
set forth herein (including the specified changes in and other adjustments of
the Conversion Rate for each series) shall thereafter be applicable, as near as
reasonably practical, in relation to any shares of stock or other securities or
other property thereafter deliverable upon the conversion of the Series A,
Series B, Series C, Series D and Series E Preferred Stock.
(xi) Liquidating Merger. If, as a result of (a) a sale or conveyance of
all or substantially all of the assets of the Company, or (b) the merger,
reorganization or consolidation of the Company with or into another corporation
or of another corporation into it, the beneficial owners of all of the equity
interest in the Company (assuming conversion of all options and Convertible
Securities outstanding at the time of such merger or consolidation) immediately
prior to any such merger or consolidation will not beneficially own a majority
of the equity interest of the entity surviving such merger or consolidation
immediately after such merger or consolidation (each such event being
hereinafter referred to as a "Liquidating Merger"), such sale, conveyance,
merger, reorganization or consolidation shall be deemed a liquidation and
shall be subject to the provisions of Section G.
(xii) Transfer Agents. Whenever the Conversion Rate of a series of
Preferred Stock is adjusted as herein provided, the Company shall (a) forthwith
file with any transfer agent or agents for such series of Preferred Stock a
certificate signed by the President or one of the Vice Presidents of the
Company and by its
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Treasurer or an Assistant Treasurer, stating the adjusted Conversion Rate for
such series determined as provided in this Section F, and in reasonable detail
the facts requiring such adjustment and (b) cause a notice to be mailed to the
respective holders of record of such series of Preferred Stock setting forth
the adjustment and the Conversion Rate for such series, as adjusted. Any such
transfer agents shall be under no duty to make any inquiry or investigation as
to the statements contained in any such certificate or as to the manner in
which any computation was made, but may accept such certificates as conclusive
evidence of the statements therein contained, and each transfer agent shall be
fully protected with respect to any and all acts done or action taken or
suffered by it in reliance thereon. No transfer agent in its capacity as
transfer agent shall be deemed to have any knowledge with respect to any change
of capital structure of the Company unless and until it receives a notice
thereof pursuant to the provisions of this subsection F(xii) and in default of
any such notice each transfer agent may conclusively assume that there has been
no such change.
(xiii) Availability of Authorized Shares. The Company shall at all
times reserve and keep available, out of its authorized and unissued or
treasury shares of Common Stock, or other stock or securities deliverable upon
conversion, solely for the purpose of effecting the conversion of the Series A,
Series B, Series C, Series D and Series E Preferred Stock, such number of
shares as shall from time to time be sufficient to effect the conversion of all
shares of Series A, Series B, Series C, Series D and Series E Preferred Stock
from time to time outstanding. The Company shall from time to time, in
accordance with the laws of the State of California, increase the authorized
amount of its Common Stock and/or securities issuable upon conversion of the
Series A, Series B, Series C, Series D and Series E Preferred Stock if at any
time the number of shares of Common Stock (or such other securities) remaining
unissued or treasury shares of Common Stock (or such other securities) shall
not be sufficient to permit the conversion of all the then outstanding Series
A, Series B, Series C, Series D and Series E Preferred Stock.
(xiv) No Fractional Shares. No fractions of shares of Common Stock
are to be issued upon conversion of Preferred Stock, but in lieu thereof the
Company will pay therefor in cash an amount determined by multiplying the
fraction of a share by the applicable Liquidation Value.
(xv) Delivery of Common Stock. The Company will pay all issue and
other taxes that may be payable in respect of any issue on delivery of shares
of Common Stock on conversion of shares of Series A, Series B, Series C, Series
D and Series E Preferred Stock pursuant hereto. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of Common Stock in a name other
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than that in which the Series A, Series B, Series C, Series D or Series E
Preferred Stock so converted was registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Company the tax so required.
G. Liquidation Rights.
(i) In the event of any liquidation, dissolution, Liquidating
Merger or winding up of the Company, whether voluntary or involuntary, before
any distribution or payment shall be made to the holders of Common Stock, the
holders of the Preferred Stock shall be entitled to receive from the assets of
the Company available for distribution to its stockholders an amount per share
in cash equal to the Liquidation Value of the respective series of Preferred
Stock plus 8% per annum of the applicable Liquidation Value per share from the
date of original issuance of such series, less any dividends that have actually
been paid on such series, since it was issued (the "Liquidation Preference
Amount"). If upon the occurrence of such event, the assets thus distributed
among the holders of Series A, Series B, Series C, Series D and series E
Preferred Stock shall be insufficient to permit the payment to such holders of
the full Liquidation Preference Amount of the respective series of Preferred
Stock, then the entire assets of the Company legally available for distribution
shall be distributed ratably among the holders of the Series A, Series B,
Series C, Series D and Series E Preferred Stock in proportion to the
applicable Liquidation Preference Amounts.
(ii) Upon completion of the distribution required by subsection
G(i), if any assets remain in the Company, the remaining assets of the Company
shall be distributed to the holders of Common Stock. Written notice of such
liquidation, dissolution, Liquidating Merger or winding up, stating a payment
date, the amount of the payment and the place where the amounts distributable
shall be payable, shall be mailed or caused to be mailed by the Company by
certified or registered mail, return receipt requested, not less than sixty
(60) days prior to the date stated therein, to each holder of record of any
share of the Series A, Series B, Series C, Series D and Series E Preferred
Stock at his address as the same appears on the books of record of the Company.
No consolidation or merger of the Company or sale or transfer by the Company of
its assets which does not qualify as a Liquidating Merger, nor the reduction of
the authorized number of shares of any class or series of capital stock of the
Company, shall be deemed to be a liquidation, dissolution, Liquidating Merger
or winding up of the corporation within the meaning of any of the provisions of
this Section G.
H. Status of Redeemed or Converted Shares. Any shares of the Series
A, Series B, Series C, Series D or Series E Preferred Stock which at any time
shall have been redeemed pursuant or
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converted hereto shall after such redemption or conversion be
cancelled and no longer be available for issuance by the Company.
I. Notice. The holders of shares of the Preferred Stock
shall receive notice of certain events as follows:
(i) not less than thirty (30) days before the occurrence of any of
the following: (a) any distributions of capital stock to holders of shares of
the Company's Common Stock including without limitation, any stock splits,
stock dividends, stock reclassifications, or the issuance of any rights or
warrants, (b) the declaration of any record date or (c) any meeting of the
holders of shares of the Company's capital stock called by the Company's Board
of Directors (which notice must set forth in reasonable detail the business to
be transacted at such meeting); (ii) not more than ten (10) days after the
occurrence of an Automatic Conversion Event, that such event has occurred; and
(iii) not less than twenty (20) days prior to the date fixed by the Board of
Directors for the termination of the conversion rights of the Preferred Stock
as a result of any liquidation, dissolution, Liquidating Merger or winding up
of the affairs of the Company that such event will occur.
J. Consent for Certain Repurchases of Common Stock Deemed to be
Distributions. Each holder of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D and Series E Preferred Stock shall be
deemed to have consented, for the purposes of Sections 502, 503 and 506 of the
California Corporations Code, to distributions made by the Company in
connection with the repurchase of shares of Common Stock issued to or held by
employees or consultants upon termination of their employment or services
pursuant to agreements providing for such right of repurchase between the
Company and such persons.
IV.
The liability of the directors of the Company for monetary damages shall
be eliminated to the fullest extent permissible under California law.
The Company is authorized to indemnify its agents for breach of duty to
the Company and its shareholders in excess of the indemnification otherwise
permitted by Section 317 of the California Corporations Code, subject to the
limits on such indemnification set forth in paragraphs (a)(10) and (a)(11) of
Section 204 of the California Corporations Code. The Company may obligate
itself in advance, through an agreement or a bylaw provision, to indemnify the
agent in all cases when the applicable standard of conduct has been satisfied
or may authorize indemnification of the agent by vote of disinterested
directors, by written opinion of independent legal counsel if a quorum of
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disinterested directors is not obtainable, or by majority vote of the shares
voting, excluding shares owned by the agent.
Any repeal or modification of the foregoing provisions of this Article IV
by the shareholders of the Company shall not adversely affect any right or
protection of a director of the Company existing at the time of such repeal of
modification."
3. The Third Amended and Restated Articles of Incorporation
have been duly approved by the Board of Directors.
4. The article amendments as included in the Third Amended
and Restated Articles of Incorporation (other than omissions required by
Section 910 of the California General Corporation Law) have been duly approved
by the required vote of the shareholders in accordance with Sections 902 and
903 of the California General Corporation Law. The total number of outstanding
shares of Common Stock of this corporation is 1,060,963. The total number of
outstanding shares of Series A, Series B, Series C and Series D Preferred Stock
are 2,264,133, 1,294,939, 200,000 and 470,590, respectively. The number of
shares voting in favor of the Third Amended and Restated Articles of
Incorporation equaled or exceeded the vote required. The percentage vote
required for the approval of the Third Amended and Restated Articles of
Incorporation was more than 50% of the Common Stock and more than 50% of the
Preferred Stock.
IN WITNESS WHEREOF, the Third Amended and Restated Articles of
Incorporation has been executed by the undersigned on February 16, 1994.
ROBERT AKINS
- ------------------------
Robert Akins, President
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WILLIAM ANGUS, III
- -----------------------------
William Angus, III, Secretary
ROBERT AKINS and WILLIAM ANGUS, III, declare under penalty of perjury
under the laws of the State of California that each has read the foregoing
certificate and knows the contents thereof and that the same is true of his own
knowledge.
ROBERT AKINS Dated: February 16, 1994
- -----------------------------
Robert Akins, President
WILLIAM ANGUS III Dated February 16, 1994
- -----------------------------
William Angus III, Secretary
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<PAGE> 95
WILSON, SONSINI, GOODRICH & ROSATI
PROFESSIONAL CORPORATION
Two Palo Alto Square
Palo Alto, California 94306
FACSIMILE: (415)493-6811 TELEPHONE: (415) 493-9300 JOHN ARNOT WILSON
COUNSEL
February 25, 1994
To the Investors listed on
Schedule 1.2 of the Series E
Preferred Stock Purchase
Agreement dated February 25, 1994
Ladies and Gentlemen:
We have acted as counsel for CYMER Laser Technologies, a California
corporation (the "Company"), in connection with the sale by the Company to you
of up to 75,600 shares of the Company's 8% Non-Cumulative Voting Redeemable
Convertible Series E Preferred Stock (the "Series E Shares") pursuant to the
CYMER Laser Technologies Series E Preferred Stock Purchase Agreement (the
"Agreement") dated of even date hereof, among the Company, certain individuals
listed on Schedule 1.1 (the "Founders") and Schedule 1.2 (the "Investors") to
the Agreement. This opinion is given to you in compliance with Section 11.5 of
the Agreement. Unless defined herein, capitalized terms have the meaning given
them in the Agreement.
In connection with this opinion, we have examined and relied upon the
originals or copies, certified to our satisfaction, of such records, documents,
certificates, memoranda and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below. In such
examination we have assumed the genuineness of all signatures on original
documents, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all copies submitted to us as copies
thereof, the legal capacity of natural persons, and the due execution and
delivery of all documents (except as to due execution and delivery by the
Company) where due execution and delivery are a prerequisite to the
effectiveness thereof.
As used in this opinion, the expression "to our knowledge" with reference
to matters of fact means that, after an examination of documents made available
to us by the Company, and after inquiries of officers of the Company, but
without any further independent factual investigation, we find no reason to
believe that the opinions expressed herein are factually incorrect. Further,
the expression "to our knowledge" with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreement and the
transactions contemplated thereby. Except to the extent expressly set forth
herein or as we otherwise believe to be necessary to our opinion,
<PAGE> 96
WILSON, SONSINI. GOODRICH & ROSATI
Investors in Series E Preferred
February 25, 1994
Page 2
we have not undertaken any independent investigation to determine the existence
or absence of any fact, and no inference as to our knowledge of the existence
or absence of any fact should be drawn from our representation of the Company
or the rendering of the opinion set forth below.
For the purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary corporate
or partnership action, to execute and deliver the Agreement, and we are
assuming that the representations and warranties made by the Investor in
Section 4 of the Agreement are true and correct. We are also assuming that the
Investor has purchased the Shares for value, in good faith and without notice
of any adverse claims within the meaning of the California Uniform Commercial
Code.
Our opinion is expressed only with respect to the federal laws of the
United States of America and the laws of the State of California. We express
no opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof.
The opinions hereinafter expressed are subject to the following
qualifications, as to which we render no opinion:
(a) the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally;
(b) the effect of rules of law governing specific performance,
injunctive relief and other equitable remedies;
(c) the compliance or noncompliance with applicable state and
federal anti-fraud statutes, rules and regulations concerning the issuance of
securities;
(d) the enforceability of the indemnification provisions of
Section 9.13 of the Agreement;
(e) the applicability to the Agreement of the Exon-Florio
Amendment to the Defense Production Act of 1950; and
(f) the enforceability of the stock repurchase provisions set
forth in Sections 7.1 and 8.1 of the Agreement due to the restrictions set
forth in Sections 500 and 501 of the California Corporations Code.
On the basis of the foregoing and in reliance thereon, except as
disclosed in Schedule 3.0 of the Agreement, and with the foregoing
qualifications, we are of the opinion that:
<PAGE> 97
WILSON, SONSINI, GOODRICH & ROSATI
Investors in Series E Preferred
February 25, 1994
Page 3
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has all
requisite corporate power and authority and the legal right to transact the
business in which it is presently engaged, to own, lease and operate all of the
assets and properties owned, leased or operated by it, to enter into and
perform the Agreement, to issue and sell the Series E Shares and to issue the
Conversion Shares and to otherwise perform and comply with all other actions
and agreements arising under the Agreement. The Company is duly qualified to
do business as a foreign corporation in good standing in all other
jurisdictions which require such qualification except to the extent that
failure to so qualify would not have a material adverse effect on the Company.
We note that the Company is qualified to do business in Massachusetts. We
express no opinion with respect to the Company's activities in Japan, or the
formation or activities of Cymer Japan, Inc., a Japanese corporation and a
wholly-owned subsidiary of the Company ("Cymer Japan").
2. The execution, delivery and performance of the Agreement, the
issuance of the Series E Shares and the Conversion Shares and the consummation
of the transactions contemplated in the Agreement by the Company have been duly
authorized by all necessary corporate action on the part of the Company,
including any action required to be taken by the Company's shareholders. The
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms (except insofar as
the enforcement of Section 9.13 of the Agreement may be limited by limitations
of public policy). The certificates representing the Series E Shares are in
due and proper form and have been validly executed by the officers of the
Company named thereon.
3. Except for Cymer Japan, the Company has no subsidiaries and,
to our knowledge, does not own (of record or beneficially) and has made no
commitment to purchase any shares or securities of, or otherwise make any
investment in, any other corporation, association, partnership or other entity
and is not a participant in any joint venture.
4. Neither the issuance or sale of the Series E Shares (including
the Conversion Shares) nor the execution and delivery by the Company of the
Agreement, nor the consummation of or compliance with the transactions and
agreements contemplated by the Agreement will conflict with or constitute a
violation or breach of (i) the Restated Articles of Incorporation or Bylaws of
the Company, (ii) to our knowledge, any material contracts or other material
instruments to which the Company is a party or by which the Company is bound or
by which the business or material assets or properties of the Company may be
materially affected or
<PAGE> 98
WILSON, SONSINI, GOODRICH & ROSATI
Investors in Series E Preferred
February 25, 1994
Page 4
secured, (iii) to our knowledge, any order, writ, injunction, award or decree
of any court, arbitrator or governmental or regulatory body against or binding
upon the Company or upon the securities, properties or business of the Company,
in each case that is specifically directed to the Company, its securities,
properties or business, (iv) to our knowledge, any statute, law, rule or
regulation of any jurisdiction to which the Company is subject, (v) to our
knowledge, any license, permit, order or approval of any federal, state or
local governmental or regulatory body that is material to or necessary for the
conduct of the business of the Company and (vi) to our knowledge, the laws of
the State of California and the federal laws of the United States applicable
therein, where such conflict, breach or violation of such laws would be
materially adverse to the Company.
5. At the Closing, upon payment of the full purchase price in
cash therefor, the Investor will receive good and valid title to the Series E
Shares and the Series E Shares (including the Conversion Shares issuable upon
conversion thereof when and if issued in accordance with the Agreement and the
Restated Articles of Incorporation) will be duly authorized, validly issued,
fully paid, non-assessable, free and clear of all liens and encumbrances, other
than liens, encumbrances or restrictions on transfer arising under the
Agreement, applicable securities laws or under agreements entered into or
actions taken by the Investor.
6. As of the date hereof (but prior to the execution and delivery
of the Agreement and the consummation of the transactions contemplated
therein), the Company will have an authorized capitalization of (i) Fifteen
Million (15,000,000) shares of Common Stock, $.01 par value, of which One
Million Sixty Thousand Nine Hundred and Sixty-Three (1,060,963) shares are
issued and outstanding; (ii) Three Million (3,000,000) shares of Series A
Preferred Stock, $.01 par value, of which Two Million Two Hundred Sixty-Four
Thousand One Hundred and Thirty-Three (2,264,133) are issued and outstanding
and One Million Five Hundred Thousand (1,500,000) shares of Series B Preferred
Stock, $.01 par value, of which One Million Two Hundred Ninety-Four Thousand
Nine Hundred and Thirty-Nine (1,294,939) are issued and outstanding; (iii) One
Million (1,000,000) shares of Series C Preferred Stock, $.01 par value, of
which Two Hundred Thousand (200,000) shares are issued and outstanding; (iv)
Five Hundred Thousand (500,000) shares of Series D Preferred Stock, $.01 par
value, of which Four Hundred Seventy Thousand Five Hundred Ninety (470,590) are
issued and outstanding prior to the Closing and (v) Two Million One Hundred and
Fifty Thousand (2,150,000) shares of Series E Preferred Stock none of which are
issued and outstanding and 75,600 of which are being issued to you pursuant to
the Agreement. In addition, the Company has reserved the
<PAGE> 99
WILSON, SONSINI, GOODRICH & ROSATI
Investors in Series E Preferred
February 25, 1994
Page 5
following shares of Common Stock and Preferred Stock for issuance: (i)
1,000,000 shares of Common Stock upon exercise of options granted or to be
granted to the Company's employees; (ii) 6,248 shares of Series A Preferred
Stock upon exercise of warrants to purchase shares of Series A Preferred Stock;
(iii) 18,382 shares of Series B Preferred Stock upon exercise of the warrants
to purchase shares of Series B Preferred Stock; (iv) up to 15,000 shares of
Series D Preferred Stock which the Company may issue to its principal bank upon
exercise of an outstanding warrant; (v) up to 13,333 shares of Series E
Preferred Stock to be issued pursuant to the Series E Bridge Warrants; and (vi)
up to 3,780 shares of Series E Preferred Stock to be issued pursuant to the
Series E Placement Warrants. Prior to the Closing, the Company had up to
$600,000 of Convertible Promissory Notes, of which a portion of the principal
amount of may be converted to Series E Preferred Stock at a price equal the
sale price of the Series E Preferred Stock.
7. Subject to the accuracy of the Investor's representations in
Section 4 of the Agreement, the offer, sale and issuance of the Series E Shares
to be issued in conformity with the terms of this Agreement, and the issuance
of the Common Stock to be issued upon conversion of the Series E Shares,
constitute transactions exempt from the registration requirements of Section 5
of the Securities Act.
8. No consent, approval or authorization of or designation,
declaration or filing with, any governmental authority on the part of the
Company is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the Series E Shares, or the
consummation of any other transaction contemplated by the Agreement, except the
notice filings required by Section 25102(f) of the California Corporate
Securities Law of 1968 and Regulation D under the Securities Act of 1933, as
amended (the "Securities Act"), as promulgated by the Securities and Exchange
Commission. The filings referred to in this paragraph have been accomplished
and are effective or will be accomplished on a timely basis following the
Closing, and to our knowledge there are no proceedings or threat thereof which
question the validity of such filings.
9. To our knowledge, there are no legal, administrative or other
proceedings, investigations or inquiries, or other asserted claims, judgments,
injunctions or restrictions, pending or outstanding or threatened against the
Company, any of its properties or business, or against or involving the Company
or the officers or directors of the Company, or any action related to the
Agreement, the issuance of the Series E Shares or any of the transactions
contemplated in the Agreement that might, if determined adversely to the
Company, either singly or in the aggregate,
<PAGE> 100
WILSON, SONSINI, GOODRICH & ROSATI
Investors in Series E Preferred
February 25, 1994
Page 6
result in any material adverse change in the business of the Company or in any
material liability on the part of the Company.
This opinion is intended solely for your use in connection with your
purchase of Series E Shares and is not to be made available to or relied upon
by other persons or entities without our prior written consent.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
<PAGE> 1
EXHIBIT 10.11
SERIES F PREFERRED STOCK PURCHASE AGREEMENT
AMONG
CYMER LASER TECHNOLOGIES,
THE FOUNDERS LISTED ON SCHEDULE 1.1
AND
THE INVESTORS LISTED ON SCHEDULE 1.2
FEBRUARY 28, 1995
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
1. Sale, Purchase and Delivery of Series F Shares..................... 3
1.1 Issuance and Sale of Series F Shares...................... 3
1.2 Delivery of Series F Shares............................... 4
2. Certain Definitions................................................ 4
3. Representations and Warranties of the Company...................... 4
3.1 Organization and Good Standing; Power and Authority....... 4
3.2 Subsidiaries.............................................. 5
3.3 Capitalization............................................ 5
3.4 Compliance with Laws...................................... 6
3.5 Validity of Agreement; Binding Effect..................... 7
3.6 No Breach................................................. 7
3.7 Financial Information..................................... 7
3.8 Absence of Undisclosed Liabilities and Obligations........ 8
3.9 Absence of Certain Changes................................ 8
3.10 Real Property............................................. 9
3.11 Tangible Assets and Equipment............................. 9
3.12 Tax Returns and Audits.................................... 9
3.13 Patents and Trademarks.................................... 10
3.14 Employees................................................. 10
3.15 Confidentiality........................................... 11
3.16 Litigation................................................ 11
3.17 ERISA..................................................... 12
3.18 Environmental Compliance Matters.......................... 12
3.19 Use of Proceeds........................................... 12
3.20 Registration Rights....................................... 12
3.21 Escrowed Certificates of Founder Common Stock............. 12
3.22 Disclosure................................................ 13
3.23 No Other Agreements....................................... 13
3.24 Claims of the Founders.................................... 13
3.25 Insurance................................................. 13
4. Representations and Warranties of the Investor..................... 13
4.1 Organization and Standing................................. 14
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
4.2 Authorization and Approval of and Ability to Carry Out
This Agreement............................................ 14
4.3 Investment Representation................................. 14
5. Company's Affirmative Covenants.................................... 15
5.1 Corporate Existence....................................... 15
5.2 Taxes and Liens........................................... 15
5.3 Maintain Property......................................... 15
5.4 Financial Statements and Reports.......................... 16
5.5 Confidentiality........................................... 16
5.6 Series F Conversion Shares................................ 16
5.7 Access to Books and Records............................... 16
5.8 Right of First Offer...................................... 17
5.9 Right of First Refusal and/or Repurchase Agreement........ 18
5.10 Insurance................................................. 19
5.11 Notice of Record Dates.................................... 19
5.12 Employee Stock Purchase Agreement......................... 19
5.13 Securities Law Filings.................................... 19
5.14 Lapse of Covenants........................................ 20
5.15 Information as to Competitors and Proprietary Information. 20
5.16 Technological Expertise................................... 20
6. Confidentiality.................................................... 20
7. Further Agreements................................................. 20
7.1 Right of First Refusal and Repurchase with Respect to
Founder Stock............................................. 20
7.2 Co-Sale Agreement on Sale of Founder Stock................ 21
8. Company's Right of First Refusal....................................... 22
8.1 Right of First Refusal.................................... 22
8.2 Tender Offer Sale......................................... 23
8.3 Assignment of Rights...................................... 24
9. Restrictions on Transferability of Shares; Compliance with the Act. 24
9.1 Restrictions on Transferability........................... 24
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
9.2 Certain Definitions....................................... 25
9.3 Notice of Proposed Transfers.............................. 26
9.4 Demand Registration Rights................................ 26
9.5 Piggy-Back Registration Rights............................ 28
9.6 Registration on Form S-3.................................. 28
9.7 Rule 144 Reporting........................................ 29
9.8 Expenses of Registration.................................. 30
9.9 Cutbacks.................................................. 30
9.10 Additional Covenants Concerning Sale of Shares............ 30
9.11 Blue Sky Provisions....................................... 31
9.12 Advising the Holders...................................... 31
9.13 Indemnification........................................... 31
9.14 Registration under the Exchange Act....................... 32
9.15 Information by Holder..................................... 32
9.16 Transfer of Registration Rights........................... 32
9.17 Standoff Agreement........................................ 33
9.18 Termination of Rights..................................... 33
10. Survival of Representations, Warranties and Covenants.............. 33
10.1 Survival of Representations, Warranties and Covenants of
the Company............................................... 33
10.2 Survival of Representations and Warranties of the
Investor.................................................. 33
11. Conditions Precedent to Obligations of the Investor................ 33
11.1 Representations and Warranties Correct.................... 33
11.2 Compliance with this Agreement............................ 34
11.3 Satisfaction of Investor.................................. 34
11.4 No Actions or Proceedings................................. 34
11.5 Opinion of Company's Counsel.............................. 34
11.6 Officer's Certificate..................................... 34
11.7 Certificate of Secretary or Assistant Secretary........... 34
11.8 Delivery of Documents..................................... 35
11.9 No Lapse in Insurance Coverage............................ 35
11.10 Employee Agreements and Nondisclosure Agreements.......... 35
11.11 Government Approvals...................................... 35
11.12 Minimum Closing Condition................................. 35
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<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
12. Conditions Precedent to the Obligation of the Company.............. 35
12.1 Representations and Warranties Correct.................... 35
12.2 Compliance with this Agreement............................ 35
12.3 Satisfaction of Company and its Counsel................... 35
12.4 No Actions or Proceedings................................. 36
12.5 Government Approvals...................................... 36
13. Documents to be Delivered at Closing............................... 36
13.1 Documents to be Delivered by the Company at the Closing... 36
13.2 Documents to be Delivered by the Investor at the Closing.. 37
14. Miscellaneous...................................................... 37
14.1 Definition of Person...................................... 37
14.2 Definition of Knowledge................................... 37
14.3 Additional Actions........................................ 37
14.4 Expenses.................................................. 37
14.5 Counterparts.............................................. 37
14.6 Binding Effect; No Assignment............................. 37
14.7 Notices................................................... 37
14.8 Applicable Laws........................................... 38
14.9 Entire Agreement.......................................... 38
14.10 Waivers and Amendments; Noncontractual Remedies;
Preservation of Remedies.................................. 38
14.11 Table of Contents; Captions............................... 38
14.12 Schedules and Exhibits Part of Agreement.................. 38
14.13 Severability.............................................. 39
14.14 Obligation of the Company to Indemnify.................... 39
14.15 Obligation of the Investor to Indemnify................... 39
14.16 Notice and Opportunity to Defend.......................... 39
-iv-
<PAGE> 6
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
SCHEDULES
1.1 FOUNDERS
1.2 INVESTORS
3.0 SCHEDULE OF EXCEPTIONS
EXHIBITS
A FOURTH AMENDED AND RESTATED ARTICLES OF INCORPORATION
B OPINION OF THE COMPANY'S COUNSEL
-v-
<PAGE> 7
EXHIBIT 10.11
SERIES F PREFERRED STOCK PURCHASE AGREEMENT
This SERIES F PREFERRED STOCK PURCHASE AGREEMENT is made as of February
28, 1995 (the "Agreement") among CYMER LASER TECHNOLOGIES, a California
corporation (the "Company"), the persons whose names are set forth on Schedule
1.1 hereto (hereinafter referred to individually as a "Founder" and collectively
as the "Founders"), and the purchasers of shares of series F preferred stock,
$.01 par value (the "Series F Preferred Stock"), set forth on Schedule 1.2
attached hereto (hereinafter referred to individually as an "Investor" and
collectively as the "Investors").
RECITALS
1. The Company sold 2,107,882 shares (the "Series A Shares") of its
series A preferred stock, $.01 par value (the Series A Preferred Stock), to
certain investors (the "Series A Investors") pursuant to a Series A Preferred
Stock Purchase Agreement, dated May 3, 1988.
2. The Company sold 1,323,531 shares (the "Series B Shares") of its
series B preferred stock, $.01 par value (the "Series B Preferred Stock"), to
certain investors (the "Series B Investors") pursuant to a Series B Preferred
Stock Purchase Agreement, dated June 28, 1989.
3. The Company sold 200,000 shares (the "Series C Shares") of its
series C preferred stock, $.01 par value (the Series C Preferred Stock"), to
certain investors (the "Series C Investors"), pursuant to the Series C Preferred
Stock Purchase Agreement, dated April 16, 1990.
4. The Company sold 470,590 shares (the "Series D Shares") of its
series D preferred stock, $.01 par value (the "Series D Preferred Stock"), to
certain investors (the "Series D Investors") pursuant to the terms of the Series
D Preferred Stock Purchase Agreements, dated March 15, 1991 and August 28, 1992.
5. The Company sold 75,600 shares (the "Series E Shares") of its series
E preferred stock, $.01 par value (the "Series E Preferred Stock"), to certain
investors (the "Series E Investors") pursuant to the terms of the Series E
Preferred Stock Purchase Agreement, dated February 25, 1994. The Series A
Investors, Series B Investors, Series C Investors, Series D Investors and Series
E Investors shall collectively be referred to as the "Prior Investors" or "Prior
Investor" as the case may be.
6. The Company sold 8% promissory notes in the aggregate principal
amount of $474,010 and warrants for the purchase of 13,941 shares of Series E or
F Preferred Stock at an exercise price of $3.40 per share to investors pursuant
to a Note and Warrant Purchase Agreement, dated October 27, 1993 and amended
February 18, 1994.
<PAGE> 8
7. The Company exchanged the 8% promissory notes and warrants described
in Recital 6 above in a subsequent bridge financing in which the Company issued
and sold convertible promissory notes in the aggregate principal amount of
$1,625,010 (the "First Bridge Notes") and warrants for the purchase of 252,914
shares of the Company's Series E or F Preferred Stock at an exercise price of
$3.40 per share (the "First Bridge Warrants") to certain investors pursuant to
the terms of a Note and Warrant Purchase Agreement, dated June 1, 1994 (the
"First Bridge Financing"). The First Bridge Notes, the accrued interest thereon,
and the First Bridge Warrants are convertible into or exercisable for either
Series E or F Preferred Stock, subject to certain conditions and pursuant to the
terms of such First Bridge Notes and First Bridge Warrants.
8. The Company sold additional convertible promissory notes in the
aggregate principal amount of $1,999,052 (the "Second Bridge Notes") and
warrants for the purchase of 146,989 shares of the Company's Series E or F
Preferred Stock at an exercise price of $3.40 per share (the "Second Bridge
Warrants") to certain investors pursuant to the terms of Note and Warrant
Purchase Agreements, dated as of November 21, 1994, December 5, 1994 and
December 19, 1994 (the "Second Bridge Financing"). The Second Bridge Notes, the
accrued interest thereon and the Second Bridge Warrants are convertible into or
exercisable for either Series E or F Preferred Stock, subject to certain
conditions and pursuant to the terms of the Second Bridge Notes and Second
Bridge Warrants. The investors in the First Bridge Notes and/or Second Bridge
Notes and the First Bridge Warrants and the Second Bridge Warrants are
hereinafter collectively referred to as "Noteholders" or individually as a
"Noteholder." The First Bridge Notes and the Second Bridge Notes, in the
aggregate principal amount of $3,624,062, shall hereinafter be collectively
referred to as the "Bridge Notes." The First Bridge Warrants and the Second
Bridge Warrants for the purchase of an aggregate of 399,903 shares of either
Series E or Series F Preferred Stock shall hereinafter be referred to as the
"Bridge Warrants." The First Bridge Financing and the Second Bridge Financing
shall hereinafter be collectively referred to as the "Bridge Financings".
9. The Noteholders intend to convert the Bridge Notes and the accrued
interest thereon into Series F Shares (as defined below) subject to the
completion [by February 28, 1995] of a financing transaction which raises at
least $5,000,000 from the sale of Series F Shares (as defined below), which
amount includes conversion of the Bridge Notes and accrued interest thereon.
10. The Company intends to sell, and the Investors intend to purchase,
(including the conversion of the Bridge Notes and accrued interest thereon
described in Recital 9) an aggregate of up to One Million Nine Hundred Thousand
(1,900,000) shares of the Company's 8% Non-Cumulative Voting Redeemable
Convertible Series F Preferred Stock (the "Series F Shares"), with such rights,
preferences and limitations as are set forth in the Company's Fourth Amended and
Restated Articles of Incorporation attached hereto as Exhibit A (the "Restated
Articles of Incorporation"), including, without limitation, the right to convert
each Series F Share into one share of the Company's common stock, $.01 par value
per share (the "Common Stock"), for an
-2-
<PAGE> 9
aggregate of One Million Nine Hundred Thousand (1,900,000) shares of Common
Stock, subject to adjustment for any dilution event described in the Restated
Articles of Incorporation or similar event (the "Series F Conversion Shares").
NOW, THEREFORE, in consideration of the mutual promises and the
representations, warranties and covenants herein contained, and of other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree, subject to the conditions and terms
herein set forth, as follows:
1. Sale, Purchase and Delivery of Series F Shares.
1.1 Issuance and Sale of Series F Shares.
(a) Issuance and Sale to Investor. Subject to
the terms and conditions of this Agreement, each Investor agrees to authorize
the release of funds (held in escrow by the Company's counsel) and purchase at
the Closing (as defined herein), and the Company agrees to issue and sell to
each Investor at the Closing, the Series F Shares listed opposite such
Investor's name on Schedule 1.2 for the aggregate purchase price set forth on
Schedule 1.2. Each Investor's purchase price shall be payable at the Closing (i)
in cash, (ii) by release of funds held in escrow by Company's counsel and/or
(iii) by conversion of the Bridge Notes previously issued for cash by the
Company to the Noteholders and conversion of the interest indebtedness accrued
on the Bridge Notes, at a conversion rate of $3.50 of principal or interest
indebtedness per Series F Share. The price per share of the Series F Shares is
$3.50 (the "Purchase Price").
(b) Additional Sales of Series F Shares and
Additional Investors. If the Company issues less than 1,900,000 Series F Shares
at the Closing (as defined below), the Company may, on or prior to April 8,
1995, issue additional Series F Shares up to a maximum number equal to the
difference between 1,900,000 Series F Shares and the number of Series F Shares
sold by the Company at the Closing. The Company shall be entitled to include
purchasers in addition to those listed in Schedule 1.2 as parties to this
Agreement, or to sell any unpurchased Series F Shares to one or more purchasers,
and such purchasers shall be deemed to be "Investors" for purposes of this
Agreement, provided that (i) the Company and such purchasers execute signature
pages of this Agreement and consummate the transactions contemplated under
Section 2.2 hereof on or prior to April 8, 1995 and (ii) the sale of Series F
Shares to such purchasers and to the Investors under this Agreement shall be
effected in accordance with applicable state and federal securities laws. The
Company's agreements, and the sales of the Series F Shares to each of the
Investors are separate sales.
(c) Closing Date. The purchase and sale of the
Series F Shares described in Section 1.1(a) shall take place at the offices of
Wilson, Sonsini, Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California
94304-1050, at 2:00 P.M., on February 28, 1995, or
-3-
<PAGE> 10
at such other time and place as the Company and the Investors, may mutually
agree upon in writing (which time and place are designated as the "Closing" or
"Closing Date").
1.2 Delivery of Series F Shares. At the Closing, the Company
shall deliver to the Investor against receipt of the Purchase Price therefor one
or more certificates bearing the appropriate legends in accordance with Section
4.3 hereof, evidencing ownership of the number of Series F Shares being
purchased hereunder by the Investor in the denomination indicated in Sections
1.1(a) and which shall be recorded on the stock transfer books of the Company in
the name of the Investor. All events which shall occur at such Closing shall be
deemed to occur simultaneously.
2. Certain Definitions. For purposes of Sections 5.8, 7.1, 7.2, 9 and
14.10 of this Agreement, the term "Shares" shall mean collectively the Series A
Shares, Series B Shares, Series C Shares, Series D Shares, Series E Shares and
the Series F Shares; the term "Conversion Shares" or singularly, "Conversion
Share" shall mean the shares of Common Stock issued upon conversion of the
Shares; and the term "Significant Holder" shall mean (i) a holder of at least
210,788 Series A Shares, (ii) a holder of at least 132,353 Series B Shares,
(iii) a holder of at least 100,000 Series C Shares, (iv) a holder of at least
100,000 Series D Shares, (v) a holder of at least 37,800 Series E Shares or (vi)
a Series F Significant Holder (as defined below) (or Conversion Shares). The
term "Series F Significant Holder" shall mean a holder of at least 100,000
Series F Shares (or Series F Conversion Shares).
3. Representations and Warranties of the Company. Except as disclosed
in the attached schedule of exceptions (Schedule 3.0), the Company represents
and warrants to the Investor as follows:
3.1 Organization and Good Standing; Power and Authority. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority and the legal right to transact the business in which it is
presently engaged, to own, lease and operate all of the assets and properties
owned, leased or operated by it, to enter into and perform this Agreement, and
will have at the Closing, all requisite corporate power and authority to sell
and issue the Series F Shares and to issue the Series F Conversion Shares and to
otherwise perform and comply with all other actions and agreements arising
hereunder. The Company does not own or lease any property or engage in any
activity in any jurisdiction which might require its qualification to do
business as a foreign corporation in any such jurisdiction. The Company has
furnished the Investor or its counsel with true, correct and complete copies
(certified by the Secretary or Assistant Secretary of the Company) of its (a)
Restated Articles of Incorporation and will make available to each Investor (b)
By-Laws, (c) the minute books of the Company (containing records of all meetings
and consents in lieu of meetings of its shareholders and the Board of Directors
of the Company (the "Board") (and any committees thereof) since the date of its
incorporation and (d) the stock transfer books of the Company. A copy of the
Restated Articles of Incorporation is attached hereto as Exhibit A.
-4-
<PAGE> 11
3.2 Subsidiaries. Except for Cymer Japan, Inc., a Japanese
corporation and a wholly-owned subsidiary of the Company, the Company has no
subsidiaries and does not own (of record or beneficially) and has made no
commitment to purchase any shares or securities of, or otherwise make any
investment in, any other corporation, association, partnership or other entity
and is not a participant in any joint venture. Cymer Japan, Inc. is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority and the legal right to transact the business in which it is presently
engaged, to own, lease and operate all of the assets and properties owned,
leased or operated by it.
3.3 Capitalization.
(a) The authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock, 1,089,736 shares of which are
issued and outstanding, and 9,500,000 shares of preferred stock, $.01 par value
(the "Preferred Stock") consisting of: 2,269,261 shares of Series A Preferred
Stock, all of which are issued and outstanding; 1,310,029 shares of Series B
Preferred Stock, all of which are issued and outstanding; 200,000 shares of
Series C Preferred Stock, all of which are issued and outstanding; 485,590
shares of Series D Preferred Stock, 470,590 of which are issued and outstanding;
1,670,000 shares of Series E Preferred Stock, of which 75,600 are issued and
outstanding; and 3,000,000 shares of Series F Preferred Stock, none of which are
outstanding prior to the Closing. All of the outstanding shares of Common Stock
and Preferred Stock are duly authorized and validly issued, fully paid and
non-assessable. The Company has reserved the following shares of capital stock
for issuance: (i) up to 1,900,000 Series F Shares to be issued pursuant to this
Agreement, (ii) 1,000,000 shares of Common Stock upon exercise of options
granted or to be granted to the Company's employees; (iii) 15,000 shares of
Series D Preferred Stock to be issued to the Company's principal bank pursuant
to the exercise of an outstanding warrant (the "Series D Warrants"); (iv) 16,000
shares of Series E Preferred Stock to be issued upon the exercise of a warrant
to be issued to the Company's principal bank (the "Series E Warrants") in
exchange for the Series D Warrants; (v) 399,903 shares of Series F Preferred
Stock to be issued upon exercise of the Bridge Warrants; (vi) up to 450,000
shares of Series F Preferred Stock to be issued pursuant to warrants to purchase
Series F Preferred Stock granted to the Company's placement agent in connection
with the Closing (the "Series F Placement Warrants"); (vii) 10,000 shares of
Common Stock to be issued to APPT, Inc. in connection with a license agreement
(the "APPT License Shares"); and (viii) up to 7,141,959 shares of Common Stock
reserved for issuance upon conversion of the Shares and upon conversion of
Preferred Stock to be issued pursuant to the Series D Warrants, Series E
Warrants, Bridge Warrants and Series F Placement Warrants. No other classes of
capital stock of the Company are authorized or outstanding. The Company's Bridge
Notes, in the aggregate principal amount of $3,624,062, will be converted into
Series F Shares at the Closing as set forth on Schedule 1.2. The exercise price
of the Series D Warrants is $8.50 per share. The exercise price of the Series E
Warrants is $4.00 per share. The exercise price of the Bridge Warrants is $3.40
per share. The exercise price of the Series F Placement Warrants is 100% of the
Purchase Price.
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(b) Except as set forth in this Agreement, the
Series D Warrants, Series E Warrants, Bridge Warrants, Series F Placement
Warrants, APPT License Shares and options to purchase up to 1,000,000 shares of
Common Stock granted or to be granted under the Company's Stock Option Plan, as
of the date hereof, there are no other outstanding rights, subscriptions,
warrants,calls, preemptive rights, options or other agreements of any kind to
purchase or otherwise to receive from or sell to the Company any of the
outstanding, authorized but unissued, unauthorized or treasury shares of the
capital stock or any other security of the Company, and there is no security of
any kind convertible into such capital stock. The Company has no obligation or
agreement under any contingency whatsoever to issue any equity, debt or other
security, or to pay, perform, guaranty, be responsible for, or satisfy in whole
or in part any debt, security, obligation or agreement incurred or made by an
individual or entity other than the Company, and the Company has no obligation
under any condition or contingency whatsoever to share its income with anyone,
or to make, accrue or set aside any payment or amount measured in any way by any
part or all of its sales or income. The Company is not indebted to any of its
employees in any amount other than for accrued but unpaid compensation.
(c) Upon issuance pursuant to this Agreement,
the Series F Shares will have the rights and preferences set forth in the
Restated Articles of Incorporation and each Series F Share will be, when issued,
initially convertible into one Series F Conversion Share, subject to adjustment
for any dilution event described in the Restated Articles of Incorporation or
similar event. The Series F Shares delivered to the Investor pursuant to this
Agreement, upon payment of the respective purchase prices therefor, shall be
duly authorized, validly issued, fully paid and non-assessable, and the
Conversion Shares have been duly and validly reserved and, upon issuance in
accordance with the conversion provisions of the Series F Shares and the
Restated Articles of Incorporation, shall be duly authorized, validly issued,
fully paid and non-assessable. Subject to the provisions of applicable federal
and state securities laws and compliance with the terms of this Agreement, upon
the consummation of the transactions contemplated hereby, the Series F Shares
and the Series F Conversion Shares will be freely transferable and free and
clear of all liens and encumbrances, other than liens, encumbrances or
restrictions on transfer arising hereunder or under agreements entered into or
actions taken by the Investor.
(d) All of the outstanding shares of Common
Stock and Preferred Stock have been, and all Series F Shares to be issued
pursuant to this Agreement and all Series F Conversion Shares and Conversion
Shares to be issued will be, offered, issued and sold in compliance with all
federal and state securities laws.
3.4 Compliance with Laws. The Company is not in violation of
(a) any applicable order, judgment, injunction, award or decree, or (b) any
federal, state, local or foreign law, ordinance or regulation or any other
requirement of any governmental or regulatory body, court or arbitrator
applicable to the business of the Company except for violations which could not
have a material adverse effect on the business or properties of the Company and
would not be in violation of any such law, ordinance, regulation or other
requirement that has been enacted or
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adopted but is not yet effective if it were effective. The Company has obtained
all licenses, permits, orders and approvals of any federal, state, local or
foreign governmental or regulatory body (collectively, "Permits") that are
material to or necessary for the conduct of the business of the Company. All of
such Permits are in full force and effect, no violations are or have been
recorded in respect of any Permit and no proceeding is pending or, to the best
of the Company's knowledge, threatened to revoke or limit any such Permit.
3.5 Validity of Agreement; Binding Effect. No approval or
consent of any foreign, federal, state, county, local or other governmental or
regulatory body is required in connection with the execution and delivery by the
Company of this Agreement, the issuance of the Series F Shares or the Series F
Conversion Shares and the consummation and performance by the Company of the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement, the issuance of the Series F Shares and the Series F Conversion
Shares and the consummation of the transactions contemplated herein by the
Company have been duly authorized by all necessary corporate action on the part
of the Company, including any action which may have been required to be taken by
the Company's shareholders, and this Agreement, when executed, will constitute
the legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms (except insofar as the enforcement hereof
may be limited by (a) applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting creditors' rights generally from time to
time in effect, (b) equitable principles of general application and (c)
limitations of public policy as applied to Section 9.13 of this Agreement).
3.6 No Breach. The execution and delivery of this Agreement
does not and the issuance of the Series F Shares and Series F Conversion Shares
and consummation of and compliance with the transactions and agreements
contemplated hereby will not conflict with or constitute a violation or breach
of (a) the Restated Articles of Incorporation or By-laws of the Company, (b) any
provision of any material contract or other instrument to which the Company is a
party or by which the Company may be bound or by which the business, assets or
properties of the Company may be affected or secured, (c) any order, writ,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body against or binding upon the Company or upon the securities,
properties or business of the Company or (d) any statute, law, rule, permit or
regulation (including, without limitation, applicable federal and state
securities laws) of any jurisdiction to which the Company is subject.
3.7 Financial Information. In the private placement
memorandum, dated December 6, 1994, as amended or supplemented prior to the date
hereof (the "Private Placement Memorandum"), the Company has furnished the
Investor with (a) its statements of operations of the Company for the three
years ended December 31, 1991, 1992 and 1993, all of which were derived from the
Company's audited Financial Statements (audited by Deloitte & Touche,
independent public accountants, (collectively, the "Annual Financials"), and (b)
an unaudited balance sheet dated as of September 30, 1994, and an unaudited
statement of operations for the period then ended (the "Unaudited Financials";
the Annual Financials and the Unaudited
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Financials are herein referred to collectively as the "Financial Statements").
The Financial Statements are complete and correct, and present fairly the
financial position and assets and liabilities of the Company at their respective
dates and the results of its operations and changes in financial position for
the periods then ended; provided, however, that the Unaudited Financials are
subject to year-end audit adjustments and do not contain all footnotes required
under generally accepted accounting principles.
3.8 Absence of Undisclosed Liabilities and Obligations. The
Company has no liability or obligation, either accrued, absolute, direct, or to
the best of its knowledge, contingent or indirect, or otherwise, whether as
principal, agent, partner, coventurer, guarantor or in any capacity whatsoever
which are not reflected in the Financial Statements, other than (a) obligations
and liabilities incurred in the ordinary course of business that are not
individually or in the aggregate material and (b) obligations under contracts
made in the ordinary course of business that would not be required to be
reflected in the Financial Statements.
3.9 Absence of Certain Changes. Since September 30, 1994,
there has not been any event or condition of any character which has either
singly or in the aggregate materially adversely affected the Company's business
or prospects, including but not limited to:
(a) Any change in the condition (financial or
otherwise), assets, liabilities or business of the Company from that shown on
the Financial Statements;
(b) Any damage, destruction or loss of any of
the properties or assets of the Company (whether or not covered by insurance)
affecting the business or plans of the Company;
(c) Any declaration, setting aside, payment or
other distribution in respect of any of the Company's capital stock, or any
direct or indirect redemption, purchase or other acquisition of any of such
stock by the Company;
(d) Any waiver by the Company of any rights of
value;
(e) Any purchase, sale or transfer of any assets
or properties of the Company, any satisfaction or cancellation of any mortgage
or pledge or any incurring of any debts or claims, or the subjection of any
assets or property of the Company to any lien, charge, security interest or
other encumbrance or any other transaction entered into by the Company other
than in the ordinary course of business;
(f) Any increase in the compensation of any of
the officers, other employees or agents of the Company, including without
limitation, any increase by means of any bonus or pension plan, contract or
other commitment; or
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(g) Any labor trouble, or any event or condition
of any character, affecting the business or plans of the Company.
3.10 Real Property. Schedule 3.0 sets forth a list and
summary description of all evidences of ownership of real property by the
Company, all leases, subleases or other agreements under which the Company is
lessor or lessee of any real property, and of all options held by the Company to
purchase or acquire real property. Such leases, subleases and other agreements
and all options are in full force and effect and the Company has not received
any notice of any default thereunder. No approval or consent of any person is
needed in order that the leases, subleases or other agreements and all options
under or pursuant to which the Company is lessor or lessee of any real property
continue in full force and effect after the Closing. The leasehold interests of
the Company are not subject to any liens or encumbrances and such leasehold
interests enjoy a right of quiet possession as against any liens or encumbrances
on the properties. The Company is not subject to any contractual obligation to
purchase or acquire any interest in real property or to sell or dispose of any
interest in real property, and the Company has not granted any options to
purchase or acquire any interest in real property. The Company has good and
marketable title to all the real property held by it outright and none of such
real property or any of the structure or improvements thereon is in violation of
any applicable building, zoning, environmental or other laws, ordinances or
regulations. None of such real property has been condemned or is the subject of
any eminent domain proceeding and the Company has no grounds to believe that any
such condemnation or eminent domain proceeding is threatened or taking place.
3.11 Tangible Assets and Equipment. The Company owns outright
and has good and marketable title to all of its tangible assets and equipment
including all tangible assets and equipment reflected in the Financial
Statements, in each case free and clear of any lien or encumbrance, subject only
to liens for taxes not yet due or which are being contested in good faith and by
appropriate proceedings and for which adequate reserves have been set aside on
the books of the Company and reflected in the Financial Statements. Each
tangible asset and piece of equipment of the Company is in good operating
condition, ordinary wear and tear excepted, is being and has been properly
serviced and maintained.
3.12 Tax Returns and Audits.
(a) (i) The Company has properly completed and
filed or will file within the time prescribed by law (including extensions of
time approved by the appropriate taxing authority) in correct form all federal,
state and other income, profits, franchise, real property, personal property,
sales, use, employment, payroll, excise and other tax returns and reports
required to be filed by the Company, (ii) all taxes imposed or which may be
imposed or asserted by the U.S. Internal Revenue Service, the State of
California, or any other taxing authority, and all deficiencies, assessments,
additions to tax, penalties and interests, which are due and payable by the
Company through December 31, 1993, or which are attributable to the operations,
business, properties or assets of the Company through that date have been paid
in full, and (iii) all
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monies required to be withheld by the Company from employees for income taxes,
social security and unemployment insurance taxes have been collected or withheld
and either paid to the respective governmental agencies or adequately provided
for by reserves on the books of the Company and reflected in the Financial
Statements, other than (x) returns and reports, the non-filing of which, (y)
deficiencies, assessments, additions to tax, penalties and interest, the
non-payment of which, and (z) withholdings, the non-collection or withholding of
which would not either singly or in the aggregate have a material adverse effect
on the Company.
(b) There are (i) no other tax returns or
reports which are required to be filed by the Company which have not been so
filed and (ii) no unpaid assessments for additional taxes for any fiscal period
or any basis therefor. The Company's tax returns have not been audited by the
U.S. Internal Revenue Service, the State of California or any other taxing
authority to which the Company is subject. The Company has not consented to any
extensions of time to assess any tax.
(c) The Company has successfully revoked its
election to be treated as an S corporation and is presently filing tax returns
and reports to, and is recognized by, the U.S. Internal Revenue Service, the
State of California and all other relevant taxing authorities as a C
corporation.
3.13 Patents and Trademarks. To the best of the Company's
knowledge, it owns or possesses, has access to, or can become licensed on
reasonable terms under all patents, patent applications, inventions, trademarks,
tradenames, servicemarks, copyrights, and other proprietary intellectual
property rights (collectively referred to as "Proprietary Rights") (a) necessary
for the lawful conduct of its business as now conducted and as proposed to be
conducted, and the lack of which would materially and adversely affect its
business or properties, and (b) without any material infringement of or conflict
with the rights of others. All of the Proprietary Rights are free and clear of
any liens or other encumbrances. The Company has not granted any licenses to its
Proprietary Rights and is not aware of any third parties who are infringing or
violating any of same. The Company has not been notified of any disputes or
claims regarding the Proprietary Rights.
3.14 Employees. No key employee of the Company is, or is now
expected to be, in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant or any other common law obligation to a
former employer relating to the right of any such employee to be employed by the
Company because of the nature of the business conducted or to be conducted by
the Company or to the use of trade secrets or proprietary information of others,
and the employment of the Company's employees does not subject the Company or
the Investor to any material liability. There is neither pending nor, to the
Company's knowledge threatened, any actions, suits, proceedings or claims, or
any basis therefor or thereof with respect to any contract, agreement, covenant
or obligation referred to in the preceding sentence. The Company is not a party
to, or subject to, any obligation, liability or commitment with respect to any
written employment, compensation, consulting, severance pay or similar agreement
and any and all oral employment, compensation, consulting or similar commitments
are terminable at will and without notice by the Company and without payment or
penalty. The Company is not a
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<PAGE> 17
party to any collective bargaining or other union contracts and its employees
are not represented by any union.
3.15 Confidentiality. Each person employed by the Company
or hired as a consultant to the Company who has access to any Proprietary Rights
or other proprietary information of or about the Company has executed and
delivered to the Company an agreement pursuant to which the employee or
consultant agrees to maintain the confidentiality of all Proprietary Rights or
other proprietary information and to assign the Company any inventions the
employee or consultant makes on the job.
3.16 Litigation.
(a) There are no legal, administrative or other
proceedings, investigations or inquiries, or other asserted claims, judgments,
injunctions or restrictions, pending or outstanding or, to the best knowledge of
the Company, threatened against the Company, any of its properties or business,
or against or involving any of the Company or the officers or directors of the
Company, or any action related to this Agreement, the issuance of the Series F
Shares or any of the transactions contemplated herein that might if determined
adversely to the Company, either singly or in the aggregate, result in any
material adverse change in the business, prospects, operations, properties or
condition (financial or otherwise) of the Company or in any material liability
on the part of the Company. To the best of the Company's knowledge, there is no
fact, event or circumstance that may give rise to any suit, action, claim,
investigation or proceeding that would be required to be set forth on Schedule
3.0 if currently pending or threatened. There are no actions, suits or claims or
legal, administrative or arbitration proceedings pending or to the best of the
Company's knowledge threatened that would give rise to any right of
indemnification on the part of any director or officer of the Company or the
heirs, executors or administrators of such director or officer against the
Company.
(b) The Company has not admitted in writing its
inability to pay its debts generally as they become due, filed or consented to
the filing against it of a petition in bankruptcy or a petition to take
advantage of any insolvency act, made an assignment for the benefit of
creditors, consented to the appointment of a receiver for itself or for the
whole or any substantial part of its property, or had a petition in bankruptcy
filed against it, been adjudicated a bankrupt, or filed a petition or answer
seeking reorganization or arrangement under the federal bankruptcy laws or any
other law or statute of the U.S. or any other jurisdiction.
3.17 ERISA. No employee pension benefit plan, within the
meaning of Section 3(a) of the Employment Retirement Income Security Act of
1974, as amended ("ERISA"), is currently maintained or sponsored by the Company
and the Company does not contribute to,
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<PAGE> 18
and is not obligated to contribute to, and none of the employees of the Company
is a participant in, any multiemployer plan within the meaning of Section 400(a)
of ERISA.
3.18 Environmental Compliance Matters.
(a) There is no soil or ground water
contamination by any "Hazardous Material" for which the Company is or may be
liable. "Hazardous Material" shall mean any flammables, asbestos, explosives,
radioactive materials, hazardous wastes, toxic substances or related materials,
including without limitation any substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
or "toxic substances" under any applicable federal, state or local laws, rules,
regulations or orders or which federal, state or local laws, rules, regulations
or orders have designated as potentially dangerous to public health and/or
safety when present in the environment;
(b) The Company has stored, used and disposed
of "Hazardous Material" in material compliance with applicable laws; and
(c) There are no (i) enforcement, cleanup,
removal or other governmental or regulatory actions instituted or completed or,
to the best of the Company's knowledge, threatened against the Company pursuant
to any applicable federal, state or local laws, ordinances or regulations
relating to any Hazardous Material, (ii) claims made or, to the best of the
Company's knowledge, threatened by any third party against the Company with
respect to or because of its property relating to damage, contribution, cost
recovery compensation, loss or injury resulting from any Hazardous Material or
(iii) conditions on any of the properties of the Company that could cause such
properties or any part thereof to be subject to any restrictions on the
ownership, occupancy transferability or use of any of such properties under any
Hazardous Material law.
3.19 Use of Proceeds. The net proceeds to be paid to the
Company at the Closing are to be used (i) for developing manufacturing
infrastructure, (ii) to capitalize the Company's subsidiary in Japan, (iii) to
repay debt, and (iv) to provide working capital.
3.20 Registration Rights. Except as provided for in this
Agreement, the Company is not under any obligation to register under the
Securities Act of 1933, as amended (the "Act"), any of its currently outstanding
securities or any of its securities which may hereafter be issued.
3.21 Escrowed Certificates of Founder Common Stock. The
certificates for all shares of Common Stock held by the Founders have been
delivered to Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, in the
form required by, and in accordance with the terms of, the Common Stock
Restriction Agreements executed by and between the Company and the Founders (the
"Restriction Agreements").
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3.22 Disclosure. The Company has provided the Investor with a
copy of its Private Placement Memorandum and any amendments or supplements
thereto. In addition, the Company has fully provided the Investor with all the
information which such Investor has requested for deciding whether to purchase
the Series F Shares and all information which the Company believes is reasonably
necessary to enable such Investor to make such decision. Neither this Agreement
nor the Private Placement Memorandum, any other statements, exhibits, schedules
or certificates made or delivered in connection herewith or therewith contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements herein or therein not misleading. With respect
to the financial projections of the Company (the "Financial Projections"), and
any projections, forecasts, and expressions of opinions or predictions contained
in the Private Placement Memorandum, the Company represents only that such
projections, forecasts, and expressions of opinions or predictions were made in
good faith and after careful consideration and due inquiry and that the Company
believes there is a reasonable basis therefor. The Company does not represent or
warrant that the results, sales or orders set forth in the Financial Projections
will be achieved.
3.23 No Other Agreements. Other than the Confidentiality
Agreement, pursuant to which the Investor received the Private Placement
Memorandum, the Purchaser's Certificate and the escrow agreement, pursuant to
which the Investor's funds have been escrowed pending the closing (the "Escrow
Agreement"), the Company has not entered into any agreement with the Investor
regarding the investment by the Investor in the Company, except as contemplated
hereby.
3.24 Claims of the Founders. The Company represents to the
Investor that the Founders have transferred to the Company all of their rights
with respect to any of the Company's Proprietary Rights (and have not retained
as their own property any invention or technology pertaining to the business of
the Company) and they have relinquished all claims to any Proprietary Rights,
including without limitation, any rights to any payments therefor, other than
their rights as employees and/or shareholders of the Company.
3.25 Insurance. The Company maintains insurance with reputable
insurance companies, on so much of its properties, to such an extent and against
such risks, as reasonably prudent persons engaged in similar businesses would
customarily insure properties of a similar character.
4. Representations and Warranties of the Investor. Each Investor
severally and not jointly hereby represents and warrants to the Company as
follows:
4.1 Organization and Standing. If the Investor is not an
individual, the Investor is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation.
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4.2 Authorization and Approval of and Ability to Carry Out
This Agreement. The Investor has duly authorized the execution and delivery of
this Agreement and the transactions contemplated hereby. If the Investor is not
an individual, the Investor has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
herein. This Agreement constitutes the legal, valid and binding obligation of
the Investor, to the extent provided for herein, enforceable in accordance with
its terms (except insofar as the enforcement hereof may be limited by (a)
applicable bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting creditors' rights generally from time to time in effect, (b) by
equitable principles of general application, and (c) limitations of public
policy as applied to Section 9.13 of this Agreement).
4.3 Investment Representation. The Investor is purchasing the
Series F Shares (including, for purposes hereof, the Series F Conversion Shares)
for its own account without a view to any distribution thereof in violation of
the Act, subject, nevertheless, to any requirement of law that the disposition
of its property shall at all times be within its control. The Investor
represents that it (a) is an "Accredited Investor" as that term is defined under
Rule 501 under the Act, (b) is experienced in evaluating and making investments
of the type contemplated by this Agreement and (c) is financially able to bear
the risks of the investment. The Investor acknowledges that the Company is
issuing and selling the Series F Shares in reliance upon the exemption from
registration provided in Regulation D of the Act and is relying upon these
representations, and agrees that the Series F Shares may only be transferred if
registered under the Act or pursuant to an exemption from such registration
requirements. The Investor understands that Rule 144 promulgated under the Act
is not presently available with respect to the Series F Shares or Series F
Conversion Shares, and that absent registration of the Series F Shares or Series
F Conversion Shares under the Act, compliance with an applicable exemption under
the Act, is required for a sale or other disposition of the Series F Shares or
Series F Conversion Shares. The Investor agrees that legends in substantially
the following forms may be placed on any certificates evidencing its Series F
Shares or Series F Conversion Shares and any other securities issued in respect
of Series F Shares or Series F Conversion Shares, upon any dilution event
described in the Restated Articles of Incorporation or similar event:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"). The shares
have been acquired for investment and may not be pledged or
hypothecated, and may not be sold or transferred except in compliance
with the registration requirements of the Act, or upon delivery to
Cymer Laser Technologies of a written opinion of counsel to the
registered holder, in form and substance satisfactory to said
corporation and its counsel, that registration under the Act is not
required."
"The shares represented by this certificate are subject to certain
restrictions upon transfer and rights of first refusal as set forth in
an agreement between the corporation and the registered holder, a copy
of which is on file at the principal office of the corporation."
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The Investor understands that, so long as the legend remains on the certificates
representing the Series F Shares or Series F Conversion Shares, the Company may
maintain appropriate "stop transfer" orders with respect to the Series F Shares
or Series F Conversion Shares on its books and records and with its registrar
and transfer agent. Notwithstanding the foregoing, such Investor shall be
entitled to replacement certificates without such legend if permitted under Rule
144 or upon presentation by such Investor to the Company of a written opinion of
counsel reasonably satisfactory in form and substance to the Company and its
counsel that the removal of such legend is not in violation of either the Act
and the rules and regulations thereunder or applicable provisions of state
securities law.
5. Company's Affirmative Covenants. Except as hereinafter
provided, the Company hereby covenants that from and after the date of this
Agreement and so long as the Investor holds beneficially or of record any of the
Series F Shares or Series F Conversion Shares:
5.1 Corporate Existence. The Company will maintain its
corporate existence and use best efforts to comply with all laws, government
regulations, rules and ordinances and judicial orders, judgments and decrees
applicable and material to the Company and its subsidiary, their business and
properties.
5.2 Taxes and Liens. The Company will (a) punctually pay and
discharge or cause to be paid and discharged before the same shall become
delinquent (i) all taxes, assessments and governmental charges lawfully imposed
upon the Company, or any of its property, or upon the income and profits
thereof, and (ii) all lawful claims for labor, materials and supplies which, if
unpaid, might result in a lien upon the property of the Company, (b) withhold
all monies required to be withheld by the Company from employees for income
taxes, social security and unemployment insurance taxes and (c) complete and
file, on a timely basis, all tax returns and reports required to be filed by it
(including, without limitation, returns and reports of the type set forth in
Section 3.12(a)(i)).
5.3 Maintain Property. The Company will cause all material
properties used or useful in the conduct of its business to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs as in the judgment of
the Company may be necessary so that business carried on in connection therewith
may be properly and advantageously conducted.
5.4 Financial Statements and Reports.
(a) The Company will keep adequate and accurate
books of account and will prepare the financial statements referred to herein,
in accordance with generally accepted accounting principles, consistently
applied.
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(b) Until the Initial Public Offering (as herein
defined), the Company shall furnish to each Series F Significant Holder, as soon
as practicable (and in any event at least thirty (30) days) prior to the
beginning of each fiscal year, an annual projected budget for the following
fiscal year, and an annual operating plan and strategic plan (collectively, the
"Plan") as approved by the Board.
(c) Until the Initial Public Offering (as herein
defined), the Company shall furnish to each holder of Series F Shares or Series
F Conversion Shares as soon as practicable (and in any event within ninety (90)
days) after the end of each fiscal year of the Company, an audited balance sheet
of the Company as of the end of the year and the related statement of
operations, retained earnings or deficit and changes in the financial position
of the Company as of the end of the year setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year,
prepared in accordance with generally accepted accounting principles
consistently applied and accompanied by an audit report and opinion in respect
of such financial statement (consolidated if applicable) of the independent
certified public accountants selected by the Company (which shall be a
nationally recognized firm of accountants), and such report and opinion shall be
unqualified as to the scope of the audit.
5.5 Confidentiality. The Company shall, after the date hereof,
cause each person employed by, or retained as a consultant to, the Company who
has access to any Proprietary Rights or other proprietary information of or
about the Company to execute an Employee Agreement, in the case of an employee,
and a Nondisclosure Agreement, in the case of a consultant.
5.6 Series F Conversion Shares. The Company shall reserve and
keep available from its authorized shares of Common Stock, solely for the
purpose of issuance upon conversion of the Series F Shares, such number of
Series F Conversion Shares as shall then be issuable upon the conversion of all
of the Series F Shares, taking into account any anti-dilution rights of the
holders thereof.
5.7 Access to Books and Records. Until the Initial Public
Offering (as defined herein), and subject to the provisions of Section 6, each
Series F Significant Holder and its agents shall (a) have access upon reasonable
notice to the Company, during usual business hours, and as often as may
reasonably be desired, to the accounts, books and records of the Company and
shall be entitled to examine, make copies and extract therefrom, and from any
other items, such information relating to the Company as each such Investor
shall reasonably specify and (b) be permitted, upon reasonable notice to the
Company to visit and inspect any of the properties of the Company.
Notwithstanding any provision to the contrary, this Section 5.7 shall not
supersede any prior confidentiality agreement or restriction on access between
the Company and any Investor and such restrictions shall remain in full force
and effort.
5.8 Right of First Offer.
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(a) The Company hereby grants to the Significant
Holders the right of first offer to purchase, pro-rata, all (or any part) of New
Securities (as defined in this Section 5.8) which the Company may, from time to
time, propose to sell and issue. A Significant Holder's pro-rata portion, for
purposes of this Agreement, is the ratio of (x) the number of the shares of
Common Stock and Series A, Series B, Series C, Series D, Series E and Series F
Preferred Stock, determined on an as-converted basis, held by such Significant
Holder at the time to (y) the total number of shares of Common Stock and
Preferred Stock (determined on an as-converted basis) of the Company issued and
outstanding at such time. Each Significant Holder shall have a right of
over-allotment such that if any Significant Holder fails to exercise his right
hereunder to purchase his pro-rata portion of New Securities, the other
Significant Holders may purchase the non-purchasing Significant Holder's portion
on a pro-rata basis within five (5) days from the date it receives notice from
the Company that a non-purchasing Significant Holder has failed to exercise its
right hereunder to purchase its pro-rata share of New Securities. This right of
first offer shall be subject to the following provisions:
(b) "New Securities" shall mean any capital
stock of the Company whether now authorized or not, and rights, options or
warrants to purchase capital stock, and securities of any type whatsoever that
are, or may become, convertible into capital stock; provided, however, that the
right of first offer shall apply at the time of issuance of the right, warrant
or option and not to the exercise thereof; provided, further, that the term "New
Securities" does not include: (i) the Shares or Conversion Shares; (ii) 15,000
shares of Series D Preferred Stock issuable upon the exercise of the Series D
Warrants; (iii) 16,000 shares of Series E Preferred Stock issuable upon the
exercise of the Series E Warrants; (iv) 399,903 shares of Series F Preferred
Stock issuable upon the exercise of the Bridge Warrants; (v) [450,000] shares of
Series F Preferred Stock issuable upon the exercise of the Series F Placement
Warrants; (vi) shares of Common Stock issuable upon conversion of the Preferred
Stock, or such securities as may be substituted for the Preferred Stock,
issuable upon the exercise of the warrants listed in (ii) through (v); (vii)
securities offered to the public pursuant to a registration statement filed
pursuant to the Act; (viii) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially all the
assets or other reorganization whereby the Company owns not less than 51% of
the voting power of such corporation; (ix) any borrowings, direct or indirect,
from financial institutions or other persons by the Company, whether or not
presently authorized, including any type of loan or payment evidenced by any
type of debt instrument, provided such borrowings do not have any equity
features, including warrants, options or other rights to purchase capital stock,
and are not convertible into capital stock of the Company; (x) 1,000,000 shares
of Common Stock reserved for issuance to Founders or employees pursuant to the
exercise of options granted or to be granted; (xi) warrants issued in connection
with the leasing of equipment by the Company which have been approved by the
Board; (xii) any security if holders of at least sixty-six and two thirds
percent (66 2/3%) of the outstanding Shares (and outstanding Conversion Shares),
voting as a single class, (or any combination of such Shares and such Conversion
Shares) consent in writing that the right of first offer shall not apply to such
securities; or (xiii) issuances of up to a cumulative number of 50,000 shares of
Common Stock or
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Preferred Stock from the date of this Agreement which are not excluded by any of
the foregoing exceptions.
(c) In the event the Company proposes to issue
New Securities, it shall give each Significant Holder written notice of its
intention, describing the type of New Securities, the price and the general
terms upon which the Company proposes to issue the same. Each Significant Holder
shall have thirty (30) days from the date of receipt of any such notice to agree
to purchase the Significant Holder's pro-rata share of such New Securities for
the price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
(d) In the event any Significant Holders fail
to exercise the right of first offer with respect to such Significant Holder's
full pro-rata portion of the New Securities proposed to be sold by the Company
within said thirty (30) day period and after the expiration of the five (5) day
period for the exercise of the over-allotment provisions of this Section 5.8,
the Company shall have 120 days thereafter to sell or enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be closed,
if at all, within 120 days from the date of said agreement), to sell the New
Securities respecting which the Significant Holders' options were not exercised,
at a price and upon general terms no more favorable to the purchasers thereof
than specified in the Company's notice. In the event the Company has not sold
within said 120-day period or entered into an agreement to sell the New
Securities within said 120-day period (or sold and issued New Securities in
accordance with the foregoing within 120 days from the date of said agreement),
the Company shall not thereafter issue or sell any New Securities, without first
offering such securities to the Significant Holders in the manner provided
above.
(e) The right of first offer set forth in this
Section 5.8 is nonassignable, except that such right is assignable (i) by each
Significant Holder to any Person (as defined in Section 14.1) controlling,
controlled by or under common control with such Significant Holder, (ii) between
and among any of the Significant Holders and (iii) upon the death of a
Significant Holder, such right shall pass to the beneficiaries under the
deceased Significant Holder's last will and testament or to the distributees of
the deceased Significant Holder's estate.
5.9 Right of First Refusal and/or Repurchase Agreement. It
shall be a condition to any issuance of shares of Common Stock (other than
shares of Common Stock issued upon conversion of the Preferred Stock) including,
without limitation, Common Stock to officers or employees of the Company
pursuant to an employee stock purchase, stock option or other benefit or
incentive plan established by the Company, that the Company will cause the
person to whom the Common Stock is to be issued to execute and deliver to the
Company an appropriate right of first refusal agreement and/or a repurchase
agreement (in the event that the shares of Common Stock being issued are subject
to absolute prohibitions on transfer that lapse over time) in a form approved by
the Board which shall provide, among other things, that the Significant Holders
shall
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have the right to exercise the Company's rights thereunder in the event the
Company shall fail to do so.
5.10 Insurance. The Company will insure and keep insured, with
reputable insurance companies, so much of its properties, to such an extent and
against such risks, as reasonably prudent persons engaged in similar businesses
would customarily insure properties of a similar character or as otherwise
approved by the Board.
5.11 Notice of Record Dates.
(a) In the event of any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, the Company shall mail to each holder of Series F Shares, at
least ten (10) days prior to such record date, specified herein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution.
(b) In the event of (i) any consolidation or
merger to which the Company is a party and for which approval of any
shareholders of the Company is required, (ii) the conveyance or transfer of all,
or substantially all, of the properties and assets of the Company, (iii) any
capital reorganization or any reclassification of the Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or (iv) the
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the Company shall mail to each holder of Series F Shares, at least ten (10) days
prior to the applicable record date, a notice specifying the date on which such
record is to be taken for the purpose of such transaction.
5.12 Employee Stock Purchase Agreement. The Company will not
issue any of its capital stock, or grant an option to purchase any of its
capital stock, to any Founder, employee, or officer of the Company (other than
any options or grants already made to any Founders or employees of the Company)
except pursuant to a plan adopted or an issuance approved by the Board.
5.13 Securities Law Filings. The Company shall make any and
all filings necessary (whether before or after the Closing) in connection with
the offer, issuance and sale of the Series F Shares and the issuance of the
Series F Conversion Shares under the securities or blue sky laws of California
or any other state where necessary, and any federal laws.
5.14 Lapse of Covenants. Except as otherwise specifically
provided in this Section 5, the covenants contained herein and further
agreements contained in Section 7 of this Agreement shall lapse and be of no
further force and effect upon the consummation by the Company of an Initial
Public Offering. "Initial Public Offering" for purposes of this Agreement, shall
be defined as the receipt by the Company of the proceeds of a bona fide firm
commitment
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underwritten public offering registered under the Act, which offering
does not exclusively relate to securities under an employee stock option, bonus
or other compensation plan and at a price of not less than $6.00 per share of
Common Stock (as equitably adjusted for any dilutive event set forth in the
Restated Articles of Incorporation or other similar event) and net proceeds to
the Company of not less than $10,000,000.
5.15 Information as to Competitors and Proprietary
Information. The Company shall not provide to the Investor or any Prior Investor
any confidential information concerning the affairs of any other Investor or
Prior Investor disclosed to the Company prior to or subsequent to the execution
of this Agreement.
5.16 Technological Expertise. The Company shall use its best
commercial efforts to maintain and improve its current level of technological
expertise through appropriate research and development and use its reasonable
commercial efforts to retain key employees.
6. Confidentiality. The Investor agrees to maintain in
confidence all books, records, documents or other information received from the
Company under this Agreement, not to disclose the same to third parties, not to
use such information other than for the purposes of this Agreement and to
obligate all of its personnel and agents having access to such information to
adhere to this obligation of confidentiality; provided, however, that such
information may be (a) disclosed to the extent that disclosure is required
pursuant to any applicable law, regulation, judicial process or order, (b)
disclosed or used when the information has been discovered or developed by the
Investor independently of the Company and such discovery or development is
documented in writing concurrently with such discovery or development, which
documentation shall be provided to the Company upon request, or (c) disclosed or
used when the information is in the public domain through no fault of the
Investor.
7. Further Agreements.
7.1 Right of First Refusal and Repurchase with Respect to
Founder Stock. In connection with the exercise of incentive stock options
granted to each of the Founders and to certain of the Company's employees (the
"Optionees"), each of the Founders and the Optionees is required to execute a
Restricted Stock Purchase Agreement (the "Restricted Stock Purchase
Agreements"). Pursuant to the Restricted Stock Purchase Agreements and the
Restriction Agreements, the Company has the right of first refusal in connection
with the sale by the Founders and the Optionees of any vested shares of Common
Stock and the right to repurchase any unvested shares of Common Stock. Pursuant
to an assignment provision in the Restriction Agreements and the assignability
of its rights in the Restricted Stock Purchase Agreements, the Company hereby
agrees, that if on any occasion it elects not to exercise any of its rights of
first refusal or repurchase under the Restricted Stock Purchase Agreements or
the Restriction Agreements or to exercise such rights only with respect to a
portion of the shares to which they are applicable, that it shall so notify the
Significant Holders in writing (the "Company Notice"), within ten (10) days
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of receipt of a notice of transfer from the Founder or Optionee, of all of the
details of the notice or event which triggered the Company's right of first
refusal or repurchase, and the Significant Holders shall thereafter have all of
the rights of the Company to exercise on a pro-rata basis the rights of first
refusal and repurchase granted thereunder to the Company with respect to all of
the shares of Common Stock to which the Company's rights apply or with respect
to that portion of the shares of Common Stock that the Company has elected not
to purchase, on the same terms granted to the Company pursuant to the Restricted
Stock Purchase Agreements or the Restriction Agreements, as applicable. A
Significant Holder's pro rata portion, for the purposes of this Section 7.1, is
the ratio of (x) the number of shares of Preferred Stock (determined on an as
converted basis) held by such Significant Holder at the time to (y) the total
number of shares of Preferred Stock (determined on an as converted basis) of the
Company held by all Significant Holders. Each Significant Holder shall deliver a
notice to the Company stating the number of shares of Common Stock which the
Significant Holder desires to purchase pursuant to this Section 7.1 or to sell
pursuant to Section 7.2 within ten (10) days of its receipt of the Company
Notice. The Company shall notify the Significant Holders (the "Non-Exercise
Notice") of any Significant Holder's election not to exercise, or to exercise
only in part, its rights under Sections 7.1 or 7.2, and each Significant Holder
shall have a right of over-allotment to purchase or sell the non- exercising
Significant Holder's portion on a pro-rata basis within five (5) days from the
date it receives the Non-Exercise Notice. Notwithstanding anything to the
contrary contained in the Restriction Agreements or in the Restricted Stock
Purchase Agreements, the notice provisions and time periods set forth in
Sections 7.1 and 7.2 shall control in the event the Company assigns its rights
under the Restriction Agreements or Restricted Stock Purchase Agreements to the
Significant Holders.
7.2 Co-Sale Agreement on Sale of Founder Stock.
Notwithstanding anything to the contrary contained in the Restriction Agreements
or in the Restricted Stock Purchase Agreements, in the event the Company does
not elect to purchase any or all of a Founder's shares of Common Stock subject
to the rights of first refusal set forth in the Restriction Agreements and in
the Restricted Stock Purchase Agreements, and in the event the Significant
Holders do not elect to purchase any or all shares of Common Stock subject to
their rights of first refusal as set forth in Section 7.1 above, then, with
respect to any shares of a Founder's Common Stock not purchased by the
Significant Holders, the Founder hereby grants to the Significant Holders the
right to participate, pro rata (based upon the relative aggregate cost of each
holder's Preferred Stock), in the sale of 50% of such shares in accordance with
the following provisions of this Section 7.2:
(a) Each Significant Holder may elect to
participate, pro rata, in the proposed sale of shares of Common Stock which the
selling Founder desires to sell on the same terms as set forth in the Founder's
notice of sale which triggered the right of first refusal, upon delivery of
notice of election to the selling Founder within the time prescribed for
exercising the Significant Holder's right of first refusal with respect to the
selling Founder's shares of Common Stock.
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(b) In the event all of the Significant Holders
fail to exercise the right of co-sale within the time period allotted therefor,
the selling Founder shall have the right to sell the shares of Common Stock
which were subject to the right of co-sale on the same terms as those set forth
in the notice triggering the right of first refusal; provided, however, that the
sale is consummated within the period of time provided for in the Restriction
Agreements or the Restricted Stock Purchase Agreements, as applicable.
(c) In the event any or all of the Significant
Holders elect to exercise their rights of co-sale in a manner consistent with
Section 7.2(a), the selling Founder agrees to reduce the number of shares of
Common Stock to be sold by him, and to sell, for the account of the selling
Significant Holders that amount of Common Stock tendered for sale by the
Significant Holders. Each Significant Holder shall have a right of
over-allotment such that if any Significant Holder fails to exercise such
Significant Holder's rights hereunder, the other Significant Holders may sell on
a pro-rata basis an amount of Shares equal to the number of Shares which the
non-exercising Significant Holder would have been permitted to sell. In no event
shall the total number of shares of Common Stock sold by the Significant Holders
pursuant to their right of co-sale exceed fifty percent (50%) of the total
number of shares of Common Stock actually being sold by the selling Founder,
other than to Significant Holders pursuant to Section 7.1, in any given sales
transaction.
8. Company's Right of First Refusal.
8.1 Right of First Refusal. Prior to making any sale or
transfer of Voting Stock of the Company, as defined below, the Investor shall
give the Company the opportunity to purchase such Voting Stock in the following
manner:
(i) The Investor shall give notice (the
"Transfer Notice") to the Company in writing of such intention, specifying the
amount of Voting Stock proposed to be sold or transferred, the proposed price
per share therefor (the "Transfer Price") and the other material terms upon
which such disposition is proposed to be made.
(ii) The Company shall have the right,
exercisable by written notice given by the Company to the Investor within thirty
(30) days after receipt of such Transfer Notice, to purchase all of the Voting
Stock specified in such Notice for cash per share equal to the Transfer Price.
(iii) If the Company exercises its right
of first refusal hereunder, the closing of the purchase of the Voting Stock with
respect to which such right has been exercised shall take place within thirty
(30) calendar days after the Company gives notice of such exercise, which period
of time shall be extended in order to comply with applicable laws and
regulations. Upon exercise of its right of first refusal, the Company and the
Investor shall be legally obligated
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to consummate the purchase contemplated thereby and shall use their best efforts
to secure any approvals required in connection therewith.
(iv) If the Company does not exercise
its right of first refusal hereunder within the time specified for such
exercise, the Investor shall be free, during the period of 90 calendar days
following the expiration of such time for exercise, to sell the Voting Stock
specified in such Transfer Notice on terms no less favorable to the Investor
than the terms specified in such Notice.
The restrictions set forth in this Section 8.1 shall lapse and be of no further
force and effect upon the consummation by the Company of an Initial Public
Offering (as defined in Section 5.14). The term "Voting Stock" means the Common
Stock, Preferred Stock and any other securities issued by the Company having the
ordinary power to vote in the election of directors of the Company (other than
securities having such power only upon the happening of a contingency).
8.2 Tender Offer Sale. Prior to making any sale or
exchange of Voting Stock in response to a tender or exchange offer, the Investor
shall give the Company the opportunity to purchase such Voting Stock in the
following manner:
(i) The Investor shall give notice (the
"Tender Notice") to the Company in writing of such intention no later than 10
calendar days prior to the latest time by which Voting Stock must be tendered in
order to be accepted pursuant to such offer or to qualify for any proration
applicable to such offer (the "Tender Date"), specifying the amount of Voting
Stock proposed to be tendered. For purposes hereof, a tender offer to purchase
Voting Stock shall be deemed to be an offer at the price specified therein,
without regard to any provisions thereof with respect to proration or conditions
to the offeror's obligation to purchase (assuming such conditions are not
impossible of performance when the offering is made, without giving effect to
the Company's right of first refusal).
(ii) If the Tender Notice is given, the
Company shall have the right, exercisable by giving notice to the Investor at
least two calendar days prior to the Tender Date, to purchase all or any part of
the Voting Stock specified in the Tender Notice for cash. If the Company
exercises such right by giving such notice, the closing of the purchase of such
Voting Stock shall take place within ninety (90) days after the Company gives
notice of the exercise of its right of first refusal hereunder; provided,
however, that if the purchase price specified in the tender offer includes any
property other than cash, the value of any property included in the purchase
price shall be jointly determined by a nationally recognized investment banking
firm selected by the Company and a nationally recognized investment banking firm
selected by the Investor or, in the event such firms are unable to agree, a
third nationally recognized investment banking firm to be selected by such two
firms. For this purpose:
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(x) The parties shall use their
best efforts to cause any determination of the value of any securities included
in the purchase price to be made within three business days after the date of
delivery of the Tender Notice. If the firms selected by the Investor and the
Company are unable to agree upon the value of any such securities within such
three-day period, the firms shall promptly select a third firm whose
determination shall be conclusive.
(y) The parties shall use their
best efforts to cause any determination of the value of property other than
securities to be made within seven business days after the date of delivery of
the Tender Notice. If the firms selected by the Investor and the Company are
unable to agree upon a value within such seven-day period, the firms shall
promptly select a third firm whose determination shall be conclusive.
The purchase price to be paid by the Company pursuant to this Section 8.2 shall
be (x) if such tender offer is consummated, the purchase price that the Investor
would have received if it had tendered the Voting Stock purchased by the Company
and all such Voting Stock had been purchased in such tender offer, including any
increases in the price paid by the tender offeror, after exercise by the Company
of its right of first refusal hereunder, or (y) if such tender offer is not
consummated, the highest price offered pursuant thereto, in each case with
property, if any, to be valued as aforesaid.
(iii) If the Company does not exercise
such right by giving such notice, then the Investor shall be free to accept for
all its Voting Stock the tender offer with respect to which the Tender Notice
was given.
8.3 Assignment of Rights. In the event that the Company elects
to exercise a right of first refusal under this Section 8, the Company may
specify in its notice of intention to exercise such right another person as its
designee to purchase the Voting Stock to which such notice relates. If the
Company shall designate another person as the purchaser pursuant to this Section
8, the giving of notice of acceptance of the right of first refusal by the
Company shall constitute a legally binding obligation of the Company to complete
such purchase if such person shall fail to do so.
9. Restrictions on Transferability of Shares; Compliance with the
Act.
9.1 Restrictions on Transferability. In addition to the
restrictions on transfer set forth in Sections 7 and 8, the Shares and the
Conversion Shares shall not be sold, assigned, transferred or pledged, except
upon the conditions specified in this Section 9, which conditions are intended
to insure compliance with the provisions of the Act and in the case of
Conversion Shares being sold pursuant to a Registration Statement, to assist in
an orderly distribution. Each Investor will cause any proposed purchaser,
assignee, transferee or pledgee of Shares or Conversion Shares held by that
Investor to agree to take and hold those Shares or Conversion Shares subject to
the provisions and upon the conditions specified in this Section 9.
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9.2 Certain Definitions. As used in this Section 9, the
following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act.
"Holder" shall mean any holder of Registrable
Securities (including any Transferee (as herein defined)) which have not been
sold to the public.
"Initiating Holders" shall mean any Holders who in
the aggregate hold 50% or more of the outstanding Registrable Securities.
The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean: (a) the
Conversion Shares (whether issued or issuable); (b) any Common Stock or other
securities of the Company issued or issuable in respect of the Conversion Shares
(or any other securities of the Company issued in respect of the Shares) on
account of any stock split, reverse stock split, stock dividend, dilution event
described in the Restated Articles of Incorporation or other similar event; (c)
any Common Stock issuable upon conversion of the Series A Preferred Stock
received upon exercise of the Series A Warrants; (d) any Common Stock issuable
upon conversion of the Series B Preferred Stock received upon exercise of the
Series B Warrants; (e) any Common Stock issuable upon conversion of the Series D
Preferred Stock received upon exercise of the Series D Warrants; (f) any Common
Stock issuable upon conversion of the Series E Preferred Stock received upon
exercise of the Series E Warrants; (g) any Common Stock issuable upon conversion
of the Series F Preferred Stock issuable upon conversion of the Bridge Warrants;
(h) any Common Stock issuable upon conversion of the Series F Preferred Stock
received upon exercise of the Series F Placement Warrants; and (i) any Shares or
Conversion Shares or Common Stock acquired pursuant to the right of first offer
set forth in Section 5.8 or the right of first refusal and repurchase with
respect to Founder Stock set forth in Section 7.1 or pursuant to any right to
purchase stock from any employee pursuant to an agreement provided for by
Section 5.9; provided, however, that shares of Common Stock or other securities
shall only be treated as Registrable Securities if and so long as (1) they have
not been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, (2) they have not been sold in
a transaction exempt from the registration and prospectus delivery requirement
of the Act under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
each sale.
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"Registration Expenses" shall mean all expenses
incurred by the Company in compliance with Sections 9.4, 9.5 and 9.6 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities
of the Company required to bear or bearing the legend set forth in Section 4.3
hereof.
"Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities and all fees and disbursements of counsel for any Holder.
9.3 Notice of Proposed Transfers. The transferee of each
certificate representing Restricted Securities (a "Transferee") by acceptance
thereof agrees to comply in all respects with the provisions of this Agreement
and shall have all the rights of an Investor hereunder with respect to the
Restricted Shares. Prior to any proposed sale, assignment, transfer or pledge of
any Restricted Securities (other than under circumstances described in Sections
9.4, 9.5 and 9.6 hereof), the Holder thereof shall give written notice to the
Company of such Holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed sale, assignment,
transfer or pledge, in sufficient detail, and shall be accompanied (except in
transactions in compliance with Rule 144) by either (a) a favorable written
opinion of counsel reasonably satisfactory in form and substance to the Company
and its counsel, to the effect that the proposed transfer of the Restricted
Securities may be effected without registration under the Act, or (b) a "no
action" letter from the Commission to the effect that the distribution of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
Holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. Not withstanding the foregoing, Holders of Restricted
Securities and their transferees shall be permitted to transfer such Restricted
Securities without complying with the provision of this Section to (a) any
Person controlling, controlled by or under common control with such Holder or
(b) to any other Holder of Restricted Securities. Each certificate evidencing
the Restricted Securities transferred as above provided shall, subject to the
provisions of Section 4.3, bear the appropriate restrictive legend set forth
therein.
9.4 Demand Registration Rights.
(a) On two occasions, upon the demand, in
writing, of Initiating Holders that the Company effect a registration with
respect to all or any part of the Registrable Securities, the Company shall give
written notice of such demand within ten (10) days to all other Holders. The
notice shall advise such Holders of their right to participate in such demand
registration,
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which right may be exercised by each such Holder giving written notice to the
Company of its intention to so participate within twenty (20) days of receipt of
such notice from the Company. The Company will use its best efforts to prepare,
file and process a registration statement and any amendments or supplements
required to be filed to ensure that such registration statement is declared
effective and remains effective under the Act, to permit the Holders or any of
them, or an underwriter on behalf of any of them, to offer and sell to the
public the number of Registrable Securities for which demand registration rights
are exercised hereunder. The Company shall file the aforesaid registration
statement as soon as reasonably practicable, and in any event, within sixty (60)
days following receipt of such written request. The Company shall use its best
efforts to cause such registration statement to become and remain effective
until the earlier of the sale of all of the Registrable Securities included in
the registration statement or one hundred twenty (120) days from the effective
date thereof.
(b) Notwithstanding the foregoing, the Company
shall not be obligated to register the Registrable Securities pursuant to this
Section 9.4, (i) during any period within six (6) months following a prior
primary or secondary public offering of the Company's Common Stock, including
any registration of the Registrable Securities but excluding a "shelf" or
continuing registration, (ii) during any period in which the Company has
commenced preparation of a registration statement of securities and pursuant to
which it has notified the Holders of their "piggy-back" registration rights
pursuant to Section 9.5 hereof, (iii) in any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Act, (iv) if the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good faith and
judgment of the Board of Directors it would be seriously detrimental to the
Company or its shareholders for a registration to be filed in the near future,
then the Company's obligation to use its best efforts to register under this
Section 9.4 shall be deferred for a period not to exceed ninety (90) days from
the receipt of the request to file such Registration Statement by Initiating
Holders; provided, however, that the Company shall not exercise the right to
defer registration granted by this subsection (iv) more than once in any
twelve-month period.
(c) The right of any Holder to registration
pursuant to this Section 9.4 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 9.4 and
the inclusion of such Holder's registrable securities in the underwriting to the
extent requested and to the extent provided herein. The Company shall (together
with all Holders proposing to distribute their securities through such an
underwriting) enter into an underwriting agreement in customary form with the
managing underwriters selected for such underwriting by a majority in interest
of the Initiating Holders (which managing underwriters shall be reasonably
acceptable to the Company). The Holders agree to be bound by the provisions of
Section 9.9 herein regarding cutbacks. If any Holder of Registrable Securities
disapproves of the terms of the underwriting, such persons may elect to withdraw
therefrom by written notice to the Company, the Managing Underwriter and the
Holders participating in the registration. The
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Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such registrable securities shall not be
transferred in a public distribution prior to ninety (90) days after the
effective date of such registration.
9.5 Piggy-Back Registration Rights.
(a) On each occasion, if any, following the date
hereof that the Company contemplates filing with the Commission a registration
statement under the Act relating in whole or in part to the primary offer and
sale of shares of its Common Stock, other than a registration statement which
exclusively relates to the registration of securities under (i) an employee
stock option, bonus or other compensation plan, or (ii) a registration relating
solely to a transaction under Rule 145 promulgated by the Commission, the
Company shall so notify the Holders in writing of its intention to do so at
least thirty (30) days prior to the filing of each such registration statement.
Each Holder who gives written notice to the Company, within twenty (20) days of
receipt of such notice from the Company, of such Holder's desire to have any of
its Registrable Securities included in such registration statement, may, subject
to the provisions of this Section 9.5, have its Registrable Securities so
included. The Company shall file any required amendments of or supplements to
any registration statement filed pursuant to this Section 9.5 and otherwise use
its best efforts to insure that such registration statement remains in effect
under the Act until the earlier of the sale of all of the Registrable Securities
included in the registration or the expiration of one hundred twenty (120) days
from the effective date thereof.
(b) If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 9.5(a). In such event the right of any Holder to
registration pursuant to Section 9.5 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
Holders who have demanded such registration). The Holders agree to be bound by
the terms and conditions of Section 9.9 hereof regarding cutbacks.
(c) The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 9.5
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.
9.6 Registration on Form S-3.
(a) The Company shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form. After
the Company has qualified for the use of
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Form S-3, in addition to the rights contained in Sections 9.4 and 9.5, the
Holders of Registrable Securities shall have the right to demand that the
Company promptly use its best efforts to effect one registration per annum on
Form S-3, provided, such request shall be made with respect to an amount of
Registrable Securities which have a reasonably anticipated aggregate price to
the public of not less than $750,000.
(b) Notwithstanding the foregoing, the Company
shall not be obligated to take any action pursuant to this Section 9.6 (i) in
any particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Act, (ii) during the period starting with the date sixty (60)
days prior to the filing of and, ending on a date six (6) months following the
effective date of a registration statement (other than with respect to a
registration statement relating to a Rule 145 transaction, or with respect to
securities offered solely to employees), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective, or (iii) if the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed ninety (90)
days from the receipt of the request to file such registration by the Holders;
provided, however, that the Company shall not exercise the right to defer
registration granted by this subsection (iii) more than once in any twelve-month
period.
9.7 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) Make and keep public information available
as those terms are understood and defined in Rule 144 under the Act, at all
times from and after 90 days following the effective date of the first
registration under the Act filed by the Company for an offering of its
securities to the general public;
(b) Use its best efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Act and the Exchange Act of 1934, as amended (the "Exchange
Act"), at any time after it has become subject to such reporting requirements;
and
(c) So long as a Holder owns any Restricted
Securities, furnish to the Holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of Rule 144 (at
any time from and after 90 days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Act and the Exchange Act (at any time after it
has become subject to
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such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed as a Holder
may reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without registration.
9.8 Expenses of Registration. Subject to any Blue Sky
requirements with respect to the allocation of expenses, all Registration
Expenses incurred in connection with registration statements under Section 9.5
and the first two registration statements filed by the Company pursuant to
Sections 9.4 and 9.6, shall be borne by the Company, and all Selling Expenses
shall be borne by the holders of the Registrable Securities so registered pro
rata on the basis of the number of their shares of Registrable Securities so
registered; provided, however, that the Company shall not be required to pay any
Registration Expenses if, as a result of the withdrawal of a request for
registration by Initiating Holders (unless in response to a material adverse
change in the Company), the registration statement does not become effective, in
which case the Holders requesting registration shall bear such Registration
Expenses pro-rata on the basis of the number of their shares of Registrable
Securities so included in the registration request; provided, further, that such
registration shall not be counted as a registration pursuant to Sections 9.4,
9.5 or 9.6.
9.9 Cutbacks. In the event the underwriter for a registration
statement filed pursuant to Sections 9.4, 9.5 or 9.6 advises the Company in
writing that the number of Registrable Securities proposed to be sold in any
such offering or sale is greater than the number of shares which the underwriter
believes feasible to sell at that time at the price and upon the terms approved
by or on behalf of the Company with respect to a registration statement filed
under Section 9.5 or on behalf of the Holders holding a majority of the
Registrable Securities to be included in such registration statement with
respect to a registration statement to be filed under Section 9.4 or 9.6, then
the number of Registrable Securities which the underwriter believes may be sold
shall (a) in the case of a registration statement filed under Section 9.5, first
be allocated to the Company and the remaining Registrable Securities shall be
allocated among the Holders in proportion to the Registrable Securities each
first proposed for inclusion in the registration statement and (b) in the case
of a registration statement filed under Sections 9.4 or 9.6, be allocated to the
Holders in proportion to the number of Registrable Securities each first
proposed for inclusion in the registration statement.
9.10 Additional Covenants Concerning Sale of Shares. In
connection with any registration statement referred to in Section 9 of this
Agreement, the Company shall furnish to each Holder whose shares of Registrable
Securities are included therein (or to any broker or other person at its
request) a reasonable number of copies of such registration statement, each
amendment and supplement thereto and each document included therein, such number
of copies of the then current prospectus included therein as they may from time
to time reasonably request, and a copy of the opinion of counsel to the Company
and a copy of the Company's accountants' "cold
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comfort letter" which are delivered to the underwriter, if such counsel or
accountants, as the case may be, so consent.
9.11 Blue Sky Provisions. Except in those jurisdictions in
which the Company would be required to execute a general consent to service of
process, the Company, at its expense, shall endeavor to cause any of the
Registrable Securities included in a registration statement referred to herein
to be qualified under the laws of such number of jurisdictions as the Holders,
or the managing underwriter named herein, may reasonably designate, and the
Company will continue such qualification in effect so long as may be necessary
to comply with all applicable laws regulating sales of securities.
9.12 Advising the Holders. In connection with any registration
statement referred to in Section 9 hereof, the Company will promptly advise each
Holder whose Registrable Securities are included therein, and confirm such
advice in writing (a) when the registration statement has become effective, (b)
upon the filing of any amendment or supplement to the registration statement,
(c) when any post-effective amendment to the registration statement becomes
effective, and (d) of any request by the Commission for any amendment or
supplement to the registration statement or prospectus or for additional
information. If at any time the Commission should institute or threaten to
institute any proceeding for the purpose of issuing, or should issue, a stop
order suspending the effectiveness of the registration statement, the Company
will promptly notify the Holders whose Registrable Securities are included in
such registration statement, and will use its best efforts to prevent the
issuance of any such stop order or to obtain the withdrawal thereof as soon as
possible; and the Company will advise the Holders promptly of any order or
communication of any public board or body addressed to the Company suspending or
threatening to suspend the qualification of any shares of Common Stock for sale
in any jurisdiction.
9.13 Indemnification.
(a) With respect to the registration rights
described in Section 9 hereof, the Company hereby agrees to indemnify, hold
harmless and defend each Holder (and any of the Holder's directors, officers,
employees, affiliates and assigns) and each Person who controls, is controlled
by or under common control of any such Holder within the meaning of the Act,
against any and all losses, claims, damages, liabilities and expenses (including
reasonable legal and other expenses incurred in investigating and defending
against the same), to which they, or any of them, may become subject under the
Act or other statute or common law, arising out of or based upon (i) any alleged
untrue statement of a material fact contained in any registration statement or
prospectus included therein, or any amendment thereof or supplement thereto, or
(ii) the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements contained therein not misleading;
provided, however, that the indemnity contained in this Section 9.13(a) shall
not apply to any such alleged untrue statement or omission made in reliance upon
and in conformity with information furnished in writing to the Company by or on
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behalf of such Holder. As soon as practicable after the receipt by any Holder of
notice of any claim or action against any of the Holders in respect of which
indemnity may be sought from the Company hereunder, such Holder shall notify the
Company thereof in writing, and the Company shall assume the defense of such
claim or action (and the cost thereof) by counsel of its own choosing, who shall
be reasonably satisfactory to a majority in interest of the Holders.
(b) Each Holder whose Registrable Securities
are included in a registration statement, severally but not jointly, hereby
agrees, to indemnify, hold harmless and defend the Company, its directors and
officers, and each Person who controls, is controlled by or under common control
of the Company within the meaning of the Act, and each other Holder against any
and all losses, claims, damages, liabilities and expenses (including reasonable
legal or other expenses incurred in investigating and defending against the
same), to which they or any of them may become subject under the Act or other
statute or common law, arising out of or based upon (i) any alleged untrue
statement of a material fact contained in any such registration statement or
prospectus included therein, or any amendment thereof or supplement thereto, or
(ii) the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements contained therein not misleading;
provided, however, that the indemnity contained in this Section 9.13(b) shall
apply in each case only to the extent such statement or omission was made solely
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder in connection with the preparation of the
registration statement. The Company, and any other person in respect of which
indemnity may be sought from a Holder hereunder, shall, as soon as practicable
after the receipt of notice of any claim or action against the Company or such
other person or entity, notify such Holder thereof in writing and such Holder
shall assume the defense of any such claim or action (and the cost thereof) by
counsel of its own choosing, who shall be reasonably satisfactory to the
Company.
9.14 Registration under the Exchange Act. If the Company shall
at any time have completed a public offering of shares of its Common Stock, it
shall thereafter take such steps as may be necessary to register its Common
Stock under Section 12 of the Exchange Act (whether or not required by law to do
so), to maintain such status, and to file with the Commission all current
reports and other information as may be necessary to enable the Holders or the
Transferees to effect sales of the Conversion Shares in reliance upon Rule 144
under the Act.
9.15 Information by Holder. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Holder or Holders, the registrable securities
held by them and the distribution proposed by such Holder or Holders as the
Company may reasonably request in writing and as shall be required in connection
with any registration referred to in this Section 9.
9.16 Transfer of Registration Rights. The rights to cause the
Company to register securities granted to Holders under Sections 9.4, 9.5 and
9.6 may be assigned to a transferee or assignee in connection with any transfer
or assignment by a Holder of at least Ten Thousand
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(10,000) shares of Registrable Securities, subject to adjustment for any
dilution event described in the Restated Articles of Incorporation or similar
event; provided, however, that the Company is given written notice by the Holder
effecting such transfer or assignment.
9.17 Standoff Agreement. Each Holder agrees in connection with
any registration of the Company's securities that, upon request of the Company
or the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration statement) without the prior written consent
of the Company or such underwriters, as the case may be, for such period of time
(not to exceed 120 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters; provided, however, that
all officers and directors of the Company have entered into substantially
similar agreements. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
9.18 Termination of Rights. The rights of any particular
Holder to cause the Company to register securities under Sections 9.4, 9.5 and
9.6 shall terminate with respect to such Holder following a bona fide, firmly
underwritten public offering of shares of Common Stock registered under the Act
at such time as such Holder is able to dispose of all of his Registrable
Securities in one three-month period, pursuant to the provisions of Rule 144.
10. Survival of Representations, Warranties and Covenants.
10.1 Survival of Representations, Warranties and Covenants of
the Company. The Investor shall have the right to rely fully upon the
representations, warranties and covenants of the Company contained in this
Agreement (notwithstanding any knowledge of facts determined or determinable by
the Investor). All such representations, warranties and covenants shall survive
the execution and delivery hereof and the Closing.
10.2 Survival of Representations and Warranties of the
Investor. The Company shall have the right to rely fully upon the
representations and warranties of the Investor contained in this Agreement
(notwithstanding any knowledge of facts determined or determinable by the
Company). All such representations, warranties, covenants and agreements shall
survive the execution and delivery hereof and the Closing.
11. Conditions Precedent to Obligations of the Investor. The
obligations of the Investor to consummate the purchase of the Shares in the
Closing shall be conditioned on the following:
11.1 Representations and Warranties Correct. Each of the
representations and warranties of the Company contained in this Agreement and in
any certificate delivered to the
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Investor pursuant hereto shall in all material respects be true and correct when
made and as of the Closing Date, with the same effect as if made at the Closing
Date (or the date to which it relates in the case of any representation or
warranty which specifically relates to an earlier date).
11.2 Compliance with this Agreement. The Company shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by the Company on or prior to the Closing Date.
11.3 Satisfaction of Investor. All corporate proceedings taken
in connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form to each
Investor.
11.4 No Actions or Proceedings. No action, suit or proceeding
by or before any court, agency or other governmental body shall have been
asserted, instituted or threatened by any party to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
11.5 Opinion of Company's Counsel. The Company shall have
delivered to the Investor an opinion of Wilson, Sonsini, Goodrich & Rosati,
counsel for the Company, addressed to the Investor and dated as of the Closing
Date in substantially the form attached hereto as Exhibit B.
11.6 Officer's Certificate. The Investor shall have received a
certificate dated the Closing Date and signed by the President certifying the
fulfillment of the conditions by the Company specified in this Section 11 and
that he does not have any knowledge of any facts which have not been disclosed
to the Investor in writing which will or may reasonably be expected to have any
material adverse effect on the value of the assets, properties, business,
goodwill or prospects of the Company. General economic conditions shall not be
deemed a fact within the meaning or application of this paragraph.
11.7 Certificate of Secretary or Assistant Secretary. The
Investor or its counsel shall have received a certificate dated the Closing Date
and signed by the Secretary or Assistant Secretary of the Company certifying as
to:
(a) the Restated Articles of Incorporation in
the form attached as Exhibit A hereto;
(b) the By-Laws of the Company;
(c) resolutions of the Board authorizing and
approving the execution and delivery of this Agreement and all documents
required to be delivered pursuant hereto by the Company, and the performance of
its obligations hereunder and that such resolutions are in full force and effect
on and as of the Closing Date;
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(d) resolutions of the shareholders of the Company
approving the Restated Articles of Incorporation of the Company and that such
resolutions are in full force and effect on and as of the Closing Date; and
(e) the incumbency and signature of each of the
officers of the Company signing this Agreement and any of the documents
delivered hereunder.
11.8 Delivery of Documents. All of the documents and
resolutions required to be delivered by the Company to the Investor at the
Closing shall have been delivered.
11.9 No Lapse in Insurance Coverage. No lapse shall have
occurred prior to the Closing Date in the coverage provided under any of the
policies of insurance of the Company, including any liability policies, which
relate to the business, assets, properties or employees of the Company.
11.10 Employee Agreements and Nondisclosure Agreements. The
Employee Agreements and Nondisclosure Agreements shall continue to be in full
force and effect.
11.11 Government Approvals. All filings, consents, approvals,
qualifications, registrations or expirations of waiting periods required or
imposed by any governmental agency or ministry necessary for the sale, delivery
or purchase of the Series F Shares, including such requirements under applicable
state securities laws and Japanese law, shall have been filed, occurred or been
obtained.
11.12 Minimum Closing Condition. A minimum of $5,000,000 must
be raised by the Company pursuant to the sale of Series F Shares offered hereby,
including the Series F Shares to be issued upon conversion of the Bridge Notes.
Subscriptions will be held in escrow until accepted by the Company or until the
offering is terminated. If the offering is terminated, all subscriptions will be
returned, together with any interest earned thereon, to the Investors.
12. Conditions Precedent to the Obligation of the Company. Except as
may be waived in writing by the Company, the obligations of the Company to
consummate the sale of the Shares herein provided for shall be conditioned upon
the following:
12.1 Representations and Warranties Correct. Each of the
representations and warranties of each Investor in this Agreement, the
Purchaser's Certificate and in any certificate delivered to the Company pursuant
hereto certifying the fulfillment of the conditions by such Investor specified
in this Section 12 shall in all material respects be true and correct when made
and as of the Closing Date (or on the date to which it relates in the case of
any representation or warranty which specifically relates to an earlier date).
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12.2 Compliance with this Agreement. Each Investor shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by such Investor on or prior to the Closing Date.
12.3 Satisfaction of Company and its Counsel. All corporate,
partnership and other proceedings taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form to the Company and its counsel, Wilson, Sonsini,
Goodrich & Rosati.
12.4 No Actions or Proceedings. No action, suit or proceeding
by or through any court, agency or other governmental body shall have been
asserted, instituted or threatened by any party to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
12.5 Government Approvals. All filings, consents, approvals,
qualifications, registrations or expirations of waiting periods required or
imposed by any governmental agency or ministry necessary for the sale, delivery
or purchase of the Series F Shares, including such requirements under applicable
state securities laws, shall have been filed, occurred or been obtained.
13. Documents to be Delivered at Closing.
13.1 Documents to be Delivered by the Company at the Closing.
At the Closing the Company shall deliver to the Investor:
(a) the Restated Articles of Incorporation, in the
form attached as EXHIBIT A hereto, certified by the Secretary of State of the
State of California;
(b) an opinion, dated the Closing Date, of Wilson,
Sonsini, Goodrich & Rosati, counsel to the Company, in substantially the form
attached as EXHIBIT B hereto;
(c) a certificate of the President certifying as to
the matters set forth in Section 11.6;
(d) a certificate of the Secretary or Assistant
Secretary certifying as to the matters set forth in Section 11.7;
(e) a Good Standing Certificate certified by the
Secretary of State of the State of California as to the good standing of the
company in California;
(f) a Tax Certificate from the Franchise Tax Board
stating that the Company does not owe any franchise taxes to the State of
California;
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(g) certificates representing the Series F Shares
being purchased by the Investor; and
(h) such other documents as the Investor or its
counsel shall have reasonably requested.
13.2 Documents to be Delivered by the Investor at the Closing.
At the Closing, the Investor shall deliver to the Company:
(a) authorization to release from escrow the Purchase
Price upon the terms of payment provided for in Section 1.1(a), including, as
applicable, the Bridge Notes to be surrendered for conversion of the principal
and accrued interest due thereon.
(b) such other documents as the Company or its
counsel shall have reasonably requested.
14. Miscellaneous.
14.1 Definition of Person. "Person" for purposes of the
Agreement means an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture or other entity
of whatever nature.
14.2 Definition of Knowledge. "To the best of the Company's
knowledge" shall mean the actual knowledge of the Company or information which
it should have obtained, after due inquiry into the subject matter of the
representation, or did obtain.
14.3 Additional Actions. The parties shall execute and deliver
such other and further instruments and perform such other and further acts as
may reasonably be required to consummate fully the transactions contemplated
hereby.
14.4 Expenses. Each party to this Agreement agrees to pay its
expenses and the expenses of its agents, employees and attorneys, incurred in
connection with the negotiation, review and execution of this Agreement and
other ancillary documents called for in this Agreement and the consummation of
the transactions contemplated hereby.
14.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
14.6 Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This
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Agreement is not assignable by any party hereto without the prior written
consent of the other parties.
14.7 Notices. All notices or other communications hereunder
shall be in writing and shall be mailed, certified or registered mail, return
receipt requested, or shall be sent by messenger or by electronic transmission,
addressed to such party at the address indicated on Schedule 1.2 for an Investor
or to any such other address as any such party shall specify in a notice to the
Company, and, if intended for the Company to Cymer Laser Technologies, 16275
Technology Drive, San Diego, California 92127-1815, Attn: Dr. Robert Akins and
Mr. William Angus, with a copy to Wilson, Sonsini, Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California 94304, Attention: Donna M. Petkanics, Esq.
14.8 Applicable Laws. This Agreement shall be construed and
governed by the laws of the State of California applicable to contracts made and
to be performed within such state.
14.9 Entire Agreement. Except as specifically provided in this
Agreement, the Confidentiality Agreement, the Escrow Agreement, the Placement
Agent Agreement and the Purchaser's Certificate, this Agreement constitutes the
entire Agreement between the parties hereto as it relates to the sale of Series
F Shares pursuant to the Private Placement Memorandum (the "Subject Matter"),
and no party hereto shall be bound by any communications between them on the
Subject Matter unless such communications are in writing and bear a date
contemporaneous with or subsequent to the date hereof. Except for the
Confidentiality Agreement, any prior written agreements or letters of intent
between the parties concerning the Subject Matter shall, upon execution of this
Agreement, be null and void.
14.10 Waivers and Amendments; Noncontractual Remedies;
Preservation of Remedies. This Agreement (except for Sections 2, 5.8, 7.1, 7.2,
9 and 14.10) may be amended, superseded, canceled, renewed or extended, and the
terms hereof may be waived, only by a written instrument duly executed and
acknowledged with the same formality as this Agreement, and signed by Investors
(or the Investors' Transferees) holding at least two-thirds of the outstanding
Series F Shares or Series F Conversion Shares; and Sections 2, 5.8, 7.1, 7.2, 9
and 14.10 of this Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument duly
executed and acknowledged with the same formality as this Agreement, and signed
by the Holders (or their Transferees) holding at least two-thirds of the
outstanding Shares (and outstanding Conversion Shares), voting together as a
class. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
-38-
<PAGE> 45
14.11 Table of Contents; Captions. The Table of Contents and
the captions of the various sections of this Agreement are inserted for
convenience of reference only, and shall not constitute a part hereof.
14.12 Schedules and Exhibits Part of Agreement. The Schedules
and Exhibits referred to herein and delivered pursuant hereto, including any
amendments thereto or changes therein prior to the Closing Date, shall be deemed
part of this Agreement as fully and effectively as if set forth at length
herein.
14.13 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
14.14 Obligation of the Company to Indemnify. The Company
hereby agrees to indemnify, defend and hold harmless the Investor (and any of
the Investor's directors, officers, employees, affiliates and assigns) from and
against any and all actual losses, liabilities, damages, deficiencies, costs or
expenses (including interest, penalties and reasonable attorneys' fees and
disbursements,) ("Losses" or singularly a "Loss") which it has incurred arising
solely out of any material inaccuracy in or any material breach of any
representation, warranty, covenant or agreement of the Company contained in this
Agreement.
14.15 Obligation of the Investor to Indemnify. The Investor
agrees to indemnify, defend and hold harmless the Company (and its directors,
officers, employees, affiliates and assigns) from and against any Losses which
it may incur arising solely out of any material inaccuracy in or material breach
of any representation, warranty, covenant or agreement of such Investor
contained in this Agreement.
14.16 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after
receipt by any party hereto (the "Indemnitee") of notice of any demand, claim or
circumstances which, with the lapse of time, would give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party
(or parties) obligated to provide indemnification pursuant to Section 14.14 or
14.15 (the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated, if
necessary) of the Loss that has been or may be suffered by the Indemnitee,
provided however that failure to provide the Claims Notice shall not relieve the
indemnifying party of its duty to indemnify the indemnities.
-39-
<PAGE> 46
(b) Opportunity to Defend. The Indemnifying
Party may elect to compromise or defend, at its own expense and by its own
counsel, any Asserted Liability. If the Indemnifying party elects to compromise
or defend such Asserted Liability, it shall, within 30 days (or sooner, if the
nature of the Asserted Liability so requires) notify the Indemnitee of its
intent to do so, and the Indemnitee shall reasonably cooperate, at the expense
of the Indemnifying Party, in the compromise of or defense against, such
Asserted Liability. If the Indemnifying Party elects not to compromise or defend
the Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may consent to settlement or compromise of any such Asserted Liability over the
objection of the other; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld, and provided further that the
Indemnifying Party shall not be liable to the Indemnitee for more than the
Indemnifying Party could have settled any Asserted Liability but for the
objection of the Indemnitee. In any event, the Indemnitee and the Indemnifying
Party may participate, at their own expense, in the defense of such Asserted
Liability.
-40-
<PAGE> 47
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date and year first above written.
"COMPANY"
CYMER LASER TECHNOLOGIES
By:
--------------------------------
Name: Robert P. Akins
Title: President
"INVESTOR"
-----------------------------------
Printed Name
-----------------------------------
(Signature)
-----------------------------------
(Title)
"FOUNDER"
-----------------------------------
Robert Akins
"FOUNDER"
-----------------------------------
Richard Sandstrom
"FOUNDER"
-----------------------------------
-41-
<PAGE> 48
Uday Sengupta
-42-
<PAGE> 49
Schedule 1.1
Founders
Robert Akins
Richard Sandstrom
Uday Sengupta
<PAGE> 50
Schedule 1.2
Investors
Name Purchase Price No. of Shares
- ---- -------------- -------------
[INFORMATION TO COME]
<PAGE> 51
Schedule 3.0
Exceptions to Representations and Warranties
Set forth below are exceptions to the representations and warranties of
the Company made in Section 3.0 of the attached Agreement. All disclosures and
exceptions are intended to modify all of the Company's representations and
warranties, and the section headings used below are for convenience only.
3.1 Organization and Standing; Articles and Bylaws
In addition to California, the Company leases property and is qualified
to do business in the state of Massachusetts. The Company leases property and is
duly organized in Chiba, Japan.
3.3 Capitalization
"Significant Holders," as that term is defined in the Series E Purchase
Agreement, were granted a right of first refusal with respect to the 8%
promissory notes and warrants issued pursuant to a Note and Warrant Purchase
Agreement dated October 27, 1993 and amended February 18, 1994, the Bridge
Warrants, Bridge Notes and the Series F Shares to be issued to the Investors
pursuant to this Agreement. As of the Closing, the Company will have taken
appropriate action to ensure that such rights, held by all Significant Holders,
have expired, have been waived or have been accepted by such Significant Holders
and included on Schedule 1.2 hereof.
3.8 Absence of Undisclosed Liabilities and Obligations
See Section 3.3 above. See Section 3.13 below. See Section 3.22 below.
3.10 Real Property
The Company or its subsidiary currently lease property at the following
locations:
16275 Technology Drive
San Diego, California 92127-1815
47 East Grove Street
Middleboro, Massachusetts
1-22-6 Ichikawa
Ichikawa
Chiba, Japan 272
<PAGE> 52
3.11 Tangible Assets and Equipment
The Company has a lease for a Hewlett Packard workstation and certain
peripheral equipment which the Company uses for its word processing needs. The
lease for such equipment, dated November 18, 1994, has a term of five years and
requires monthly payments of approximately $800.00. The Company has no material
leases other than for real property.
3.13 Patent and Trademarks
PATLEX CORP.
Effective August 1, 1989 and lasting until the expiration of the
licensed patents, the Company entered into a Patent License Agreement for a
nonexclusive worldwide license to certain patented laser technology with Patlex
Corp., a patent holding company ("Patlex"). Under the terms of the agreement,
the Company is required to pay royalties ranging from 1/4% to 5% of gross sales
and leases, as defined, depending on total revenues earned.
SEIKO
In August 1992, the Company entered into a (i) Product License and
Manufacturing Agreement, dated August 28, 1992 (the "License Agreement") and
(ii) a Research and Development Agreement, dated August 28, 1992 (the "Research
Agreement") with Seiko. In return for partially funding the Company's research
and development of its industrial laser technology pursuant to the Research
Agreement, Seiko has the right and license (according to the terms of the
License Agreement) to use the developments, improvements and modifications made
by the Company. Under the License Agreement, the Company granted to Seiko the
royalty-bearing, nontransferable, exclusive right (in Japan) and the
nonexclusive right (worldwide) to manufacture, market, distribute and sell the
Company's HPL-100K industrial laser and subsequent enhancements thereto. The
Company also granted Seiko the right of first refusal to license and fund the
Company's development of new technologies which are not funded by other parties.
SEMATECH, INC.
The Company entered into a Development Agreement, dated August 2, 1994
(the "Development Agreement"), with Sematech, Inc., a Delaware corporation
representing a U.S. industry government and business consortium organized to
conduct research and development of advanced semiconductor manufacturing for the
use of the consortium's members ("Sematech"), under which the parties agreed to
jointly develop a new laser for use with a SVGL Microscan tool. If the Company
is unable to manufacture sufficient numbers of the new laser for Sematech or
Sematech's members' needs, the Company will grant an unrestricted, worldwide,
nonexclusive and irrevocable license for the production of the new laser. All
patents resulting from any invention made solely by an employee of either
Sematech or Cymer will belong to the company
-2-
<PAGE> 53
that employs the inventor. All patents resulting from any invention made solely
by a Sematech member's employee will belong to that employee's employer. All
patents resulting from any invention made jointly by Sematech employees,
members' employees and/or the Company's employees will be jointly owned by the
employers of such joint inventors. The Company is obligated to grant Sematech a
royalty-free, worldwide, unrestricted, nonexclusive and irrevocable license,
which Sematech may sublicense to (i) its members, who may in turn sublicense to
majority-owned entities, or (ii) the Department of Defense, which in turn may
sublicense to its subcontractors, to all of the Company's patents which result
from the development work completed under the agreement; provided, however, that
if such patents are used for the manufacture or contracting for the manufacture
of materials or equipment covered by such patents, the Company is obligated to
grant to Sematech or its members a license requiring certain limited royalty
payments.
COHERENT INC.
On November 8, 1993 and August 31, 1994, the Company received notices
from Coherent Inc. ("Coherent") which alleged that the Company's excimer laser
systems infringe on Coherent's ownership of a patent related to gas discharge
lasers. The Company has referred such claim to its patent attorneys for further
investigation. Coherent has offered to license the patent to Cymer; however, the
Company believes that it has valid defenses to the infringement claim.
3.16 Litigation
See Section 3.13 - "Coherent, Inc." above.
3.20 Registration Rights
Pursuant to a Registration Rights Agreement, dated October 16, 1992
(the "Registration Rights Agreement"), between the Company and Silicon Valley
Bank, the Company's principal bank ("SVB"), SVB is entitled to certain
registration rights with respect to the registration of the shares of Series D
Preferred Stock issuable upon exercise of the Series D Warrants or the Common
Stock issuable upon conversion of the Series D Preferred Stock (the "SVB
Conversion Shares") under the Securities Act. If the Company proposes to
register any of its securities under the Securities Act, SVB or its assigns are
entitled to notice of such proposed registration and the opportunity to include
shares of SVB Conversion Stock therein. The Company expects to substitute the
Series E Warrants for the Series D Warrants, and at such time, the Company
anticipates that it will execute and deliver a Registration Rights Agreement to
SVB containing terms which are substantially similar to the terms of the
agreement described above.
-3-
<PAGE> 54
3.22 Disclosure
a. Bridge Loans. Certain Prior Investors and other investors
purchased the Bridge Notes, in the aggregate principal amount of $3,624,062,
which Bridge Notes will be converted into Series F Shares at the Closing. The
conversion price shall be equal to the Purchase Price. In connection with the
Bridge Loans, the Company issued the Bridge Warrants which are exercisable for
399,903 shares of Series F Preferred Stock. The exercise price of the Bridge
Warrants is $3.40 per share.
Upon issuance, the above Bridge Notes had a maturity date of December
31, 1994. Pursuant to Promissory Note Amendment Agreements executed by each
holder of Bridge Notes, the maturity date for the Bridge Notes was extended to
February 28, 1995.
b. Placement Agreement. In November 1994, the Company entered
into an Agreement (the "Placement Agreement") with Weeden & Co., L.P. (the
"Placement Agent") to act as exclusive placement agent for the sale of the
Series F Shares. The Letter Agreement provides that the Placement Agent shall
receive the following remuneration:
(i) the Series F Placement Warrants, issued by the
Company, to purchase Series F Preferred Stock at an
exercise price equal to the Purchase Price. The
number of shares of Series F Preferred Stock into
which such Series F Placement Warrants may be
converted shall be a number equal to nine (9%)
percent of the gross proceeds of the sale of the
Series F Shares (less the value of the conversion of
the First Bridge Notes in the aggregate principal
amount of approximately $1,625,000 plus accrued
interest thereon but including the conversion of the
Second Bridge Notes in the aggregate principal amount
of approximately $2,000,000 (the "Second Bridge
Financing") divided by $1. For example:
if the gross proceeds from the sale of the
Series F Shares equals $6,650,000 (including
the First Bridge Notes and the Second Bridge
Notes of $1,625,000 and $2,000,000
respectively) then such gross proceeds will
be reduced by the First Bridge Notes
($1,625,000), plus accrued interest on the
First Bridge Notes ($25,000) ($6,650,000 -
$1,650,000 = $5,000,000). Five million
dollars shall then be multiplied by 9% which
equals $450,000 ($6,000,000 x .09 =
$450,000). $450,000 is then divided by $1
which equals 450,000. The Placement Agent
shall then receive 450,000 Series F
Placement Warrants exercisable for 450,000
shares of Series F Preferred Stock at the
Purchase Price.
-4-
<PAGE> 55
The Series F Placement Warrants shall be exercisable
in whole or in part from time-to-time during a term
of five (5) years beginning with the first business
day following the date of the Closing. The Series F
Preferred Stock underlying the Series F Placement
Warrants or any securities for which such shares may
be exchanged or into which such shares may be
converted shall be subject to the same registration
rights granted to Investors in the Series F Shares.
(ii) upon request and upon receipt of appropriate invoices
therefor, for all reasonable expenses (including
legal fees and expenses and consultant fees and
expenses) as incurred in connection with the private
placement of the Series F Shares; provided that such
amount shall not exceed $125,000;
(iii) for a period of five years from the date of Closing,
the Company will consider in good faith using the
Placement Agent as a placement agent or a managing or
lead underwriter for the Company in connection with
any private or public offering of securities of the
Company commenced within such five year period. The
Agent shall have the right for a period of five years
from the end of the offering period to participate as
co-manager or co-placement agent for the Company in
connection with any public or private offering of the
Company's securities commenced within such five year
period and in connection with any such offering to
sell a minimum of 33 1/3 percent of the total number
of securities offered. If the Placement Agent, in its
sole discretion, chooses not to act as a placement
agent or underwriter in connection with any specific
public or private offering of such securities, then
the Company may use any other placement agent or
underwriter, but only in connection with that
specific offering.
-5-
<PAGE> 56
EXHIBIT 10.11
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FIRST CLOSING - FEBRUARY 28, 1995:
Clearwater Ventures Partnership $830,000.00 $49,481.64 $ 71,967.20 $1,340.76
Attn. Steve Gladstone
180 Maiden Lane
New York, NY 10038
Ventana Growth Fund II, L.P. $118,878.00 $ 7,087.08
Attn.: F. Duwaine Townsen
8880 Rios San Diego Drive
Suite 500
San Diego, CA 92108
Convergences Gestion SA $ 69,033.80 $1,286.11
Attn.: Mr. Gilles Theves
60 Rue de Rendezvous
7012 Paris
France 43
C. Ian Sym-Smith $150,000.00 $ 8,942.47 $ 69,033.80 $1,286.11
10800 E. Cactus Road, No. 20
Scottsdale, AZ 85259
Xerox Corporation $180,132.00 $10,738.83 $108,626.50 $ 2,357.05
Attn.: Jeanne K. Impleman
c/o Xerox Venture Capital
800 Long Ridge Road
Stamford, CT 06904
Interven II, L.P. $200,000.00 $11,923.29 $199,000.00 $3,707.40
Attn.: Kenneth Deemer
301 Arizona Avenue, Suite 306
Santa Monica, CA 90401
Allsop Venture Partners III, L.P. $100,000.00 $ 5,961.64
Attn.: Michael Meyer
7400 College Blvd., Suite 302
Overland Park, KS 66210
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIRST CLOSING - FEBRUARY 28, 1995:
Clearwater Ventures Partnership $396,032.80 $6,162.92 $176,778.00 $1,531,761.00 437,646
Attn. Steve Gladstone
180 Maiden Lane
New York, NY 10038
Ventana Growth Fund II, L.P. $ 125,965.00 35,990
Attn.: F. Duwaine Townsen
8880 Rios San Diego Drive
Suite 500
San Diego, CA 92108
Convergences Gestion SA $ 5,966.20 $ 92.84 $100,000.00 $ 176,375.50 50,393
Attn.: Mr. Gilles Theves
60 Rue de Rendezvous
7012 Paris
France 43
C. Ian Sym-Smith $ 5,966.20 $ 92.84 $ 235,319.00 67,234
10800 E. Cactus Road, No. 20
Scottsdale, AZ 85259
Xerox Corporation $ 72,425.00 $1,127.05 $ 375,403.00 107,258
Attn.: Jeanne K. Impleman
c/o Xerox Venture Capital
800 Long Ridge Road
Stamford, CT 06904
Interven II, L.P. $ 414,627.50 118,465
Attn.: Kenneth Deemer
301 Arizona Avenue, Suite 306
Santa Monica, CA 90401
Allsop Venture Partners III, L.P. $ 105,959.00 30,274
Attn.: Michael Meyer
7400 College Blvd., Suite 302
Overland Park, KS 66210
</TABLE>
<PAGE> 57
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Neil Winter and Nina Winter, $25,000.00 $1,490.41
Joint Tenants with Rights of
Survivorship
1410 Ridge Road
Laurel Hollow, Ny 11791
Andrew Fisch $10,000.00 $ 596.16
3 Brown Place
Rowayton, CT 06853
Norman Weisberg $10,000.00 $ 596.16
3215 Northwest 56th Street
Boca Raton, FL 33496-2523
Controlfida B.V.I. $500,000.00 $10,849.32
16 Plazza Riscossa
6906 Cassarate
Lugano, Switzerland
David J. Meyrowitz
210 Birch Drive
Roslyn, NY 11576
Arthur J. Radin
200 Hicks Street
Brooklyn, NY 11201
U.S. Clearing Corp., Custodian
FBO Donald E. Weeden IRA
Rollover Trust
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Neil Winter and Nina Winter, $ $26,488.00 7,568
Joint Tenants with Rights of
Survivorship
1410 Ridge Road
Laurel Hollow, Ny 11791
Andrew Fisch $10,594.50 3,027
3 Brown Place
Rowayton, CT 06853
Norman Weisberg $ 11,000.50 $21,595.00 6,170
3215 Northwest 56th Street
Boca Raton, FL 33496-2523
Controlfida B.V.I. $500,000.00 $7,780.82 $225,000.00 $1,243,627.00 355,322
16 Plazza Riscossa
6906 Cassarate
Lugano, Switzerland
David J. Meyrowitz $ 10,500.00 $10,500.00 3,000
210 Birch Drive
Roslyn, NY 11576
Arthur J. Radin $ 25,000.50 $25,000.50 7,143
200 Hicks Street
Brooklyn, NY 11201
U.S. Clearing Corp., Custodian $ 70,000.00 $70,000.00 20,000
FBO Donald E. Weeden IRA
Rollover Trust
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
</TABLE>
Page 2
<PAGE> 58
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John D. Weeden, Trustee U/A/D
9/7/93 FBO John D. Weeden
76 Calhoun Terrace
San Francisco, CA 94133
Robert E. Weeden
1000 Forest Avenue
Rye, NY 10580
John D. Lium
P.O. Box 664
Rye NY 10580
William C. Mattison, Jr., IRA
Rollover, Bear Stearns Securities
Corp., Custodian
IRA Department
Attn.: Chris Johnson
Bear Stearns Securities Corp.
245 Park Avenue
New York, NY 10167
Joel Florin
35 Sherwood Gate
Oyster Bay, NY 11771
Paul Erlich
c/o Feldman, Radin & Co., P.C.
805 Third Avenue, 21st Floor
New York, NY 10022
Donald S. Ershow
12 Gavin Road
West Orange, NJ 07052
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John D. Weeden, Trustee U/A/D $35,000.00 $35,000.00 10,000
9/7/93 FBO John D. Weeden
76 Calhoun Terrace
San Francisco, CA 94133
Robert E. Weeden $10,500.00 $10,500.00 3,000
1000 Forest Avenue
Rye, NY 10580
John D. Lium $25,000.00 $24,997.00 7,142
P.O. Box 664
Rye NY 10580
William C. Mattison, Jr., IRA $52,500.00 $52,500.00 15,000
Rollover, Bear Stearns Securities
Corp., Custodian
IRA Department
Attn.: Chris Johnson
Bear Stearns Securities Corp.
245 Park Avenue
New York, NY 10167
Joel Florin $25,000.00 $24,997.00 7,142
35 Sherwood Gate
Oyster Bay, NY 11771
Paul Erlich $30,002.00 $30,002.00 8,572
c/o Feldman, Radin & Co., P.C.
805 Third Avenue, 21st Floor
New York, NY 10022
Donald S. Ershow $15,000.00 $14,997.50 4,285
12 Gavin Road
West Orange, NJ 07052
</TABLE>
Page 3
<PAGE> 59
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Sporck & Jeanine Sporck
Co-TTEES The Sporck 1993
Living Trust DTD 3-9-93
27241 Atamont Road
Los Altos Hills, CA 94022
Robert Turchyn
183 Catalpa Road
Wilton, CT 06830
U.S. Clearing Corp., Custodian
for Gerard Smith IRA
c/o Quick & Reilly Group Inc.
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Barry Small IRA
Attn.: Ed Flynn
c/o Quick & Reilly
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Ralph Giorgio IRA
Attn.: Ed Flynn
c/o Quick & Reilly
26 Broadway
New York, NY 10004-1798
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles E. Sporck & Jeanine Sporck $25,000.00 $24,997.00 7,142
Co-TTEES The Sporck 1993
Living Trust DTD 3-9-93
27241 Atamont Road
Los Altos Hills, CA 94022
Robert Turchyn $35,000.00 $35,000.00 10,000
183 Catalpa Road
Wilton, CT 06830
U.S. Clearing Corp., Custodian
for Gerard Smith IRA $50,001.00 $50,001.00 14,286
c/o Quick & Reilly Group Inc.
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Barry Small IRA $25,001.00 $25,000.50 7,143
Attn.: Ed Flynn
c/o Quick & Reilly
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Ralph Giorgio IRA $25,000.50 $25,000.50 7,143
Attn.: Ed Flynn
c/o Quick & Reilly
26 Broadway
New York, NY 10004-1798
</TABLE>
Page 4
<PAGE> 60
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Clearing Corp., Custodian
for Robert A. Cervoni IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Monty March IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Bruno E. Bruce IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for John Nolan IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
Weeden Capital Partners, L.P.
Attn.: Steven Gladstone
145 Mason Street
Greenwich, CT 06830
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Clearing Corp., Custodian
for Robert A. Cervoni IRA $25,000.50 $25,000.50 7,143
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Monty March IRA $10,000.00 $ 9,999.50 2,857
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Bruno E. Bruce IRA $32,000.00 $31,997.00 9,142
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for John Nolan IRA $10,003.00 $10,003.00 2,858
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
Weeden Capital Partners, L.P. $262,500.00 $262,500.00 75,000
Attn.: Steven Gladstone
145 Mason Street
Greenwich, CT 06830
</TABLE>
Page 5
<PAGE> 61
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Savas C. Tsivicos
524 Green Grove Road
Wayside, NJ 07712
Angelo M. Grogos
c/o Angelo M. Gregos, TTEE
168 Route 537, Colts Neck
Colts Neck, NJ 07722
Emmanuel Geronimos
180 Round Hill Road
Greenwich, CT 06830
U.S. Clearing Corp., Custodian
for Rita Fabrizi IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Claudio Fabrizi IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Tim McDonald IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Savas C. Tsivicos $52,500.00 $52,500.00 15,000
524 Green Grove Road
Wayside, NJ 07712
Angelo M. Grogos $52,500.00 $52,500.00 15,000
c/o Angelo M. Gregos, TTEE
168 Route 537, Colts Neck
Colts Neck, NJ 07722
Emmanuel Geronimos $70,000.00 $70,000.00 20,000
180 Round Hill Road
Greenwich, CT 06830
U.S. Clearing Corp., Custodian
for Rita Fabrizi IRA $10,500.00 $10,500.00 3,000
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Claudio Fabrizi IRA $13,499.50 $13,499.50 3,857
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian
for Tim McDonald IRA $17,871.00 $17,871.00 5,106
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
</TABLE>
Page 6
<PAGE> 62
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Clearing Corp., Custodian for
Paolino Cervoni IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
Stein, Zeuderer, Ellenhorn,
Frischer & Sharp Sal Ret Plan
DTD 1/1/85 TST SUB ACC'T
Richard Sharp
555 East 78th Street
New York, NY 10021
Weeden & Co., L.P.
Attn.: Don Weeden
145 Mason Street
Greenwich, CT 06830
- -------------------------------------------------------------------------------------------------------------------------
FIRST CLOSING SUBTOTALS $1,624,010.00 $96,817.69 $608,626.50 $13,206.36 $409,034.80 $7,620.37
U.S. Clearing Corp., Custodian for
SECOND CLOSING - MARCH 28, 199?:
Herman P. Alswanger
87 Idlewood Drive
Stamford, CT 06905
U.S. Clearing Corp., Custodian
for Bruno Bruce
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Clearing Corp., Custodian for
Paolino Cervoni IRA $14,000.00 $14,000.00 4,000
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
Stein, Zeuderer, Ellenhorn, $25,025.00 $25,025.00 7,150
Frischer & Sharp Sal Ret Plan
DTD 1/1/85 TST SUB ACC'T
Richard Sharp
555 East 78th Street
New York, NY 10021
Weeden & Co., L.P. 324,069(a)
Attn.: Don Weeden
145 Mason Street
Greenwich, CT 06830
- ------------------------------------------------------------------------------------------------------------
FIRST CLOSING SUBTOTALS $980,390.20 $15,256.48 $1,566,682.50 $5,321,603.00 1,520,458
SECOND CLOSING - MARCH 28, 199?:
Herman P. Alswanger $10,500.00 $10,500.00 3,000
87 Idlewood Drive
Stamford, CT 06905
U.S. Clearing Corp., Custodian
for Bruno Bruce $32,998.00 $32,998.00 9,428
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
</TABLE>
Page 7
<PAGE> 63
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C&F Investment Club
c/o Claudio Fabrizi
796 Hancock Avenue
Franklin Square, NY 11010
CFNA Corp.
Attn.: Andrew Fiach
3 Brown Place
Rowayton, CT 06853
Clearwater Ventures Partnership
Attn: Steve Gladstone
145 Mason Street
Greenwich, CT 06830
Steven H. Danz
215 E. 68th Street
New York, NY 10021
Robert De Michele and
June C. De Michele, Joint
Tenants with Rights of
Survivorship
588 Oenoke Ridge
New Canaan, CT 06840
U.S. Clearing Corp., Custodian for
Samuel X. Difeo IRA Rollover Trust
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
Claudio Fabrizi
796 Hancock Avenue
Franklin Square, NY 10010
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
C&F Investment Club $20,002.50 $20,002.50 5,715
c/o Claudio Fabrizi
796 Hancock Avenue
Franklin Square, NY 11010
CFNA Corp. $10,000.00 $ 9,999.50 2,857
Attn.: Andrew Fiach
3 Brown Place
Rowayton, CT 06853
Clearwater Ventures Partnership $30,002.00 $30,002.00 8,572
Attn: Steve Gladstone
145 Mason Street
Greenwich, CT 06830
Steven H. Danz $35,000.00 $35,000.00 10,000
215 E. 68th Street
New York, NY 10021
Robert De Michele and $52,500.00 $52,500.00 15,000
June C. De Michele, Joint
Tenants with Rights of
Survivorship
588 Oenoke Ridge
New Canaan, CT 06840
U.S. Clearing Corp., Custodian for
Samuel X. Difeo IRA Rollover Trust $50,000.00 $49,997.50 14,285
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
Claudio Fabrizi $20,002.50 $20,002.50 5,715
796 Hancock Avenue
Franklin Square, NY 10010
</TABLE>
Page 8
<PAGE> 64
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Clearing Corp., Custodian
for Andrew Fisch
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Trustee for
Ralph Giorgio IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
Eugene R. Gyesky
81 Cat Rock Road
Cos Cob, CT 06807
Joseph J. Isabella
49 Dartmouth Street
Rockville Centre, NY 11570
Brian Mahoney
21 Vassar Place
Rockville Centre, NY 11570
Henry P. Massey, Jr.
12670 Viscaino Court
Los Altos Hills, CA 94022
Dennis L. McGrath
P.O. Box 80
18 Adams Hill Road
Cross River, NY 10518
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Clearing Corp., Custodian
for Andrew Fisch $10,000.00 $ 9,999.50 2,857
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Trustee for
Ralph Giorgio IRA $63,000.00 $63,000.00 18,000
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
Eugene R. Gyesky $10,000.00 $ 9,999.50 2,857
81 Cat Rock Road
Cos Cob, CT 06807
Joseph J. Isabella $ 7,000.00 $ 7,000.00 2,000
49 Dartmouth Street
Rockville Centre, NY 11570
Brian Mahoney $17,500.00 $17,500.00 5,000
21 Vassar Place
Rockville Centre, NY 11570
Henry P. Massey, Jr. $ 9,000.00 $ 8,998.50 2,571
12670 Viscaino Court
Los Altos Hills, CA 94022
Dennis L. McGrath $50,001.00 $50,001.00 14,286
P.O. Box 80
18 Adams Hill Road
Cross River, NY 10518
</TABLE>
Page 9
<PAGE> 65
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Clearing Corp., Custodian
for Joseph J. Mitolo IRA
Rollover Trust
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
John Nolan
132 Point Lookout
Milford, CT 06460
Trustee, WSGR Retirement
Plan FBO Donna Petkanics
c/o Wilson, Sonsini,
Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Piedmont Harbor-Piedmont
Associates Limited Partnership
c/o Piedmont Financial Company, Inc.
230 N. Elm Street, Suite 1050
Greensboro, NC 27401
Thomas A. Reilly
71 Springhurst Road
Bedford Hills, NY 10507
Stuart Smith Richardson
c/o Piedmont Financial Company, Inc.
230 N. Elm Street, Suite 1050
Greensboro, NC 27401
Joel Sheriff and Gail Sheriff
75 Highline Trail
Stamford, CT 06902
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Clearing Corp., Custodian $ 24,999474 $ 24,993.50 7,141
for Joseph J. Mitolo IRA
Rollover Trust
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
John Nolan $ 10,003.00 $ 10,003.00 2,858
132 Point Lookout
Milford, CT 06460
Trustee, WSGR Retirement $ 3,500.00 $ 3,500.00 1,000
Plan FBO Donna Petkanics
c/o Wilson, Sonsini,
Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Piedmont Harbor-Piedmont $402,500.00 $402,500.00 115,000
Associates Limited Partnership
c/o Piedmont Financial Company, Inc.
230 N. Elm Street, Suite 1050
Greensboro, NC 27401
Thomas A. Reilly $ 25,000.00 $ 24,997.00 7,142
71 Springhurst Road
Bedford Hills, NY 10507
Stuart Smith Richardson $ 52,500.00 $ 52,500.00 15,000
c/o Piedmont Financial Company, Inc.
230 N. Elm Street, Suite 1050
Greensboro, NC 27401
Joel Sheriff and Gail Sheriff $ 21,000.00 $ 21,000.00 6,000
75 Highline Trail
Stamford, CT 06902
</TABLE>
Page 10
<PAGE> 66
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Clearing Corp., Trustee
for Gerard Smith IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
David Tennenbaum
580 5th Avenue, Suite 700
New York, NY 10036
Felix Tennenbaum
5 Lake Shore Close
N. Tarrytown, NY 10591
Ventimco Limited
Attn: Dr. Claude Blum
Von Meisss Blum & Partner
Usteristrasse 14
CH-8021 Zurich
Switzerland
U.S. Clearing Corp., Custodian
for Donald E. Weeden IRA
Rollover Trust
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian for
Robert Weppler IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Clearing Corp., Trustee $ 20,002.50 $ 20.002.50 5,715
for Gerard Smith IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
David Tennenbaum $ 10,000.00 $ 9,999.50 2,857
580 5th Avenue, Suite 700
New York, NY 10036
Felix Tennenbaum $ 10,000.00 $ 9,999.50 2,857
5 Lake Shore Close
N. Tarrytown, NY 10591
Ventimco Limited $213,902.50 $213,902.50 61,115
Attn: Dr. Claude Blum
Von Meisss Blum & Partner
Usteristrasse 14
CH-8021 Zurich
Switzerland
U.S. Clearing Corp., Custodian $ 35,000.00 $ 35,000.00 10,000
for Donald E. Weeden IRA
Rollover Trust
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
U.S. Clearing Corp., Custodian for $ 50,001.00 $ 50,001.00 14,286
Robert Weppler IRA
c/o Quick & Reilly
Attn.: Ed Flynn
26 Broadway
New York, NY 10004-1798
</TABLE>
Page 11
<PAGE> 67
SCHEDULE 1.2
CYMER LASER TECHNOLOGIES
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
FIRST BRIDGE FINANCING SECOND BRIDGE LOAN
1-JUN-94 INTEREST 21-NOV-94 INTEREST 5-DEC-94 INTEREST
NAME PRINCIPAL 272 DAYS PRINCIPAL 99 DAYS PRINCIPAL 85 DAYS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WS Investments Company 95A
Attn: Linda Wilson
Wilson, Sonsini,
Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Weeden & Co., L.P.
Attn: Don Weeden
145 Mason Street
Greenwich, CT 06830
- -------------------------------------------------------------------------------------------------------------------------
SECOND CLOSING SUBTOTALS $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
TOTALS $1,624,010.00 $96,817.69 $608,626.50 $13,206.36 $409,034.80 $7,620.37
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE
19-DEC-94 INTEREST CASH PURCHASE SERIES F
NAME PRINCIPAL 71 DAYS CONSIDERATION AMOUNT(b) SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WS Investments Company 95A $ 22,500.00 $ 22,498.00 6,428
Attn: Linda Wilson
Wilson, Sonsini,
Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Weeden & Co., L.P. 119,555(a)
Attn: Don Weeden
145 Mason Street
Greenwich, CT 06830
- ------------------------------------------------------------------------------------------------------------
SECOND CLOSING SUBTOTALS $0.00 $0.00 $0.00 $0.00 0.00
----------- ---------- ------------- ------------- ---------
TOTALS $980,390.20 $15,256.48 $2,895,092.24 $6,650,000.00 1,900,000
============================================================================================================
</TABLE>
(a) Represents the number of Series F Shares to be issued upon exercise of the
Placement Agent Warrants (not included in total number of Series F Shares).
(b) Each Investor's Aggregate Purchase Amount excludes the cash value of
fractional share amounts, which was refunded.
Page 12
<PAGE> 68
Schedule 3.0
Exceptions to Representations and Warranties
Set forth below are exceptions to the representations and warranties of the
Company made in Section 3.0 of the attached Agreement. All
disclosures and exceptions are intended to modify all of the Company's
representations and warranties, and the section headings used below are for
convenience only.
3.1 Organization and Standing; Articles and Bylaws
In addition to California, the Company leases property and is
qualified to do business in the state of Massachusetts. The Company leases
property and is duly organized in Chiba, Japan.
3.3 Capitalization
"Significant Holders," as that term is defined in the Series E
Purchase Agreement, were granted a right of first refusal with respect to the
8% promissory notes and warrants issued pursuant to a Note and Warrant Purchase
Agreement dated October 27, 1993 and amended February 18, 1994, the Bridge
Warrants, Bridge Notes and the Series F Shares to be issued to the Investors
pursuant to this Agreement. As of the Closing, the Company will have taken
appropriate action to ensure that such rights, held by all Significant Holders,
have expired, have been waived or have been accepted by such Significant
Holders and included on Schedule 1.2 hereof.
3.8 Absence of Undisclosed Liabilities and Obligations
See Section 3.3 above. See Section 3.13 below. See Section 3.22
below.
3.10 Real Property
The Company or its subsidiary currently lease property at the
following locations:
16275 Technology Drive
San Diego, California 92127-1815
Suite 150L
1 Longfellow Center
526 Boston Post Rd.
Wayland, Massachusetts
1-22-6 Ichikawa
Ichikawa
Chiba, Japan 272
<PAGE> 69
3.11 Tangible Assets and Equipment
No material leases other than for real property.
3.13 Patent and Trademarks
Effective August 1, 1989 and lasting until the expiration of the
licensed patents, the Company entered into a Patent License Agreement for a
nonexclusive worldwide license to certain patented laser technology with Patlex
Corp., a patent holding company ("Patlex"). Under the terms of the agreement,
the Company is required to pay royalties ranging from 1/4% to 5% of gross sales
and leases, as defined, depending on total revenues earned. The Company's
average Patlex license cost per laser in 1994 has been $1,890. During 1993 and
1992, royalty fees totalled $13,000 and $33,000, respectively.
On November 8, 1993 and August 31, 1994, the Company received notices
from Coherent Inc. ("Coherent") which alleged that the Company's excimer laser
systems infringe on Coherent's ownership of a patent related to gas discharge
lasers. The Company has referred such claim to its patent attorneys for
further investigation. Coherent has offered to license the patent to Cymer;
however, the Company believes that it has valid defenses to the infringement
claim.
PATENTS
Cymer Laser Technologies has been awarded the following additional U.S.
patents:
<TABLE>
<S> <C> <C> <C>
Patent Date PATENT
Number Patent Title Filed DATE
</TABLE>
Cymer Laser Technologies has applied for the following additional U.S. patents:
<TABLE>
<S> <C> <C>
Patent Date
Number Patent Title Filed
</TABLE>
TRADEMARKS
Cymer Laser Technologies has registered "CYMER" as a trademark in the following
countries:
<TABLE>
<CAPTION>
Country Registration No. Date
<S> <C> <C>
USA 1,622,222 11/13/90
</TABLE>
-2-
<PAGE> 70
<TABLE>
<S> <C> <C>
Benelux 480,693 02/01/91
</TABLE>
"CYMER" as a trademark is applied for and is pending in the following
countries:
<TABLE>
<CAPTION>
File No.
<S> <C>
Canada 662,500
Korea 90-22583
Germany C 40772-9
Japan Z-85870
</TABLE>
3.16 Litigation
See Section 3.13 above.
3.22 Disclosure
a. Bridge Loans. Certain Prior Investors and other investors purchased
the Bridge Notes to the Company, in the principal amount of $3,624,062, which
will be converted into Series F Shares at the Closing. The conversion price
shall be equal to the Purchase Price. In connection with the Bridge Loans, the
Company issued the Bridge Warrants which are exercisable for 399,903 shares of
Series F Preferred Stock. The exercise price of the Bridge Warrants is $3.40
per share.
b. Placement Agreement. In November 1994, the Company entered into an
Agreement (the "Placement Agreement") with Weeden & Co., L.P. (the "Placement
Agent") to act as exclusive placement agent for the sale of the Series F
Shares. The Letter Agreement provides that the Placement Agent shall receive
the following remuneration:
(i) the Series F Placement Warrants, issued by the Company, to
purchase Series F Preferred Stock at an exercise price
equal to the Purchase Price. The number of shares of
Series F Preferred Stock into which such Series F Placement
Warrants may be converted shall be a number equal to nine
(9%) percent of the gross proceeds of the sale of the
Series F Shares (less the value of the conversion of the
First Bridge Notes in the aggregate principal amount of
approximately $1,625,000 plus accrued interest thereon but
including the conversion of the Second Bridge Notes in the
aggregate
-3-
<PAGE> 71
principal amount of approximately $2,000,000 (the "Second Bridge
Financing") divided by $1. For example:
if the gross proceeds from the sale of the Series F
Shares equals $6,650,000 (including the First Bridge
Notes and the Second Bridge Notes of $1,625,000 and
$2,000,000 respectively) then such gross proceeds
will be reduced by the First Bridge Notes
($1,625,000), plus accrued interest on the First
Bridge Notes ($25,000) ($6,650,000 - $1,650,000 =
$5,000,000). Five million dollars shall then be
multiplied by 9% which equals $450,000 ($6,000,000 x
.09 = $450,000). $450,000 is then divided by $1
which equals 450,000. The Placement Agent shall then
receive 450,000 Series F Placement Warrants
exercisable for 450,000 shares of Series F Preferred
Stock at the Purchase Price.
The Series F Placement Warrants shall be exercisable in whole
or in part from time-to-time during a term of five (5) years
beginning with the first business day following the date of
the Closing. The Series F Preferred Stock underlying the
Series F Placement Warrants or any securities for which such
shares may be exchanged or into which such shares may be
converted shall be subject to the same registration rights
granted to Investors in the Series F Shares.
(ii) upon request and upon receipt of appropriate invoices therefor, for
all reasonable expenses (including legal fees and expenses and
consultant fees and expenses) as incurred in connection with the
private placement of the Series F Shares; provided that such amount
shall not exceed $125,000;
(iii) for a period of five years from the date of Closing, the Company
will consider in good faith using the Placement Agent as a placement
agent or a managing or lead underwriter for the Company in
connection with any private or public offering of securities of the
Company commenced within such five year period. The Agent shall
have the right for a period of five years from the end of the
offering period to participate as co-manager or co-placement agent
for the Company in connection with any public or private offering of
the Company's securities commenced within such five year period and
in connection with any such offering to sell a minimum of 33-1/3
percent of the total number of securities offered. If the Placement
Agent, in its sole discretion, chooses not to act as a placement
agent or underwriter in connection with any specific public or
private offering of such securities, then the Company may use any
other placement agent or underwriter, but only in connection with
that specific offering.
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<PAGE> 72
SUPPLEMENT
TO THE SCHEDULE OF EXCEPTIONS TO THE
SERIES F PREFERRED STOCK PURCHASE AGREEMENT OF
CYMER LASER TECHNOLOGIES
dated March 10, 1995
In connection with the issuance and sale by Cymer Laser Technologies
(the "Company") of shares of its Series F Preferred Stock (the "Series F
Shares") on February 28, 1995 (the "First Closing") and certain other events,
Schedule 3.0 (Exceptions to Representations and Warranties) of the Series F
Preferred Stock Purchase Agreement (the "Agreement") is amended as follows.
All capitalized terms shall have the meanings given to them in the Agreement,
unless otherwise defined herein.
This Supplement shall also serve to amend the Company's Private
Placement Memorandum, dated December 6, 1995, as previously amended on February
21, 1995.
3.3 Capitalization.
In the First Closing, the Company issued and sold 1,520,458 Series F
Shares to the investors and in the amounts listed on Schedule 1.2 of the
Agreement. The Company also issued warrants to purchase 324,069 shares of
Series F Preferred Stock at a price of $3.50 per share to Weeden & Co., L.P.,
the Company's Placement Agent. Certain of the investors converted 8.0%
promissory notes, in the aggregate principal amount of $3,622,062, and the
interest due thereon into Series F Shares at the First Closing. On the First
Closing date, the Company repaid the principal, in the amount of $2,000, and
the interest due thereon to the holder of two 8.0% promissory notes.
The number of shares of Common Stock outstanding has increased by
33,783 to 1,123,519 as a result of (i) the issuance of 10,000 shares of Common
Stock to APPT, Inc. pursuant to the terms of a license agreement among the
Company, APPT, Inc. and another affiliated company of APPT, Inc. and Science
Research Laboratory and (ii) the exercise of stock options for 23,783 shares of
Common Stock by certain officers and employees of the Company.
On March 2, 1993, the Board of Directors approved a 500,000 share
increase in the Common Stock issuable under the Company's 1987 stock plan-(the
"1987 Stock Plan"). Such increase will be submitted for the approval of the
Company's shareholders at the Company's annual shareholders, meeting.
3.9 Absence of Certain chances.
(f) On March 2, 1995, the company's Board of Directors approved
(i) increases in the salaries of certain officers of the Company and (ii) the
issuance of new options upon the surrender of
<PAGE> 73
existing options held by certain officers or directors as set forth below:
Salaries and Wages:
Effective as of March 2, 1995, the Managing Director of Cymer Japan,
Inc., Shuzo Kimura, will receive an annual salary of $165,000, an increase of
$19,000 from his 1994 salary, and the Vice President - Advanced Research,
Richard L. Sandstrom, will receive an annual salary of $95,000. In connection
with annual reviews, most other employees received salary increases, which in
the aggregate average 5.0%. In the future, the Board of Directors will consider
the compensation of the President and Chief Executive Officer, Dr. Robert P.
Akins, and the Vice President - Finance and Administration, William A. Angus
III, and such consideration could occur at the next Board of Directors meeting
in April. Any increases in Dr. Akins' or Mr. Angus' compensation could be made
retroactive to January 1, 1995 and may represent substantial increases as
compared to their present salaries.
Stock Options:
The Company's stock options are issued pursuant to the 1987 Stock
Plan. The 1987 Stock Plan provides for vesting over four years, unless
specified to the contrary, and expiration of outstanding options after five
years. On March 2, 1995, the Board of Directors authorized the exchange of new
stock options with new four year vesting schedules upon the surrender of
outstanding stock options as follows:
Shuzo Kimura may surrender the following outstanding stock options:
(i) 10,000 options at an exercise price of $.85 per share expiring in 1996,
(ii) 6,400 options at an exercise price of $.85 per share expiring in 1997, and
(iii) 35,000 options at an exercise price of $.50 per share expiring in 1999 in
exchange for 51,400 options at an exercise price of $.50 per share. On March
2, 1995, Mr. Kimura was also granted options for 20,000 shares of Common Stock
at a price of $.50 per share.
Richard L. Sandstrom may surrender the following outstanding stock
options: (i) 16,500 options at an exercise price of $.80 per share expiring in
1996 and (ii) 42,300 options at an exercise price of $.85 per s hare expiring
in 1997 in exchange for 58,800 options at an exercise price of $.50 per share.
On March 2, 1995, Richard P. Abraham (Director) was granted options
for 17,600 shares of Common Stock at a pride of $.So per share.
On March 2, 1994, the Board of Directors also authorized the exchange
of outstanding stock options held by other employees for
-2-
<PAGE> 74
an aggregate of 37,750 options at an exercise price of $.50 per share in
exchange for (i) 3,000 options expiring this year at an exercise price of $.65
per share, (ii) 7,500 options expiring this year at an exercise price of $.70,
(iii) 15,750 options expiring in 1998 at an exercise price of $1.00 and (iv)
11,500 options expiring in 1999 at an exercise price of $.50 per share. The
Board of Directors also granted such employees additional options for 33,000
shares of Common Stock at an exercise price of $.50 per share.
The Company's management has found a suitable candidate for the
position of Director - Marketing and has made such candidate an offer of
employment. The Board of Directors has approved a compensation package for
this position which provides for a salary of $135,000, plus $15,000 in
incentive, and a grant of 100,000 stock options at an exercise price of $.50
per share.
3.16 Litigation.
On October 20, 1994, the Company sent a letter to Coherent,
Inc. ("Coherent") asserting that Coherent's U.S. Patent No. 4,393,505, (the
"Fahlen Patent") which was issued in 1983, was invalid due to prior art as
referenced in two papers published in 1977. On March 6, 1995, the Company
received Coherent's response to its October 20, 1994 letter, which included an
opinion of one of the co-authors of one of the 1977 papers that the two papers
do not make the Fahlen Patent invalid. Coherent has threatened to sue the
Company if the Company does not respond timely, and again has offered to
license the patent to the Company. The Company is evaluating its response to
the March 6, 1995 letter and continuing to explore possible defenses with its
patent attorneys. There can be no assurance that the Company will be able to
prove that the Fahlen Patent is invalid or that if the Company is required to
license the Fahlen Patent, that the license terms will not have a material
adverse effect on the Company's results of operations.
-3-
<PAGE> 75
SECOND SUPPLEMENT TO THE SCHEDULE OF EXCEPTIONS TO THE
SERIES F PREFERRED STOCK PURCHASE AGREEMENT OF
CYMER LASER TECHNOLOGIES
dated March 24, 1995
Introduction:
Throughout the month of March, Cymer Laser Technologies (the
"Company") has been working with its independent financial accountants to
prepare its consolidated financial statements for the year ended December 31,
1994. On March 23, 1995, the accountants raised an issue concerning the
accounting of an 8% redemption premium which the company is required to pay in
the event of a redemption of its preferred stock, as set forth in the Company's
Fourth Amended and Restated Articles of Incorporation. In response, the
Company decided to make certain changes to the stockholder's equity section of
its balance sheet as described below.
Amendment of Schedule 3.0:
In connection with the second closing of the Company's issuance and
sale of shares of its Series F Preferred Stock (the "Series F Shares"),
Schedule 3.0 (Exceptions to Representations and Warranties), as amended on
March 10, 1995, of the Series F Preferred Stock Purchase Agreement (the
"Agreement") is further amended as follows. All capitalized terms shall have
the meanings given to them in the Agreement, unless otherwise defined herein.
This Supplement shall also serve to amend the Company's Private Placement
Memorandum, dated December 6, 1994, as previously amended on February 21, 1995
and March 10, 1995.
3.7 Financial Information On March 23, 1995, in connection with
the preparation of its consolidated financial statements for the year ended
December 31 1994, the Company made a decision to change the method of
accounting for the accretion of the 8% per annum redemption premium on its
redeemable convertible preferred stock. The impact of that change was to
increase the "Redeemable preferred stock" account in the stockholders' equity
section of the balance sheet by approximately $6.0 million with a corresponding
increase in the accumulated deficit in "STOCKHOLDERS" EQUITY (DEFICIT)" as of
December 31, 1994. There was no impact on net "STOCKHOLDERS' EQUITY
(DEFICIT)." There was no impact on the income statement, and this change will
also have no future impact on earnings.
The attached consolidated balance sheet has been derived from the
unaudited financial statements of the Company and incorporates the change
described above. The Company's financial statements are currently being
audited by the Company's independent financial accountants, and the company
expects the audit to be complete by the end of March, at which time the audited
financial statements will be made available to investors.
<PAGE> 76
If you should have any questions regarding this supplement, please
contact William Angus at Cymer Laser Technologies (619/487-2442) or Geoffrey
Hale, Esq. at Wilson, Sonsini, Goodrich & Rosati (415/493-9300 ext. 4736).
After your review of this Supplement, please sign where indicated below and
return by facsimile transmission a copy of this signed page to Geoffrey Hale at
Wilson, Sonsini, Goodrich & Rosati (fax No.: 415/493-6811) by Monday, March 27,
1995. Thank you for your attention to this matter and your continued support
of Cymer Laser Technologies.
I have reviewed this Supplement and the attached financial information
and have had sufficient opportunity to obtain any other information I need from
Cymer Laser Technologies prior to my purchase of Series F Shares.
By: _____________________
Investor (print name)
Signed: _________________
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<PAGE> 77
CYMER LASER TECHNOLOGIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $2,326,000 $715,000
Accounts receivable 2,451,000 2,068,000
Inventories 2,526,000 1,297,000
Repaid expenses and other assets 447,000 125,000
Total current assets 7,750,000 4,205,000
PROPERTY 1,346,000 1,448,000
OTHER ASSETS 76,000 152,000
$9,172,000 $5,805,000
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit agreements $1,546,000 $1,588,000
Accounts payable 3,624,000 474,000
Accrued liabilities 935,000 488,000
Deferred revenue 1,015,000 627,000
Advance against commercial drafts 478,000 495,000
Total current liabilities 1,709,000 655,000
LONG-TERM DEBT 9,307,000 4,327,000
DEFERRED RENT 0 0
COMMITMENTS AND CONTINGENCIES 327,000 317,000
STOCKHOLDERS' EQUITY:
Redeemable convertible preferred stock - authorized - 9,500,000 shares;
Issued and outstanding 4,325,480 and 4,229,661
shares (liquidation preference - $19,290,000) 19,290,000 12,989,000
Common stock - authorized - 15,000,000 shares);
issued and outstanding 1,091,437 and 1,083,013 shares 175,000 180,000
Accumulated deficit (19,898,000) (11,956,000)
Cumulative translation adjustment (29,000) (32,000)
Total stockholders equity (462,000) 1,161,000
TOTAL $9,172,000 $5,805,000
</TABLE>
<PAGE> 1
EXHIBIT 10.12
SERIES G PREFERRED STOCK PURCHASE AGREEMENT
AMONG
CYMER LASER TECHNOLOGIES,
THE FOUNDERS LISTED ON SCHEDULE 1.1
AND
THE INVESTORS LISTED ON SCHEDULES 1.2 AND 1.3
JANUARY 30, 1996
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
1. Sale, Purchase and Delivery of Series G Shares............................................................ 2
1.1 Issuance and Sale of Series G Shares............................................................. 2
1.2 Delivery of Series G Shares...................................................................... 3
2. Certain Definitions....................................................................................... 3
3. Representations and Warranties of the Company............................................................. 3
3.1 Organization and Good Standing; Power and Authority.............................................. 3
3.2 Subsidiaries..................................................................................... 4
3.3 Capitalization................................................................................... 4
3.4 Compliance with Laws............................................................................. 5
3.5 Validity of Agreement; Binding Effect............................................................ 6
3.6 No Breach........................................................................................ 6
3.7 Financial Information............................................................................ 6
3.8 Absence of Undisclosed Liabilities and Obligations............................................... 7
3.9 Absence of Certain Changes....................................................................... 7
3.10 Real Property.................................................................................... 7
3.11 Tangible Assets and Equipment.................................................................... 8
3.12 Tax Returns and Audits........................................................................... 8
3.13 Patents and Trademarks........................................................................... 9
3.14 Employees........................................................................................ 9
3.15 Confidentiality.................................................................................. 9
3.16 Litigation....................................................................................... 10
3.17 ERISA............................................................................................ 10
3.18 Environmental Compliance Matters................................................................. 10
3.19 Use of Proceeds.................................................................................. 11
3.20 Registration Rights.............................................................................. 11
3.21 Escrowed Certificates of Founder Common Stock.................................................... 11
3.22 Disclosure....................................................................................... 11
3.23 Claims of the Founders........................................................................... 11
3.24 Insurance........................................................................................ 12
4. Representations and Warranties of the Investor............................................................ 12
4.1 Organization and Standing........................................................................ 12
4.2 Authorization and Approval of and Ability to Carry Out This Agreement............................ 12
4.3 Investment Representation........................................................................ 12
5. Company's Affirmative Covenants........................................................................... 13
5.1 Corporate Existence.............................................................................. 13
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
5.2 Taxes and Liens.................................................................................. 13
5.3 Maintain Property................................................................................ 14
5.4 Financial Statements and Reports................................................................. 14
5.5 Confidentiality.................................................................................. 14
5.6 Series G Conversion Shares....................................................................... 14
5.7 Access to Books and Records...................................................................... 15
5.8 Right of First Offer............................................................................. 15
5.9 Right of First Refusal and/or Repurchase Agreement............................................... 17
5.10 Insurance........................................................................................ 17
5.11 Notice of Record Dates........................................................................... 17
5.12 Employee Stock Purchase Agreement................................................................ 17
5.13 Securities Law Filings........................................................................... 18
5.14 Lapse of Covenants............................................................................... 18
5.15 Information as to Competitors and Proprietary Information........................................ 18
5.16 Technological Expertise.......................................................................... 18
6. Investor's Affirmative Covenants.......................................................................... 18
6.1 No Solicitation of Employees..................................................................... 18
6.2 Certain Definitions.............................................................................. 18
6.3 Limitation on Ownership of Voting Stock.......................................................... 19
6.4 Notice of Voting Stock Purchases................................................................. 19
6.5 Voting Trust, etc................................................................................ 20
6.6 Solicitation of Proxies.......................................................................... 20
6.7 Acts in Concert with Others...................................................................... 20
6.8 Agreement not to Control......................................................................... 20
6.9 Restrictions on Transfer of Voting Stock......................................................... 20
6.10 Confidentiality.................................................................................. 21
6.11 Amendment of Prior Agreements.................................................................... 21
7. Further Agreements........................................................................................ 21
7.1 Right of First Refusal and Repurchase with Respect to Founder Stock.............................. 21
7.2 Co-Sale Agreement on Sale of Founder Stock....................................................... 22
8. Company's Right of First Refusal.......................................................................... 23
8.1 Right of First Refusal........................................................................... 23
8.2 Tender Offer Sale................................................................................ 24
8.3 Assignment of Rights............................................................................. 25
9. Restrictions on Transferability of Shares; Compliance with the Act........................................ 25
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9.1 Restrictions on Transferability.................................................................. 25
9.2 Certain Definitions.............................................................................. 25
9.3 Notice of Proposed Transfers..................................................................... 27
9.4 Demand Registration Rights....................................................................... 27
9.5 Piggy-Back Registration Rights................................................................... 28
9.6 Registration on Form S-3......................................................................... 29
9.7 Rule 144 Reporting............................................................................... 30
9.8 Expenses of Registration......................................................................... 30
9.9 Cutbacks......................................................................................... 31
9.10 Additional Covenants Concerning Sale of Shares................................................... 31
9.11 Blue Sky Provisions.............................................................................. 31
9.12 Advising the Holders............................................................................. 31
9.13 Indemnification.................................................................................. 32
9.14 Registration under the Exchange Act.............................................................. 33
9.15 Information by Holder............................................................................ 33
9.16 Transfer of Registration Rights.................................................................. 33
9.17 Standoff Agreement............................................................................... 33
9.18 Termination of Rights............................................................................ 33
10. Survival of Representations, Warranties and Covenants..................................................... 33
10.1 Survival of Representations, Warranties and Covenants of the Company............................. 33
10.2 Survival of Representations and Warranties of the Investor....................................... 34
11. Conditions Precedent to Obligations of the Investor....................................................... 34
11.1 Representations and Warranties Correct........................................................... 34
11.2 Compliance with this Agreement................................................................... 34
11.3 Satisfaction of Investor......................................................................... 34
11.4 No Actions or Proceedings........................................................................ 34
11.5 Opinion of Company's Counsel..................................................................... 34
11.6 Officer's Certificate............................................................................ 34
11.7 Certificate of Secretary or Assistant Secretary.................................................. 35
11.8 Delivery of Documents............................................................................ 35
11.9 No Lapse in Insurance Coverage................................................................... 35
11.10 Employee Agreements and Nondisclosure Agreements................................................. 35
11.11 Government Approvals............................................................................. 35
12. Conditions Precedent to the Obligation of the Company..................................................... 36
12.1 Representations and Warranties Correct........................................................... 36
12.2 Compliance with this Agreement................................................................... 36
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
12.3 Satisfaction of Company and its Counsel.......................................................... 36
12.4 No Actions or Proceedings........................................................................ 36
12.5 Government Approvals............................................................................. 36
13. Documents to be Delivered at Closings..................................................................... 36
13.1 Documents to be Delivered by the Company at the Closings......................................... 36
13.2 Documents to be Delivered by the Investor at the Closings........................................ 37
14. Miscellaneous............................................................................................. 37
14.1 Definition of Person............................................................................. 37
14.2 Definition of Knowledge.......................................................................... 37
14.3 Additional Actions............................................................................... 37
14.4 Expenses......................................................................................... 37
14.5 Counterparts..................................................................................... 38
14.6 Binding Effect; No Assignment.................................................................... 38
14.7 Notices.......................................................................................... 38
14.8 Applicable Laws.................................................................................. 38
14.9 Entire Agreement................................................................................. 38
14.10 Waivers and Amendments; Noncontractual Remedies; Preservation of Remedies........................ 38
14.11 Table of Contents; Captions...................................................................... 39
14.12 Schedules and Exhibits Part of Agreement......................................................... 39
14.13 Severability..................................................................................... 39
14.14 Obligation of the Company to Indemnify........................................................... 39
14.15 Obligation of the Investor to Indemnify.......................................................... 39
14.16 Notice and Opportunity to Defend................................................................. 39
</TABLE>
SCHEDULES
1.1 FOUNDERS
1.2 FIRST CLOSING PURCHASERS
1.3 SECOND CLOSING PURCHASERS
3.0 SCHEDULE OF EXCEPTIONS
EXHIBITS
A FIFTH AMENDED AND RESTATED ARTICLES OF INCORPORATION
B OPINION OF THE COMPANY'S COUNSEL
-iv-
<PAGE> 6
EXHIBIT 10.12
SERIES G PREFERRED STOCK PURCHASE AGREEMENT
This SERIES G PREFERRED STOCK PURCHASE AGREEMENT is made as of January
30, 1996 (the "Agreement") among CYMER LASER TECHNOLOGIES, a California
corporation (the "Company"), the persons whose names are set forth on Schedule
1.1 hereto (hereinafter referred to individually as a "Founder" and collectively
as the "Founders"), and the purchasers of shares of series G preferred stock,
$.01 par value (the "Series G Preferred Stock"), set forth on Schedules 1.2 and
1.3 attached hereto (hereinafter referred to individually as an "Investor" and
collectively as the "Investors").
RECITALS
1. The Company sold 2,107,882 shares (the "Series A Shares") of its series
A preferred stock, $.01 par value (the Series A Preferred Stock), to certain
investors (the "Series A Investors") pursuant to a Series A Preferred Stock
Purchase Agreement, dated May 3, 1988 (the "Series A Agreement").
2. The Company sold 1,323,531 shares (the "Series B Shares") of its series
B preferred stock, $.01 par value (the "Series B Preferred Stock"), to certain
investors (the "Series B Investors") pursuant to a Series B Preferred Stock
Purchase Agreement, dated June 28, 1989 (the "Series B Agreement").
3. The Company sold 200,000 shares (the "Series C Shares") of its series C
preferred stock, $.01 par value (the "Series C Preferred Stock"), to certain
investors (the "Series C Investors"), pursuant to the Series C Preferred Stock
Purchase Agreement, dated April 16, 1990 (the "Series C Agreement").
4. The Company sold 470,590 shares (the "Series D Shares") of its series D
preferred stock, $.01 par value (the "Series D Preferred Stock"), to certain
investors (the "Series D Investors") pursuant to the terms of the Series D
Preferred Stock Purchase Agreements, dated March 15, 1991 and August 28, 1992
(the "Series D Agreement").
5. The Company sold 75,600 shares (the "Series E Shares") of its series E
preferred stock, $.01 par value (the "Series E Preferred Stock"), to certain
investors (the "Series E Investors") pursuant to the terms of the Series E
Preferred Stock Purchase Agreement, dated February 25, 1994 (the "Series E
Agreement").
6. The Company sold 1,900,00 shares (the "Series F Shares") of its series
F preferred stock, $.01 par value (the "Series F Preferred Stock") to certain
investors (the "Series F Investors") pursuant to the terms of the Series F
Preferred Stock Purchase Agreement, dated February 28, 1995 (the "Series F
Agreement"). The Series A Agreement, the Series B Agreement, the Series C
Agreement, the Series D Agreement, the Series E Agreement and the Series F
Agreement shall
<PAGE> 7
collectively be referred to as the "Prior Agreements." The Series A Investors,
Series B Investors, Series C Investors, Series D Investors, Series E Investors
and Series F Investors shall collectively be referred to as the "Prior
Investors" or "Prior Investor" as the case may be.
7. The Company intends to sell, and the Investors intend to purchase, an
aggregate of up to Nine Hundred Thousand (900,000) shares of the Company's 8%
Non-Cumulative Voting Redeemable Convertible Series G Preferred Stock (the
"Series G Shares"), with such rights, preferences and limitations as are set
forth in the Company's Fifth Amended and Restated Articles of Incorporation
attached hereto as EXHIBIT A (the "Restated Articles of Incorporation"),
including, without limitation, the right to convert each Series G Share into one
share of the Company's common stock, $.01 par value per share (the "Common
Stock"), for an aggregate of Nine Hundred Thousand (900,000) shares of Common
Stock, subject to adjustment for any dilution event described in the Restated
Articles of Incorporation or similar event (the "Series G Conversion Shares").
NOW, THEREFORE, in consideration of the mutual promises and the
representations, warranties and covenants herein contained, and of other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree, subject to the conditions and terms
herein set forth, as follows:
1. Sale, Purchase and Delivery of Series G Shares.
1.1 Issuance and Sale of Series G Shares.
(a) Issuance and Sale to Investors. Subject to
the terms and conditions of this Agreement, each Investor agrees to authorize
the release of funds (held in escrow by the Company's counsel) and purchase at
one of the Closings (as defined herein), and the Company agrees to issue and
sell to such Investor at such Closing, the Series G Shares listed opposite such
Investor's name on Schedule 1.2 or Schedule 1.3 for the aggregate purchase price
set forth on Schedule 1.2 or Schedule 1.3. Each Investor's purchase price shall
be payable (i) in cash or (ii) by release of funds held in escrow by the
Company's counsel. The price per share of the Series G Shares is $6.00 (the
"Purchase Price"). Upon execution of this Agreement by the Company and any
Investor, this Agreement shall be effective as to the Company and such Investor.
(b) First Closing. The purchase and sale of the
Series G Shares to the purchasers set forth on Schedule 1.2 (the "First Closing
Purchasers") shall take place at the offices of Wilson Sonsini Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California 94304-1050, at 2:00 p.m., on
January 30, 1996, or at such other time and place as the Company and the First
Closing Purchasers, may mutually agree upon in writing (which time and place are
designated as the "First Closing" or "First Closing Date").
(c) Second Closing. A second closing of the
purchase and sale of Series G Shares (the "Second Closing" and, together with
the First Closing, the "Closings") shall take place at the offices of Wilson,
Sonsini, Goodrich and Rosati at 2:00 p.m. on February 15, 1996 or on such
-2-
<PAGE> 8
earlier date as the Company and the purchasers set forth on Schedule 1.3 may
agree (the "Second Closing Purchasers"). Each of the First Closing Purchasers
and the Company agree that no provision of this Agreement may be amended or
waived prior to the Second Closing without the written consent of the Second
Closing Purchasers. Each Second Closing Purchaser shall become a party to this
Agreement and, together with the First Closing Purchasers, shall be deemed to be
an "Investor" for purposes of this Agreement upon execution of this Agreement by
such Second Closing Purchaser provided that the sale of the Series G Shares to
such purchasers shall be effected in accordance with applicable state and
federal securities laws. In the event that either of the Second Closing
Purchasers does not purchase at the Second Closing the full number of shares set
forth opposite such Second Closing Purchaser's name on Schedule 1.3, the Company
may, on or prior to February 29, 1996, issue the shares not purchased by such
Second Closing Purchaser to other Investors.
1.2 Delivery of Series G Shares. At the Closings, the Company
shall deliver to each Investor against receipt of the Purchase Price therefor
one or more certificates bearing the appropriate legends in accordance with
Section 4.3 hereof, evidencing ownership of the number of Series G Shares being
purchased hereunder by such Investor in the denomination indicated in Section
1.1(a) and which shall be recorded on the stock transfer books of the Company in
the name of the Investor. All events which shall occur at such Closing shall be
deemed to occur simultaneously.
2. Certain Definitions. For purposes of Sections 5.8, 7.1, 7.2, 9 and
14.10 of this Agreement, the term "Shares" shall mean collectively the Series A
Shares, Series B Shares, Series C Shares, Series D Shares, Series E Shares,
Series F Shares and Series G Shares; the term "Conversion Shares" or singularly,
"Conversion Share" shall mean the shares of Common Stock issued upon conversion
of the Shares; and the term "Significant Holder" shall mean (i) a holder of at
least 210,788 Series A Shares, (ii) a holder of at least 132,353 Series B
Shares, (iii) a holder of at least 100,000 Series C Shares, (iv) a holder of at
least 100,000 Series D Shares, (v) a holder of at least 37,800 Series E Shares,
(vi) a holder of at least 100,000 Series F Shares (or Conversion Shares) or
(vii) a Series G Significant Holder (as defined below). The term "Series G
Significant Holder" shall mean a holder of at least 200,000 Series G Shares (or
Series G Conversion Shares).
3. Representations and Warranties of the Company. Except as disclosed in
the attached schedule of exceptions (Schedule 3.0), the Company represents and
warrants to the Investors as follows:
3.1 Organization and Good Standing; Power and Authority. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority and the legal right to transact the business in which it is
presently engaged, to own, lease and operate all of the assets and properties
owned, leased or operated by it, to enter into and perform this Agreement, and
will have at the Closing, all requisite corporate power and authority to sell
and issue the Series G Shares and to issue the Series G Conversion Shares and to
otherwise perform and comply with all other actions and agreements arising
hereunder. The Company does not own or lease any property or engage in any
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activity in any jurisdiction which might require its qualification to do
business as a foreign corporation in any such jurisdiction. The Company has
furnished the Investor or its counsel with true, correct and complete copies
(certified by the Secretary or Assistant Secretary of the Company) of its (a)
Restated Articles of Incorporation and will make available to each Investor (b)
By-Laws, (c) the minute books of the Company (containing records of all meetings
and consents in lieu of meetings of its shareholders and the Board of Directors
of the Company (the "Board") (and any committees thereof) since the date of its
incorporation and (d) the stock transfer books of the Company. A copy of the
Restated Articles of Incorporation is attached hereto as EXHIBIT A.
3.2 Subsidiaries. Except for Cymer Japan, Inc., a Japanese
corporation and a wholly-owned subsidiary of the Company, the Company has no
subsidiaries and does not own (of record or beneficially) and has made no
commitment to purchase any shares or securities of, or otherwise make any
investment in, any other corporation, association, partnership or other entity
and is not a participant in any joint venture. Cymer Japan, Inc. is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority and the legal right to transact the business in which it is presently
engaged, to own, lease and operate all of the assets and properties owned,
leased or operated by it.
3.3 Capitalization.
(a) The authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock, 1,156,123 shares of which are
issued and outstanding, and 9,834,880 shares of preferred stock, $.01 par value
(the "Preferred Stock"), consisting of: 2,269,261 shares of Series A Preferred
Stock, all of which are issued and outstanding; 1,310,029 shares of Series B
Preferred Stock, all of which are issued and outstanding; 200,000 shares of
Series C Preferred Stock, all of which are issued and outstanding; 485,590
shares of Series D Preferred Stock, 470,590 of which are issued and outstanding;
1,670,000 shares of Series E Preferred Stock, of which 75,600 are issued and
outstanding; 3,000,000 shares of Series F Preferred Stock, 2,170,074 of which
are outstanding; and 900,000 shares of Series G Preferred Stock, none of which
are outstanding prior to the Closing. All of the outstanding shares of Common
Stock and Preferred Stock are duly authorized and validly issued, fully paid and
non-assessable. The Company has reserved the following shares of capital stock
for issuance: (i) up to 900,000 Series G Shares to be issued pursuant to this
Agreement, (ii) 1,500,000 shares of Common Stock upon exercise of options
granted or to be granted to the Company's employees; (iii) 21,514 shares of
Series E Preferred Stock to be issued pursuant to Warrants to purchase Series E
Preferred Stock (the "Series E Warrants"); (iv) up to 843,526 shares of Series F
Preferred Stock to be issued pursuant to warrants to purchase Series F Preferred
Stock (the "Series F Warrants"); and (v) up to 8,561,295 shares of Common Stock
reserved for issuance upon conversion of the Shares and upon conversion of
Preferred Stock to be issued pursuant to the Series E Warrants and the Series F
Warrants. No other classes of capital stock of the Company are authorized or
outstanding.
(b) Except as set forth in this Agreement, the
Series E Warrants, the Series F Warrants and options to purchase up to 1,500,000
shares of Common Stock granted or to be
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<PAGE> 10
granted under the Company's Stock Option Plan, as of the date hereof, there are
no other outstanding rights, subscriptions, warrants, calls, preemptive rights,
options or other agreements of any kind to purchase or otherwise to receive from
or sell to the Company any of the outstanding, authorized but unissued,
unauthorized or treasury shares of the capital stock or any other security of
the Company, and there is no security of any kind convertible into such capital
stock. The Company has no obligation or agreement under any contingency
whatsoever to issue any equity, debt or other security, or to pay, perform,
guaranty, be responsible for, or satisfy in whole or in part any debt, security,
obligation or agreement incurred or made by an individual or entity other than
the Company, and the Company has no obligation under any condition or
contingency whatsoever to share its income with anyone, or to make, accrue or
set aside any payment or amount measured in any way by any part or all of its
sales or income. The Company is not indebted to any of its employees in any
amount other than for accrued but unpaid compensation.
(c) Upon issuance pursuant to this Agreement,
the Series G Shares will have the rights and preferences set forth in the
Restated Articles of Incorporation and each Series G Share will be, when issued,
initially convertible into one Series G Conversion Share, subject to adjustment
for any dilution event described in the Restated Articles of Incorporation or
similar event. The Series G Shares delivered to the Investor pursuant to this
Agreement, upon payment of the respective purchase prices therefor, shall be
duly authorized, validly issued, fully paid and non-assessable, and the
Conversion Shares have been duly and validly reserved and, upon issuance in
accordance with the conversion provisions of the Series G Shares and the
Restated Articles of Incorporation, shall be duly authorized, validly issued,
fully paid and non-assessable. Subject to the provisions of applicable federal
and state securities laws and compliance with the terms of this Agreement, upon
the consummation of the transactions contemplated hereby, the Series G Shares
and the Series G Conversion Shares will be freely transferable and free and
clear of all liens and encumbrances, other than liens, encumbrances or
restrictions on transfer arising hereunder or under agreements entered into or
actions taken by the Investor.
(d) All of the outstanding shares of Common
Stock and Preferred Stock have been, and all Series G Shares to be issued
pursuant to this Agreement and all Series G Conversion Shares and Conversion
Shares to be issued will be, offered, issued and sold in compliance with all
federal and state securities laws.
3.4 Compliance with Laws. The Company is not in violation of (a)
any applicable order, judgment, injunction, award or decree, or (b) any federal,
state, local or foreign law, ordinance or regulation or any other requirement of
any governmental or regulatory body, court or arbitrator applicable to the
business of the Company except for violations which could not have a material
adverse effect on the business or properties of the Company and would not be in
violation of any such law, ordinance, regulation or other requirement that has
been enacted or adopted but is not yet effective if it were effective. The
Company has obtained all licenses, permits, orders and approvals of any federal,
state, local or foreign governmental or regulatory body (collectively,
"Permits") that are material to or necessary for the conduct of the business of
the Company. All of such Permits are in full force and effect, no violations are
or have been recorded in respect of any Permit and no
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<PAGE> 11
proceeding is pending or, to the best of the Company's knowledge, threatened to
revoke or limit any such Permit.
3.5 Validity of Agreement; Binding Effect. No approval or consent
of any foreign, federal, state, county, local or other governmental or
regulatory body is required in connection with the execution and delivery by the
Company of this Agreement, the issuance of the Series G Shares or the Series G
Conversion Shares and the consummation and performance by the Company of the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement, the issuance of the Series G Shares and the Series G Conversion
Shares and the consummation of the transactions contemplated herein by the
Company have been duly authorized by all necessary corporate action on the part
of the Company, including any action which may have been required to be taken by
the Company's shareholders, and this Agreement, when executed, will constitute
the legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms (except insofar as the enforcement hereof
may be limited by (a) applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting creditors' rights generally from time to
time in effect, (b) equitable principles of general application and (c)
limitations of public policy as applied to Section 9.13 of this Agreement).
3.6 No Breach. The execution and delivery of this Agreement
does not and the issuance of the Series G Shares and Series G Conversion Shares
and consummation of and compliance with the transactions and agreements
contemplated hereby will not conflict with or constitute a violation or breach
of (a) the Restated Articles of Incorporation or By-laws of the Company, (b) any
provision of any material contract or other instrument to which the Company is a
party or by which the Company may be bound or by which the business, assets or
properties of the Company may be affected or secured, (c) any order, writ,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body against or binding upon the Company or upon the securities,
properties or business of the Company or (d) any statute, law, rule, permit or
regulation (including, without limitation, applicable federal and state
securities laws) of any jurisdiction to which the Company is subject.
3.7 Financial Information. The Company has furnished the Investor
with (a) its statements of operations of the Company for the three years ended
December 31, 1992, 1993 and 1994, all of which were derived from the Company's
audited Financial Statements (audited by Deloitte & Touche, independent public
accountants, (collectively, the "Annual Financials"), and (b) an unaudited
balance sheet dated as of September 30, 1995, and an unaudited statement of
operations for the period then ended (the "Unaudited Financials"; the Annual
Financials and the Unaudited Financials are herein referred to collectively as
the "Financial Statements"). The Financial Statements are complete and correct,
and present fairly the financial position and assets and liabilities of the
Company at their respective dates and the results of its operations and changes
in financial position for the periods then ended; provided, however, that the
Unaudited Financials are subject to year-end audit adjustments and do not
contain all footnotes required under generally accepted accounting principles.
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<PAGE> 12
3.8 Absence of Undisclosed Liabilities and Obligations. The
Company has no liability or obligation, either accrued, absolute, direct, or to
the best of its knowledge, contingent or indirect, or otherwise, whether as
principal, agent, partner, co-venturer, guarantor or in any capacity whatsoever
which are not reflected in the Financial Statements, other than (a) obligations
and liabilities incurred in the ordinary course of business that are not
individually or in the aggregate material and (b) obligations under contracts
made in the ordinary course of business that would not be required to be
reflected in the Financial Statements.
3.9 Absence of Certain Changes. Since September 30, 1995, there
has not been any event or condition of any character which has either singly or
in the aggregate materially adversely affected the Company's business or
prospects, including but not limited to:
(a) Any change in the condition (financial or otherwise),
assets, liabilities or business of the Company from that shown on the Financial
Statements;
(b) Any damage, destruction or loss of any of the
properties or assets of the Company (whether or not covered by insurance)
affecting the business or plans of the Company;
(c) Any declaration, setting aside, payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(d) Any waiver by the Company of any rights of value;
(e) Any purchase, sale or transfer of any assets or
properties of the Company, any satisfaction or cancellation of any mortgage or
pledge or any incurring of any debts or claims, or the subjection of any assets
or property of the Company to any lien, charge, security interest or other
encumbrance or any other transaction entered into by the Company other than in
the ordinary course of business;
(f) Any increase in the compensation of any of the
officers, other employees or agents of the Company, including without
limitation, any increase by means of any bonus or pension plan, contract or
other commitment; or
(g) Any labor trouble, or any event or condition of any
character, affecting the business or plans of the Company.
3.10 Real Property. Schedule 3.0 sets forth a list and summary
description of all evidences of ownership of real property by the Company, all
leases, subleases or other agreements under which the Company is lessor or
lessee of any real property, and of all options held by the Company to purchase
or acquire real property. Such leases, subleases and other agreements and all
options are in full force and effect and the Company has not received any notice
of any default thereunder. No approval or consent of any person is needed in
order that the leases, subleases or
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other agreements and all options under or pursuant to which the Company is
lessor or lessee of any real property continue in full force and effect after
the Closing. The leasehold interests of the Company are not subject to any liens
or encumbrances and such leasehold interests enjoy a right of quiet possession
as against any liens or encumbrances on the properties. The Company is not
subject to any contractual obligation to purchase or acquire any interest in
real property or to sell or dispose of any interest in real property, and the
Company has not granted any options to purchase or acquire any interest in real
property. The Company has good and marketable title to all the real property
held by it outright and none of such real property or any of the structure or
improvements thereon is in violation of any applicable building, zoning,
environmental or other laws, ordinances or regulations. None of such real
property has been condemned or is the subject of any eminent domain proceeding
and the Company has no grounds to believe that any such condemnation or eminent
domain proceeding is threatened or taking place.
3.11 Tangible Assets and Equipment. The Company owns outright and
has good and marketable title to all of its tangible assets and equipment
including all tangible assets and equipment reflected in the Financial
Statements, in each case free and clear of any lien or encumbrance, subject only
to liens for taxes not yet due or which are being contested in good faith and by
appropriate proceedings and for which adequate reserves have been set aside on
the books of the Company and reflected in the Financial Statements. Each
tangible asset and piece of equipment of the Company is in good operating
condition, ordinary wear and tear excepted, is being and has been properly
serviced and maintained.
3.12 Tax Returns and Audits.
(a) (i) The Company has properly completed and filed or
will file within the time prescribed by law (including extensions of time
approved by the appropriate taxing authority) in correct form all federal, state
and other income, profits, franchise, real property, personal property, sales,
use, employment, payroll, excise and other tax returns and reports required to
be filed by the Company, (ii) all taxes imposed or which may be imposed or
asserted by the U.S. Internal Revenue Service, the State of California, or any
other taxing authority, and all deficiencies, assessments, additions to tax,
penalties and interests, which are due and payable by the Company through
December 31, 1994, or which are attributable to the operations, business,
properties or assets of the Company through that date have been paid in full,
and (iii) all monies required to be withheld by the Company from employees for
income taxes, social security and unemployment insurance taxes have been
collected or withheld and either paid to the respective governmental agencies or
adequately provided for by reserves on the books of the Company and reflected in
the Financial Statements, other than (x) returns and reports, the non-filing of
which, (y) deficiencies, assessments, additions to tax, penalties and interest,
the non-payment of which, and (z) withholdings, the non-collection or
withholding of which would not either singly or in the aggregate have a material
adverse effect on the Company.
(b) There are (i) no other tax returns or reports which
are required to be filed by the Company which have not been so filed and (ii) no
unpaid assessments for additional taxes
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<PAGE> 14
for any fiscal period or any basis therefor. The Company's tax returns have not
been audited by the U.S. Internal Revenue Service, the State of California or
any other taxing authority to which the Company is subject. The Company has not
consented to any extensions of time to assess any tax.
(c) The Company has successfully revoked its election to
be treated as an S corporation and is presently filing tax returns and reports
to, and is recognized by, the U.S. Internal Revenue Service, the State of
California and all other relevant taxing authorities as a C corporation.
3.13 Patents and Trademarks. To the best of the Company's
knowledge, it owns or possesses, has access to, or can become licensed on
reasonable terms under all patents, patent applications, inventions, trademarks,
tradenames, servicemarks, copyrights, and other proprietary intellectual
property rights (collectively referred to as "Proprietary Rights") (a) necessary
for the lawful conduct of its business as now conducted and as proposed to be
conducted, and the lack of which would materially and adversely affect its
business or properties, and (b) without any material infringement of or conflict
with the rights of others. All of the Proprietary Rights are free and clear of
any liens or other encumbrances. The Company has not granted any licenses to its
Proprietary Rights and is not aware of any third parties who are infringing or
violating any of same. The Company has not been notified of any disputes or
claims regarding the Proprietary Rights.
3.14 Employees. No key employee of the Company is, or is now
expected to be, in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant or any other common law obligation to a
former employer relating to the right of any such employee to be employed by the
Company because of the nature of the business conducted or to be conducted by
the Company or to the use of trade secrets or proprietary information of others,
and the employment of the Company's employees does not subject the Company or
the Investor to any material liability. There is neither pending nor, to the
Company's knowledge threatened, any actions, suits, proceedings or claims, or
any basis therefor or thereof with respect to any contract, agreement, covenant
or obligation referred to in the preceding sentence. The Company is not a party
to, or subject to, any obligation, liability or commitment with respect to any
written employment, compensation, consulting, severance pay or similar agreement
and any and all oral employment, compensation, consulting or similar commitments
are terminable at will and without notice by the Company and without payment or
penalty. The Company is not a party to any collective bargaining or other union
contracts and its employees are not represented by any union.
3.15 Confidentiality. Each person employed by the Company or hired
as a consultant to the Company who has access to any Proprietary Rights or other
proprietary information of or about the Company has executed and delivered to
the Company an agreement pursuant to which the employee or consultant agrees to
maintain the confidentiality of all Proprietary Rights or other proprietary
information and to assign the Company any inventions the employee or consultant
makes on the job.
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<PAGE> 15
3.16 Litigation.
(a) There are no legal, administrative or other
proceedings, investigations or inquiries, or other asserted claims, judgments,
injunctions or restrictions, pending or outstanding or, to the best knowledge of
the Company, threatened against the Company, any of its properties or business,
or against or involving any of the Company or the officers or directors of the
Company, or any action related to this Agreement, the issuance of the Series G
Shares or any of the transactions contemplated herein that might if determined
adversely to the Company, either singly or in the aggregate, result in any
material adverse change in the business, prospects, operations, properties or
condition (financial or otherwise) of the Company or in any material liability
on the part of the Company. To the best of the Company's knowledge, there is no
fact, event or circumstance that may give rise to any suit, action, claim,
investigation or proceeding that would be required to be set forth on Schedule
3.0 if currently pending or threatened. There are no actions, suits or claims or
legal, administrative or arbitration proceedings pending or to the best of the
Company's knowledge threatened that would give rise to any right of
indemnification on the part of any director or officer of the Company or the
heirs, executors or administrators of such director or officer against the
Company.
(b) The Company has not admitted in writing its inability
to pay its debts generally as they become due, filed or consented to the filing
against it of a petition in bankruptcy or a petition to take advantage of any
insolvency act, made an assignment for the benefit of creditors, consented to
the appointment of a receiver for itself or for the whole or any substantial
part of its property, or had a petition in bankruptcy filed against it, been
adjudicated a bankrupt, or filed a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other law or statute of the
U.S. or any other jurisdiction.
3.17 ERISA. No employee pension benefit plan, within the meaning of
Section 3(a) of the Employment Retirement Income Security Act of 1974, as
amended ("ERISA"), is currently maintained or sponsored by the Company and the
Company does not contribute to, and is not obligated to contribute to, and none
of the employees of the Company is a participant in, any multiemployer plan
within the meaning of Section 400(a) of ERISA.
3.18 Environmental Compliance Matters.
(a) There is no soil or ground water contamination by any
"Hazardous Material" for which the Company is or may be liable. "Hazardous
Material" shall mean any flammables, asbestos, explosives, radioactive
materials, hazardous wastes, toxic substances or related materials, including
without limitation any substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," or "toxic
substances" under any applicable federal, state or local laws, rules,
regulations or orders or which federal, state or local laws, rules, regulations
or orders have designated as potentially dangerous to public health and/or
safety when present in the environment;
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<PAGE> 16
(b) The Company has stored, used and disposed of
"Hazardous Material" in material compliance with applicable laws; and
(c) There are no (i) enforcement, cleanup, removal or
other governmental or regulatory actions instituted or completed or, to the best
of the Company's knowledge, threatened against the Company pursuant to any
applicable federal, state or local laws, ordinances or regulations relating to
any Hazardous Material, (ii) claims made or, to the best of the Company's
knowledge, threatened by any third party against the Company with respect to or
because of its property relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Material or (iii)
conditions on any of the properties of the Company that could cause such
properties or any part thereof to be subject to any restrictions on the
ownership, occupancy transferability or use of any of such properties under any
Hazardous Material law.
3.19 Use of Proceeds. The net proceeds to be paid to the Company at
the Closing are to be used (i) for developing manufacturing infrastructure and
(ii) to provide working capital.
3.20 Registration Rights. Except as provided for in this Agreement,
the Company is not under any obligation to register under the Securities Act of
1933, as amended (the "Act"), any of its currently outstanding securities or any
of its securities which may hereafter be issued.
3.21 Escrowed Certificates of Founder Common Stock. The
certificates for all shares of Common Stock held by the Founders have been
delivered to Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, in the
form required by, and in accordance with the terms of, the Common Stock
Restriction Agreements executed by and between the Company and the Founders (the
"Restriction Agreements").
3.22 Disclosure. In addition, the Company has fully provided the
Investor with all the information which such Investor has requested for deciding
whether to purchase the Series G Shares and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement nor any other statements, exhibits, schedules or
certificates made or delivered in connection herewith or therewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading. With respect to the
financial projections of the Company (the "Financial Projections"), and any
projections, forecasts, and expressions of opinions or predictions delivered to
the Investors, the Company represents only that such projections, forecasts, and
expressions of opinions or predictions were made in good faith and after careful
consideration and due inquiry and that the Company believes there is a
reasonable basis therefor. The Company does not represent or warrant that the
results, sales or orders set forth in the Financial Projections will be
achieved.
3.23 Claims of the Founders. The Company represents to the Investor
that the Founders have transferred to the Company all of their rights with
respect to any of the Company's Proprietary Rights (and have not retained as
their own property any invention or technology pertaining to the business of the
Company) and they have relinquished all claims to any Proprietary
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<PAGE> 17
Rights, including without limitation, any rights to any payments therefor, other
than their rights as employees and/or shareholders of the Company.
3.24 Insurance. The Company maintains insurance with reputable
insurance companies, on so much of its properties, to such an extent and against
such risks, as reasonably prudent persons engaged in similar businesses would
customarily insure properties of a similar character.
4. Representations and Warranties of the Investor. Each Investor severally
and not jointly hereby represents and warrants to the Company as follows:
4.1 Organization and Standing. If the Investor is not an
individual, the Investor is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation.
4.2 Authorization and Approval of and Ability to Carry Out This
Agreement. The Investor has duly authorized the execution and delivery of this
Agreement and the transactions contemplated hereby. If the Investor is not an
individual, the Investor has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
herein. This Agreement constitutes the legal, valid and binding obligation of
the Investor, to the extent provided for herein, enforceable in accordance with
its terms (except insofar as the enforcement hereof may be limited by (a)
applicable bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting creditors' rights generally from time to time in effect, (b) by
equitable principles of general application, and (c) limitations of public
policy as applied to Section 9.13 of this Agreement).
4.3 Investment Representation. The Investor is purchasing the
Series G Shares (including, for purposes hereof, the Series G Conversion Shares)
for its own account without a view to any distribution thereof in violation of
the Act, subject, nevertheless, to any requirement of law that the disposition
of its property shall at all times be within its control. The Investor
represents that it (a) is an "Accredited Investor" as that term is defined under
Rule 501 under the Act, (b) is experienced in evaluating and making investments
of the type contemplated by this Agreement and (c) is financially able to bear
the risks of the investment. The Investor acknowledges that the Company is
issuing and selling the Series G Shares in reliance upon the exemption from
registration provided in Regulation D of the Act and is relying upon these
representations, and agrees that the Series G Shares may only be transferred if
registered under the Act or pursuant to an exemption from such registration
requirements. The Investor understands that Rule 144 promulgated under the Act
is not presently available with respect to the Series G Shares or Series G
Conversion Shares, and that absent registration of the Series G Shares or Series
G Conversion Shares under the Act, compliance with an applicable exemption under
the Act, is required for a sale or other disposition of the Series G Shares or
Series G Conversion Shares. The Investor agrees that legends in substantially
the following forms may be placed on any certificates evidencing its Series G
Shares or Series G Conversion Shares
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<PAGE> 18
and any other securities issued in respect of Series G Shares or Series G
Conversion Shares, upon any dilution event described in the Restated Articles of
Incorporation or similar event:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"). The shares
have been acquired for investment and may not be pledged or
hypothecated, and may not be sold or transferred except in compliance
with the registration requirements of the Act, or upon delivery to
Cymer Laser Technologies of a written opinion of counsel to the
registered holder, in form and substance satisfactory to said
corporation and its counsel, that registration under the Act is not
required."
"The shares represented by this certificate are subject to certain
restrictions upon transfer and rights of first refusal as set forth in
an agreement between the corporation and the registered holder, a copy
of which is on file at the principal office of the corporation."
The Investor understands that, so long as the legend remains on the certificates
representing the Series G Shares or Series G Conversion Shares, the Company may
maintain appropriate "stop transfer" orders with respect to the Series G Shares
or Series G Conversion Shares on its books and records and with its registrar
and transfer agent. Notwithstanding the foregoing, such Investor shall be
entitled to replacement certificates without such legend if permitted under Rule
144 or upon presentation by such Investor to the Company of a written opinion of
counsel reasonably satisfactory in form and substance to the Company and its
counsel that the removal of such legend is not in violation of either the Act
and the rules and regulations thereunder or applicable provisions of state
securities law.
5. Company's Affirmative Covenants. Except as hereinafter provided, the
Company hereby covenants that from and after the date of this Agreement and so
long as the Investor holds beneficially or of record any of the Series G Shares
or Series G Conversion Shares:
5.1 Corporate Existence. The Company will maintain its corporate
existence and use best efforts to comply with all laws, government regulations,
rules and ordinances and judicial orders, judgments and decrees applicable and
material to the Company and its subsidiary, their business and properties.
5.2 Taxes and Liens. The Company will (a) punctually pay and
discharge or cause to be paid and discharged before the same shall become
delinquent (i) all taxes, assessments and governmental charges lawfully imposed
upon the Company, or any of its property, or upon the income and profits
thereof, and (ii) all lawful claims for labor, materials and supplies which, if
unpaid, might result in a lien upon the property of the Company, (b) withhold
all monies required to be withheld by the Company from employees for income
taxes, social security and unemployment insurance taxes and (c) complete and
file, on a timely basis, all tax returns and reports required to be filed by it
(including, without limitation, returns and reports of the type set forth in
Section 3.12(a)(i)).
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5.3 Maintain Property. The Company will cause all material
properties used or useful in the conduct of its business to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs as in the judgment of
the Company may be necessary so that business carried on in connection therewith
may be properly and advantageously conducted.
5.4 Financial Statements and Reports.
(a) The Company will keep adequate and accurate books of
account and will prepare the financial statements referred to herein, in
accordance with generally accepted accounting principles, consistently applied.
(b) Until the Initial Public Offering (as herein
defined), the Company shall furnish to each Series G Significant Holder, as soon
as practicable (and in any event at least thirty (30) days) prior to the
beginning of each fiscal year, an annual projected budget for the following
fiscal year, and an annual operating plan and strategic plan (collectively, the
"Plan") as approved by the Board; provided that the Company may, at its
discretion, redact from such budget and Plan any confidential information
relating to its customers.
(c) Until the Initial Public Offering (as herein
defined), the Company shall furnish to each holder of Series G Shares or Series
G Conversion Shares as soon as practicable (and in any event within ninety (90)
days) after the end of each fiscal year of the Company, an audited balance sheet
of the Company as of the end of the year and the related statement of
operations, retained earnings or deficit and changes in the financial position
of the Company as of the end of the year setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year,
prepared in accordance with generally accepted accounting principles
consistently applied and accompanied by an audit report and opinion in respect
of such financial statement (consolidated if applicable) of the independent
certified public accountants selected by the Company (which shall be a
nationally recognized firm of accountants), and such report and opinion shall be
unqualified as to the scope of the audit.
5.5 Confidentiality. The Company shall, after the date hereof,
cause each person employed by, or retained as a consultant to, the Company who
has access to any Proprietary Rights or other proprietary information of or
about the Company to execute an Employee Agreement, in the case of an employee,
and a Nondisclosure Agreement, in the case of a consultant.
5.6 Series G Conversion Shares. The Company shall reserve and keep
available from its authorized shares of Common Stock, solely for the purpose of
issuance upon conversion of the Series G Shares, such number of Series G
Conversion Shares as shall then be issuable upon the conversion of all of the
Series G Shares, taking into account any anti-dilution rights of the holders
thereof.
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5.7 Access to Books and Records. Until the Initial Public Offering
(as defined herein), and subject to the provisions of Section 6, each Series G
Significant Holder and its agents shall (a) have access upon reasonable notice
to the Company, during usual business hours, and as often as may reasonably be
desired, to the accounts, books and records of the Company and shall be entitled
to examine, make copies and extract therefrom, and from any other items, such
information relating to the Company as each such Investor shall reasonably
specify and (b) be permitted, upon reasonable notice to the Company to visit and
inspect any of the properties of the Company. Notwithstanding any provision to
the contrary, this Section 5.7 shall not supersede any prior confidentiality
agreement or restriction on access between the Company and any Investor and such
restrictions shall remain in full force and effort.
5.8 Right of First Offer.
(a) The Company hereby grants to the Significant Holders
the right of first offer to purchase, pro-rata, all (or any part) of New
Securities (as defined in this Section 5.8) which the Company may, from time to
time, propose to sell and issue. A Significant Holder's pro-rata portion for
purposes of this Agreement, unless otherwise stated, is the ratio of (x) the
number of the shares of Common Stock and Series A, Series B, Series C, Series D,
Series E, Series F and Series G Preferred Stock, determined on an as-converted
basis, held by such Significant Holder at the time to (y) the total number of
shares of Common Stock and Preferred Stock (determined on an as-converted basis)
of the Company issued and outstanding at such time. Each Significant Holder
shall have a right of over-allotment such that if any Significant Holder fails
to exercise his right hereunder to purchase his pro-rata portion of New
Securities, the other Significant Holders may purchase the non-purchasing
Significant Holder's portion on a pro-rata basis within five (5) days from the
date it receives notice from the Company that a non-purchasing Significant
Holder has failed to exercise its right hereunder to purchase its pro-rata share
of New Securities. For the purpose of determining the over-allotment rights
under this Agreement with respect to any offering of New Securities, a
Significant Holder's pro-rata portion is the ratio of (x) the number of the
shares of Common Stock and Series A, Series B, Series C, Series D, Series E,
Series F and Series G Preferred Stock, determined on an as-converted basis, held
by such Significant Holder at the time to (y) the total number of shares of
Common Stock and Series A, Series B, Series C, Series D, Series E, Series F and
Series G Preferred Stock, determined on an as-converted basis, held by all
Significant Holders exercising their right of first offer with respect to such
offering. This right of first offer shall be subject to the following
provisions:
(b) "New Securities" shall mean any capital stock of the
Company whether now authorized or not, and rights, options or warrants to
purchase capital stock, and securities of any type whatsoever that are, or may
become, convertible into capital stock; provided, however, that the right of
first offer shall apply at the time of issuance of the right, warrant or option
and not to the exercise thereof; provided, further, that the term "New
Securities" does not include: (i) the Shares or Conversion Shares; (ii) 16,000
shares of Series E Preferred Stock issuable upon the exercise of the Series E
Warrants; (iii) up to 843,526 shares of Series F Preferred Stock issuable upon
the exercise of the Series F Warrants; (iv) shares of Common Stock issuable upon
conversion of the Preferred Stock,
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or such securities as may be substituted for the Preferred Stock, issuable upon
the exercise of the warrants listed in (ii) and (iii); (v) securities offered to
the public pursuant to a registration statement filed pursuant to the Act; (vi)
securities issued pursuant to the acquisition of another corporation by the
Company by merger, purchase of substantially all the assets or other
reorganization whereby the Company owns not less than 51% of the voting power of
such corporation; (vii) any borrowings, direct or indirect, from financial
institutions or other persons by the Company, whether or not presently
authorized, including any type of loan or payment evidenced by any type of debt
instrument, provided such borrowings do not have any equity features, including
warrants, options or other rights to purchase capital stock, and are not
convertible into capital stock of the Company; (viii) 1,500,000 shares of Common
Stock reserved for issuance to Founders or employees pursuant to the exercise of
options granted or to be granted; (ix) warrants issued in connection with the
leasing of equipment by the Company which have been approved by the Board; (x)
any security if holders of at least sixty-six and two thirds percent (66 2/3%)
of the outstanding Shares (and outstanding Conversion Shares), voting as a
single class, (or any combination of such Shares and such Conversion Shares)
consent in writing that the right of first offer shall not apply to such
securities; or (xi) issuances of up to a cumulative number of 19,995 shares of
Common Stock or Preferred Stock from the date of this Agreement which are not
excluded by any of the foregoing exceptions.
(c) In the event the Company proposes to issue New
Securities, it shall give each Significant Holder written notice of its
intention, describing the type of New Securities, the price and the general
terms upon which the Company proposes to issue the same. Each Significant Holder
shall have thirty (30) days from the date of receipt of any such notice to agree
to purchase the Significant Holder's pro-rata share of such New Securities for
the price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
(d) In the event any Significant Holders fail to exercise
the right of first offer with respect to such Significant Holder's full pro-rata
portion of the New Securities proposed to be sold by the Company within said
thirty (30) day period and after the expiration of the five (5) day period for
the exercise of the over-allotment provisions of this Section 5.8, the Company
shall have 120 days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within 120 days from the date of said agreement), to sell the New Securities
respecting which the Significant Holders' options were not exercised, at a price
and upon general terms no more favorable to the purchasers thereof than
specified in the Company's notice. In the event the Company has not sold within
said 120-day period or entered into an agreement to sell the New Securities
within said 120-day period (or sold and issued New Securities in accordance with
the foregoing within 120 days from the date of said agreement), the Company
shall not thereafter issue or sell any New Securities, without first offering
such securities to the Significant Holders in the manner provided above.
(e) The right of first offer set forth in this Section
5.8 is nonassignable, except that such right is assignable (i) by each
Significant Holder to any Person (as defined in Section 14.1) controlling,
controlled by or under common control with such Significant Holder,
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(ii) between and among any of the Significant Holders and (iii) upon the death
of a Significant Holder, such right shall pass to the beneficiaries under the
deceased Significant Holder's last will and testament or to the distributees of
the deceased Significant Holder's estate.
5.9 Right of First Refusal and/or Repurchase Agreement. It shall
be a condition to any issuance of shares of Common Stock (other than shares of
Common Stock issued upon conversion of the Preferred Stock) including, without
limitation, Common Stock to officers or employees of the Company pursuant to an
employee stock purchase, stock option or other benefit or incentive plan
established by the Company, that the Company will cause the person to whom the
Common Stock is to be issued to execute and deliver to the Company an
appropriate right of first refusal agreement and/or a repurchase agreement (in
the event that the shares of Common Stock being issued are subject to absolute
prohibitions on transfer that lapse over time) in a form approved by the Board
which shall provide, among other things, that the Significant Holders shall have
the right to exercise the Company's rights thereunder in the event the Company
shall fail to do so.
5.10 Insurance. The Company will insure and keep insured, with
reputable insurance companies, so much of its properties, to such an extent and
against such risks, as reasonably prudent persons engaged in similar businesses
would customarily insure properties of a similar character or as otherwise
approved by the Board.
5.11 Notice of Record Dates.
(a) In the event of any taking by the Company of a record
of the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution,
the Company shall mail to each holder of Series G Shares, at least ten (10) days
prior to such record date, specified herein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend or
distribution.
(b) In the event of (i) any consolidation or merger to
which the Company is a party and for which approval of any shareholders of the
Company is required, (ii) the conveyance or transfer of all, or substantially
all, of the properties and assets of the Company, (iii) any capital
reorganization or any reclassification of the Common Stock (other than a change
in par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or (iv) the voluntary or
involuntary dissolution, liquidation or winding up of the Company, the Company
shall mail to each holder of Series G Shares, at least ten (10) days prior to
the applicable record date, a notice specifying the date on which such record is
to be taken for the purpose of such transaction.
5.12 Employee Stock Purchase Agreement. The Company will not issue
any of its capital stock, or grant an option to purchase any of its capital
stock, to any Founder, employee, or officer of the Company (other than any
options or grants already made to any Founders or employees of the Company)
except pursuant to a plan adopted or an issuance approved by the Board.
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5.13 Securities Law Filings. The Company shall make any and all
filings necessary (whether before or after the Closing) in connection with the
offer, issuance and sale of the Series G Shares and the issuance of the Series G
Conversion Shares under the securities or blue sky laws of California or any
other state where necessary, and any federal laws.
5.14 Lapse of Covenants. Except as otherwise specifically provided
in this Section 5, the covenants contained herein and further agreements
contained in Section 7 of this Agreement shall lapse and be of no further force
and effect upon the consummation by the Company of an Initial Public Offering.
"Initial Public Offering" for purposes of this Agreement, shall be defined as
the receipt by the Company of the proceeds of a bona fide firm commitment
underwritten public offering registered under the Act, which offering does not
exclusively relate to securities under an employee stock option, bonus or other
compensation plan and at a price of not less than $6.00 per share of Common
Stock (as equitably adjusted for any dilutive event set forth in the Restated
Articles of Incorporation or other similar event) and net proceeds to the
Company of not less than $10,000,000.
5.15 Information as to Competitors and Proprietary Information. The
Company shall not provide to the Investor or any Prior Investor any confidential
information concerning the affairs of any other Investor or Prior Investor
disclosed to the Company prior to or subsequent to the execution of this
Agreement.
5.16 Technological Expertise. The Company shall use its best
commercial efforts to maintain and improve its current level of technological
expertise through appropriate research and development and use its reasonable
commercial efforts to retain key employees.
6. Investor's Affirmative Covenants
6.1 No Solicitation of Employees. So long as the provisions of
Section 6.3 hereof with respect to the Investor's limitation on ownership of
Voting Stock remains in effect, each Investor agrees not to solicit, jointly or
severally, for itself or any other entity, any employee of the Company to leave
the employ of the Company. The Investors further agree not to otherwise
interfere, or solicit others to interfere, with the Company's relationships with
current or prospective employees.
6.2 Certain Definitions. As used in this Section 6:
(i) The term "Total Voting Power of the Company" means
the total number of votes which may be cast in the election of directors of the
Company at any meeting of shareholders of the Company if all securities entitled
to vote in the election of directors of the Company were present and voted at
such meeting other than votes that may be cast only upon the happening of a
contingency.
(ii) The term "Voting Stock" means the Common Stock,
Preferred Stock and any other securities issued by the Company having the
ordinary power to vote in the
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election of directors of the Company (other than securities having such power
only upon the happening of a contingency).
6.3 Limitation on Ownership of Voting Stock. Each Investor shall
not, directly or indirectly, acquire beneficial ownership of any Voting Stock,
any securities convertible into or exchangeable for Voting Stock, or any other
right to acquire Voting Stock (except, in any case, by way of stock dividends or
other distributions or offerings made available to holders of any Voting Stock
generally) without the consent of the majority vote of the Board of Directors of
the Company at a properly-noticed meeting of the Board of Directors, if the
effect of such acquisition would be to increase the Voting Power of all Voting
Stock then owned by such Investor or which it has a right to acquire to more
than 10% of the Total Voting Power of the Company at the time in effect;
provided that such Investor may acquire Voting Stock without regard to the
foregoing limitation if:
(i) a bona fide offer is made by another person or group
(not affiliated with such Investor or any Prior Investor) to purchase or
exchange for cash or other consideration any Voting Stock which, if successful,
would result in such person or group owning or having the right to acquire
shares of Voting Stock with aggregate Voting Power of more than 40% of the Total
Voting Power of the Company then in effect and such offer is not withdrawn or
terminated prior to such Investor making an offer to acquire voting stock in
response thereto (the "Offer"),
(ii) it is publicly disclosed or Investor otherwise learns
that another person or group (not affiliated with such Investor or any Prior
Investor) has acquired any Voting Stock which results in such person or group
owning or having the right to acquire Voting Stock with aggregate Voting Power
of more than 40% of the Total Voting Power of the Company then in effect,
(iii) the acquisition of more than 10% of the Total Voting
Power occurs after the second anniversary of the consummation of the Company's
Initial Public Offering, or
Notwithstanding the foregoing, if the Company repurchases any of its shares and
such repurchases result in Investor owning more than 10% of the Total Voting
Power of the Company at the effective time of such repurchases, the Investor
shall not be obligated to divest itself of shares of the Voting Stock to meet
the foregoing 10% limitation, but shall not acquire any additional Voting Stock
unless such acquisition would otherwise be permitted pursuant to this Section
6.3.
6.4 Notice of Voting Stock Purchases. So long as the provisions of
Section 6.3 hereof with respect to the Investor's limitation on ownership of
Voting Stock remain in effect, the Investor shall advise management of the
Company as to the Investor's plans to acquire additional shares of Voting Stock,
or rights thereto, reasonably in advance of any such acquisition. All purchases
of Voting Stock of the Company by the Investor shall be made in compliance with
applicable laws and regulations.
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6.5 Voting Trust, etc. So long as the provisions of Section
6.3 hereof with respect to the Investor's limitation on ownership of Voting
Stock remain in effect, the Investor shall not deposit any shares of Voting
Stock in a voting trust or, except as otherwise provided herein, subject any
Voting Stock to any arrangement or agreement with respect to the voting of such
Voting Stock.
6.6 Solicitation of Proxies. So long as the provisions of
Section 6.3 hereof with respect to the Investor's limitation on ownership of
Voting Stock remain in effect, the Investor shall not solicit proxies with
respect to any Voting Stock, nor shall it become a "participant" in any
"election contest" (as terms are used in Rule 14(a)-11 of Regulation 14(A) under
the Securities Exchange Act of 1934, as amended, (the "Exchange Act") relating
to the election of directors of the Company), without the Company's prior
written consent; provided, however, that the Investor shall not be deemed to be
a "participant" by reason of the membership of its designee on the Company's
Board of Directors.
6.7 Acts in Concert with Others. So long as the provisions
of Section 6.3 hereof with respect to the Investor's limitation on ownership of
Voting Stock remain in effect, the Investor shall not join a partnership,
limited partnership, syndicate or other group, or otherwise act in concert with
any third person, for the purpose of acquiring, holding, or disposing of Voting
Stock.
6.8 Agreement not to Control. So long as the provisions of
Section 6.3 hereof with respect to the Investor's limitation on ownership of
Voting Stock remain in effect, the Investor shall not seek to control the
Company's management, Board of Directors or policies. Notwithstanding the
foregoing, the Investor may give advice to the Company's Board of Directors and
management from time to time regarding research and development of technology.
6.9 Restrictions on Transfer of Voting Stock. The Investor
shall not, directly or indirectly, sell or transfer any Voting Stock except (i)
to the Company or any person or group approved by the Company; or (ii) to a
corporation of which the Investor owns not less than 80% of the voting power
entitled to be cast in the election of directors (a "Controlled Corporation"),
so long as such controlled corporation agrees to hold such Voting Stock subject
to all provisions of this Agreement, including this Section 6.9; or (iii)
pursuant to a bona fide public offering registered under the Act of either
Voting Stock or securities exchangeable or exercisable for Voting Stock or
pursuant to a rights offering or a dividend or other distribution to
stockholders of the Investor; or (iv) under an exemption provided by the SEC
Release 33-4708 or Regulation S, provided that the Investor complies with the
volume of limitations of Rule 144 under the Act; or (v) subject to the Company's
right of first refusal as set forth in Section 8.1 hereof, in transactions not
described in (i), (ii), (iii), (iv) or (vi) hereof so long as such transactions
do not, directly or indirectly, result in a single person or group owning or
having the right to acquire or intent to acquire Voting Stock with aggregate
Voting Power of 1% or more of the Total Voting Power of the Company; or (vi) in
response to (1) a tender offer to purchase or exchange for cash or other
consideration any Voting Stock which is made by another person or group and is
not opposed by the Board of Directors of the Company within the time such Board
is required, pursuant to regulations under the Exchange Act, to advise Company
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stockholders of such Board's position on such offer, or (2) subject to the
Company's right of first refusal as set forth in Section 8.1 hereof, any offer
made by another person or group (except by an affiliate of the Investors)
purchase or exchange for cash or other consideration any Voting Stock which, if
successful, would result in such person or group owning or having the right to
acquire Voting Stock with aggregate Voting Power of more than 40% of the Total
Voting Power of the Company then in effect. The restrictions set forth in this
Section 6.9 shall lapse and be of no further force and effect upon the
consummation of the Initial Public Offering.
6.10 Confidentiality. The Investor agrees to maintain in
confidence all books, records, documents or other information received from the
Company under this Agreement, not to disclose the same to third parties, not to
use such information other than for the purposes of this Agreement and to
obligate all of its personnel and agents having access to such information to
adhere to this obligation of confidentiality; provided, however, that such
information may be (a) disclosed to the extent that disclosure is required
pursuant to any applicable law, regulation, judicial process or order, (b)
disclosed or used when the information has been discovered or developed by the
Investor independently of the Company and such discovery or development is
documented in writing concurrently with such discovery or development, which
documentation shall be provided to the Company upon request, or (c) disclosed or
used when the information is in the public domain through no fault of the
Investor.
6.11 Amendment of Prior Agreements. Effective upon the
execution hereof by the Second Closing Purchasers, the Series C Preferred Stock
Purchase Agreement dated April 16, 1990 (the "Series C Agreement") and the
Series E Preferred Stock Purchase Agreement dated February 24, 1994 (the "Series
E Agreement") shall be deemed amended as follows: (i) Section 6 of each of the
Series C Agreement and the Series E Agreement shall be deemed deleted in their
entirety and replaced by Sections 6.1 through 6.10, inclusive, of this
Agreement, and (ii) Section 8 of each of the Series C Agreement and the Series E
Agreement shall be deemed deleted in their entirety and replaced by Section 8 of
this Agreement. The Series C Agreement and Series E Agreement, as amended, shall
continue in full force and effect.
7. Further Agreements.
7.1 Right of First Refusal and Repurchase with Respect to
Founder Stock. In connection with the exercise of incentive stock options
granted to each of the Founders and to certain of the Company's employees (the
"Optionees"), each of the Founders and the Optionees is required to execute a
Restricted Stock Purchase Agreement (the "Restricted Stock Purchase
Agreements"). Pursuant to the Restricted Stock Purchase Agreements and the
Restriction Agreements, the Company has the right of first refusal in connection
with the sale by the Founders and the Optionees of any vested shares of Common
Stock and the right to repurchase any unvested shares of Common Stock. Pursuant
to an assignment provision in the Restriction Agreements and the assignability
of its rights in the Restricted Stock Purchase Agreements, the Company hereby
agrees, that if on any occasion it elects not to exercise any of its rights of
first refusal or repurchase under the Restricted Stock Purchase Agreements or
the Restriction Agreements or to exercise such rights only with respect to a
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portion of the shares to which they are applicable, that it shall so notify the
Significant Holders in writing (the "Company Notice"), within ten (10) days of
receipt of a notice of transfer from the Founder or Optionee, of all of the
details of the notice or event which triggered the Company's right of first
refusal or repurchase, and the Significant Holders shall thereafter have all of
the rights of the Company to exercise on a pro-rata basis the rights of first
refusal and repurchase granted thereunder to the Company with respect to all of
the shares of Common Stock to which the Company's rights apply or with respect
to that portion of the shares of Common Stock that the Company has elected not
to purchase, on the same terms granted to the Company pursuant to the Restricted
Stock Purchase Agreements or the Restriction Agreements, as applicable. A
Significant Holder's pro rata portion, for the purposes of this Section 7.1, is
the ratio of (x) the number of shares of Preferred Stock (determined on an as
converted basis) held by such Significant Holder at the time to (y) the total
number of shares of Preferred Stock (determined on an as converted basis) of the
Company held by all Significant Holders. Each Significant Holder shall deliver a
notice to the Company stating the number of shares of Common Stock which the
Significant Holder desires to purchase pursuant to this Section 7.1 or to sell
pursuant to Section 7.2 within ten (10) days of its receipt of the Company
Notice. The Company shall notify the Significant Holders (the "Non-Exercise
Notice") of any Significant Holder's election not to exercise, or to exercise
only in part, its rights under Sections 7.1 or 7.2, and each Significant Holder
shall have a right of over-allotment to purchase or sell the non- exercising
Significant Holder's portion on a pro-rata basis within five (5) days from the
date it receives the Non-Exercise Notice. Notwithstanding anything to the
contrary contained in the Restriction Agreements or in the Restricted Stock
Purchase Agreements, the notice provisions and time periods set forth in
Sections 7.1 and 7.2 shall control in the event the Company assigns its rights
under the Restriction Agreements or Restricted Stock Purchase Agreements to the
Significant Holders.
7.2 Co-Sale Agreement on Sale of Founder Stock.
Notwithstanding anything to the contrary contained in the Restriction Agreements
or in the Restricted Stock Purchase Agreements, in the event the Company does
not elect to purchase any or all of a Founder's shares of Common Stock subject
to the rights of first refusal set forth in the Restriction Agreements and in
the Restricted Stock Purchase Agreements, and in the event the Significant
Holders do not elect to purchase any or all shares of Common Stock subject to
their rights of first refusal as set forth in Section 7.1 above, then, with
respect to any shares of a Founder's Common Stock not purchased by the
Significant Holders, the Founder hereby grants to the Significant Holders the
right to participate, pro rata (based upon the relative aggregate cost of each
holder's Preferred Stock), in the sale of 50% of such shares in accordance with
the following provisions of this Section 7.2:
(a) Each Significant Holder may elect to
participate, pro rata, in the proposed sale of shares of Common Stock which the
selling Founder desires to sell on the same terms as set forth in the Founder's
notice of sale which triggered the right of first refusal, upon delivery of
notice of election to the selling Founder within the time prescribed for
exercising the Significant Holder's right of first refusal with respect to the
selling Founder's shares of Common Stock.
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(b) In the event all of the Significant Holders
fail to exercise the right of co-sale within the time period allotted therefor,
the selling Founder shall have the right to sell the shares of Common Stock
which were subject to the right of co-sale on the same terms as those set forth
in the notice triggering the right of first refusal; provided, however, that the
sale is consummated within the period of time provided for in the Restriction
Agreements or the Restricted Stock Purchase Agreements, as applicable.
(c) In the event any or all of the Significant
Holders elect to exercise their rights of co-sale in a manner consistent with
Section 7.2(a), the selling Founder agrees to reduce the number of shares of
Common Stock to be sold by him, and to sell, for the account of the selling
Significant Holders that amount of Common Stock tendered for sale by the
Significant Holders. Each Significant Holder shall have a right of
over-allotment such that if any Significant Holder fails to exercise such
Significant Holder's rights hereunder, the other Significant Holders may sell on
a pro-rata basis an amount of Shares equal to the number of Shares which the
non-exercising Significant Holder would have been permitted to sell. In no event
shall the total number of shares of Common Stock sold by the Significant Holders
pursuant to their right of co-sale exceed fifty percent (50%) of the total
number of shares of Common Stock actually being sold by the selling Founder,
other than to Significant Holders pursuant to Section 7.1, in any given sales
transaction.
8. Company's Right of First Refusal.
8.1 Right of First Refusal. Prior to making any sale or
transfer of Voting Stock of the Company pursuant to Section 6.9(v), the Investor
shall give the Company the opportunity to purchase such Voting Stock in the
following manner:
(i) The Investor shall give notice (the
"Transfer Notice") to the Company in writing of such intention, specifying the
amount of Voting Stock proposed to be sold or transferred, the proposed price
per share therefor (the "Transfer Price") and the other material terms upon
which such disposition is proposed to be made.
(ii) The Company shall have the right,
exercisable by written notice given by the Company to the Investor within thirty
(30) days after receipt of such Transfer Notice, to purchase all of the Voting
Stock specified in such Notice for cash per share equal to the Transfer Price.
(iii) If the Company exercises its right
of first refusal hereunder, the closing of the purchase of the Voting Stock with
respect to which such right has been exercised shall take place within ninety
(90) calendar days after the Company gives notice of such exercise, which period
of time shall be extended in order to comply with applicable laws and
regulations. Upon exercise of its right of first refusal, the Company and the
Investor shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
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(iv) If the Company does not exercise its
right of first refusal hereunder within the time specified for such exercise,
the Investor shall be free, during the period of 90 calendar days following the
expiration of such time for exercise, to sell the Voting Stock specified in such
Transfer Notice on terms no less favorable to the Investor than the terms
specified in such Notice.
The restrictions set forth in this Section 8.1 shall lapse and be of no further
force or effect upon the consummation of the Initial Public Offering.
8.2 Tender Offer Sale. Prior to making any sale or exchange
of Voting Stock pursuant to Section 6.9(vi)(2) in response to a tender or
exchange offer, the Investor shall give the Company the opportunity to purchase
such Voting Stock in the following manner:
(i) The Investor shall give notice (the
"Tender Notice") to the Company in writing of such intention no later than 10
calendar days prior to the latest time by which Voting Stock must be tendered in
order to be accepted pursuant to such offer or to qualify for any proration
applicable to such offer (the "Tender Date"), specifying the amount of Voting
Stock proposed to be tendered. For purposes hereof, a tender offer to purchase
Voting Stock shall be deemed to be an offer at the price specified therein,
without regard to any provisions thereof with respect to proration or conditions
to the offeror's obligation to purchase (assuming such conditions are not
impossible of performance when the offering is made, without giving effect to
the Company's right of first refusal).
(ii) If the Tender Notice is given, the
Company shall have the right, exercisable by giving notice to the Investor at
least two calendar days prior to the Tender Date, to purchase all or any part of
the Voting Stock specified in the Tender Notice for cash. If the Company
exercises such right by giving such notice, the closing of the purchase of such
Voting Stock shall take place within ninety (90) days after the Company gives
notice of the exercise of its right of first refusal hereunder; provided,
however, that if the purchase price specified in the tender offer includes any
property other than cash, the value of any property included in the purchase
price shall be jointly determined by a nationally recognized investment banking
firm selected by the Company and a nationally recognized investment banking firm
selected by the Investor or, in the event such firms are unable to agree, a
third nationally recognized investment banking firm to be selected by such two
firms. For this purpose:
(x) The parties shall use their
best efforts to cause any determination of the value of any securities included
in the purchase price to be made within three business days after the date of
delivery of the Tender Notice. If the firms selected by the Investor and the
Company are unable to agree upon the value of any such securities within such
three-day period, the firms shall promptly select a third firm whose
determination shall be conclusive.
(y) The parties shall use their
best efforts to cause any determination of the value of property other than
securities to be made within seven business days
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after the date of delivery of the Tender Notice. If the firms selected by the
Investor and the Company are unable to agree upon a value within such seven-day
period, the firms shall promptly select a third firm whose determination shall
be conclusive.
The purchase price to be paid by the Company pursuant to this Section 8.2 shall
be (x) if such tender offer is consummated, the purchase price that the Investor
would have received if it had tendered the Voting Stock purchased by the Company
and all such Voting Stock had been purchased in such tender offer, including any
increases in the price paid by the tender offeror, after exercise by the Company
of its right of first refusal hereunder, or (y) if such tender offer is not
consummated, the highest price offered pursuant thereto, in each case with
property, if any, to be valued as aforesaid.
(iii) If the Company does not exercise
such right by giving such notice, then the Investor shall be free to accept for
all its Voting Stock the tender offer with respect to which the Tender Notice
was given.
The restrictions set forth in this Section 8.2 shall lapse and be of no further
force and effect upon the consummation of the Initial Public Offering.
8.3 Assignment of Rights. In the event that the Company
elects to exercise a right of first refusal under this Section 8, the Company
may specify in its notice of intention to exercise such right another person as
its designee to purchase the Voting Stock to which such notice relates. If the
Company shall designate another person as the purchaser pursuant to this Section
8, the giving of notice of acceptance of the right of first refusal by the
Company shall constitute a legally binding obligation of the Company to complete
such purchase if such person shall fail to do so.
9. Restrictions on Transferability of Shares; Compliance with the
Act.
9.1 Restrictions on Transferability. In addition to the
restrictions on transfer set forth in Sections 7 and 8, the Shares and the
Conversion Shares shall not be sold, assigned, transferred or pledged, except
upon the conditions specified in this Section 9, which conditions are intended
to insure compliance with the provisions of the Act and in the case of
Conversion Shares being sold pursuant to a Registration Statement, to assist in
an orderly distribution. Each Investor will cause any proposed purchaser,
assignee, transferee or pledgee of Shares or Conversion Shares held by that
Investor to agree to take and hold those Shares or Conversion Shares subject to
the provisions and upon the conditions specified in this Section 9.
9.2 Certain Definitions. As used in this Section 9, the
following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act.
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"Holder" shall mean any holder of Registrable
Securities (including any Transferee (as herein defined)) which have not been
sold to the public.
"Initiating Holders" shall mean any Holders who in
the aggregate hold 40% or more of the outstanding Registrable Securities.
The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean: (a) the
Conversion Shares (whether issued or issuable); (b) any Common Stock or other
securities of the Company issued or issuable in respect of the Conversion Shares
(or any other securities of the Company issued in respect of the Shares) on
account of any stock split, reverse stock split, stock dividend, dilution event
described in the Restated Articles of Incorporation or other similar event; (c)
any Common Stock issuable upon conversion of the Series D Preferred Stock
received upon exercise of the Series D Warrants; (d) any Common Stock issuable
upon conversion of the Series E Preferred Stock received upon exercise of the
Series E Warrants; (e) any Common Stock issuable upon conversion of the Series F
Preferred Stock issuable upon conversion of the Bridge Warrants (as defined in
the Series F Agreement); (f) any Common Stock issuable upon conversion of the
Series F Preferred Stock received upon exercise of the Series F Placement
Warrants (as defined in the Series F Agreement); and (g) any Shares or
Conversion Shares or Common Stock acquired pursuant to the right of first offer
set forth in Section 5.8 or the right of first refusal and repurchase with
respect to Founder Stock set forth in Section 7.1 or pursuant to any right to
purchase stock from any employee pursuant to an agreement provided for by
Section 5.9; provided, however, that shares of Common Stock or other securities
shall only be treated as Registrable Securities if and so long as (1) they have
not been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, (2) they have not been sold in
a transaction exempt from the registration and prospectus delivery requirement
of the Act under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
each sale.
"Registration Expenses" shall mean all expenses
incurred by the Company in compliance with Sections 9.4, 9.5 and 9.6 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of
the Company required to bear or bearing the legend set forth in Section 4.3
hereof.
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"Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities and all fees and disbursements of counsel for any Holder.
9.3 Notice of Proposed Transfers. The transferee of each
certificate representing Restricted Securities (a "Transferee") by acceptance
thereof agrees to comply in all respects with the provisions of this Agreement
and shall have all the rights of an Investor hereunder with respect to the
Restricted Shares. Prior to any proposed sale, assignment, transfer or pledge of
any Restricted Securities (other than under circumstances described in Sections
9.4, 9.5 and 9.6 hereof), the Holder thereof shall give written notice to the
Company of such Holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed sale, assignment,
transfer or pledge, in sufficient detail, and shall be accompanied (except in
transactions in compliance with Rule 144) by either (a) a favorable written
opinion of counsel reasonably satisfactory in form and substance to the Company
and its counsel, to the effect that the proposed transfer of the Restricted
Securities may be effected without registration under the Act, or (b) a "no
action" letter from the Commission to the effect that the distribution of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
Holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. Notwithstanding the foregoing, Holders of Restricted
Securities and their transferees shall be permitted to transfer such Restricted
Securities without complying with the provision of this Section to (a) any
Person controlling, controlled by or under common control with such Holder or
(b) to any other Holder of Restricted Securities. Each certificate evidencing
the Restricted Securities transferred as above provided shall, subject to the
provisions of Section 4.3, bear the appropriate restrictive legend set forth
therein.
9.4 Demand Registration Rights.
(a) On two occasions, upon the demand, in
writing, of Initiating Holders that the Company effect a registration with
respect to all or any part of the Registrable Securities, the Company shall give
written notice of such demand within ten (10) days to all other Holders. The
notice shall advise such Holders of their right to participate in such demand
registration, which right may be exercised by each such Holder giving written
notice to the Company of its intention to so participate within twenty (20) days
of receipt of such notice from the Company. The Company will use its best
efforts to prepare, file and process a registration statement and any amendments
or supplements required to be filed to ensure that such registration statement
is declared effective and remains effective under the Act, to permit the Holders
or any of them, or an underwriter on behalf of any of them, to offer and sell to
the public the number of Registrable Securities for which demand registration
rights are exercised hereunder. The Company shall file the aforesaid
registration statement as soon as reasonably practicable, and in any event,
within sixty (60) days following receipt of such written request. The Company
shall use its best efforts to cause such registration statement to become and
remain effective until the earlier of the sale of all of the Registrable
Securities included in the registration statement or one hundred twenty (120)
days from the effective date thereof.
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(b) Notwithstanding the foregoing, the Company
shall not be obligated to register the Registrable Securities pursuant to this
Section 9.4, (i) during any period within six (6) months following a prior
primary or secondary public offering of the Company's Common Stock, including
any registration of the Registrable Securities but excluding a "shelf" or
continuing registration, (ii) during any period in which the Company has
commenced preparation of a registration statement of securities and pursuant to
which it has notified the Holders of their "piggy-back" registration rights
pursuant to Section 9.5 hereof, (iii) in any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Act, (iv) if the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good faith and
judgment of the Board of Directors it would be seriously detrimental to the
Company or its shareholders for a registration to be filed in the near future,
then the Company's obligation to use its best efforts to register under this
Section 9.4 shall be deferred for a period not to exceed ninety (90) days from
the receipt of the request to file such Registration Statement by Initiating
Holders; provided, however, that the Company shall not exercise the right to
defer registration granted by this subsection (iv) more than once in any
twelve-month period.
(c) The right of any Holder to registration
pursuant to this Section 9.4 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 9.4 and
the inclusion of such Holder's registrable securities in the underwriting to the
extent requested and to the extent provided herein. The Company shall (together
with all Holders proposing to distribute their securities through such an
underwriting) enter into an underwriting agreement in customary form with the
managing underwriters selected for such underwriting by a majority in interest
of the Initiating Holders (which managing underwriters shall be reasonably
acceptable to the Company). The Holders agree to be bound by the provisions of
Section 9.9 herein regarding cutbacks. If any Holder of Registrable Securities
disapproves of the terms of the underwriting, such persons may elect to withdraw
therefrom by written notice to the Company, the Managing Underwriter and the
Holders participating in the registration. The Registrable Securities and/or
other securities so withdrawn shall also be withdrawn from registration, and
such registrable securities shall not be transferred in a public distribution
prior to ninety (90) days after the effective date of such registration.
9.5 Piggy-Back Registration Rights.
(a) On each occasion, if any, following the date
hereof that the Company contemplates filing with the Commission a registration
statement under the Act relating in whole or in part to the primary offer and
sale of shares of its Common Stock, other than a registration statement which
exclusively relates to the registration of securities under (i) an employee
stock option, bonus or other compensation plan, or (ii) a registration relating
solely to a transaction under Rule 145 promulgated by the Commission, the
Company shall so notify the Holders in writing of its intention to do so at
least thirty (30) days prior to the filing of each such registration statement.
Each Holder who gives written notice to the Company, within twenty (20) days of
receipt of such notice from the
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Company, of such Holder's desire to have any of its Registrable Securities
included in such registration statement, may, subject to the provisions of this
Section 9.5, have its Registrable Securities so included. The Company shall file
any required amendments of or supplements to any registration statement filed
pursuant to this Section 9.5 and otherwise use its best efforts to insure that
such registration statement remains in effect under the Act until the earlier of
the sale of all of the Registrable Securities included in the registration or
the expiration of one hundred twenty (120) days from the effective date thereof.
(b) If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 9.5(a). In such event the right of any Holder to
registration pursuant to Section 9.5 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
Holders who have demanded such registration). The Holders agree to be bound by
the terms and conditions of Section 9.9 hereof regarding cutbacks.
(c) The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 9.5
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.
9.6 Registration on Form S-3.
(a) The Company shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in Sections 9.4 and 9.5, the Holders of Registrable Securities shall
have the right to demand that the Company promptly use its best efforts to
effect one registration per annum on Form S-3, provided, such request shall be
made with respect to an amount of Registrable Securities which have a reasonably
anticipated aggregate price to the public of not less than $750,000.
(b) Notwithstanding the foregoing, the Company
shall not be obligated to take any action pursuant to this Section 9.6 (i) in
any particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Act, (ii) during the period starting with the date sixty (60)
days prior to the filing of and, ending on a date six (6) months following the
effective date of a registration statement (other than with respect to a
registration statement relating to a Rule 145 transaction, or with respect to
securities offered solely to employees), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective, or (iii) if the Company shall furnish to Holder a
certificate signed by the President of the Company stating that in the good
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faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed ninety (90)
days from the receipt of the request to file such registration by the Holders;
provided, however, that the Company shall not exercise the right to defer
registration granted by this subsection (iii) more than once in any twelve-month
period.
9.7 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) Make and keep public information available
as those terms are understood and defined in Rule 144 under the Act, at all
times from and after 90 days following the effective date of the first
registration under the Act filed by the Company for an offering of its
securities to the general public;
(b) Use its best efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Act and the Exchange Act of 1934, as amended (the "Exchange
Act"), at any time after it has become subject to such reporting requirements;
and
(c) So long as a Holder owns any Restricted
Securities, furnish to the Holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of Rule 144 (at
any time from and after 90 days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
9.8 Expenses of Registration. Subject to any Blue Sky
requirements with respect to the allocation of expenses, all Registration
Expenses incurred in connection with registration statements under Section 9.5
and the first two registration statements filed by the Company pursuant to
Sections 9.4 and 9.6, shall be borne by the Company, and all Selling Expenses
shall be borne by the holders of the Registrable Securities so registered pro
rata on the basis of the number of their shares of Registrable Securities so
registered; provided, however, that the Company shall not be required to pay any
Registration Expenses if, as a result of the withdrawal of a request for
registration by Initiating Holders (unless in response to a material adverse
change in the Company), the registration statement does not become effective, in
which case the Holders requesting registration shall bear such Registration
Expenses pro-rata on the basis of the number of their shares of Registrable
Securities so included in the registration request; provided, further, that such
registration shall not be counted as a registration pursuant to Sections 9.4,
9.5 or 9.6.
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9.9 Cutbacks. In the event the underwriter for a
registration statement filed pursuant to Sections 9.4, 9.5 or 9.6 advises the
Company in writing that the number of Registrable Securities proposed to be sold
in any such offering or sale is greater than the number of shares which the
underwriter believes feasible to sell at that time at the price and upon the
terms approved by or on behalf of the Company with respect to a registration
statement filed under Section 9.5 or on behalf of the Holders holding a majority
of the Registrable Securities to be included in such registration statement with
respect to a registration statement to be filed under Section 9.4 or 9.6, then
the number of Registrable Securities which the underwriter believes may be sold
shall (a) in the case of a registration statement filed under Section 9.5, first
be allocated to the Company and the remaining Registrable Securities shall be
allocated among the Holders in proportion to the Registrable Securities each
first proposed for inclusion in the registration statement and (b) in the case
of a registration statement filed under Sections 9.4 or 9.6, be allocated to the
Holders in proportion to the number of Registrable Securities each first
proposed for inclusion in the registration statement.
9.10 Additional Covenants Concerning Sale of Shares. In
connection with any registration statement referred to in Section 9 of this
Agreement, the Company shall furnish to each Holder whose shares of Registrable
Securities are included therein (or to any broker or other person at its
request) a reasonable number of copies of such registration statement, each
amendment and supplement thereto and each document included therein, such number
of copies of the then current prospectus included therein as they may from time
to time reasonably request, and a copy of the opinion of counsel to the Company
and a copy of the Company's accountants' "cold comfort letter" which are
delivered to the underwriter, if such counsel or accountants, as the case may
be, so consent.
9.11 Blue Sky Provisions. Except in those jurisdictions in
which the Company would be required to execute a general consent to service of
process, the Company, at its expense, shall endeavor to cause any of the
Registrable Securities included in a registration statement referred to herein
to be qualified under the laws of such number of jurisdictions as the Holders,
or the managing underwriter named herein, may reasonably designate, and the
Company will continue such qualification in effect so long as may be necessary
to comply with all applicable laws regulating sales of securities.
9.12 Advising the Holders. In connection with any
registration statement referred to in Section 9 hereof, the Company will
promptly advise each Holder whose Registrable Securities are included therein,
and confirm such advice in writing (a) when the registration statement has
become effective, (b) upon the filing of any amendment or supplement to the
registration statement, (c) when any post-effective amendment to the
registration statement becomes effective, and (d) of any request by the
Commission for any amendment or supplement to the registration statement or
prospectus or for additional information. If at any time the Commission should
institute or threaten to institute any proceeding for the purpose of issuing, or
should issue, a stop order suspending the effectiveness of the registration
statement, the Company will promptly notify the Holders whose Registrable
Securities are included in such registration statement, and will use its best
efforts to prevent the issuance of any such stop order or to obtain the
withdrawal thereof as soon as possible; and the Company will advise the Holders
promptly of any order or communication of any public
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board or body addressed to the Company suspending or threatening to suspend the
qualification of any shares of Common Stock for sale in any jurisdiction.
9.13 Indemnification.
(a) With respect to the registration rights
described in Section 9 hereof, the Company hereby agrees to indemnify, hold
harmless and defend each Holder (and any of the Holder's directors, officers,
employees, affiliates and assigns) and each Person who controls, is controlled
by or under common control of any such Holder within the meaning of the Act,
against any and all losses, claims, damages, liabilities and expenses (including
reasonable legal and other expenses incurred in investigating and defending
against the same), to which they, or any of them, may become subject under the
Act or other statute or common law, arising out of or based upon (i) any alleged
untrue statement of a material fact contained in any registration statement or
prospectus included therein, or any amendment thereof or supplement thereto, or
(ii) the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements contained therein not misleading;
provided, however, that the indemnity contained in this Section 9.13(a) shall
not apply to any such alleged untrue statement or omission made in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such Holder. As soon as practicable after the receipt by any Holder of
notice of any claim or action against any of the Holders in respect of which
indemnity may be sought from the Company hereunder, such Holder shall notify the
Company thereof in writing, and the Company shall assume the defense of such
claim or action (and the cost thereof) by counsel of its own choosing, who shall
be reasonably satisfactory to a majority in interest of the Holders.
(b) Each Holder whose Registrable Securities are
included in a registration statement, severally but not jointly, hereby agrees,
to indemnify, hold harmless and defend the Company, its directors and officers,
and each Person who controls, is controlled by or under common control of the
Company within the meaning of the Act, and each other Holder against any and all
losses, claims, damages, liabilities and expenses (including reasonable legal or
other expenses incurred in investigating and defending against the same), to
which they or any of them may become subject under the Act or other statute or
common law, arising out of or based upon (i) any alleged untrue statement of a
material fact contained in any such registration statement or prospectus
included therein, or any amendment thereof or supplement thereto, or (ii) the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements contained therein not misleading; provided,
however, that the indemnity contained in this Section 9.13(b) shall apply in
each case only to the extent such statement or omission was made solely in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder in connection with the preparation of the
registration statement. The Company, and any other person in respect of which
indemnity may be sought from a Holder hereunder, shall, as soon as practicable
after the receipt of notice of any claim or action against the Company or such
other person or entity, notify such Holder thereof in writing and such Holder
shall assume the defense of any such claim or action (and the cost thereof) by
counsel of its own choosing, who shall be reasonably satisfactory to the
Company.
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9.14 Registration under the Exchange Act. If the Company
shall at any time have completed a public offering of shares of its Common
Stock, it shall thereafter take such steps as may be necessary to register its
Common Stock under Section 12 of the Exchange Act (whether or not required by
law to do so), to maintain such status, and to file with the Commission all
current reports and other information as may be necessary to enable the Holders
or the Transferees to effect sales of the Conversion Shares in reliance upon
Rule 144 under the Act.
9.15 Information by Holder. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Holder or Holders, the registrable securities
held by them and the distribution proposed by such Holder or Holders as the
Company may reasonably request in writing and as shall be required in connection
with any registration referred to in this Section 9.
9.16 Transfer of Registration Rights. The rights to cause the
Company to register securities granted to Holders under Sections 9.4, 9.5 and
9.6 may be assigned to a transferee or assignee in connection with any transfer
or assignment by a Holder of at least Ten Thousand (10,000) shares of
Registrable Securities, subject to adjustment for any dilution event described
in the Restated Articles of Incorporation or similar event; provided, however,
that the Company is given written notice by the Holder effecting such transfer
or assignment.
9.17 Standoff Agreement. Each Holder agrees in connection
with any registration of the Company's securities that, upon request of the
Company or the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration statement) without the prior written consent
of the Company or such underwriters, as the case may be, for such period of time
(not to exceed 120 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters; provided, however, that
all officers and directors of the Company have entered into substantially
similar agreements. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
9.18 Termination of Rights. The rights of any particular
Holder to cause the Company to register securities under Sections 9.4, 9.5 and
9.6 shall terminate with respect to such Holder following a bona fide, firmly
underwritten public offering of shares of Common Stock registered under the Act
at such time as such Holder is able to dispose of all of his Registrable
Securities in one three-month period, pursuant to the provisions of Rule 144.
10. Survival of Representations, Warranties and Covenants.
10.1 Survival of Representations, Warranties and Covenants of
the Company. The Investor shall have the right to rely fully upon the
representations, warranties and covenants of the Company contained in this
Agreement (notwithstanding any knowledge of facts determined or
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determinable by the Investor). All such representations, warranties and
covenants shall survive the execution and delivery hereof and the Closings.
10.2 Survival of Representations and Warranties of the
Investor. The Company shall have the right to rely fully upon the
representations and warranties of the Investor contained in this Agreement
(notwithstanding any knowledge of facts determined or determinable by the
Company). All such representations, warranties, covenants and agreements shall
survive the execution and delivery hereof and the Closing.
11. Conditions Precedent to Obligations of the Investor. The
obligations of the Investor to consummate the purchase of the Shares in each
Closing shall be conditioned on the following:
11.1 Representations and Warranties Correct. Each of the
representations and warranties of the Company contained in this Agreement and in
any certificate delivered to the Investor pursuant hereto shall in all material
respects be true and correct when made and as of the Closing Date, with the same
effect as if made at the Closing Date (or the date to which it relates in the
case of any representation or warranty which specifically relates to an earlier
date), except, in the case of the Second Closing, as disclosed in an updated
Schedule of Exceptions delivered to each Second Closing Purchaser not less than
two days prior to the Second Closing. The obligations of each of the Second
Closing Purchasers to purchase Series G Shares at the Second Closing shall be
subject to its approval of any changes to the Schedule of Exceptions set forth
in such update.
11.2 Compliance with this Agreement. The Company shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by the Company on or prior to the Closing Date.
11.3 Satisfaction of Investor. All corporate proceedings
taken in connection with the transactions contemplated by this Agreement, and
all documents incident thereto, shall be reasonably satisfactory in form to each
Investor.
11.4 No Actions or Proceedings. No action, suit or proceeding
by or before any court, agency or other governmental body shall have been
asserted, instituted or threatened by any party to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
11.5 Opinion of Company's Counsel. The Company shall have
delivered to the Investor an opinion of Wilson, Sonsini, Goodrich & Rosati,
counsel for the Company, addressed to the Investor and dated as of the Closing
Date in substantially the form attached hereto as EXHIBIT B.
11.6 Officer's Certificate. The Investor shall have received
a certificate dated the Closing Date and signed by the President certifying the
fulfillment of the conditions by the Company specified in this Section 11 and
that he does not have any knowledge of any facts which have not been disclosed
to the Investor in writing which will or may reasonably be expected to have any
material adverse effect on the value of the assets, properties, business,
goodwill or prospects of the Company.
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<PAGE> 40
General economic conditions shall not be deemed a fact within the meaning or
application of this paragraph.
11.7 Certificate of Secretary or Assistant Secretary. The
Investor or its counsel shall have received a certificate dated the Closing Date
and signed by the Secretary or Assistant Secretary of the Company certifying as
to:
(a) the Restated Articles of Incorporation in the
form attached as EXHIBIT A hereto;
(b) the By-Laws of the Company;
(c) resolutions of the Board authorizing and
approving the execution and delivery of this Agreement and all documents
required to be delivered pursuant hereto by the Company, and the performance of
its obligations hereunder and that such resolutions are in full force and effect
on and as of the Closing Date;
(d) resolutions of the shareholders of the Company
approving the Restated Articles of Incorporation of the Company and that such
resolutions are in full force and effect on and as of the Closing Date; and
(e) the incumbency and signature of each of the
officers of the Company signing this Agreement and any of the documents
delivered hereunder.
11.8 Delivery of Documents. All of the documents and
resolutions required to be delivered by the Company to the Investor at the
Closing shall have been delivered.
11.9 No Lapse in Insurance Coverage. No lapse shall have
occurred prior to the Closing Date in the coverage provided under any of the
policies of insurance of the Company, including any liability policies, which
relate to the business, assets, properties or employees of the Company.
11.10 Employee Agreements and Nondisclosure Agreements. The
Employee Agreements and Nondisclosure Agreements shall continue to be in full
force and effect.
11.11 Government Approvals. All filings, consents, approvals,
qualifications, registrations or expirations of waiting periods required or
imposed by any governmental agency or ministry necessary for the sale, delivery
or purchase of the Series G Shares, including such requirements under applicable
state securities laws and Japanese law, shall have been filed, occurred or been
obtained.
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<PAGE> 41
12. Conditions Precedent to the Obligation of the Company.
Except as may be waived in writing by the Company, the obligations of the
Company to consummate the sale of the Shares herein provided for shall be
conditioned upon the following:
12.1 Representations and Warranties Correct. Each of the
representations and warranties of each Investor in this Agreement and in any
certificate delivered to the Company pursuant hereto certifying the fulfillment
of the conditions by such Investor specified in this Section 12 shall in all
material respects be true and correct when made and as of the Closing Date (or
on the date to which it relates in the case of any representation or warranty
which specifically relates to an earlier date).
12.2 Compliance with this Agreement. Each Investor shall have
performed and complied with all covenants, agreements and conditions required to
be performed or complied with by such Investor on or prior to the Closing Date.
12.3 Satisfaction of Company and its Counsel. All corporate,
partnership and other proceedings taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form to the Company and its counsel, Wilson, Sonsini,
Goodrich & Rosati.
12.4 No Actions or Proceedings. No action, suit or proceeding
by or through any court, agency or other governmental body shall have been
asserted, instituted or threatened by any party to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
12.5 Government Approvals. All filings, consents, approvals,
qualifications, registrations or expirations of waiting periods required or
imposed by any governmental agency or ministry necessary for the sale, delivery
or purchase of the Series G Shares, including such requirements under applicable
state securities laws, shall have been filed, occurred or been obtained.
13. Documents to be Delivered at Closings.
13.1 Documents to be Delivered by the Company at the
Closings. At the Closings the Company shall deliver to the Investor:
(a) the Restated Articles of Incorporation, in the
form attached as EXHIBIT A hereto, certified by the Secretary of State of the
State of California;
(b) an opinion, dated the Closing Date, of Wilson,
Sonsini, Goodrich & Rosati, counsel to the Company, in substantially the form
attached as EXHIBIT B hereto;
(c) a certificate of the President certifying as to
the matters set forth in Section 11.6;
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<PAGE> 42
(d) a certificate of the Secretary or Assistant
Secretary certifying as to the matters set forth in Section 11.7;
(e) a Good Standing Certificate certified by the
Secretary of State of the State of California as to the good standing of the
company in California;
(f) a Tax Certificate from the Franchise Tax Board
stating that the Company does not owe any franchise taxes to the State of
California;
(g) certificates representing the Series G Shares
being purchased by the Investor; and
(h) such other documents as the Investor or its
counsel shall have reasonably requested.
13.2 Documents to be Delivered by the Investor at the
Closings. At the Closings, the Investor shall deliver to the Company:
(a) authorization to release from escrow the
Purchase Price upon the terms of payment provided for in Section 1.1(a).
(b) such other documents as the Company or its
counsel shall have reasonably requested.
14. Miscellaneous.
14.1 Definition of Person. "Person" for purposes of the
Agreement means an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture or other entity
of whatever nature.
14.2 Definition of Knowledge. "To the best of the Company's
knowledge" shall mean the actual knowledge of the Company or information which
it should have obtained, after due inquiry into the subject matter of the
representation, or did obtain.
14.3 Additional Actions. The parties shall execute and
deliver such other and further instruments and perform such other and further
acts as may reasonably be required to consummate fully the transactions
contemplated hereby.
14.4 Expenses. Each party to this Agreement agrees to pay its
expenses and the expenses of its agents, employees and attorneys, incurred in
connection with the negotiation, review and execution of this Agreement and
other ancillary documents called for in this Agreement and the consummation of
the transactions contemplated hereby.
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<PAGE> 43
14.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
14.6 Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable by any
party hereto without the prior written consent of the other parties.
14.7 Notices. All notices or other communications hereunder
shall be in writing and shall be mailed, certified or registered mail, return
receipt requested, or shall be sent by messenger or by electronic transmission,
addressed to such party at the address indicated on Schedule 1.2 for an Investor
or to any such other address as any such party shall specify in a notice to the
Company, and, if intended for the Company to Cymer Laser Technologies, 16275
Technology Drive, San Diego, California 92127-1815, Attn: Dr. Robert Akins and
Mr. William Angus, with a copy to Wilson, Sonsini, Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California 94304, Attention: Henry P. Massey, Jr., Esq.
14.8 Applicable Laws. This Agreement shall be construed and
governed by the laws of the State of California applicable to contracts made and
to be performed within such state.
14.9 Entire Agreement. Except as specifically provided in
this Agreement, this Agreement constitutes the entire Agreement between the
parties hereto as it relates to the sale of Series G Shares (the "Subject
Matter"), and no party hereto shall be bound by any communications between them
on the Subject Matter unless such communications are in writing and bear a date
contemporaneous with or subsequent to the date hereof. Any prior written
agreements or letters of intent between the parties concerning the Subject
Matter shall, upon execution of this Agreement, be null and void.
14.10 Waivers and Amendments; Noncontractual Remedies;
Preservation of Remedies. This Agreement (except for Sections 2, 5.8, 7.1, 7.2,
9 and 14.10) may be amended, superseded, canceled, renewed or extended, and the
terms hereof may be waived, only by a written instrument duly executed and
acknowledged with the same formality as this Agreement, and signed by Investors
(or the Investors' Transferees) holding at least two-thirds of the outstanding
Series G Shares or Series G Conversion Shares; Sections 2, 7.1, 7.2, 9 and 14.10
of this Agreement may be amended, superseded, canceled, renewed or extended, and
the terms hereof may be waived, only by a written instrument duly executed and
acknowledged with the same formality as this Agreement, and signed by the
Holders (or their Transferees) holding at least two-thirds of the outstanding
Shares (and outstanding Conversion Shares), voting together as a class; and
Section 5.8 of this Agreement may be amended, superseded, canceled, renewed or
extended, and the terms thereof may be waived, only by a written instrument duly
executed and acknowledged with the same formality as this Agreement, and signed
by two thirds of the Shares held by Significant Holders. Each Prior Agreement
(as amended as of the date hereof) may be amended, superseded, canceled, renewed
or extended, and the terms thereof may be waived, only by a written instrument
duly executed and acknowledged with the same
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<PAGE> 44
formality as such Prior Agreement, and signed by the Prior Investors holding at
least two-thirds of the outstanding Shares (or Conversion Shares) sold pursuant
to such Prior Agreement. No delay on the part of any party in exercising any
right, power or privilege hereunder or under any Prior Agreement shall operate
as a waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof or the exercise of any
other such right, power or privilege.
14.11 Table of Contents; Captions. The Table of Contents and
the captions of the various sections of this Agreement are inserted for
convenience of reference only, and shall not constitute a part hereof.
14.12 Schedules and Exhibits Part of Agreement. The Schedules
and Exhibits referred to herein and delivered pursuant hereto, including any
amendments thereto or changes therein prior to the Closing Date, shall be deemed
part of this Agreement as fully and effectively as if set forth at length
herein.
14.13 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
14.14 Obligation of the Company to Indemnify. The Company
hereby agrees to indemnify, defend and hold harmless the Investor (and any of
the Investor's directors, officers, employees, affiliates and assigns) from and
against any and all actual losses, liabilities, damages, deficiencies, costs or
expenses (including interest, penalties and reasonable attorneys' fees and
disbursements,) ("Losses" or singularly a "Loss") which it has incurred arising
solely out of any material inaccuracy in or any material breach of any
representation, warranty, covenant or agreement of the Company contained in this
Agreement.
14.15 Obligation of the Investor to Indemnify. The Investor
agrees to indemnify, defend and hold harmless the Company (and its directors,
officers, employees, affiliates and assigns) from and against any Losses which
it may incur arising solely out of any material inaccuracy in or material breach
of any representation, warranty, covenant or agreement of such Investor
contained in this Agreement.
14.16 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after
receipt by any party hereto (the "Indemnitee") of notice of any demand, claim or
circumstances which, with the lapse of time, would give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party
(or parties) obligated to provide indemnification pursuant to Section 14.14 or
14.15 (the "Indemnifying Party"). The Claims Notice
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<PAGE> 45
shall describe the Asserted Liability in reasonable detail, and shall indicate
the amount (estimated, if necessary) of the Loss that has been or may be
suffered by the Indemnitee, provided however that failure to provide the Claims
Notice shall not relieve the indemnifying party of its duty to indemnify the
indemnities.
(b) Opportunity to Defend. The Indemnifying Party
may elect to compromise or defend, at its own expense and by its own counsel,
any Asserted Liability. If the Indemnifying party elects to compromise or defend
such Asserted Liability, it shall, within 30 days (or sooner, if the nature of
the Asserted Liability so requires) notify the Indemnitee of its intent to do
so, and the Indemnitee shall reasonably cooperate, at the expense of the
Indemnifying Party, in the compromise of or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may consent to settlement or compromise of any such Asserted Liability over the
objection of the other; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld, and provided further that the
Indemnifying Party shall not be liable to the Indemnitee for more than the
Indemnifying Party could have settled any Asserted Liability but for the
objection of the Indemnitee. In any event, the Indemnitee and the Indemnifying
Party may participate, at their own expense, in the defense of such Asserted
Liability.
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<PAGE> 46
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date and year first above written.
"COMPANY"
CYMER LASER TECHNOLOGIES
By:
---------------------------
Name: Robert P. Akins
Title: President
"INVESTOR"
--------------------------------
Printed Name
--------------------------------
(Signature)
--------------------------------
(Title)
"FOUNDER"
--------------------------------
Robert Akins
"FOUNDER"
--------------------------------
Richard Sandstrom
"FOUNDER"
-------------------------------
Uday Sengupta
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<PAGE> 47
Schedule 1.1
Founders
Robert Akins
Richard Sandstrom
Uday Sengupta
<PAGE> 48
Schedule 1.2
First Closing Purchasers
<TABLE>
<CAPTION>
Name Purchase Price No. of Shares
---- -------------- -------------
<S> <C> <C>
ASM Lithography Holding N.V. $2,422,356 403,726
DE Run 1110
5503 La Veldhoven
The Netherlands
</TABLE>
<PAGE> 49
Schedule 1.3
Second Closing Purchasers
<TABLE>
<CAPTION>
Name Purchase Price No. of Shares
---- -------------- -------------
<S> <C> <C>
Canon Inc. $1,488,822 248,137
20-2 Kiyohara-Kogyo-Danchi
Utsunomiya-shi
Tochigi-ken, 321-22
Japan
Nikon Corporation $1,488,822 248,137
Fuji Bldg.
2-3, Marunouchi 3-chome
Chiyoda-ku
Tokyo 100
Japan
</TABLE>
<PAGE> 50
FIFTH AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CYMER LASER TECHNOLOGIES
Robert Akins and William Angus, III, certify that:
1. They are the President and the Secretary, respectively, of
CYMER LASER TECHNOLOGIES, a California corporation (the "Company").
2. The articles of incorporation of the Company, as amended to
the date of the filing of this certificate, including amendments set forth
herein but not separately filed (and with the omissions required by Section 910
of the California General Corporations Law) are restated as follows (hereinafter
referred to as the "Fifth Amended and Restated Articles of Incorporation"):
I.
The name of this corporation is: CYMER LASER TECHNOLOGIES (the
"Company").
II.
The purpose of the Company is to engage in any lawful act or activity
for which a corporation may be organized under the California General
Corporation Law, other than the banking business, the trust company business, or
the practice of a profession permitted to be incorporated by the California
General Corporation Law.
III.
The Company is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares of Common Stock authorized to be issued is Fifteen Million
(15,000,000), $.01 par value per share. The total number of shares of Preferred
Stock authorized to be issued is Nine Million Eight Hundred Thirty-four Thousand
Eight Hundred Eighty (9,834,880), $.01 par value per share. The Preferred Stock
shall be issued in seven series. The first series of Preferred Stock shall be
designated as 8% Non-Cumulative Voting Redeemable Convertible Series A Preferred
Stock (the "Series A Preferred Stock") and shall consist of
<PAGE> 51
Two Million Two Hundred Sixty-Nine Thousand Two Hundred Sixty-One (2,269,261)
shares with the rights, preferences, privileges and restrictions set forth
below. The second series of Preferred Stock shall be designated as 8%
Non-Cumulative Voting Redeemable Convertible Series B Preferred Stock (the
"Series B Preferred Stock") and shall consist of One Million Three Hundred Ten
Thousand Twenty-Nine (1,310,029) shares with the rights, preferences, privileges
and restrictions set forth below. The third series of Preferred Stock shall be
designated as 8% Non-Cumulative Voting Redeemable Convertible Series C Preferred
Stock (the "Series C Preferred Stock") and shall consist of Two Hundred Thousand
(200,000) shares with the rights, preferences, privileges and restrictions set
forth below. The fourth series of Preferred Stock shall be designated as 8%
Non-Cumulative Voting Redeemable Convertible Series D Preferred Stock (the
"Series D Preferred Stock") and shall consist of Four Hundred Eighty-Five
Thousand Five Hundred Ninety (485,590) shares with the rights, preferences,
privileges and restrictions set forth below. The fifth series of Preferred Stock
shall be designated as 8% Non-Cumulative Voting Redeemable Convertible Series E
Preferred Stock (the "Series E Preferred Stock") and shall consist of One
Million Six Hundred Seventy Thousand (1,670,000) shares with the rights,
preferences, privileges and restrictions set forth below. The sixth series of
Preferred Stock shall be designated as 8% Non-Cumulative Voting Redeemable
Convertible Series F Preferred Stock (the "Series F Preferred Stock") and shall
consist of Three Million (3,000,000) shares with the rights, preferences,
privileges and restrictions set forth below. The seventh series of Preferred
Stock shall be designated as 8% Non-Cumulative Voting Redeemable Convertible
Series G Preferred Stock (the "Series G Preferred Stock") and shall consist of
Nine Hundred Thousand (900,000) shares with the rights, preferences, privilege
and restrictions set forth below. The rights, preferences, privileges and
restrictions granted to and imposed upon the Preferred Stock are as follows:
A. Dividend Rate. The holders of record of shares of Series A,
Series B, Series C, Series D, Series E, Series F and Series G Preferred Stock
shall be entitled to receive, when, if and as declared by the Board of Directors
of the Company (the "Board") out of any assets of the Company legally available
therefor, an annual cash dividend at the rate per share of 8% of the Liquidation
Value of the respective series, which shall be payable when and if declared by
the Board on a pari passu basis. "Series A Liquidation Value," "Series B
Liquidation Value," "Series C Liquidation Value," "Series D Liquidation Value",
"Series E Liquidation Value", "Series F Liquidation Value" and "Series G
Liquidation Value" shall mean $1.60, $3.40, $7.00, $8.50, $5.00, $3.50 and $6.00
per share, respectively. No dividends (other than those payable solely in Common
Stock) shall be declared or paid or set aside for payment or other distribution
made with respect to the Common Stock during any fiscal year of the Company nor
shall any shares of Common Stock be redeemed, purchased or otherwise acquired by
the Company until a dividend equal to 8% per annum of the applicable Liquidation
Value per share of Series A, Series B, Series C, Series D, Series E, Series F
and Series G Preferred Stock has been paid or declared and set apart during the
fiscal year. If in the event of the declaration of a dividend, the assets and
funds thus distributed among the holders of Series A, Series B, Series C, Series
D, Series E, Series F and Series G Preferred Stock shall be insufficient to
permit the payment to such holders of the full dividend, then such assets and
funds shall be distributed ratably among the holders of the Series A, Series B,
Series C, Series D, Series E, Series F and Series G Preferred Stock (in
proportion to the applicable Liquidation Values). Any reference in these Fifth
Amended and Restated Articles of Incorporation to Common Stock includes any
other class or series of Common Stock that may be authorized from time to time.
The foregoing restriction on redemption,
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<PAGE> 52
repurchase or acquisition of Common Stock shall be inapplicable to (i) the
redemption provisions of these Fifth Amended and Restated Articles of
Incorporation, (ii) any payments in lieu of issuance of fractional shares
thereof whether upon any merger, conversion, stock dividend or otherwise, (iii)
repurchases of Common Stock by the Company pursuant to the terms of the
Company's Incentive Stock Option Plan or the Common Stock Restriction Agreements
entered into by the Company with each of Robert P. Akins, Uday Sengupta, Richard
L. Sandstrom and Donald G. Larson and any other repurchases by the Company under
circumstances comparable to those contemplated by the Company's Incentive Stock
Option Plan or the Common Stock Restriction Agreements or (iv) the rescission of
any acquisition by the Company pursuant to which such stock was issued.
Dividends on the Series A, Series B, Series C, Series D, Series E, Series F and
Series G Preferred Stock shall not be cumulative and no rights to dividends
shall accrue to the holders of Series A, Series B, Series C, Series D, Series E,
Series F and Series G Preferred Stock in the event that the Company shall fail
to declare or pay dividends in whole or in part on the Series A, Series B,
Series C, Series D, Series E,. Series F and Series G Preferred Stock,
respectively, in any previous fiscal year of the Company, whether or not the
earnings of the Company in that previous fiscal year were sufficient to pay such
dividends in whole or in part. After dividends in the amount of 8% per annum of
the Liquidation Value per share on the Series A, Series B, Series C, Series D,
Series E, Series F and Series G Preferred Stock have been paid or declared and
set aside in any one fiscal year of the Company, if the Board shall elect to
declare additional dividends out of funds legally available therefor in that
fiscal year, such additional dividends shall be paid on the Common Stock and on
the Series A, Series B, Series C, Series D, Series E, Series F, and Series G
Preferred Stock as if the Series A, Series B, Series C, Series D, Series E,
Series F and Series G Preferred Stock had been converted to Common Stock prior
to the payment of the additional dividends.
B. Voting.
(i) Subject to subsection B(ii) hereof, each holder of the
Series A, Series B, Series C, Series D, Series E, Series F and Series G
Preferred Stock shall be entitled to vote on all matters submitted to a vote (or
to give their written consent in lieu of a vote) of shareholders of the Company
and, with respect to such vote, shall be entitled to cast the number of votes he
would have been entitled to cast had he converted all of his shares of Series A,
Series B, Series C, Series D, Series E, Series F and Series G Preferred Stock
into Common Stock immediately prior to such vote. Except as otherwise provided
herein or required by law, the holders of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock
and Common Stock shall vote together and not as separate classes or series.
(ii) The holders of shares of Common Stock voting separately
as a class shall elect two members of the Board of Directors of the Company, the
holders of shares of Series A Preferred Stock voting separately as a class shall
elect two members of the Board of Directors of the Company, and the holders of
shares of Series B Preferred Stock voting separately as a class shall elect one
member of the Board of Directors. Additional members of the Board of Directors,
if any, shall be elected by the holders of shares of Common Stock and Series A,
Series B, Series C, Series D, Series E, Series F and Series G Preferred Stock
voting together as a single class. If a vacancy on the Board of
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<PAGE> 53
Directors is to be filled by the Board of Directors, only a director or
directors elected by the same class of shareholders as those who would be
entitled to vote to fill such vacancy, if any, shall vote to fill such vacancy.
No action by members of the Board of Directors filling a vacancy on the Board of
Directors shall be effective until 10 days after all Board members who do not
have a right to vote on such appointment have received notice thereof. A
majority of the Board members entitled to receive such notice may waive such
notice requirement on behalf of all such Board members.
C. Protective Provisions.
(i) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series A, Series B,
Series C, Series D, Series E, Series F and Series G Preferred Stock, voting
together as a class:
(a) Amend or restate the Fifth Amended and Restated
Articles of Incorporation in a manner which would adversely alter or change the
rights, preferences, privileges or restrictions of the Series A, Series B,
Series C, Series D, Series E, Series F and Series G Preferred Stock;
(b) Establish any class or series of capital stock
which would rank senior to or on a parity with the Series A, Series B, Series C,
Series D, Series E, Series F or Series G Preferred Stock with respect to the
right to receive dividends or any distribution upon the liquidation,
dissolution, Liquidating Merger (as defined below) or winding up of the Company;
(c) Effect or permit any sale, lease, encumbrance,
assignment, transfer or conveyance or merger of all or substantially all of the
assets of the Company, or any liquidation or winding up of the Company;
(d) Increase or decrease (other than by permitted
repurchase, redemption or conversion) the total number of authorized shares of
capital stock or reduce the stated capital of the Company;
(e) Amend the Articles of Incorporation or the By-Laws
of the Company to increase the authorized number of members of the Board of
Directors in excess of seven; or
(f) Obligate itself to do any of the foregoing.
(ii) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series C Preferred
Stock:
(a) Amend or restate the Fifth Amended and Restated
Articles of Incorporation in a manner which would adversely alter or change the
rights, preferences, or privileges of the Series C Preferred Stock, provided the
Series C Preferred Stock is adversely affected by such amendment or restatement
in a different manner than the Series A, Series B, Series D, Series E, Series F
or Series G Preferred Stock;
-4-
<PAGE> 54
(b) Establish any class or series of capital
stock which would rank senior to or on a parity with Series C Preferred Stock
with respect to the right to receive dividends or any distribution upon the
liquidation, dissolution, Liquidating Merger (as defined) or winding up of the
Company, provided the Series C Preferred Stock is adversely affected by such
establishment in a different manner than the Series A, Series B, Series D,
Series E or Series G Preferred Stock; or
(c) Obligate itself to do any of the foregoing.
(iii) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series D Preferred
Stock:
(a) Amend or restate the Fifth Amended and
Restated Articles of Incorporation in a manner which would adversely alter or
change the rights, preferences, or privileges of the Series D Preferred Stock,
provided the Series D Preferred Stock is adversely affected by such amendment or
restatement in a different manner than the Series A, Series B, Series C, Series
E, Series F or Series G Preferred Stock;
(b) Establish any class or series of capital
stock which would rank senior to or on a parity with Series D Preferred Stock
with respect to the right to receive dividends or any distribution upon the
liquidation, dissolution, Liquidating Merger (as defined) or winding up of the
Company, provided the Series D Preferred Stock is adversely affected by such
establishment in a different manner than the Series A, Series B, Series C,
Series E, Series F or Series G Preferred Stock; or
(c) Obligate itself to do any of the foregoing.
(iv) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series E Preferred
Stock:
(a) Amend or restate the Fifth Amended and
Restated Articles of Incorporation in a manner which would adversely alter or
change the rights, preferences, or privileges of the Series E Preferred Stock,
provided the Series E Preferred Stock is adversely affected by such amendment or
restatement in a different manner than the Series A, Series B, Series C, Series
D, Series F or Series G Preferred Stock;
(b) Establish any class or series of capital
stock which would rank senior to or on a parity with Series E Preferred Stock
with respect to the right to receive dividends or any distribution upon the
liquidation, dissolution, Liquidating Merger (as defined) or winding up of the
Company, provided the Series E Preferred Stock is adversely affected by such
establishment in a different manner than the Series A, Series B, Series C,
Series D, Series F or Series G Preferred Stock;
(c) Obligate itself to do any of the foregoing.
(v) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series F Preferred
Stock:
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<PAGE> 55
(a) Amend or restate the Fifth Amended and
Restated Articles of Incorporation in a manner which would adversely alter or
change the rights, preferences, or privileges of the Series F Preferred Stock,
provided the Series F Preferred Stock is adversely affected by such amendment or
restatement in a different manner than the Series A, Series B, Series C, Series
D, Series E or Series G Preferred Stock;
(b) Establish any class or series of capital
stock which would rank senior to or on a parity with Series F Preferred Stock
with respect to the right to receive dividends or any distribution upon the
liquidation, dissolution, Liquidating Merger (as defined) or winding up of the
Company, provided the Series F Preferred Stock is adversely affected by such
establishment in a different manner than the Series A, Series B, Series C,
Series D, Series E and Series G Preferred Stock;
(c) Obligate itself to do any of the foregoing.
(vi) The Company shall not, without the consent of persons
holding greater than a majority of the outstanding shares of Series G Preferred
Stock:
(a) Amend or restate the Fifth Amended and
Restated Articles of Incorporation in a manner which would adversely alter or
change the rights, preferences, or privileges of the Series G Preferred Stock,
provided the Series G Preferred Stock is adversely affected by such amendment or
restatement in a different manner than the Series A, Series B, Series C, Series
D, Series E or Series F Preferred Stock;
(b) Establish any class or series of capital
stock which would rank senior to or on a parity with Series G Preferred Stock
with respect to the right to receive dividends or any distribution upon the
liquidation, dissolution, Liquidating Merger (as defined) or winding up of the
Company, provided the Series G Preferred Stock is adversely affected by such
establishment in a different manner than the Series A, Series B, Series C,
Series D, Series E and Series F Preferred Stock;
(c) Obligate itself to do any of the foregoing.
D. Redemption and Sinking Fund.
(i) So long as any Series A, Series B, Series C, Series D,
Series E, Series F or Series G Preferred Stock remains outstanding, the Company
shall, on each of the dates set forth in the following schedule (each a "Sinking
Fund Payment Date"), set aside as and for a sinking fund for the redemption of
the Series A, Series B, Series C, Series D, Series E, Series F and Series G
Preferred Stock (hereinafter called the "Sinking Fund") in cash out of any funds
legally available therefor, a sum equal to the product of (a) the applicable
Redemption Price (as hereinafter defined) multiplied by (b) the number of shares
of Series A, Series B, Series C, Series D, Series E, Series F and Series G
Preferred Stock to be redeemed as determined pursuant to subsection D(vii)
hereof, a maximum number of shares as set forth below opposite such Sinking Fund
Payment Date:
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<PAGE> 56
<TABLE>
<CAPTION>
Sinking Fund Number of Shares of Preferred
Payment Date Stock to be Redeemed
- ---------------------------------------------------------------------------------
<S> <C>
March 15, 1997 One third of the shares of each series of
Series A, Series B, Series C, Series D, Series E,
Series F and Series G Preferred Stock then
outstanding.
March 15, 1998 One third of the shares of each series of
Series A, Series B, Series C, Series D, Series E,
Series F and Series G Preferred Stock
outstanding as of March 15, 1997.
March 15, 1999 One third of the shares of each series of
Series A, Series B, Series C, Series D, Series E,
Series F and Series G Preferred Stock
outstanding as of March 15, 1997.
</TABLE>
(ii) The Redemption Price for each share of
Series A, Series B, Series C, Series D, Series E, Series F and Series G
Preferred Stock shall be an amount in cash equal to the sum of the Liquidation
Value of such series plus 8% per annum of the Liquidation Value from date of
original issuance of such series less any dividends actually paid on such share
of Series A, Series B, Series C, Series D, Series E, Series F or Series G
Preferred Stock to the date of redemption.
(iii) If on any Sinking Fund Payment Date the
funds of the Company legally available therefor shall be insufficient to
discharge such Sinking Fund requirement in full, funds to the extent legally
available for such purpose shall be set aside for the Sinking Fund. Such Sinking
Fund requirements shall be cumulative, so that if for any year or years such
requirements shall not be fully discharged as they accrue, funds legally
available therefor, after such payment or provisions for dividends, for each
year thereafter shall be applied thereto until such requirements are fully
discharged.
(iv) On or before the fifth day (the "Redemption
Date") following each Sinking Fund Payment Date, the cash in the Sinking Fund
shall be used to acquire by redemption, in the manner provided below, the number
of shares of Series A, Series B, Series C, Series D, Series E, Series F and
Series G Preferred Stock to be redeemed as, determined in subsection D(vii)
hereof.
(v) In the event of the redemption of only a
part of the outstanding shares of Series A, Series B, Series C, Series D, Series
E, Series F and Series G Preferred Stock, the Company shall effect such
redemption pro rata among the total of all series of Series A, Series B, Series
C, Series D, Series E, Series F and Series G Preferred Stock according to the
number of shares to be redeemed by the Company for each holder of Series A,
Series B, Series C, Series D, Series E, Series F or Series G Preferred Stock.
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<PAGE> 57
(vi) At least 30 days but not more than 60 days
prior to the Redemption Date, a written offer (a "Offer to Redeem"), shall be
mailed, postage pre-paid, to each holder of record of the Series A, Series B,
Series C, Series D, Series E, Series F and Series G Preferred Stock offered to
be redeemed at his address last shown on the records of the Company. The Offer
to Redeem shall state:
(a) Whether all or less than all of the
outstanding shares of Series A, Series B, Series C, Series D, Series E, Series F
or Series G Preferred Stock are offered to be redeemed and the total number of
shares offered for redemption;
(b) The number of shares of Series A,
Series B, Series C, Series D, Series E, Series F or Series G Preferred Stock
held by the holder that the Company intends to redeem;
(c) The Redemption Date and the
Redemption Price for each series;
(d) The date upon which the holder's
rights to convert such shares of Series A, Series B, Series C, Series D, Series
E, Series F or Series G Preferred Stock into Common Stock will terminate; and
(e) That the holder is to surrender to
the Company, in the manner and at the place designated, his certificate or
certificates representing the shares of Series A, Series B, Series C, Series D,
Series E, Series F or Series G Preferred Stock to be redeemed.
(vii) If a holder of Series A, Series B, Series C,
Series D, Series E, Series F or Series G Preferred Stock elects to accept the
Offer to Redeem on or before the applicable Redemption Date (unless such holder
has exercised his right to convert the shares as provided in Section E hereof),
such holder shall (i) deliver to the principal offices of the Company a written
statement accepting the Offer to Redeem and setting forth the number of shares
of Preferred Stock such holder desires to have redeemed and identifying the
series of such shares and (ii) surrender the certificate or certificates
representing such shares to the Company, in the manner and at the place
designated in the Offer to Redeem, and thereupon the Redemption Price for such
shares shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event less than all of the
shares represented by such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(viii) If the Offer to Redeem shall have been duly
given, and if on the Redemption Date the Redemption Price is either paid or made
available for payment through the deposit arrangement specified in subsection
D(ix) below, then notwithstanding that the certificates evidencing any of the
shares of Series A, Series B, Series C, Series D, Series E, Series F or Series G
Preferred Stock so called for redemption shall not have been surrendered, the
dividends with respect to such shares shall cease to accrue after the Redemption
Date and all rights with respect to such shares shall forthwith after the
Redemption Date terminate, except only the right of the holders to receive the
Redemption Price without interest upon surrender of their certificate or
certificates therefor.
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<PAGE> 58
(ix) On or prior to the Redemption Date, the
Company shall deposit with any bank or trust company in the State of California,
having a capital and surplus of at least $100,000,000 as a trust fund, a sum
equal to the aggregate Redemption Price of all shares of Series A, Series B,
Series C, Series D, Series E, Series F or Series G Preferred Stock which the
holder thereof has accepted the Company's offer to redeem and not yet redeemed,
with irrevocable instructions and authority to the bank or trust company to pay,
on or after the Redemption Date or prior thereto, the Redemption Price to the
respective holders upon the surrender of their share certificates. From and
after the later of the date of such deposit or the applicable Redemption Date,
the shares so called for redemption shall be redeemed. The deposit shall
constitute full payment of the shares to their holders, and from and after the
later of the date of the deposit or the applicable Redemption Date, the shares
shall be deemed to be no longer outstanding, and the holders thereof shall cease
to be shareholders of the Company with respect to such shares and shall have no
rights with respect thereto except the rights to receive from the bank or trust
company payment of the Redemption Price of the shares, without interest, upon
surrender of their certificates therefor, and the right to convert such shares
as provided in Section E hereof. Any funds so deposited and unclaimed at the end
of one year from the Redemption Date shall be released or repaid to the Company,
after which the holders of shares called for redemption shall be entitled to
receive payment of the Redemption Price only from the Company.
(x) The Company may elect to redeem all or a
portion of any series of Series A, Series B, Series C, Series D, Series E,
Series F or Series G Preferred Stock at any time, provided, that it shall have
received the prior written consent of persons holding sixty-six and two-thirds
percent (662/3) of the outstanding shares of each series of Preferred Stock,
with each series voting separately as a class.
E. Conversion.
(i) In General. Subject to subsection E(v)
below, the Series A, Series B, Series C, Series D, Series E, Series F or Series
G Preferred Stock shall be convertible at the option of the holder at any time
into fully paid and nonassessable shares of Common Stock of the Company
initially at the Conversion Rate for each series (as defined herein) of one (1)
share of Common Stock for each share of Series A, Series B, Series C, Series D,
Series E, Series F or Series G Preferred Stock; provided, however, that in case
of the redemption of any shares of Series A, Series B, Series C, Series D,
Series E, Series F or Series G Preferred Stock, such right of conversion shall
cease and terminate as to the shares which the holder thereof has accepted the
Company's Offer to Redeem, at the close of business on the day prior to the
Redemption Date for those shares, notwithstanding any earlier deposit by the
Company of funds sufficient for such redemption, unless default shall be made in
the payment of the Redemption Price, in which case the rights of conversion
granted hereby shall survive.
(ii) The number of shares of Common Stock which
shall be deliverable in exchange for a share of Series A, Series B, Series C,
Series D, Series E, Series F and Series G Preferred Stock upon conversion
thereof is hereinafter referred to as the "Conversion Rate" for each such
series. The Conversion Rate of each series shall be subject to adjustment from
time to time in certain instances as hereinafter provided.
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<PAGE> 59
(iii) An irrevocable notice of conversion shall be
mailed by each holder of shares of Series A, Series B, Series C, Series D,
Series E, Series F and Series G Preferred Stock electing to convert his shares
addressed to the Company. If less than all of the shares of the Series A, Series
B, Series C, Series D, Series E, Series F and Series G Preferred Stock owned by
such holder are to be converted, the notice shall specify the number of shares
thereof which are to be converted. Two days after the mailing of such notice,
notwithstanding that no certificate for the shares of Common Stock into which
the Series A, Series B, Series C, Series D, Series E, Series F or Series G
Preferred Stock was converted shall have been received by the holder so electing
to convert and notwithstanding that no certificate for shares of the Series A,
Series B, Series C, Series D, Series E, Series F or Series G Preferred Stock
converted into the Common Stock shall have been surrendered to the Company, the
conversion of the Series A, Series B, Series C, Series D, Series E, Series F or
Series G Preferred Stock shall be deemed effective and the certificate or
certificates representing the shares of Series A, Series B, Series C, Series D,
Series E, Series F or Series G Preferred Stock for which notice of conversion
was mailed shall be deemed to evidence the shares of Common Stock into which
they were converted until such time as they are exchanged for a new certificate
representing the shares of Common Stock into which they were converted.
(iv) Exchange of Certificates. As soon as
possible after the holder mails its notice of conversion to the Company, but in
no event later than five (5) business days thereafter; (a) the holder shall
surrender the certificate or certificates for such Series A, Series B, Series C,
Series D, Series E, Series F or Series G Preferred Stock at the office of any
duly appointed transfer agent for such Preferred Stock or the Company's offices.
Such certificate or certificates shall be duly endorsed to the Company or in
blank and accompanied by proper instruments of transfer to the Company, unless
the Company shall waive such requirement, and shall state in writing therein the
name or names in which the holder wishes the certificate or certificates for
Common Stock issued; and (b) the Company will issue and deliver to the person
for whose account such Series A, Series B, Series C, Series D, Series E, Series
F or Series G Preferred Stock was so surrendered, or to his nominee or nominees,
certificates for the number of full shares of Common Stock to which he shall be
entitled as aforesaid, together with a cash adjustment for any fraction of a
share as hereinafter stated, if the shares of Series A, Series B, Series C,
Series D, Series E, Series F or Series G Preferred Stock surrendered for
conversion are not in the aggregate evenly convertible into a number of full
shares of Common Stock. In the event of any liquidation, dissolution,
Liquidating Merger (as hereinafter defined) or winding up of the affairs of the
Company, all conversion rights of the holders of Series A, Series B, Series C,
Series D, Series E, Series F and Series G Preferred Stock shall terminate on the
date fixed by resolutions of the Board of Directors of the Company, which date
shall not be later than ten (10) days nor earlier than twenty (20) days prior to
such liquidation, dissolution, Liquidating Merger or winding up.
(v) Automatic Conversion.
(a) All shares of Series A, Series B,
Series C, Series D, Series E, Series F or Series G Preferred Stock outstanding
shall be converted automatically and without the requirement of any election on
the part of any holder of such shares of Series A, Series B, Series C, Series D,
Series E, Series F or Series G Preferred Stock at the applicable Conversion Rate
in effect immediately prior to the closing by the Company of a bona fide firm
commitment underwritten public
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<PAGE> 60
offering registered under the Securities Act of 1933, as amended, of its Common
Stock at a public offering price of not less than $6.00 per share of Common
Stock (as adjusted for any stock dividend, stock split or combination) with net
proceeds to the Company of not less than $10,000,000 (an "Automatic Conversion
Event").
(b) Written notice shall be given to
the holders of the Series A, Series B, Series C, Series D, Series E, Series F
and Series G Preferred Stock immediately upon the occurrence of an Automatic
Conversion Event. On and after the date of mailing of such notice, and
notwithstanding that any certificates for the Series A, Series B, Series C,
Series D, Series E , Series F or Series G Preferred Stock shall not have been
surrendered for conversion, the shares of Series A, Series B, Series C, Series
D, Series E. Series F and Series G Preferred Stock evidenced thereby shall be
deemed to be no longer outstanding, and all rights with respect thereto shall
forthwith cease and terminate, except any rights of the holder (1) to receive
the shares of Common Stock to which he shall be entitled upon conversion
thereof, (2) to receive the amount of cash payable in respect of any fractional
share of Common Stock to which he shall be entitled and (3) to receive any
dividends declared but unpaid on such Series A, Series B, Series C, Series D,
Series E, Series F and Series G Preferred Stock prior to the Automatic
Conversion Event. No adjustments with respect to the Conversion Rate for each
series shall be made on account of any holder's rights to dividends that have
been declared but are unpaid prior to the Automatic Conversion Event; provided,
however, that no dividends shall thereafter be paid on the Common Stock unless
dividends have first been paid to the holders of Series A, Series B, Series C,
Series D, Series E, Series F and Series G Preferred Stock entitled to payment
prior to the Automatic Conversion Event. As soon as practicable after such
Automatic Conversion Event, but in no event later than ten (10) business days
after a holder of Series A, Series B, Series C, Series D, Series E, Series F or
Series G Preferred Stock shall have received notice from the Company of such
Automatic Conversion Event: (1) such holder shall surrender the certificate or
certificates for such Series A, Series B, Series C, Series D, Series E, Series F
or Series G Preferred Stock at the office and in the manner provided for such
purpose pursuant to subsection E(iii) above; and (2) the Company shall issue and
deliver to the person for whose account such Series A, Series B, Series C,
Series D, Series E, Series F or Series G Preferred Stock was so surrendered, or
to his nominee or nominees, certificates for the number of full shares of Common
Stock to which he shall be entitled as aforesaid, together with a cash
adjustment for any fraction of a share as hereinafter stated, if the shares of
Series A, Series B, Series C, Series D, Series E, Series F or Series G Preferred
Stock automatically converted are not in the aggregate evenly convertible into a
number of full shares of Common Stock.
F. Anti-Dilution Protection. The Conversion Rates for the Series
A, Series B, Series C, Series D, Series E, Series F and Series G Preferred Stock
shall be subject to adjustment from time to time as set forth below.
(i) Certain Definitions and Assumptions. For
purposes of this Section F, the following definitions and assumptions shall
apply:
(a) "Options" shall mean rights,
options or warrants to subscribe for, purchase or otherwise acquire Common Stock
or Convertible Securities.
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<PAGE> 61
(b) "Convertible Securities" shall mean
any evidence of indebtedness, shares (other than the Series A, Series B, Series
C, Series D, Series E, Series F or Series G Preferred Stock) or other securities
convertible into or exchangeable for Common Stock.
(c) "Original Issue Date" shall mean
the date on which the first share of Series E Preferred Stock was issued.
(d) "Series F Original Issue Date"
shall mean the date on which the first share of Series F Preferred Stock was
issued.
(e) "Series G Original Issue Date"
shall mean the date on which the first share of Series G Preferred Stock was
issued.
(f) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (or pursuant to this subsection
F(i), deemed to be issued) by the Company subsequent to the Series G Original
Issue Date, other than shares of Common Stock issued or issuable (or pursuant to
this subsection F(i), deemed to be issued) at any time:
(1) upon conversion of the
Series A, Series B, Series C, Series D, Series E, Series F or Series G Preferred
Stock (including any such shares of Series A, Series B, Series C, Series D,
Series E or Series F Preferred stock issued on or issuable upon conversion or
exercise of Convertible Securities or Options);
(2) pursuant to Options to
purchase an aggregate of 1,000,000 shares of Common Stock reserved for issuance
or outstanding on the Original Issue Date, or Options to purchase shares of
Series A, Series B, Series D, or Series E Preferred Stock outstanding or issued
on the Original Issue Date or Options to purchase shares of Series F Preferred
Stock outstanding or issued on the Series F Original Issue Date;
(3) to employees, consultants,
agents or directors of the Company as approved by the Board of Directors after
the Original Issue Date;
(4) by way of dividend or
distribution pursuant to subsection F(ii) or F(iii) below or a dividend or
distribution on Series A, Series B, Series C, Series D, Series E, Series F or
Series G Preferred Stock; and
(5) up to a total of 50,000
shares of Common Stock or Preferred Stock issued since the Original Issue Date
at a purchase price less than the then applicable Conversion Price and which are
not excluded pursuant to clauses (1-4) of this subsection F(i)(f).
(g) "Conversion Price" for Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F and Series G Preferred Stock
shall mean $1.60, $3.40, $7.00, $8.50, $5.00, $3.50 and $6.00, respectively,
divided by the applicable Conversion Rate in effect at the time of any such
determination.
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<PAGE> 62
(h) The issuance of Options or
Convertible Securities of the Company shall be deemed the issuance of the shares
of Common Stock which may be acquired upon the exercise of the Options or the
exchange or conversion of the Convertible Securities for a consideration equal
to the consideration for which such Options were issued, plus the exercise price
of any such Options or the consideration equal to the consideration for which
the Convertible Securities were issued, plus any additional consideration to be
received on exchange or conversion thereof. Such shares of Common Stock shall be
deemed outstanding for the purposes of this Section F.
(i) Once an adjustment has been made to
the applicable Conversion Rate by reason of the deemed issuance of Additional
Shares of Common Stock, no further adjustment in the Conversion Rate for each
series shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities.
(j) If such Option or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase or decrease in the consideration payable to the Company upon
exercise, exchange or conversion thereof or increase or decrease in the number
of shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Rate for each series shall, upon any such increase or
decrease becoming effective, be equitably adjusted to reflect such increase or
decrease.
(k) Upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Conversion Rate for each
series computed upon the original issue thereof and any subsequent adjustments
based thereon, shall, upon such expiration, be recomputed as if:
(1) in the case of Convertible
Securities or Options for Common Stock, the only Additional Shares of Common
Stock issued were shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Company for the issue of all such Options, whether or
not exercised, plus the consideration actually received by the Company upon such
exercise, or for the issue of all such Convertible Securities which were
actually converted or exchanged, plus the additional consideration, if any,
actually received by the Company upon such conversion or exchange, and
(2) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such Options, and
the consideration received by the Company for Additional Shares of Common Stock
deemed to have been then issued was the consideration actually received by the
Company for the issue of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Company upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised.
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<PAGE> 63
(ii) Dividends. If at any time the Company pays
a dividend on Common Stock payable in Common Stock or Convertible Securities,
subdivides its outstanding shares of Common Stock into a larger number of shares
or combines the outstanding shares of Common Stock into a smaller number of
shares by reclassification or otherwise (each, a "Dilutive Event"), the
Conversion Rate for each series in effect immediately prior to such Dilutive
Event shall be adjusted by multiplying such Conversion Rate by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such Dilutive Event (assuming exercise or conversion of all
outstanding Options and Convertible Securities) and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such Dilutive Event (assuming exercise or conversion of all outstanding Options
and Convertible Securities). An adjustment made pursuant to this subsection
F(ii), shall become effective retroactively to the record date in the case of a
dividend and shall become effective on the effective date in the case of a
subdivision or combination.
(iii) Distribution of Assets. If the Company
shall distribute to holders of shares of Common Stock any assets (other than any
regular quarterly cash dividend out of earned surplus), any evidence of
indebtedness or other securities of the Company or any rights to subscribe
thereto (the "Assets") then in each such case the Conversion Rate for the Series
A, Series B, Series C, Series D, Series E, Series F and Series G Preferred Stock
shall be increased by multiplying the applicable Conversion Rate in effect on
the record date for the determination of the shareholders entitled to receive
such distribution, and prior to such distribution, by the absolute value of a
fraction the numerator of which shall be the product of (a) the fair value per
share (determined as provided in subsection F(ix) below) of the Common Stock on
such record date (assuming exercise or conversion of all Options and Convertible
Securities) and (b) the number of shares of Common Stock outstanding on such
record date (assuming exercise or conversion of all Options and Convertible
Securities) prior to such distribution and the denominator of which shall be the
remainder of (c) the numerator and (d) the fair value (as determined in a
resolution adopted by the Board of Directors of the Company, which shall be
conclusive evidence of such fair value) of all of the Assets distributed by the
Company to holders of shares of Common Stock on such record date. Such
adjustment to the Conversion Rate for each series shall become effective
retroactively immediately after the record date.
(iv) Issuance or Sale Below the Conversion Price
for Series A Preferred Stock. If at any time the Company shall issue or sell, or
shall, pursuant to subsection F(i), be deemed to have issued and sold Additional
Shares of Common Stock without consideration or at a price per share less than
the Conversion Price for the Series A Preferred Stock, then, in each such case,
the Conversion Rate for the Series A Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount determined by multiplying
the Conversion Rate for such series in effect on the date of and immediately
prior to such issuance or sale by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such issuance or
sale (assuming exercise or conversion of all outstanding Options and Convertible
Securities) and the denominator of which shall be the sum of (a) the number of
shares of Common Stock outstanding (assuming exercise or conversion of all
outstanding Options and Convertible Securities) on the date immediately
preceding the date on which the Additional Shares of Common Stock were issued or
sold and (b) the number of shares of Common Stock which the aggregate
consideration to be received by the Company
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<PAGE> 64
in respect of such Additional Shares of Common Stock would have purchased at the
Conversion Price of such series in effect immediately prior to such issuance or
sale.
(v) Issuance or Sale Below the Conversion Price
for Series B Preferred Stock.
(a) Sales not exceeding $1,000,000 at
prices in excess of $2.40 per share. If (x) at any time after the Original Issue
Date, the Company shall issue or sell, or shall, pursuant to subsection F(i), be
deemed to have issued and sold Additional Shares of Common Stock at a price per
share less than the Conversion Price for the Series B Preferred Stock and in
excess of $2.40 (as adjusted for any stock dividend, stock split or combination)
and (y) the aggregate consideration of all such sales or deemed sales from the
Original Issue Date does not exceed $1,000,000, then, in each such case, the
Conversion Rate for the Series B Preferred Stock shall be increased,
concurrently with such issuance or sale, to an amount determined by multiplying
the Conversion Rate for such series in effect on the date of and immediately
prior to such issuance or sale by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such issuance or
sale (assuming exercise or conversion of all outstanding Options and Convertible
Securities) and the denominator of which shall be the sum of (a) the number of
shares of Common Stock outstanding (assuming exercise or conversion of all
outstanding Options and Convertible Securities) on the date immediately
preceding the date on which the Additional Shares of Common Stock were issued or
sold and (b) the number of shares of Common Stock which the aggregate
consideration to be received by the Company in respect of such Additional Shares
of Common Stock would have purchased at the Conversion Price of such series in
effect immediately prior to such issuance or sale.
(b) Sales after June 21, 1991 or after
the Conversion Price for the Series B Preferred Stock is reduced below $2.40. If
the Company shall issue or sell, or shall, pursuant to subsection F(i), be
deemed to have issued and sold Additional Shares of Common Stock without
consideration or at a price per share less than the Conversion Price for the
Series B Preferred Stock (x) at any time after June 21, 1991 or (y) at any time
after the Conversion Price for the Series B Preferred Stock immediately prior to
such issuance or sale does not exceed $2.40 (as adjusted for any stock dividend,
stock split or combination), then, in each such case, the Conversion Rate for
the Series B Preferred Stock shall be increased, concurrently with such issuance
or sale, to an amount determined by multiplying the Conversion Rate for such
series in effect on the date of and immediately prior to such issuance or sale
by a fraction the numerator of which shall be the number of shares of Common
Stock outstanding immediately after such issuance or sale (assuming exercise or
conversion of all outstanding Options and Convertible Securities) and the
denominator of which shall be the sum of (a) the number of shares of Common
Stock outstanding (assuming exercise or conversion of all out standing Options
and Convertible Securities) on the date immediately preceding the date on which
the Additional Shares of Common Stock were issued or sold and (b) the number of
shares of Common Stock which the aggregate consideration to be received by the
Company in respect of such Additional Shares of Common Stock would have
purchased at the Conversion Price of such series in effect immediately prior to
such issuance or sale.
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(vi) Issuance or Sale Below the Conversion Price
for Series C Preferred Stock. If at any time after the Original Issue Date the
Company shall issue or sell, or shall, pursuant to subsection F(i), be deemed to
have issued and sold Additional Shares of Common Stock without consideration or
at a price per share less than the Conversion Price for the Series C Preferred
Stock, then, in each such case, the Conversion Rate for the Series C Preferred
Stock shall be increased, concurrently with such issuance or sale, to an amount
determined by multiplying the Conversion Rate for such series in effect on the
date of and immediately prior to such issuance or sale by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issuance or sale (assuming exercise or conversion of all
outstanding Options and Convertible Securities) and the denominator of which
shall be the sum of (a) the number of shares of Common Stock outstanding
(assuming exercise or conversion of all outstanding Options and Convertible
Securities) on the date immediately preceding the date on which the Additional
Shares of Common Stock were issued or sold and (b) the number of shares of
Common Stock which the aggregate consideration to be received by the Company in
respect of such Additional Shares of Common Stock would have purchased at the
Conversion Price of such series in effect immediately prior to such issuance or
sale. Notwithstanding the foregoing, no adjustment to the Conversion Price for
the Series C Preferred Stock shall occur pursuant to this subsection F(vi)
unless the purchase price per share of the Additional Shares of Common Stock is
less than $3.40 per share.
(vii) Issuance or Sale Below the Conversion Price
for Series D Preferred Stock. If at any time after the Original Issue Date the
Company shall issue or sell, or shall, pursuant to subsection F(i), be deemed to
have issued and sold Additional Shares of Common Stock without consideration or
at a price per share less than the Conversion Price for the Series D Preferred
Stock, then, in each such case, the Conversion Rate for the Series D Preferred
Stock shall be increased, con currently with such issuance or sale, to an amount
determined by multiplying the Conversion Rate for such series in effect on the
date of and immediately prior to such issuance or sale by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issuance or sale (assuming exercise or conversion of all
outstanding Options and Convertible Securities) and the denominator of which
shall be the sum of (a) the number of shares of Common Stock outstanding
(assuming exercise or conversion of all outstanding Options and Convertible
Securities) on the date immediately preceding the date on which the Additional
Shares of Common Stock were issued or sold and (b) the number of shares of
Common Stock which the aggregate consideration to be received by the Company in
respect of such Additional Shares of Common Stock would have purchased at the
Conversion Price of such series in effect immediately prior to such issuance or
sale. Notwithstanding the foregoing, no adjustment to the Conversion Price for
the Series D Preferred Stock shall occur pursuant to this subsection F(vii)
unless the purchase price per share of the Additional Shares of Common Stock is
less than $3.40 per share.
(viii) Issuance or Sale Below the Conversion Price
for Series E Preferred Stock.
(a) Issuances After the Original Issue Date
Aggregating Less than $9,622,000. If at any time after the Original Issue Date
the Company shall issue or sell, or shall, pursuant to subsection F(i), be
deemed to have issued and sold Additional Shares of Common Stock
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without consideration or at a price per share less than the Conversion Price for
the Series E Preferred Stock, then, in each such case, the Conversion Rate for
the Series E Preferred Stock shall be increased, concurrently with such issuance
or sale, to an amount determined by multiplying the Conversion Rate for such
series in effect on the date of and immediately prior to such issuance or sale
by a fraction the numerator of which shall be the Conversion Price of the Series
E Preferred Stock in effect on the date of such issuance and the denominator of
which shall be the per share consideration received by the Company for the
Additional Shares of Common Stock so issued. Notwithstanding any provision to
the contrary, this subsection (F)(viii)(a) shall be applicable until such time
that the Company has raised an aggregate of $9,622,000 from the sale of
Additional Shares of Common Stock.
(b) Issuance or Sale Below the Conversion
Price. In the event that subsection F(viii)(a) is not applicable, and if at any
time after the Original Issue Date the Company shall issue or sell, or shall,
pursuant to subsection F(i), be deemed to have issued and sold Additional Shares
of Common Stock without consideration or at a price per share less than the
Conversion Price for the Series E Preferred Stock then in effect, then, in each
such case, the Conversion Rate for the Series E Preferred Stock shall be
increased, concurrently with such issuance or sale, to an amount determined by
multiplying the Conversion Rate for such series in effect on the date of and
immediately prior to such issuance or sale by a fraction the numerator of which
shall be the number of shares of Common Stock outstanding immediately after such
issuance or sale (assuming exercise or conversion of all outstanding Options and
Convertible Securities) and the denominator of which shall be the sum of (a) the
number of shares of Common Stock outstanding (assuming exercise or conversion of
all outstanding Options and Convertible Securities) on the date immediately
preceding the date on which the Additional Shares of Common Stock were issued or
sold and (b) the number of shares of Common Stock which the aggregate
consideration to be received by the Company in respect of such Additional Shares
of Common Stock would have purchased at the Conversion Price of such series in
effect immediately prior to such issuance or sale.
(ix) Issuance or Sale Below the Conversion Price
for Series F Preferred Stock. If at any time after the Original Issue Date the
Company shall issue or sell, or shall, pursuant to subsection F(i), be deemed to
have issued and sold Additional Shares of Common Stock without consideration or
at a price per share less than the Conversion Price for the Series F Preferred
Stock, then, in each such case, the Conversion Rate for the Series F Preferred
Stock shall be increased, concurrently with such issuance or sale, to an amount
determined by multiplying the Conversion Rate for such series in effect on the
date of and immediately prior to such issuance or sale by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issuance or sale (assuming exercise or conversion of all
outstanding Options and Convertible Securities) and the denominator of which
shall be the sum of (a) the number of shares of Common Stock outstanding
(assuming exercise or conversion of all outstanding Options and Convertible
Securities) on the date immediately preceding the date on which the Additional
Shares of Common Stock were issued or sold and (b) the number of shares of
Common Stock which the aggregate consideration to be received by the Company in
respect of such Additional Shares of Common Stock would have purchased at the
Conversion Price of such series in effect immediately prior to such issuance or
sale.
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(x) Issuance or Sale Below the Conversion Price
for Series G Preferred Stock. If at any time after the Series G Original Issue
Date the Company shall issue or sell, or shall, pursuant to subsection F(i), be
deemed to have issued and sold Additional Shares of Common Stock without
consideration or at a price per share less than the Conversion Price for the
Series G Preferred Stock, then, in each such case, the Conversion Rate for the
Series G Preferred Stock shall be increased, concurrently with such issuance or
sale, to an amount determined by multiplying the Conversion Rate for such series
in effect on the date of and immediately prior to such issuance or sale by a
fraction the numerator of which shall be the number of shares of Common Stock
outstanding immediately after such issuance or sale (assuming exercise or
conversion of all outstanding Options and Convertible Securities) and the
denominator of which shall be the sum of (a) the number of shares of Common
Stock outstanding (assuming exercise or conversion of all outstanding Options
and Convertible Securities) on the date immediately preceding the date on which
the Additional Shares of Common Stock were issued or sold and (b) the number of
shares of Common Stock which the aggregate consideration to be received by the
Company in respect of such Additional Shares of Common Stock would have
purchased at the Conversion Price of such series in effect immediately prior to
such issuance or sale.
(xi) Fair Value. For the purpose of any
computation under subsection F(iii), the "fair value" on any date shall be as
mutually agreed upon by the Board of Directors of the Company with the
representatives of the holders of the shares of Preferred Stock voting in favor
of such valuation; provided, however, that if the Common Stock is listed or
admitted to trading on a national securities exchange, the fair value on any
date shall be equal to the average of the daily closing prices for the thirty
(30) consecutive trading days commencing forty-five (45) trading days before the
date in question. The closing price for each day shall be the last sales price
regular way, or if no such sale takes place, the average of the closing bid and
asked prices regular way on the principal national securities exchange on which
such class of Common Stock is listed or admitted to trading, or if not listed on
such an exchange, the average of the closing bid and asked prices for a share of
Common Stock on the over-the-counter market, as reported by the National
Association of Securities Dealer's Automated Quotation System at the close of
business on such date.
(xii) Capital Reorganization. In the case of any
capital reorganization or any reclassification of the capital stock of the
Company or in case of the consolidation or merger of the Company with another
corporation (other than a merger not involving any reclassification, conversion
or exchange of Common Stock, in which, subject to subsection F(xiii), the
Company is the surviving corporation), each share of Series A, Series B, Series
C, Series D, Series E, Series F and Series G Preferred Stock shall thereafter be
convertible into the number of shares of stock (or of any class or classes) or
other securities or property receivable upon such capital reorganization,
reclassification of capital stock, consolidation or merger as the case may be,
by a holder of the number of shares of Common Stock into which such share of
Series A, Series B, Series C, Series D, Series E, Series F and Series G
Preferred Stock was convertible immediately prior to such capital
reorganization, reclassification of capital stock, consolidation or merger;
and, in any case, appropriate adjustment (as determined by the Board) shall be
made in the application of the provisions herein set forth with respect to the
rights and interests thereafter of the holders of the Series A, Series B, Series
C, Series D, Series E, Series F and Series G Preferred Stock, to the end that
the provisions set forth herein
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<PAGE> 68
(including the specified changes in and other adjustments of the Conversion Rate
for each series) shall thereafter be applicable, as near as reasonably
practical, in relation to any shares of stock or other securities or other
property thereafter deliverable upon the conversion of the Series A, Series B,
Series C, Series D, Series E, Series F and Series G Preferred Stock.
(xiii) Liquidating Merger. If, as a result of (a)
a sale or conveyance of all or substantially all of the assets of the Company,
or (b) the merger, reorganization or consolidation of the Company with or into
another corporation or of another corporation into it, the beneficial owners of
all of the equity interest in the Company (assuming conversion of all options
and Convertible Securities outstanding at the time of such merger or
consolidation) immediately prior to any such merger or consolidation will not
beneficially own a majority of the equity interest of the entity surviving such
merger or consolidation immediately after such merger or consolidation (each
such event being hereinafter referred to as a "Liquidating Merger"), such sale,
conveyance, merger, reorganization or consolidation shall be deemed a
liquidation and shall be subject to the provisions of Section G.
(xiv) Transfer Agents. Whenever the Conversion
Rate of a series of Preferred Stock is adjusted as herein provided, the Company
shall (a) forthwith file with any transfer agent or agents for such series of
Preferred Stock a certificate signed by the President or one of the Vice
Presidents of the Company and by its Treasurer or an Assistant Treasurer,
stating the adjusted Conversion Rate for such series determined as provided in
this Section F, and in reasonable detail the facts requiring such adjustment and
(b) cause a notice to be mailed to the respective holders of record of such
series of Preferred Stock setting forth the adjustment and the Conversion Rate
for such series, as adjusted. Any such transfer agents shall be under no duty to
make any inquiry or investigation as to the statements contained in any such
certificate or as to the manner in which any computation was made, but may
accept such certificates as conclusive evidence of the statements therein
contained, and each transfer agent shall be fully protected with respect to any
and all acts done or action taken or suffered by it in reliance thereon. No
transfer agent in its capacity as transfer agent shall be deemed to have any
knowledge with respect to any change of capital structure of the Company unless
and until it receives a notice thereof pursuant to the provisions of this
subsection F(xiv) and in default of any such notice each transfer agent may
conclusively assume that there has been no such change.
(xv) Availability of Authorized Shares. The
Company shall at all times reserve and keep available, out of its authorized and
unissued or treasury shares of Common Stock, or other stock or securities
deliverable upon conversion, solely for the purpose of effecting the conversion
of the Series A, Series B, Series C, Series D, Series E, Series F and Series G
Preferred Stock, such number of shares as shall from time to time be sufficient
to effect the conversion of all shares of Series A, Series B, Series C, Series
D, Series E, Series F and Series G Preferred Stock from time to time
outstanding. The Company shall from time to time, in accordance with the laws of
the State of California, increase the authorized amount of its Common Stock
and/or securities issuable upon con version of the Series A, Series B, Series C,
Series D, Series E, Series F and Series G Preferred Stock if at any time the
number of shares of Common Stock (or such other securities) remaining unissued
or treasury shares of Common Stock (or such other securities) shall not be
sufficient to permit the conversion of all the then outstanding Series A, Series
B, Series C, Series D, Series E, Series F and Series G Preferred Stock.
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<PAGE> 69
(xvi) No Fractional Shares. No fractions of
shares of Common Stock are to be issued upon conversion of Preferred Stock, but
in lieu thereof the Company will pay therefor in cash an amount determined by
multiplying the fraction of a share by the applicable Liquidation Value.
(xvii) Delivery of Common Stock. The Company will
pay all issue and other taxes that may be payable in respect of any issue on
delivery of shares of Common Stock on conversion of shares of Series A, Series
B, Series C, Series D, Series E, Series F and Series G Preferred Stock pursuant
hereto. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of Common
Stock in a name other than that in which the Series A, Series B, Series C,
Series D, Series E, Series F and Series G Preferred Stock so converted was
registered, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Company the tax so required.
G. Liquidation Rights.
(i) In the event of any liquidation, dissolution,
Liquidating Merger or winding up of the Company, whether voluntary or
involuntary, before any distribution or payment shall be made to the holders of
Common Stock, the holders of the Preferred Stock shall be entitled to receive
from the assets of the Company available for distribution to its shareholders an
amount per share in cash equal to the Liquidation Value of the respective series
of Preferred Stock plus a liquidation premium of 8% per annum of the applicable
Liquidation Value per share from the date of original issuance of such series,
less any dividends that have actually been paid on such series, since it was
issued (the "Liquidation Preference Amount"). If upon the occurrence of such
event, the assets thus distributed among the holders of Series A, Series B,
Series C, Series D, Series E, Series F and Series G Preferred Stock shall be
insufficient to permit the payment to such holders of the full Liquidation
Preference Amount of the respective series of Preferred Stock, then the entire
assets of the Company legally available for distribution shall be distributed
ratably among the holders of the Series A, Series B, Series C, Series D, Series
E, Series F and Series G Preferred Stock in proportion to the applicable
Liquidation Preference Amounts.
(ii) Upon completion of the distribution required by
subsection G(i), if any assets remain in the Company, the remaining assets of
the Company shall be distributed to the holders of Common Stock. Written notice
of such liquidation, dissolution, Liquidating Merger or winding up, stating a
payment date, the amount of the payment and the place where the amounts
distributable shall be payable, shall be mailed or caused to be mailed by the
Company by certified or registered mail, return receipt requested, not less than
sixty (60) days prior to the date stated therein, to each holder of record of
any share of the Series A, Series B, Series C, Series D, Series E, Series F and
Series G Preferred Stock at his address as the same appears on the books of
record of the Company. No consolidation or merger of the Company or sale or
transfer by the Company of its assets which does not qualify as a Liquidating
Merger, nor the reduction of the authorized number of shares of any class or
series of capital stock of the Company, shall be deemed to be a liquidation,
dissolution, Liquidating Merger or winding up of the corporation within the
meaning of any of the provisions of this Section G.
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<PAGE> 70
H. Status of Redeemed or Converted Shares. Any shares of the
Series A, Series B, Series C, Series D, Series E, Series F or Series G Preferred
Stock which at any time shall have been redeemed pursuant or converted hereto
shall after such redemption or conversion be canceled and no longer be available
for issuance by the Company.
I. Notice. The holders of shares of the Preferred Stock shall
receive notice of certain events as follows:
(i) not less than thirty (30) days before the
occurrence of any of the following: (a) any distributions of capital stock to
holders of shares of the Company's Common Stock including without limitation,
any stock splits, stock dividends, stock reclassifications, or the issuance of
any rights or warrants, (b) the declaration of any record date or (c) any
meeting of the holders of shares of the Company's capital stock called by the
Company's Board of Directors (which notice must set forth in reasonable detail
the business to be transacted at such meeting); (ii) not more than ten (10) days
after the occurrence of an Automatic Conversion Event, that such event has
occurred; and (iii) not less than twenty (20) days prior to the date fixed by
the Board of Directors for the termination of the conversion rights of the
Preferred Stock as a result of any liquidation, dissolution, Liquidating Merger
or winding up of the affairs of the Company that such event will occur.
J. Consent for Certain Repurchases of Common Stock Deemed to be
Distributions. Each holder of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D, Series E, Series F and Series G
Preferred Stock shall be deemed to have consented, for the purposes of Sections
502, 503 and 506 of the California Corporations Code, to distributions made by
the Company in connection with the repurchase of shares of Common Stock issued
to or held by employees or consultants upon termination of their employment or
services pursuant to agreements providing for such right of repurchase between
the Company and such persons.
II.
The liability of directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through Bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors, or otherwise, to the fullest extent permissible under California law.
Any amendment, repeal or modification of any provisions of this Article
IV shall not adversely affect any right or protection of an agent of this
corporation existing at the time of such amendment, repeal or modification.
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<PAGE> 71
3. The Fifth Amended and Restated Articles of Incorporation have
been duly approved by the Board of Directors.
4. The article amendments as included in the Fifth Amended and
Restated Articles of Incorporation (other than omissions required by Section 910
of the California General Corporation Law) have been duly approved by the
required vote of the shareholders in accordance with Sections 902 and 903 of the
California General Corporation Law. The total number of outstanding shares of
Common Stock of this corporation is 1,143,102. The total number of outstanding
shares of Series A, Series B, Series C, Series D, Series E and Series F
Preferred Stock are 2,269,261, 1,310,029, 200,000, 470,590, 75,600, and
1,900,000 respectively. The number of shares voting in favor of the Fifth
Amended and Restated Articles of Incorporation equaled or exceeded the vote
required. The percentage vote required for the approval of the Fifth Amended and
Restated Articles of Incorporation was more than 50% of the Common Stock and
more than 50% of the Preferred Stock.
IN WITNESS WHEREOF, the Fifth Amended and Restated Articles of
Incorporation has been executed by the undersigned on January __, 1996.
-----------------------------
Robert Akins, President
-----------------------------
William Angus, III, Secretary
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<PAGE> 72
ROBERT AKINS and WILLIAM ANGUS, III, declare under penalty of perjury
under the laws of the State of California that each has read the foregoing
certificate and knows the contents thereof and that the same is true of his own
knowledge.
Dated: January ___, 1996
-----------------------------
Robert Akins, President
Dated: January ___, 1996
-----------------------------
William Angus, III, Secretary
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<PAGE> 73
January 30, 1996
To the Investors listed on
Schedule 1.2 of the Series G
Preferred Stock Purchase
Agreement dated January 30, 1996
Ladies and Gentlemen:
We have acted as counsel for CYMER Laser Technologies, a California
corporation (the "Company"), in connection with the sale by the Company to you
of 900,000 shares of the Company's Series G Preferred Stock (the "Series G
Shares") pursuant to the CYMER Laser Technologies Series G Preferred Stock
Purchase Agreement dated as of January 30, 1996 (the "Agreement") among the
Company, certain individuals listed on Schedule 1.1 (the "Founders") and
Schedule 1.2 (the "Investors") to the Agreement. This opinion is given to you in
compliance with Section 11.5 of the Agreement. Unless defined herein,
capitalized terms have the meaning given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
originals or copies, certified to our satisfaction, of such records, documents,
certificates, memoranda and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below. In such
examination we have assumed the genuineness of all signatures on original
documents, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all copies submitted to us as copies
thereof, the legal capacity of natural persons, and the due execution and
delivery of all documents (except as to due execution and delivery by the
Company) where due execution and delivery are a prerequisite to the
effectiveness thereof.
As used in this opinion, the expression "to our knowledge," "known to
us," "to the best of our knowledge" or "to the best of our knowledge after due
inquiry" means as to matters of fact that we have examined documents in our
files and documents made available to us by the Company and have made such
inquiries of officers of the Company and others as we have deemed necessary, but
beyond that we have made no independent factual investigation for the purpose of
rendering this opinion. Further, the expression "to our knowledge," "known to
us," "to the best of our knowledge" or "to the best of our knowledge after due
inquiry" with reference to matters of fact refers to the current actual
knowledge of the attorneys of this firm who have worked on matters for the
Company. Except to the extent expressly set forth herein or as we otherwise
believe to be necessary to our opinion, we have not undertaken any independent
investigation to determine the existence or absence of any other facts, and no
inference as to our knowledge of the existence or absence of any such facts
should be drawn from our representation of the Company or the rendering of the
opinion set forth below.
<PAGE> 74
Investors in Series G Shares
January 30, 1996
Page 2
For the purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary corporate or
partnership action, to execute and deliver the Agreement, and we are assuming
that the representations and warranties made by the Investors in Section 4 of
the Agreement are true and correct. We are also assuming that the Investors have
purchased the Shares for value, in good faith and without notice of any adverse
claims within the meaning of the California Uniform Commercial Code.
Our opinion is expressed only with respect to the federal laws of the
United States of America and the laws of the State of California. We express no
opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof.
The opinions hereinafter expressed are subject to the following
qualifications, as to which we render no opinion:
(a) the applicability to the Agreement of the Exon-Florio
Amendment (50 U.S.C. Section2170) to the Defense Production Act of 1950;
(b) the enforceability of the stock repurchase provisions set
forth in Sections 7.1 and 8.1 of the Agreement due to the restrictions set forth
in Sections 500 and 501 of the California Corporations Code; and
(c) the Company's activities in Japan or the formation or
activities of Cymer Japan, Inc., a Japanese corporation and a wholly owned
subsidiary of the Company (the "Subsidiary").
On the basis of the foregoing and in reliance thereon, except as
disclosed in Schedule 3.0 of the Agreement, and with the foregoing
qualifications, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has all
requisite corporate power and authority and the legal right to transact the
business in which it is presently engaged, to own, lease and operate all of the
assets and properties owned, leased or operated by it, to enter into and per
form the Agreement, to issue and sell the Series G Shares and to issue the
shares of Common Stock issuable upon conversion of the Series G Shares (the
"Conversion Shares") and to otherwise perform and comply with all other actions
and agreements arising under the Agreement. The Company is duly qualified to do
business as a foreign corporation in good standing in all other United States
jurisdictions which require such qualification except to the extent that failure
to so qualify would not have a material adverse effect on the financial
<PAGE> 75
Investors in Series G Shares
January 30, 1996
Page 3
condition, earnings, assets, business affairs or business prospects of the
Company and the Subsidiary considered as one enterprise.
2. The execution, delivery and performance of the Agreement, the
issuance of the Series G Shares and the Conversion Shares and the consummation
of the transactions contemplated in the Agreement by the Company have been duly
authorized by all necessary corporate action on the part of the Company,
including any action required to be taken by the Company's shareholders. The
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms (A) subject to the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws relating to or affecting the enforcement of creditor's rights
generally, (B) subject to general principles of equity (regardless of whether
such enforceability is considered in equity or at law), or (C) except as the
enforceability of the indemnification provisions of Section 9.13 of the
Agreement may be limited under federal or state securities laws or by public
policy. The certificates representing the Series G Shares are in due and proper
form and have been validly executed by the officers of the Company named
thereon.
3. Except for the Subsidiary, the Company has no subsidiaries
and, to our knowledge, does not own (of record or beneficially) and has made no
commitment to purchase any shares or securities of, or otherwise make any
investment in, any other corporation, association, partnership or other entity
and is not a participant in any joint venture.
4. Neither the issuance or sale of the Series G Shares (including
the Conversion Shares) nor the execution and delivery by the Company of the
Agreement, nor the consummation of or compliance with the transactions and
agreements contemplated by the Agreement will conflict with or constitute a
violation or breach of (i) the Restated Articles of Incorporation or Bylaws of
the Company, (ii) any material contracts or any provision of any material
license, indenture, mortgage, deed of trust, bank loan, credit agreement or
other agreement, or instrument identified on Schedule I hereto (the "Material
Contracts") and to which the Company is a party or by which it is bound or,
violate any order, rule or regulation known to us after due inquiry, on the date
hereof, which is applicable to the Company of any court or of any federal, state
or foreign regulatory body or administrative agency having jurisdiction over the
Company or any of its properties.
5. At the closing, upon payment of the full purchase price
therefor, the Investor will receive good and valid title to the Series G Shares
(including the Conversion Shares issuable upon conversion thereof when and if
issued in accordance with the Agreement and the Restated Articles of
Incorporation), and the Series G Shares (including the Conversion Shares
issuable upon conversion thereof when and if issued in accordance with the
Agreement and the Restated Articles of Incorporation) will be duly authorized,
validly issued, fully paid, non-
<PAGE> 76
Investors in Series G Shares
January 30, 1996
Page 4
assessable, free and clear of all liens and encumbrances and preemptive or
similar rights, other than liens, encumbrances or restrictions on transfer
arising under the Agreement, applicable securities laws or under agreements
entered into or actions taken by the Investor.
6. As of the date of this opinion (but prior to the execution and
delivery of the Agreement and the consummation of the transactions contemplated
therein) the Company will have 15,000,000 shares of Common Stock, 1,156,123
shares of which are issued and outstanding, and 9,834,880 shares of Preferred
Stock, $.01 par value (the "Preferred Stock"), consisting of: 2,269,261 shares
of Series A Preferred Stock, all of which are issued and outstanding; 1,310,029
shares of Series B Preferred Stock, all of which are issued and outstanding;
200,000 shares of Series C Preferred Stock, all of which are issued and
outstanding; 485,590 shares of Series D Preferred Stock, 470,590 of which are
issued and outstanding; 1,670,000 shares of Series E Preferred Stock, of which
75,600 are issued and outstanding; 3,000,000 shares of Series F Preferred Stock,
2,170,074 of which are issued and outstanding; and 900,000 shares of Series G
Preferred Stock, none of which are outstanding prior to the closing. All of the
outstanding shares of Common Stock and Preferred Stock are duly authorized and
validly issued, fully paid and non-assessable. In addition, the Company has
reserved the following shares of capital stock for issuance: (i) up to 900,000
Series G Shares to be issued pursuant to the Agreement, (ii) 1,500,000 shares of
Common Stock upon exercise of options granted or to be granted to the Company's
employees; (iii) 21,514 shares of Series E Preferred Stock to be issued pursuant
to Warrants to purchase Series E Preferred Stock (the "Series E Warrants"); (iv)
up to 843,526 shares of Series F Preferred Stock to be issued pursuant to
warrants to purchase Series F Preferred Stock (the "Series F Warrants"); and (v)
up to 8,561,295 shares of Common Stock reserved for issuance upon conversion of
the Shares and upon conversion of Preferred Stock to be issued pursuant to the
Series E Warrants and the Series F Warrants. No other classes of capital stock
of the Company are authorized or outstanding. To our knowledge, except for
rights set forth or described in the Restated Articles and the Agreement
(including the Schedule of Exceptions), there are no other options, warrants,
conversion privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of capital stock or other
securities of the Company, or any other agreements to issue any such securities
or rights.
7. Subject to the accuracy of the Investors' representations in
Section 4 of the Agreement, the offer, issuance and sale of the Series G Shares
to be issued in conformity with the terms of the Agreement and the issuance of
the Conversion Shares constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act.
8. No consent, approval or authorization of or designation,
declaration or filing with, any governmental authority on the part of the
Company is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the Series G Shares (or the
issuance of the Conversion Shares), or the consummation of any other transaction
contemplated by the Agreement.
<PAGE> 77
Investors in Series G Shares
January 30, 1996
Page 5
9. After due investigation, we know of no actions, suits,
proceedings pending or threatened against the Company or any of their
properties, at law or in equity or before or by any commission, board, body,
authority, or agency other than such as are described in the Schedule of
Exceptions attached to the Agreement as Schedule 3.0.
This opinion is intended solely for your use in connection with your
purchase of Series G Shares and is not to be made available to or relied upon by
other persons or entities without our prior written consent.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
<PAGE> 78
SCHEDULE I
MATERIAL CONTRACTS
1. COMMERCIAL AGREEMENTS
Service Agreement, dated March 15, 1991, with Mitsubishi Corporation,
and Amendment to Service Agreement, dated August 24, 1992.
Product License and Manufacturing Agreement--High Power Laser, dated
August 28, 1992, with Seiko Instruments Inc.
Contract Manufacturing Agreement--Lithography Laser, dated August 28,
1992, with Seiko Instruments Inc.
Research and Development Contract, dated August 28, 1992 with Seiko
Instruments Inc., including:
Sub-Agreement (1), dated June 1, 1993, with Seiko Instruments
Inc.
Sub-Agreement (2), dated June 14, 1994, with Seiko Instruments
Inc.
Service Plan of Cymer's Excimer Lasers, dated December 30, 1991, with
EO Technics Co.
Purchase Agreement, dated March 30, 1994, with Oramir Semiconductor
Equipment Ltd.
ARPA Contract, dated July 27, 1993, with Advanced Research Projects
Agency.
Patent License Agreement, dated August 1, 1989, with Patlex
Corporation.
Sematech Development Agreement, dated August 2, 1994, with Sematech,
Inc.
Agreement, dated May 7, 1993, with ASM Lithography B.V.
APPT/SRL/CYMER Solid State Modulator License and Manufacturing
Agreement, dated January 26, 1995 with APPT and SRL.
2. CREDIT AGREEMENTS
CEFO Preliminary Commitment to Guarantee, dated August 4, 1994, with
California Export Finance Office.
CEFO Guarantee Agreement, dated August 17, 1994, with California Export
Finance Office.
Silicon Valley Bank Loan Agreement, dated October 4, 1993 , as amended
to date.
<PAGE> 79
Loan Agreement, dated August 15, 1991, with Mitsubishi International
Corporation, including:
Promissory Note, dated September 20, 1993 and August 19, 1993
Security Agreement, dated April 21, 1993; and Substitution
Agreement, dated April 21, 1993.
Letter of Awareness, dated June 28, 1994, with The Hong Kong and
Shanghai Banking Corporation Limited.
3. FINANCING AGREEMENTS
Series F Preferred Stock Purchase Agreement, dated February 28, 1995.
4. INSURANCE AGREEMENTS
Life Insurance Policies for Robert Akins, dated April 7, 1988 and for
Richard Sandstrom, dated April 7, 1988.
5. LEASE AGREEMENTS
Industrial Real Estate Lease, 16160 West Bernardo Drive, San Diego, CA
92128, dated August 19, 1991 and addendums, dated February 1, 1994 and
August 19, 1991.
6. INDEMNIFICATION AGREEMENTS
Indemnification Agreement with Robert P. Akins, dated April 15, 1988.
Indemnification Agreement with Martin B. Pedley, dated April 15, 1988.
Indemnification Agreement with Richard Abraham, dated April 15, 1988.
Indemnification Agreement with F. Duwaine Townsen, dated April 15,
1988.
Indemnification Agreement with Richard L. Sandstrom, dated April 15,
1988.
Indemnification Agreement with Kenneth M. Deemer, dated May 3, 1988.
Indemnification Agreement with Narendra Kumar Agarwal, dated July 5,
1988.
Indemnification Agreement with William A. Angus, dated November 9,
1990.
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<PAGE> 80
7. AGREEMENTS WITH EMPLOYEES
Separation Agreement, dated August 8, 1994, with Uday Sengupta.
Employee Non-Disclosure Agreements signed by all employees.
Confidential Disclosure Agreement, dated August 26, 1994, with Uday
Sengupta.
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<PAGE> 81
Schedule 3.0
Exceptions to Representations and Warranties
Set forth below are exceptions to the representations and warranties of
the Company made in Section 3.0 of the attached Agreement. All disclosures and
exceptions are intended to modify all of the Company's representations and
warranties, and the section headings used below are for convenience only.
3.1 Organization and Standing; Articles and Bylaws
In addition to California, the Company leases property and is qualified
to do business in the state of Massachusetts. The Company leases property and is
duly organized in Chiba, Japan.
3.8 Absence of Undisclosed Liabilities and Obligations
See Section 3.13 below.
3.10 Real Property
The Company or its subsidiary currently lease property at the following
locations:
16275 Technology Drive
San Diego, California 92127-1815
47 East Grove Street
Middleboro, Massachusetts
1-22-6 Ichikawa
Ichikawa
Chiba, Japan 272
3.13 Patent and Trademarks
PATLEX CORP.
Effective August 1, 1989 and lasting until the expiration of the
licensed patents, the Company entered into a Patent License Agreement for a
nonexclusive worldwide license to certain patented laser technology with Patlex
Corp., a patent holding company ("Patlex"). Under the terms of the agreement,
the Company is required to pay royalties ranging from 1/4% to 5% of gross sales
and leases, as defined, depending on total revenues earned.
SEIKO
<PAGE> 82
In August 1992, the Company entered into a (i) Product License and
Manufacturing Agreement, dated August 28, 1992 (the "License Agreement") and
(ii) a Research and Development Agreement, dated August 28, 1992 (the "Research
Agreement") with Seiko. In return for partially funding the Company's research
and development of its industrial laser technology pursuant to the Research
Agreement, Seiko has the right and license (according to the terms of the
License Agreement) to use the developments, improvements and modifications made
by the Company. Under the License Agreement, the Company granted to Seiko the
royalty-bearing, nontransferable, exclusive right (in Japan) and the
nonexclusive right (worldwide) to manufacture, market, distribute and sell the
Company's HPL-100K industrial laser and subsequent enhancements thereto. The
Company also granted Seiko the right of first refusal to license and fund the
Company's development of new technologies which are not funded by other parties.
SEMATECH, INC.
The Company entered into a Development Agreement, dated August 2, 1994
(the "Development Agreement"), with Sematech, Inc., a Delaware corporation
representing a U.S. industry government and business consortium organized to
conduct research and development of advanced semiconductor manufacturing for the
use of the consortium's members ("Sematech"), under which the parties agreed to
jointly develop a new laser for use with a SVGL Microscan tool. If the Company
is unable to manufacture sufficient numbers of the new laser for Sematech or
Sematech's members' needs, the Company will grant an unrestricted, worldwide,
nonexclusive and irrevocable license for the production of the new laser. All
patents resulting from any invention made solely by an employee of either
Sematech or Cymer will belong to the company that employs the inventor. All
patents resulting from any invention made solely by a Sematech member's employee
will belong to that employee's employer. All patents resulting from any
invention made jointly by Sematech employees, members' employees and/or the
Company's employees will be jointly owned by the employers of such joint
inventors. The Company is obligated to grant Sematech a royalty-free, worldwide,
unrestricted, nonexclusive and irrevocable license, which Sematech may
sublicense to (i) its members, who may in turn sublicense to majority-owned
entities, or (ii) the Department of Defense, which in turn may sublicense to its
subcontractors, to all of the Company's patents which result from the
development work completed under the agreement; provided, however, that if such
patents are used for the manufacture or contracting for the manufacture of
materials or equipment covered by such patents, the Company is obligated to
grant to Sematech or its members a license requiring certain limited royalty
payments.
COHERENT INC.
On November 8, 1993 and August 31, 1994, the Company received notices
from Coherent Inc. ("Coherent") which alleged that the Company's excimer laser
systems infringe on Coherent's ownership of a patent related to gas discharge
lasers. The Company has referred such claim to its patent attorneys for further
investigation. Coherent has offered to license the patent to Cymer; however, the
Company believes that it has valid defenses to the infringement claim.
<PAGE> 83
3.16 Litigation
See Section 3.13 - "Coherent, Inc." above.
3.20 Registration Rights
Silicon Valley Bank, the Company's principal bank ("SVB"), is entitled
to certain registration rights with respect to the registration of the shares of
Series E Preferred Stock issuable upon exercise of the Series E Warrants or the
Common Stock issuable upon conversion of the Series E Preferred Stock (the "SVB
Conversion Stock") under the Securities Act. If the Company proposes to register
any of its securities under the Securities Act, SVB or its assigns are entitled
to notice of such proposed registration and the opportunity to include shares
of SVB Conversion Stock therein.
<PAGE> 1
EXHIBIT 10.13
PATENT LICENSE AGREEMENT
This Agreement by and between Cymer Laser Technologies, a corporation
organized and existing under the laws of the State of California, having its
principal place of business at 7887 Dunbrook Road, San Diego, CA 92126,
(hereinafter designated "LICENSEE") and Patlex Corporation, a corporation
organized and existing under the laws of the Commonwealth of Pennsylvania,
having its principal place of business at 250 Cotorro Court, Las Cruces, New
Mexico 88005 (hereinafter designated "PATLEX").
WHEREAS, Gordon Gould, an individual residing at P.O. Box 112, Route
1, Kinsale, Virginia, 22488 (hereinafter designated "GOULD") is the owner,
along with PATLEX, of various patents in the United States and Canada relating
to lasers and laser systems. Such patents are listed in Exhibit "A" annexed
hereto; and
WHEREAS, GOULD has granted to PATLEX the exclusive right to license
others under any and all of the aforesaid GOULD patents; and
WHEREAS, LICENSEE desires to obtain a license from PATLEX under the
aforesaid GOULD patents; and
WHEREAS, it is the intention of the parties that this Agreement
prescribe the rights and obligations among the parties and GOULD regarding all
patents issued to or partially owned by GOULD relating to lasers and laser
systems and which are licensable by PATLEX; and
WHEREAS, PATLEX desires to license LICENSEE under the aforesaid GOULD
patents;
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<PAGE> 2
NOW, THEREFORE, PATLEX and LICENSEE agree as follows:
ARTICLE I - DEFINITIONS
For the purposes of this Agreement, the terms specified shall
have the meanings as defined below:
A. "Subsidiary"
Subsidiary shall mean a corporation, company, or other entity, foreign
or domestic, at least fifty percent (50%) of whose outstanding shares
or securities (representing the right to vote for the election of
directors or other managing authority) are, now or hereafter, owned or
controlled by LICENSEE. Whenever the term LICENSEE is used throughout
this Agreement, it is intended to include Subsidiaries of LICENSEE
unless such inclusion would be inappropriate to this Agreement. A
complete list of LICENSEE's Subsidiaries as of the Effective Date of
this Agreement is annexed hereto as Exhibit "B".
B. "Licensed Patents"
Licensed Patents shall mean the patents set forth in Exhibit "A", and
all reissues and renewals thereof. It shall not include other
inventions of GOULD or PATLEX or patents based on applications filed
subsequent to the Effective Date of this Agreement and not relating
back to a patent set forth in Exhibit "A".
C. "Low Power Laser Tube"
Low Power Laser Tube shall mean a sealed gas-filled laser tube having
an output power of one (1) Watt or less, with
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<PAGE> 3
or without optical elements at the ends thereof, which is not a staple
article or commodity of commerce suitable for substantial noninfringing
use but is especially made or especially adapted for use in a gas
discharge laser or laser system and which is sold or leased other than
as part of a laser or laser system.
D. "High Power Laser Tube"
High Power Laser Tube shall bean a sealed gas-filled laser tube other
than a Low Power Laser Tube, with or without optical elements at the
ends thereof, which is not a staple article or commodity of commerce
suitable for substantial noninfringing use but is especially made or
especially adapted for use in a gas discharge laser or laser system and
which is sold or leased other than as part of a laser or laser system.
E. "Licensed Laser"
Licensed Laser shall mean the royalty base items of all lasers, laser
systems and Low and High Power Laser Tubes manufactured, used, leased or
sold by LICENSEE which infringe (see 35 U.S.C. 271) any one or more of
the valid claims of any Licensed Patent and upon which the requisite
royalties have accrued as a royalty under this Agreement.
F. "Excluded Uses"
Excluded Uses shall mean any and all uses of Licensed Lasers for the
manufacture or mastering of laser discs, compact discs, laser memories,
or similar products on
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<PAGE> 4
which a laser or laser system is used to record sound, visual
matter, or data.
G. "Net Selling Price"
Net Selling Price shall mean the price at which LICENSEE invoices the
sale or lease of Licensed Lasers to its customers, less any reasonable
charges for packing, shipping, installation, import duties, brokerage,
and use or sales taxes. It is further understood and agreed that in
respect of inter-company sales between the LICENSEE and its related
companies, the Net Selling Price shall mean the price at which the
LICENSEE ordinarily sells to its distributors under similar
circumstances. In such event no royalty shall accrue or be payable in
respect of any subsequent resale of such equipment to a third party.
H. "Effective Date"
The Effective Date of this Agreement shall mean August 1, 1989.
ARTICLE II - PATENT RIGHTS GRANTED
A. Licenses and Immunities
1. Lasers and Laser Systems
PATLEX hereby grants to LICENSEE a non-exclusive, worldwide
license to make, use, lease, or sell lasers and laser systems
which would infringe any valid claim of one or more of the
Licensed Patents upon which royalties are accrued under this
Agreement, provided such lasers and laser systems are not used
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<PAGE> 5
or intended for use in Excluded Uses. All of the Licensed
Patents are covered by this Agreement at the specific request of
LICENSEE in preference to licensing less than all of the patents
which PATLEX was willing to do.
This Agreement does not apply to, nor require royalty payments
for, components of lasers and laser systems, which components
are staple articles or commodities of commerce suitable for
substantial noninfringing use, when such components are sold by
LICENSEE other than as part of a laser or laser system.
2. Low Power Laser Tubes
(a) License
PATLEX hereby grants to LICENSEE a non-exclusive, worldwide license
under U.S. Patent No. 4,704,583 to make, use, lease or sell Low Power
Laser Tubes which would infringe any valid claim of U.S. Patent No.
4,704,583 provided:
i) such Low Power Laser Tubes are not used or intended for
use in Excluded Uses, and
ii) LICENSEE's customer either resells the Low Power Laser
Tube as part of a Larger System or uses it for its own
internal use.
-5-
<PAGE> 6
For purposes of this Article II, Section A. subsection 2, a
"Larger System" shall mean a system including a Low Power Laser
Tube, in which at least fifty percent (50%) of the selling price
of the system is attributable to other than the Low Power Laser
Tube and associated power supply.
Patlex hereby covenants not to sue customers of LICENSEE under
U.S. Patent No. 4,704,583 for using Low Power Laser Tubes
licensed under this Article II, Section A, subsection (2)(a) upon
which the requisite royalties are accrued.
(b) Immunity
LICENSEE is hereby granted an immunity from suit under the Licensed
Patents with regard to the sale of a Low Power Laser Tube to a
customer who resells said Low Power Laser Tube without incorporating
the same into a Larger System. In such circumstances, PATLEX reserves
the right to pursue LICENSEE's customer for royalties under the
Licensed Patents on said Low Power Laser Tube and all equipment added
thereto. However, LICENSEE may, at its discretion, pay PATLEX a fee
equal to the amount set forth in Article
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<PAGE> 7
III, Section B, subsection (2), and such payment shall relieve the
customer of any obligation to pay a royalty to PATLEX for said Low
Power Laser Tube.
3. High Power Laser Tubes
LICENSEE is hereby granted an immunity from suit under the Licensed
Patents with regard to the sale of High Power Laser Tubes. LICENSEE
shall pay PATLEX a fee equal to the amount set forth in Article III,
Section B, subsection (2) for such immunity and such payment shall
relieve LICENSEE's customer of any obligation to pay a royalty to PATLEX
for said High Power Laser Tube. PATLEX expressly reserves the right to
pursue LICENSEE's customer for royalties under the Licensed Patents on
any equipment added to said High Power Laser Tube that taken together
with such tube would infringe any valid claim of a Licensed Patent.
B. Customer Use
PATLEX hereby covenants not to sue customers of LICENSEE for using
lasers and laser systems sold or leased by LICENSEE upon which the
requisite royalties are accrued provided such lasers and laser systems
are not used in Excluded Uses. This covenant does not extend to
customers who incorporate such lasers and laser systems into new
systems, the use of which infringes U.S. Patent No. 4,161,436, and who
sell such new systems.
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<PAGE> 8
C. Release of Past Infringement:
(1) Optically Pumped Lasers - U.S. Patent No. 4,053,845
Payment of the requisite royalties by LICENSEE under Article III,
Section A hereof shall be in full settlement of any claim of
infringement liability arising under U.S. Patent No. 4,053,845 incurred
prior to the Effective Date of this Agreement.
(2) Gas Discharge Lasers - U.S. Patent No. 4,704,583
Payment of the requisite royalties by LICENSEE under Article III,
Section A hereof shall be in full settlement of any claim of
infringement liability arising under U.S. Patent No. 4,704,583 incurred
prior to the Effective Date of this Agreement.
(3) Use Patent - U.S. Patent No. 4,161,436
Payment of the requisite royalties by LICENSEE under Article III,
Section A hereof shall be in full settlement of any claim of
infringement liability arising under U.S. Patent No. 4,161,436 incurred
prior to the Effective Date of this Agreement and shall release
customers of the LICENSEE for the use of Licensed Lasers leased or
purchased from LICENSEE prior to the Effective Date hereof, the
use of which would infringe any valid claim of
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<PAGE> 9
U.S. Patent No. 4,161,436. PATLEX will not sue any customer of LICENSEE
for the use of Licensed Lasers purchased or leased from the LICENSEE,
provided that such uses are not Excluded Uses. The aforesaid covenant
does not extend to customers who incorporate Licensed Lasers into new
systems, the use of which infringes any valid claim of U.S. Patent No.
4,161,436, and who sell such new systems.
(4) Light Generating and Amplifying Apparatus - Canadian Patent No. 907,110
Payment of the requisite royalties by LICENSEE under Article III,
Section A hereof shall be in full settlement of any claim of
infringement liability arising under Canadian Patent No. 907,110
incurred prior to the Effective Date of this Agreement.
(5) Brewster's Angle Window - U.S. Patent No. 4,746,201
Payment of the requisite royalties by LICENSEE under Article III,
Section A hereof shall be in full settlement of any claim of
infringement liability arising under U.S. Patent No. 4,746,201 incurred
prior to the Effective Date of this Agreement.
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<PAGE> 10
(6) U.S. Patent No. 3,388,314
U.S. Patent No. 3,562,662
U.S. Patent No. 3,576,500
U.S. Patent No. 3,586,998
Payment of the requisite royalties by LICENSEE under Article
III, Section A hereof shall be in full settlement of any claim
of infringement liability arising under U.S. Patent Nos.
3,388,314, 3,562,662, 3,576,500, and 3,586,998 incurred prior
to the Effective Date of this Agreement.
ARTICLE III - ROYALTY PAYMENTS
A. Past Infringement
LICENSEE shall pay to PATLEX the sum of Twenty Five Thousand and Eight
Hundred and Twenty U.S. Dollars ($25,820.00).
B. Future Royalty Payments
(1) Optically Pumped Lasers -
U.S. Patent No. 4,053,845
LICENSEE shall pay to PATLEX a royalty of five percent (5%) of
the Net Selling Price for all Licensed Lasers sold or leased
by LICENSEE from the Effective Date of this Agreement to the
expiration of U.S. Patent No. 4,053,845, the manufacture, use,
or sale of which would infringe any valid claim of U.S. Patent
No. 4,053,845.
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<PAGE> 11
(2) Gas Discharge Lasers -
U.S. Patent No. 4,704,583
(a) LICENSEE shall pay to PATLEX a royalty of five percent (5%) of
the Net Selling Price for all lasers and laser systems sold or
leased by LICENSEE from the Effective Date of this Agreement to
the expiration of U.S. Patent No. 4,704,583, the manufacture,
use, or sale of which would infringe any valid claim of U.S.
Patent No. 4,704,583.
(b) Notwithstanding any other provisions of this Agreement to the
contrary, LICENSEE shall not be obligated to pay to PATLEX more
than One Hundred Thousand Dollars ($100,000.00) annually for
the sale, manufacture, use or lease of excimer lasers.
(3) Use Patent -
U.S. Patent No. 4,161,436
(a) LICENSEE shall pay to PATLEX a royalty of five percent (5%) of
the Net Selling Price for all Licensed Lasers sold or leased by
LICENSEE from the Effective Date of this Agreement to the
expiration date of U.S. Patent No. 4,161,436, the use of which
would infringe any valid claim of U.S. Patent No. 4,161,436.
(b) LICENSEE shall have the right to use lasers, laser systems and
Low and High Power Laser
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<PAGE> 12
Tubes for its own internal use provided such lasers, laser systems
and Low and High Power Laser Tubes are not used for Excluded Uses and
are manufactured by LICENSEE or are purchased from a vendor who is
licensed by PATLEX under all of the Licensed Patents applicable
thereto and, if manufactured by LICENSEE, LICENSEE pays the requisite
royalties or fees based upon the equivalent Net Selling Price thereon
and, if purchased from a licensed vendor, said licensed vendor paid
the requisite royalties or fees thereon. If LICENSEE purchases a
laser, laser system, or Low or High Power Laser Tube for its internal
use from a vendor not licensed by PATLEX, LICENSEE shall pay to
PATLEX a royalty of six percent (6%) of the purchase price of said
laser, laser system or Low or Power Laser Tube.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, LICENSEE shall not be obligated to pay to PATLEX more than
One Hundred and Twenty Five Thousand Dollars ($125,000.00) per year
for the sale or lease of items included in the royalty base of U.S.
Patent No. 4,161,436 and which are not included in the royalty base of
any other
<PAGE> 13
Licensed Patent and which are a part of any lasers or laser systems
the use of which would infringe any valid claim of U.S. Patent No.
4,161,436.
(4) Light Generating and Amplifying Apparatus - Canadian Patent No. 907,110
LICENSEE shall pay to PATLEX a royalty of five percent (5%) of the Net
Selling Price of all Licensed Lasers sold or leased in Canada by
LICENSEE from the Effective Date of this Agreement to the expiration
of Canadian Patent No. 907,110, the manufacture, use or sale of which
would infringe any valid claim of Canadian Patent No. 907,110.
(5) Brewster's Angle Window - U.S. Patent No. 4,746,201
LICENSEE shall pay to PATLEX a royalty of three and one-half percent
(3 1/2%) of the Net Selling Price for all Licensed Lasers sold or
leased by LICENSEE from the Effective Date of this Agreement to the
expiration date of U.S. Patent No. 4,746,201, the manufacture, use or
sale of which would infringe any valid claim of U.S. Patent No.
4,746,201.
(6) Other Patents
No additional royalty shall accrue for any Licensed Laser sold or
leased by LICENSEE, the manufacture, use or sale of which would
infringe any valid claim of any patent listed in Exhibit "A" and not
described
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<PAGE> 14
heretofore in Article III, Section B, subsections (1) to (5) hereof.
(7) Foreign Sales
Notwithstanding the royalty rates set forth in Article III, Section B,
if the sale or lease of any Licensed Laser manufactured in the United
States or Canada is directly to an end user in a country other than the
United States or Canada or to an intermediary who warrants in writing to
LICENSEE that the end user is in a country other than the United States
or Canada, then the royalty rate shall be reduced to two percent (2%) of
the Net Selling Price for said sale or lease. This reduced rate will
also apply to sales or leases for Canadian end users after Canadian
Patent No. 907,110 has expired (August 8, 1989).
C. Multiple Patents
In the event that the manufacture, lease, sale or use of a Licensed
Laser by LICENSEE infringes a valid claim of more than one Licensed
Patent, then the royalty payable to PATLEX shall be computed in
accordance with the greatest of the applicable royalty rates, if they
are different, with regard to those portions of the Licensed Laser
wherein the royalty bases as defined herein overlap. With regard to the
remaining portions of the Licensed Laser, the individual royalty rates
still apply.
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<PAGE> 15
D. Volume Discount
(1) Whenever during any calendar year the combined Net Selling Price upon
which royalty payments are accrued by LICENSEE to PATLEX under
Article III, Section B, subsections (1), (2)(a), and (5) shall exceed
Fifteen Million Dollars ($15,000,000.00), then thereafter during that
calendar year the royalty rate for all additional lasers and laser
systems (other than excimer lasers) sold or leased by LICENSEE in the
United States shall be reduced to three percent (3%) until said combined
Net Selling Price exceeds Twenty Million Dollars ($20,000,000.00);
(2) Whenever during any calendar year the combined Net Selling Price upon
which royalty payments are accrued by LICENSEE to PATLEX under Article
III, Section B, subsections (1), (2)(a), and (5) shall exceed Twenty
Million Dollars ($20,000,000.00), then thereafter during that calendar
year the royalty rate for all additional lasers and laser systems (other
than excimer lasers) sold or leased by LICENSEE in the United States
shall be reduced to one percent (1%) until said combined Net Selling
Price exceeds Twenty Five Million Dollars ($25,000,000.00);
(3) Whenever during any calendar year the combined Net Selling Price upon
which royalty payments are
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<PAGE> 16
accrued by LICENSEE to PATLEX under Article III, Section B, subsections
(1), (2)(a), and (5) shall exceed Twenty Five Million Dollars
($25,000,000.00), then thereafter during that calendar year the royalty
rate for all additional lasers and laser systems (other than excimer
lasers) sold or leased by LICENSEE in the United States shall be reduced
to one-half percent (1/2%);
(4) Whenever during any calendar year the Net Selling Price upon which
royalty payments are accrued by LICENSEE to PATLEX under Article III,
Section B, subsection (7) shall exceed Five Million Dollars
($5,000,000.00), then thereafter during that calendar year the royalty
rate for all additional lasers and laser systems (other than excimer
lasers) sold or leased by LICENSEE in any country other than the United
States shall be reduced to one percent (1%) until said-Net Selling Price
exceeds Ten Million Dollars ($10,000,000.00);
(5) Whenever during any calendar year the Net Selling Price upon which
royalty payments are accrued by LICENSEE to PATLEX under Article III,
Section B, subsection (7) hereof shall exceed Ten Million Dollars
($10,000,000.00) then thereafter during that calendar year the royalty
rate for all additional lasers and laser systems (other than
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<PAGE> 17
excimer lasers) sold or leased by LICENSEE in any country other than
the United States shall be reduced to one-half percent (1/2%) until
said Net Selling Price exceeds Fifteen Million Dollars
($15,000,000.00);
(6) Whenever during any calendar year the Net Selling Price upon which
royalty payments are accrued by LICENSEE to PATLEX under Article III,
Section B, subsection (7) hereof shall exceed Fifteen Million Dollars
($15,000,000.00), then thereafter during that calendar year the royalty
rate for all additional lasers and laser systems (other than excimer
lasers) sold or leased by LICENSEE in any country other than the United
States shall be reduced to one-quarter percent (1/4%);
(7) In each calendar year after calendar year 1989, the dollar sales
amounts set forth in this Section E to establish royalty rate volume
breakpoints, and the calendar year limits on royalty payments set
forth in Section B, subsections (2)(b) and (3)(c) of this Article III,
shall be adjusted upward for the next succeeding calendar year to
reflect the cumulative Consumer Price Index for all Urban Consumers,
U.S. City Coverage ("CPI") percentage increase for the preceding
calendar year. For example, if the CPI from January 1, 1989 to
January 1, 1990 is from 100 to 110, that
-17-
<PAGE> 18
is a 10% increase ((110-100)/100) and each of the dollar sales amounts
in Section E and the calendar year limits of Section B, subsections
(2)(b) and (2)(c) shall be adjusted upward by 10% for calendar year
1990. In the event that there is no cumulative percentage increase in
the CPI during any calendar year, the dollar sales amounts in Section
E and the calendar year limits of Section B, subsections (2)(b) and
(2)(c) shall not change for the next succeeding calendar year from
their value for the current calendar year.
E. When Accrued
Royalties as aforesaid shall accrue hereunder when income from the
lease of Licensed Lasers shall have been received or invoiced by
LICENSEE, whichever is sooner, and when the sale of Licensed Lasers
shall have been invoiced by LICENSEE to its customers or, if invoices
are not issued, when Licensed Lasers shall have been shipped by
LICENSEE.
F. Trial Shipments
With respect to Licensed Lasers shipped to customers under lease or on
a trial basis, LICENSEE shall have six (6) months from the date of
such shipment to designate each such transaction as a sale or lease,
unless fifty percent (50%) or more of the purchase price shall have
been paid to LICENSEE in which event the transaction shall be deemed a
sale.
-18-
<PAGE> 19
G. Resale
LICENSEE shall have the right to acquire and resell lasers, laser
systems, and Low and High Power Laser Tubes manufactured by others.
If the laser, laser system, or Low or High Power Laser Tube is
acquired from a vendor who is licensed by PATLEX under all of the
patents in Exhibit "A" applicable thereto and pays the requisite
royalties or fees to PATLEX, then LICENSEE need not pay royalties
hereunder for the laser, laser system, or Low or High Power Laser Tube
so acquired with respect to which royalties or fees have been
previously paid. LICENSEE shall pay all applicable royalties required
under Article III, Section B hereof for whatever additional royalty
base items are combined with said so acquired laser or laser system.
Where LICENSEE combines additional royalty base items with such a Low
or High Power Laser Tube, LICENSEE's payment of additional royalties
for the additional royalty base items shall be determined in
accordance with the provisions of Article II, Section A, subsections 2
and 3.
H. Adjustments
LICENSEE shall have the right to adjust royalties payable hereunder for
returns, bona fide price reductions and allowances of Licensed Lasers
sold or leased by LICENSEE on which the requisite royalties or fees
shall previously have been paid hereunder.
-19-
<PAGE> 20
I. Calculations
Subject to provisions specifically herein set forth, all calculations
and procedures related to the determination of royalties and fees
payable hereunder shall be in accordance with recognized standards of
good accounting practice consistently applied.
ARTICLE IV - ROYALTY BASE
For purposes of paying and/or computing royalties and fees hereunder
the following shall apply:
A. Optically Pumped Lasers -
U.S. Patent No. 4,053,845
The royalty base shall include the lasing medium, and means for
containing the same where applicable, a bright pumping light source,
(save that if such light source is a gas discharge laser the
appropriate royalty called for under Article III, Section B,
subsection (2) hereof shall apply) and means (including power supply,
lamp and optical system) for activating and using same, together with
at least any and all of the following functionally combined components:
(1) means for mounting the lasing medium and the bright pumping
light source to enable the desired functional relationship, for
example including base and housing;
(2) means that enable the optically pumped medium to emit light in a
wave-train that has a sharply rising intensity with an intensity
rise time of less than approximately 10(-7) seconds;
-20-
<PAGE> 21
(3) means for conveying the stimulating light beam through the
amplification region including mirrors employed for this purpose;
and
(4) means integral with the apparatus of this Article IV, Section A
hereof such as meters, shutters, controls, and cooling system.
B. Gas Discharge Lasers -
U.S. Patent No. 4,704,583
The royalty base shall include the lasing medium if supplied by the
LICENSEE, including means for containing the same and means, including
power supply, for activating same, together with at least any and all of
the following functionally combined components:
(1) means for producing an electrical discharge in the lasing medium
and for delivering a gas discharge mixture to the discharge region
at partial and total pressure such that a population inversion is
initiated in the lasing medium;
(2) means for conveying the stimulating light beam through the
amplification region including mirrors employed for this purpose;
and
(3) means for mounting the lasing medium and electrical discharge
producing means to enable the desired functional relationship, for
example including base and housing; and
(4) means integral with the apparatus of this Article IV, Section B
hereof such as meters, shutters, controls, and cooling system.
-21-
<PAGE> 22
C. Use Patent
U.S. Patent No. 4,161,436
The royalty base shall include all assemblies, subassemblies,
components, and portions thereof necessary to produce coherent light,
to transport such light to a particular point on a workpiece, and to
control the physical parameters of such light in such a way as to make
it efficient in performing its intended end use.
D. Brewster's Angle -
U.S. Patent No. 4,746,201
The royalty base shall include: a source of light rays including means
to contain and energize said source; means for directing certain
unpolarized light rays from said source to multiply traverse a
predetermined path; an optical element having a first surface; and
means for mounting said optical element to intersect said unpolarized
light rays with a line perpendicular to said first surface inclined to
said path substantially at Brewster's Angle thereby passing one
polarization of said light rays and reflecting some of the light rays
of the other polarization upon each traversal of said predetermined
path.
E. Other Patents
The royalty base shall include any laser or part thereof conforming to
any valid claim contained in any of the patents cited in Exhibit "A"
not described in Sections A through D of this Article.
-22-
<PAGE> 23
ARTICLE V - MARKING
LICENSEE shall mark in appropriate locations all Licensed Lasers
manufactured and the packages and containers in which such Licensed Lasers are
sold, leased or shipped, and all advertisements, literature and promotional
material in which such Licensed Lasers shall be mentioned or described, as
follows: "Licensed by PATLEX Corporation under U.S. Patent No(s). ."
Here LICENSEE shall insert the appropriate U.S. Patent No. or Nos. applicable to
the equipment so marked, with the exception that LICENSEE shall not be required
to include U.S. Patent No. 4,161,436 in its marking. Said marking requirement
may from time to time be altered by PATLEX as the applicable patent law and
practice may require.
ARTICLE VI - DURATION OF AGREEMENT
A. Expiration
This Agreement shall continue in full force and effect until the
expiration of the last of the Licensed Patents unless this Agreement
is sooner terminated as herein provided.
B. Termination
If either party to this Agreement should default in the performance of
any of the terms of this Agreement (including a breach of this
Agreement which can be cured), the non-defaulting party may terminate
this Agreement by providing written notice of termination to the
defaulting party and the termination shall be
-23-
<PAGE> 24
effective thirty (30) days from said notice unless the defaulting
party cures such default within said thirty (30) day period. Should
LICENSEE terminate this Agreement, said notice of termination shall be
accompanied by a statement of all royalty-based activities performed
by LICENSEE on which royalties or fees are due hereunder for such
period as has elapsed since the last report under the Licensed
Patents. Said statement shall be accompanied by payment of all monies
reported as being due.
ARTICLE VII - RECORDS AND REPORTING
A. Within thirty (30) days after the close of each calendar quarter,
LICENSEE shall deliver to PATLEX a statement of all royalty-based
activities performed by LICENSEE on which royalties or fees are due
hereunder for such calendar quarter, and each such statement shall
generally be in accord with the sample royalty reports annexed hereto
as Exhibits "C" and "D" and shall also contain such other information
as PATLEX may reasonably require.
B. Simultaneously with the delivery of each statement covering any
calendar quarter, LICENSEE shall pay to PATLEX all monies reported as
being due.
C. LICENSEE shall keep at its principal place of business accurate and
complete records of all Licensed Lasers manufactured, leased, sold,
used or otherwise delivered
-24-
<PAGE> 25
to other parties by LICENSEE and of all details in connection with the
aforesaid activities necessary to enable LICENSEE to comply with this
Agreement. PATLEX shall have the right, upon ten (10) days written
notice and during regular business hours, and at the expense of
PATLEX, and not more than once in each calendar year, to have an
independent auditor, audit at the place of business of LICENSEE or
other place agreeable to the parties, the aforesaid records, and to
report compliance or non-compliance with the payment, record
maintenance and all other reporting requirements herein.
D. Audit
If an audit shall reveal that in each of two successive years the
LICENSEE has made an error of 10% or more in its favor in any payment
due to PATLEX, the LICENSEE shall be obligated to pay the audit fee in
respect of such audits.
ARTICLE VIII - WAIVER
A. Waiver in Writing
During the life of this Agreement, neither party shall be deemed to
have waived any right, power or privilege under this Agreement or any
provision thereof unless such waiver shall have been duly executed in
writing and acknowledged by the party to be charged with such waiver.
-25-
<PAGE> 26
B. No Implied Waiver
The failure of PATLEX to act or exercise its rights hereunder upon the
breach of any of the terms or conditions hereof by LICENSEE shall not
be construed as a waiver of such breach, nor shall it prevent PATLEX
from hereafter enforcing strict compliance with any and all of the
terms and conditions herein set forth.
ARTICLE IX - TRANSFERABILITY
Notwithstanding anything herein to the contrary, this Agreement, and
all of the rights, licenses and obligations contained herein, may not be
transferred without permission in writing by PATLEX, which permission shall not
be unreasonably withheld.
ARTICLE X - ACQUISITION
If LICENSEE shall acquire in whole or in part the laser business of an
unlicensed third party engaged in the manufacturer lease, sale or use of
lasers, laser systems, or Low or High Power Laser Tubes, neither the
acquisition nor this Agreement shall extinguish the third party's liability for
past infringement, but the same shall be assumed by LICENSEE.
If LICENSEE shall acquire in whole or in part the laser business of a
third party which was previously licensed by PATLEX under the Licensed Patents
applicable to such laser business and said third party has made all required
royalty and fee payments to PATLEX, then LICENSEE shall have no liability for
acts of said
-26-
<PAGE> 27
party covered by said previous license and the terms of this Agreement shall
apply to all further transactions of the laser business so acquired.
ARTICLE XI - COMMUNICATIONS
Any payment, notice or other communication required by, or permitted
to be made by or given to, either party pursuant to this Agreement shall be
sent to such party by registered, certified or express mail, postage prepaid,
or prepaid courier service, addressed to such party at its address set forth
below, or to such other addresses as such party shall designate by written
notice given to the other party, and shall be deemed to have been made, given
or provided on the date of mailing. The addresses are as follows:
PATLEX: royalty statements and payments -
Patlex Corporation
P.O. Box 88060
Dallas, Texas 75388
for all other correspondence
General Counsel
Patlex Corporation
250 Cotorro Court
Las Cruces, New Mexico 88005
CYMER:
Mr. Robert P. Akins
President
Cymer Laser Technologies
7887 Dunbrook Road
San Diego, CA 92126
with copy to:
Mr. Michael A. Stallman
Limbach, Limbach, & Sutton
2001 Ferry Building
San Francisco, CA 94111
-27-
<PAGE> 28
ARTICLE XII - MOST FAVORED LICENSEE
If subsequent to the Effective Date of this Agreement another
manufacturer of lasers, laser systems, or Low or High Power Laser Tubes
similarly situated to LICENSEE is granted a license by PATLEX which provides to
said another manufacturer a combined royalty rate and royalty base materially
more favorable to said another manufacturer with respect to any of the Licensed
Patents than that provided herein to LICENSEE for lasers, laser systems and Low
or High Power Laser Tubes sold or leased in the United States, then LICENSEE
may, at its option, adopt the subsequent license in its entirety, mutatis
mutandis, as of the effective date of such subsequent license. PATLEX shall
notify LICENSEE of any such subsequent license and provide LICENSEE an
opportunity to exercise the option provided herein.
ARTICLE XIII - GOVERNMENT SALES
No royalty or fee shall accrue or be payable in respect of sales or
leases of lasers, laser systems, or Low or High Power Laser Tubes authorized
and consented to by the Government of the United States or its agencies. This
provision shall not inhibit PATLEX from seeking such compensation as the law
permits from the Government of the United States or its agencies arising out of
such sales or leases.
Since the parties recognize that LICENSEE may have difficulty in
determining when sales to certain entities may constitute sales to the United
States' government which are excludable from the payment of royalties and fees
under this Article XIII, PATLEX agrees
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<PAGE> 29
that lasers, laser systems, or Low or High Power Laser Tubes sold by LICENSEE
will be excludable under this Article XIII if any of the following conditions
are met:
A. If the sale is made directly to the U.S. Government or an
agency or research facility thereof;
B. If the sale is made to a U.S. government contractor who lists
the contract number under which the sale is made on the
purchase order;
C. If the sale is made to a U.S. government contractor who
provides a written statement that the sale is under a U.S.
government contract which provides authorization and consent
to the contractor's purchase and use of the equipment; and
D. If the sale is made to a University which provides a written
statement that the equipment has been purchased with U.S.
government funds under a grant requiring the purchase of a
laser, laser system or Low or High Power Laser Tube such as
the one supplied by LICENSEE.
If, however, a court of competent jurisdiction from which no appeal
can be or has been taken, shall determine that the Government of the United
States is not liable for the purchase, use or lease of such lasers, laser
systems, or Low or High Power Laser Tubes by reason of the failure or
inapplicability of said authorization and consent, or a determination that the
Government of the United States is not a real party in interest or for any
other reason indicating that the LICENSEE is the appropriate party from which a
royalty or fee should be sought, PATLEX shall notify LICENSEE accordingly and
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<PAGE> 30
with the next quarterly report and payment required under Article VII hereof,
LICENSEE shall include a full statement and payment as required.
ARTICLE XIV - REPRESENTATIONS
PATLEX and GOULD represent that PATLEX has the full rights and power
to grant the licenses and releases set forth in this Agreement, and that there
are no outstanding agreements, assignments or encumbrances inconsistent with
the provisions of this Agreement. PATLEX and GOULD further represent that
there are no patent applications pending in any Patent Office in the world
relating to lasers, laser systems, or Low or High Power Laser Tubes which are
fully or partially owned by GOULD and which are licensable by PATLEX. PATLEX
represents that it has the exclusive right to license others under the Licensed
Patents and to collect royalties and fees under the Licensed Patents on behalf
of all entities entitled to receipt of the same. PATLEX makes no other
representation, express or implied, nor does PATLEX assume any liability in
respect of any infringement of patents or other rights of third parties due to
LICENSEE's operation under the license herein granted.
ARTICLE XV - HEADINGS
The headings of the several articles and sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
-30-
<PAGE> 31
GORDON GOULD acknowledges that he has read, approves and accepts this
Agreement between LICENSEE and PATLEX CORPORATION as set forth above, including
the patent rights granted herein.
GORDON GOULD
Date: 10/16/89
--------------- By: /s/ GORDON GOULD
-----------------------------
Gordon Gould
IN WITNESS WHEREOF, the parties hereto affix their respective hands as
of the date indicated:
PATLEX CORPORATION
Date: Oct. 13, 1989
------------------- By: [SIG]
-----------------------------
CYMER LASER TECHNOLOGIES
Date: 10/11/89 By: [SIG]
------------------- -----------------------------
-31-
<PAGE> 32
EXHIBIT "A"
Expired U.S. Patents:
U.S. Patent No. 3,388,314 (expired June 11, 1985) "Apparatus for
Generating Radiation of Frequencies Higher than those of Light"
U.S. Patent No. 3,562,662 (expired February 9, 1988)
"Laser Utilizing Collision Depopulation"
U.S. Patent No. 3,576,500 (expired April 27, 1988) "Low Level Laser
with Cyclic Excitation and Relaxation"
U.S. Patent No. 3,586,998 (expired June 22, 1988)
"Pulsed Laser with Output Control"
Unexpired U.S. Patents:
U.S. Patent No. 4,053,845 (expires October 11, 1994) "Optically
Pumped Laser Amplifier"
U.S. Patent No. 4,161,436 (expires July 17, 1996) "Method of
Energizing a Material"
U.S. Patent No. 4,704,583 (expires November 3, 2004) "Light
Amplifier Employing Collisions to Produce a Population Inversion"
U.S. Patent No. 4,746,201 (expires May 24, 2005) "Polarizing
Apparatus Employing an Optical Element Inclined at Brewster's Angle"
Unexpired Canadian Patent:
Canadian Patent No. 907,110 (expires August 8, 1989)
"Light Generating and Amplifying Apparatus"
-32-
<PAGE> 33
EXHIBIT "B"
LICENSEE'S SUBSIDIARIES
NONE
-33-
<PAGE> 34
EXHIBIT "C"
Royalty Report of CYMER LASER TECHNOLOGIES
For Period From ________________ To ________________
Lasers and Laser Systems
<TABLE>
<CAPTION>
Patent
Type--
*Total Gas, Use, Domestic
Product #Units Total Royalty Optical- or Royalty Royalty
Model-Type Sold Sales Price Base $ Pumped Export Rate % Due $
- ---------- ------ ----- ------------ --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
* If a different royalty rate applies to portions of a sale or group of sales,
please separate the royalty base of such sales according to the different
royalty rates.
-34-
<PAGE> 35
EXHIBIT "D"
Royalty Report of CYMER LASER TECHNOLOGIES
For Period From ______________ To ____________
Sealed Gas-Filled Laser Tubes
<TABLE>
<CAPTION>
Total Domestic
Product Power #Units Royalty or Royalty Royalty
model-Type Output Sold Customer Base $ Export Rate % Due
- ---------- ------ ------ -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
-35-
<PAGE> 36
[LOGO PATLEX
250 COTORRO COURT - SUITE A - LAS CRUCES, NEW MEXICO CORPORATION]
October 23, 1989
Mr. Robert P. Akins
President
CYMER LASER TECHNOLOGIES
7887 Dunbrook Road
Suite H
San Diego, California 92126
Dear Mr. Akins:
After having signed the Patlex/Cymer Patent License Agreement, I
noticed that in Paragraph I of the Accompanying Side Letter that the 2nd
installment due on account of past infringement was incorrectly designated as
being payable on January 15, 1989 rather than January 15, 1990.
If you agree that the payment is due on January 15, 1990, we would
appreciate acknowledgment of your concurrence by returning a signed copy of
this letter.
Sincerely yours,
/s/ J. HENRY MUETTERTIES
--------------------------
J. Henry Muetterties
Vice President,
General Counsel & Secretary
ACKNOWLEDGEMENT:
/s/ R.P. AKINS
- ------------------------
Cymer Laser Tech
<PAGE> 37
CYMER LASER TECHNOLOGIES
7887 Dunbrook Road
San Diego, CA 92126
Patlex Corporation
20415 Nordhoff Street
P.O. Box 2158
Chatsworth, CA 91311
Re: Patlex/Cymer Laser Technologies
Patent License Agreement
Gentlemen:
In clarification of the Patent License Agreement entered into today
between Patlex Corporation and Cymer Laser Technologies it is agreed as
follows:
1. Payment of the Twenty Five Thousand and Eight Hundred and
Twenty Dollars ($25,820.00) due in Article III, Section A of
the Agreement shall be made as follows:
a. Fifteen Thousand Dollars ($15,000.00) by August 31,
1989; and
b. Ten Thousand and Eight Hundred and Twenty Dollars
($10,820.00) by January 15, 1989.
2. No royalty shall be required to be paid by LICENSEE to PATLEX
for any warranty, training cost, installation or demonstration
charges so long as such items are separately accounted for, at
least internally, by LICENSEE;
3. The sale of replacement parts or consumables for lasers or
laser systems sold or leased before the Effective Date of the
Agreement or where royalties have been paid to PATLEX for the
original laser or laser system shall not be subject to
additional royalties under the Agreement;
4. The parties agree that LICENSEE's frequency stabilization
(including computer controlled redundant shutter), acoustic
damping foam in outer casing, dust filter, cart, breaker box
and gas handling accessory equipment (including automatic
computer controlled valves and remote vacuum pump and fluorine
trap) are excluded from the royalty bases. By agreement of
the parties to resolve a difference of opinion, LICENSEE's
line narrowing equipment is 50% included in and 50% excluded
from the royalty bases.
-1-
<PAGE> 38
Patlex Corporation
Page Two
Please acknowledge your agreement by signing below.
Sincerely,
CYMER LASER TECHNOLOGIES
By: /s/ ROBERT P. AKINS
---------------------
Title: President
------------------
AGREED:
PATLEX CORPORATION
By: /s/ J. HENRY MUETTERTIES
------------------------------
Title: Vice President
---------------------------
-2-
<PAGE> 1
EXHIBIT 10.14
LOAN AGREEMENT
This Loan Agreement, made and entered into this 15th day of August,
1991, by and between MITSUBISHI INTERNATIONAL CORPORATION, a New York
corporation having its Los Angeles Branch located at 333 South Hope Street,
Suite 2500, Los Angeles, California 90071 (the "Lender"), and CYMER LASER
TECHNOLOGIES, a California corporation located at 7887 Dunbrook Road, San
Diego, California 92126 (the "Borrower"),
WITNESSETH:
WHEREAS, the Borrower has requested the Lender to make available a
loan facility to the Borrower for financing Borrower's working capital
requirements for the development, manufacture, sale, marketing and enhancement
of laser technologies; and
WHEREAS, the Lender has agreed to make available such loan facility
requested by the Borrower upon the terms and conditions herein contained;
NOW THEREFORE, in consideration of the covenants and promises
hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE 1. DEFINITIONS
1.1 Except as otherwise provided in this Loan Agreement, the terms
set forth below shall have the following meanings:
"Availability Period" means the period from and including the date of
this Loan Agreement to and including one (1) year from the date of this Loan
Agreement and any subsequent annual periods for which Availability Period is
renewed pursuant to Article 11.2.
"Business Day" means a day other than a Saturday and a Sunday on which
banks are open for transaction of business in the State of California.
"Interest Calculation Date" means the last day of each of the
Borrower's fiscal quarters, with the first Interest Calculation Date to occur
an the last day of the quarter in which the initial drawing is made.
"Interest Period" means, as to the first Interest Period, the period
commencing the date of the first drawing hereunder and ending on the first
Interest Calculation Date, and thereafter "Interest Period" means the period
commencing the day immediately following the preceding Interest Calculation
Date and ending on the next succeeding Interest Calculation Date.
"Loan" means the aggregate principal amount advanced pursuant to this
Loan Agreement and from time to time outstanding
<PAGE> 2
"Repayment Date" means the date five (5) years from the date of this
Loan Agreement unless otherwise defined in this Loan Agreement.
1.2 Where the content so admits, words importing the singular
include the plural and vice versa.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
During the Availability Period and until the Loan will have
been fully repaid by the Borrower, the Borrower represents and warrants to the
Lender that:
(a) The Borrower is a corporation duly organized and validly
existing and in good standing under the laws of the State of California and has
all power and authority to carry on its business as now being conducted or
planned to be conducted and to own its properties necessary for its business.
(b) The execution, delivery and performance by the Borrower of
this Loan Agreement are within the Borrower's power, have been duly authorized
by all necessary corporate action of the Borrower, and do not contravene, or
constitute a default under, any provision of applicable laws or regulations, or
of the Articles of Incorporation or Bylaws of the Borrower, or of any
judgement, order, decree, agreement or instrument binding the Borrower, or
result in the creation of any of lien upon any of its property or assets except
for the lien contemplated in Article 9.
(c) This Loan Agreement constitutes the valid and binding
obligation of the Borrower enforceable in accordance with the terms and
conditions herein set forth.
ARTICLE 3. AMOUNT
3.1 The Lender shall grant to the Borrower, subject to the terms
and conditions hereof and in reliance on the Borrower's representations and
warranties set forth in Article 2 hereof, a revolving loan facility not
exceeding at any time the principal amount of U.S. ONE MILLION DOLLARS
(U.S.$1,000,000.00), from which Borrower shall be able to withdraw drawings
from time to time during the Availability Period and subject to the conditions
of this Agreement.
3.2 The loan facility is available to the Borrower only during the
Availability Period.
ARTICLE 4. PURPOSE
The proceeds of the Loan hereunder shall be used by the Borrower
solely to pay its expenses related to the development, manufacturing,
marketing, sale and enhancement of laser technologies.
<PAGE> 3
ARTICLE 5. DRAWING
5.1 The Lender shall make drawing(s) available to Borrower under
the loan facility granted hereunder on such date(s) as shall be agreed upon
between the Lender and Borrower in writing, but in no case later than ten (10)
days after a request from Borrower if the Borrower is in material compliance
with the provisions of this Article 5.
5.2 The Borrower shall deliver to the Lender a duly executed copy
of the promissory note, the form of which is attached hereto as exhibit A,
together with such other papers or documents relative to the legality of the
proceedings taken hereunder and fulfillment of the conditions of this Loan
Agreement as counsel for the Lender may reasonably request.
5.3 Such promissory note as referred to in Article 5.2 shall be
delivered to the Lender no less than five (5) Business Days prior to the date
of each drawing.
5.4 The obligation of the Lender to make drawings to the Borrower
hereunder are subject to the conditions precedent that no Event of Default
shall have occurred and that the representations and warranties of Borrower
hereunder are true and accurate as of the date of each drawing.
5.5 The unit of each drawing shall be U.S. one hundred thousand
dollars (U.S.$100,000.00).
ARTICLE 6. REPAYMENT AND PREPAYMENT
6.1 The Borrower shall repay to the Lender the Loan on the
Repayment Date.
6.2 The Borrower may, on not later than thirty (30) Business Days
prior written notice to the Lender, prepay, without any penalty, all or any
part of the Loan then outstanding together with the accrued interest thereon.
ARTICLE 7. INTEREST
7.1 On each interest Calculation Date, the Borrower shall pay to
the Lender interest on the Loan for the respective Interest Period at the per
annum rate of U.S. prime rate plus one percent (1%) on the basis of a year of
360 days and the actual number of days elapsed.
7.2 The U.S. prime rate shall mean the reference rate to corporate
customers published by Bank of America, N.T. & S.A., San Francisco, from time
to time.
7.3 All overdue outstanding principal of the Loan and overdue
interest shall, to the extent permitted by law, bear interest, payable on
demand, for each day until paid in full at the rate per
<PAGE> 4
annum equal to the U.S. reference rate plus four percent (4%).
ARTICLE 8. PAYMENT TERM
8.1 Any sum to be advanced by the Lender to the Borrower hereunder
shall be paid in U. S. currency to the Borrower's bank account number.
8.2 Any payment to be made by the Borrower to the Lender hereunder
shall be made in U. S. currency to the account of the Lender with a bank(s)
designated by the Lender.
ARTICLE 9. SECURITY
The obligation of the Lender to make its advance to the Borrower is
subject to the condition that (1) Mitsubishi Corporation ("Guarantor") shall
execute and deliver to the Lender the letter of guarantee substantially in the
form to be attached hereto as Exhibit B (the "Guarantee") whereby the Guarantor
unconditionally and irrevocably guarantees the obligations of Borrower
hereunder, and that (2) the Borrower shall execute and deliver to the Lender
the Security Agreement between the lender and the Borrower, substantially in
the form attached hereto as Exhibit C.
ARTICLE 10. EVENT OF DEFAULT
10.1 Each of the following events and occurrences shall
constitute an event of default ("Event of Default") under this Loan Agreement:
(a) the Borrower fails to pay when due any installment of
the principal, interest thereon or any other sum hereunder for a period of five
(5) days upon written notice from Lender;
(b) any representation and warranty made by the Borrower
hereunder is incorrect in any material respect;
(c) the Borrower fails to materially comply with any
other terms, covenants or conditions contained herein and such failure is not
remedied within thirty (30) days thereafter;
(d) any indebtedness of the Borrower to any other
lender(s) in excess of $10,000.00 for borrowed money becomes repayable by
reason of any default or any other event;
(e) the Borrower is unable to pay its indebtedness as it
falls due or stops payments generally, or enters into any arrangement with or
makes assignment for the benefit or its creditors, and such situation is not
remedied for a period of thirty (30) days from the date payment is stopped or
such assignment is made;
(f) the commencement of proceedings in bankruptcy, or for
<PAGE> 5
reorganization of the borrower under the Federal Bankruptcy code, as amended,
or any other laws, whether state or federal, for the benefit of debtor, which
is not revoked within thirty (30) days of their commencement;
(g) the appointment of a receiver, trustee or custodian
for the Borrower, or for the substantial part of the assets of the Borrower, or
institution of the proceedings for dissolution or the full or partial
liquidation of the Borrower, and such receiver or trustee shall not be
discharged within thirty (30) days of their appointment;
(h) the discontinuance of the business of the Borrower;
or
(i) the dissolution of the Borrower.
10.2 If the Event of Default shall occur and be continuing for the
period set forth in Article 10.1, the Lender may, by written notice to the
Borrower, 1) declare the Loan, together with accrued interest and any other sum
payable hereunder, to be immediately due and payable, and the same shall
thereupon become due and payable without presentment, demand, protest or notice
of any kind, and the Borrower shall pay to the Lender the entire principal
amount of Loan then outstanding and interest accrued thereon or any other sum
payable, and 2) declare this Loan Agreement and any undrawn loan facility
hereunder canceled, such cancellation shall become effective upon the giving of
such notice. The Borrower shall indemnify the Lender against any loss or
expenses which the Lender may sustain or incur as a direct consequence of any
default in payment of the principal amount of the Loan or any default in
payment of the principal or any amount due hereunder or as a consequence of the
occurrence of any Event of Default hereunder.
ARTICLE 11. TERM OF THE LOAN AGREEMENT; AVAILABILITY PERIOD
11.1 Unless the Borrower earlier terminates this Agreement as
provided in Article 11.3, the term of this Agreement shall be five (5) years
from the date first set forth above.
11.2 The Availability Period shall be automatically renewed on the
same terms set forth herein, without any action by either of the parties for
four consecutive one (1) year periods after the termination of the initial
Availability Period. If the Availability Period granted under this Loan
Agreement is not renewed as set forth in this Article 11.2 for any reason other
than those set forth in Article 11.3 or 10.2, the Loan shall remain due and
payable on the Repayment Date and the terms and conditions of this Agreement
shall govern until the Loan, all accrued interest and any other sums payable
have been paid.
11.3 Borrower may, in Borrower's sole discretion, terminate this
Agreement by payment in full of all outstanding Loan in accordance with in
Section 6.2.
<PAGE> 6
ARTICLE 12. EXPENSES
The Borrower promises to pay to the Lender all reasonable costs
incurred by the Lender to Lender's bank (not including preparation costs of
Lender's internal personnel or outside counsel) in preparing and collecting on
this Loan Agreement, whether or not litigation is commenced, including, but not
limited to, all reasonable attorney's fees and costs incurred by the Lender in
any bankruptcy or foreclosure proceedings or related proceedings, such as an
action for relief from an automatic stay in bankruptcy.
ARTICLE 13. GOVERNING LAW AND JURISDICTION
This Loan Agreement shall be governed by and construed in all respects
in accordance with the laws of the State of California.
The Borrower consents to the personal jurisdiction of the state or
federal courts located in Los Angeles county, California, for proceedings in
respect of this Loan Agreement. The Borrower waives, to the fullest extent
permitted by law, any right it has to a jury trial.
ARTICLE 14. WAIVER
14.1 The Borrower agrees and acknowledges that the Lender has not
made any representations concerning the Lender's willingness not to exercise,
or delay exercise, its rights to enforce this Loan Agreement or to demand
payment under this Loan Agreement. No delay or omission on the part of the
Lender in exercising any right or remedy to enforce this Loan Agreement shall
operate as waiver of such right or remedy under this Loan Agreement. No waiver
by the Lender of any right or remedy shall be effective unless in writing and
signed by the Lender and no such waiver on one occasion shall be construed as a
waiver on any other occasion. No modification of this Loan Agreement shall be
effective unless the modification is in writing signed by the Lender and the
Borrower.
14.2 The Borrower, and each endorser, guarantor and surety hereof
hereby waive diligence, presentment, notice and protest and all other demands
and notices in connection with the delivery, acceptance, performance, default
or enforcement of this Loan Agreement and agree to any extension of the time of
payment or other indulgence permitted by the Lender and to the addition or
release of any other party or person primarily or secondarily liable for the
payment of this Agreement.
ARTICLE 15. MISCELLANEOUS
15.1 Neither party may assign any of its rights or obligations
hereunder without prior written consent of the other party.
15.2 This Loan Agreement shall not be amended nor modified unless
said amendment or modification shall be in writing and
<PAGE> 7
executed by both parties.
15.3 This Loan Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but shall be
deemed an original and the same instrument.
15.4 All notices or other communications which shall or may be
given effect pursuant to this Loan Agreement shall be in writing, shall be
effective upon receipt, and shall be delivered by Federal Express or a similar
courier, personal delivery, registered air mail or by facsimile transmission
addressed as follows:
William Angus
Cymer Laser Technologies
7887 Dunbrook Road
San Diego, CA 92126
Facsimile: 619-549-6795
Hajime Kimura
Mitsubishi International Corporation
Los Angeles Branch
333 South Hope Street, Suite 2500
Los Angeles, CA 90071
Facsimile: 213-626-3738
IN WITNESS WHEREOF, both parties have caused this Loan Agreement to be
executed by duly authorized officers thereunto as of the date first above,
written.
The Lender: MITSUBISHI INTERNATIONAL CORPORATION
by: /s/ AKIRA TSUKADA
------------------------------------------
AKIRA Tsukada
Its Senior Vice President
General Manager of Los Angeles Branch
The Borrower: CYMER LASER TECHNOLOGIES
by: /s/ WILLIAM ANGUS
------------------------------------------
William Angus
Chief Financial Officer
<PAGE> 8
Exhibit A
PROMISSORY NOTE
$ Due ,
, 19
The undersigned, for value received, promises to pay to the order of Mitsubishi
International Corporation ("Payee") at its principal business office in 333
South Hope St., Suite 2500, Los Angeles, California, the sum of
dollars ($ ) payable on or before the date indicated above, with
interest at the rate one percent (1%) plus Bank of America's reference rate
from time to time payable quarterly on the last day of the quarter with the
first interest payment commencing , 19 , on the principal hereof remaining
from time to time unpaid.
This note evidences indebtedness incurred under a certain loan agreement dated
, 1991, between the undersigned and the Payee to which reference is hereby made
for a statement of the terms and conditions, under which repayment of this note
may be made prior to the due date, and under which the due date of all
repayment may be accelerated without penalty.
This note may be transferred only upon surrender of the original note for
registration of transfer, duly endorsed, or accompanied by a duly executed
written instrument of transfer in form satisfactory to the undersigned.
Thereupon, a new note for like principal amount and interest will be issued to,
and registered in the name of, the transferee. Interest and principal are
payable only to the registered holder of the note.
CYMER Laser Technologies ("BORROWER")
By:
------------------------------------------
William Angus, Chief Financial
Officer
<PAGE> 9
Exhibit B
Messrs. Mitsubishi International Corporation
520 Madison Avenue, New York, N.Y. 10022
U.S.A.
LETTER OF GUARANTY
For valuable consideration, the undersigned, MITSUBISHI CORPORATION, a
corporation duly organized and existing under the laws of Japan and having its
principal place of business at 6-3, Marunouchi 2-chome, Chiyoda-ku, Tokyo,
Japan (hereinafter called GUARANTOR), does hereby unconditionally guarantee to
MITSUBISHI INTERNATIONAL CORPORATION, a corporation duly organized and existing
under the laws of the State of New York, U.S.A. and having its principal place
of business at 520 Madison Avenue, New York, N.Y., U.S.A. (hereinafter called
LENDER), full and punctual payment when due, whether by acceleration or
otherwise, by CYMER LASER TECHNOLOGIES duly organized and existing under the
laws of the State of California, U.S.A., having its principal place of business
at 7887 Dunbrook Road, San Diego, California 92126, U.S.A. (hereinafter called
BORROWER), of all obligations and liabilities of BORROWER arising under a Loan
Agreement dated the day of , 1991 between LENDER and BORROWER
(hereinafter called the Loan Agreement), in the event BORROWER fails at any
time to pay as and when due any installments of principal of or interest on the
loan under the Loan Agreement, whether by acceleration or otherwise, GUARANTOR
shall, on demand, pay any such sums due hereunder.
The right of recovery against GUARANTOR is, however, limited to the amount of
One Million U.S. Dollars (US$1,000,000.00) plus interest on such amount and all
expenses in relation to enforcing this Guaranty.
This is an irrevocable guaranty and shall remain in full force and effect until
all of the obligations and liabilities of BORROWER as set forth in the Loan
Agreement shall have been paid in full.
IN WITNESS WHEREOF, GUARANTOR has caused this Letter of Guaranty to be executed
on this day of , 1991.
MITSUBISHI CORPORATION
------------------------------------------
General Manager of
Semiconductor Dept.
<PAGE> 10
Exhibit C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made, effective as of , 1991,
between CYMER LASER TECHNOLOGIES, a California corporation (the "Debtor"), and
MITSUBISHI INTERNATIONAL CORPORATION, a New York corporation (the "Secured
Party").
WHEREAS, the Secured Party has committed to provide a loan facility to
Debtor for up to One Million United States Dollars ($1,000,000) pursuant to a
Loan Agreement dated , 1991 (the "Loan Agreement"); and
WHEREAS, Debtor intends to grant the Secured Party a security interest
in certain assets to secure the loans pursuant to the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and as an inducement to the Secured Party to commit to lend to Debtor
pursuant to the Loan Agreement, the parties agree as follows:
1. Creation of a Security Interest. As security for payment of
all Indebtedness (as defined below) of Debtor to the Secured Party when and as
due, Debtor hereby grants the Secured Party a security interest in the
Collateral described in paragraph 2 below. For purposes of this Agreement,
"Indebtedness" shall mean all obligations and liabilities of Debtor to Secured
Party under the Loan Agreement, whether now existing or hereafter incurred or
created (including without limitation, future advances), whether voluntary or
involuntary, due or not due, or absolute or contingent. Reference to the
"Secured Party" in the remainder of this Agreement shall include any subsequent
registered holders of promissory note(s) (the "Note(s)") executed pursuant to
the Loan Agreement. The security interest granted hereby shall be and remain a
first and prior security interest (subject to the provisions of Division 9 of
the California Uniform Commercial Code granting priority to certain security
interests regardless of priority of filing) in all of the Collateral.
2. Collateral. The Collateral that is subject to the security
interest created hereby consists of the following property:
(a) Debtor's accounts receivable from customers for the
sale of lithography lasers delivered in Japan by Debtor.
3. Debtor's Obligation. The Debtor shall pay to the Secured
Party all Indebtedness due and owing to the Secured Party under the Loan
Agreement and any Note both as to principal and as to
<PAGE> 11
interest, in accordance with the terms of same, when and as the same become
due.
4. Warranties by Debtor. Debtor hereby represents and warrants
to the Secured Party that, except for the security interest created by this
Security Agreement, Debtor is the full legal and equitable owner of the
Collateral and no other person or entity has any right, title, interest or
claim in or to the Collateral or any part of the Collateral.
5. Default. The following shall be defined as Events of Default
under this Security Agreement:
(a) Nonpayment of any Indebtedness when due;
(b) Nonperformance of any covenant agreed to be performed
by the Debtor under this Security Agreement; provided that Debtor shall have a
period of thirty (30) days from the date of receipt of written notice from
Secured Party to cure such nonperformance;
(c) Sale, transfer, or disposition of the Collateral or
any interest therein (except those items sold in the ordinary course of the
Debtor's business) without the written consent of the Secured Party; and
(d) Assignment by the Debtor for the benefit of
creditors, or admission in writing of its inability to pay its debts as they
become due, or filing a voluntary petition in bankruptcy, or adjudication as a
bankrupt or insolvent, or filing any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or filing any answer admitting or failing to deny the material
allegations of a petition filed against it for any such relief, or seeking or
consenting to or acquiescing in the appointment of any trustee, receiver or
liquidator of itself or of all or any substantial part of its properties, or
its directors or majority stockholders taking any action looking to its
dissolution or liquidation.
6. Rights of Secured Party.
(a) Upon the occurrence of any Event of Default, the
Secured Party shall be entitled to declare any Indebtedness secured hereby
immediately due and payable. In addition to the right of acceleration and all
other rights of the Secured Party, the Secured Party shall be entitled to any
and all remedies available under the Uniform Commercial Code in force in the
State of California as of the date hereof.
-2-
<PAGE> 12
(b) Secured Party shall give Debtor notice of the time
and place of any sale of the Collateral or other intended disposition is to be
consummated, which notice shall be mailed, by first class mail, postage
prepaid, to Debtor in the manner set forth in paragraph 10(b) hereof at least
ten days prior to the time of such sale or other intended disposition.
(c) Each purchaser at any sale of the Collateral shall
hold the property sold absolutely free from any claim or right on the part of
Debtor, and Debtor hereby waives, to the extent permitted by law, all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted
and, to the extent permitted by law, any right which it may have to demand a
hearing or other judicial or administrative proceeding prior to the enforcement
by Secured Party of any of their rights and remedies hereunder. Any sale of
the Collateral or any part of its shall be held at such time or times within
ordinary business hours and at such place or places as Secured Party may fix in
the notice of sale.
(d) Secured Party shall not be obligated to make any sale
of the Collateral, or any part of it, if they determine not to do so,
regardless, of the fact that notice of sale of the Collateral may have been
given.
7. Application of the Proceeds. All proceeds of any sale of the
Collateral by Secured Party pursuant to paragraph 6 shall be applied as
follows:
First, to the payment of accrued interest, if any, on the principal of
the Note(s), to the date of receipt of such proceeds;
Second, to the payment of the outstanding principal balance of the
Notes(s);
Third, to the payment of any other outstanding Indebtedness to Secured
Party or in payment of fees and expenses incurred by Secured Party in
connection with any such sales; and
Fourth, to Debtor.
8. Further Assurances. At the written request of the Secured
Party, the Debtor will promptly make, execute, deliver, record, register or
file all such financing statements, continuation statements and amendments
thereto, and other instruments, acts, pledges, assignments and transfers (or
cause the same to be done) and will deliver to the Secured Party such
instruments constituting or evidencing items of the Collateral as may be
requested by the Secured Party to better assure them with respect
-3-
<PAGE> 13
to the security interests granted pursuant to this Agreement. The Debtor will
cause all security instruments, notices and financing statements to be duly
registered, recorded and filed and to be duly reregistered, rerecorded and
refiled at the time and in the places now or hereafter required by all
applicable laws for the proper maintenance of the validity and priority of the
security interests and liens given as described above, and will pay all fees,
charges, or taxes imposed with respect to any such registration, recording or
filing.
9. Termination of the Securities Interest. The security interest
created pursuant to this Security Agreement shall terminate upon payment of all
Indebtedness to the Secured Party.
10. Miscellaneous.
(a) Secured Party may delay exercising, or omit to
exercise, any right or remedy under this Security Agreement without waiving
that or any part, present or future right or remedy. Neither this Agreement,
nor any term hereof, may be amended, waived, discharged or terminated except by
means of an agreement in writing signed by the Company and the Secured Party.
(b) All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed by first-class mail, postage prepaid, to the
parties at the addresses set forth below (or such other address as shall be
given in writing by either party to the others).
(c) This Security Agreement shall bind and inure to the
benefit of the parties, their legal representatives, successors and assigns.
(d) This Security Agreement and its performance shall be
governed by the laws of the State of California.
(e) This Security Agreement may be executed in
counterparts, all of which taken together shall constitute one and the same
instrument by signing any such counterpart.
(f) This Security Agreement and the security interest
created hereby are for the sole and exclusive benefit of the
-4-
<PAGE> 14
Secured Party and their assignees and shall not operate to the benefit of any
other third party.
Debtor: CYMER LASER TECHNOLOGIES
By: WILLIAM ANGUS
--------------------------------
William Angus,
Chief Financial Officer
Address: 7887 Dunbrook Road
San Diego, CA 92126
Secured Party: MITSUBISHI INTERNATIONAL
CORPORATION
By:
--------------------------------
Akira Tsukada
Senior Vice President &
General Manager of
Los Angeles Branch
Address: 333 South Hope Street
Suite 2500
Los Angeles, CA 90071
<PAGE> 15
SUBSTITUTION AGREEMENT
THIS SUBSTITUTION AGREEMENT is made as of the 21st day of April, 1993,
by and between CYMER LASER TECHNOLOGIES, a California corporation ("CYMER
USA"), CYMER JAPAN, INC., a Japan corporation ("CYMER Japan"), and MITSUBISHI
INTERNATIONAL CORPORATION, a New York Corporation ("Mitsubishi").
WHEREAS, Cymer USA and Mitsubishi entered that certain Security
Agreement dated August 15, 1991 (the "Security Agreement"); and
WHEREAS, the parties now desire to substitute the collateral of Cymer
USA set forth in Section 2(a) of the Security Agreement with new collateral of
Cymer USA and Cymer Japan set forth below;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Mitsubishi hereby releases fully and forever any rights to
Cymer USA's accounts receivable for the sale of lithography lasers delivered in
Japan by Cymer USA or any proceeds thereof. Mitsubishi hereby agrees to take
all additional action requested by Cymer USA related to such release, including
the filing of a UCC-2 in the State of California in a form acceptable to Cymer
USA.
2. The following collateral (the "Substituted Collateral") shall
be substituted under Section 2(a) of the Security Agreement in consideration of
the release of collateral set forth in Section 1:
i. CX-2LS Laser, Serial No. 1007, located at the main
offices of Cymer Japan in Ichikawa Japan;
ii. ELS-4000 Laser, Serial No. 1012, located at the main
offices of Cymer Japan in Ichikawa, Japan;
iii. ELS-4000 Laser, Serial No. 4024, Nikon Corporation,
Kumagaya Plant, Japan.
3. The term "Debtor" in the Security Agreement shall mean Cymer
Japan (i) in Section 4 thereof with respect to the collateral referenced in
Sections 2(i) and 2(ii) of this Substitution Agreement; and (ii) where the
construction and interpretation of Security Agreement so indicate in order to
effect the purpose and intent of the Security Agreement.
4. Cymer USA shall cause Cymer Japan to take appropriate action
under the Security Agreement to cause the Substituted Collateral to
substantially comply with the terms and conditions of the Security Agreement,
provided however, in no event will the location of the Substituted Collateral
be required to change unless
<PAGE> 16
Cymer USA defaults on its obligations under the Loan Agreement with Mitsubishi
dated August 15, 1991. The parties acknowledge that the Substituted Collateral
is located in Japan and that the remedies under California law may be limited
by virtue of such location.
5. That no default under the Security Agreement or any other
agreement between Cymer USA and Mitsubishi is caused by the execution and
delivery of this Substitution Agreement and the actions contemplated hereby.
IN WITNESS WHEREOF, the undersigned have executed this Substitution
Agreement as of the day and year first above written.
CYMER LASER TECHNOLOGIES
a California corporation
By: WILLIAM A. ANGUS
--------------------------------
William A. Angus
Chief Financial Officer
CYMER JAPAN, INC.
a Japan corporation
By: ROBERT P. AKINS
--------------------------------
Name: Robert P. Akins
------------------------------
Title: President
-----------------------------
MITSUBISHI INTERNATIONAL CORPORATION
a New York Corporation
By: AKIRA TSUKADA
--------------------------------
Name: Akira Tsukada
------------------------------
Title: Senior Vice President &
General Manager of
Los Angeles Branch
----------------------------
-2-
<PAGE> 1
EXHIBIT 10.15
STANDARD INDUSTRIAL LEASE -- MULTI-TENANT
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
1. PARTIES. This Lease, dated, for reference purposes only, August 19,
1991 is made by and between Frankris Corporation, a California corporation
(herein called "Lessor") and Cymer Laser Technologies, Inc., a California
corporation (herein called "Lessee").
2. PREMISES, PARKING AND COMMON AREAS.
2.1 PREMISES. Lessor hereby leases to Lessee and Lessee leases
from Lessor for the term, at the rental, and upon all of the conditions set
forth herein, real property situated in the County of San Diego, State of
California commonly known as 16160 West Bernardo Drive, San Diego, California
92128 and described as approximately 40,074 square feet located on the Western
portion of the property herein referred to as the "Premises", as shall be
outlined on Exhibit A attached hereto, including rights to the Common Areas as
hereinafter specified but not including any rights to the roof of the Premises
or to any Building in the Industrial Center. The Premises are a portion of a
building, herein referred to as the "Building". The Premises, the Building,
the Common Areas, the land upon which the same are located, along with all
other buildings and improvements thereon, are herein collectively referred to
as the "Industrial Center".
2.2 VEHICLE PARKING. Lessee shall be entitled to 120 vehicle
parking spaces, unreserved and unassigned, on those portions of the Common Areas
designated by Lessor for parking. Lessee shall not use more parking spaces
than said number. Said parking spaces shall be used only for parking by
vehicles no larger than full size passenger automobiles or pick-up trucks,
herein called "Permitted Size Vehicles". Vehicles other than Permitted Size
Vehicles are herein referred to as "Oversized Vehicles".
2.2.1 Lessee shall not permit or allow any vehicles that
belong to or are controlled by Lessee or Lessee's employees, suppliers,
shippers, customers, or invitees to be loaded, unloaded, or parked in areas
other than those reasonably designed by Lessor for such activities.
2.2.2 If Lessee permits or allows any of the prohibited
activities described in paragraph 2.2 of this Lease, then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it
may have, to remove or tow away the vehicle involved and charge the cost to
Lessee, which cost shall be immediately payable upon demand by Lessor.
2.3 COMMON AREAS -- DEFINITION. The term "Common Areas" is defined
as all areas and facilities outside the Premises and within the exterior
boundary line of the Industrial Center that are provided and designated by the
Lessor from time to time for the general non-exclusive use of Lessor. Lessee
and of other lessees of the Industrial Center and their respective employees,
suppliers, shippers, customers and invitees, including parking areas, loading
and unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways and landscaped areas.
2.4 COMMON AREAS -- LESSEE'S RIGHTS. Lessor hereby grants to
Lessee, for the benefit of Lessee and its employees, suppliers, shippers,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and regulations
or restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor's designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove the property and charge to cost to Lessee,
which cost shall be immediately payable upon demand by Lessor.
2.5 COMMON AREAS -- RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and management
of the Common Areas and shall have the right, from time to time, to establish,
modify, amend and enforce reasonable rules and regulations with respect
thereto. Lessee agrees to abide by and conform to all such rules and
regulations, and to cause its employees, suppliers, shippers, customers, and
invitees to so abide and conform. Lessor shall not be responsible to Lessee
for the non-compliance with said rules and regulations by other lessees of the
Industrial Center. See Second Addendum.
2.6 COMMON AREAS -- CHANGES. Lessor shall have the right, in
Lessor's reasonable discretion from time to time.
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas and walkways; (b) To close
temporarily any of the Common Areas for maintenance purposes so long as
reasonable access to the Premises remains available; (c) To designate other
land outside the boundaries of the Industrial Center to be a part of the
Common Areas; (d) To add additional buildings and improvements to the Common
Areas; (e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; (f) to do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Industrial Center as Lessor may, in
the exercise of sound business judgment, deem to be appropriate. See Second
Addendum.
2.6.1 Lessor shall at all times provide the parking
facilities required by applicable law and in no event shall the number of
parking spaces that Lessee is entitled to under paragraph 2.2 be reduced.
3. TERM.
3.1 TERM. The term of this Lease shall be for Eighty-four (84)
months commencing on the Commencement Date as defined in paragraph 2 of the
Second Addendum to Lease and ending on Eighty-four (84) months thereafter
unless sooner terminated pursuant to any provision hereof. See Second Addendum.
3.2 DELAY IN POSSESSION. Notwithstanding said commencement date,
if for any reason, Lessor cannot deliver possession of the Premises to Lessee
on said date, Lessor shall not be subject to any liability therefor, nor shall
such failure affect the validity of this Lease or the obligations of Lessee
hereunder or extend the term hereof, but in such case, Lessee shall not be
obligated to pay rent or perform any other obligation of Lessee under the terms
of this Lease, except as may be otherwise provided in this Lease, until
possession of the Premises is lendered to Lessee; provided, however, that if
Lessor shall not have delivered possession of the Premises within sixty (60)
days from said commencement date, Lessee may, at Lessee's option, by notice in
writing to Lessor within ten (10) days thereafter, cancel this Lease, in which
event the parties shall be discharged from all obligations hereunder; provided
further, however, that if such written notice of Lessee is not received by
Lessor within said ten (10) day period, Lessee's right to cancel this Lease
hereunder shall terminate and be of no further force or effect.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to
said commencement date, for the conduct of its business, such occupancy shall
be subject to all provisions of this Lease, such occupancy shall not advance
the termination date, and Lessee shall pay rent for such period at the initial
monthly rates set forth below.
4. RENT.
4.1 BASE RENT. Lessee shall pay to Lessor, as Base Rent for the
Premises, without any offset or deduction, except as may be otherwise expressly
provided in this Lease, on the first day of each month of the term hereof,
monthly payments in advance of $________. See Addendum attached hereto and made
a part thereto. Lessee shall pay Lessor upon execution hereof $15,027.00 as
Base Rent for the fifth month of the Lease Term following the Commencement
Date. Rent for any period during the term hereof which is for less than one
month shall be a pro rata portion of the Base Rent. Rent shall be payable in
lawful money of the United States to Lessor at the address stated herein or to
such other persons or at such other places as Lessor may designate in writing.
4.2 OPERATING EXPENSES. Lessee shall pay to Lessor during the term
hereof, in addition to the Base Rent, Lessee's share, as hereinafter defined,
of all Operating Expenses, as hereinafter defined, during such calendar year of
the term of this Lease, in accordance with the following provisions.
(a) "Lessee's Share" is defined, for purposes of this Lease,
as Sixty-two (62) percent.
(b) "Operating Expenses" is defined, for purposes of this
Lease, as all costs incurred by Lessor, if any, for
(i) The operation, repair and maintenance, in neat,
clean, good order and condition, of the following:
(aa) The Common Areas, including parking areas,
loading and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, driveways, landscaped areas, striping, bumpers, irrigations systems.
Common Areas lighting facilities and fences and gates;
(bb) Trash disposal services;
(cc) Tenant directories;
(dd) Fire detection systems including sprinkler
system maintenance and repair;
<TABLE>
<S> <C> <C>
(c) American Industrial Real Estate Association 1981 MULTI TENANT-MODIFIED NET INITIALS: [SIG]
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[SIG]
</TABLE>
<PAGE> 2
(ee) Security services:
(ff) Any other service to be provided by Lessor that
is elsewhere in this Lease stated to be an Operating Expense.
(ii) Any deductible portion of an insured loss concerning
any of the items or matters described in this paragraph 4.2.
(iii) The cost of the premiums for the liability and property
insurance policies to be maintained by Lessor under paragraph 8 hereof.
(iv) The amount of the real property tax to be paid by
Lessor under paragraph 10.1 hereof.
(v) The cost of water, gas and electricity to service the
Common Areas.
[See Second Addendum]
(c) The inclusion of the improvements, facilities and services set
forth in paragraph 4.2(b)(i) of the definition of Operation Expenses shall not
be deemed to impose an obligation upon Lessor to either have said improvements
or facilities or to provide those services unless the Industrial Center already
has the same. Lessor already provides the services, or Lessor has agreed
elsewhere in this Lease to provide the same or some of them.
(d) Lessee's Share of Operating Expenses shall be payable by Lessee
within thirty (30) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time of Lessee's Share of annual
Operating Expenses and the same shall be payable monthly or quarterly, as
Lessor shall designate, during each twelve-month period of the Lease term, on
the same day as the Base Rent is due hereunder. In the event that Lessee pays
Lessor's estimate of Lessee's Share of Operating Expenses as aforesaid. Lessor
shall deliver to Lessee within sixty (60) days after the expiration of each
calendar year a reasonably detailed statement showing Lessee's Share of the
actual Operating Expenses incurred during the preceding year. If Lessee's
payments under this paragraph 4.2(d) during said preceding year exceed Lessee's
Share as indicated on said statement, Lessee shall be entitled to credit the
amount of such overpayment against Lessee's Share of Operating Expenses next
falling due. If Lessee's payments under this paragraph during said preceding
year were less than Lessee's Share as indicated on said statement, Lessee shall
pay to Lessor the amount of the deficiency within ten (10) days after delivery
by Lessor to Lessee of said statement.
5. Security Deposit. Lessee shall deposit with Lessor upon execution
hereof $23,756 as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default or for the payment of any other
sum to which Lessor may become obligated by reason of Lessee's default, or to
compensate Lessor for any loss or damage which Lessor may suffer thereby. If
Lessor so uses or applies all or any portion of said deposit, Lessee shall
within ten (10) days after written demand therefor deposit cash with Lessor in
an amount sufficient to restore said deposit to the full amount then required
of Lessee. If the monthly rent shall, from time to time, increase during the
term of this Lease, Lessee shall, at the time of such increase, deposit with
Lessor additional money as a security deposit so that the total amount of the
security deposit held by Lessor shall at all times bear the same proportion to
the then current Base Rent as the initial security deposit bears to the initial
Base Rent set forth in paragraph 4. Lessor shall not be required to keep said
security deposit separate from its general accounts. If Lessee performs all of
Lessee's obligations hereunder, said deposit, or so much thereof as has not
theretofore been applied by Lessor, shall be returned, without payment of
interest or other increment for its use, to Lessee (or, at Lessor's option to
the last assignee, if any, of Lessee's interest hereunder) within thirty (30)
days after the expiration of the term hereof, and after Lessee has vacated the
Premises. No trust relationship is created herein between Lessor and Lessee
with respect to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for design,
fabrication, storage, light manufacturing and assembly or any other use which
is reasonably comparable and for no other purpose without the advance written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in the
state existing on the date that the Lease term commences, but without regard to
the use for which Lessee will occupy the Premises, does not violate any
covenants or restrictions of record, or any applicable building code,
regulation or ordinance in effect on such Lease term commencement date. In the
event it is determined that this warranty has been violated, then it shall be
the obligation of the Lessor, after written notice from Lessee, to promptly, at
Lessor's sole cost and expense, rectify any such violation. The warranty
contained in this paragraph 6.2(a) shall be of no force or effect if, prior to
the date of this Lease, Lessee was an owner or occupant of the Premises and, in
such event, Lessee shall correct any such violation at Lessee's sole cost.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at
Lessee's expense, promptly comply with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements of any fire insurance underwriters or rating bureaus now in effect
or which may hereafter come into effect, whether or not they reflect a change
in policy from that now existing, during the term or any part of the term
hereof, relating in any manner to the Premises and the occupation and use by
Lessee of the Premises and of the Common Areas. Lessee shall not use nor
permit the use of the Premises or the Common Areas in any manner that will tend
to create waste or a nuisance or shall tend to disturb other occupants of the
Industrial Center. [See Second Addendum]
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee clean and
free of debris on the Lease commencement date and Lessor warrants to Lessee that
the plumbing, lighting, air conditioning, heating and loading doors in the
Premises shall be in good operating condition on the Lease commencement date.
In the event that it is determined that this warranty has been violated, then it
shall be the obligation of Lessor, after receipt of written notice from Lessee
setting forth with specificity the nature of the violation, to promptly, at
Lessor's sole cost, rectify such violation.
(b) Except as otherwise provided in this Lease or in the
Second Addendum to Lease, Lessee hereby accepts the Premises in their condition
existing as of the Lease commencement date or the date that Lessee takes
possession of the Premises, whichever is earlier, subject to all applicable
zoning, municipal, county and state laws, ordinances and regulations governing
and regulating the use of the Premises, and any covenants or restrictions of
record, and accepts this Lease subject thereto and to all matters disclosed
thereby and by any exhibits attached hereto. Except as set forth in this
Lease, Lessee acknowledges that neither Lessor nor Lessor's agent has made any
representation or warranty as to the present or future suitability of the
Premises for the conduct of Lessee's business.
7. Maintenance, Repairs, Alterations and Common Area Services.
7.1 Lessee's Obligations. Subject to the provisions of paragraph 9
(Damage or Destruction) and except for damage caused by any negligent or
intentional act or omission of Lessee, Lessee's employees, suppliers, shippers,
customers, or invitees, in which event Lessee shall repair the damage. Lessor
at Lessor's expense, subject to reimbursement pursuant to paragraph 4.2, shall
keep in good condition and repair the foundations, exterior walls, structural
condition of interior bearing walls and roof of the Premises, as well as the
parking lots, walkways, driveways, landscaping, fences, signs and utility
installations of the Common Areas and all parts thereof, as well as providing
the services for which there is an Operating Expense pursuant to paragraph
4.2. Lessor shall not, however, be obligated to maintain, repair or replace
windows, doors or plate glass of the Premises. Lessee expressly waives the
benefits of any statute now or hereafter in effect which would otherwise afford
Lessee the right to make repairs at Lessor's expense or to terminate this Lease
because of Lessor's failure to keep the Premises in good order, condition and
repair. Lessor shall not be liable for damages or loss of any kind or nature
by reason of Lessor's failure to furnish any Common Area Services when such
failure is caused by accident, breakage, repairs, strikes, lockout, or other
labor disturbances or disputes of any character or by any other cause beyond
the reasonable control of Lessor. [See Second Addendum]
7.2 Lessee's Obligations.
(a) Subject to the provisions of paragraphs 6 (Use), 7.1 (Lessor's
Obligations), and 9 (Damage or Destruction), Lessee at Lessee's expense, shall
keep in good order, condition and repair the Premises and every part thereof
(whether or not the damaged portion of the Premises or the means of repairing
the same are reasonably or readily accessable to Lessee) including, without
limiting the generality of the foregoing, all plumbing, heating, ventilating and
air conditioning systems (Lessee shall procure and maintain, at Lessee's
expense, a ventilating and air conditioning system maintenance contract),
electrical and lighting facilities and equipment within the Premises, fixtures,
interior walls and interior surfaces of exterior walls, ceilings, windows,
doors, plate glass, and skylights located within the Premises. Lessor reserves
the right to procure and maintain the ventilating and air conditioning system
maintenance contract and if Lessor so elects, Lessee shall reimburse Lessor upon
demand, for the cost thereof. [See Second Addendum]
(b) If Lessee fails to perform Lessee's obligations under this
paragraph 7.2 or under any other paragraph of this Lease, Lessor may enter upon
the Premises after ten (10) days prior written notice to Lessee (except in the
case of emergency, in which no notice shall be required) perform such
obligations on Lessee's behalf and put the Premises in good order, condition
and repair, and the reasonable cost thereof together with interest thereon at
the maximum rate then allowable by law shall be due and payable as additional
rent to Lessor together with Lessee's next Base Rent installment.
(c) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same
condition as received, ordinary wear and tear excepted, clean and free of
debris. Any damage or deterioration of the Premises shall not be deemed
ordinary wear and tear if the same could have been prevented by good
maintenance practices. Lessee shall repair any damage to the Premises
occasioned by the installation or removal of Lessee's trade fixtures,
alterations, furnishings and equipment. Notwithstanding anything to the
contrary otherwise stated in this Lease, Lessee shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing and fencing on the Premises in good
operating condition. [See Second Addendum]
7.3 Alterations and Additions. [See Second Addendum]
(a) Lessee shall not, without Lessor's prior written
consent make any alterations, improvements, additions, or Utility Installations
in, on or about the Premises, or the Industrial Center, except for
nonstructural alterations to the Premises not exceeding $2,500 in cumulative
costs, during the term of this Lease. In any event, whether or not in excess
of $2,500 in cumulative cost, Lessee shall make no change or alteration to the
--2--
<PAGE> 3
exterior of the Premises nor the exterior of the Building nor the Industrial
Center without Lessor's prior written consent. As used in this paragraph 7 3 the
term "Utility Installation" shall mean carpeting, window coverings, air lines,
power panels, electrical distribution systems, lighting fixtures, space heaters,
air conditioning, plumbing, and fencing. Lessor may require that Lessee remove
any or all of said alterations, improvements, additions or Utility Installations
at the expiration of the term, and restore the Premises and the Industrial
Center to their prior condition. Lessor may require Lessee to provide Lessor, at
Lessee's sole cost and expense, a lien and completion bond in an amount equal to
one and one-half times the estimated cost of such improvements, if the estimated
cost of the improvement exceeds One Hundred Thousand Dollars ($100,000.00), to
insure Lessor against any liability for mechanic's and materialsmen's liens and
to insure completion of the work. Should Lessee make any alterations,
improvements, additions or Utility Installations without the prior approval of
Lessor, Lessor may, at any time during the term of this Lease, require that
Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Industrial Center that Lessee
shall desire to make and which requires the consent of the Lessor shall be
presented to Lessor in written form, with proposed detailed plans. If Lessor
shall give its consent, the consent shall be deemed conditioned upon Lessee
acquiring a permit to do so from appropriate governmental agencies, the
furnishing of a copy thereof to Lessor prior to the commencement of the work and
the compliance by Lessee of all conditions of said permit in a prompt and
expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use in the Premises, which claims are or may be secured by any mechanic's or
materialsmen's lien against the Premises, or the Industrial Center, or any
interest therein. Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises, and Lessor shall have the
right to post notices of non-responsibility in or on the Premises or the
Building as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises or the Industrial Center, upon the
condition that if Lessor shall require, Lessee shall furnish to Lessor a surety
bond satisfactory to Lessor in an amount equal to such contested lien claim or
demand indemnifying Lessor against liability for the same and holding the
Premises and the Industrial Center free from the effect of such lien or claim.
In addition, Lessor may require Lessee to pay Lessor's attorneys fees and costs
in participating in such action if Lessor shall decide it is to Lessor's best
interest to do so.
(d) All alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made on the Premises, shall be the property of
Lessor and shall remain upon and be surrendered with the Premises at the
expiration of the Lease term, unless Lessor requires their removal pursuant to
paragraph 7 3(a). Notwithstanding the provisions of this paragraph 7.3(d),
Lessee's machinery and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to the Premises,
and other than Utility Installations, shall remain the property of Lessee and
may be removed by Lessee subject to the provisions of paragraph 7.2.
7.4 UTILITY ADDITIONS. Lessor reserves the right to install new or
additional utility facilities throughout the Building and the Common Areas for
the benefit of Lessor or Lessee, or any other lessee of the Industrial Center,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, security systems, communication systems, and fire protection and
detection systems, so long as such installations do not unreasonably interfere
with Lessee's use of the Premises.
SEE SECOND ADDENDUM
8. INSURANCE; INDEMNITY
8.1 LIABILITY INSURANCE -- LESSEE. Lessee shall, at Lessee's
expense, obtain and keep in force during the term of this Lease a policy of
Combined Single Limit Bodily Injury and Property Damage insurance insuring
Lessee and Lessor against any liability arising out of the use, occupancy or
maintenance of the Premises and the Industrial Center. Such insurance shall be
in an amount not less than $500,000.00 per occurrence. The policy shall insure
performance by Lessee of the indemnity provisions of this paragraph 8. The
limits of said insurance shall not, however, limit the liability of Lessee
hereunder.
8.2 LIABILITY INSURANCE -- LESSOR. Lessor shall obtain and keep in
force during the term of this Lease a policy of Combined Single Limit Bodily
Injury and Property Damage insurance, insuring Lessor, but not Lessee, against
any liability arising out of the ownership, use, occupancy or maintenance of the
Industrial Center in an amount not less than $500,000.00 per occurrence.
8.3 PROPERTY INSURANCE. Lessor shall obtain and keep in force during
the term of this Lease a policy or policies of insurance covering loss or damage
to the Industrial Center improvements, but not Lessee's personal property,
fixtures, equipment or alterations in an amount equal to the full replacement
value thereof, as the same may exist from time to time, providing protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, flood (in the event same is required by
a lender having a lien on the Premises) special extended perils ("all risk", as
such term is used in the insurance industry), plate glass insurance and such
other insurance as Lessor deems advisable. In addition, Lessor shall obtain and
keep in force, during the term of this Lease, a policy of rental value insurance
covering a period of one year, with loss payable to Lessor, which insurance
shall also cover all Operating Expenses for said period. In the event that the
Premises shall suffer an insured loss as defined in paragraph 9.1(g) hereof, the
deductible amounts under the casualty insurance policies relating to the
Premises shall be paid by Lessee.
SEE SECOND ADDENDUM
8.4 PAYMENT OF PREMIUM INCREASE.
(a) After the term of this Lease has commenced, Lessee shall
not be responsible for paying Lessee's Share of any increase in the property
insurance premium for the Industrial Center specified by Lessor's insurance
carrier as being caused by the use, acts or omissions of any other lessee of the
Industrial Center, or by the nature of such other lessee's occupancy which
create an extraordinary or unusual risk.
(b) Lessee, however, shall pay the entirety of any increase
in the property insurance premium for the Industrial Center over what it was
immediately prior to the commencement of the term of this Lease if the increase
is specified by Lessor's insurance carrier as being caused by the nature of
Lessee's occupancy or any act or omission of Lessee.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least B plus, or such
other rating as may be required by a lender having a lien on the Premises, as
set forth in the most current issue of "Best's Insurance Guide." Lessee shall
not do or permit to be done anything which shall invalidate the insurance
policies carried by Lessor. Lessee shall deliver to Lessor copies of liability
insurance policies required under paragraph 8.1 or certificates evidencing the
existence and amounts of such insurance within seven (7) days after the
commencement date of this Lease. No such policy shall be cancellable or subject
to reduction of coverage or other modification except after thirty (30) days
prior written notice to Lessor. Lessee shall, at least thirty (30) days prior to
the expiration of such policies, furnish Lessor with renewals or "binders"
thereof.
SEE SECOND ADDENDUM
8.6 WAIVER OF SUBROGATION.
8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor from
and against any and all claims arising from Lessee's use of the Industrial
Center, or from the conduct of Lessee's business or from any activity, work or
things done, permitted or suffered by Lessee in or about the Premises or
elsewhere and shall further indemnify and hold harmless Lessor from and against
any and all claims arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this Lease, or
arising from any act or omission of Lessee, or any of Lessee's agents,
contractors, or employees, and from and against all costs, attorney's fees,
expenses and liabilities incurred in the defense of any such claim or any action
or proceeding brought thereon; and in case any action or proceeding be brought
against Lessor by reason of any such claim, Lessee upon notice from Lessor shall
defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor
and Lessor shall cooperate with Lessee in such defense. Lessee, as a material
part of the consideration to Lessor, hereby assumes all risk of damage to
property of Lessee or injury to persons, in, upon or about the Industrial Center
arising from any cause and Lessee hereby waives all claims in respect thereof
against Lessor.
SEE SECOND ADDENDUM
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee. Lessee's employees, invitees, customers, or any other person in or about
the Premises or the Industrial Center, nor shall Lessor be liable for injury to
the person of Lessee. Lessee's employees, agents or contractors, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether said damage or injury results from
conditions arising upon the Premises or upon other portions of the Industrial
Center, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other lessee, occupant or user of the Industrial Center, nor from
the failure of Lessor to enforce the provisions of any other lease of the
Industrial Center.
9. DAMAGE OR DESTRUCTION. SEE SECOND ADDENDUM
9.1 DEFINITIONS.
(a) "Premises Partial Damage" shall mean if the Premises are
damaged or destroyed to the extent that the cost of repair is less than fifty
percent of the then replacement cost of the Building.
(b) "Premises Total Destruction" shall mean if the Premises
are damaged or destroyed to the extent that the cost of repair is fifty percent
or more of the then replacement cost of the Building.
(c) "Premises Building Partial Damage" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the extent
that the cost to repair is less than fifty percent of the then replacement cost
of the Building.
(d) "Premises Building Total Destruction" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the extent
that the cost to repair is fifty percent or more of the then replacement cost of
the Building.
(e) "Industrial Center Buildings" shall mean all of the
buildings on the Industrial Center site.
(f) "Industrial Center Buildings Total Destruction" shall
mean if the Industrial Center Buildings are damaged or destroyed to the extent
that the cost of repair is fifty percent or more of the then replacement cost of
the Industrial Center Buildings.
--3-- Initials: /s/ A.O.
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/s/ ROG
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<PAGE> 4
(g) "Insured Loss" shall mean damage or destruction which was
covered by an event required to be covered by the insurance described in
paragraph 8. The fact that an insured Loss has a deductible amount shall not
make the loss an uninsured loss.
(h) "Replacement Cost" shall mean the amount of money
necessary to be spent in order to repair or rebuild the damaged area to the
condition that existed immediately prior to the damage occurring excluding all
improvements made by lessees.
9.2 PREMISES PARTIAL DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4
and 9.5 if at any time during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of either Premises Partial
Damage or Premises Building Partial Damage then Lessor shall at Lessor's
expense, repair such damage to the Premises, but not Lessee's fixtures,
equipment or alterations, as soon as reasonably possible and this Lease shall
continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4
and 9.5, if at any time during the term of this Lease there is damage which is
not an Insured Loss and which falls within the classification of Premises
Partial Damage or Premises Building Partial Damage, unless caused by a negligent
or willful act of Lessee (in which event Lessee shall make the repairs at
Lessee's expense) which damage prevents Lessee from using the Premises, Lessor
may at Lessor's option either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) give written notice to Lessee within thirty (30) days
after the date of the occurrence of such damage of Lessor's intention to cancel
and terminate this Lease as of the date of the occurrence of such damage in the
event Lessor elects to give such notice of Lessor's intention to cancel and
terminate this Lease. Lessee shall have the right within ten (10) days after
the receipt of such notice to give written notice to Lessor of Lessee's
intention to repair such damage at Lessee's expense, without reimbursement from
Lessor, in which event this Lease shall continue in full force and effect, and
Lessee shall proceed to make such repairs as soon as reasonably possible. If
Lessee does not give such notice within such 10-day period this Lease shall be
cancelled and terminated as of the date of the occurrence of such damage.
9.3 PREMISES TOTAL DESTRUCTION; PREMISES BUILDING TOTAL
DESTRUCTION; INDUSTRIAL CENTER BUILDINGS TOTAL DESTRUCTION.
(a) Subject to the provisions of paragraphs 9.4 and 9.5, if at
any time during the term of this Lease there is damage whether or not it is an
Insured Loss, and which falls into the classifications of either (i) Premises
Total Destruction, or (ii) Premises Building Total Destruction, or (iii)
Industrial Center Buildings Total Destruction, then Lessor may at Lessor's
option either (i) repair such damage or destruction, but not Lessee's fixtures,
equipment or alterations, as soon as reasonably possible at Lessor's expense,
and this Lease shall continue in full force and effect, or (ii) give written
notice to Lessee within thirty (30) days after the date of occurrence of such
damage of Lessor's intention to cancel and terminate this Lease, in which case
this Lease shall be cancelled and terminated as of the date of the occurrence
of such damage.
9.4 DAMAGE NEAR END OF TERM.
(a) Subject to paragraph 9.4(b), if at any time during the
last six months of the term of this Lease there is substantial damage, whether
or not an Insured Loss, which falls within the classification of Premises
Partial Damage, Lessor may at Lessor's option cancel and terminate this Lease
as of the date of occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within 30 days after the date of occurrence
of such damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee
has an option to extend or renew this Lease, and the time within which said
option may be exercised has not yet expired, Lessee shall exercise such option,
if it is to be exercised at all, no later than twenty (20) days after the
occurrence of an Insured Loss falling within the classification of Premises
Partial Damage during the last six months of the term of this Lease. If Lessee
duly exercises such option during said twenty (20) day period, Lessor shall, at
Lessor's expense, repair such damage, but not Lessee's fixtures, equipment or
tenant improvements, as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option
during said twenty (20) day period, then Lessor may at Lessor's option
terminate and cancel this Lease as of the expiration of said twenty (20) day
period by giving written notice to Lessee of Lessor's election to do so within
ten (10) days after the expiration of said twenty (20) day period,
notwithstanding any term or provision in the grant of option to the contrary.
9.5 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event Lessor repairs or restores the Premises
pursuant to the provisions of this paragraph 9, the rent payable hereunder for
the period during which such damage, repair or restoration continues shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of rent, if any, Lessee shall have no claim
against Lessor for any damage suffered by reason of any such damage,
destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this paragraph 9 and shall not commence such
repair or restoration within ninety (90) days after such obligation shall
accrue, Lessee may at Lessee's option cancel and terminate this Lease by giving
Lessor written notice of Lessee's election to do so at any time prior to the
commencement of such repair or restoration. In such event this Lease shall
terminate as of the date of such notice. See Second Addendum which supercedes
Section 9 to the extent inconsistent herewith.
9.6 TERMINATION -- ADVANCE PAYMENTS. Upon termination of this
Lease pursuant to this paragraph 9, an equitable adjustment shall be made
concerning advance rent and any advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor.
9.7 WAIVER. Lessor and Lessee waive the provisions of any statute
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the real property tax, as
defined in paragraph 10.3, applicable to the Industrial Center subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with the
provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2.
10.2 ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for
paying Lessee's Share of any increase in real property tax specified in the tax
assessor's records and work sheets as being caused by additional improvements
placed upon the Industrial Center by other lessees or by Lessor for the
exclusive enjoyment of such other lessees. Lessee shall, however, pay to
Lessor at the time that Operating Expenses are payable under paragraph 4.2(c)
the entirety of any increase in real property tax if assessed solely by reason
of additional improvements placed upon the Premises by Lessee or at Lessee's
request.
10.3 DEFINITION OF "REAL PROPERTY TAX." As used herein, the term
"real property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on the Industrial Center or any portion
thereof by any authority having the direct or indirect power to tax, including
any city, county, state or federal government, or any school, agricultural,
sanitary, fire, street, drainage or other improvement district thereof, as
against any legal or equitable interest of Lessor in the Industrial Center or in
any portion thereof, as against Lessor's right to rent or other income
therefrom, and as against Lessor's business of leasing the Industrial Center.
The term "real property tax" shall also include any tax, fee, levy, assessment
or charge (i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove included within the definition of "real
property tax", or (ii) the nature of which was hereinbefore included within the
definition of "real property tax", or (iii) which is imposed for a service or
right not charged prior to June 1, 1978, or, if previously charged, has been
increased since June 1, 1978, or (iv) which is imposed as a result of a
transfer, either partial or total, of Lessor's interest in the Industrial Center
or which is added to a tax or charge hereinbefore included within the definition
of real property tax by reason of such transfer, or (v) which is imposed by
reason of this transaction, any modifications or changes hereto, or any
transfers hereof.
10.4 JOINT ASSESSMENT. If the Industrial Center is not separately
assessed, Lessee's Share of the real property tax liability shall be an
equitable proportion of the real property taxes for all of the land and
improvements included within the tax parcel assessed, such proportion to be
determined by Lessor from the respective valuations assigned in the assessor's
work sheets or such other information as may be reasonably available. Lessor's
reasonable determination thereof, in good faith, shall be conclusive.
10.5 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere. When
possible, Lessee shall cause and trade fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Lessor.
(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to the
Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a
reasonable proportion to be determined by Lessor of all charges jointly metered
with other premises in the Building.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease without the need for notice to Lessee under paragraph 13.1.
12.2 LESSEE AFFILIATE. Notwithstanding the provisions of paragraph
12.1 hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by
or is under common control with Lessee, or to any corporation resulting from
the merger or consolidation with Lessee, or to any person or entity which
acquires all the assets of Lessee as a going concern of the business that is
being conducted on the Premises, all of which are referred to as "Lessee
Affiliate", provided that before such assignment shall be effective and
assignee shall assume, in full, the obligations of Lessee under this Lease.
Any such assignment shall not, in any
<PAGE> 5
way affect or limit the liability of Lessee under the terms of this Lease.
12.3 TERMS AND CONDITIONS OF ASSIGNMENT. Regardless of Lessor's
consent, no assignment shall release Lessee of Lessee's obligations hereunder
or after the primary liability of Lessee to pay the Base Rent and Lessee's
Share of Operating Expenses, and to perform all other obligations to be
performed by Lessee hereunder. Lessor may accept rent from any person other
than Lessee pending approval or disapproval of such assignment. Neither a
delay in the approval or disapproval of such assignment nor the acceptance of
rent shall constitute a waiver or estoppel of Lessor's right to exercise its
remedies for the breach of any of the terms or conditions of this paragraph 12
or this Lease Consent to one assignment shall not be deemed consent to any
subsequent assignment. In the event of default by any assignee or Lessee or
any successor of Lessee in the performance of any of the terms hereof. Lessor
may proceed directly against Lessee without the necessity of exhausting
remedies against said assignee.
12.4 TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. Regardless of
Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be included
in subleases:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease heretofore
or hereafter made by Lessee, and Lessor may collect such rent and income and
apply same toward Lessee's obligations under this Lease: provided, however, that
until a default shall occur in the performance of Lessee's obligations under
this Lease. Lessee may receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a default exists in
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that such
sublessee shall have the right to rely upon any such statement and request from
Lessor, and that such sublessee shall pay such rents to Lessor without any
obligations or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee or Lessor if Lessor acts in
good faith for any such rents so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective
unless and until it has been approved in writing by Lessor. In entering into
any sublease, Lessee shall use only such form of sublease as is reasonably
satisfactory to Lessor, and once approved by Lessor, such sublease shall not be
changed or modified without Lessor's prior written consent. Any sublessee
shall, by reason of entering into a sublease under this Lease, be deemed, for
the benefit of Lessor, to have agreed to conform and comply with each and every
obligation herein to be performed by Lessee other than such obligations as are
contrary to or inconsistent with provisions contained in a sublease to which
Lessor has expressly consented in writing.
(c) If Lessee's obligations under this Lease have been
guaranteed by third parties, then a sublease, and Lessor's consent thereto,
shall not be effective unless said guarantors give their written consent to
such sublease and the terms thereof.
(d) The consent by Lessor to any subletting shall not release
Lessee from its obligations or after the primary liability of Lessee to pay the
rent and perform and comply with all of the obligations of Lessee to be
performed under this Lease.
(e) The consent by Lessor to any subletting shall not
constitute a consent to any subsequent subletting by Lessee or to any
assignment or subletting by the sublessee.
(f) In the event of any default under this Lease, Lessor may
proceed directly against Lessee, any guarantors or any one else responsible for
the performance of this Lease, without first exhausting Lessor's remedies
against any other person or entity responsible therefore to Lessor, or any
security held by Lessor or Lessee.
(g) In the event Lessee shall default in the performance of
its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of Lessee under such sublease from
the time of the exercise of said option to the termination of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to Lessee or for any other prior defaults of
Lessee under such sublease.
(h) See Second Addendum.
(i) No sublessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent which consent shall
not be unreasonably withheld.
(j) Lessor's written consent to any subletting of the Premises
by Lessee shall not constitute an acknowledgement that no default then exists
under this Lease of the obligations to be performed by Lessee nor shall such
consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(k) With respect to any subletting to which Lessor has
consented, Lessor agrees to deliver a copy of any notice of default by Lessee
to the sublessee. Such sublessee shall have the right to cure a default of
Lessee within ten (10) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset
from and against Lessee for any such defaults cured by the sublessee.
12.5 ATTORNEY'S FEES. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorneys fees incurred in connection
therewith, such attorneys fees not to exceed $350.00 for each such request.
13 DEFAULT: REMEDIES.
13.1 DEFAULT. The occurrence of any one or more of the following
events shall constitute a material default of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
See Second Addendum.
(b) The failure by Lessee to make any payment of rent or any
other payment required to be made by Lessee hereunder, as and when due, where
such failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee.
(c) Except as otherwise provided in this Lease, the failure by
Lessee to observe or perform any of the covenants, conditions or provisions of
this Lease to be observed or performed by Lessee, other than described in
paragraph (b) above, where such failure shall continue for a period of thirty
(30) days after written notice thereof from Lessor to Lessee; provided, however,
that if the nature of Lessee's noncompliance is such that more than thirty (30)
days are reasonably required for its cure, then Lessee shall not be deemed to be
in default if Lessee commenced such cure within said thirty (30) day period and
thereafter diligently prosecutes such cure to completion. To the extent
permitted by law, such thirty (30) day notice shall constitute the sole and
exclusive notice required to be given to Lessee under applicable Unlawful
Detainer statutes, if given in the form and manner required by such statute.
(d) (i) The making by Lessee of any general arrangement or
general assignment for the benefit of creditors; (ii) Lessee becomes a debtor
as defined in 11 U.S.C. section 101 or any successor statute thereto (unless,
in the case of a petition filed against Lessee, the same is dismissed within
sixty (60) days; (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where possession is not restored to Lessee
within thirty (30) days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days. In the event that any provision of this paragraph 13.1(d) is
contrary to any applicable law, such provision shall be of no force or effect.
(e) The discovery by Lessor that any financial statement given
to Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee's obligation
hereunder, was materially false.
13.2 REMEDIES. In the event of any such material default by Lessee,
Lessor may at any time thereafter, with or without notice or demand and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such default:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor.
In such event Lessor shall be entitled to recover from Lessee all damages
incurred by Lessor by reason of Lessee's default including, but not limited to,
the cost of recovering possession of the Premises; reasonable expenses of
reletting, less reasonable costs incurred by Landlord in bringing the Premises
to the "surrender" condition required by the terms of this Lease, the worth at
the time of award by the court having jurisdiction thereof of the amount by
which the unpaid rent for the balance of the term after the time of such award
exceeds the amount of such rental loss for the same period that Lessee proves
could be reasonably avoided; that portion of the leasing commission paid by
Lessor pursuant to paragraph 15 applicable to the unexpired term of this Lease,
and unamortized above-standard interior improvement costs paid by Landlord
applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this
Lease shall continue in effect whether or not Lessee shall have vacated or
abandoned the Premises. In such event Lessor shall be entitled to enforce all
of Lessor's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located. Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but
in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Lessee
in writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion. See Second Addendum.
Initials:
MULTI TENANT--MODIFIED NET -----------
(C) American Industrial Real Estate Association 1981 -----------
-5-
<PAGE> 6
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of Base Rent. Lessee's Share of Operating Expenses or other
sums due hereunder will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Property. Accordingly, if any installment of Base Rent
Operating Expenses or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within five (5) days after Lessee has received
written notice from Lessor that Lessor has failed to receive the payment in
question, then without any requirement for notice to Lessee, Lessee shall pay
to Lessor a late charge equal to 4% of such overdue amount. The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lessee. Acceptance of
such late charge by Lessor shall in no event constitute a waiver of Lessee's
default with respect to such overdue amount, nor prevent Lessor from exercising
any of the other rights and remedies granted hereunder.
14. CONDEMNATION. If the Premises or any portion thereof of the industrial
Center are taken under the power of eminent domain or sold under the threat of
the exercise of said power (all of which are herein called "condemnation"), this
Lease shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs. If more than ten
percent of the floor area of the Premises or more than twenty-five percent of
that portion of the Common Areas designated as parking for the Industrial Center
is taken by condemnation, Lessee may at Lessee's option, to be exercised in
writing only within ten (10) days after Lessor shall have given Lessee written
notice of such taking (or in the absence of such notice, within ten (10) days
after the condemning authority shall have taken possession) terminate this Lease
as of the date the condemning authority takes such possession. If Lessee does
not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the premises remaining,
except that the rent shall be reduced in the proportion that the floor area of
the Premises taken bears to the total floor area of the Premises. No reduction
of rent shall occur if the only area taken is that which does not have the
Premises located thereon. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taxing of the fee, or as severance damages, provided, however, that Lessee
shall be entitled to any award for loss of or damage to Lessee's trade fixtures
and removable personal property. In the event that this Lease is not terminated
by reason of such condemnation, Lessor shall to the extent of severance damages
received by Lessor in connection with such condemnation, repair any damage to
the Premises caused by such condemnation except to the extent that Lessee has
been reimbursed therefor by the condemning authority. See Second Addendum.
15. BROKER'S FEE.
(a) Upon execution of this Lease by both parties, Lessor shall pay to
CB Commercial and AWS Commercial Real Estate, Licensed real estate broker(s), a
fee as set forth in a separate agreement between Lessor and said broker(s), or
in the event there is no separate agreement between Lessor and said broker(s),
the sum of $ AS AGREED , for brokerage services rendered by said broker(s) to
Lessor in this transaction.
(b) Lessor further agrees that if Lessee exercises any Option, as
defined in paragraph 39.1 of this Lease, which is granted to Lessee under this
Lease, or any subsequently granted option which is substantially similar to an
Option granted to Lessee under this Lease, or if Lessee acquires any rights to
the Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or if Lessee remains in possession of the Premises
after the expiration of the term of this Lease after having failed to exercise
an Option, or if said broker(s) are the procuring cause of any other lease or
sale entered into between the parties pertaining to the Premises and/or any
adjacent property in which Lessor has an interest, then as to any of said
transactions, Lessor shall pay said broker(s) fee in accordance with the
schedule of said broker(s) in effect at the time of execution of this Lease.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but also
on behalf of any person, corporation, association, or other entity having an
ownership interest in said real property or any part thereof, when such fee is
due hereunder. Any transferee of Lessor's interests in this Lease, whether such
transfer is by agreement or by operation of law, shall be deemed to have assumed
Lessor's obligation under this paragraph 15. Said broker shall be a third party
beneficiary of the provisions of this paragraph 15.
16. ESTOPPEL CERTIFICATE.
(a) Each party (as "responding party") shall at any time upon not less
than ten (10) days prior written notice from the other party ("requesting
party"), execute, acknowledge and deliver to the requesting party a statement
in writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and
the date to which the rent and other charges are paid in advance, if any, and
(ii) acknowledging that there are not, to the responding party's knowledge any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises or of the
business of the requesting party.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it
shall be conclusive upon such party that (i) this Lease is in full force and
effect, without modification, except as may be represented by the requesting
party, (ii) there are no uncured defaults in the requesting party's performance
and (iii) if Lessor is the requesting party, not more than one month's rent has
been paid in advance.
(c) If Lessor desires to finance, refinance, or sell the Property, or
any part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three (3) years financial statements of Lessee, if available. All such
financial statements shall be received by Lessor and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only the
owner or owners at the time in question, of the fee title or a Lessee's
interest in a ground lease of the Industrial Center, and except as expressly
provided in paragraph 15, in the event of any transfer of such title or
interest, Lessor herein named (and in case of any subsequent transfers then the
grantor) shall be relieved from and after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that any funds in the hands of Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall,
subject as aforesaid, be binding on Lessor's successors and assigns, only
during their respective periods of ownership. See Second Addendum.
18. SEVERABILITY. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction, shall in no way affect the validity of
any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided,
any amount due to Lessor not paid when due shall bear interest at the maximum
rate then allowable by law from the date due. Payment of such interest shall
not excuse or cure any default by Lessee under this Lease, provided, however,
that interest shall not be payable on late charges incurred by Lessee nor on
any amounts upon which late charges are paid by Lessee.
20. TIME OF ESSENCE. Time is of the essence with respect to the obligations
to be performed under this Lease.
21. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expenses and insurance and tax expenses payable shall be deemed to be rent.
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
in this Lease, Lessee hereby acknowledges that neither the real estate broker
listed in paragraph 15 hereof nor any cooperating broker on this transaction nor
the Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or use
by Lessee of the Premises or the Property and Lessee acknowledges that Lessee
assumes all responsibility regarding the Occupational Safety Health Act, the
legal use and adaptability of the Premises and the compliance thereof with all
applicable laws and regulations in effect during the term of this Lease except
as otherwise specifically stated in this Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified mail, and if
given personally or by mail, shall be deemed sufficiently given if addressed
to Lessee or to Lessor at the address noted below the signature of the
respective parties, as the case may be. Either party may by notice to the
other specify a different address for notice purposes except that upon Lessee's
taking possession of the Premises, the Premises shall constitute Lessee's
address for notice purposes. A copy of all notices required or permitted to be
given to Lessor hereunder shall be concurrently transmitted to such party or
parties at such addresses as Lessor may from time to time hereafter designate
by notice to Lessee. See Second Addendum.
24. WAIVERS. No waiver by Lessor or any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach of Lessee of any
provision hereof other than the failure of Lessor to pay the particular rent so
accepted, regardless of Lessor's knowledge of such preceding breach at the time
of acceptance of such rent. See Second Addendum.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of
this Lease pertaining to the obligations of Lessee, but all Options, if any,
granted under the terms of this Lease shall be deemed terminated and be of no
further effect during said month to month tenancy.
<PAGE> 7
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
29. BINDING EFFECT: CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
where the Industrial Center is located and any litigation concerning this Lease
between the parties hereto shall be initiated in the county in which the
Industrial Center is located.
30. SUBORDINATION.
(a) This Lease, and any Option granted hereby, at Lessor's option,
shall be subordinate to any ground lease, mortgage, deed of trust or any other
hypothecation or security now or hereafter placed upon the Industrial Center and
to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease and any
Options granted hereby prior to the lien of its mortgage, deed of trust or
ground lease, and shall give written notice thereof to Lessee, this Lease and
such Options shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) Lessee agrees to execute any reasonable documents required to
effectuate an attornment, a subordination or to make this Lease or any Option
granted herein prior to the lien of any mortgage, deed of trust or ground lease,
as the case may be. Lessee's failure to execute such documents within ten (10)
days after written demand shall constitute a material default by Lessee
hereunder without further notice to Lessee.
31. ATTORNEY'S FEES. If either party named herein brings an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the court.
32. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to
enter the Premises at reasonable times for the purpose of inspecting the same,
showing the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises or the Building any
ordinary "For Sale" signs and Lessor may at any time during the last 120 days of
the term hereof place on or about the Premises any ordinary "For Lease" signs.
All activities of Lessor pursuant to this paragraph shall be without abatement
of rent, nor shall Lessor have any liability to Lessee for the same. SEE SECOND
ADDENDUM
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent.
34. SIGNS. Lessee shall not place any sign upon the Premises or the
Industrial Center without Lessor's prior written consent. Under no circumstances
shall Lessee place a sign on any roof of the Industrial Center.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. CONSENTS. Except for paragraph 33 hereof, wherever in this Lease the
consent of one party is required to an act of the other party such consent shall
not be unreasonably withheld or delayed.
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Property.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the word "Option" has the
following meaning. (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option or right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other space within the Industrial Center or other property of
Lessor or the right of first offer to lease other space within the Industrial
Center or other property of Lessor; (3) the right or option to purchase the
Premises or the Industrial Center, or the right of first refusal to purchase the
Premises or the Industrial Center, or the right of first offer to purchase the
Premises or the Industrial Center, or the right or option to purchase other
property of Lessor, or the right of first refusal to purchase other property of
Lessor or the right of first offer to purchase other property of Lessor.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple options
to extend or renew this Lease a later option cannot be exercised unless the
prior option to extend or renew this Lease has been so exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
40. SECURITY MEASURES. Lessee hereby acknowledges that Lessor shall have no
obligation whatsoever to provide guard service or other security measures for
the benefit of the Premises or the Industrial Center. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole option,
from providing security protection for the Industrial Center or any part
thereof, in which event the cost thereof shall be included within the definition
of Operating Expenses, as set forth in paragraph 4.2(b).
41. EASEMENTS. Lessor reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so long
as such easements, rights, dedications, Maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall sign
any of the aforementioned documents within ten (10) days after request of Lessor
and failure to do so shall constitute a material default of this Lease by Lessee
without the need for further notice to Lessee provided Lessee shall approve such
document in advance, which consent shall not be unreasonably withheld.
42. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment, and there shall survive the right
on the part of said party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said party
to pay such sum or any part thereof, said party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
--7-- Initials: /s/ A.O.
--------
/s/ RDA
<PAGE> 8
43. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
SEE SECOND ADDENDUM
44. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions, if any, shall be controlled by the
typewritten or handwritten provisions.
45. OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease. This Lease
shall become binding upon Lessor and Lessee only when fully executed by Lessor
and Lessee.
46. ADDENDUM. Attached hereto is an addendum or addenda containing
paragraphs 47 through 49 which constitute a part of this Lease. Also attached is
the Second Addendum which constitutes a part of this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR
APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER OR
ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR
TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO.
THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL
COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
/s/ FRANKRIS CORPORATION, /s/ CYMER LASER TECHNOLOGIES, INC.
- -------------------------------- -----------------------------------
a California corporation a California corporation
By /s/ Anthony J. Deleonardis By /s/ Robert P. Akins
---------------------------- -------------------------------
Anthony J. Deleonardis Robert P. Akins
President President
Executed on August 21, 1991 Executed on 8/21/91
------------------- --------------------
(Corporate ????) (Corporate ????)
ADDRESS FOR NOTICES AND RENT ADDRESS
c/o Karwin Company 7887 Dunbrook Road
- ----------------------------------- -----------------------------------
10660 Scripps Ranch Blvd., #200 San Diego, CA 92126
- ----------------------------------- -----------------------------------
San Diego, CA 92131
- ----------------------------------- -----------------------------------
American Industrial Real Estate Association
Los Angeles, CA 90071 (213) 687-8777
Form 100MT 8/81
o 1991 -- By American Industrial Real Estate Association.
All rights reserved. No part of these words may be reproduced
in any form without permission in writing.
<PAGE> 9
ADDENDUM TO LEASE
THIS ADDENDUM TO THAT CERTAIN INDUSTRIAL REAL ESTATE LEASE-NET, DATED JUNE 24,
1991 BY AND BETWEEN FRANKRIS CORPORATION, AS LESSOR, AND CYMER LASER
TECHNOLOGIES, INC., A CALIFORNIA CORPORATION, AS LESSEE, FOR THE PROPERTY
COMMONLY KNOWN AS 16160 WEST BERNARDO DRIVE, SAN DIEGO, CALIFORNIA, 92128, IN
THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA.
_______________________________________________________________________________
Page 1 of 1
47. Rent: The base rent per month for the term of the lease in accordance
with Section 4.1 of the lease shall be as follows:
Lease Year Monthly Rent
---------- ------------
1 $17,560.33
2 $32,026.00
3 $34,731.00
4 $36,735.00
5 $38,738.00
6 $40,742.00
7 $42,078.00
Tenant shall occupy approximately 35,600 square feet of improved space
during the first 18 months of the lease. The remaining approximately
4,474 square feet of tenant space shall be unimproved and unoccupied
during this 18 months. Tenant will pay for all tenant improvement
construction costs for this approximately 4,474 square feet prior to
occupancy of this space. In exchange for Tenant paying for these tenant
improvements, Landlord shall grant to the Tenant four months of free
rent and a move-in allowance as noted in paragraphs 48 and 49 below.
Tenant may improve and occupy this additional 4,474 square feet of space
prior to 18 months from the inception of the lease. In such case,
Tenant shall pay additional rent in proportion to the rent schedule
shown above.
48. Rental Abatement: Lessee to receive four (4) months free rent up front
outside the lease term upon completion of tenant improvements and
issuance of a certificate of occupancy. The expected occupancy date is
December 1, 1991, however, in the event the occupancy does not occur on
the expected occupancy date, then the occupancy date and the lease
commencement date shall be moved forward accordingly to provide four (4)
months of free rent. Lessee shall not be responsible for any operating
expenses or taxes during the free rent period.
49. Moving Allowance: Lessee shall receive a $16,000 moving allowance paid
in cash by Lessor upon completion of tenant improvements.
- ------------------- ----------------
Lessor's Lessee's
Initials Initials
<PAGE> 10
ADDENDUM TO LEASE
THIS ADDENDUM TO THAT CERTAIN INDUSTRIAL REAL ESTATE LEASE-NET, DATED JUNE 24,
1991 BY AND BETWEEN FRANKRIS CORPORATION, AS LESSOR, AND CYMER LASER
TECHNOLOGIES, INC., A CALIFORNIA CORPORATION, AS LESSEE, FOR THE PROPERTY
COMMONLY KNOWN AS 16160 WEST BERNARDO DRIVE, SAN DIEGO, CALIFORNIA, 92128, IN
THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA.
_______________________________________________________________________________
Page 1 of 1
47. Rent: The base rent per month for the term of the lease in accordance
with Section 4.1 of the lease shall be as follows:
Lease Year Monthly Rent
---------- ------------
1 $15,027
2 $32,026
3 $34,731
4 $36,735
5 $38,738
6 $40,742
7 $42,078
48. Rental Abatement: Lessee to receive four (4) months free rent up front
outside the lease term upon completion of tenant improvements and
issuance of a certificate of occupancy. The expected occupancy date is
November 1, 1991, however, in the event the occupancy does not occur on
the expected occupancy date, then the occupancy date and the lease
commencement date shall be moved forward accordingly to provide four (4)
months of free rent. Lessee shall not be responsible for any operating
expenses or taxes during the free rent period.
49. Moving Allowance: Lessee shall receive a $16,000 moving allowance paid
in cash by Lessor upon completion of tenant improvements.
- ------------------- ----------------
Lessor's Lessee's
Initials Initials
<PAGE> 11
EXHIBIT A
CYMER LEASED PREMISES
Page 1 of 2
[FIRST FLOOR PLAN]
Changes of Aug. 14 meeting not shown
<PAGE> 12
EXHIBIT A
CYMER LEASED PREMISES
Page 2 of 2
[SECOND FLOOR PLAN]
Changes of Aug. 14 meeting not shown
<PAGE> 13
[LOGO]
FRANKRIS CORPORATION
10660 Scripps Ranch Blvd., Suite 210 619-271-1774
San Diego, California 92131 FAX 619-271-9802
February 1, 1994
ADDENDUM TO CYMER/FRANKRIS LEASE
Cymer Laser will lease an additional 2,557 square feet in the West Bernardo
Corporate Plaza at 16275 Technology Dr. The space is adjacent to Cymer's
present facility. Approximately 1,120 square feet of the new space is on the
first floor and the balance on the second floor.
This 2,557 square feet shall be unfinished space. Any improvements to the
space shall be at Cymer's sole expense and will be performed in accordance with
all standard building codes and safety regulations.
The rent in the first year on this additional space shall be $1,406.35 per
month.
The rent is to commence on June 1, 1994, and continue through May 31, 1999, to
coincide with the expiration of the lease on the space Cymer currently
occupies.*
There shall be a 5% increase in the rent on the additional space each year,
beginning June 1, 1995.
In line with provisions noted in the basic lease, there shall also be a 3%
management fee paid monthly on the additional space. For the first year, this
management fee shall be $42.19 per month.
All other terms and conditions in the basic lease shall apply to the additional
leased space.
/s/ /s/
- ------------------------- ----------------------------
Frankris Corporation Cymer Laser Technologies
Authorized signature
* Rent increase deferred until July 1, 1994.
<PAGE> 14
SECOND ADDENDUM TO LEASE
THIS SECOND ADDENDUM TO LEASE ("Addendum") is dated for reference
purposes as of August 19, 1991, and is made between FRANKRIS CORPORATION, a
California corporation ("Landlord"), and CYMER LASER TECHNOLOGIES, a California
corporation ("Tenant"), to be a part of that certain Standard Industrial Lease
- - Multi-Tenant of even date herewith between Landlord and Tenant (herein the
"Lease Form") concerning 40,074 square feet of space (the "Premises") located
in the building (the "Building") located at 16160 West Bernardo Drive, San
Diego, California 92128. The term "Effective Date" as used herein shall mean
the date that the Lease has been fully executed by both Landlord and Tenant.
Landlord and Tenant agree that the Lease Form is hereby modified and
supplemented as follows:
1. Title Report: Landlord shall deliver to Tenant on or before
that date that is seven (7) days after the Effective Date a current preliminary
title report and copies of all underlying title exceptions referred to in such
report for the land on which the Building is located. In addition to Tenant's
other rights and remedies, Tenant shall have the right to terminate this Lease
if such title documents are not furnished to Tenant within fifteen (15) days
after the Effective Date. Further, if Tenant is not satisfied with its review
of title matters, Tenant shall have the right to terminate this Lease by
delivering written notice to Landlord of such election on or before that date
which is eight (8) days after Tenant's actual receipt of the preliminary title
report and underlying title exceptions referred to above, in which case any
monies previously paid by Tenant shall be reimbursed to Tenant together with
interest thereon from the date of the termination until paid at twelve percent
per annum or the highest rate permitted by law, whichever is less (the
"Interest Rate"). Landlord shall reasonably cooperate with Tenant in
furnishing information that may be reasonably required by Tenant in connection
with Tenant's title review.
2. Commencement Date: Notwithstanding anything to the contrary in
the Lease Form:
A. The Lease shall commence (the "Commencement Date") on
the later of (i) December 1, 1991 or (ii) the date by which all of the
following have occurred: (a) Landlord has substantially completed the Tenant
Improvements (defined below) in accordance with paragraph 3 of this Addendum;
(b) there remains no incomplete or defective item of Tenant Improvements that
would adversely affect Tenant's intended use of the Premises; (c) Landlord has
delivered possession of the Premises to Tenant; and (d) Landlord has obtained
all approvals and permits from the appropriate governmental authorities
required for the legal occupancy of the Premises for Tenant's intended use.
B. If the Commencement Date has not occurred for any
reason whatsoever on or before April 30, 1992 (the "Termination Date"), then in
addition to Tenant's other rights or remedies, Tenant may terminate this Lease
by written notice to Landlord, whereupon any monies previously paid by Tenant
to Landlord shall be reimbursed to Tenant, together with interest thereon from
the date of the termination until paid at the Interest Rate. The Termination
Date shall be delayed by one day for each day that a "Tenant Delay" (as defined
in paragraph 3.E below) actually delays completion of the Tenant Improvements.
3. Tenant Improvements:
A. Definitions: The term "Tenant Improvements" shall
mean those improvements that Landlord is obligated to construct at its sole
cost and expense at the Premises pursuant to the "Final Plans" described in
paragraph 3.B below.
B. Plans and Specifications: Preliminary plans and
specifications prepared by Kniff Essert Associates ("Architect") describing the
Tenant Improvements which have been approved by Landlord and Tenant (the
"Preliminary Plan") are attached hereto as Schedule 1 and are incorporated
herein by reference. On or before that date that is thirty (30) days after the
Effective Date, Landlord shall cause Architect and GMW Mechanical Engineering
("Engineer") to prepare and deliver to Tenant proposed final plans,
specifications and working drawings for the Tenant Improvements shown on the
Preliminary Plan, which shall be consistent with, and logical evolutions of,
the approved Preliminary Plan and the specifications and requirements submitted
by Tenant. If Tenant reasonably disapproves the proposed final plans in any
respect, then within seven (7) days following receipt of the proposed final
plans, Tenant may deliver to Landlord its written proposal for the changes
necessary to satisfy Tenant's
<PAGE> 15
objections. If the parties working together in good faith are unable to reach
agreement on final plans on or before that date that is forty-five (45) days
after the Effective Date, Tenant shall have the right to terminate this Lease
by delivery of a written notice to Landlord within ten (10) days thereafter,
provided that in such case: (i) Tenant shall pay to Landlord within fifteen
(15) days after Landlord's written demand therefor and Tenant's receipt of
reasonable substantiation from Landlord, one-half of the out-of-pocket costs
incurred by Landlord for architectural fees for preparation of the proposed
final plans as of the date of Tenant's termination notice, provided: (a)
Landlord shall include in its contract with Architect and Engineer a right of
early termination without penalty and shall use its reasonable efforts to
mitigate its damages by immediately informing Architect and Engineer of
Tenant's election to terminate; and (b) Tenant's total reimbursement obligation
hereunder shall not exceed $22,500; and (ii) all monies previously paid by
Tenant to Landlord shall be reimbursed to Tenant, together with interest
thereon at the Interest Rate from the date of the termination until paid. The
final plans, modified for changes proposed by Tenant and approved by Landlord
pursuant to this paragraph, shall be the approved Final Plans for purposes of
this paragraph 3. Landlord and Tenant shall indicate their approval of the
Final Plans by initialling them and attaching then hereto as Schedule 2.
C. Changes to Plans for Tenant Improvements: Once the
Final Plans have been finally approved by Tenant as provided above, thereafter
neither party shall have the right to order extra work or change orders with
respect to the construction of the Tenant Improvements without the prior
written consent of the other, which consent shall not be unreasonably
withheld or delayed. No changes to the Final Plans shall be effective unless
made pursuant to a written change order signed by Landlord and Tenant
specifying the amount of delay or time saving resulting therefrom, and any
added or reduced cost resulting therefrom. If a change order proposed by
Tenant and approved by Landlord causes a reduction in the cost of constructing
the Tenant Improvements, the amount of such actual cost savings may be used by
Tenant to offset the costs of any change orders for which Tenant would
otherwise be responsible under the terms of this Lease. Tenant shall pay any
increased tenant improvement costs caused by change orders initiated by Tenant
pursuant to a written change order signed by Tenant. Tenant shall pay such
costs within seven (7) days after the Commencement Date. Landlord (and any
contractor employed by Landlord or Landlord's contractor) shall not charge a
total fee for overhead, management and profit in excess of ten percent of the
actual cost increase occasioned by the change order.
D. Commencement and Completion of the Tenant Improvements:
As soon as (a) the Final Plans have been developed as provided above; and (b)
all necessary governmental approvals have been obtained (which Landlord shall
use due diligence to procure), Landlord shall thereafter commence construction
of the Tenant Improvements and shall diligently prosecute such construction to
completion. If all permits required for construction of the Tenant
Improvements in accordance with the Final Plans have not been issued on or
before October 15, 1991, then in addition to Tenant's other rights and
remedies, Tenant shall have the right to terminate this Lease by giving written
notice to Landlord, in which case any monies previously paid by Tenant shall be
reimbursed to Tenant, together with interest thereon at the Interest Rate from
the date of termination until paid.
E. Delay in Completion Caused by Tenant: The parties
hereto acknowledge that the date on which Tenant's obligations to pay base rent
under this Lease would otherwise commence may be delayed because of the
following events (herein referred to as "Tenant Delays"):
(1) Change orders requested by Tenant and
approved by Landlord to the extent such delay has been approved by Tenant
pursuant to a written change order signed by Tenant,
(2) Failure to respond to Landlord's submission
of the proposed Final Plans within the time periods set forth in paragraph 3.B
of this Addendum.
(3) Interference with Landlord's work caused by
Tenant or by Tenant's contractors or subcontractors; provided that prior to
claiming a delay hereunder, Landlord shall give twenty-four (24) hours advance
notice to Tenant of the delay in question and furnish Tenant an opportunity to
cure said delay.
-2-
<PAGE> 16
The date Tenant is otherwise obligated to begin paying rent
under this Lease shall occur one (1) day earlier than it would have otherwise
occurred for each day that the Commencement Date is actually delayed as a result
of a Tenant Delay (as defined herein); provided, however, that for purposes of
this Lease, the Commencement Date shall in no event be deemed to occur on any
date earlier than December 1, 1991, regardless of any Tenant Delay, unless
Landlord and Tenant can agree in writing on an earlier date.
F. Tenant's Right to Enter: Tenant, and its authorized
representatives, shall have the right to enter the Building at all reasonable
times for the purpose of inspecting the progress of the construction of the
Tenant Improvements. Landlord shall give Tenant at least sixty (60) days prior
written notice of its estimated date for substantial completion of the Tenant
Improvements, so that Tenant may cause its fixtures and equipment to be ordered.
When the construction of the Tenant Improvements has proceeded to the point
where Tenant's work of installing its fixtures and equipment in the Premises can
be commenced in accordance with good construction practices, Landlord also shall
notify Tenant to that effect and shall permit Tenant and its authorized
representatives and contractors to have access to the Premises for a period of
not less than fourteen (14) days for the purpose of installing Tenant's trade
fixtures and equipment. Tenant shall ensure that the insurance described in
paragraph 8.1 of the Lease Form is in effect during any period of early entry
and shall hold Landlord harmless from any loss or damage to Tenant's trade
fixtures and equipment during such period of early entry.
G. Construction Warranty: Landlord warrants that the
construction of the Building and the Tenant Improvements will conform to the
Final Plans, and that upon delivery of the Premises to Tenant, the Premises
(including the Tenant Improvements), Building and the project in which the
Building is located (the "Project") shall comply with all laws, building codes,
ordinances, statutes, rules, regulations (collectively, "Laws"), private
restrictions and other title matters affecting the Premises, Building or
Project, and that the Premises, Building and Tenant Improvements were
constructed in a good and workmanlike manner, and that all materials and
equipment furnished will conform to the Final Plans, and will be new and
otherwise of good quality. Tenant shall promptly notify Landlord in writing of
any defect in design, construction or equipment, and promptly thereafter
Landlord shall commence the cure of each such defect and complete such cure
with diligence at Landlord's cost and expense, not to be passed through to
Tenant. This warranty does not extend to, and Landlord shall not be liable
for, any construction defect in the Tenant Improvements which is discovered
more than one (1) year after the Commencement Date. With respect to
construction defects in the Tenant Improvements discovered after the expiration
of such one-year period, Landlord and Tenant acknowledge that they intend that
Tenant shall have the benefit of any express or implied warranties existing in
favor of Landlord which would assist Tenant in correcting such defects. Upon
request by Tenant following the expiration of such one-year period, Landlord
shall inform Tenant of all written warranties existing in favor of Landlord
which affect the Tenant Improvements and hereby assigns such warranties to
Tenant. Landlord shall cooperate with Tenant in enforcing such warranties and
in bringing any suit that may be necessary to enforce liability with regard to
any defective item or condition which is discovered or of which Landlord
receives notice after the expiration of said one-year warranty period, so long
as Tenant pays all costs reasonably incurred by Landlord in connection
therewith.
H. Punch List: Within five (5) days after the
Commencement Date, Landlord and Tenant shall together walk through and inspect
the work and prepare a written "punch list" of incomplete or defective
construction. Landlord shall use its best efforts to complete and/or repair
any items on the "punch list" within thirty (30) days after the parties have
prepared the "punch list" or as soon thereafter as practicable in the exercise
of due diligence. The preparation of such a "punch list" shall not be deemed a
waiver of Tenant's rights under this Lease.
I. Costs Associated With Tenant Improvements: Landlord
shall pay all costs associated with the design and construction of the Tenant
Improvements, and Tenant's sole obligation for such costs shall be for the
payment of increased costs, if any, associated with change orders initiated by
Tenant which costs are approved by Tenant pursuant to a written change order in
accordance with paragraph 3.C hereof.
-3-
<PAGE> 17
4. Rent:
A. Notwithstanding anything to the contrary in the Lease
Form, all base rent and additional rent shall be equitably prorated to reflect
the commencement and termination dates of the Lease.
B. Tenant shall have no obligation to pay Base Rent or
Operating Expenses (including Taxes) for the period of time beginning on the
Commencement Date and ending on that date that is four (4) months after the
Commencement Date (such that Tenant shall be entitled to a full four months
free Rent.)
5. Condition of Premises: Notwithstanding anything to the
contrary in the Lease Form, Landlord warrants and represents that as of the
Commencement Date the Premises will be in good condition and repair and the
electrical, mechanical, HVAC, plumbing, elevator and other systems serving the
Premises and the Building will be in good condition and repair.
6. Compliance with Laws:
A. If, at the Commencement Date, the Tenant
Improvements, Premises, Building, or the Project fail to conform to all
requirements of covenants, conditions, restrictions and encumbrances ("CC&Rs"),
underwriters' requirements, title matters affecting the Project or Laws
applicable thereto, then Landlord shall correct any such violations at
Landlord's solo cost and expense.
B. Except as expressly set forth in paragraph 6.D below,
Tenant shall not be required to construct or pay for the cost of complying with
any CC&Rs, title matters, underwriters' requirements or Laws requiring
construction of improvements in the Premises which are properly capitalized
under general accounting principles, unless such compliance is necessitated
because of Tenant's particular use of the Premises.
C. Tenant's compliance with Laws governing the use and
disposal of Hazardous Materials and Tenant's obligation to defend Landlord with
competent counsel, indemnify and hold Landlord harmless from any claims,
damages or liabilities resulting from Tenant's failure to do so in connection
with Hazardous Materials shall be governed solely and exclusively by paragraph
13 of this Addendum.
D. Tenant shall not be required to construct
modifications, alterations or improvements required to comply with Laws, title
matters, CC&Rs or insurance underwriters' requirements not necessitated by
Tenant's particular use of the Project, and Landlord shall perform and
construct such improvements within the time period required by Law or
governmental authority, underwriters' requirements or CC&Rs, as the case may be,
and such costs shall be amortized in the same manner as capital improvements as
set forth in paragraph 9.C of this Addendum. Tenant shall pay its
proportionate share (based on the percentage of the Building or Project leased
by Tenant, or other equitable basis) of the amortized cost of modifications,
alterations or improvements not necessitated by Tenant's particular use that
are required to be constructed by Landlord in accordance with this
subparagraph, provided that (i) such costs are amortized over the useful life
of the item in accordance with paragraph 9.B of this Addendum; and (ii) any
such requirement is not necessitated by the failure of the Premises, Building
or Project to comply with Laws, CC&Rs, title matters or underwriters'
requirements as of the Commencement Date.
7. Use of Premises: Notwithstanding anything to the contrary in
the Lease Form, Landlord represents and warrants that the use of the Premises
for the design, manufacture, assembly, and storage of lasers and laser related
equipment is and as of the Commencement Date will be permitted by all zoning
Laws and CC&Rs. If the Premises should become unsuitable for Tenant's use as a
consequence of fire, casualty, exercise of eminent domain, cessation of
utilities or other services required to be provided to the Premises by Landlord,
or the presence of any Hazardous Material (as defined in paragraph 13), which
does not result from Tenant's use, storage or disposal of such material in or
about the Premises, then Tenant shall be entitled to an abatement of rent to the
extent of the interference with Tenant's use of the Premises occasioned thereby.
If such interference cannot be corrected or the damage resulting therefrom
repaired so that the Premises will be reasonably suitable for Tenant's intended
use within two hundred seventy (270) days following the occurrence of such
event, then
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Tenant also shall be entitled to terminate this Lease by delivery of written
notice to Landlord at any time after occurrence of the event of interfering
with Tenant's use.
8. Alterations, Additions and Improvements: Notwithstanding
anything to the contrary in the Lease Form:
A. Nonstructural: Tenant may construct nonstructural
alterations, additions and improvements ("Alterations") in the Premises without
Landlord's prior approval, if the cost of such work does not exceed Ten Thousand
Dollars ($10,000) (the "Alterations Threshold"), provided that Tenant shall
nonetheless notify Landlord five (5) business days prior to commencing such
Alterations so that Landlord may post notices of nonresponsibility. If
Landlord's consent is required for an Alteration and Landlord does not notify
Tenant in writing of its approval or disapproval within fifteen (15) days
following Tenant's request for approval, then Landlord shall be deemed to have
approved the proposed Alteration.
B. Alterations In Excess of $10,000: Where the proposed
cost of any Alteration exceeds the Alterations Threshold, Landlord may require
Tenant to select one of the following alternatives: (i) provided Landlord or
such contractor is a licensed contractor and furnishes services at competitive
rates, Landlord may require Tenant to employ Landlord or a contractor selected
by Landlord to construct the Alteration in question (in which case the
supervisory fee described in (ii) shall not be charged by Landlord); or (ii)
Landlord may allow Tenant to select Tenant's own contractor, provided that such
contractor is first approved by Landlord (which approval shall not be
unreasonably withheld or delayed), but in such case Tenant shall pay to Landlord
a supervisory fee equal to seven percent (7%) of the cost of the Alteration
(excluding the supervisory fee) in compensation for Landlord's services in
evaluating and supervising the construction. Landlord shall notify Tenant in
writing within ten (10) days of Tenant's request of the alternative selected by
Landlord.
C. Removal: Upon request, Landlord shall advise Tenant
in writing whether it reserves the right to require Tenant to remove any
Alterations from the Premises upon termination of the Lease.
D. Tenant's Property: All Alterations, trade fixtures and
personal property installed in the Premises at Tenant's expense ("Tenant's
Property") shall at all times remain Tenant's property and Tenant shall be
entitled to all depreciation, amortization and other tax benefits with respect
thereto. Except for Alterations which cannot be removed without structural
injury to the Premises, at any time Tenant may remove Tenant's Property from the
Premises, provided Tenant repairs all damage caused by such removal.
E. Lien Waiver: Landlord shall have no lien or other
interest whatsoever in any item of Tenant's Property, or any portion thereof or
interest therein located in the Premises or elsewhere, and Landlord hereby
waives all such liens and interests. Within ten (10) days following Tenant's
request, Landlord shall execute documents in form reasonably acceptable to
Tenant to evidence Landlord's waiver of any right, title, lien or interest in
Tenant's Property located in the Premises.
F. Insurance: Tenant shall have no obligation to insure
any property in the Premises, other than Tenant's Property, from fire or any
other casualty and Tenant shall be entitled to all insurance proceeds and
condemnation awards and settlements payable with respect to Tenant's Property.
C. Sale of Tenant's Property: Landlord shall provide
Tenant with at least five (5) days prior written notice of any sale of Tenant's
Property.
9. Repairs and Maintenance:
A. Notwithstanding anything to the contrary in the Lease
Form, Landlord shall perform and construct, and Tenant shall have no
responsibility to perform or construct, any repair, maintenance or improvement
(i) necessitated by the acts or omissions of Landlord or any other occupant of
the Project, or their respective agents, employees or contractors; (ii)
occasioned by fire, acts of God or other casualty or by the exercise of the
power of eminent domain; (iii) required as a consequence of any violation of Law
or construction defect in the Premises or the Project as of the Commencement
Date; (iv) for which Landlord receives reimbursement from others or for which
Landlord would have received reimbursement from others had Landlord, in the
exercise of Landlord's good faith business judgment, pursued such reimbursement;
(v) which would be treated as a "capital expenditure" under generally
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accepted accounting principles, except to the extent the costs of such items are
amortized in accordance with paragraph 9.C below, and (vi) to any portion of the
Project outside of the demising walls of the Premises. Tenant's obligation, if
any, to reimburse Landlord for the costs of such repairs, maintenance and
improvements shall be governed by the other provisions of this Lease.
B. Tenant shall obtain at Tenant's cost a routine
maintenance contract for the heating, ventilating and air conditioning ("HVAC")
system serving the Premises which provides for the periodic inspection and
service of such equipment. For the first year of the Lease term following the
Commencement Date, Landlord shall promptly after notice by Tenant perform all
maintenance and repair of the HVAC system that is not covered by such HVAC
maintenance contract.
C. If any of Tenant's obligations under the Lease Form
(as modified by this Addendum) would require Tenant to pay all or any portion
of any charge which could be treated as a capital improvement under generally
accepted accounting principles, then Tenant shall pay its share of such expense
as follows:
(1) The cost of such improvements shall be
amortized over the useful life of the improvement (as reasonably determined by
Landlord in accordance with generally accepted accounting principles) with
interest on the unamortized balance at the then prevailing market rate Landlord
would pay if it borrowed funds from an institutional lender to construct such
improvements. Landlord shall inform Tenant of the monthly amortization payment
required to so amortize such costs, and shall also provide Tenant with the
information upon which such determination is made.
(2) Tenant shall pay its proportionate share
(based on the percentage of the Building or Project leased by Tenant, or other
equitable basis) of such amortization payment for each month after such
improvement is completed until the first to occur of (i) the expiration of the
initial Lease term or (ii) the end of the term over which such costs were
amortized, which amount shall be due at the same time the monthly Base Rent is
due.
10. Expenses: Notwithstanding anything to the contrary in the
Lease Form, in no event shall Tenant have any obligation to perform, or to pay
directly, or to reimburse Landlord for, all or any portion of the following
repairs, maintenance, improvements, replacements, premiums, claims, losses,
fees, charges, costs and expenses (collectively, "Costs"):
A. Excluded Costs/Cost Limitations:
(1) Structure: Costs relating to the repair or
maintenance of the structure of the Building, including, without limitation,
the foundations, load-bearing walls, exterior walls, and structural roof,
excluding damage thereto caused by the negligence or willful misconduct of
Tenant or Tenant's employees, agents or contractors.
(2) Losses Caused Others: Costs occasioned by the
act, omission or violation of Law by Landlord, any other occupant of the
Project, or their respective agents, employees or contractors.
(3) Casualties and Condemnations: Costs
occasioned by fire, acts of God, or other casualties or by the exercise of the
power of eminent domain.
(4) Capital Improvements: Costs relating to
repairs, alterations, improvements, equipment and tools which would properly be
capitalized under generally accepted accounting principles ("GAP"), except to
the extent that such Cost is amortized over the useful life of the item in
question in accordance with GAP and only the amortized amount included in annual
operating expenses. Such excluded Costs shall also include lease payments and
Costs for capital machinery and equipment, such as air conditioners, elevators,
and the like.
(5) Reimbursable Expenses: Costs for which
Landlord receives reimbursement from others or for which Landlord would have
received reimbursement from others had Landlord, in the exercise of Landlord's
good faith business judgment, pursued such reimbursement. Costs and expenses
for which Tenant reimburses Landlord directly or which Tenant pays directly to
a third person.
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(6) Real Estate Taxes: Taxes, assessments, all
other governmental levies, and any increases in the foregoing occasioned by or
relating to any of the following: (i) land and improvements not reserved for
Tenant's exclusive or nonexclusive use; (ii) a voluntary or involuntary change
of ownership or other conveyance of the real property of which the Premises is
a part, except as set forth in subparagraph 10.B below; (iii) assessments and
other fees for improvements and services which do not benefit the Premises, or
(iv) construction of improvements for other occupants of the Project. In the
event any assessment may be paid in installments, only the installment payment
shall be included in the expenses toward which Tenant will be required to
contribute, even if Landlord elects to pay the assessment in full.
(7) Construction Defects: Costs to correct any
construction defect in the Premises or the Project or to comply with any
CC&R's, underwriter's requirement or Law applicable to the Premises or the
Project on the Commencement Date.
(8) Utilities or Services: All utilities to the
Premises shall be separately metered at Landlord's expense. Tenant shall have
no obligation to pay costs arising from the use of any utility or service
supplied by Landlord to any other occupant of the Project. However, Tenant
shall pay its percentage share of utilities service charges for utilities
furnished to the Common Areas.
(9) Reserves: Depreciation, amortization or
other expense reserves.
(10) Mortgages: Interest, charges and fees
incurred on debt, payments on mortgages and rent under ground leases.
(11) Concessions and Parking: Costs incurred in
connection with the operation of any parking or commercial concession within
the Project.
(12) Art: Costs of sculptures, fountains,
paintings and other art objects.
(13) Insurance: Insurance Costs for coverage not
customarily paid by tenants of similar projects in the vicinity of the
Premises, increases in insurance Costs caused by the activities of another
occupant of the Project, insurance deductibles to the extent Tenant's share
thereof exceeds $10,000 per casualty, and co-insurance payments. Tenant shall
have no obligation to pay for earthquake insurance premiums to the extent
Tenant's share of such cost exceeds $10,000 per year (determined on an annual
non-cumulative basis).
(14) Hazardous Materials: Costs incurred to
investigate the presence of any Hazardous Material (defined in paragraph 13 of
this Addendum), Costs to respond to any claim of Hazardous Material
contamination or damage, Costs to remove any Hazardous Material from the
Project and any judgments or any other Cost incurred in connection with the
presence of Hazardous Materials, except to the extent caused by the storage,
use or disposal of the Hazardous Material in question by Tenant.
(15) Management: Wages, salaries, compensation,
and labor burden for any employee not stationed on the Project on a full-time
basis or any fee, profit or compensation retained by Landlord or its affiliates
for management and administration of the Project in excess of three percent
(3%) of Tenant's Base Rent.
B. Change of Ownership: If property taxes increase as a
result of reassessment after change of ownership under Proposition 13 or any
successor Law, Tenant's liability for property taxes during each of the twelve
(12) month periods following the change of ownership, commencing as of the date
of the change of ownership, shall be limited as follows: Tenant's liability in
the first twelve (12) months following the transfer of ownership shall be
limited to one hundred thirty-three and one-third percent (133-1/3%) of the
property taxes payable hereunder by Tenant with respect to the twelve (12)
months paid immediately preceding the transfer, and in the second twelve (12)
month period, one hundred sixty-six and two-thirds percent (166-2/3%) of the
property taxes paid by Tenant with respect to the twelve month period preceding
the transfer. Commencing on the third twelve (12) month period after the
change in ownership, Tenant shall be liable for the entire amount of property
taxes for which Tenant is otherwise responsible under this Lease levied against
the Premises with respect to each period after the third twelve (12) month
period. If the reassessment occurs as of a date other than July 1 (i.e., the
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commencement of a tax year), Tenant's liability for property taxes shall be
prorated on the basis of a 365-day year for the purpose of calculating the
amounts payable by Tenant during the years following the transfer.
11. Damage and Destruction of Premises: Notwithstanding anything
to the contrary in the Lease Form:
A. As soon as possible, but not later than forty-five
(45) days after an event of damage or destruction to the Premises or Building,
Landlord shall provide Tenant with a good faith written estimate supplied by an
independent contractor of the amount of time required to repair such damage or
destruction. If it is estimated that repairs required due to any such damage
to or destruction of the Premises or Building will not be completed within two
hundred seventy (270) days from the date of such damage or destruction, Tenant
may terminate the Lease by giving written notice of such election to Landlord
within thirty (30) days of receipt of Landlord's written estimate.
B. Landlord and Tenant shall each have the right to
terminate the Lease if (i) any damage to the Premises occurs during the last
year of the term of the Lease and (ii) it is estimated that necessary repairs
will not be completed within sixty (60) days from the date of such damage,
unless Tenant has an option to extend the term of the Lease and Tenant
exercises such option within thirty (30) days of the date of such damage.
C. Subject to paragraph 11.D governing uninsured loss
and deductible for loss due to flood and earthquake damage, Landlord shall not
have the right to terminate the Lease and shall be obligated to restore damage
caused by a casualty, fire or act of God, if the casualty was caused by either
a loss or peril which Landlord was required to insure against under the Lease
or a loss or a peril which Landlord actually insured against, even if such
insurance was not required (an "Insured Loss").
D. In the event of damage by casualty that is not an
Insured Loss or in the event of flood or earthquake damage, the following will
apply. Landlord shall not have the right to terminate the Lease and shall be
obligated to restore, except that Landlord may elect to terminate this Lease by
delivery of written notice to Tenant within forty-five (45) days after the
casualty if (i) the cost of restoration not covered by available insurance
proceeds exceeds Three Hundred Fifty Thousand Dollars ($350,000); and (ii)
Tenant does not elect in Tenant's sole discretion to pay the uninsured
restoration costs in excess of Three Hundred Fifty Thousand Dollars ($350,000)
to keep this Lease in effect.
12. Indemnity: Notwithstanding anything to the contrary in the
Lease Form:
A. Negligence or Misconduct: Tenant shall neither
release Landlord from, nor indemnify Landlord with respect to: (i) the
negligence, willful misconduct or breach of Law of Landlord, the other
occupants of the Project, or their respective agents, employees, contractors or
invitees; or (ii) a breach of Landlord's obligations or representations under
this Lease; or (iii) Hazardous Materials not discharged, released or otherwise
introduced on or about the Premises by Tenant or Tenant's employees, agents,
contractors or invitees.
B. Landlord's Indemnification: Landlord shall indemnify,
defend, protect and hold harmless Tenant from all damages, liabilities, claims,
judgments, actions, attorneys' fees, consultants, fees' costs and expenses
arising from the breach of Law, negligence or willful misconduct of Landlord or
its employees, agents or contractors, or the breach of Landlord's obligations or
representations under this Lease.
13. Hazardous Materials: Notwithstanding anything to the contrary
in the Lease Form:
A. Tenant shall be entitled to cause such inspections,
soils and groundwater tests and other evaluations to be made of the Premises
and Project as Tenant deems necessary regarding the presence and use of
Hazardous Materials in or about the Premises or Project.
B. If any environmental studies or evaluations performed
by Tenant with respect to the Project are unsatisfactory to Tenant in Tenant's
discretion, Tenant shall have the right to terminate this Lease by giving
written notice to Landlord of
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such election within twenty (20) days after the Effective Date, in which event
any monies previously paid by Tenant shall be reimbursed to Tenant together
with interest thereon from the date of termination until paid at the Interest
Rate.
C. Landlord represents that to the best of its knowledge,
any handling, transportation, storage, treatment or use of Hazardous Materials
that has occurred on the Project prior to the date of the Lease has not caused
any contamination of the Premises and that the Project is, to the best of
Landlord's knowledge, presently in compliance with all Laws which relate to
Hazardous Materials. To the best of Landlord's knowledge, there are no
Hazardous Materials at the Premises, Building or Project at levels that would
require remediation under applicable laws or ordinances. To the best of
Landlord's knowledge, there is no asbestos or PCB's at, or within any components
of, the Building. Landlord has delivered to Tenant all environmental reports
that Landlord has in its possession concerning the environmental condition of
the Premises and Project.
D. Any handling, transportation, storage, treatment,
disposal or use of Hazardous Materials by Tenant in or about the Premises shall
comply with all applicable Hazardous Materials Laws.
E. Tenant shall indemnify, defend upon demand with
counsel reasonably acceptable to Landlord, and hold harmless Landlord from and
against any and all liabilities, judgments, interest, penalties, fines,
monetary sanctions, attorneys' fees, experts' fees and court costs resulting
from any claim, demand, order or requirement of any governmental agency with
jurisdiction or any claim and any demand brought or threatened by any party
other than the parties to this Lease, and reasonably incurred remediation
costs, investigation costs and other related expenses which result from or
arise in any manner whatsoever out of the use, storage, transportation,
treatment, release or disposal of Hazardous Materials on or about the Premises
by Tenant, its agents, employees, invitees or contractors.
F. If the use, storage, disposal or release of Hazardous
Materials on the Premises caused by Tenant, its agents, employees, invitees or
contractors results in contamination or deterioration of water or soil
resulting in a level of contamination greater than the levels established as
acceptable and requiring remediation by any governmental agency having
jurisdiction over such contamination, then Tenant shall promptly take any and
all action necessary to remediate such contamination in accordance with, and to
the extent required by, any Law or governmental agency.
G. Except to the extent that the Hazardous Material in
question was released, emitted, discharged or otherwise introduced by Tenant,
or Tenant's agents, employees, invitees or contractors on or about the
Premises, Landlord, at its sole expense, shall promptly comply with all Laws,
orders, judgments and directives of any applicable governmental authority
concerning the investigation, removal, monitoring or remediation of any
Hazardous Materials present at any time on the Premises or Project or the soil,
groundwater, or surface water thereof.
H. As used herein, the term "Hazardous Materials" means
any substance, material or waste which is or becomes regulated by any local
governmental authority, the State of California or the United States
Government. The term "Hazardous Materials" includes, without limitation, any
material or substance which is (i) defined as a "hazardous waste," "extremely
hazardous waste" or "restricted hazardous waste" under Section 25115, 25117 or
15122.7, or listed pursuant to Section 25140 of the California Health and
Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law); (ii)
defined as "hazardous substance" under Section 25316 of the California Health
and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous
Substances Account Act); (iii) defined as a "hazardous material," "hazardous
substance" or "hazardous waste" under Section 25501 of the California Health and
Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release, Response,
Plans and Inventory); (iv) defined as a "hazardous substance" under Section
25281 of the California Health and Safety Code, Division 20, Chapter 6.7
(Underground Storage of Hazardous Substances); (v) petroleum; (vi) asbestos;
(vii) listed under Article 9 or defined as "hazardous" or "extremely hazardous"
pursuant to Article II of Title 22 of the California Administrative Code,
Division 4, Chapter 20; (viii) designated as a "hazardous substance" pursuant
to Section 311 of the Federal Water Pollution Control Act, 33 U.S.C. 1251 et
seq. or listed pursuant to Section 307 of the Federal Water Pollution Control
Act (33 U.S.C. 1317); (ix) defined as a "hazardous waste" pursuant to Section
1004 of the
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Federal Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq.; (x)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensations, and Liability Act, 42 U.S.C. 9601 et
seq.; or (xi) regulated under the Toxic Substances Control Act, 15 U.S.C. 2601
et seq. The term "Hazardous Materials Laws" shall mean (i) all of the
foregoing laws, as amended from time to time; and (ii) any other federal, state
or local law, ordinance, regulation or order regulating Hazardous Materials.
I. Landlord and Tenant shall each give written notice to
the other as soon as reasonably practicable of (i) any communication received
from any governmental authority concerning any Hazardous Material which relates
to the Premises or Project; and (ii) any contamination of the Premises or
Project by Hazardous Materials which constitutes a violation of any Hazardous
Materials Law.
J. The obligations of Landlord and Tenant under this
paragraph 13 shall survive the expiration or earlier termination of this Lease.
K. Tenant's obligations with respect to issues relating
to Hazardous Materials are exclusively established by this paragraph 13. In
the event of any inconsistency between any other part of this Lease and this
paragraph 13, the terms of this paragraph 13 shall control.
14. Waiver of Subrogation: Notwithstanding anything to the
contrary in the Lease Form, the parties hereto release each other and their
respective agents, employees, successors, assignees and subtenants from all
liability for injury to any person or damage to any property that is caused by
or results from a risk which is actually insured against, which is required to
be insured against under this Lease, or which would normally be covered by the
standard form of "all risk-extended coverage" casualty insurance, without
regard to the negligence or willful misconduct of the entity so released. Each
party shall use its best efforts to cause each insurance policy it obtains to
provide that the insurer thereunder waives all right of recovery by way of
subrogation as required herein in connection with any injury or damage covered
by the policy. If such insurance policy cannot be obtained with such waiver of
subrogation, or if such waiver of subrogation is only available at additional
cost and the party for whose benefit the waiver is not obtained does not pay
such additional cost, then the party obtaining such insurance shall immediately
notify the other party of that fact.
15. Assignment and Subletting: Notwithstanding anything to the
contrary in the Lease Form, Landlord's consent to any proposed assignment or
subletting shall not be unreasonably withheld or delayed and, if not given or
withheld within fourteen (14) days following Tenant's request for consent,
shall be deemed given. In evaluating a proposed subletting or assignment,
Landlord shall be entitled to consider, among other factors, (i) the financial
ability of the proposed subtenant or assignee to perform its obligations under
the sublease or assignment, as the case may be; (ii) the proposed use of the
Premises by the assignee or subtenant; and (iii) whether the use of Hazardous
Materials by the proposed assignee or subtenant, in Landlord's reasonable
opinion, poses a material risk of contamination of the Project or a serious
risk of harm to persons or to the property of Landlord, adjacent property
owners or other tenants.
16. Subordination: Notwithstanding anything to the contrary in the
Lease Form:
A. There is no loan or ground lease encumbering the
Premises other than a loan in favor of City National Bank ("Lender"). Within
forty-five (45) days after the Effective Date, Landlord shall furnish to Tenant
a recognition and nondisturbance agreement in form reasonably satisfactory to
Tenant executed by Lender, providing for recognition and continuation of this
Lease in the event of a foreclosure of Landlord's interests.
B. This Lease shall not be subject to or subordinate to
any ground or underlying lease or to any lien, mortgage, deed of trust, or
security interest now or hereafter affecting the Premises, nor shall Tenant be
required to execute any documents subordinating this Lease, unless the ground
lessor, lender, or other holder of the interest to which this Lease shall be
subordinated contemporaneously executes a recognition and nondisturbance
agreement which (i) provides that this Lease shall not be terminated so long as
Tenant is not in default under this Lease and (ii) recognizes all of Tenant's
rights hereunder. Further, Tenant shall have no obligation to attorn
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<PAGE> 24
to any successor-in-interest or ground lessor, nor to execute any documents
evidencing attornment, unless the successor-in-interest or ground lessor in
question assumes, in writing, all obligations of the Landlord under this Lease.
If Landlord sells or otherwise conveys its interest in the Premises, Landlord
shall not be relieved of its obligations under the Lease, unless and until
Landlord transfers any security deposit of Tenant to its successor and the
successor assumes in writing the obligations to be performed by Landlord on and
after the effective date of the transfer.
17. Common Areas: Notwithstanding anything to the contrary in the
Lease form, if Landlord is permitted to alter any Common Area of the Premises,
such alteration shall not unreasonably interfere with Tenant's use of the
Premises or Tenant's parking rights.
18. Rules and Regulations: Notwithstanding anything to the
contrary in the Lease Form, Tenant shall not be required to comply with any new
rule or regulation, unless the same applies non-discriminatorily to all
occupants of the Project and does not unreasonably interfere with Tenant's use
of the Premises or Tenant's parking rights.
19. Approvals: Notwithstanding anything to the contrary in the
Lease Form, whenever the Lease requires an approval, consent, designation,
determination or judgment by either Landlord or Tenant, such approval, consent,
designation, determination or judgment (including, without limiting the
generality of the foregoing, those required in connection with assignment and
subletting) shall not be unreasonably withheld or delayed and in exercising any
right or remedy hereunder, each party shall at all times act reasonably and in
good faith.
20. Reasonable Expenditures: Notwithstanding anything to the
contrary in the Lease Form, any expenditure by a party permitted or required
under the Lease, for which such party is entitled to demand and does demand
reimbursement from the other party, shall be limited to the fair market value
of the goods and services involved, shall be reasonably incurred, and shall be
substantiated by documentary evidence available for inspection and review by
the other party or its representative during normal business hours.
21. Surrender: Notwithstanding anything to the contrary in the
Lease Form, Tenant obligation to surrender the Premises shall be fulfilled if
Tenant surrenders possession of the Premises in the condition existing at the
commencement of the Lease, ordinary wear and tear, acts of God, casualties that
would typically be covered by a standard form of "all risk" policy covering the
Building, condemnation, Hazardous Materials (other than those stored, used or
disposed of by Tenant in or about the Premises), and interior improvements
which Landlord states in writing may be surrendered at the termination of the
Lease excepted.
22. Eminent Domain: Notwithstanding anything to the contrary in
the Lease Form, Tenant shall receive a portion of the condemnation proceeds
(whether by award or payment under threat of condemnation) based on: (i) fifty
percent (50%) of the Lease bonus value (the difference between the Lease rent
and fair market value rent); (ii) the value of the condemned improvements
Tenant has the right to remove from the Premises; (iii) the unamortized value,
allocable to the remainder of the Lease term, of any improvements installed at
Tenant's expense, which are not removable; (iv) Tenant's moving cost; (v) loss
to Tenant's goodwill as a consequence of the condemnation; and (vi) Tenant's
trade fixtures.
23. Vacation of Premises: Notwithstanding anything to the contrary
in the Lease Form, it shall not be a default under the Lease for Tenant to
vacate the Premises provided all of the following conditions are satisfied: (i)
Tenant is not otherwise in default under the term of this Lease at the time
Tenant vacates the Premises; (ii) Tenant reasonably secures the Premises; (iii)
Tenant continues to perform all of its obligations as set forth in the Lease to
maintain and repair the Premises; and (iv) the time period that the Premises are
vacant does not exceed ninety (90) business days in the aggregate during a
twelve month period.
24. Notices: Notwithstanding anything to the contrary in the Lease
Form, any notice or report required or desired to be given regarding this Lease
shall be in writing, may be given by personal delivery, by facsimile, by courier
service or by mail. Any notice or report addressed to Tenant at the Premises or
to Landlord at 10660 Scripts Ranch Boulevard, San Diego, California 92131, shall
be deemed to have been given (i) on the third business day after mailing if such
notice or report was
-11-
<PAGE> 25
deposited in the United States mail, certified or registered, postage prepaid;
(ii) when delivered if given by personal delivery; (iii) one day following
deposit, cost prepaid, with Federal Express or similar private carrier; (iv)
instantaneously upon confirmation of receipt of facsimile, and (v) in all other
cases when actually received. Either party may change its address by giving
notice of the same in accordance with this Paragraph.
25. Landlord's Entry of Premises: Notwithstanding anything to the
contrary in the Lease Form, Landlord and Landlord's agents, except in the case
of emergency, shall provide Tenant with twenty-four (24) hours' notice prior to
entry of the Premises. Such entry by Landlord and Landlord's agents shall not
impair Tenant's operations more than reasonably necessary. During any such
entry, Landlord and Landlord's agents shall at all times be accompanied by
Tenant.
26. Sale of Property: Notwithstanding anything to the contrary in
the Lease Form, Landlord shall not be relieved of its obligations under the
Lease upon a sale of the Building, unless the purchasing owner assumes the
obligations of Landlord in writing.
27. Quiet Possession: Notwithstanding anything to the contrary in
the Lease Form, Tenant shall peacefully have, hold and enjoy the Premises,
subject to the other terms of this Lease, provided that Tenant pays the Rent
and performs all of Tenant's covenants and agreement contained in this Lease.
This covenant and the other covenants of Landlord contained in this Lease shall
be binding upon Landlord and its successors only with respect to breaches
occurring during its and their respective ownerships of Landlord's interest
hereunder.
28. Landlord's Authority to Execute: Notwithstanding anything to
the contrary in the Lease Form, Landlord warrants and represents to Tenant that
Landlord has the full right, power and authority to enter into this Lease and
has obtained all necessary consents and approvals from its partners, officers,
board of directors or other members required under the documents governing its
affairs in order to consummate to the Lease contemplated hereby and that
Landlord hold title to the Project. The persons executing this Lease on behalf
of Landlord have the full right, power and authority so to do and affirm the
foregoing warranty on behalf of Landlord and on their own behalf.
29. No Waiver: No waiver by Tenant of any provision of this Lease
shall be deemed a waiver of any other provision or any subsequent breach by
Lessor of the same or other provision. The payment of rent by Tenant shall not
be deemed a waiver by Tenant of any provision of this Lease, regardless of
Tenant's knowledge of any breach at the time of payment of the rent in
question.
30. Landlord's Default: If Landlord breaches any obligation or
covenant under the Lease, Landlord shall be deemed to be in default if Landlord
fails to cure the breach within thirty (30) days after Tenant furnishes
Landlord with written notice specifying the nature of the breach; provided,
however, that if the nature of the breach is such that Landlord in the exercise
of due diligence requires more than thirty (30) days to cure, Landlord shall
not be deemed to be in default if Landlord promptly commences to cure the
breach within the thirty (30) day period and thereafter proceeds with due
diligence to complete the cure. If Landlord defaults in the performance of its
obligations under this Lease as defined above, in addition to Tenant's other
legal rights and remedies, Tenant, at its election way proceed to cure the
breach in question and (i) recover the cost of cure, together with interest at
the Interest Rate from Landlord from the date the sum was expended by Tenant
until the date repaid by Landlord; or (ii) offset the cost of cure together
with interest at the Interest Rate from the date the sum was expended by Tenant
from Tenant's obligations under this Lease, provided that the total amount that
may be offset by Tenant hereunder shall not exceed two (2) monthly installments
of the then payable Base Rent.
31. Defined Terms: Each term used herein with initial capital
letters shall have the meaning ascribed to such term in the Lease Form unless
specifically otherwise defined herein.
32. Option to Extend: Notwithstanding anything to the contrary in
the Lease Form:
A. Grant of Option: Landlord hereby grants to Tenant one
option (the "Option") to extend the term of this Lease, for an additional term
of five (5) years,
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<PAGE> 26
commencing when the then-existing term expires, upon the terms and conditions
set forth in this Paragraph.
B. Exercise of Option: Tenant may exercise such option
by giving Landlord written notice of its intention not less than ninety (90)
days prior to the expiration of the then-existing term of this Lease.
C. Extended Term Rent: If this Option is exercised, the
basic rent for the Premises shall become ninety-five percent (95%) of the then
current fair market monthly rent ("Fair Market Rent") for the Promises as of
the commencement date of the applicable extended term, as determined by the
agreement of the parties or, if the parties cannot agree within sixty (60) days
prior to the commencement of such extended term, then by an appraisal. All
other terms and conditions contained in the Lease and this Addendum, as the
same may be amended from time to time by the parties in accordance with the
provisions of the Lease, shall remain in full force and effect and shall apply
during the Option term.
D. Appraisal: If it becomes necessary to determine the
fair market rental value for the Premises by appraisal, real estate
appraiser(s), all of whom shall be members of the American Institute of Real
Estate Appraisers and who have at least five (5) years experience appraising
office space located in the vicinity of the Premises shall be appointed and
shall act in accordance with the following procedures:
(i) If the parties are unable to agree on the
Fair Market Rent within the allowed time, either party may demand an appraisal
by giving written notice to the other party, which demand to be effective must
state the name, address and qualifications of an appraiser selected by the
party demanding an appraisal (the "Notifying Party"). Within ten (10) days
following the Notifying Party's appraisal demand, the other party (the
"Non-Notifying Party") shall either approve the appraiser selected by the
notifying party or select a second properly qualified appraiser by giving
written notice of the name, address and qualification of said appraiser to the
Notifying Party. If the Non-Notifying Party fails to select an appraiser
within the ten (10) day period, the appraiser selected by the Notifying Party
shall be deemed selected by both parties and no other appraiser shall be
selected. If two appraisers are selected, they shall select a third
appropriately qualified appraiser. If the two appraisers fail to select a
third qualified appraiser, the third appraiser shall be appointed by the then
presiding judge of the county where the Premises are located upon application
by either party.
(ii) If only one appraiser is selected, that
appraiser shall notify the parties in simple letter form of its determination
of the Fair Market Rent for the Premises within fifteen (15) days following his
selection, which appraisal shall be conclusively determinative and binding on
the parties as the appraised Fair Market Rent.
(iii) If multiple appraisers are selected, the
appraisers shall meet not later than ten (10) days following the selection of
the last appraiser. At such meeting the appraisers shall attempt to determine
the Fair Market Rent for the Premises as of the commencement date of the
extended term by the agreement of at least two (2) of the appraisers.
(iv) If two (2) or more of the appraisers agree an
the Fair Market Rent for the Premises at the initial meeting, such agreement
shall be determinative and binding upon the parties hereto and the agreeing
appraisers shall, in simple letter form executed by the agreeing appraisers,
forthwith notifying both Landlord and Tenant of the amount set by such
agreement. If multiple appraisers are selected and two (2) appraisers are
unable to agree on the Fair Market Rent for the Premises, all appraisers shall
submit to Landlord and Tenant an independent appraisal of the Fair Market Rent
for the Premises in simple letter form within twenty (20) days following
appointment of the final appraiser. The parties shall then determine the Fair
Market Rent for the Premises by averaging the appraisals; provided that any
high or low appraisal, differing from the middle appraisal by more than ten
percent (10%) of the middle appraisal, shall be disregarded in calculating the
average.
(v) The appraisers' determination of Fair Market
Rent shall be based on rental of space of the same age, construction, size and
location as the Premises with the improvements installed therein at Landlord's
expense and shall take into account Tenant's obligations to pay additional rent
under this Lease. In determining
-13-
<PAGE> 27
Fair Market Rent, the appraisers shall not consider any alterations installed
in the Premises at Tenant's expense.
(vi) If only one appraiser is selected, then each
party shall pay one-half of the fees and expenses of that appraiser. If three
appraisers are selected, each party shall bear the fees and expenses of the
appraiser it selects and one-half of the fees and expenses of the third
appraiser.
E. Rescission of Option Exercises: Notwithstanding
anything to the contrary contained in this Paragraph, if the rent during any
extended term is determined by appraisal and if Tenant does not, in its sole
discretion, approve the rental amount established by such appraisal, Tenant may
rescind its exercise of the Option by giving Landlord written notice of such
election to rescind within ten (10) days after receipt of all appraisals. If
Tenant rescinds its exercise of the Option, then (i) the Lease shall terminate
on the thirtieth (30th) day after Tenant's notice of rescission or on the data
the Lease would have otherwise terminated absent Tenant's exercise of the
Option, whichever data is later; and (ii) Tenant shall pay all costs and
expenses of the appraisal.
33. Tenant's Right of First Refusal to Lease Additional Space:
Landlord hereby grants to Tenant a right of first refusal to lease the
mezzanine area located on the second floor of the Building as shown on Schedule
3 hereto (the "Right of First Refusal Property") under the terms of this
paragraph 33. If during the term of this Lease Landlord receives a bona fide
proposal from a third party which Landlord intends to accept for a lease of all
or any part of the Right of First Refusal Property, and which proposal is
acceptable to Landlord and the third party, Landlord shall so notify Tenant,
shall provide a copy of the proposal to Tenant, and shall give Tenant three (3)
business days to either (1) lease the Right of First Refusal Property set forth
in the third party proposal on the same terms and conditions as set forth in
the third party proposal, or (2) to refuse to lease the Right of First Refusal
Property on the terms of the third party proposal. In the event that Tenant
elects to lease the Right of First Refusal Property, Landlord and Tenant shall
enter into a lease which shall be in the same form as this Lease as modified by
the third party proposal within thirty (30) days of Tenant's notice of
acceptance to Landlord. If Tenant does not elect to lease the Right of First
Refusal Property by giving notice to Landlord as set forth herein, Landlord
shall be free to lease the Right of First Refusal Property set forth in the
third party proposal to the third party on the same terms and conditions set
forth in the proposal, within one hundred twenty (120) days after notice of the
proposal is given to Tenant. Any transaction (i) on terms and conditions more
favorable to the third party than the terms and conditions set forth in the
third party proposal furnished to Tenant; (ii) after one hundred twenty (120)
days has elapsed after Landlord has notified Tenant; (iii) with respect to
space other than that subject to the third party proposal; or (iv) after the
lease subject to the third party proposal has terminated or expired, shall be
subject to Tenant's right of first refusal as set forth herein.
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<PAGE> 28
34. Effect of Addendum: In the event of any inconsistency between
this Second Addendum and the Lease Form, the terms of this Second Addendum shall
prevail. As used herein, the term "Lease" shall mean the Lease Form, this
Addendum and all riders, exhibits, rules, regulations, covenants, conditions and
restrictions referred to in the Lease Form or this Addendum.
LANDLORD: TENANT:
FRANKRIS CORPORATION, CYMER LASER TECHNOLOGIES,
a California corporation a California corporation
By: [SIG] By: [SIG]
------------------------------ ------------------------------
Printed Printed
Name: Name:
--------------------------- ---------------------------
Title: President Title: President
--------------------------- ---------------------------
Date: 8/21/91 Date: 8/21/91
--------------------------- ---------------------------
-15-
<PAGE> 29
SCHEDULE 1
Preliminary Plan
(To Be Attached)
See attached binder
(105 pages)
<PAGE> 30
SCHEDULE 2
Final Plans
(To Be Attached When Agreed Upon
Pursuant to p3)
<PAGE> 31
SCHEDULE 3
CYMER LEASED PREMISES
[Right of first refusal space]
<PAGE> 32
TENANT ESTOPPEL CERTIFICATE
The undersigned is the Lessee under that certain Lease Agreement by and between
Frankris Corp., a California corporation, Lessor, and Cymer Laser Technologies,
Inc., a California corporation, Lessee, dated August 19, 1991 as amended from
time to time conveying a leasehold interest in the real property described
therein (the "Real Property"), said leasehold is commonly known as 16160 West
Bernardo Drive, San Diego, California (the "Leasehold Interest"). Lessee has
been notified that City National Bank (the "Bank") is the holder or proposed
holder of a note or other obligation secured or to be secured by a mortgage or
deed of trust upon the Real Property. Lessee hereby makes the following
promises, representations, warranties and certifications upon which the Bank
shall rely:
1) The Lease is for the term of 7 years and 4 months, with rent payable in
the amount of $ see attached schedule per year, payable monthly in
the amount of $ . The unexpired term of the Lease is equal to 7
years and 2 months, expiring on 31st of May 1999. The total amount of
rent to be paid over such period is equal to the sum of $2,911,323.96,
subject to the terms of Lease, of which the sum of $15,027 has been
paid in advance. Lessor is in receipt of a security deposit in the
amount of $23,756.
2) Lessee has accepted and is presently in possession of the premises and
there are no other persons in possession of the premises or holding
under Lessee and there has been no subletting or assignment of the
Lease. There are no other amendments or modifications to the Lease
except as referenced herein.
3) The Lease is presently in full force and effect. Lessee is not in
default in the performance of the terms of the Lease and has not
committed any breach of the Lease. Lessee does not have any offsets,
claims or defenses against the Lessor as to the enforcement of the terms
of the Lease. Lessor is not in default in the performance of the Lease
and has not committed any breach of the Lease.
4) The Lease is and shall at all times remain subordinate to the Bank's
deed of trust referenced herein and any extensions and renewals thereof
and Lessee does hereby agree to and does attorn to Bank in the event
that Bank shall obtain title to the Real Property. Lessee agrees to
execute such documentation as Bank may reasonably request in order to
effectuate the foregoing
-1-
<PAGE> 33
subordination and attornment agreement. Lessee hereby agrees and Lessor
hereby irrevocably authorizes Lessee to directly pay to Bank any rents
payable under the terms of the Lease upon notification by Bank, and
Lessor hereby waives any further rights against Lessee for said payments
to the extent that said amounts are actually received by Bank.
5) Lessee does not have any right, lien, charge, in or under any contract,
option, or agreement, involving the sale or transfer of the Real
Property. Neither Lessor nor Lessee is obligated for the payment of any
agent's fees with respect to the Leasehold.
In the event of any litigation arising in the enforcement of the Certificate,
the prevailing party shall be entitled to an award of reasonable attorney's
fees. Lessee acknowledges that this Certificate is made for the benefit of
Bank and that Bank intends to rely upon said Certificate in the extension of
credit to the Lessor.
IN WITNESS WHEREOF, the Certificate is executed this 17th day of December, 1991.
Cymer Laser Technologies, Inc., a
California corporation
BY: X /s/ ROBERT P. AKINS
----------------------------------
Robert P. Akins, President
(Lessee)
Lessor hereby acknowledges and agrees to be bound by the terms of the foregoing
Certificate and authorizes Lessee to execute same and to act in accordance
therewith.
Frankris Corp., a California
Corporation
BY: X /s/ ANTHONY V. DE LEONARDIS
------------------------------------
Anthony V. DeLeonardis
President
(Lessor)
<PAGE> 34
ADDENDUM TO LEASE
THIS ADDENDUM TO THAT CERTAIN INDUSTRIAL REAL ESTATE LEASE-NET, DATED JUNE 24,
1991 BY AND BETWEEN FRANKRIS CORPORATION, AS LESSOR, AND CYMER LASER
TECHNOLOGIES, INC., A CALIFORNIA CORPORATION, AS LESSEE, FOR THE PROPERTY
COMMONLY KNOWN AS 16160 WEST BERNARDO DRIVE, SAN DIEGO, CALIFORNIA, 92128, IN
THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA.
_______________________________________________________________________________
Page 1 of 1
47. Rent: The base rent per month for the term of the lease in accordance
with Section 4.1 of the lease shall be as follows:
Lease Year Monthly Rent
---------- ------------
1 $17,560.33
2 $32,026.00
3 $34,731.00
4 $36,735.00
5 $38,738.00
6 $40,742.00
7 $42,078.00
Tenant shall occupy approximately 35,600 square feet of improved space
during the first 18 months of the lease. The remaining approximately
4,474 square feet of tenant space shall be unimproved and unoccupied
during this 18 months. Tenant will pay for all tenant improvement
construction costs for this approximately 4,474 square feet prior to
occupancy of this space. In exchange for Tenant paying for these tenant
improvements, Landlord shall grant to the Tenant four months of free
rent and a move-in allowance as noted in paragraphs 48 and 49 below.
Tenant may improve and occupy this additional 4,474 square feet of space
prior to 18 months from the inception of the lease. In such case,
Tenant shall pay additional rent in proportion to the rent schedule
shown above.
<PAGE> 35
ADDENDUM TO LEASE
THIS ADDENDUM TO THAT CERTAIN INDUSTRIAL REAL ESTATE LEASE-NET, DATED JUNE 24,
1991 BY AND BETWEEN FRANKRIS CORPORATION, AS LESSOR, AND CYMER LASER
TECHNOLOGIES, INC., A CALIFORNIA CORPORATION, AS LESSEE, FOR THE PROPERTY
COMMONLY KNOWN AS 16160 WEST BERNARDO DRIVE, SAN DIEGO, CALIFORNIA, 92128, IN
THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA.
_______________________________________________________________________________
Page 1 of 1
47. Rent: The base rent per month for the term of the lease in accordance
with Section 4.1 of the lease shall be as follows:
Lease Year Monthly Rent
---------- ------------
1 $17,560.33
2 $32,026.00
3 $34,731.00
4 $36,735.00
5 $38,738.00
6 $40,742.00
7 $42,078.00
Tenant shall occupy approximately 35,600 square feet of improved space
during the first 18 months of the lease. The remaining approximately
4,474 square feet of tenant space shall be unimproved and unoccupied
during this 18 months. Tenant will pay for all tenant improvement
construction costs for this approximately 4,474 square feet prior to
occupancy of this space. In exchange for Tenant paying for these tenant
improvements, Landlord shall grant to the Tenant four months of free
rent and a move-in allowance as noted in paragraphs 48 and 49 below.
Tenant may improve and occupy this additional 4,474 square feet of space
prior to 18 months from the inception of the lease. In such case,
Tenant shall pay additional rent in proportion to the rent schedule
shown above.
<PAGE> 1
EXHIBIT 10.16
CONTRACT MANUFACTURING AGREEMENT - LITHOGRAPHY LASER
This Contract Manufacturing Agreement is entered into as of August 28,
1992, by and between CYMER Laser Technologies, a California corporation
("CYMER"), with offices at 16275 Technology Drive, San Diego, CA 92127-1815 and
Seiko Instruments Inc., a Japanese corporation, ("SII") with offices at 31-1,
Kameido 6-chome, Koto-ku, Tokyo 136, Japan.
WHEREAS, CYMER desires to have certain products of its design
manufactured by SII for sale only to CYMER pursuant to the terms and conditions
set forth in this Agreement;
THEREFORE, it is hereby agreed by and between the parties hereto as
follows:
SECTION 1. DEFINITION.
1.1 "Product" or "Products" shall mean the lithography excimer
laser described on Exhibit A hereto as well as all other excimer lasers that
are used for lithographic applications and all subsequent versions of the
foregoing, except for prototypes and research and development versions, that
are developed by or for CYMER during the term of this Agreement and their
attendant spare parts and refurbished discharge chambers.
1.2 "Subsidiary" or "Subsidiaries" means a corporation or other
legal entity of which more than fifty percent (50%) of its outstanding shares
or securities (representing the right to vote for the election of directors or
other managing authority) are, on the effective date of this Agreement or
hereafter, owned or controlled, directly or indirectly by Seiko Instruments
Inc. (but such corporation or other entity shall be deemed to be a Subsidiary
only so long as such ownership or control exists).
SECTION 2. AGREEMENT TO MANUFACTURE, SELL AND PURCHASE EXCLUSIVELY.
2.1 Manufacture, Sale and Purchase. Upon CYMER's orders, SII
agrees to manufacture and sell Products to CYMER, and CYMER agrees to purchase
such Products from SII, on the terms and conditions set forth herein. SII
shall not manufacture or sell the Products for, or to, any party other than
CYMER.
2.2 Exclusivity. During the term of this Agreement, SII shall not
use the confidential or proprietary information of CYMER to manufacture, sell
or produce for its own consumption or for third parties (except CYMER) excimer
lasers for lithography applications.
<PAGE> 2
SECTION 3. PRODUCT QUALIFICATION.
3.1 Manufacturing Process Integration. Subject to SII's option to
delay manufacturing of the Product as set forth in Section 5.2, SII agrees to
manufacture, in strict compliance with the design specifications and other
manufacturing instructions provided by CYMER (the "Specifications"), the
Products upon completion of the Manufacturing Process Integration set forth in
Exhibit B. The Specifications for the initial Product, final except for minor
modifications reasonably requested by CYMER's Product customers, shall be
delivered to SII by mid-June, 1993. CYMER shall deliver to SII preliminary
Specifications by December 1, 1992.
3.2 Qualification. SII shall, at its expense, take all necessary
or advisable actions to become qualified, within a reasonable period after
delivery of the Specifications, by CYMER to manufacture the Product according
to Specifications. CYMER will grant qualification by written notice upon such
actions being taken and completed successfully (the "Qualification").
3.3 Chances after Qualification. After the Qualification is
successfully completed for any Product to be manufactured under this Agreement,
SII shall not make any material changes in the manufacturing process unless
such changes are requested by CYMER or SII and agreed to in writing by both
parties. Notwithstanding the foregoing, SII may, in its own discretion, make
any non-material changes in such process without the prior written consent of
CYMER.
3.4 Right to Subcontract. SII shall have the right to subcontract
to third parties the manufacture of modules of the Product (except the
discharge chamber) in Japan or in any other country where such subcontract
would not violate United States or Japanese export laws, provided that such
third parties enter into a confidentiality agreement with SII to maintain
confidentiality of CYMER proprietary information.
SECTION 4. PRODUCTION MANUFACTURING.
4.1 Production Manufacturing. After Qualification of each Product
manufactured by the process described in Section 3 above, SII shall manufacture
the Product as ordered by CYMER pursuant to Section 5 below. CYMER shall not
authorize any third party to manufacture Products (other than spare parts) in
Japan or for end use in Japan, provided that SII is in compliance with its
material obligations under this Agreement and that notice of nonrenewal has not
been given as described in Section 11.1
4.2 Materials. SII shall be obligated to provide all materials
not supplied by CYMER, including without limitation all equipment, facilities,
tooling and labor necessary to perform under
-2-
<PAGE> 3
this Agreement. CYMER shall cooperate with any reasonable request by SII to
provide it with introductions to quality suppliers of materials necessary for
manufacture of the Product.
4.3 Technical Assistance. Subject to the availability of CYMER's
personnel, CYMER will provide to SII mutually agreeable technical assistance
with respect to manufacturing the Products.
4.4 Production Control Reporting. SII shall send CYMER monthly
updates reporting the status of all Products previously ordered by CYMER and
currently in process.
4.5 Facilities and Process Inspections. CYMER reserves the right
upon thirty (30) days prior written notice to SII to conduct inspections on SII
premises during normal business hours for the purpose of ensuring compliance
with this Agreement and the specifications provided by CYMER, provided CYMER
does not unduly interfere with SII's routine operation of its business affairs.
During the term of this Agreement, SII shall provide reasonable access to the
manufacturing operation as is required for assuring compliance with this
Agreement.
4.6 On Premise Acceptance. SII shall provide to CYMER sufficient
support and working space contiguous to the production line for the Product at
SII's manufacturing facility such that CYMER will be able to perform
acceptance, final product integration and final testing of the Product prior to
SII's wrapping and crating of the Product. Such support and working space
shall be substantially similar to that used by CYMER at its San Diego facility
to perform the same functions. CYMER shall deliver to SII on or before
December 15, 1992 a detailed description of such support and working space in
order to facilitate SII planning and budgeting. The acceptance tests to be
performed shall be identical to those used by CYMER at its own facility (the
"Acceptance Test"). A description of such Acceptance Test for the initial
Product to be manufactured by SII under this Agreement shall be delivered to
SII within 90 days of June 15, 1993. However, CYMER shall provide SII,
promptly following the effective date of this Agreement, with preliminary
Acceptance Test documentation existing as of the effective date of this
Agreement. Upon fulfillment of the Acceptance Test for each Product the
Product will be deemed accepted by CYMER and title and risk of loss will pass
to CYMER, F.O.B, SII's manufacturing facility. SII, at CYMER's expense, will
wrap, crate and ship the Product in accordance with CYMER's instructions.
SECTION 5. PURCHASE PRICE AND FORECASTS.
5.1 Purchase Price. The purchase price in yen per Product ordered
by CYMER hereunder shall be mutually agreed to in writing at least 120 days
prior to CYMER's first order. Such pricing
-3-
<PAGE> 4
schedule shall be CYMER San Diego's manufacturing cost of the Product (as
calculated in accordance with the calculation method described in Exhibit C
hereto) plus a 25% profit margin. Such pricing will be revised on a yearly
basis and may also be revised upon introduction of new models, in each case by
mutual written agreement. All currency conversions to determine CYMER San
Diego's manufacturing cost in yen shall be based on the average Wednesday New
York closing yen\dollar exchange rate as quoted in the Wall Street Journal for
the previous twelve weeks. Exhibit D is attached for reference purposes only
as estimated projections of such costs as of October 31, 1991. Both parties on
an annual basis or prior to introduction of new models will exchange cost
information. Notwithstanding the foregoing, in the event that the applicable
yen\dollar exchange rate used to determine CYMER San Diego's manufacturing
costs in yen is fifteen percent (15%) greater or less than the applicable
yen\dollar exchange rate as of the effective date of this Agreement, the
parties shall in good faith renegotiate the purchase price in yen per Product.
However, until or unless the parties successfully renegotiate such prices, such
prices will remain unchanged.
5.2 Schedule of Production. It is currently anticipated that
production by SII will begin in July 1994. However, SII shall have the option
to delay commencement of manufacture by up to one year (July 1995) if so
desired.
Subject to orders for Product permanently residing in Japan and mutual
agreement of the sales price of the Product to CYMER, the production orders to
SII will be a minimum of (i) thirty percent (30%) of the combined CYMER and SII
production during SII's first year of production, (ii) forty percent (40%) of
the combined CYMER and SII production during SII's second year of production,
and (iii) fifty percent (50%) of the combined CYMER and SII production
thereafter; provided, however, that in all events SII's production, and CYMER's
obligation to purchase Product, shall not exceed the aggregate sales during the
respective period for Product permanently residing in Japan. Upon thirty (30)
days notice to CYMER, SII shall have the right to inspect the sales and
manufacturing records of CYMER during normal business hours for the purpose of
verifying CYMER's compliance with minimum order requirements.
5.3 Forecasts and Purchase Obligations. Upon Qualification, CYMER
shall prepare in good faith and provide to SII 6-month, binding, rolling orders
on or before the first of each calendar month in order for SII to make timely,
necessary and appropriate preparations for factory equipment, tooling,
materials and staffing; provided that CYMER may defer quantities ordered for
months four (4), five (5), and six (6) for a period of not more than six (6)
months from the originally scheduled date, which deferred quantities shall be
reflected in subsequent orders.
-4-
<PAGE> 5
Exhibit E is attached for reference purposes only as an estimated projection as
of September 1991 of worldwide sales of excimer lasers for lithography
application.
5.4 Supply. During the term of this Agreement, SII will use its
best efforts to accept and fulfill all CYMER purchase orders for Products up to
the quantities as set forth in CYMER's current forecast, with a timeliness
substantially equivalent to CYMER's then current response time for customer
orders and shall also use its best efforts to fulfill CYMER's orders for
additional Products.
5.5 Order and Acceptance. All orders for Products submitted by
CYMER shall be initiated by written purchase orders sent to SII by facsimile or
courier and requesting a delivery date during the term of this Agreement which
is not earlier than ninety (90) days after the date of the order. All orders
shall be confirmed or rejected in writing by SII within five (5) SII business
days after receipt by SII. Orders shall be made by purchase orders, which
shall set forth the requested model number, delivery date, quantity, price and
delivery destinations of the ordered Products. Except for such items, the
terms and conditions of such purchase orders will be of no force or effect.
SECTION 6. PURCHASE TERMS AND CONDITIONS.
6.1 Purchase Orders. Any purchase orders placed by CYMER pursuant
to this Agreement that are accepted by SII shall be subject to this following
terms: (i) payment to SII net sixty (60) days after delivery of Products to
CYMER; and (ii) payment by CYMER of sales, use, excise or other similar tax
applicable to the sale of Product. The form of payment shall be a 90 day draft
by CYMER.
SECTION 7. WARRANTY
7.1 Testing. Each Product shall be subject to, and shall
satisfactorily pass, the Acceptance Test. SII shall provide access necessary
to conduct the Acceptance Tests.
7.2 Warranty. SII shall warrant that each Product delivered to
CYMER hereunder meets, and shall have been manufactured in accordance with the
Specifications. Additionally, SII shall warrant for the period set forth below
that the Product shall be free from defects in material and workmanship
("Defects"), except for defects arising from SII's compliance with the
Specifications, or any materials or equipment supplied by CYMER. The warranty
period shall be the shorter of (i) seventeen (17) months from the date of
purchase by CYMER or (ii) one year after delivery to an end-user. The parties
shall enter into good faith negotiations to amend the warranty period upon the
reasonable request of one party. To the extent that a customer of CYMER's
agrees to a shorter warranty period from CYMER, CYMER shall reduce the required
-5-
<PAGE> 6
warranty period from SII for the respective customer by the same amount of
time. All at SII's expense, CYMER shall be entitled, during or within
forty-five (45) days after expiration of the Warranty Period, to return to SII
any Product which has Defects and to require SII to provide, at CYMER's option,
either a refund, credit or a replacement Product within forty-five (45) days.
7.3 THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
ANY STATEMENTS MADE BY ANY OFFICERS, DIRECTORS, AGENTS OR EMPLOYEES OF SII
ABOUT THE DESIGN SUITABILITY, QUALITY, PERFORMANCE OR RESULTS OF PRODUCTS SHALL
NOT BE DEEMED TO BE A WARRANTY OR REPRESENTATION BY SII FOR ANY PURPOSE OR GIVE
RISE TO ANY LIABILITY OF SII.
SECTION 8. TECHNOLOGY OWNERSHIP.
CYMER shall retain ownership of all designs, process technology, trade
secrets, patents, copyrights, tooling, product information or other information
and materials provided by CYMER to SII for purposes of manufacturing Products.
All such proprietary information shall be considered CYMER's Confidential
Information (as defined below). Notwithstanding the foregoing, SII shall
retain the ownership of any and all intellectual property rights for
improvements in the manufacturing process of the Product conceived and
developed by SII. SII hereby grants to CYMER a royalty-free, worldwide
license, with the right to sublicense, to each such SII improvement, for a
period of ten (10) years from the date of implementation of the improvement by
CYMER.
SECTION 9. INTELLECTUAL PROPERTY AND DESIGN DEFECT INDEMNITY.
9.1 CYMER Indemnity. CYMER shall defend SII against any and all
claims, proceedings, causes of action and suits (collectively, "Claims") based
on any allegation that (i) the Product infringes any patent or any copyright,
trade secret or intellectual property right of any third parties (ii) the
Product has a design defect that has resulted in harm to a third party and such
third party has made a product liability Claim based on such design defect.
CYMER agrees to pay all costs of any such defense (including without limitation
all reasonable attorneys' fees) and all judgments, awards and settlement
amounts awarded against SII as a result of such Claims, subject to SII giving
CYMER prompt written notice upon discovering each Claim and giving CYMER full
information and reasonably requested assistance and sole control of the defense
or settlement of the Claim.
9.2 Insurance. CYMER shall, at its sole cost and expense,
maintain or obtain insurance in the amount of $1,000,000 per insurable event to
cover the type of claims described in
-6-
<PAGE> 7
Section 9.1. CYMER shall name SII an additional insured on the policy. The
insurance policy shall provide that the insurer will send SII written
notification of any change to such policy and the insurance coverage amounts
shall be annually reviewed and revised as deemed appropriate by both parties.
Full and complete copies of any insurance policy obtained pursuant to this
Section 9.2, together with a certificate of insurance shall be delivered to SII
within thirty (30) days after (i) the date of this agreement and (ii)
after each anniversary date thereof.
9.3 Sole Liability. THE FOREGOING PROVISIONS OF THIS SECTION 9
STATES THE SOLE LIABILITY OF EITHER PARTY TO THE OTHER WITH RESPECT TO ANY
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS RELATING TO THE SUBJECT OF THIS
AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE RESPONSIBLE FOR ANY INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES INCURRED BY THE OTHER, EVEN IF THE OTHER HAS
KNOWLEDGE OF THE POSSIBILITY OF SUCH POTENTIAL LOSS OR DAMAGE.
10. CONFIDENTIAL INFORMATION
10.1 CYMER and SII acknowledge that one party ("Disclosing Party")
may disclose to the other party ("Recipient") certain information required to
carry out this Agreement, including but not limited to, Product related
materials or know-how and financial, statistical, personnel or technical
information relating to the Disclosing Party's business which the Disclosing
Party deems proprietary and confidential. In the event Recipient receives such
information, Recipient agrees to keep such information confidential by using
the same care and discretion that it uses with its own information which it
considers confidential and shall not use such confidential information except
for the purposes of this Agreement. The exchange at specific meetings between
the parties of confidential information which has not been reduced to a
tangible medium shall not be subject to the confidentiality obligations imposed
on the Recipient under this Section 10 unless the Disclosing Party identifies
the information as confidential at the time of disclosure and confirms its
confidentiality in writing within thirty (30) days of the oral disclosure.
10.2 The obligations described in this section shall terminate ten
(10) years from the date of disclosure to Recipient or termination of this
Agreement, whichever occurs later, and shall not be applicable with respect to
any portion of the received information which:
(a) is rightfully known by Recipient at the time of its
receipt thereof from Disclosing Party.
(b) is publicly known through no fault of Recipient,
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<PAGE> 8
(c) is rightfully provided to Recipient without any
restriction on disclosure, by a third party not bound in a confidential
relationship to Disclosing Party,
(d) is provided by Disclosing Party to third parties
without restriction on disclosure,
(e) is disclosed pursuant to the requirements of a
government agency or disclosure is permitted by operation of law, or
(f) is independently developed by the Recipient by clear
and convincing evidence that no reference to the Disclosing Party's
confidential information was made.
10.3 Employees. The Recipient shall take appropriate action, with
respect to its employees, agents and consultants having access to confidential
information of the Disclosing Party to diligently enforce the confidentiality
of the Disclosing Party's confidential information and shall be responsible for
the actions of such employees, agents and consultants in this respect.
10.4 Breach. If the Recipient breaches any of its obligations with
respect to confidentiality and unauthorized use of the Disclosing Party's
confidential information hereunder, the Disclosing Party shall be entitled to
equitable relief to protect its interest therein, including but not limited to
injunctive relief, as well as money damages.
SECTION 11. TERM AND TERMINATION
11.1 Term. This Agreement shall remain in full force and effect
for five (5) years from the date of this Agreement unless otherwise terminated
earlier as provided below. Thereafter, this Agreement will be renewed
automatically for successive two (2) year terms unless, at least one (1) year
prior to the renewal date, one party notifies the other that this Agreement
will not be renewed.
11.2 Termination for Breach. Except as set forth in Subsection
11.3 below, if either party defaults in the performance of any provision of
this Agreement, then the non-defaulting party may give written notice to the
defaulting party that if the default is not cured within sixty (60) days the
Agreement will be terminated. If the non-defaulting party gives such notice
and the default is not cured during the sixty-day period, then the Agreement
shall automatically terminate at the end of that period.
11.3 Termination for Insolvency. This Agreement shall terminate
upon written notice by the other party in the event of (i) the institution by
or against SII or CYMER of insolvency, receivership or bankruptcy proceedings
or any other proceedings for the settlement of SII's or CYMER's debts, (ii)
upon SII's or
-8-
<PAGE> 9
CYMER's making an assignment for the benefit of creditors, or (iii) upon SII's
or CYMER's dissolution or ceasing to do business.
11.4 Return of Materials. Upon termination or expiration of this
Agreement, SII shall within ninety (90) days of such termination or expiration
(i) return to CYMER all drawings, plans, designs, tooling, descriptions of
processes and all other materials supplied to SII under this Agreement,
including without limitation all tangible embodiment of information with
respect to the CYMER Products, and (ii) certify in writing to the compliance of
the above.
11.5 Survival of Provisions. The rights and obligations of the
parties pursuant to Sections 7-10, 11.4, 12-17 and 19-22 shall survive the
termination, rescission or expiration of this Agreement for any reason. In
addition, the rights and obligations of the parties with respect to purchase
orders outstanding on the effective date of termination shall continue,
provided that the purchasing party can provide evidence satisfactory to the
other party of its ability to pay for such orders in a prompt and timely
manner.
SECTION 12. GOVERNMENTAL APPROVALS.
12.1 SII shall obtain all required approvals of the Japanese
Government necessary in connection with this Agreement. Any obligation of SII
under this Agreement is subject to all required government approvals in form
and substance agreeable to the parties.
12.2 SII agrees to promptly file this Agreement, as required, with
the Japanese Fair Trade Commission.
12.3 CYMER shall obtain all required approvals from the United
States government, including any CYMER security clearances from the Defense
Department, on behalf of both parties hereto, as shall be required to permit
the delivery and license of technology, trade secrets, know-how, CYMER
Confidential Information and CYMER Products as required by the Agreement. Any
obligation to license or deliver such technology, trade secrets, know-how,
CYMER Confidential Information or CYMER Products is subject to all required
government approvals in form and substance agreeable to the parties.
12.4 If at any time any government or agency having jurisdiction
over either party hereto should require, directly or indirectly, any alteration
or modification of any term or condition of this Agreement or of the
performance by the parties under this Agreement in a manner which has a
material adverse effect on the other party hereto, then that party which
suffers from such alteration or modification may give written notice to the
other party
-9-
<PAGE> 10
setting forth its objection to such alteration or modification and requesting
consultation between the parties hereto relative to such alteration or
modification. Not later than thirty (30) days after the giving of such notice,
the parties shall discuss in good faith the possibilities of a mutually
satisfactory resolution of such objection; provided, however, that if the
parties hereto fail to reach agreement in writing on any mutually satisfactory
resolution within ninety (90) days after the date of giving of such notice of
objection, the suffering party shall have the right to rescind this Agreement,
on a second written notice to the other party. The parties acknowledge and
agree that, in the event of any such rescission pursuant to this section, the
party which elects to rescind shall not incur any liability to the other party
for any alleged default in the performance of this Agreement arising from the
exercise of its rescission rights under this section.
SECTION 13. WAIVER.
Either party's forbearance or failure to enforce any right or claim
against the other party arising under this Agreement shall not be deemed to be
a waiver by that party to such right or claim. Either party's waiver of a
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach or breaches of the same or any other
provision.
SECTION 14. GOVERNING LAW.
The validity, construction, and performance of this Agreement and the
legal relations among the parties to this Agreement shall be governed by and
construed in accordance with the laws of Japan, without reference to its
principles of conflicts of laws or statutory rules of arbitration. All
disputes, controversies or differences which may arise between the parties, out
of or in relation to or in connection with this Agreement, or for the breach
thereof, shall be settled by negotiation in good faith between the parties as
promptly as possible. If such disputes, controversies or differences are not
settled amicably, within sixty (60) days of written notice, either party may
proceed to initiate an arbitration. The arbitration shall be held in Honolulu,
Hawaii under the commercial rules and auspices of the Asia/Pacific Center for
the Resolution of International Business Disputes (the "Center"), by which each
party is hereby bound. Under such arbitration there shall be three
arbitrators. Each party, within thirty (30) days after initiation of the
arbitration, shall appoint one arbitrator and instruct them, respectively, to
select together the third arbitrator; but if they cannot select the third
arbitrator within sixty (60) days after initiation of the arbitration, then the
Center may appoint the third arbitrator in accordance with its rules. The
arbitrators shall apply Japanese law to the merits of any disputes or claim,
without reference to rules of conflicts of law. The arbitral proceedings and
all pleadings and written
-10-
<PAGE> 11
evidence shall be in the English language. Any written evidence originally in
a language other than English shall be submitted in English translation
accompanied by the original or a true copy thereof. The award rendered by the
arbitrator shall be final and binding upon the parties and may be enforced in
any court of competent jurisdiction.
SECTION 15. PROFESSIONAL FEES.
In any proceeding relating to the subject matter of the Agreement,
each party shall bear its own costs, fees, and expenses incurred by
accountants, attorneys, and other professionals for services rendered to that
party in connection with the proceeding, including costs, fees, and expenses of
preparation and appeal.
SECTION 16. SEVERABILITY.
In the event any provision of this Agreement or the application of any
such provision shall be held by a court of competent jurisdiction to be
contrary to law, the parties shall meet to discuss whether such provision
should be severed from this Agreement and whether the remaining provisions of
this Agreement should remain valid and in full force and effect.
SECTION 17. FORCE MAJEURE
17.1 If the performance of this Agreement or any obligations
hereunder, except the making of payments, is prevented, restricted or
interfered with by reason of fire or other casualty or accident, strikes or
labor disputes, war or other violence, any law, order, proclamation,
regulations, ordinance, demand or requirement of any government agency, or any
other act or condition beyond the reasonable control of the parties hereto
("Event of Force Majeures"), the party so affected upon giving prompt notice to
the other party shall be excused from such performance to the extent of such
prevention, restriction or interference; provided that the party so affected
shall use its reasonable best efforts to avoid or remove such causes of
nonperformance and shall continue performance hereunder with the utmost
dispatch whenever such causes are removed.
17.2 The party suffering an Event of Force Majeure shall notify the
other party within fifteen (15) days of the occurrence of such Events and
within thirty (30) days shall furnish the other party with a recovery plan of
action. Without limiting the foregoing, a party suffering an Event of Force
Majeure shall use its reasonable best efforts to limit the impact of the Event
of Force Majeure on such party's performance of this Agreement.
-11-
<PAGE> 12
SECTION 18. ASSIGNMENT.
All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement and to their
respective heirs, successors, assigns, and legal representatives, provided
that:
(a) neither party may assign this Agreement in whole or
in part without the other party's prior written consent, which each party may
withhold in its sole discretion; provided, however, that SII shall have the
right to assign this Agreement to a Subsidiary;
(b) any permitted assignee or transferee must agree in
writing to comply with all terms and conditions of this Agreement; and
(c) any assignment shall not exceed the existing scope
of this Agreement.
SECTION 19. NOTICES.
Except as otherwise provided herein, notices required to be given by
this Agreement shall be in writing and shall be deemed to be effective when
received by the other party if delivered by facsimile (with facsimile
confirmation of receipt and the dispatch of confirmation copy by first class
mail) or by international courier such as DHL or Federal Express, delivery fees
prepaid, properly addressed to the offices of the respective parties specified
in this Agreement or such other address or facsimile number as the party may
later specify in writing for such purposes. Notice to SII shall be addressed
to the attention of the SII Legal Department. This provision shall apply
regardless of whether such delivery is accepted or unclaimed. The facsimile
number for notices to SII shall be 03-3638-1102. The facsimile number for
notices to CYMER shall be 619-487-2441.
SECTION 20. RELATIONSHIP OF THE PARTIES.
The relationship of the parties to this Agreement is that of
arms-length negotiators, and the parties expressly agree that neither party is
the agent of the other and that neither party has any express or implied
authority to act on behalf of or make any representations whatsoever on behalf
of each other. Further, the parties agree that neither party has the right to
control any activity of the other party outside the terms of this Agreement.
SII shall take appropriate action to ensure that any Subsidiary acquiring
rights under this Agreement shall be bound by the provisions hereof.
-12-
<PAGE> 13
SECTION 21. ENTIRE AGREEMENT.
The parties expressly acknowledge that they have read this Agreement
and understand its provisions. The parties further agree and acknowledge that
they understand that this Agreement constitutes the entire agreement between
them with respect to the subject matter of this Agreement, and that it
supersedes all prior proposals, agreements, negotiations, representations,
writings, and all other communications, whether written or oral, between them
with regard to the subject matter of this Agreement. No modification of waiver
of any provision of this Agreement shall be effective unless it is in writing
and signed by both parties. This agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of which shall
constitute one document.
SECTION 22. PUBLICITY
Neither CYMER nor SII shall issue any press release or otherwise make
any public statements with respect to this Agreement without the written
consent of the other. Notwithstanding the foregoing, each party shall be
allowed to inform its attorneys, bankers, auditors, subsidiaries and agents
about the existence and contents of this Agreement. Additionally, each party
shall be allowed to make any announcement or disclosure required by law,
required or advisable for inclusion in financial statements.
IN WITNESS WHEREOF, the parties hereto have caused this CONTRACT
MANUFACTURE AGREEMENT - LITHOGRAPHY LASER to be executed by their authorized
representatives.
CYMER LASER TECHNOLOGIES: SEIKO INSTRUMENTS INC.:
a California corporation a Japanese corporation
By: /s/ ROBERT P. ATKINS By: /s/ SADAO MORITOMO
------------------------- -----------------------
Robert P. Atkins, President Sadao Moritomo, Senior
Managing Director
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<PAGE> 14
EXHIBIT A
PRODUCT DESCRIPTION AND MANUFACTURING SPECIFICATION
FOR ELS-5000 AND SUCCESSORS MINUS CERTAIN
SPECIFIED PROPRIETARY MODULES, SOFTWARE INTERFACES AND SOURCE CODE
<PAGE> 15
EXHIBIT "B"
Cymer / SII Manufacturing Process
Transfer for Contract Manufacturing
<TABLE>
<CAPTION>
1992 1993 1994 1995
Jun Jun Jun Jun
--- --- --- ---
<S> <C> <C> <C>
SII begins participating in 3rd quarter begin
5000 series development in manufacture.
San Diego.
5000 Series documentation
complete. SII can begin to
qualify suppliers.
SII sends a manufacturing/ Cymer sends manufacturing Ongoing consultations by
mechanical engineer to San engineer to SII to assist both companies both in Japan
Diego to participate in 5000 in qualifying facility and and USA.
series development. process.
</TABLE>
<PAGE> 16
EXHIBIT "C"
CYMER SAN DIEGO'S MANUFACTURING COST CALCULATION
Cymer San Diego calculates its manufacturing costs on the first in first out
("FIFO") method in accordance with generally accepted accounting principles
applied on a consistent basis. To determine product manufacturing cost in
inventories and cost of sales, the Company combines the standard manufacturing
cost of the Product (as defined below) with the appropriate capitalized
(inventories) or expensed (cost of sales) portion of purchase price, quantity
and capacity variances.
STANDARD MANUFACTURING COST CALCULATION
The standard manufacturing cost of a laser is determined by adding the standard
cost of (i) raw materials, (ii) labor, and (iii) overhead burden, associated
with assembling and testing a laser. The standard overhead rate is applied
based upon direct labor hours and is calculated by dividing the total projected
overhead costs for the year by the total projected work hours available,
assuming 90% efficiency. Overhead costs include among other items, facilities
expenses, depreciation, salaries and benefits for manufacturing administration,
operating supplies, expensed equipment, equipment lease and rentals, repairs
and maintenance, temporary help, product liability and freight costs.
<PAGE> 17
EXHIBIT "D"
10/31/91
CYMER LASER TECHNOLOGIES
PRO-FORMA BUSINESS PLAN PROPOSAL
TO CONTRACT FOR MANUFACTURE OF
NON-PROPRIETARY MODULES OF LASER
COST ANALYSIS OF LASER 1991
COST OF CHAMBER 24,100
COST OF CONTRACTOR MODULES 88,000
<TABLE>
<CAPTION>
PROJECTED COST AND UNIT SALES THROUGH 1996 1991 1992 1993 1994 1995 1996
- ------------------------------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
WORLD WIDE UNIT SALES OF LASERS 12 26 60 120 284 391
CUMULATIVE POPULATION OF LASERS 14 40 100 220 504 895
NUMBER OF CHAMBER REFURBS @2X 7 28 80 200 440 1008
CHAMBER REFURBS TO BE DONE IN JAPAN 0 100 220 504
UNIT SALES TO BE PRODUCED IN JAPAN 0 0 0 45 110 200
PROJECTED COST OF CONTRACTED MODULES 88,000 88,000 79,200 71,280 65,934 60,989
PROJECTED COST OF CHAMBER BUILD 24,100 24,100 21,690 19,521 18,057 16,703
COST PLUS 25% GROSS PROFIT 121,068 111,988 103,589
PROJECTED COST OF CHAMBER REFURBISHMENT 14,300 14,300 12,870 11,583 10,714 9,911
COST PLUS 25% GROSS PROFIT 15,444 14,286 13,214
CONTRACTOR LASER SALES REVENUE 5,448,060 12,318,669 20,717,762
CONTRACTOR PROFIT 1,362,015 3,079,667 5,179,440
CONTRACTOR PROFIT PERCENTAGE 25% 25% 25%
CONTRACTOR CHAMBER REFURB REVENUE 1,544,400 3,142,854 6,659,993
CONTRACTOR PROFIT 386,100 785,714 1,664,998
CONTRACTOR PROFIT PERCENTAGE 25% 25% 25%
TOTAL CONTRACTOR REVENUE 6,992,460 15,461,523 27,377,755
TOTAL CONTRACTOR PROFIT 1,748,115 3,865,381 6,844,439
CONTRACTOR PROFIT PERCENTAGE 25% 25% 25%
</TABLE>
<PAGE> 18
EXHIBIT "E"
---------------------------
LITHOGRAPHY UNIT PRODUCTION
---------------------------
[GRAPH]
<PAGE> 1
EXHIBIT 10.17
PRODUCT LICENSE AND MANUFACTURING AGREEMENT - HIGH POWER LASER
This Product License and Manufacturing Agreement is entered into as of
August 28, 1992, by and between CYMER Laser Technologies, a California
corporation ("CYMER"), with offices at 16275 Technology Drive, San Diego, CA
92127-1815 and Seiko Instruments Inc., a Japanese corporation ("SII"), with
offices at 31-1, Kameido 6-chome, Koto-ku, Tokyo 136, Japan.
WHEREAS, CYMER has rights to excimer laser technology in which SII
desires to acquire certain rights with respect to that technology; and
WHEREAS, CYMER and SII have executed a Research and Development
Agreement of even date hereof (the "Research and Development Agreement").
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. DEFINITIONS.
The terms defined in this Section 1 shall, for all purposes of this
Agreement, have the meanings in this Section 1 specified.
1.1 "Product" or "Products" means the product described in Exhibit
A hereto as well as the repackaged and improved version to be introduced in
mid-1993 and all subsequent versions of, and improvements to, the product
described in Exhibit A hereto that are developed by CYMER or SII during the
term of, and under the Research and Development Agreement, and, in each case,
their attendant spare parts and refurbished discharge chambers.
1.2 "Sale", "Sell" or "Sold" means a disposition for value
including any lease or other disposition by which the selling party receives
value.
1.3 "Subsidiary" or "Subsidiaries" means a corporation or other
legal entity of which more than fifty percent (50%) of its outstanding shares
or securities (representing the right to vote for the election of directors or
other managing authority) are, on the effective date of this Agreement or
hereafter, owned or controlled, directly or indirectly by SII (but such
corporation or other entity shall be deemed to be a Subsidiary only so long as
such ownership or control exists).
1.4 "System" means a finished system in which the Product is
incorporated that includes the addition of hardware and/or software supplied by
SII or a customer of SII, as the case may be, which (i) augments the market
value of the Product by more than 50% and (ii) by an objective examination of
standard list price, cost of production and product features represents a
significant transformation
<PAGE> 2
of the Product and results in a system that performs substantial additional
functions beyond the Product alone. Upon CYMER's request, SII shall furnish to
CYMER evidence of compliance with the provisions of definition of "System."
2. LICENSE GRANTS.
2.1 License with Respect to the Product. Subject to the
terms and conditions of this Agreement, CYMER grants to SII, an exclusive
(including against CYMER, except as provided in section 3.6), royalty bearing,
nontransferable (except as permitted in Section 23), right and license during
the term of this Agreement in the territory of Japan, to use CYMER's patents,
copyrights, mask work rights and proprietary information with respect to the
Product, to manufacture, market, distribute, modify, adapt, improve and Sell
the Product. CYMER agrees not to grant any such license to any third party to
manufacture, distribute or Sell any product substantially similar to, or
competitive with, the Product. Pursuant to the foregoing license, SII shall
also have the nonexclusive right to manufacture or have manufactured or
assembled Products and their components, other than their discharge chambers,
in countries other than Japan for Sale by SII pursuant to rights and
limitations in sections 2.1 and 2.2. The license granted in this Section 2.1
includes the right to have made by third parties components and sub-assemblies
of the Product, except the discharge chamber, provided that such third parties
shall enter into a confidentiality agreement with SII to maintain
confidentiality of CYMER proprietary information. Except with respect to the
subcontracting rights granted in sections 2.1, 2.2, 2.3, 2.4 and 2.5, and the
sublicense rights granted in Sections 2.6 and 3.1(b), no right to subcontract
or sublicense is granted from CYMER to SII.
2.2 License with Respect to Systems. Subject to the
terms and conditions of this Agreement, CYMER grants to SII, a nonexclusive,
royalty bearing, nontransferable (except as permitted in Section 23),
worldwide, right and license during the term of this Agreement, to use CYMER's
patents, copyrights, mask work rights and proprietary information with respect
to the Product to manufacture, market, distribute, modify, adapt, improve and
Sell Products for incorporation, and as incorporated into, Systems. The
license granted under this Section 2.2 includes (i) the right to have Systems
and all components and sub-assemblies of the Systems, other than Product
discharge chambers, made by third parties, provided that each such third party
shall enter into a confidentiality agreement to maintain the confidentiality of
CYMER proprietary information, and (ii) in accordance with Section 2.1, the
right to sell Products to third parties in Japan for incorporation into Systems
in Japan to be resold by such third parties to customers anywhere in the world.
-2-
<PAGE> 3
2.3 Limitations on Use; License for Enhancements to
Other Products
(a) Except as provided in Section 2.3, all
licenses granted under this Agreement by either party shall be limited to use
by the licensed party in the field of non-lithography excimer lasers.
(b) Subject to the terms and conditions of this
Agreement, CYMER hereby grants to SII, a non-exclusive, paid-up,
nontransferable (except as permitted in Section 23), worldwide, right and
license during the term of this Agreement, to use CYMER's patents, copyrights,
mask work rights and proprietary information with respect to the Product (the
"CYMER Product Intellectual Property") to develop Enhancements to SII products
and to incorporate such Enhancements in SII products for a period of ten (10)
years from the date of implementation by SII. No license is granted to SII to
develop or manufacture new products substantially based on CYMER Product
Intellectual Property.
(c) For the purposes of this Agreement the term
"Enhancements" means minor modifications to SII products which (i) by an
objective examination of functionality does not represent a significant
transformation of the product prior to such minor modification or (ii) would
not make the product competitive (on the basis of price, performance and
functionality) with the Product.
(d) SII shall provide to CYMER a written notice
of an Enhancement prior to the first sale of the respective product
incorporating the Enhancement.
(e) NOTWITHSTANDING ANY PROVISION TO THE
CONTRARY, ALL WARRANTIES OF ANY KIND WHATSOEVER GRANTED UNDER SECTION 6 OR
ELSEWHERE IN THIS AGREEMENT AND ALL INDEMNIFICATION OR ANY OTHER RECOURSE
AGAINST CYMER GRANTED TO SII ARE EXPRESSLY EXCLUDED WITH RESPECT TO USE OF
CYMER PRODUCT INTELLECTUAL PROPERTY UNDER THIS SECTION 2.3.
2.4 Cross License for Improvements.
(a) Cross License from CYMER to SII. CYMER
hereby grants to SII a worldwide, nontransferable (except as permitted in
Section 23), royalty free, paid up, perpetual (unless this Agreement is
terminated by CYMER pursuant to Section 12.2 or 12.3) right and license under
Sections 2.1 and 2.2 to use and implement in the Products improvements and
modifications to the Products (including manufacturing processes) developed and
reduced to practice by or for CYMER under the Research and Development
Agreement. The foregoing license is exclusive in Japan and nonexclusive
outside Japan.
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<PAGE> 4
(b) Cross License from SII to CYMER. SII hereby
grants to CYMER a nonexclusive, nontransferable (except as permitted in Section
23), royalty free, paid-up, perpetual (unless this Agreement is terminated by
SII pursuant to Section 12.2 or 12.3), right and license under SII's patents,
copyrights, mask work rights and proprietary information pertaining to
improvements and modifications to the Products (including manufacturing
processes) developed and reduced to practice by or for SII during the term of
the Research and Development Agreement, to use and improve such improvements
and modifications, including without limitation the right to make, have made,
Sell or otherwise distribute Products and systems incorporating such
improvements and modifications, subject to the limitations on CYMER's rights
under Section 2.1 of this Agreement. The foregoing license is worldwide with
respect to systems and excimer laser products other than Products and worldwide
except for Japan with respect to Products.
2.5 Software License. The licenses granted in Sections
2.1, 2.2, 2.3 and 2.4 include a license to the software set forth in the
Product description in Exhibit A and all additional software incorporated into
Products or used in the manufacture and testing of Products, in source code
format. The license to such software shall be subject to the limitations set
forth in Sections 2.1, 2.2, 2.3 and 2.4 and 3.1(b).
2.6 SII Subsidiaries. SII's Subsidiaries shall have the
right to exercise any and all of the rights granted by CYMER to SII under this
Agreement, for so long as any such rights may be exercised by SII hereunder,
provided that SII shall guarantee payment of royalties to CYMER by any such
Subsidiary and either (i) cause any such Subsidiary to execute a copy of this
Agreement at any time during the term of this Agreement and agree to be bound
hereby, or (ii) cause any such Subsidiary to execute a sublicense agreement
between SII and the Subsidiary at any time during the term of this Agreement
imposing obligations on such Subsidiary consistent with those imposed on SII
under this Agreement.
2.7 SII's Right of First Refusal.
(a) "New CYMER Funded Technology" means a
nonlithography excimer laser product of CYMER if (i) a definitive prototype of
such product has been produced by CYMER after the date of this Agreement and
(ii) the research and development of such product has not been partially paid
for by an entity other than SII that seeks to license such product after
completion of development.
(b) CYMER hereby grants to SII the right of first
refusal to license the New CYMER Funded Technologies on a royalty-bearing,
exclusive basis in Japan. In the event that CYMER proposes to undertake the
licensing of New CYMER Funded Technologies covering the territory of Japan,
CYMER shall give SII
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<PAGE> 5
written notice of its intention, describing the particular New CYMER Funded
Technology being licensed and the terms and conditions, including, but not
limited to the royalty rates, upon which CYMER proposes to license the same.
SII shall have sixty (60) days from the date of receipt of any such notice to
agree to license the New CYMER Funded Technology upon the terms and conditions
specified in the notice, or upon such terms as may be mutually agreed to by
CYMER and SII during such period, by giving written notice to CYMER and stating
therein that it will enter into a definitive license agreement upon such terms
and conditions within one hundred and fifty (150) days of the original notice.
(c) In the event SII fails to exercise the right
of first refusal within said sixty (60) day period, CYMER shall have ninety (90)
days thereafter to enter into an agreement to license the New CYMER Funded
Technology upon terms and conditions no more favorable to the licensee than
specified in CYMER's notice. In the event CYMER has not licensed the New CYMER
Funded Technology within said one hundred and fifty (150) day period, CYMER
shall not thereafter license the New CYMER Funded Technology without first
offering such New CYMER Funded Technology in the manner provided above.
(d) In addition, CYMER hereby grants to SII the
right of first refusal, on the terms and conditions set forth in paragraphs (b)
and (c) above, to fund projects for which CYMER seeks funding, in the manner
contemplated in the Research and Development Agreement, for the development of
technologies not contemplated by the "Technology Road Map" attached as Exhibit B
to the Research and Development Agreement, including the right to receive a
royalty-bearing license exclusive in Japan.
3. LICENSE LIMITATIONS AND EXCEPTIONS
3.1 Limitations on SII
(a) System Certification, SII will not Sell
Products to customers whom SII has reason to know, after due inquiry, will
resell those Products outside of Japan, except as incorporated into a System.
(b) Purchase of Products by Third Parties Subject
to Software License and Other Restrictions. The Sale of each Product shall
include a fully paid license for SII to sublicense the software to its
customers upon execution of a software license by SII's customers in a form to
be mutually agreed upon by CYMER and SII. Except for improvements and
modifications made by SII which CYMER shall be licensed to use according to
Section 2.4, CYMER shall retain full title to the software so licensed and all
copies thereof, and SII and its customers may use the software only in
accordance with the provisions of their executed software
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<PAGE> 6
licenses. SII's customers shall not have any access to or rights in the
software source codes. SII's customers will not have the right to copy, modify
or remanufacture any Product or software or part thereof.
3.2 Exceptional Sales Outside Japan. On an exceptional
basis, upon thirty (30) days prior written notification to CYMER SII may Sell
the Product outside Japan, without being incorporated into a System, as a
replacement or a spare part.
3.3 Sufficiency of Marketing Efforts. SII agrees that
during the term of this Agreement that SII will conduct its Product and System
businesses in a manner reasonably required to maximize Product and System
sales.
3.4 Market Protection. If SII enters into an agreement
with a third party concerning excimer laser products other than the Products or
Systems, then SII's Product license in Japan will automatically convert to a
nonexclusive license and, in addition, CYMER shall have the right to treat such
an action by SII to be a breach and may terminate this Agreement according to
the provisions of Section 12.2. SII agrees not to combine or use CYMER's
proprietary information, trade secret or other technology with any other
products except for the combination of Products into Systems sold by SII and
except as provided in Section 2.3.
3.5 SII's Rights for Lasers. CYMER acknowledges that SII
shall retain the right to access, adapt, license, distribute or otherwise deal
in laser technology (other than excimer laser products) during the term of this
Agreement, including, but not limited to, YAG and C02 lasers, provided that it
complies with section 3.4.
3.6 Sufficiency of Production. Except as set forth in
Section 2.1, in the event that SII does not have sufficient manufacturing
capacity to satisfy any reasonable Product order from customers in Japan, SII
shall have the right to consult CYMER and provide CYMER with the opportunity to
sell the ordered Products to SII for resale to such customer. Subject to SII's
manufacturing capacity, SII agrees to offer Products for sale, on reasonable
terms and conditions, to all potential customers in Japan other than potential
customers which manufacture or distribute products or systems competitive with
the Products or Systems. SII agrees to use diligent efforts to meet Product
demand by such potential customers.
3.7 Exclusivity. Except as provided in this Agreement
and unless this Agreement is terminated by CYMER under Section 12.2 or 12.3 due
to breach or insolvency of SII, CYMER agrees not to Sell, manufacture, market,
or distribute (or have manufactured, marketed or distributed) the Product in
Japan. CYMER will not Sell Products to customers whom CYMER has reason to
believe, after due
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<PAGE> 7
inquiry, will resell those Products to customers in Japan, except as
incorporated into a System. CYMER retains the right to market, Sell or
distribute Systems in Japan.
3.8 Limitation on Grant. Except an expressly provided in
this Agreement, no other right, title or interest is granted by CYMER with
respect to the Product or improvements.
4. CONSIDERATION.
4.1 License Fee. As consideration for the rights and
license granted herein, except as provided in section 4.1(h), SII agrees to pay
CYMER the following non-refundable license fees and royalties:
(a) License Fees from SII to CYMER
<TABLE>
<S> <C>
August 31, 1992 $ 500,000
October 31, 1992 500,000
January 31, 1993 1,000,000
April 30, 1993 1,000,000
-----------------------------------
Total $3,000,000
</TABLE>
(b) Royalties to CYMER (payable in U.S. dollars) Payable
through September 30, 1999.
<TABLE>
<S> <C> <C>
a. For Products: 5% of the Net Sales Price (as defined below) of
the Product, but not less than $11,000 per
Product.
b. For Systems: 5% of the System Value of the Product (as defined
below), but not less than $11,000 per Product.
c. For Spare 5% of the Net Sales Price
Parts and
Refurbished
Discharge
Chambers
</TABLE>
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<PAGE> 8
(c) Royalties to CYMER (Payable in U.S. dollars) from
October 1, 1999 through September 30, 2004.
<TABLE>
<S> <C> <C> <C>
a. For Products - The Interim Percentage
(as defined below) of
the Net Sales Price of
the Product.
b. For Systems - The Interim Percentage
of the System Value of
the Product.
c. For Spare - The Interim Percentage
Parts and of the Net Sales Price
Refurbished
Discharge
Chambers
</TABLE>
(d) Royalties to CYMER (payable in U.S. dollars) from
October 1, 2004 through September 30, 2009; and from
October 1, 2009 through expiration of this Agreement.
<TABLE>
<S> <C> <C> <C>
a. For Products - A Negotiated
Percentage (as defined
below) of the Net
Sales Price of the
Product.
b. For Systems - A Negotiated
Percentage of the
System Value of the
Product.
c. For Spare - A Negotiated
Parts and Percentage of the Net
Refurbished Sales Price
Discharge
Chambers
</TABLE>
(e) Failure to Reach Agreement on Percentages. The parties
shall negotiate in good faith to determine the respective Negotiated
Percentages. The Negotiated Percentage may be different for the periods
specified in Sections 4(d)(i) and (ii) above. In the event the parties are
unable to agree on the Interim Percentage or the Negotiated Percentages, either
party may, within 30 days after the date when the respective percentage was to
take effect, submit the matter to arbitration described in Section 19 of this
Agreement for an equitable determination within the ranges specified in this
agreement. Royalties shall continue to be paid by SII
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<PAGE> 9
at the prior rate until a determination by the arbitrator has been made. If
the arbitrator determines a rate for the new period different from the rate
paid by SII for the previous period, then an adjustment for any previous
overpayment or underpayment in the new period shall be made, either in the form
of, respectively, payments to CYMER or credits to SII against future royalty
payments over a period to be agreed upon by the parties.
(f) Patlex Royalties. SII shall be liable for
any royalties, fees, expenses or other payments due Patlex, Inc. by virtue of
SII selling Systems in the United States.
(g) Currency Conversion. All currency
conversions to determine the amount of SII's royalty payments in United States
Dollars shall be based on the yen/dollar telegraphic transfer selling rate as
quoted at the bank who remits SII's royalty, on the date of payment.
(h) Term of Royalty Payment Obligations.
Royalties shall be payable by SII at the full rate specified under this Section
4.1 until the expiration or declaration of invalidity of the last CYMER patent
anywhere in the world that would be directly or contributorily infringed by the
manufacture, use or Sale of Products. Upon such expiration or declaration of
invalidity, the parties shall negotiate in good faith a new royalty rate based
on the value of CYMER's trade secrets, trademarks and copyrights incorporated
into the Product.
(i) Negotiated Percentage. "Negotiated
Percentage" means, for the purposes of determining the amount of royalties
payable under this Section 4.1, a percentage to be mutually agreed upon by
CYMER and SII or, in absence of agreement to be determined as set forth in
Section 4.1(e).
(j) Interim Percentage. "Interim Percentage"
means, for the purposes of determining the amount of royalties payable under
this Section 4.1, a percentage not less than three percent (3%) and not more
than five percent (5%) to be mutually agreed by CYMER and SII or, in absence of
agreement to be determined as set forth in Section 4.1(e).
(k) Net Sales Price. "Net Sales Price" means the
actual sales price for a Product, spare part or refurbished discharge chamber
(as the case may be) charged by SII to its customers, excluding all
transportation and packaging charges, insurance, installation charges, customer
training charges, maintenance and extended warranty charges, sales, use and
other similar taxes (other than taxes imposed on SII's net income), import
duties and sales commissions to third parties that are not affiliates of SII,
and less all returns and transportation charges on returns.
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<PAGE> 10
(1) System Value of the Product. "System Value
of the Product" means, for the purposes of determining the amount of royalties
payable under Section 4.1, the lesser of (i) the average of all Net Sales
Prices for all Products Sold in the most recent quarter then completed in which
Product was Sold or (ii) the list price of the Product.
4.2 Payment Terms. Royalties shall be paid quarterly,
within sixty (60) days after the end of a calendar quarter during which a
Product is Sold to SII's customer or, in the case of a Product incorporated by
SII into a System, when a System is Sold by SII. The royalties shall be paid
upon all Products Sold, regardless of use.
4.3 Reports. Payment of continuing royalties to CYMER
hereunder shall be accompanied by a report describing the number of Products
Sold by SII during the applicable quarter, the Net Sales Price for such
Products, the number of Systems Sold by SII during the applicable quarter, the
System Value of the Products incorporated into such Systems, the number of
returns of Products and Systems actually accepted by SII during the applicable
quarter, and such additional information as CYMER may reasonably request to
permit it to understand the calculation of royalties payable by SII for the
applicable quarter.
4.4 Audit and Inspection. SII shall permit CYMER's
independent certified public accountants to inspect and audit, on a
confidential basis, SII's books and records relating to the Sale of the
Products. Any such audit or inspection shall be upon not less than thirty (30)
days notice, not more often than once a year. In addition, any such audit or
inspection shall be at CYMER's expense, unless the audit or inspection
discloses an aggregate shortfall in amounts payable to CYMER hereunder of more
than ten percent (10%) for any quarter, in which event SII shall bear such
expense.
5. DELIVERY AND DEVELOPMENT.
5.1 Product Deliverables. CYMER shall deliver to SII,
according to the list and timetable of deliverables attached hereto as Exhibits
B and C certain deliverables in a form which, apart from general expertise
required in the manufacture of Products, will reasonably enable SII to
implement the manufacture, test, and further development of the Product. In
addition to the deliverables described above, CYMER shall throughout the term
of this Agreement provide, at no additional charge to SII, such additional
deliverables and technical assistance as SII may reasonably require to
manufacture, use, sell, maintain, repair, adapt, modify and improve the
Products and Systems. Each party shall bear the salaries and expenses of its
respective personnel in connection with the delivery of such deliverables and
the provision of such technical assistance. If, upon SII's reasonable request,
CYMER
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<PAGE> 11
personnel travel to Japan to provide training or consulting services prior to
July 1, 1993, CYMER shall also bear the transportation and travel related
expenses of such personnel.
6. WARRANTIES AND INDEMNITY.
6.1 Noninfringement of CYMER Intellectual Property.
CYMER warrants that, to the best of its knowledge, CYMER has full power and
authority to license the Product to SII and convey all other rights and
licenses granted to SII under this Agreement. In particular, CYMER warrants
that, to the best of its knowledge, after reasonable investigation, SII's use
of the Product hereunder will not infringe any United States, Japanese or
European (excluding the countries of the former Soviet Union) patent,
copyright, or trade secret right of any third party. Notwithstanding the
foregoing, however, CYMER does not warrant that Systems incorporating Products
distributed in the United States will not infringe basic laser patents owned by
Patlex, Inc. CYMER shall engage patent counsel in Japan and instruct such
patent counsel to use diligent efforts to monitor patent applications published
for public comment in Japan, and CYMER shall take appropriate actions with
regard to pertinent patent applications pursuant to Section 6.6.
6.2 (a) Product Warranty and indemnity by CYMER. CYMER
further represents and warrants to SII that the Products, if manufactured
according to the deliverables to be provided by CYMER pursuant to Section 5,
will perform in accordance with the applicable functional specifications. CYMER
agrees to pay all costs of the defense of any claim resulting in a judgment
adverse to SII that the Product has a design defect as a result of CYMER's
negligence that has resulted in harm to a third party (including without
limitation all reasonable attorneys' fees) and all judgments, awards and
settlement amounts awarded against or incurred by SII as a result of such
claims, subject to SII notifying CYMER promptly in writing of the claim, giving
CYMER the exclusive control of the defense and settlement thereof, and providing
all reasonable assistance in connection therewith.
(b) Product Warranty and Indemnity by SII. Subject to
Section 6.2(a), SII agrees to pay all costs of the defense of any claim
resulting in a judgment adverse to CYMER claiming negligent manufacture of a
Product produced by SII or SII's negligent design of a System where such
negligence has resulted in harm to a third party (including without limitation
all reasonable attorneys' fees) and all judgments, awards and settlement amounts
awarded against or incurred by CYMER as a result of such claims, subject to
CYMER notifying SII promptly in writing of the claim, giving SII the exclusive
control of the defense and settlement thereof, and providing all reasonable
assistance in connection therewith.
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<PAGE> 12
6.3 Disclaimer. THE FOREGOING WARRANTY IN SECTIONS 6.1
AND 6.2 ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS,
IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. ANY STATEMENTS MADE BY
ANY OFFICERS, DIRECTORS, AGENTS OR EMPLOYEES OF EITHER PARTY ABOUT THE DESIGN,
SUITABILITY, QUALITY, PERFORMANCE OR RESULTS OF PRODUCTS BASED ON THE PRODUCT OR
ADAPTATIONS WITH, OR IN ADDITION TO, THE SPECIFICATIONS SET FORTH IN EXHIBIT A
HERETO SHALL NOT BE DEEMED TO BE A WARRANTY OR REPRESENTATION BY EITHER PARTY
FOR ANY PURPOSE OR GIVE RISE TO ANY LIABILITY BY EITHER PARTY. IN NO EVENT
SHALL ANY LIABILITY OF EITHER PARTY UNDER THIS AGREEMENT EXCEED THE AMOUNT SET
FORTH IN SECTION 13.
6.4 Insurance. CYMER and SII shall, at their sole cost
and expense, respectively, maintain or obtain insurance in the amount of
$1,000,000 per insurable event to cover the type of claims described in
Sections 6.2 and 6.6. Each party shall name the other an additional insured on
the policy. The respective insurance policies shall provide that the insurer
will send the other party written notification of any change to such policy and
the insurance coverage amounts shall be annually reviewed and revised as deemed
appropriate by the other party. Full and complete copies of any insurance
policy obtained pursuant to this Section 6.4, together with a certificate of
insurance shall be delivered to the other party within thirty (30) days after
(i) the date of this agreement and (ii) after each anniversary date thereof.
6.5 Third Parties Excluded. The warranties made by CYMER
herein are nontransferable, made solely for the benefit of SII and shall not
extend to any third party, except as expressly provided in this Agreement with
respect to Subsidiaries.
6.6 (a) Intellectual Property Indemnity by CYMER. CYMER
shall defend at its expense any action brought against SII or any customer of
SII to the extent that it is based on a claim that the Product or any part
thereof, when used within the scope of this Agreement, infringes a patent or
copyright in any country in the territory as set forth in Section 6.1, and
CYMER will pay any settlements and any costs, damages and attorneys' fees
finally awarded against SII or any customer of SII in such action which are
attributable to such claim; provided, that the foregoing obligation will be
subject to SII notifying CYMER promptly in writing of the claim, giving CYMER
the exclusive control of the defense and settlement thereof, and providing
reasonable assistance at CYMER's cost and expense in connection therewith.
Subject to the limitations set forth in this Agreement, if it is adjudicatively
determined (or if the parties mutually agree after consultation), that the
Product, or any part thereof, infringes any patent, copyright, trade secret
right or trademark of any country of the territory set forth in Section 6.1, or
if the sale or use of the
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<PAGE> 13
Product, or any part thereof, is enjoined for any reason, then CYMER shall, at
its option and expense: (i) procure for SII and its customers the right to
continue such sale or use, as appropriate, of the Product or part thereof; or
(ii) replace the Product or part thereof, with substantially equivalent
technology or software; or (iii) modify the Products or part thereof to make it
noninfringing but substantially equivalent; or (iv) if items "(i)", "(ii)" and
"(iii)" above are not commercially practicable, remove the Products or any part
thereof which is infringing and all copies thereof, terminate all rights
thereto, and refund all fees paid by SII under Section 4.1(a), notwithstanding
the stated nonrefundability therein. CYMER shall not be liable for any costs
or expenses incurred by SII or its customers in defending or resolving any such
claim without its prior written authorization. In all events, CYMER and SII
shall cooperate to avoid any third party claim of infringement, by the Product,
of any patent or trademark of any jurisdiction other than the United States,
and to avoid any adverse effects of the claim. CYMER will have no liability
for any claim of infringement arising (i) where the Product was not current
when sold and the sale of the most current version of the Product would have
avoided the claim or (ii) the use or combination of the Product with other
non-CYMER products, data or equipment if such infringement was caused by such
use or combination; or (iii) infringes on a Patlex patent. THE FOREGOING
STATES THE ENTIRE LIABILITY AND OBLIGATION OF CYMER WITH RESPECT TO
INFRINGEMENT OR CLAIMS OF INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADE SECRET
OR OTHER PROPRIETARY RIGHT BY THE PRODUCT OR ANY PART THEREOF. IN NO EVENT
SHALL ANY LIABILITY OF CYMER UNDER THIS AGREEMENT EXCEED THE AMOUNT SET FORTH
IN SECTION 13.
(b) Intellectual Property Indemnity By SII. SII
will defend at its expense any action brought against CYMER to the extent that
it is based on a claim that the SII Systems or Products sold by SII which
incorporate SII improvements, when used within the scope of this Agreement,
infringe a United States, Japanese or European (other than the countries of the
former Soviet Union) patent or copyright; and SII will pay any settlements and
any costs, damages and attorneys fees finally awarded against CYMER in such
action which are attributable to such claim; provided, that the foregoing
obligation will be subject to CYMER notifying SII promptly in writing of the
claim, giving SII the exclusive control of the defense and settlement thereof,
and providing all reasonable assistance in connection therewith. THE FOREGOING
STATES THAT ENTIRE LIABILITY AND OBLIGATION OF SII WITH RESPECT TO INFRINGEMENT
OR CLAIMS OF INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADE SECRET OR OTHER
PROPRIETARY RIGHT BY THE SII SYSTEMS OR IMPROVEMENTS OR APPLICATIONS OR ANY
PART THEREOF. IN NO EVENT SHALL ANY LIABILITY OF SII UNDER THIS AGREEMENT
EXCEED THE AMOUNT SET FORTH IN SECTION 13.
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<PAGE> 14
7. SUPPORT AND MAINTENANCE.
7.1 Training by CYMER. In addition to the obligations of
CYMER under Section 5.1, CYMER shall provide Product training, manufacturing
test support, maintenance support and production line implementation support,
as set forth in Exhibit C. SII shall reimburse CYMER for all reasonable travel
and related expenses incurred on and after July 1, 1993 in connection with
providing such training, provided that SII has approved such expenses in
advance and in writing. CYMER shall also, on an on-going basis, provide SII
with such additional information as CYMER may provide generally to licensees of
CYMER regarding new Product developments at least as promptly as CYMER provides
such information to such third-party licensees, and in any event promptly after
their reduction to practice. CYMER shall promptly respond to reasonable SII
requests for information regarding the Products.
7.2 Warranties to Customer by SII. If SII shall warrant
to customers that the Product delivered will be free from defects in materials
and workmanship for a period of one (1) year from the date of delivery thereof
and SII provides additional service obligations to its customers as shall be
mutually agreed between CYMER and SII then SII shall receive an additional five
percent (5%) discount on Product purchases from CYMER under section 8.1.
8. PURCHASE OF PRODUCTS.
8.1 CYMER Products Purchased by Seiko. SII shall be
entitled to purchase Products and spare parts from CYMER (subject to
availability), at a discount of 15 percent below U.S. list price and pursuant
to the standard terms and conditions of sale of CYMER, for SII's own use or for
Sale subject to the conditions of this Agreement. SII shall have no obligation
to pay CYMER royalties on account of SII's resale of Products purchased by SII
from CYMER.
8.2 Products Purchased by CYMER. Upon commencement of
production of the Product by SII, CYMER shall be entitled to purchase Products
and spare parts from SII (subject to availability), at a discount of 15 percent
below Japan list price and pursuant to the SII standard terms and conditions of
sale. If CYMER shall have additional service obligations to its customers for
Product purchased from SII, as shall be mutually agreed between the parties,
CYMER shall receive an additional five percent (5%) discount on Product
purchases from SII. SII shall have no obligation to pay CYMER royalties on
account of SII's sale of Products to CYMER pursuant to this Section 8.2.
9. OWNERSHIP RIGHTS.
9.1 Intellectual Property. Except for SII's patents,
copyrights, mask work rights and proprietary information pertaining
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<PAGE> 15
to improvements and modifications to the Products developed and reduced to
practice by or for SII during the term of this Agreement and for which CYMER
has a non-exclusive license under Section 2.4, title to and ownership of the
Product and deliverables, including the licensed software and all other
materials, developed by or for CYMER and delivered to SII hereunder, and all
related technical know-how and all rights therein, including all United States
and foreign patents, copyrights and trade secrets applicable thereto, shall
remain vested in CYMER or CYMER's third party licensors.
9.2 Proprietary Notices. All reproductions of the
licensed software in source or object (machine readable) code shall be affixed
with the following notice:
COPYRIGHT (c) 1987, 1988, 1989, 1990, 1991 and 1992.
AN UNPUBLISHED WORK BY CYMER LASER TECHNOLOGIES. ALL
RIGHTS RESERVED. THIS PROGRAM IS AN UNPUBLISHED WORK
PROTECTED BY UNITED STATES COPYRIGHT LAWS (TITLE 17
UNITED STATES CODE) AND CONTAINS TRADE SECRETS OF
CYMER LASER TECHNOLOGIES WHICH MUST BE HELD IN STRICT
CONFIDENCE.
Licensed software copies in object code format reproduced by
SII shall incorporate the foregoing legend and any other proprietary notices
affixed by CYMER in the same manner they are incorporated by CYMER.
10. TRADEMARKS
CYMER hereby grants to SII the right to use CYMER trademarks
pursuant to the licenses granted in Section 2 of this Agreement, provided that
any use of CYMER trademarks by SII shall be subject to prior approval of CYMER.
Any use by SII shall be subject to revocation by CYMER if CYMER determines that
the quality of Product manufactured by SII is not as good or better than that
manufactured by CYMER.
11. CONFIDENTIAL INFORMATION.
11.1 CYMER and SII acknowledge that one party ("Disclosing
Party") may disclose to the other party ("Recipient") certain information
required to carry out this Agreement, including but not limited to, Product
related materials or know-how and financial, statistical, personnel or
technical information relating to the Disclosing Party's business which the
Disclosing Party deems proprietary and confidential. In the event Recipient
receives such information, Recipient agrees to keep such information
confidential by using the same care and discretion that it uses with its own
information which it considers confidential and shall not use such confidential
information except for the purposes of this Agreement.
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<PAGE> 16
The exchange at specific meetings between the parties of confidential
information which has not been reduced to a tangible medium shall not be
subject to the confidentiality obligations imposed on the Recipient under this
Section 11 unless the Disclosing Party identifies the information as
confidential at the time of disclosure and confirms its confidentiality in
writing within thirty (30) days of the oral disclosure.
11.2 The obligations described in this section shall
terminate ten (10) years from the date of disclosure to Recipient or
termination of this Agreement, whichever occurs later, and shall not be
applicable with respect to any portion of the received information which:
(a) is rightfully known by Recipient at the time
of its receipt thereof from Disclosing Party.
(b) is publicly known through no fault of
Recipient,
(c) is rightfully provided to Recipient without
any restriction on disclosure, by a third party not bound in a confidential
relationship to Disclosing Party,
(d) is provided by Disclosing Party to third
parties without restriction on disclosure,
(e) is disclosed pursuant to the requirements of
a government agency or disclosure is permitted by operation of law, or
(f) is independently developed by the Recipient
by clear and convincing evidence that no reference to the Disclosing Party's
confidential information was made.
11.3 Employees. The Recipient shall take appropriate
action, with respect to its employees, agents and consultants having access to
confidential information of the Disclosing Party to diligently enforce the
confidentiality of the Disclosing Party's confidential information and shall be
responsible for the actions of such employees, agents and consultants in this
respect.
11.4 Breach. If the Recipient breaches any of its
obligations with respect to confidentiality and unauthorized use of the
Disclosing Party's confidential information hereunder, the Disclosing Party
shall be entitled to equitable relief to protect its interest therein,
including but not limited to injunctive relief, as well as money damages.
-16-
<PAGE> 17
12. TERM AND TERMINATION.
12.1 Term. This Agreement shall continue in force for a
period of twenty (20) years from the date hereof unless terminated earlier
under the provisions of this Section 12. At the end of the fixed term, this
Agreement shall terminate automatically without notice unless prior to that
time the term of the Agreement is extended by mutual written consent of the
parties.
12.2 Termination for Cause. Except as set forth in
Subsection 12.3 below, if either party defaults in the performance of any
provision of this Agreement, then the non-defaulting party may give written
notice to the defaulting party that if the default is not cured within sixty
(60) days the Agreement will be terminated. If the non-defaulting party gives
such notice and the default is not cured during the sixty-day period, then the
Agreement shall automatically terminate at the end of that period.
12.3 Termination for Insolvency. This Agreement shall
terminate upon written notice by the other party in the event of (i) the
institution by or against SII or CYMER of insolvency, receivership or bankruptcy
proceedings or any other proceedings for the settlement of SII's or CYMER's
debts, (ii) upon SII's or CYMER's making an assignment for the benefit of
creditors, or (iii) upon SII's or CYMER's dissolution or ceasing to do business.
12.4 Fulfillment of Orders upon Termination. Upon
termination of this Agreement, each party shall continue to fulfill, subject to
the terms of Section 4 above, all orders accepted by it prior to the date of
termination.
12.5 Survival of Certain Terms. The provisions of
Sections 2.3, 2.4, 2.5, 2.6, 4, 11, 13, 16-22 and 24-26 shall survive the
termination, rescission or expiration of this Agreement for any reason.
12.6 Termination of Certain Licenses. All licenses
granted to SII under Sections 2.1 and 2.2 will terminate on the effective date
of termination of this Agreement, whether such termination is by expiration or
pursuant to a termination by CYMER under Section 12.2 or 12.3 due to a breach
by, or insolvency of, SII.
12.7 Remedy for Termination by Breach. In addition to
termination of licenses as set forth in Section 12.6, upon termination by
either party pursuant to Section 12.2, the non-breaching party shall be
entitled to collect contract damages not to exceed the amount set forth in
Section 13.
-17-
<PAGE> 18
12.8 Survival of this Agreement. This Agreement shall
survive any termination of the Research and Development Agreement of even date
hereof between the parties.
13. LIMITATION OF LIABILITY.
EITHER PARTY'S LIABILITY FOR DAMAGES INCURRED BY THE OTHER, REGARDLESS
OF THE FORM OF ACTION, SHALL NOT EXCEED THE ACTUAL AMOUNTS PAID BY SII TO CYMER
FOR THE LICENSES GRANTED BY THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE
RESPONSIBLE FOR ANY INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES INCURRED BY THE
OTHER, EVEN IF THE OTHER HAS KNOWLEDGE OF THE POSSIBILITY OF SUCH POTENTIAL
LOSS OR DAMAGE.
14. GOVERNMENTAL APPROVALS.
14.1 SII shall obtain all required approvals of the
Japanese Government necessary in connection with this Agreement. Any
obligation of SII under this Agreement is subject to all required government
approvals in form and substance agreeable to the parties.
14.2 SII agrees to promptly file this Agreement, as
required, with the Japanese Fair Trade Commission.
14.3 CYMER represents and warrants that it shall obtain
all required approvals from the United States government, including any CYMER
security clearances from the Defense Department, on behalf of both parties
hereto, as shall be required to permit the delivery and license deliverables,
training, improvements and CYMER Products as required by the Agreement. Any
obligation to license or deliver such improvements or CYMER Products is subject
to all required government approvals in form and substance agreeable to the
parties.
14.4 If at any time any government or agency having
jurisdiction over either party hereto should require, directly or indirectly,
any alteration or modification of any term or condition of this Agreement or of
the performance by the parties under this Agreement in a manner which has a
material adverse effect on the other party hereto, then that party which
suffers from such alteration or modification may give written notice to the
other party setting forth its objection to such alteration or modification and
requesting consultation between the parties hereto relative to such alteration
or modification. Not later than thirty (30) days after the giving of such
notice, the parties shall discuss in good faith the possibilities of a mutually
satisfactory resolution of such objection; provided, however, that if the
parties hereto fail to reach agreement in writing on any mutually satisfactory
resolution within ninety (90) days after the date of giving of such notice of
objection, the suffering party shall have the right to rescind this
-18-
<PAGE> 19
Agreement, on a second written notice to the other party. The parties
acknowledge and agree that, in the event of any such rescission pursuant to
this section, the party which elects to rescind shall not incur any liability
to the other party for any alleged default in the performance of this Agreement
arising from the exercise of its rescission rights under this section.
15. EXPORT CONTROLS.
15.1 United States Government controls. SII understands
and acknowledges that CYMER is subject to regulation by agencies of the U.S.
government, including the U.S. Department of Commerce, which prohibit export or
diversion of certain products and technology to certain countries. Any and all
obligations of CYMER to provide Products, software, documentation or any media
in which any of the foregoing is contained, as well as any technical assistance
shall be subject in all respects to such United States laws and regulations as
shall from time to time govern the license and delivery of technology and
products abroad by persons subject to the jurisdiction of the United States,
including the Export Administration Act of 1979, as amended, any successor
legislation, and the Export Administration Regulations issued by the Department
of Commerce, International Trade Administration, Bureau of Export
Administration. SII agrees to cooperate with CYMER, including, without
limitation, providing required documentation, in order to obtain export
licenses or exemptions therefrom. SII warrants that it will comply with the
Export Administration Regulations or other United States laws and regulations
in effect from time to time.
15.2 Restricted Countries. Without in any way limiting
the provisions of this Agreement, SII agrees that unless prior written
authorization is obtained from the Bureau of Export Administration or the
Export Administration Regulations explicitly permitting the reexport, it will
not export, reexport, or transship, directly or indirectly, to country groups
Q, S, W, Y, or Z (as defined in the Export Administration Regulations), or
Afghanistan or the People's Republic of China (excluding Taiwan) any of the
technical data or software disclosed or provided to SII or the direct product
of such technical data or software (if the direct products are commodities,
software, or technical data described on the Control List with a letter "A"
following its Export Control Number).
16. WITHHOLDING TAX.
If income tax, which may be imposed upon CYMER by the Japanese or any
other government with respect to the payments to be made by SII to CYMER under
this Agreement, is required to be withheld at the source of income, SII shall
deduct such income tax from the amount of payment as specified herein and
promptly furnish CYMER with original tax certificates appropriately completed,
or
-19-
<PAGE> 20
such other documents as may be used by the taxing authorities evidencing such
tax withholding.
17. TRANSACTION TAXES.
Fees payable to CYMER under this Agreement are exclusive of any
transactions taxes which may be imposed, in accordance with applicable laws, as
a result of the license granted and deliverables provided by CYMER to SII,
including sales, use, consumption, value-added and similar transactions taxes,
but excluding withholding taxes and United States and Japanese taxes on the net
income of CYMER which CYMER will bear. SII agrees to bear or reimburse CYMER
for all such transactions taxes if any such taxes are levied against, and paid
by, CYMER.
18. WAIVER.
Either party's forbearance or failure to enforce any right or claim
against the other party arising under this Agreement shall not be deemed to be
a waiver by that party to such right or claim. Either party's waiver of a
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach or breaches of the same or any other
provision.
19. GOVERNING LAW.
The validity, construction, and performance of this Agreement and the
legal relations among the parties to this Agreement shall be governed by and
construed in accordance with the laws of the State of California, without
reference to its principles of conflicts of laws or statutory rules of
arbitration. All disputes, controversies or differences which may arise
between the parties, out of or in relation to or in connection with this
Agreement, or for the breach thereof, shall be settled by negotiation in good
faith between the parties as promptly as possible. If such disputes,
controversies or differences are not settled amicably, within sixty (60) days
of written notice, either party may proceed to initiate an arbitration. The
arbitration shall be held in Honolulu, Hawaii under the commercial rules and
auspices of the Asia/Pacific Center for the Resolution of International
Disputes (the "Center") with three arbitrators. Each party, within thirty (30)
days after initiation of the arbitration, shall appoint one arbitrator and
instruct them, respectively, to select together the third arbitrator; but, if
they cannot select the third arbitrator within sixty (60) days after initiation
of the arbitration, than the Center may appoint the third arbitrator in
accordance with its rules. The arbitrators shall apply California law to the
merits of any disputes or claim, without reference to rules of conflicts of
law. The arbitral proceedings and all pleadings and written evidence shall be
in the English language. Any written evidence originally in a language other
than English shall be submitted in
-20-
<PAGE> 21
English translation accompanied by the original or a true copy thereof. The
award rendered by the arbitrator shall be final and binding upon the parties
and may be enforced in any court of competent jurisdiction.
20. PROFESSIONAL FEES.
In any proceeding relating to the subject matter of the
Agreement, each party shall bear its own costs, fees, and expenses incurred by
accountants, attorneys, and other professionals for services rendered to that
party in connection with the proceeding, including costs, fees, and expenses of
preparation and appeal.
21. SEVERABILITY.
In the event any provision of this Agreement or the
application of any such provision shall be held by a court of competent
jurisdiction to be contrary to law, the parties shall meet to discuss whether
such provision should be severed from this Agreement and whether the remaining
provisions of this Agreement should remain valid and in full force and effect.
22. FORCE MAJEURE.
22.1 If the performance of this Agreement or any
obligations hereunder, except the making of payments, is prevented, restricted
or interfered with by reason of fire or other casualty or accident, strikes or
labor disputes, war or other violence, any law, order, proclamation,
regulations, ordinance, demand or requirement of any government agency, or any
other act or condition beyond the reasonable control of the parties hereto
("Event of Force Majeure"), the party so affected upon giving prompt notice to
the other party shall be excused from such performance to the extent of such
prevention, restriction or interference; provided that the party so affected
shall use its reasonable best efforts to avoid or remove such causes of
nonperformance and shall continue performance hereunder with the utmost
dispatch whenever such causes are removed.
22.2 The party suffering an Event of Force Majeure shall
notify the other party within fifteen (15) days of the occurrence of such
Events and within thirty (30) days shall furnish the other party with a
recovery plan of action. without limiting the foregoing, a party suffering an
Event of Force Majeure shall use its reasonable best efforts to limit the
impact of the Event of Force Majeure on such party's performance of this
Agreement.
23. ASSIGNMENT
Subject to Section 2.6 of this Agreement, all the terms and
provisions of this Agreement shall be binding upon and inure to
-21-
<PAGE> 22
the benefit of the parties to this Agreement and to their respective heirs,
successors, assigns, and legal representatives, provided that:
(a) neither party may assign this Agreement in whole or
in part without the other party's prior written consent, which each party may
withhold in its sole discretion;
(b) any permitted assignee or transferee must agree in
writing to comply with all terms and conditions of this Agreement; and
(c) any assignment shall not exceed the existing scope of
this Agreement.
24. NOTICES.
Except as otherwise provided herein, notices required to be
given by this Agreement shall be in writing and shall be deemed to be effective
when received by the other party if delivered by facsimile (with facsimile
confirmation of receipt and the dispatch of confirmation copy by first class
mail) or by international courier such as DHL or Federal Express, delivery fees
prepaid, properly addressed to the offices of the respective parties specified
in this Agreement or such other address or facsimile number as the party may
later specify in writing for such purposes. Notice to SII shall be addressed
to the attention of the SII Legal Department. This provision shall apply
regardless of whether such delivery is accepted or unclaimed. The facsimile
number for notices to SII shall be 03-3638-1102. The facsimile number for
notices to CYMER shall be 619-487-2441.
25. RELATIONSHIP OF THE PARTIES.
The relationship of the parties to this Agreement is that of
arms-length negotiators, and the parties expressly agree that neither party is
the agent of the other and that neither party has any express or implied
authority to act on behalf of or make any representations whatsoever on behalf
of each other. Further, the parties agree that neither party has the right to
control any activity of the other party outside the terms of this Agreement.
SII shall take appropriate action to ensure that any Subsidiary acquiring
rights under this Agreement shall be bound by the provisions hereof.
26. ENTIRE AGREEMENT
The parties expressly acknowledge that they have read this Agreement
and understand its provisions. The parties further agree and acknowledge that
they understand that this Agreement and the Research and Develo pment Agreement
constitute the entire
-22-
<PAGE> 23
agreement between them with respect to the subject matter of those Agreements,
and they supersede all prior proposals, agreements, negotiations,
representations, writings, and all other communications, whether written or
oral, between then with regard to the subject matter of this Agreement and the
Research and Development Agreement. No modification of waiver of any provision
of this Agreement shall be effective unless it is in writing and signed by both
parties. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original.
27. PUBLICITY
Neither CYMER nor SII shall issue any press release or
otherwise make any public statements with respect to this Agreement without the
written consent of the other. Notwithstanding the foregoing, each party shall
be allowed to inform its attorneys, bankers, auditors, subsidiaries and agents
about the existence and contents of this Agreement. Additionally, each party
shall be allowed to make any announcement or disclosure required by law,
required or advisable for inclusion in financial statements; and CYMER may
disclose the existence of this Agreement to Rofin Sinar.
IN WITNESS WHEREOF, the parties hereto have caused this PRODUCT
LICENSE AND MANUFACTURING AGREEMENT to be executed by their authorized
representatives.
CYMER LASER TECHNOLOGIES: SEIKO INSTRUMENTS INC.:
a California corporation a Japanese corporation
By: By:
--------------------------- -------------------------
Robert P. Atkins, President Sadao Moritomo, Senior
Managing Director
-23-
<PAGE> 24
HPL-100K SPECIFICATIONS
- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------
Wavelength 248nm
Pulse Energy 400mJ
Repetition Rate 250Hz
Average Stabilized Output Power 100 Watts
Pulse Duration (FWHM) 30nsec
Beam size (V x H) at 1m 23 x 10mm (FWHM)
Beam Divergence (V x H) 3 x 1.2mrad (FWHM)
Pulse-to-Pulse Energy Variation less than 4% (peak to peak)
Beam Pointing Stability 0.3 x 0.12mrad
Gas Life
operational* greater than 7.2 x 10(6) pulses
static** greater than 3 days
Window Cleaning Interval greater than 10(8) pulses [LOGO]
All specifications subject to change without notice.
* With no cryogenic gas reprocessor, but with F(2) injections.
** With no cryogenic gas reprocessor, and no F(2) injections.
- --------------------------------------------------------------------------------
OTHER
- --------------------------------------------------------------------------------
Size 1613mm L, 700mm W, 1190mm H
Weight 500kg
Electrical Power 180-250Vac, 35A or 360-440Vac, 18A, 3 phase,
50 or 60Hz
Cooling Water 20lpm (5gpm) @ (20deg. plus or minus 2)deg. C
Laser Gas
1% Fluorine(1) in Neon(2) 11.3 liter--atm per fill @ 5.6kg/cm(2) (80psig)
1.2% Krypton(2) in Neon(2) 150 liter--atm per fill @ 5.6kg/cm(2) (80psig)
Nitrogen(3) 200 liter/hour @ 5.3kg/cm(2) (75psig)
Helium(2) 300 liter--atm per window change @ 3.8kg/cm(2)
(55psig)
1. 99.9% pure
2. 99.999% pure
3. Used for purging optics and activating valves.
Use only boil-off from an LN(2) tank.
[ILLUSTRATION]
EXHIBIT "A"
<PAGE> 25
EXHIBIT B
HIGH POWER LASER PRODUCT DELIVERABLES FOR TECHNOLOGY TRANSFER
Manufacturing Environment
o Clean Room Design specifications and design
o Temperature, humidity specifications
o Space Allocation Breakdown
o Laser Facilities: gas, water, electrical power
Parts
o Bill of Materials
o Cost Breakdown
o List of Qualified Suppliers
o Parts Specification Control Sheets
o Mechanical:
- Mechanical Drawings - Components
- Mechanical Drawings - Assemblies
- Copies CAD Pro-Engineer Tapes
o Electrical:
- Electrical Schematics
- Electrical Circuit Board Maskwork
- Copies CAD Pads Tapes
o Optical:
- Component Specifications
Assembly and Test
o Assembly Proceedure Documentation
o Testing Proceedure Documentation
o Tooling and Fixture Design
Software
o Laser Operating Software, source code format
o Laser Testing Software, source code format
o Software Documentation
Support
o Service Manuals
o Spare Parts Listing
o Support Training Documentation
<PAGE> 26
------------------------------------
CYMER / SII TECHNOLOGY TRANSFER PLAN
HIGH POWER LASER
------------------------------------
1992 Dec Jan 1993
Jul Sep Oct Mar Apr Jun
x-------------------------------x----------------------------------------------x
- --------------------
Technology transfer -------------------------------------------
begins in San Diego. Full documentation of HPL-100, including
- -------------------- drawings, bill of materials, assembly
instructions, etc. have transferred to SII.
-------------------------------------------
-------------------------------------------
Full documentation of repackaged HPL-100
transferred to SII, including bill of
materials, drawings, assembly instructions.
-------------------------------------------
{------------------------------------------------------------------------------}
------------------------------------------------------------
SII provides a manufacturing/mechanical engineer and laser
engineer in San Diego to receive documentation and training.
------------------------------------------------------------
EXHIBIT "C"
<PAGE> 1
EXHIBIT 10.18
C Y M E R
LASER TECHNOLOGIES
Rev 12/6/94
AGREEMENT BETWEEN
CYMER LASER TECHNOLOGIES AND EO TECHNICS CO., LTD.
1. GENERAL:
The purpose of this agreement is to define a working relationship between Cymer
Laser Technologies (Cymer) and EO Technics Co., Ltd. (EOT). The goal is to have
EOT perform all service work on all Cymer lasers in Korea. This includes
providing service labor and stocking spare parts. It also includes marketing
assistance for Cymer in Korea.
This agreement shall be effective from the date of signing through December 31,
1996.
2. PRODUCT:
This agreement pertains to the following Cymer laser models which are presently
in Korea or may be installed in Korea in the future.
1. Model CX-2LS
2. Model ELS-4000
3. Model HPL-100K
3. SERVICE ENGINEERS:
EOT will provide the necessary service engineers to support Cymer's entire
installed laser base in Korea. The service engineers will be required to be
knowledgeable in all areas of the Cymer laser. This includes, but is not limited
to, Level 1 and 2 service support.
EOT will be responsible for providing all labor during the installation and
warranty period, which is normally 12 months from date of installation
acceptance by the Korean end user.
At the present time EOT has one service engineer, Mr. Hong, Dae-Eui, who has
been trained by Cymer in San Diego. It is recognized that Mr. Hong is a key
service engineer for the successful
- -------------------------------------------------------------------------------
1
<PAGE> 2
C Y M E R
LASER TECHNOLOGIES
support of Cymer lasers in Korea. Up to 100% of Mr. Hong's time shall be
available for the service of Cymer lasers.
EOT will provide additional service engineers as required to support an
increased installed base of lasers in Korea. Additional service engineers will
be trained by Cymer in San Diego. Cymer will provide the training materials and
instructor. EOT will pay for travel and living expenses of the trainee(s).
Cymer will train EOT service engineers on the model HPL in San Diego prior to
the shipment of the first HPL in May of 1995.
4. SPARE PARTS:
EOT will be responsible for stocking all parts necessary to support the
installed laser base in Korea. This includes Level 1 and 2 parts at a minimum,
and may include other parts as agreed upon by EOT and Cymer. EOT currently has
spare parts for the ELS-4000 model "B" laser only.
Cymer's design goal is to have backward compatibility of spare parts, however,
it is very possible that new model lasers will have certain spare parts that are
not compatible with previous model lasers. In this case the following will
apply:
1. Cymer will position such unique new model spare parts in Korea at
Cymer's expense. To accomplish this, Cymer will pay a one-time new
model spare parts inventory stocking fee to EOT each time a new model
laser is installed in Korea. EOT will be responsible for placing
purchase orders with Cymer for the necessary new spare parts, and
will make payment to Cymer at an amount equal to the one-time spare
parts inventory stocking fee. (This will be retroactive to the first
ELS-4000 model "D" laser already installed in Korea). All spare parts
inventory stocked in this manner shall be considered Cymer property.
Any spare part used from the initial inventory shall be replaced by
EOT immediately issuing a purchase order to Cymer. The replacement
inventory shall also be considered Cymer property.
2. EOT will be responsible for the shipping costs, duties, and taxes
associated with these parts.
EOT shall be responsible for increasing the spare parts inventory, at their
expense, as required to support the installed base. The parts will be sold to
EOT at the transfer price shown on the Korean Spare Parts Price List. It is
important for EOT to keep an adequate spare parts inventory. EOT shall provide a
monthly inventory report to Cymer that includes 1) part description, 2) part
number, 3) serial number, and 4) quantity.
- -------------------------------------------------------------------------------
2
<PAGE> 3
C Y M E R
LASER TECHNOLOGIES
Cymer shall publish a Korean Spare Parts Price List effective January 1 of each
year. The list shall be published by the previous December 1. This list will
show 1) the list price for each part, and 2) the transfer price that EOT pays to
Cymer for each part. EOT shall be responsible for the cost of shipping parts to
Korean and back to Cymer, and the cost of duties and taxes in Korea.
EOT shall negotiate final spare parts prices with the Korean end users and
potential OEM stepper support organizations within Korea. This will allow EOT to
control their price margin on sales of spare parts.
Cymer shall be responsible for the cost of all parts used for warranty purposes.
This shall include shipping costs, duties, and taxes for the warranty
replacement part.
In case this agreement between EOT and Cymer terminates for any reason, EOT
agrees to transfer all of their remaining spare parts inventory back to Cymer.
The inventory stocked at Cymer's expense (initial parts stocked for new model
installation) will be returned at no cost to Cymer. Increases to the initial
spare parts inventory stocked at EOT's expense will be purchased by Cymer at the
original transfer price.
5. COMPENSATION:
In addition to the margin from the sale of spare parts and service in Korea, EOT
shall be compensated per the following commission structure for the ELS-4000 and
HPL-100K. In return EOT is required to provide installation assistance at the
Korean end user's facility, provide end user training, provide labor to replace
parts during warranty, provide marketing support for end-user pull through
(ELS-4000), and sales and marketing efforts (HPL-100K) in Korea.
5.1. Model ELS-4000:
The following compensation plan for the Model ELS-4000 laser shall be effective
beginning January 1, 1995.
------------------------------------------------------------------------
<TABLE>
<CAPTION>
LASER INSTALLATION COMMISSION ADDITIONAL
(After Jan. 1, 1995) ($U.S.) MONTHLY
COMPENSATION
------------------------------------------------------------------------
<S> <C> <C>
1 10,000 $3,000
------------------------------------------------------------------------
2 15,000 2,000
------------------------------------------------------------------------
3 20,000 1,000
------------------------------------------------------------------------
4 and on 25,000 None
------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
3
<PAGE> 4
C Y M E R
LASER TECHNOLOGIES
In addition Cymer will pay EOT a one-time $38,000 new model spare parts
inventory stocking fee for the first ELS-4000 model D laser (S/N 4025) which
was installed in Korea during October, 1994. This fee shall be used for
stocking the initial model "D" spare parts inventory at EOT.
A one-time spare parts inventory stocking fee will be paid to EOT when a new
model laser is installed in Korea, if EOT is required to stock new and unique
spare parts to support the new model laser. This fee will be determined at the
time of the new model installation. The spare parts inventory stocking fee
will be sufficient to cover EOT's cost to stock the necessary new spare parts.
5.2 Model HPL-100K:
Cymer shall pay EOT a commission equal to 15% of the actual sales price (U.S.
list price is $330,000) for each HPL-100K sold by EOT in Korea.
6. MARKETING REQUIREMENTS:
6.1 Lithography Laser:
Cymer and EOT understand that EOT is not responsible for direct sales
activities with Korean semiconductor manufacturers for the lithography laser.
However, EOT will conduct marketing activities appropriate for the process of
end user pull through in Korea. Additionally EOT will assist Cymer with
setting up meetings with end users in Korea, coordinating seminars, and
otherwise reasonably assist Cymer with marketing and sales. EOT will also
advise Cymer on the Korean semiconductor climate, and suggest appropriate end
user pull through activities.
6.2 Industrial Laser:
Cymer will loan an HPL-100K-500 laser to EOT for a trial period of one year for
the purpose of assisting EOT with industrial excimer laser market development
in Korea.
EOT will prepare a demonstration facility and maintain a log of all contacts
including company names, names and titles of individuals, and notes about the
potential application. Cymer intends to visit Korean end users with EOT
personnel in an effort to sell lasers and determine market potential. Cymer
will also provide EOT with appropriate brochures.
The laser will ship from Cymer in May of 1995 under a General License G-Dest.
This export license will allow the laser to stay in Korea for an indefinite
period of time, and will allow the
- ------------------------------------------------------------------------------
4
<PAGE> 5
C Y M E R
LASER TECHNOLOGIES
laser to be sold in Korea at a later date if agreed to by Cymer and EOT. EOT
will pay for all shipping charges, duties, taxes, and installation costs. The
value shown on the shipping documents will be approximately $60,000. The
shipping documents will state: "Value shown for Customs Purposes only; there is
no charge to consignee".
EOT will be responsible for the cost of replacing all normal Level 1 and 2
consumable parts. At the present time Cymer does not plan to stock spare parts
for the industrial laser in Korea.
At the end of the one year period, and depending on the marketing activity
levels that result, Cymer and EOT will meet to discuss whether to extend the
loan period of the HPL for an additional year, or if the laser will be upgraded
to a more recent model.
Cymer perceives a potential conflict in selling and servicing lasers if EOT
becomes a system integrator. Cymer does not currently have a solution to this
potential conflict, but raises this point in an attempt to avoid the conflict.
ROBERT AKINS 12/6/94 KYU-DONG SUNG 12/14/94
- ------------------------- ------- ------------------------- --------
Cymer Laser Technologies Date EO Technics Co., Ltd. Date
Dr. Robert Akins Mr. Kyu-Dong Sung
President President
- ------------------------------------------------------------------------------
5
<PAGE> 1
EXHIBIT 10.19
HAWORTH Master Lease Agreement
LEASING VOICE: (800) 66-WORTH
1055 Westlakes Drive - Berwyn, Pennsylvania 19312 FACSIMILE: (800) 488-8831
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Full Legal Name Phone Number
Cymer Laser Technologies
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CBA Name (If Any) Fax Number
- ----------------------------------------------------- -----------------------------
Billing Address Send invoice to Attention of
16275 Technology Drive, San Diego, CA 92127
</TABLE>
- -------------------------------------------------------------------------------
TERMS AND CONDITIONS
This MASTER LEASE AGREEMENT ("Agreement") is dated as of April 23, 1996, and is
by and between Haworth Leasing, a customer finance program sponsored by Tokai
Financial Services, Inc., with offices located at 1055 Westlakes Drive, Berwyn,
Pennsylvania 19312 ("Lessor") and the above referenced Lessee ("Lessee"). The
parties hereto for good and valuable consideration and intending to be legally
bound hereby agree as follows:
1. LEASE OF EQUIPMENT. This Agreement establishes the general terms and
conditions under which Lessor may, from time to time, lease Equipment (as
hereinafter defined) to Lessee. The terms hereof shall be deemed to form a part
of each Master Lease Schedule ("Schedule") executed by the parties which
references this Agreement. "Equipment" shall mean all items of equipment set out
in any Schedule. Lessee hereby requests Lessor to purchase the Equipment from
the supplier listed in the related Lease hereunder (hereinafter called "Vendor
and/or Manufacturer", as applicable) and to lease the Equipment to Lessee on the
terms and conditions contained herein. Each Schedule shall constitute a separate
Lease agreement ("Lease") incorporating all the terms hereof. In the event of a
conflict between the provisions of any Lease and the provisions hereof, the
provisions of the Lease shall prevail.
The amount of the Lease Payments on each Schedule ("Lease Payments") are
based upon the estimated total cost of the Equipment on the applicable Schedule.
The Lease Payments shall be adjusted proportionately upward, or downward if the
actual total cost of the Equipment on the applicable Schedule exceeds or is less
than the estimate and Lessee authorizes Lessor to adjust the Lease Payment by up
to fifteen percent (15%) in that event.
Unless Lessor has provided Lessee with a written commitment to the
contrary, Lessee authorizes Lessor to adjust the Lease Payment on each Lease to
increase or decrease the implicit rate of the Lease Payment to the Lessor in an
amount equal to any increase or decrease in the rate of Treasury Notes with a
comparable term to the term of the Lease from the date the Lessor quoted the
Lease Rate to the date Lessor accepts the Lease.
2. TERM AND RENT. This Agreement shall become effective upon acceptance
and execution by Lessor at its corporate offices, as specified above, and shall
remain effective at least until the expiration of the term of the last Lease
hereunder. Each Lease shall become effective upon acceptance and execution by
Lessor and shall be for the term provided therein. The term of each Lease shall
commence on the date the first Lease Payment is applied by Lessor and shall
thereafter continue until all obligations of the Lessee under the Lease shall
have been fully performed ("Lease Term"). The first Lease Payment will be
applied on the date the Lease is accepted by Lessor or [COPY ILLEGIBLE] date
designated by Lessor ("Lease Commencement Date"). Subsequent Lease Payments
shall be due on [COPY ILLEGIBLE] day as the Lease Commencement Date for each
successive month (or other time period as designated in [COPY ILLEGIBLE]
thereafter until the balance of the Lease Payments and any additional payments
or expenses chargeable to Lessee under the Lease shall have been paid in full.
If the Lease Commencement Date is other than the date Lessor executes the Lease,
Lessee agrees to pay Lessor interim rent in the amount set forth in the Lease
for each [COPY ILLEGIBLE] and including the day the Lessor executes the Lease
until the day preceding the Lease Commencement Date. All interim rent, if any,
shall be due and payable as specified in Lessor's invoice therefor. All payments
made by or on behalf of Lessee hereunder shall be nonrefundable. LESSEE'S
OBLIGATION TO PAY SUCH LEASE PAYMENTS SHALL BE ABSOLUTE AND UNCONDITIONAL AND IS
NOT SUBJECT TO ANY ABATEMENT, SET[COPY ILLEGIBLE] DEFENSE OR COUNTER-CLAIM FOR
ANY REASON WHATSOEVER. All payments hereunder shall be made to Lessor at its
address specified above (or such other place as Lessor, in writing, directs)
without notice or demand therefor, if the term of a Lease is extended. "Lease
Term" shall be deemed to refer to all extensions hereof. All provisions of this
Agreement shall apply during any extended term except as may be otherwise
specifically provided in this Agreement, in a Lease, or in any subsequent
written agreement of the parties.
3. DELIVERY AND ACCEPTANCE. Delivery and installation arrangements and
costs, unless included in the cost of the Equipment to Lessor and upon which the
Lease Payments were computed, are the sole responsibility of Lessee. Lessee
agrees to accept the Equipment when delivered, installed and operating to
Manufacturer's specifications and to execute the Delivery and Acceptance Receipt
supplied by Lessor as evidence thereof. Lessee agrees to hold Lessor harmless
from specific performance of this Agreement and from damages, if for any reason,
the Vendor fails to deliver, or delays in delivery of, the Equipment so ordered
or if the Equipment is unsatisfactory for any reason whatsoever. Lessee agrees
that any delay in delivery of the Equipment shall not affect the validity of
this Agreement, any Lease or the obligation to make Lease Payments thereunder.
Lessee's execution of the Delivery and Acceptance Receipt shall conclusively
establish that the Equipment covered thereby is acceptable to [COPY ILLEGIBLE]
purposes of the Lease related thereto.
The Lessee agrees to provide a suitable installation environment for the
Equipment as specified in the applicable Manufacturer's manual. [COPY ILLEGIBLE]
and except as otherwise specified by Manufacturer to furnish all labor [COPY
ILLEGIBLE] or unpacking and placing each item of Equipment in the desired
location. Without [COPY ILLEGIBLE] the generality of the foregoing, the
foundation or floor on which the Equipment is to be installed, shall be in
accordance with the builder's specifications, and the power for the Equipment
shall be in accordance with the builder's specifications and the [COPY
ILLEGIBLE] electrical code.
If Lessee has entered into any purchase, licensing or maintenance
agreements with the Vendor and/or the Manufacturer ("Acquisition Agreement")
covering the Equipment or any portion thereof. Lessee transfers and assigns to
Lessor all of Lessee's rights, but none of its obligations (except for Lessee's
obligation to pay for the Equipment upon Lessor's acceptance of the Lease) in
and to the Acquisition Agreement, including without limitation the right to take
title to the Equipment.
If Lessee cancels or terminates a Lease prior to delivery of the
Equipment or if Lessee fails or refuses to sign the Delivery and Acceptance
Receipt within a reasonable time, not to exceed five (5) business days, after
the Equipment has been delivered, installed and is operating to Manufacturer's
specifications, Lessor shall have the right of treating the Lease as cancelled
by Lessee and Lessee shall automatically assume all of Lessor's rights and
obligations as purchaser of the Equipment, whether under an Acquisition
Agreement or otherwise.
IT IS HEREBY AGREED THAT LESSOR IS NOT RESPONSIBLE FOR THE PERFORMANCE,
MAINTENANCE OR [COPY ILLEGIBLE] OF THE EQUIPMENT AND LEASES SAME "AS-IS."
4. SELECTION OF EQUIPMENT AND DISCLAIMER OF WARRANTY. Lessee has
selected both the Equipment and the supplier from whom Lessor covenants to
purchase the Equipment at Lessee's request. LESSEE ACKNOWLEDGES, THAT LESSOR HAS
NO EXPERTISE OR SPECIAL FAMILIARITY ABOUT OR WITH RESPECT TO THE EQUIPMENT.
LESSEE AGREES THAT THE EQUIPMENT LEASED HEREUNDER IS LEASED "AS-IS" AND IS [COPY
ILLEGIBLE] DESIGN AND CAPACITY SELECTED BY LESSEE AND THAT LESSEE IS SATISFIED
THAT THE SAME [COPY ILLEGIBLE] LESSEE'S PURPOSES, AND THAT LESSOR HAS MADE NO
REPRESENTATION OR WARRANTY [COPY ILLEGIBLE] OF SAID EQUIPMENT FOR THE PURPOSES
AND USES [COPY ILLEGIBLE] WARRANTY EXPRESS OR IMPLIED WITH RESPECT THERETO,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. LESSOR FURTHER DISCLAIMS ANY LIABILITY FOR LOSS, DAMAGE OR INJURY TO
LESSEE OR THIRD PARTIES AS A RESULT OF ANY DEFECTS, LATENT OR OTHERWISE, IN THE
EQUIPMENT WHETHER ARISING FROM THE APPLICATION OF THE LAWS OF STRICT LIABILITY
OR OTHERWISE. If the Equipment is not properly installed, does not operate as
represented or warranted by the Vendor and/or Manufacturer, or is unsatisfactory
for any reason, Lessee shall make any claim on account thereof solely against
the Vendor and/or Manufacturer and shall, nevertheless, pay Lessor all Lease
Payments under the Lease and shall not set up against Lessee's obligations any
such claims as a defense, counterclaim, set-off or otherwise. So long as Lessee
is not in breach or default of this Agreement of any Lease hereunder, Lessor
hereby assigns to Lessee, solely for the purpose of making and prosecuting any
such claim, any rights, which Lessor may have against the Vendor and/or
Manufacturer for breach of warranty or other representation respecting any item
of Equipment. All proceeds of any warranty recovery by Lessee from the Vendor
and/or Manufacturer of any item of Equipment shall first be used to repair or
replace the affected item of Equipment.
LESSEE ACKNOWLEDGES THAT NEITHER THE VENDOR NOR ANY SALESPERSON,
EMPLOYEE, REPRESENTATIVE OR AGENT OF THE VENDOR IS AN AGENT OR REPRESENTATIVE OF
LESSOR, AND THAT NONE OF THE ABOVE IS AUTHORIZED TO WAIVE OR ALTER ANY TERM,
PROVISION OR CONDITION OF THIS AGREEMENT OR ANY LEASE HEREUNDER, OR MAKE ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO THIS AGREEMENT, ANY LEASE HEREUNDER
OR THE EQUIPMENT LEASED HEREUNDER. Lessee further acknowledges and agrees that
Lessee, in executing this Agreement and each Lease hereunder, has relied solely
upon the terms, provisions and conditions contained herein and therein, and any
other statements, warranties, or representations, if any, by the Vendor, or any
salesperson, employee, representative or agent of the Vendor, have not been
relied upon, and shall not in any way affect Lessee's obligation to make the
Lease Payments and otherwise perform as set forth in this Agreement and each
Lease.
REGARDLESS OF CAUSE, LESSEE WILL NOT ASSERT ANY CLAIM WHATSOEVER AGAINST
LESSOR FOR LOSS OF ANTICIPATORY PROFITS OR ANY OTHER INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES, NOR SHALL LESSOR BE RESPONSIBLE FOR ANY DAMAGES OR COSTS
WHICH MAY BE ASSESSED AGAINST LESSEE IN ANY ACTION FOR INFRINGEMENT OF ANY
UNITED STATES LETTERS PATENT OR COPYRIGHT. LESSOR MAKES NO WARRANTY AS TO THE
TREATMENT OF THIS AGREEMENT OR ANY LEASE HEREUNDER FOR TAX OR ACCOUNTING
PURPOSES.
5. TITLE, PERSONAL PROPERTY AND LOCATION. The Equipment is, and shall at
all times be and remain the sole and exclusive property of Lessor, and Lessee,
notwithstanding any trade-in or down payment made by Lessee or on its behalf
with respect to the Equipment, shall have no right, title or interest therein or
thereto, except as to the use thereof subject to the terms and conditions of
this Agreement and the related Lease hereunder. Lessee will not directly or
indirectly create, incur, assume or suffer to exist any lien on or with respect
to the Equipment or Lessor's title thereto, except such liens as may arise
through the independent acts or omissions of the Lessor. Lessee, at its own
expense, will promptly pay, satisfy or otherwise take such actions as may be
necessary to keep the Equipment free and clear of any and all such liens. The
Equipment is, and at all times shall remain, personal property, notwithstanding
that the Equipment or any item thereof may now be, or hereafter become, in any
manner affixed or attached to, or imbedded in, or permanently resting upon real
property or any improvement thereof or attached in any manner to what is
permanent. If requested by Lessor prior to or at any time during the Lease Term,
Lessee will obtain and deliver to Lessor waivers of interest or liens in
recordable form, satisfactory to Lessor, from all persons claiming any interest
in the real property on which an item of Equipment is installed or located.
The Equipment shall be kept at the address designated in each Lease and
shall not be removed therefrom without the prior written consent of the Lessor,
which consent shall not be unreasonably withheld. Lessor may require plates or
markings to be affixed to or placed on the Equipment indicating the Lessor's
ownership of the Equipment.
6. USE AND MAINTENANCE. Lessee shall use the Equipment solely in the
conduct of its business and in a careful and proper manner consistent with the
requirements of all applicable insurance sources; shall only permit qualified
personnel to operate the Equipment and shall not discontinue the use of the
Equipment during the Lease Term. Lessee will not modify the Equipment in any way
without the prior written consent of Lessor, which consent shall not be
unreasonably withheld. Lessee shall not attach or incorporate the Equipment to
or on any other item of equipment in such a manner that the Equipment becomes or
may be deemed to have become an [COPY ILLEGIBLE] to or a part of such other item
of equipment.
At its own expense, Lessee [COPY ILLEGIBLE] the Equipment to be [COPY
ILLEGIBLE], used and maintained as recommended by the Manufacturer and
Manufacturer's maintenance manuals and plans by competent and duly qualified
personnel only approved by the Manufacturer. In accordance with applicable
governmental regulations, if any, and for business purposes only and in as good
operating condition as when delivered to Lessee hereunder, ordinary wear and
tear resulting from proper use alone excepted, and will provide all maintenance
and service and make all repairs or replacements reasonably necessary for such
purpose. Lessee shall record in a log book all maintenance and repair performed
on the Equipment and deliver the same to Lessor from time to time as requested
by Lessor and upon termination of the Lease.
If any parts or accessories forming part of the Equipment become worn
out, destroyed, damaged beyond repair or otherwise permanently rendered unfit
for use, Lessee, at its own expense, shall within a reasonable time cause such
parts or accessories to be replaced by replacement parts or accessories which
are free and clear of all liens, encumbrances or rights of others and have a
utility at least equal to the parts or accessories replaced. All equipment,
accessories, parts and replacements for or which are added to or become attached
to the Equipment, which are essential to the operation of the Equipment or which
cannot be detached from the Equipment without materially interfering with the
operation of the Equipment or adversely affecting the value and [COPY ILLEGIBLE]
which the Equipment would have [COPY ILLEGIBLE] addition thereof, shall
immediately become the property of Lessor, and shall be deemed incorporated
[COPY ILLEGIBLE] Equipment and subject to the terms of this Agreement [COPY
ILLEGIBLE] Lease as if originally leased hereunder. Lessee shall not make any
material alterations to the Equipment without the prior written consent of
Lessor, which consent shall not be unreasonably withheld.
Upon reasonable advance notice, Lessor shall have the right to inspect
the Equipment [COPY ILLEGIBLE] and all other maintenance records with respect
thereto, if any, at any reasonable time during normal business hours.
In the event the Lease Payments include the cost of maintenance and/or
service being provided by Vendor and/or Manufacturer, Lessee acknowledges that
Lessor is not responsible for providing any [COPY ILLEGIBLE] maintenance and/or
service for the Equipment. Lessee shall make all claims for service and/or
maintenance [COPY ILLEGIBLE] the Vendor and/or Manufacturer and Lessee's [COPY
ILLEGIBLE] Lease Payments [COPY ILLEGIBLE] ...
<PAGE> 2
[COPY ILLEGIBLE]
RIGHTS HEREUNDER ??? SHALL THE LESSEE SUBLEASE OR LEND THE EQUIPMENT OR SUBMIT
IT TO BE USED BY ANYONE OTHER THAN LESSEE'S EMPLOYEES WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD. Lessor
may at any time assign all or part of any interest in this Agreement or any
Lease and in each item of Equipment and monies to become due to Lessor
hereunder; and, Lessor may grant security interests in the Equipment, subject
to the Lessee's rights therein. In such events, all the provisions of this
Agreement or any Lease hereunder for the benefit of Lessor shall inure to the
benefit of and be ??? by or on behalf of such assignee, but the assignee shall
not be liable for or be required to perform any ??? or obligations to Lessee.
The Lessor may direct that all Lease Payments due and to become due under this
Agreement or any Lease hereunder and assigned by Lessor shall be paid directly
to assignee upon notice of ??? assignment to Lessee. The right of the assignee
to the payment of the assigned Lease Payments, the performance of all Lessee's
obligations and to exercise any other of Lessor's rights hereunder shall not be
subject ??? counterclaim or set-off which the Lessee may have or assert against
the Lessor, and the Lessee hereby agrees that it will not assert any such
defenses, set-offs, counterclaims and claims against the assignee.
8. RETURN OF EQUIPMENT, STORAGE. The Lessee shall, at its sole
expense, surrender each item of Equipment then, subject to any Lease hereunder
at the end of the Lease Term by delivering the item to the Lessor at a location
accessible by common carrier and designated by the Lessor within the
Continental United States or, if specified by the Lessor, into the custody of
a carrier designated by the Lessor. If the item of Equipment is delivered into
the custody of a carrier, the Lessee shall arrange for the shipping of the item
and its insurance in transit in accordance with the Lessor's instructions and
at the Lessee's sole expense. The Lessee, at its sole expense, shall
completely sever and disconnect the Equipment from the Lessee's property, all
without liability of the Lessor to the Lessee, or to any person claiming
through or under the Lessee, for damage of loss caused by such severance and
disconnection. The Lessee, at its sole expense, shall pack or crate the
Equipment or its component parts ??? and in accordance with any recommendations
of the Manufacturer with respect to similar new equipment before surrendering
the Equipment to the Lessor. The Lessee shall deliver to the Lessor the plans,
specifications, operation manuals and other warranties and documents furnished
by the Manufacturer or Vendor of the Equipment and such other documents in the
Lessee's possession relating to the maintenance and methods of operation of
such Equipment.
When an item of Equipment is surrendered to the Lessor, it shall be in
the condition and repair required to be maintained under this Agreement. It
will also be free of all evidence of advertising or insignia placed on it by
the Lessee and meet all legal and regulatory conditions necessary for the
Lessor to sell or lease it to a third party and be free of all liens. If
Lessor reasonably determines that an item of Equipment, once it is returned, is
not in the condition required hereby, Lessor may cause the repair, service,
modification or overhaul of the item of Equipment to achieve such condition and
upon demand. Lessee shall promptly reimburse Lessor for all amounts reasonably
expended in connection with the foregoing.
Should Lessee not return the Equipment at the end of the Lease Term,
Lessee shall continue to make Lease Payments to Lessor in the sum equal to the
last Lease Payment and at the same intervals as set out in the Lease as a
month-to-month lease term (or other term as designated by Lessor) until
returned by Lessee or until returned upon demand therefor by Lessor. The
acceptance of said Lease Payments by Lessor shall not waive Lessor's right to
have the Equipment promptly returned to Lessor pursuant to the provisions
hereof, nor shall the acceptance of said Lease Payments be deemed to be an
extension of the Lease Term.
Upon written request of the Lessor, the Lessee shall provide free
storage for any item of Equipment for a period not to exceed 60 days after
expiration of its Lease Term before returning it to the Lessor. The Lessee
shall arrange for the insurance described to continue in full force and effect
with respect to such item during its storage period and the Lessor shall
reimburse the Lessee on demand for the incremental premium cost of providing
such insurance.
9. LOSS OR DAMAGE. Lessee hereby assumes and shall bear the entire
risk of loss (including theft and ???) or destruction of or damage to the
Equipment from any and every cause whatsoever, whether or ??? until the
Equipment is returned to Lessor. No such loss or damage shall relieve Lessee
from any ??? under this Agreement or any Lease hereunder, which shall continue
in full force and effect. In the event of damage to or loss or destruction of
the Equipment or any item thereof), Lessee shall promptly notify Lessor in ???
of such fact and shall, at the option of Lessor, (a) place the same in good
repair, condition and working order, (b) replace the Equipment with like
equipment in good repair, condition and working order, acceptable to Lessor and
transfer clear title to such replacement equipment to Lessor, whereupon such
equipment shall be subject to the Lease and be deemed the Equipment for purposes
hereof, or (c) on the due date for the next Lease Payment or upon the expiration
of the Lease, whichever first occurs, pay to Lessor; (i) the Stipulated Loss
Value ??? as may be specified in the Lease ??? Lease Payments then due, or if
the Lease does not provide for Stipulated Loss Values, (ii) the present value of
the total of all unpaid Lease Payments for the entire Lease Term ??? estimated
fair market value of the Equipment at the end of the originally scheduled Lease
Term or the agreed upon purchase option price. If any, all of which shall be
discounted to the date of payment by Lessee at an ??? equal to the lesser of six
percent (6%) or the ??? rate of interest of the Lease, whereupon the Lease shall
terminate with respect thereto. All proceeds of insurance received by Lessor as
a result of such loss or damage shall, where applicable, be applied toward the
replacement or repair of the Equipment or the payment of ??? of Lessee
hereunder.
10. INSURANCE. Prior to the Lease Commencement Date, Lessee shall
obtain, maintain and keep the Equipment insured against all risks of loss or
damage from every cause whatsoever including, without limitation, loss by fire,
theft, "mysterious disappearance", collision, earthquake, flood and such other
risks of loss as are customarily insured against on the type of Equipment leased
hereunder by businesses of the type in which Lessee is engaged. In an amount
not less than the replacement cost or Stipulated Loss Value of the Equipment,
whichever greater without deductible and without co-insurance. Lessee shall
maintain such insurance coverage for the ??? Lease Term, Lessee shall ???
maintain for the entire Lease Term, comprehensive public facility insurance
covering facility for bodily injury including death, and property damage
resulting from the purchase ??? maintenance, use, operation or return of the
Equipment with a combined single limit of not more than Two Million Dollars
($2,000,000.00) per occurrence. If Lessee is a doctor, hospital or other
health care provider, Lessee shall furnish Lessor with evidence of sufficient
medical malpractice insurance. All said insurance shall be in a form and an
amount and with companies reasonably satisfactory to Lessor. Lessor, its ???
or assigns, shall be the sole named loss payee with respect to insurance for
damage to or loss of the Equipment and shall be named as an additional insured
on the public liability insurance. Lessee shall pay all premiums for such
insurance and shall deliver to Lessor the original policy or policies of
insurance, certificates of insurance or other evidence satisfactory to Lessor
evidencing the insurance required thereby, along with proof, satisfactory to
Lessor, of the payment of the premiums for such insurance policies. All
insurance shall provide for at least sixty (60) days advance written notice to
Lessor before any cancellation, expiration or material modification ??? and
also provide that no act or default of any person other than Lessor, its agents
or those claiming under ??? Lessor's right to recover under such policy or
policies in case of loss. Lessee hereby irrevocably ??? as Lessee's
attorney-in-fact (which power shall be deemed coupled with an interest) to make
??? payment of and execute and enforce all documents, checks ??? received in
payment for ??? default, Lessee may with the prior written ??? shall fail to
procure, maintain, and ??? obligation to obtain such insurance on behalf of
??? obtain such insurance, Lessee agrees to pay all costs ??????.
11. [COPY ILLEGIBLE]
copyright infringement) or operation on any item of the Equipment, and by
whomsoever ??? during the Lease Term with respect to that item of the Equipment,
the loss, damage, destruction, environmental impact, removal, return, surrender,
sale or other disposition of the Equipment or any item thereof. Lessor shall
give Lessee prompt notice of any claim or liability hereby indemnified against.
Lessee shall be entitled to control the defense thereof, so long as Lessee is
not in Default hereunder, provided, however, that Lessor shall have the right to
approve defense counsel selected by Lessee. The obligations contained in this
paragraph continue beyond the termination of the Lease if the liability occurred
during the Lease Term.
12. TAX TREATMENT AND INDEMNIFICATION. (a) Unless otherwise
provided for in the related Lease ??? acknowledged and agreed by the parties
that they are entering into this Agreement with the assumption that Lessor and
the consolidated group of which Lessor is a member (all references to Lessor in
this Section include such consolidated group) will be treated for federal
income tax purposes and to the extent allowable (for state and local tax
purposes) as the owner of all Equipment leased hereunder and will have the
maximum federal income tax rate applicable to corporations during the term
hereof (which maximum federal income tax rate shall remain constant during the
term hereof).
(b) The Lessee acknowledges and agrees that each Lease has been
executed by Lessor based upon the following representations and warranties of
Lessee, (i) each item of Equipment has been placed in service on the Lease
Commencement Date (as defined in each Lease); (ii) Lessor will not under the
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder (the "Code"), be required to include in its gross income for federal
income tax purposes, any amount with respect to any improvement, modification
or addition made by Lessee to any item of Equipment; (iii) Lessor shall be
entitled to accelerated cost recovery deductions ("Recovery Deductions") for
the cost of each item of Equipment over the number of years indicated in the
related Lease by using the 200% declining balance method permitted under Code
Section 168 and the half year convention, unless otherwise required by
operation of Code Section 168 (d)(3)(A); (iv) no item of Equipment is limited
use property within the meaning of Rev. Proc. 76-30;; and (v) for federal income
tax purposes, all amounts included in the gross income of Lessor with respect
to each item of Equipment will be treated as served from or allocable to
sources within the United States.
(c) If by reason of (1) the inaccuracy in law or in fact of any of the
assumptions or representations or warranties set forth in Subsections (a) of (b)
of this Section, (2) the inaccuracy of any statement or any letter or document
furnished to Lessor by or on behalf of Lessee in connection with the
transactions contemplated under the Lease, or (3) the act, failure to act or
omission of or by Lessee or (4) any change in the Code occurring after the date
hereof, Lessor will (i) lose, will not have the right to claim or if there will
be disallowed with respect to Lessor all or any portion of the Recovery
Deduction as to any item of the Equipment, (ii) be required to include in its
gross income any amount in respect to any alteration, modification or addition,
any item other than an alteration, modification or addition which is permitted
without adverse tax consequences to Lessor under Rev. Procs. 75-21, 76-30 or
79-48 (an "Improvement Loss"), or (iii) suffer a decrease in Lessor's net return
over the then remaining portion of the Lease Term (any such occurrence referred
to hereinafter as "Loss"), then at Lessor's option either (X) the rent will, on
and after the next succeeding date for the payment thereof upon notice to Lessee
by Lessor that a Loss has occurred, and describing the amount as to which Lessor
intends to claim indemnification and the reason for such adjustment in
reasonable detail, be increased by such amount, which will cause Lessor's net
return over the then remaining portion of the Lease Term (taking into account
the tax effect from deferred utilization of tax basis resulting from changes in
the method of calculating Recovery Deductions) to equal the net return that
would have been available if such loss had not occurred, or (Y) in lieu of a
rent increase, Lessee shall pay to Lessor on such next succeeding date for the
payment of rent such sum as will cause Lessor's net return over the term of the
Lease in respect of the Equipment to equal to the net return that would have
been available if such Loss had not occurred. If such Loss occurs after the
expiration or termination of the Lease, Lessor will notify Lessee of such Loss
and Lessee will, within sixty (60) days after such notice, pay to Lessor such
sum as required by the preceding clause, (Y). Lessee will forthwith pay on
demand to Lessor an amount on an after-tax basis which will be equal to the
amount of any interest and/or penalties which may be assessed by the United
States or any state against Lessor as a result of the Loss.
(d) For purposes of this Section, a Loss will occur upon the earliest
of (1) the happening of any event which may cause such Loss, (2) the payment by
Lessor to the Internal Revenue Service of the tax increase resulting from such
Loss, or (3) the adjustment of the tax return of Lessor to reflect such Loss.
Lessor will be responsible for, and, will not be entitled to a payment under
this Section on account of any Loss due solely to one or more of the following
events: (i) the failure of Lessor to have sufficient taxable income to benefit
from the Recovery Deduction; (ii) any disposition of the Equipment by Lessor
prior to an Event of Default which has occurred and is continuing under the
Lease; or (iii) the failure of Lessor to properly claim the Recovery Deduction.
(e) The indemnities and assumptions of facility provided herein and
all Lessor's rights and privileges herein will continue in full force and
effect notwithstanding the expiration or termination of the Lease.
13. EVENTS OF DEFAULT. The term "Event of Default" shall mean any
one or more of the following: (a) Lessee shall fail to make any Lease Payment,
or any other payment, as it becomes due and such failure is not cured within 10
days; or (b) Lessee shall fail to perform or observe any of the covenants set
forth in Paragraph 10; or (c) Lessee shall fail to perform or observe any other
covenant, condition or agreement to be performed or observed by thereunder or
in any Lease and such failure is not cured within 30 days after the earlier if:
(i) the date on which Lessee obtains, or should have obtained, knowledge of
such failure or (ii) the case of notice thereof by Lessor to Lessee; or (d)
Lessee shall enter into any transaction of merger or consolidation in which it
is not the surviving entity or sell, transfer or otherwise dispose of all or
substantially all of its assets ("Assets") unless the surviving entity or the
entity acquiring such Assets assumes all the duties and obligations of Lessee
hereunder and which merger, consolidation, sale or transfer must be approved in
writing by Lessor; or (e) (i) Lessee or any guarantor of Lessee's obligations
shall commence any action (A) for relief under any exiting or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or ??? of debtor, or (B) seeking appointment of a receiver
custodian or other similar official for ??? Assets or making a general
assignment for the benefit of its creditors, or (ii) there shall be commenced
against Lessee any action (A) or a nature referred to in clause (I) which
results in the entry of an order for relief of any such other ??? remains
undismissed or undischarged for a period of 30 days, or (B) seeking attachment,
execution or similar process against it assets which results in the entry of an
order for any such relief which shall not be vacated or discharged within 30
days from the entry thereof; or (iii) Lessee shall generally not, or be unable
to pay its debts as they come due; or (f) Lessee shall die or (if an entity)
liquidate or dissolve itself or be liquidated or terminated; or (g) Any
representation or warranty made by Lessee herein or otherwise furnished Lessor
in connection with this Agreement or any Lease hereunder shall prove at any
time to have been untrue or misleading in any material respect; or (h) Lessee
or any guarantor of Lessee's obligations defaults on any indebtedness for
borrowed money, lease, or installment sale obligation, in each case when an
applicable grace period for such obligation has expired and the lender, lessor
or creditor has commenced to exercise any remedy, but only if the indebtedness
or other obligation is in an amount equal to or in excess of $50,000; or (i)
Lessor shall reasonably deem itself insecure as a result of a material adverse
chance in Lessee's financial condition or operations.
14. REMEDIES. Upon the occurrence of any Event of Default, Lessor
may declare this Agreement or any Lease hereunder ??? default and exercise any
one or more of the following remedies. a) Declare the entire unpaid balance of
Lease Payments for the unexpired term of the Lease hereunder immediately the ???
and similarly accelerate the balances due under any other Leases between Lessor
and Lessee without notice or demand, b) ??? recover (i) Lease Payments and other
monies due and to become due under the Lease hereunder plus the estimated fair
market value of the Equipment at the end of the originally scheduled Lease Term
or any agreed upon Purchase Option, all of which shall be discounted to the date
of default at an annual rate equal to the lesser of six percent (6%) of the ???
rate of interest of the Lease but only to the extent permitted by law, (c)
Charge Lessee interest on all monies due Lessor at the rate of eighteen percent
(18%) per annum from the date of default until said ??? than the maximum rate
permitted by law, (d) Charge Lessee [COPY ILLEGIBLE]
<PAGE> 3
[PARAGRAPH ILLEGIBLE]
Whenever any payment is not made by Lessee when due hereunder, Lessee
agrees to pay to Lessor, not later than one month thereafter, an amount
calculated at the rate of five cents per one dollar for each such delayed
payment as compensation for Lessor's internal operating expenses arising as a
result of such delayed payment, but only to the extent permitted by law. Such
amount shall be payable in addition to all amounts payable by Lessee as a result
of the exercise of any of the remedies herein provided.
All remedies of Lessor hereunder are cumulative, are in addition to any
other remedies provided for by law, and may, to the extent permitted by law, be
exercised concurrently or separately. The exercise of any one remedy shall not
be deemed to be an election of such remedy or to preclude the exercise of any
other remedy. No failure on the part of the Lessor to exercise and no delay in
exercising any right or remedy shall operate as a waiver thereof or modify the
terms of this Agreement or any Lease hereunder. A waiver of default shall not
be a waiver of any other or subsequent default. Lessor's recovery hereunder
shall in no event exceed the maximum recovery permitted by law.
15. LAWS, REGULATIONS AND TAXES. Lessee shall comply with all laws,
regulations and orders relating or pertaining to the Equipment, this Agreement
or any Lease hereunder and Lessee shall be responsible for, as and when due, and
shall indemnify and hold Lessor harmless from and against all present and future
taxes and other governmental charges, or any increases therein (including,
without limitation, sales, use, leasing and stamp taxes and license and
registration fees) and amounts in lieu of such taxes and charges and any
penalties or interest on any of the foregoing, imposed, levied upon, in
connection with, or as a result of the purchase, ownership, delivery, leasing,
possession or use of the Equipment, or based upon or measured by the Lease
Payments or receipt with respect to this Agreement or any Lease hereunder.
Lessee shall not, however, be obligated to pay any taxes on or measured by
Lessor's net income. Lessee authorizes Lessor to add to the amount of each
Lease Payment any fees, use or leasing tax that may be imposed on or measured by
such Lease Payment. Lessee shall pay Lessor on demand, as additional rent, the
amount of the personal property tax required to be paid by Lessor as owner of
the Equipment, plus reasonable costs incurred in collecting and administering
any taxes, assessments or fees [COPY ILLEGIBLE] them to the appropriate
authorities and interest thereon at the highest legal rate allowed, from the
date due until fully paid. In the event Lessee does not pay all sums specified
above, Lessor has the right, but not the obligation to pay the same. If Lessor
shall so pay any of the aforementioned, then the Lessee shall remit [COPY
ILLEGIBLE] amount with the next Lease Payment plus Lessor's reasonable costs
incurred in collecting and administering any taxes, assessments or fees and
remitting them to the appropriate authorities.
In the event the Equipment is located at more than one location, Lessee
shall file the personal property tax [COPY ILLEGIBLE] pay the personal property
tax for each equipment location and forward to Lessor at Lessor's request a copy
of the personal property tax declaration listing the Equipment. The obligations
contained in this Section [COPY ILLEGIBLE] beyond the termination of the Lease
of the obligations occurred during the Lease Term.
16. [COPY ILLEGIBLE] FILING AND FINANCIAL STATEMENTS. Lessee authorizes
Lessor to file a financing statement with respect to the Equipment signed only
by the Lessor where permitted by the Uniform Commercial Code or per applicable
law. Lessee hereby appoints Lessor as Lessee's attorney-in-fact to execute such
financing statements on Lessee's behalf and to do all acts or things which
Lessor may deem necessary to protect Lessor's title and interest hereunder.
Lessor and Lessee further agree that [COPY ILLEGIBLE] photographic or other
reproduction of this Agreement of any lease hereunder may be filed as a
financing statement and shall be sufficient as a financing [COPY ILLEGIBLE]
under the Uniform Commercial Code or other applicable law. It is the intent of
the parties that this is a [PARAGRAPH ILLEGIBLE]
[PARAGRAPH ILLEGIBLE]
17. SECURITY DEPOSIT. Lessor shall retain any security deposit set
forth on each Lease as security or the [COPY ILLEGIBLE] hereunder. Any
security deposit so taken shall be non-interest bearing. [PARAGRAPH ILLEGIBLE]
18. WARRANTY OF BUSINESS PURPOSE. Lessee hereby warrants and
represents that the Equipment will be used for business purposes and not for
personal family or household purposes. Lessee acknowledges that Lessor [COPY
ILLEGIBLE] this representation in entering into this Agreement and each Lease
hereunder.
19. LESSEE REPRESENTATIONS AND WARRANTIES. [PARAGRAPH ILLEGIBLE]
any regulatory commission, board or other administrative governmental agency
against or affecting Lessee, which will have a material adverse effect on the
ability of Lessee to fulfill its obligations under the Lease, and (f) the
balance sheet and statement of income of Lessee, or of any consolidated group
of which Lessee is a member, heretofore delivered to Lessor have been prepared
in accordance with generally accepted accounting principles and fairly present
the financial position of Lessee or the consolidated group of companies of which
Lessee is a member on and as of the date hereof and the results of its or their
operations for the period or periods covered thereby. Since the date of such
balance sheet and statement of income there has been no material adverse change
in the financial or operating condition of Lessee or its consolidated group.
20. MISCELLANEOUS. All obligations of the Lessee, if more than one,
shall be joint and several. All paragraph headings are inserted for reference
purposes only and shall not affect the interpretation or meaning of this
Agreement or any Lease hereunder. Lessee agrees to execute or obtain and
deliver to Lessor at Lessor's request such additional documents as Lessor may
reasonably deem necessary to protect Lessor's interest in the Equipment, this
Agreement and any Lease.
21. NOTICE. Written notices to be given hereunder shall be deemed to
have been given when delivered personally or deposited in the United States
mails, postage prepaid, addressed to such party at its address set forth above
or at such other address as such party may have subsequently provided in
writing.
22. SUPPLIER'S CONTRACT. Lessor and Lessee agree that each Lease is a
Finance Lease as that term is defined in Article 2A of the Uniform Commercial
Code. Lessee acknowledges that Lessor has apprised Lessee of the identity of
the equipment supplier. Lessor hereby notifies Lessee that Lessee may have
rights pursuant to the contract with the supplier and the Lessee may contact
the supplier for a description of any rights or warranties that Lessee may have
under this contract.
23. LESSEE'S WAIVERS. Lessee hereby waives any and all rights and
remedies granted Lessee by Sections 508 through 522 of Article 2A of the
Uniform Commercial Code including, by way of example only and not as a
limitation, the right to repudiate any Lease and reject the Equipment; the
right to cancel any lease; the right to revoke acceptance of the Equipment; the
right to grant a security interest in the Equipment in Lessee's possession and
control for any reason; the right to recover damages thereunder for any breach
of warranty or for any other reason deduct all or any part of the claimed
damages resulting from Lessor's default, if any, under any Lease; the right to
accept partial delivery of Equipment; the right to "cover" by making any
purchase or leases of or contract to purchase or lease equipment in
substitution for those due from Lessor; the right to recover any general,
special, incidental or consequential damages, for any reason whatsoever; and
the right to specific performance, replevin, detinue, sequestration, claim and
delivery and the like for the Equipment.
24. CHOICE OF LAW. THIS AGREEMENT AND EACH LEASE HEREUNDER SHALL BE
BINDING AND EFFECTIVE WHEN ACCEPTED BY LESSOR AT ITS CORPORATE OFFICE IN BERWYN,
PENNSYLVANIA, SHALL BE DEEMED TO HAVE BEEN MADE IN BERWYN, PENNSYLVANIA AND,
EXCEPT FOR LOCAL FILING REQUIREMENTS AND LAWS RELATING TO CONFLICT OF LAWS,
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA. LESSEE HEREBY CONSENTS TO AND AGREES THAT
PERSONAL JURISDICTION OVER LESSEE AND SUBJECT MATTER JURISDICTION OVER THE
EQUIPMENT SHALL BE WITH THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA OR THE
FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, SOLELY AT
LESSOR'S OPTION, WITH RESPECT TO ANY PROVISION OF THIS AGREEMENT OR ANY LEASE
HEREUNDER. LESSEE AGREES THAT SERVICE OF PROCESS IN ANY ACTION OR PROCEEDING
MAY BE DULY AFFECTED UPON LESSEE BY MAILING SUCH PROCESS VIA CERTIFIED MAIL,
RETURN RECEIPT REQUESTED. LESSEE ALSO AGREES TO WAIVE ITS RIGHT TO A TRIAL BY
JURY.
25. ENTIRE AGREEMENT, NON-WAIVER AND SEVERABILITY. This Agreement and
each Lease hereunder contain the entire agreement and understanding between
Lessee and Lessor relating to the subject matter of each Lease. No agreements
or understandings shall be binding on the parties hereto unless set forth in
writing and signed by the parties. Time is of the essence in this Agreement and
each Lease hereunder. No waiver by Lessor of any breach or default shall
constitute a waiver of any additional or subsequent breach or default by Lessor
nor shall it be a waiver of any of Lessor's rights. Any provision of this
Agreement or any Lease hereunder which for any reason may be held unenforceable
in any one jurisdiction shall, as to such jurisdiction, be effective to the
extent of such unenforceability without invalidating the remaining provisions of
this Agreement or any Lease hereunder, and any such unenforceability in any one
jurisdiction shall not render such provision unenforceable in any other
jurisdiction.
________________________________________________________________________________
L You agree to all of the Terms and Conditions contained in both sides of
this Agreement and on any attachments to same (all of which are included
E by reference) and become part of this Agreement. You acknowledge to
have read and agreed to all the Terms and Conditions and understand that
S this is a non-cancellable Agreement for the full terms shown above.
Agreement shall not be binding upon Lessor or become effective unless
S and until Lessor executes the Agreement. This Agreement is not intended
for home or personal use.
E ------------------------------------------------------------------------
You acknowledge that the equipment is: [ ] NEW [ ] USED
E ------------------------------------------------------------------------
Signature
WILLIAM A. ANGUS III
S ------------------------------------------------------------------------
I Date
G April 26, 1996
N ------------------------------------------------------------------------
A Print Name
T WILLIAM A. ANGUS III
U ------------------------------------------------------------------------
R Title Sr. Vice President and Chief Financial Officer
E
------------------------------------------------------------------------
For
Cymer Laser Technologies
------------------------------------------------------------------------
________________________________________________________________________________
------------------------------------------------------------------------
Lessor Signature Date
------------------------------------------------------------------------
Print Name
L
------------------------------------------------------------------------
E Title
S ------------------------------------------------------------------------
For
S Tokai Financial Services, Inc.
------------------------------------------------------------------------
O [COPY ILLEGIBLE]
R ------------------------------------------------------------------------
[COPY ILLEGIBLE]
------------------------------------------------------------------------
[COPY ILLEGIBLE]
------------------------------------------------------------------------
<PAGE> 4
MASTER LEASE SCHEDULE NO. 01
This Master Lease Schedule No. 01 ("Lease") is by and between Tokai Financial
Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee") and
incorporates the terms and conditions of that certain Master Lease Agreement
dated as of April 3, 1996 between Lessor and Lessee ("Master Lease"). Lessor
hereby leases to Lessee and Lessee hereby leases from Lessor the following
described items of Equipment for the Lease Term and on terms and conditions set
forth herein. The Lease shall become effective as against Lessor upon Lessor's
execution hereof.
- -------------------------------------------------------------------------------
1. EQUIPMENT: (see Attachment A)
- -------------------------------------------------------------------------------
EQUIPMENT LOCATION: BILLING ADDRESS:
16275 Technology Drive 16275 Technology Drive
San Diego San Diego
CA 92127 CA 92127
Phone #: (619) 487-2442 Phone #: (619) 487-2442
- -------------------------------------------------------------------------------
2. LEASE TERM:
For all purposes under the Lease, Lessee agrees that the Lease shall commence
ten (10) days after the delivery of all, or substantially all, of the Equipment
(Commencement Date), as certified in writing to Lessor by the Vendor.
LESSEE AND LESSOR ACKNOWLEDGE THAT THE INSTALLATION OF THE EQUIPMENT MAY NOT
HAVE BEEN COMPLETED AS OF THE COMMENCEMENT DATE. HOWEVER, IN CONSIDERATION OF
LESSOR'S AGREEING TO PROVIDE THE FIXED RATE FINANCING SET FORTH HEREIN AND OTHER
GOOD AND VALUABLE CONSIDERATION, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED,
LESSEE AGREES THAT ITS OBLIGATIONS HEREUNDER ARE ABSOLUTE AND UNCONDITIONAL.
LESSOR IS RELYING UPON LESSEE'S ACCEPTANCE OF THE ABOVE TERMS IN FUNDING THE
VENDOR OF THE EQUIPMENT.
The Base Lease Term of the Lease shall be for the term indicated below and shall
commence on the first day of the calendar month following the Commencement Date
("Base Term Commencement Date").
a) Base Lease Term: 48 months.
- -------------------------------------------------------------------------------
3. LEASE PAYMENTS:
(a) Interim Rent is due and payable in full on the date specified in Lessor's
invoice(s) therefor and shall be computed by dividing one payment of Base Term
Rent by thirty (30) and multiplying the result by the number of days from and
including the Commencement Date to the day preceding the Base Term
Commencement Date.
(b) Base Term Rent consists of:
- -------------------------------------------------------------------------------
Number Amount Taxes Total
- -------------------------------------------------------------------------------
1-48 $3,231.40 included $3,231.40
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Frequency of Base Term Rent:
- -------------------------------------------------------------------------------
Monthly X Quarterly Other
- -------------------------------------------------------------------------------
The first installment of Base Term Rent shall be due and payable upon the
earlier of (i) the date specified in Lessor's invoice therefor, or (ii) the
Base Term Commencement Date.
- -------------------------------------------------------------------------------
4. SPECIAL PAYMENTS:
The following Special Payment(s) shall be due and payable on the date Lessee
executes this Lease.
- -------------------------------------------------------------------------------
$3,231.40 $3,231.40*
Security Deposit Advance Lease Payment Other Total
- -------------------------------------------------------------------------------
To be applied to the first Base Term Rent payment.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 5
5. STIPULATED LOSS VALUES: (None)
6. STANDARDS FOR USE AND MAINTENANCE: (see Master Lease)
7. STANDARDS FOR RETURN CONDITION: (see Master Lease)
8. LEASE END OPTION:
Provided no Event of Default shall have occurred and remain uncured, Lessee may
upon the expiration of the Lease Term exercise any one of the following options
with respect to not less than all items of Equipment leased hereunder, (i)
return the Equipment to Lessor, (ii) extend the Lease Term at the then fair
rental value ("Fair Rental Value") for an extension term the length of which
shall be determined by agreement between Lessee and Lessor or (iii) purchase the
Equipment for a cash price equal to ten percent (10%) of the Lessor's
acquisition cost ("Cash Price"). Lessee agrees to provide Lessor with written
notice of Lessee's decision not less than 180 days prior to the expiration of
the Lease Term. If Lessee fails to give Lessor 180 days prior written notice,
the Lease Term shall automatically be extended without notice to Lessee upon the
same terms and conditions for an additional 180 days and may be terminated
thereafter upon 180 days prior written notice to Lessor. Upon receipt of
Lessee's notice of termination and prior to the return of the Equipment, Lessor
shall be entitled to expose the Equipment for resale or lease at the Lessee's
premises during reasonable business hours (so long as such exposure does not
unreasonably interfere with Lessee's business operations). If by proper notice
Lessee elects to purchase the Equipment and upon receipt by Lessor of the Cash
Price and all other sums due hereunder, Lessor shall convey title to the
Equipment to Lessee free of liens and encumbrances created by Lessor on an
AS-IS, WHERE-IS basis and without warranty.
Fair Rental Value shall mean an amount which would obtain in a transaction
between an informed and willing lessee (other than a dealer) and an informed
and willing lessor (assuming for this purpose that the Equipment shall have
been maintained in accordance with this Lease and taking into consideration the
in-place value of the Equipment to Lessee) and will be determined by agreement
between Lessor and Lessee.
9. ADDITIONAL PROVISIONS: (None)
10. MODIFICATIONS AND WAIVERS, EXECUTION IN COUNTERPARTS:
To the extent any of the terms and conditions set forth in this Lease conflict
with or are inconsistent with the Master Lease, this Lease shall govern and
control. No amendment, modification or waiver of this Lease will be effective
unless evidenced by a written document signed by both parties. This Lease may
be executed in counterparts, all of which when taken together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Master Lease Schedule
to be executed and delivered by their duly authorized representatives as of the
dates set forth below.
- -------------------------------------- ----------------------------------------
LESSEE: Cymer Laser Technologies LESSOR: Tokai Financial Services, Inc.
- -------------------------------------- ----------------------------------------
By: [SIG] By:
- -------------------------------------- ----------------------------------------
Print Name: Print Name:
- -------------------------------------- ----------------------------------------
Title: Title:
- -------------------------------------- ----------------------------------------
Date: Date:
- -------------------------------------- ----------------------------------------
----------------------------------------
FOR OFFICE USE ONLY
----------------------------------------
Lease No.
----------------------------------------
Customer No.
----------------------------------------
Commencement Date
----------------------------------------
Base Term Commencement Date
----------------------------------------
page 2 of 2
<PAGE> 6
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 01 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 HAN 1 NPFS-4224-N, FABRIC PANEL 291.00 291.00
42" X 24" SELL% %65.0000
101.85 101.85
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
2 HAN 1 NPFS-4224-P, FABRIC PANEL 392.00 392.00
42" X 36" SELL% %65.0000
137.20 137.20
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
3 HAN 12 NPFS-4230-N, FABRIC PANEL 317.00 3804.00
42" X 30" SELL% %65.0000
110.95 1331.40
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
4 HAN 18 NPFS-4236-N, FABRIC PANEL 345.00 6210.00
42" X 36" SELL% %65.0000
120.75 2173.50
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
5 HAN 39 NPFS-4236-P, FABRIC PANEL 446.00 17394.00
42" X 36" SELL% %65.0000
156.10 6087.90
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
6 HAN 3 NPFS-4248-P, FABRIC PANEL 525.00 1575.00
42" X 48" SELL% %65.0000
183.75 531.25
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
7 HAN 2 NPFS-4260-P, FABRIC PANEL 594.00 1188.00
42" X 60" SELL% %65.0000
207.90 415.80
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
8 HAN 6 NPFS-6424-N, FABRIC PANEL 356.00 2136.00
54" X 24" SELL% %65.0000
124.50 747.60
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
9 HAN 4 NPFS-6430-N, FABRIC PANEL 411.00 1644.00
54" X 30" SELL% %65.0000
143.85 575.40
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
</TABLE>
Page 1 of 7
<PAGE> 7
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 01 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 HAN 1 NPFS-6436-N, FABRIC PANEL 448.00 448.00
64" X 36" SELL% %65.0000
156.80 156.80
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
11 HAN 55 NPFS-6436-P, FABRIC PANEL 549.00 30195.00
64" X 36" SELL% %65.0000
192.15 10568.25
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
12 HAN 23 NPFS-6448-N, FABRIC PANEL 520.00 11960.00
64" X 48" SELL% %65.0000
182.00 4186.00
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
13 HAN 2 NPFS-6448-P, FABRIC PANEL 621.00 1242.00
64" X 48" SELL% %65.0000
217.35 434.70
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
14 HAN 5 NPFS-6460-N, FABRIC PANEL 500.00 3000.00
64" X 50" SELL% %65.0000
210.00 1050.00
FN- OAC, FN- OAC, TR- OAC
- -------------------------------------------------------------------------------
15 HAN 33 NVSS-42, STRAIGHT CONNECTOR 29.00 957.00
42" SELL% %65.0000
10.15 334.95
00
- -------------------------------------------------------------------------------
16 HAN 55 NVSS-64, STRAIGHT CONNECTOR 35.00 1925.00
64" SELL% %65.0000
12.25 673.75
00
- -------------------------------------------------------------------------------
17 HAN 1 NV2S-42,F 2-WAY PANEL CONNECTOR - 42" 125.00 125.00
SELL% %65.0000
44.10 44.10
TR- OAC, FN- OAC.
- -------------------------------------------------------------------------------
18 HAN 27 NV2S-64-F, 2-WAY PANEL CONNECTOR - 64" 138.00 3726.00
SELL% %65.0000
48.30 1304.10
TR- OAC, FN- OAC,
- -------------------------------------------------------------------------------
</TABLE>
Page 2 of 7
<PAGE> 8
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 01 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
19 HAN 26 NV3S-64-F, 3-WAY PANEL CONNECTOR--64" 184.00 4784.00
SELL% %65.0000
64.40 1674.40
TR- OAC, FN- OAC
- -------------------------------------------------------------------------------
20 HAN 3 NV4S-64-S, 4-WAY PANEL CONNECTOR--64" 205.00 615.00
SELL% %65.0000
71.75 215.25
TR- OAC
- -------------------------------------------------------------------------------
21 HAN 34 NVES-42-F, END-OF-RUN COVER--42" 60.00 2040.00
SELL% %65.0000
21.00 714.00
TR- OAC, FN- OAC
- -------------------------------------------------------------------------------
22 HAN 12 NVES-64-F, END-OF-RUN COVER--64" 65.00 780.00
SELL% %65.0000
22.75 273.00
TR- OAC, FN- OAC
- -------------------------------------------------------------------------------
23 HAN 58 NVVS-22-F, VARIABLE HEIGHT COVER--22" 63.00 3654.00
SELL% %65.0000
22.03 1278.90
TR- OAC, FN- OAC
- -------------------------------------------------------------------------------
24 HAN 1 NVTS-64, T-MOUNT KIT--64" 62.00 62.00
SELL% %65.0000
21.70 21.70
TR- OAC,
- -------------------------------------------------------------------------------
25 HAN 13 NET-64, TOP FEED MODULE 228.00 2964.00
54" PANEL SELL% %65.0000
79.80 1037.40
TR- OAC,
- -------------------------------------------------------------------------------
26 HAN 22 NER-1, POWER RECEPTACLE--TRIPLEX 33.00 1325.00
BOX OF 6 SELL% %65.0000
29.05 639.10
TR- OAC,
- -------------------------------------------------------------------------------
27 HAN 1 NES-1, POWER CONNECTOR 59.00 59.00
STRAIGHT-SPAN SELL% %65.0000
20.65 20.65
00
- -------------------------------------------------------------------------------
</TABLE>
Page 3 of 7
<PAGE> 9
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 01 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
28 HAN 42 NEC-2, PANEL PORT KIT--STANDARD 30.00 1250.00
WALL OUTLET SELL% %65.0000
10.50 441.00
00
- -------------------------------------------------------------------------------
29 HAN 83 NEV-1, VERTICAL WIRE MANAGER 13.00 1079.00
SELL% %65.0000
4.55 377.65
TR- OAC,
- -------------------------------------------------------------------------------
30 HAN 64 NUDS-36, OVERHEAD STORAGE UNIT--36" 359.00 22976.00
STEEL DOOR SELL% %65.0000
125.65 8041.60
TR- OAC,
- -------------------------------------------------------------------------------
31 HAN 19 NUDS-48, OVERHEAD STORAGE UNIT--48" 383.00 7277.00
STEEL DOOR SELL% %65.0000
134.05 2546.95
TR- OAC,
- -------------------------------------------------------------------------------
32 HAN 64 NTL-36, TASK LIGHT--36" 148.00 9472.00
SELL% %65.0000
51.80 3315.20
TR- OAC,
- -------------------------------------------------------------------------------
33 HAN 19 NTL-48, TASK LIGHT--48" 153.00 2907.00
SELL% %65.0000
53.55 1017.45
TR- OAC,
- -------------------------------------------------------------------------------
34 HAN 23 NAPB-36, 36" PAPER MST MOUNTING BAR 70.00 1610.00
SELL% %65.0000
24.50 563.50
TR- OAC,
- -------------------------------------------------------------------------------
35 HAN 18 NAPB-48, 48" PAPER MST MOUNTING BAR 83.00 1494.00
SELL% %65.0000
29.05 522.50
TR- OAC,
- -------------------------------------------------------------------------------
36 HAN 41 NAPD-12, DIAGONAL UNIT--4 DIVIDERS 82.00 3362.00
12", SUSPENDED SELL% %65.0000
28.70 1175.70
TR- OAC,
- -------------------------------------------------------------------------------
</TABLE>
Page 4 of 7
<PAGE> 10
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 01 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
37 HAN 41 NAPH-13, HORIZONTAL UNIT, SUSPENDED 78.00 3198.00
SIDE-TO-SIDE SELL% %65.0000
27.30 1119.30
TR- OAC,
- -------------------------------------------------------------------------------
38 HAN 6 NWRL-2436, LMNT WORKSURFACE - REGULAR 166.00 996.00
24" X 36" SELL% %65.0000
58.10 348.50
OH- OAC,
- -------------------------------------------------------------------------------
39 HAN 37 NWRL-2448, LMNT WORKSURFACE - REGULAR 233.00 8621.00
24" X 48" SELL% %65.0000
81.55 3017.35
OH- OAC,
- -------------------------------------------------------------------------------
40 HAN 1 NWRL-2460, LMNT WORKSURFACE - REGULAR 267.00 267.00
24" X 60" SELL% %65.0000
93.45 93.45
OH- OAC,
- -------------------------------------------------------------------------------
41 HAN 20 NWRL-2472, LMNT WORKSURFACE - REGULAR 326.00 6520.00
24" X 72" SELL% %65.0000
114.10 2282.00
OH- OAC,
- -------------------------------------------------------------------------------
42 HAN 41 NWCL-2436, CORNER WS - LAMINATE 281.00 11521.00
24" X 36" SELL% %65.0000
98.35 4032.35
OH- OAC,
- -------------------------------------------------------------------------------
43 HAN 42 NAK-2P, ADJUSTABLE KEYBOARD PAD 325.00 13692.00
W/PALM REST SELL% %65.0000
114.10 4792.20
OO
- -------------------------------------------------------------------------------
44 HAN 108 MSC-1, SHARED CANTILEVER BRACKET 37.00 3996.00
SELL% %65.0000
12.95 1398.60
OO
- -------------------------------------------------------------------------------
45 HAN 28 NSBL-1, CORNER SUPPORT BRACKET - LEFT 5.00 140.00
SELL% %65.0000
1.75 49.00
OO
- -------------------------------------------------------------------------------
</TABLE>
Page 5 of 7
Lessee Initials /s/
------
<PAGE> 11
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 01 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
46 HAN 28 NSBR-1, CORNER SUPPORT BRACKET-RIGHT 5.00 140.00
SELL% %65.0000
1.75 49.00
OO
- -------------------------------------------------------------------------------
47 HAN 41 NDFS-2415- FIXED PEDESTAL-STEEL FRONT 391.00 16031.00
1H, 24" DEEP SELL% %65.0000
136.85 5610.85
TR- OAC,
- -------------------------------------------------------------------------------
48 HAN 41 NAC-18, PENCIL DRAWER 50.00 2050.00
SELL% %65.0000
17.50 717.50
OO
- -------------------------------------------------------------------------------
49 HAF 18 LFSS-542-L, 5-HI LATERAL FILE, SQUARE 1590.00 28620.00
DOF, CASE 42 INCHES SELL% %55.0000
715.50 12879.00
TR- OAC, TR- OAC,
- -------------------------------------------------------------------------------
50 HAF 1 LFSS-530-L 5-HI LATERAL FILE, SQUARE 1229.00 1229.00
DOF, CASE 3O INCHES SELL% %55.0000
553.05 553.05
TR- OAC, TR-OAC
- -------------------------------------------------------------------------------
51 HAF 2 LFSS-536-L 5-HI STORAGE, SQUARE 788.00 1576.00
C, CASE,36" SELL% %55.0000
354.60 709.20
TR- OAC, TR- OAC,
- -------------------------------------------------------------------------------
52 ECK 41 2723/3159 ERGONOMIC HIGH BACK TASK 538.00 26158.00
ARMS CHAIR W/ADJUSTABLE "T" SELL% %50.0000
ARMS 319.00 13079.00
- -------------------------------------------------------------------------------
53 ECK 1 27000 GUEST ECK ADAMS GUEST CHAIR 500.00 500.00
SELL% %50.0000
250.00 250.00
- -------------------------------------------------------------------------------
54 SDO 1 LOT FREIGHT, DELIVERY AND 12900.0 12900.00
PRODUCT INSTALLATION SELL% %0.0000
SERVICE 12900.00 12900.00
- -------------------------------------------------------------------------------
</TABLE>
Page 6 of 7
<PAGE> 12
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 01 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 SDD 1 LOT FINAL DESIGN AND 4290.00 4290.00
SPECIFICATION OF PHASE I SELL% %65.0000
WORKSTATIONS, 4290.00 4290.00
- -------------------------------------------------------------------------------
56 TAX 1 LOT 7.75% SALES TAX 9991.48 9991.48
SELL% %65.0000
9991.48 9991.48
- -------------------------------------------------------------------------------
</TABLE>
Totals:
List = $308870.48
Sell% = %56.9678
Sell = $132913.93
- ----------------------------------- -----------------------------------
LESSEE SIGNATURE ACCEPTED BY LESSOR
- ----------------------------------- -----------------------------------
By: By:
- ----------------------------------- -----------------------------------
Print Name: Print Name:
- ----------------------------------- -----------------------------------
Title: Title:
- ----------------------------------- -----------------------------------
Date: Date:
- ----------------------------------- -----------------------------------
Page 7 of 7
<PAGE> 13
MASTER LEASE SCHEDULE NO. 02
This Master Lease Schedule No. 02 ("Lease") is by and between Tokai Financial
Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee") and
incorporates the terms and conditions of that certain Master Lease Agreement
dated as of April 23, 1996 between Lessor and Lessee ("Master Lease"). Lessor
hereby leases to Lessee and Lessee hereby leases from Lessor the following
described items of Equipment for the Lease Term and on terms and conditions set
forth herein. The Lease shall become effective as against Lessor upon Lessor's
execution hereof.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
1. EQUIPMENT: (see Attachment A)
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: BILLING ADDRESS:
- --------------------------------------------------------------------------------
16275 Technology Drive 16275 Technology Drive
- --------------------------------------------------------------------------------
San Diego San Diego
- --------------------------------------------------------------------------------
CA 92127 CA 92127
- --------------------------------------------------------------------------------
Phone #: (619) 487-2442 Phone #: (619) 487-2442
- --------------------------------------------------------------------------------
</TABLE>
2. LEASE TERM:
For all purposes under the Lease, Lessee agrees that the Lease shall commence
ten (10) days after the delivery of all, or substantially all, of the Equipment
(Commencement Date), as certified in writing to Lessor by the Vendor. LESSEE
AND LESSOR ACKNOWLEDGE THAT THE INSTALLATION OF THE EQUIPMENT MAY NOT HAVE BEEN
COMPLETED AS OF THE COMMENCEMENT DATE. HOWEVER, IN CONSIDERATION OF LESSOR'S
AGREEING TO PROVIDE THE FIXED RATE FINANCING SET FORTH HEREIN AND OTHER GOOD AND
VALUABLE CONSIDERATION, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, LESSEE
AGREES THAT ITS OBLIGATIONS HEREUNDER ARE ABSOLUTE AND UNCONDITIONAL. LESSOR IS
RELYING UPON LESSEE'S ACCEPTANCE OF THE ABOVE TERMS IN FUNDING THE VENDOR OF THE
EQUIPMENT.
The Base Lease Term of the Lease shall be for the term indicated below and
shall commence on the first day of the calendar month following the
Commencement Date ("Base Term Commencement Date").
(a) Base Lease Term: 48 months
- --------------------------------------------------------------------------------
3. LEASE PAYMENTS:
(a) Interim Rent is due and payable in full on the date specified in Lessor's
invoice(s) therefor and shall be computed by dividing one payment of Base Term
Rent by thirty (30) and multiplying the result by the number of days from and
including the Commencement Date to the day preceding the Base Term Commencement
Date.
(b) Base Term Rent consists of:
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Number Amount Taxes Total
- --------------------------------------------------------------------------------
1-48 $8,291.01 included $8,291.01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Frequency of Base Term Rent:
- --------------------------------------------------------------------------------
Monthly X Quarterly Other
- --------------------------------------------------------------------------------
The first installment of Base Term Rent shall be due and payable upon the
earlier of (i) the date specified in Lessor's invoice therefor, or (ii) the Base
Term Commencement Date.
- --------------------------------------------------------------------------------
</TABLE>
4. SPECIAL PAYMENTS:
The following Special Payment(s) shall be due and payable on the date Lessee
executes this Lease.
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
$8,291.01 $8,291.01*
Security Deposit Advance Lease Payment Other Total
- --------------------------------------------------------------------------------
* To be applied to the first Base Term Rent payment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
5. STIPULATED LOSS VALUES: (None)
6. STANDARDS FOR USE AND MAINTENANCE: (see Master Lease)
7. STANDARDS FOR RETURN CONDITION: (see Master Lease)
8. LEASE END OPTION:
Provided no Event of Default shall have occurred and remain uncured, Lessee may
upon the expiration of the Lease Term exercise any one of the following options
with respect to not less than all items of Equipment leased hereunder, (i)
return the Equipment to Lessor, (ii) extend the Lease Term at the then fair
rental value ("Fair Rental Value") for an extension term the length of which
shall be determined by agreement between Lessee and Lessor or (iii) purchase the
Equipment for a cash price equal to ten percent (10%) of the Lessor's
acquisition cost ("Cash Price"). Lessee agrees to provide Lessor with written
notice of Lessee's decision not less than 180 days prior to the expiration of
the Lease Term. If Lessee fails to give Lessor 180 days prior written notice,
the Lese Term shall automatically be extended without notice to Lessee upon the
same terms and conditions for an additional 180 days and may be terminated
thereafter upon 180 days prior written notice to Lessor. Upon receipt of
Lessee's notice of termination and prior to the return of the Equipment, Lessor
shall be entitled to expose the Equipment for resale or lease at the Lessee's
premises during reasonable business hours (so long as such exposure does not
unreasonably interfere with Lessee's business operations). If by proper notice
Lessee elects to purchase the Equipment and upon receipt by Lessor of the Cash
Price and all other sums due hereunder, Lessor shall convey title to the
Equipment to Lessee free of liens and encumbrances created by Lessor on an
AS-IS, WHERE-IS basis and without warranty.
Fair Rental Value shall mean an amount which would obtain in a transaction
between an informed and willing lessee (other than a dealer) and an informed
and willing lessor (assuming for this purpose that the Equipment shall have
been maintained in accordance with this Lease and taking into consideration the
in-place value of the Equipment to Lessee) and will be determined by agreement
between Lessor and Lessee.
9. ADDITIONAL PROVISIONS: (None)
10. MODIFICATIONS AND WAIVERS, EXECUTION IN COUNTERPARTS:
To the extent any of the terms and conditions set forth in this Lease conflict
with or are inconsistent with the Master Lease, this Lease shall govern and
control. No amendment, modification or waiver of this Lease will be effective
unless evidenced by a written document signed by both parties. This Lease may
be executed in counterparts, all of which when taken together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Master Lease Schedule
to be executed and delivered by their duly authorized representatives as of the
dates set forth below.
- -------------------------------------- ----------------------------------------
LESSEE: Cymer Laser Technologies LESSOR: Tokai Financial Services, Inc.
- -------------------------------------- ----------------------------------------
By: [SIG] By:
- -------------------------------------- ----------------------------------------
Print Name: Print Name:
- -------------------------------------- ----------------------------------------
Title: Title:
- -------------------------------------- ----------------------------------------
Date: Date:
- -------------------------------------- ----------------------------------------
----------------------------------------
FOR OFFICE USE ONLY
----------------------------------------
Lease No.
----------------------------------------
Customer No.
----------------------------------------
Commencement Date
----------------------------------------
Base Term Commencement Date
----------------------------------------
page 2 of 2
<PAGE> 15
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 02 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 HAN 2 NPFS-4224-N, FABRIC PANEL 291.00 582.00
42" X 24" SELL% %65.0000
101.85 203.70
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
2 HAN 2 NPFS-4224-P, FABRIC PANEL 392.00 784.00
42" X 24" SELL% %65.0000
137.20 274.40
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
3 HAN 6 NPFS-4230-N, FABRIC PANEL 317.00 1902.00
42" X 30" SELL% %65.0000
110.95 665.70
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
4 HAN 95 NPFS-4236-N, FABRIC PANEL 345.00 32775.00
42" X 35" SELL% %65.0000
120.75 11471.25
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
5 HAN 24 NPFS-4236-P, FABRIC PANEL 446.00 10704.00
42" X 36" SELL% %65.0000
156.10 3745.40
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
6 HAN 4 NPFS-4248-N, FABRIC PANEL 424.00 1696.00
42" X 48" SELL% %65.0000
148.40 593.60
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
7 HAN 12 NPFS-6424-N, FABRIC PANEL 356.00 4272.00
64" X 24" SELL% %65.0000
124.60 1495.20
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
8 HAN 1 NPFS-6424-P, FABRIC PANEL 457.00 457.00
64" X 24" SELL% %65.0000
159.95 159.95
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
9 HAN 3 NPFS-6430-N, FABRIC PANEL 411.00 1233.00
64" X 30" SELL% %65.0000
143.85 431.55
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
</TABLE>
Page 1 of 10
<PAGE> 16
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 02 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 HAN 1 NPFS-6430-P, FABRIC PANEL 512.00 512.00
64" X 30" SELL% %65.0000
179.20 179.20
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
11 HAN 11 NPFS-6436-N, FABRIC PANEL 448.00 4928.00
64" X 36" SELL% %65.0000
156.80 1724.80
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
12 HAN 197 NPFS-6436-P, FABRIC PANEL 549.00 108153.00
64" X 36" SELL% %65.0000
192.15 37853.55
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
13 HAN 61 NPFS-6448-N, FABRIC PANEL 520.00 31720.00
64" X 48" SELL% %65.0000
182.00 11102.50
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
14 HAN 4 NPFS-6448-P, FABRIC PANEL 621.00 2484.00
64" X 48" SELL% %65.0000
217.35 869.40
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
15 HAN 12 NPFS-6460-N, FABRIC PANEL 600.00 7200.00
64" X 60" SELL% %65.0000
210.00 2520.00
FN- 0AC, FN- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
16 HAN 18 NVSS-42, STRAIGHT CONNECTOR 29.00 522.00
42" SELL% %65.0000
10.15 182.70
00
- -------------------------------------------------------------------------------
17 HAN 176 NVSS-64, STRAIGHT CONNECTOR 35.00 6160.00
64" SELL% %65.0000
12.25 2156.00
00
- -------------------------------------------------------------------------------
18 HAN 8 NV2S-42-F, 2-WAY PANEL CONNECTOR - 42" 125.00 1008.00
SELL% %65.0000
44.10 352.80
TR- 0AC, FN- 0AC,
- -------------------------------------------------------------------------------
</TABLE>
Page 2 of 10
<PAGE> 17
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 02 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
19 HAN 39 NV2S-64-F, 2-WAY PANEL CONNECTOR - 64" 138.00 5382.00
SELL% %65.0000
48.30 1883.70
TR- 0AC, FN- 0AC,
- -------------------------------------------------------------------------------
20 HAN 65 NV3S-64-F, 3-WAY PANEL CONNECTOR - 64" 184.00 11960.00
SELL% %65.0000
4 EXTRA 64.40 4186.00
TR- 0AC, FN- 0AC,
- -------------------------------------------------------------------------------
21 HAN 19 NV4S-64-S, 4-WAY PANEL CONNECTOR - 64" 205.00 3895.00
SELL% %65.0000
71.75 1363.25
TR- 0AC
- -------------------------------------------------------------------------------
22 HAN 105 NVES-42-F, END-OF-RUN COVER - 42" 60.00 6300.00
SELL% %65.0000
21.00 2205.00
TR- 0AC, FN-0AC,
- -------------------------------------------------------------------------------
23 HAN 22 NVES-64-F, END-OF-RUN-COVER - 64" 65.00 1430.00
SELL% %65.0000
22.75 500.50
TR- 0AC, FN- 0AC,
- -------------------------------------------------------------------------------
24 HAN 109 NVVS-22-F, VARIABLE HEIGHT COVER - 22" 63.00 6867.00
SELL% %65.0000
22.05 2403.45
TR- 0AC, FN- 0AC,
- -------------------------------------------------------------------------------
25 HAN 2 NVTS-64, T-MOUNT KIT 62.00 124.00
64" SELL% %65.0000
21.70 43.40
TR- 0AC
- -------------------------------------------------------------------------------
26 HAN 2 NET-42, TOP FEED MODULE 236.00 472.00
42" PANEL SELL% %65.0000
82.60 165.20
TR- 0AC
- -------------------------------------------------------------------------------
27 HAN 29 NET-64, TOP FEED MODULE 228.00 6612.00
64" PANEL SELL% %65.0000
79.80 2314.20
TR- 0AC,
- -------------------------------------------------------------------------------
</TABLE>
Page 3 of 10
<PAGE> 18
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 02 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
28 HAN 58 NER-1, POWER RECEPTACLE - TRIPLEX 83.00 4814.00
BOX OF 6 SELL% %65.0000
347 EA. 29.05 1684.90
TR- 0AC,
- -------------------------------------------------------------------------------
29 HAN 1 NES-1, POWER CONNECTOR 59.00 59.00
STRAIGHT-SPAN SELL% %65.0000
20.65 20.65
00
- -------------------------------------------------------------------------------
30 HAN 115 NEC-2, PANEL PORT KIT - STANDARD WALL 30.00 3450.00
OUTLET SELL% %65.0000
10.50 1207.50
00
- -------------------------------------------------------------------------------
31 HAN 229 NEV-1, VERTICAL WIRE MANAGER 13.00 2977.00
SELL% %65.0000
4.55 1041.95
TR- 0AC,
- -------------------------------------------------------------------------------
32 HAN 217 NUDS-36, OVERHEAD STORAGE UNIT - 36" 359.00 77903.00
STEEL DOOR SELL% %65.0000
125.65 27266.05
TR- 0AC,
- -------------------------------------------------------------------------------
33 HAN 11 NUDS-48, OVERHEAD STORAGE UNIT - 48" 383.00 4213.00
STEEL DOOR SELL% %65.0000
134.05 1474.55
TR- 0AC,
- -------------------------------------------------------------------------------
34 HAN 1 NUDS-60, OVERHEAD STORAGE UNIT - 60" 454.00 454.00
STEEL DOOR SELL% %65.0000
158.90 158.90
TR- 0AC,
- -------------------------------------------------------------------------------
35 HAN 217 NTL-36, TASK LIGHT - 36" 148.00 32116.00
SELL% %65.0000
51.80 11240.60
TR- 0AC,
- -------------------------------------------------------------------------------
36 HAN 11 NTL-48, TASK LIGHT - 48" 153.00 1683.00
SELL% %65.0000
53.55 589.05
TR- 0AC,
- -------------------------------------------------------------------------------
</TABLE>
Page 4 of 10
<PAGE> 19
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 02 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
37 HAN 3 NTL-60, TASK LIGHT - 60" 166.00 166.00
42" X 24" SELL% %65.0000
58.10 58.10
TR- 0AC,
- -------------------------------------------------------------------------------
38 HAN 17 NAPB-36, 36" PAPER MGT MOUNTING BAR 70.00 1190.00
SELL% %65.0000
24.50 416.50
TR- 0AC,
- -------------------------------------------------------------------------------
39 HAN 98 NAPB-48, 48" PAPER MGT MOUNTING BAR 83.00 8134.00
SELL% %65.0000
29.05 2846.90
TR- 0AC,
- -------------------------------------------------------------------------------
40 HAN 115 NAPD-12, DIAGONAL UNIT - 4 DIVIDERS 82.00 9430.00
12", SUSPENDED SELL% %65.0000
28.70 3300.50
TR- 0AC,
- -------------------------------------------------------------------------------
41 HAN 115 NAPH-13, HORIZONTAL UNIT, SUSPENDED 78.00 8970.00
SIDE-TO-SIDE SELL% %65.0000
27.30 3139.50
TR- 0AC,
- -------------------------------------------------------------------------------
42 HAN 2 NWRL-2430, LMNT WORKSURFACE - REGULAR 150.00 300.00
24" X 30" SELL% %65.0000
52.50 105.00
0H- 0AC,
- -------------------------------------------------------------------------------
43 HAN 15 NWRL-2436, LMNT WORKSURFACE - REGULAR 156.00 2490.00
24" X 36" SELL% %65.0000
58.10 371.50
0H- 0AC,
- -------------------------------------------------------------------------------
44 HAN 109 NWRL-2448, LMNT WORKSURFACE - REGULAR 233.00 25397.00
24" X 48" SELL% %65.0000
81.55 8888.95
0H- 0AC,
- -------------------------------------------------------------------------------
45 HAN 1 NWRL-2460, LMNT WORKSURFACE - REGULAR 267.00 267.00
24" X 60" SELL% %65.0000
93.45 93.45
0H- 0AC,
- -------------------------------------------------------------------------------
</TABLE>
Page 5 of 10
<PAGE> 20
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 02 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
46 HAN 51 NWRL-2472, LMNT WORKSURFACE - REGULAR 326.00 16625.00
24" X 72" SELL% %65.0000
114.10 5819.10
0H- 0AC,
- -------------------------------------------------------------------------------
47 HAN 111 NWCL-2436, CORNER WS - LAMINATE 281.00 31191.00
24" X 36" SELL% %65.0000
98.35 10916.85
0H - 0AC,
- -------------------------------------------------------------------------------
48 HAN 2 NWTL-1236, COUNTER TOP - LAMINATE 204.00 408.00
12" X 36" SELL% %65.0000
71.40 142.80
0H - 0AC,
- -------------------------------------------------------------------------------
49 HAN 2 NWTL-1248, COUNTER TOP - LAMINATE 228.00 456.00
12" X 48" SELL% %65.0000
79.80 159.60
0H- 0AC,
- -------------------------------------------------------------------------------
50 HAN 2 SPLA-4032, CORNER COUNTER TOP - LAMINATE 484.00 968.00
12" X 36" SELL% %65.0000
169.40 338.80
0H - 0AC,
- -------------------------------------------------------------------------------
51 HAN 115 NAX-2P, ADJUSTABLE KEYBOARD PAD 326.00 37490.00
W/PALM REST SELL% %65.0000
114.10 13121.50
00
- -------------------------------------------------------------------------------
52 HAN 280 NSC-1, SHARED CANTILEVER BRACKET 37.00 10360.00
SELL% %65.0000
2 EXTRA 00 12.95 3625.00
- -------------------------------------------------------------------------------
53 HAN 71 NEBL-1, CORNER SUPPORT BRACKET-LEFT 5.00 355.00
SELL% %65.0000
2 EXTRA 1.75 124.25
00
- -------------------------------------------------------------------------------
54 HAN 76 NSBR-1, CORNER SUPPORT BRACKET-RIGHT 5.00 380.00
SELL% %65.0000
2 EXTRA 1.75 133.00
00
- -------------------------------------------------------------------------------
</TABLE>
Page 6 of 10
<PAGE> 21
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 02 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 HAN 2 NSP-24, END PANEL - 24", LEFT 191.00 382.00
SELL% %65.0000
66.85 133.70
0M- 0AC,
- -------------------------------------------------------------------------------
56 HAN 113 NDFS-2415-1H, FIXED PEDESTAL - STEEL FRONT 391.00 44183.00
24" DEEP SELL% %65.0000
136.85 15464.05
TR- 0AC,
- -------------------------------------------------------------------------------
57 HAN 116 NAC-18, PENCIL DRAWER 50.00 5800.00
SELL% %65.0000
17.50 2030.00
00
- -------------------------------------------------------------------------------
58 HAJ 114 LSET-3, STANDARD LOCK PLUG & KEY 0.00 0.00
LOCK SET (QTY 3) SELL% %65.0000
114 WRKSTA 0.00 0.00
LX- 0BL,
- -------------------------------------------------------------------------------
59 HAJ 2 LSET-6, STANDARD LOCK PLUG & KEY 0.00 0.00
LOCK SET (QTY 6) SELL% %65.0000
156, 157 0.00 0.00
LX- 0BL,
- -------------------------------------------------------------------------------
60 HAJ 7 LSET-3, STANDARD LOCK PLUG & KEY 0.00 0.00
LOCK SET (QTY 3) SELL% %65.0000
47, 94, 110, 121, 13 0.00 0.00
7, 140, 234 LX- 0BP,
- -------------------------------------------------------------------------------
61 HAJ 5 LSET-6, STANDARD LOCK PLUG & KEY 0.00 0.00
LOCK SET (QTY 6) SELL% %65.0000
109, 142, 2X 0.00 0.00
237, 238 LX- 0BP,
- -------------------------------------------------------------------------------
62 HAJ 2 LSET-9, STANDARD LOCK PLUG & KEY 0.00 0.00
LOCK SET (QTY 9) SELL% %65.0000
215 X 2 0.00 0.00
AISLE LX- 0BP,
- -------------------------------------------------------------------------------
63 HAJ 1 LSET-12, STANDARD LOCK PLUG & KEY 0.00 0.00
LOCK SET (QTY 12) SELL% %65.0000
234 AISLE 0.00 0.00
LX- 0BP,
- -------------------------------------------------------------------------------
</TABLE>
Page 7 of 10
<PAGE> 22
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 02 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
64 HAJ 1 SK-300 SET OF EACH OF THE SL SERIES 450.00 450.00
KEYS (QTY 300) SELL% %65.0000
157.50 157.50
00
- -------------------------------------------------------------------------------
65 HAN 4 NPKL-2436, CORNER - LAMINATE TOP 580.00 2320.00
24" X 36" SELL% %55.0000
FREESTG. 261.00 1044.00
0H- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
66 HAN 3 NFRL-2448- RETURN, DESK HEIGHT, LAMINATE 603.00 1809.00
L. 24" X 48" SELL% %55.0000
FREESTG. 271.35 814.05
0H- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
67 HAN 1 NFRL-2448- RETURN, DESK HEIGHT, LAMINATE 603.00 603.00
R, 24" X 48" SELL% %55.0000
FREESTG. 271.35 271.35
0H- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
68 HAF 21 LFSS-330-L 3-HI LATERAL FILE, SQUARE 602.00 16842.00
D0F, CASE 30 INCHES SELL% %55.0000
SQUARE 360.90 7578.90
TR- 0AC, TR-0AC,
- -------------------------------------------------------------------------------
69 HAF 2 LFSS-342-L 3-HI LATERAL FILE, SQUARE 1021.00 2042.00
DGF, CASE 42 INCHES SELL% %55.0000
SQUARE 459.45 918.90
TR- 0AC, TR-0AC,
- -------------------------------------------------------------------------------
70 HAF 3 LFSS-442-L 4-HI LATERAL FILE, SQUARE 1327.00 3981.00
D0F, CASE 42 INCHES SELL% %65.0000
SQUARE 597.15 1791.45
TR- 0AC, TR-0AC,
- -------------------------------------------------------------------------------
71 HAF 1 LFSS-430-L 4-HI LATERAL FILE, SQUARE 1022.00 1022.00
D0F, CASE 30 INCHES SELL% %55.0000
SQUARE 459.90 459.90
TR- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
72 HAF 4 LFSS-530-L 5-HI LATERAL FILE, SQUARE 1229.00 4916.00
D0F, CASE 30 INCHES SELL% %55.0000
SQUARE 553.05 2212.20
TR- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
</TABLE>
Page 3 of 10
<PAGE> 23
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 02 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
73 HAF 30 LFSS-542-L 5-HI LATERAL FILE, SQUARE CASE 1590.00 47700.00
DOF, 42 INCHES SELL% %55.0000
SQUARE 715.50 21465.00
TR- 0AC, TR- 0AC,
- -------------------------------------------------------------------------------
74 HAL 1 LTPR-3030, SOFT PROFILE SERIES, CORNER TBL 1017.00 1017.00
30" X 30" SELL% %40.0000
REC'PN. 610.20 610.20
(1) VM- 00A,
- -------------------------------------------------------------------------------
75 HAL 1 LTPR-2453, SOFT PROFILE SERIES, COFFEE TBL 1028.00 1028.00
24" X 53" SELL% %40.0000
REC'PN. 616.80 616.80
(1) VM- 00A,
- -------------------------------------------------------------------------------
76 HAM 5 190-0029, 190 ASCENT - LOUNGE CHAIR 1474.00 7370.00
SELL% %40.0000
REC'PN. 584.40 4422.00
NT- 012, M2- CAA,
- -------------------------------------------------------------------------------
77 ECP 85 2723/3159 ERGONOMIC HIGH BACK TASK CHAIR 638.00 54230.00
ARMS W/ ADJUSTABLE "T" ARMS SELL% %50.0000
WORKSTA. 319.00 27115.00
FAB- 276, TR- 0BX, TR- 0BK,
- -------------------------------------------------------------------------------
78 MAS 6 M600-2100, 4-LEG STCKR, NO ARMS, POLY OUTER 245.00 1470.00
SELL% %50.0000
122.50 735.00
TE- 047, TR- 00E,
- -------------------------------------------------------------------------------
79 SDO 1 LOT FREIGHT, DELIVERY AND PRODUCT 35000.00 35000.00
INSTALLATION SERVICE SELL% % 5.0000
35000.00 35000.00
- -------------------------------------------------------------------------------
80 SDO 1 LOT FINAL DESIGN AND SPECIFICATION 4120.00 4120.00
OF PHASE 1 WORKSTATIONS. SELL% % 0.0000
4120.00 4120.00
- -------------------------------------------------------------------------------
81 TAX 1 LOT 7.75% SALES TAX 24232.18 24232.18
SELL% % 5.0000
24232.18 24232.18
- -------------------------------------------------------------------------------
</TABLE>
Page 9 of 10
<PAGE> 24
ATTACHMENT A - EQUIPMENT DESCRIPTION
Attachment forming part of Master Lease Schedule No. 02 by and between Tokai
Financial Services, Inc. ("Lessor") and Cymer Laser Technologies ("Lessee").
- -------------------------------------------------------------------------------
Equipment Description:
<TABLE>
<CAPTION>
# Mfg Qty Part # Description/Options Unit Extended
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Totals
List = $802898.18
Sell% = %57.5257
Sell = $341025.53
- -------------------------------------------------------------------------------
</TABLE>
- ----------------------------------------- ------------------------------------
| LESSEE SIGNATURE | | ACCEPTED BY LESSOR |
----------------------------------------- ------------------------------------
| By: [SIG] | | By: |
----------------------------------------- ------------------------------------
| Print Name: W. P. Angus III | | Print Name: |
----------------------------------------- ------------------------------------
| Title: Sr. Vice President & CFO | | Title: |
----------------------------------------- ------------------------------------
| Date: April 26, 1996 | | Date: |
----------------------------------------- ------------------------------------
PAGE 10 of 10
<PAGE> 25
BLANKET INSURANCE AUTHORIZATION
LESSEE INFORMATION
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Full Legal Name: Cymer Laser Technologies DBA Name (If Any):
- --------------------------------------------------------------------------------
Billing Address: 16275 Technology Drive Phone: (619) 487-2442,
(619) 487-3105
- --------------------------------------------------------------------------------
City: San Diego County: State: CA Zip Code: 92127
- --------------------------------------------------------------------------------
</TABLE>
INSURANCE CONTACT
- --------------------------------------------------------------------------------
Insurance Company: Zurich-American - Zurich Insurance Company
- --------------------------------------------------------------------------------
Name of Agent: Barney & Barney
- --------------------------------------------------------------------------------
Address: P.O. Box 85638
- --------------------------------------------------------------------------------
City: San Diego County: State: CA
- --------------------------------------------------------------------------------
Phone: (619) 457-3414 Fax: (619) 452-7530
- --------------------------------------------------------------------------------
Lessee has entered into a Master Lease Agreement ("Master Lease") with
Tokai Financial Services, Inc., a Michigan corporation having a mailing address
of 1055 Westlakes Drive, Berwyn, Pennsylvania 19312, Attention: Commercial
Equipment Group ("Lessor") pursuant to which Lessee will from time to time lease
various items of equipment and personal property ("Equipment") under one or more
Master Lease Schedules (each a "Lease Schedule"). According to the terms of the
Master Lease, Lessee must obtain and maintain during the term of each Lease
Schedule, insurance policy(ies) which provide all-risk insurance coverage for
the Equipment which names Lessor as loss payee and comprehensive public
liability insurance coverage which names Lessor as an additional insured
("Required Insurance"). Lessee hereby irrevocably directs and authorizes Lessor
to contact the above-referenced Insurance Company and/or Agent to obtain the
Required Insurance on behalf of Lessee and at Lessee's sole expense. Lessee
hereby directs and authorizes Insurance Company and/or Agent to comply with the
requests and directions given by Lessor with respect to the Required Insurance
for all Lease Schedules.
-----------------------------------------
| LESSEE SIGNATURE |
-----------------------------------------
| By: [SIG] |
-----------------------------------------
| Print Name: W. P. Angus III |
-----------------------------------------
| Title: Sr. Vice President & CFO |
-----------------------------------------
| Date: April 26, 1996 |
-----------------------------------------
<PAGE> 26
CERTIFICATE OF INCUMBENCY AND AUTHORITY
The undersigned, Secretary or Assistant Secretary of Cymer of Laser Technologies
("Company"), does hereby certify that:
1. He or she is the duly elected, qualified and acting Secretary or
Assistant Secretary of Company, and that he or she has custody of the
corporate records of the Company and its corporate seal.
2. Set forth below are the names and true signatures of individuals
("Officers") who hold the office of the Company set forth opposite
their respective names.
3. Each of the Officers set forth below have the requisite power and
authority pursuant to the Company's by-laws and/or resolutions to enter
into any and all agreements with Tokai Financial Services, Inc.
("Laser") on behalf of Company.
NAME TITLE SIGNATURE
ROBERT P. AKINS President [Sig]
- --------------------------------------------------------------------------------
WILLIAM A. ANGUS III Sr. Vice President & CFO [Sig]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 26th
day of April, 1996.
By: [Sig]
------------------------------------------
(Corporate Seal) Print Name: W. A. ANGUS III
------------------------------------------
Title: Secretary
------------------------------------------
<PAGE> 27
LANDLORD/MORTGAGEE WAIVER
LESSEE INFORMATION
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Full Legal Name: Cymer Laser Technologies DBA Name (If Any):
- --------------------------------------------------------------------------------
Address: 16275 Technology Drive Phone: (619) 487-2442,
- --------------------------------------------------------------------------------
City: San Diego County: State: CA Zip Code: 92127
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- ------------------------------------------ ------------------------------------
| PREMISES INFORMATION | | LANDLORD/MORTGAGEE INFORMATION |
- ------------------------------------------ ------------------------------------
| Street Address: 16275 Technology Drive | |[ ] Landlord [ ] Mortgagee |
- ------------------------------------------ ------------------------------------
| City: San Diego County: | |Name: [ILLEGIBLE] |
- ------------------------------------------ ------------------------------------
| State: CA Zip: 92127 | |City: San Diego County: San Diego|
- ------------------------------------------ ------------------------------------
| | |State: CA Zip: [ILLEGIBLE] |
| ------------------------------------
| |Phone Number: (619) 451-0312 |
- ------------------------------------------ ------------------------------------
</TABLE>
For good and valuable consideration, receipt of which is hereby acknowledged,
Landlord or Mortgagee ("Undersigned") of the above described Premises where the
equipment described in Attachment A attached hereto ("Equipment") is located or
will be located acknowledges and agrees as follows:
1. That the said Equipment is owned by Tokai Financial Services, Inc.
("Lessor") and is leased or will be leased to the above described Lessee.
2. That the Equipment may be affixed to the Premises and that the Equipment is
to remain personal property notwithstanding the manner in which it is affixed to
the said Premises and that title thereof shall remain in Lessor, its legal
representatives, successors, agents or assigns until such time if any, as it
conveyed by Lessor to other parties.
3. That this agreement shall also apply to any of the Equipment which is
already on the Premises, or may hereafter be delivered or installed thereon.
4. That the Undersigned waives each and every right which Undersigned now has
or may hereafter have under the laws of any state or by the terms of any real
estate lease or mortgage now in effect or hereafter executed by Undersigned or
Lessee to levy or [ILLEGIBLE] upon for rent, in arrears, in advance or both, or
to claim or assert title to the Equipment.
5. That the Undersigned recognizes and acknowledges that any claim or claims
that Lessor has or may hereafter have with respect to the Equipment by virtue of
any lease, agreement or otherwise shall be superior to any lien or claim of any
nature which Undersigned now has or may hereafter have to the Equipment by
statute, agreement or otherwise.
6. That it is further agreed that Lessor or its assigns or agents may remove
the Equipment from the Premises whenever Lessor feels it is necessary to do so
to protect its interest and without liability or accountability to the
Undersigned therefore.
7. That Lessor may, without affecting the validity of this agreement, extend
the times of payment of any indebtedness of Lessee to Lessor or alter the
performance of any of the terms and conditions of any such Lease, without the
consent of Undersigned and without giving notice thereof to Undersigned.
--------------------------------------------
| LANDLORD/MORTGAGEE INFORMATION |
--------------------------------------------
| Signature: [SIG] |
--------------------------------------------
(Corporate Seal) | Print Name: [ILLEGIBLE] |
--------------------------------------------
| Title: [ILLEGIBLE] |
[ILLEGIBLE] --------------------------------------------
| Date: [ILLEGIBLE] |
--------------------------------------------
| For: [ILLEGIBLE] |
--------------------------------------------
|(LEGAL NAME OF CORPORATION OR PARTNERSHIP)|
--------------------------------------------
<PAGE> 28
ATTACHMENT A - TO LANDLORD/MORTGAGE WAIVER
Attachment forming part of Landlord/Mortgage Waiver by the undersigned in favor
of Tokai Financial Services, Inc. ("Lessor").
- -------------------------------------------------------------------------------
Equipment Description:
All Haworth office furniture previously installed and hereafter installed at
the above mentioned premises.
--------------------------------------------------
LANDLORD/MORTGAGEE
--------------------------------------------------
Signature: [COPY ILLEGIBLE]
--------------------------------------------------
Print Name: [COPY ILLEGIBLE]
--------------------------------------------------
Title: President Date: 4/29/96
--------------------------------------------------
For: [COPY ILLEGIBLE]
--------------------------------------------------
LEGAL NAME OF CORPORATION OF PARTNERSHIP
--------------------------------------------------
<PAGE> 1
EXHIBIT 11.1
<TABLE>
<CAPTION>
CYMER, INC.
CALCULATION OF PRIMARY AND FULLY DILUTED
PRO FORMA EARNINGS (LOSS) PER SHARE OF COMMON STOCK
- -------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1996
<S> <C> <C> <C>
PRIMARY AND FULLY DILUTED:
Net income (loss) applicable to
earnings (loss) per share $ 69,000 $ (383,000) $ 957,000
---------- ---------- ----------
Common stock and common stock equivalents:
Pro forma weighted average shares of common
stock outstanding during the year 7,330,640 6,691,916 8,765,319
Common stock equivalents (stock options
and warrants) 240,630 900,361
---------- ---------- ----------
Total common stock and common stock
equivalents 7,571,270 6,691,916 9,665,680
---------- ---------- ----------
Pro forma earnings (loss) per common share $0.01 ($0.06) $0.10
----- ------ -----
</TABLE>
Note: Based on the Company's capital structure, there is no difference between
primary and fully diluted proforma earnings (loss) per share. As such,
the calculation above reflects both primary and fully diluted pro forma
earnings (loss) per common share for the periods indicated. Common
stock equivalents are not included for the six months ended June 30,
1995 as they are antidilutive.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement No.
333-08383 of Cymer, Inc. (successor to Cymer Laser Technologies) on Form S-1 of
our report dated August 9, 1996 (August 21, 1996 as to the second paragraph of
Note 1 and Note 12; which report contains an explanatory paragraph that
describes a change during 1994 in the Company's method of accounting for the
accretion on the Company's redeemable convertible preferred stock), appearing
in the Prospectus, which is part of such Registration Statement and to the
reference to us under the heading "Selected Consolidated Financial Data" and
"Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
San Diego, California
August 21, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF TOWNSEND AND TOWNSEND AND CREW
PALO ALTO, CALIFORNIA
We hereby consent to the reference to our firm under the captions "Risk
Factors -- Uncertainty Regarding Patents and Protection of Proprietary
Technology." "Business -- Intellectual Property Rights" and "Experts" in the
Registration Statement on Form S-1 and related Prospectus of Cymer, Inc. (File
No. 333-08383) for the registration of its Common Stock.
TOWNSEND AND TOWNSEND AND CREW
Palo Alto, California
August 22, 1996
