<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________ to __________.
Commission file number: 0-26966
ADVANCED ENERGY INDUSTRIES, INC.
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 84-0846841
__________________________________ ___________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1625 SHARP POINT DRIVE, FORT COLLINS, CO 80525
____________________________________ ___________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (970) 221-4670
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
As of July 31, 1998, there were 22,593,014 shares of the Registrant's Common
Stock, par value $0.001 per share, outstanding.
[GRAPHIC]
<PAGE>
ADVANCED ENERGY INDUSTRIES, INC.
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets-
June 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations-
Three months and six months ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows-
Six months ended June 30, 1998 and 1997 5
Notes to consolidated financial statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 2. CHANGES IN SECURITIES 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 18
ITEM 5. OTHER INFORMATION 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
(UNAUDITED)
----------- ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . $11,293 $11,470
Marketable securities - trading . . . . . . 19,047 20,174
Accounts receivable, net. . . . . . . . . . 21,543 28,386
Inventories . . . . . . . . . . . . . . . . 20,556 26,243
Other current assets. . . . . . . . . . . . 1,497 2,472
Deferred income tax assets, net . . . . . . 2,957 2,836
------- --------
Total current assets. . . . . . . . . . . 76,893 91,581
------- --------
PROPERTY AND EQUIPMENT, net. . . . . . . . . 13,223 11,331
OTHER ASSETS:
Deposits and other. . . . . . . . . . . . . 1,264 500
Goodwill, net . . . . . . . . . . . . . . . 6,608 7,112
Demonstration and customer service equipment, net 1,689 1,719
------- --------
Total assets. . . . . . . . . . . . . . . $99,677 $112,243
------- --------
------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade. . . . . . . . . . . $5,362 $12,045
Accrued payroll and employee benefits . . . 3,701 5,243
Other accrued expenses. . . . . . . . . . . 1,236 1,327
Customer deposits . . . . . . . . . . . . . 82 226
Accrued income taxes payable. . . . . . . . 0 2,734
Current portion of long-term debt . . . . . 2,262 3,298
------- --------
Total current liabilities . . . . . . . . 12,643 24,873
------- --------
LONG-TERM LIABILITIES:
Long-term debt. . . . . . . . . . . . . . . 0 22
------- --------
Total liabilities . . . . . . . . . . . . 0 24,895
------- --------
STOCKHOLDERS' EQUITY . . . . . . . . . . . . 87,034 87,348
------- --------
Total liabilities and stockholders' equity $99,677 $112,243
------- --------
------- --------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
3
<PAGE>
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
SALES . . . . . . . . . . . . . . . . . . $26,158 $32,690
COST OF SALES. . . . . . . . . . . . . . . . 19,115 20,139
------ ------
Gross profit. . . . . . . . . . . . . . . . 7,043 12,551
------ ------
OPERATING EXPENSES:
Research and development. . . . . . . . . . 4,774 3,513
Sales and marketing . . . . . . . . . . . . 2,915 2,336
General and administrative. . . . . . . . . 1,914 1,702
----- -----
Total operating expenses. . . . . . . . . 9,603 7,551
----- -----
(LOSS) INCOME FROM OPERATIONS. . . . . . . . (2,560) 5,000
OTHER INCOME . . . . . . . . . . . . . . . . 198 286
----- -----
Net (loss) income before income taxes. . . . (2,362) 5,286
PROVISION FOR INCOME TAXES . . . . . . . . . (897) 1,996
------ -----
NET (LOSS) INCOME. . . . . . . . . . . . . . $(1,465) $3,290
-------- ------
-------- ------
BASIC (LOSS) EARNINGS PER SHARE. . . . . . . $(0.06) $0.15
-------- ------
-------- ------
DILUTED (LOSS) EARNINGS PER SHARE. . . . . . $(0.06) $0.15
-------- ------
-------- ------
BASIC WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING . . . . . . . . . . . . . . . 22,539 21,283
-------- ------
-------- ------
DILUTED WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING . . . . . . . . . . . . . . . 23,137 21,877
-------- ------
-------- ------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
SALES . . . . . . . . . . . . . . . . . . $62,828 $53,358
COST OF SALES. . . . . . . . . . . . . . . . 44,658 33,298
------- -------
Gross profit. . . . . . . . . . . . . . . . 18,170 20,060
------- -------
OPERATING EXPENSES:
Research and development. . . . . . . . . . 9,416 6,334
Sales and marketing . . . . . . . . . . . . 5,911 4,135
General and administrative. . . . . . . . . 4,067 2,950
------- -------
Total operating expenses. . . . . . . . . 19,394 13,419
------- -------
(LOSS) INCOME FROM OPERATIONS. . . . . . . . (1,224) 6,641
OTHER INCOME (EXPENSE) . . . . . . . . . . . 347 (101)
------- --------
Net (loss) income before income taxes . . . (877) 6,540
PROVISION FOR INCOME TAXES . . . . . . . . . (333) 2,485
-------- --------
NET (LOSS) INCOME. . . . . . . . . . . . . . $(544) $4,055
-------- --------
-------- --------
BASIC (LOSS) EARNINGS PER SHARE. . . . . . . $(0.02) $0.19
-------- --------
-------- --------
DILUTED (LOSS) EARNINGS PER SHARE. . . . . . $(0.02) $0.19
-------- --------
-------- --------
BASIC WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING . . . . . . . . . . . . . . . 22,520 21,277
-------- --------
-------- --------
DILUTED WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING . . . . . . . . . . . . . . . 23,130 21,806
-------- --------
-------- --------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
4
<PAGE>
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income. . . . . . . . . . . . . . . . . . . . . $(544) $4,055
Adjustments to reconcile net income to net cash provided by
operating activities --
Depreciation and amortization . . . . . . . . . . . . . 2,652 1,673
Provision for deferred income taxes . . . . . . . . . . (121) --
Amortization of deferred compensation . . . . . . . . . 24 24
Loss on disposal of property and equipment. . . . . . . 12 --
Earnings from marketable securities, net. . . . . . . . (373) --
Changes in operating assets and liabilities --
Accounts receivable-trade, net. . . . . . . . . . . . 5,594 (8,854)
Related parties and other receivables . . . . . . . . 1,249 (1,184)
Inventories . . . . . . . . . . . . . . . . . . . . . 5,687 (2,193)
Other current assets. . . . . . . . . . . . . . . . . 975 376
Deposits and other. . . . . . . . . . . . . . . . . . (14) 634
Demonstration and customer service equipment. . . . . (476) 250
Accounts payable, trade . . . . . . . . . . . . . . . (6,683) 4,043
Accrued payroll and employee benefits . . . . . . . . (1,542) 1,291
Customer deposits and other accrued expenses. . . . . (235) 513
Income taxes payable. . . . . . . . . . . . . . . . . (2,734) 561
------- -----
Net cash provided by operating activities. . . . . 3,471 1,189
------- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease of marketable securities. . . . . . . . . . . . . 1,500 --
Purchase of property and equipment, net. . . . . . . . . . (3,546) (770)
Purchase of preferred stock of Litmas. . . . . . . . . . . (750) --
------- ------
Net cash used in investing activities. . . . . . . (2,796) (770)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change from notes payable and capital lease obligations (1,058) (517)
Proceeds from sale of common stock . . . . . . . . . . . . 282 27
------- ------
Net cash used in financing activities. . . . . . . (776) (490)
------- ------
EFFECT OF CURRENCY TRANSLATION ON CASH FLOW. . . . . . . . . (76) 23
------- ------
DECREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . (177) (48)
CASH AND CASH EQUIVALENTS, beginning of period . . . . . . . 11,470 11,231
------- -------
CASH AND CASH EQUIVALENTS, end of period . . . . . . . . . . $11,293 $11,183
------- -------
------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest . . . . . . . . . . . . . . . . . . $9 $76
------- -------
------- -------
Cash paid for income taxes . . . . . . . . . . . . . . . . $2,255 $905
------- -------
------- -------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
5
<PAGE>
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND MANAGEMENT OPINION
In the opinion of management, the accompanying unaudited consolidated
balance sheets and statements of operations and cash flows contain all
adjustments, consisting only of normal recurring items, necessary to present
fairly the financial position of Advanced Energy Industries, Inc., a Delaware
corporation, and its wholly owned subsidiaries (the "Company") at June 30, 1998,
and the results of their operations and cash flows for the three- and six-month
periods ended June 30, 1998 and June 30, 1997.
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and note disclosures required by generally accepted accounting
principles. The financial statements should be read in conjunction with the
audited financial statements and notes thereto contained in the Company's latest
Annual Report on Form 10-K for the year ended December 31, 1997.
(2) ACQUISITION
Effective August 15, 1997, the Company acquired all of the outstanding stock
of Tower Electronics, Inc., a Minnesota-based designer and manufacturer of
custom, high-performance switchmode power supplies used principally in the
telecommunications, medical and non-impact printing industries. The purchase
price consisted of $14.5 million in cash and a $1.5 million non-interest-bearing
promissory note to the seller (the "Note"), payable in August 1998. Total
consideration, including the effect of imputing interest on the Note, equaled
$15,889,000. The acquisition was accounted for using the purchase method of
accounting and resulted in a one-time charge of $3,080,000 for in-process
research and development acquired as a result of the transaction. Acquisition
costs totaled approximately $209,000.
The results of operations of Tower are included within the accompanying
consolidated financial statements for the three- and six-month periods ended
June 30, 1998.
(3) UNDERWRITTEN PUBLIC OFFERING
In October 1997, the Company closed on an underwritten offering of its common
stock. In connection with this offering, 1,000,000 shares of common stock were
sold at a price of $31 per share, providing gross proceeds of $31,000,000.
Offering costs and underwriters' commissions totaled $2,276,000.
6
<PAGE>
(4) ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
(UNAUDITED)
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . . . . $10,467 $16,724
Foreign. . . . . . . . . . . . . . . . . . . . . . 10,513 9,854
Allowance for doubtful accounts. . . . . . . . . . (424) (428)
-------- -------
Trade accounts receivable. . . . . . . . . . . . . $20,556 $26,150
Related parties. . . . . . . . . . . . . . . . . . 318 893
Other. . . . . . . . . . . . . . . . . . . . . . . 669 1,343
------- -------
Total accounts receivable. . . . . . . . . . . . . $21,543 $28,386
------- -------
------- -------
</TABLE>
(5) INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
(UNAUDITED)
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Parts and raw materials. . . . . . . . . . . . . . $13,830 $18,549
Work in process. . . . . . . . . . . . . . . . . . 2,484 2,542
Finished goods . . . . . . . . . . . . . . . . . . 4,242 5,152
------- -------
Total inventories. . . . . . . . . . . . . . . . . $20,556 $26,243
------- -------
------- -------
</TABLE>
(6) EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which requires companies to present basic earnings
per share ("EPS") and diluted EPS, instead of the primary and fully-diluted
EPS that were previously required. The new standard is effective for the
Company in fiscal 1997 and all prior periods have been retroactively
adjusted. Basic EPS is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding
during the period. The computation of diluted EPS is similar to the
computation of basic EPS except that the denominator is increased to include
the number of additional common shares that would have been outstanding if
dilutive potential common shares had been issued.
(7) STOCKHOLDERS' EQUITY
Stockholders' equity consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
(UNAUDITED)
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Common stock, $0.001 par value, 30,000
shares authorized; 22,576 and 22,493
shares issued and outstanding at June 30, 1998
and December 31, 1997, respectively . . . . . $23 $22
Additional paid-in capital . . . . . . . . . . . . 52,906 52,625
Retained earnings. . . . . . . . . . . . . . . . . 34,883 35,427
Deferred compensation. . . . . . . . . . . . . . . (10) (34)
Cumulative translation adjustment. . . . . . . . . (768) (692)
------ ------
Total stockholders' equity . . . . . . . . . . . . $87,034 $87,348
------ ------
------ ------
</TABLE>
7
<PAGE>
(8) ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income," which is required to be adopted by the
Company in fiscal 1998. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. SFAS 130 establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The Company
adopted SFAS 130 in the first quarter of fiscal 1998.
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
(UNAUDITED) (UNAUDITED)
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Net (loss) income, as reported . . . . . . . . . . $(544) $4,055
Adjustment to arrive at comprehensive net (loss) income:
Cumulative translation adjustment. . . . . . . . (76) 23
------ ------
Comprehensive net (loss) income. . . . . . . . . . $(620) $4,078
------ ------
------ ------
</TABLE>
In June 1998, the FASB issued SFAS No. 133, ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities" which establishes accounting and
reporting standards for derivative instruments and for hedging activity. SFAS
133 is effective for all periods in fiscal years beginning after June 15, 1999.
SFAS 133 requires all derivatives to be recorded on the balance sheet as either
an asset or liability and measured at their fair value. Changes in the
derivative's fair value will be recognized currently in earnings unless
specific hedging accounting criteria are met. SFAS 133 also establishes uniform
hedge accounting criteria for all derivatives. The Company has not yet evaluated
the impact that the adoption of SFAS 133 will have on the financial statements.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion contains, in addition to historical information,
forward-looking statements, within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Such forward-looking statements involve risks and uncertainties. As
a result, the Company's actual results may differ materially from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below and in the Company's 1997 Annual Report on Form 10-K.
In particular, the Company believes that the factors described in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 Part I
"CAUTIONARY STATEMENTS - RISK FACTORS" could impact forward-looking statements
made herein or in future written or oral releases and by hindsight, prove such
statements to be overly optimistic and unachievable.
YEAR 2000 PROGRAM
The Year 2000 problem is the result of computer programs that rely on
two-digit date codes, instead of four-digit date codes, to indicate the year.
Such computer programs, which are unable to interpret the date code "00" as
the year 2000, may not be able to perform computations and decision-making
functions and could cause computer systems to malfunction. The Company has
developed a multi-phase program for Year 2000 information systems compliance
that consists of (i)assessment of the corporate systems and operations of the
Company that could be affected by the Year 2000 problem, (ii) remediation of
non-compliant systems and components, and (iii) testing of systems and
components following remediation. The Company has focused its Year 2000
review on three areas: (A) information technology (IT) system
applications, (B) non-IT systems, including engineering
and manufacturing applications, and (C) relationships with third parties.
The Company has conducted an initial assessment of the Year 2000 problem on
its IT systems. The Company believes that its enterprise-wide software system is
Year 2000 compliant. Such belief is based significantly on discussions with and
representations by the vendor of such software. The Company has been, and will
continue to be, in contact with such vendor in order to obtain any additional
revisions or upgrades issued by the vendor to ensure that such enterprise-wide
software remains Year 2000 compliant. The Company also is taking an independent
inventory of and assessing all informational systems that could be affected by
the Year 2000 problem. Remediation of non-compliant
9
<PAGE>
systems is being conducted as the assessment phase nears completion. The
Company expects to complete these phases during the third quarter of 1998.
The Company also is in the process of conducting an initial assessment of the
Year 2000 problem on its non-IT systems, including engineering and manufacturing
applications. The Company expects to complete its initial assessment of such
areas during the third quarter of 1998. Following such initial assessment, the
Company will undertake Year 2000 remediation and testing of these applications.
The Company cannot determine, at this time, the number or type of non-IT systems
that will require remediation; however, the Company does not expect this area to
pose substantial Year 2000 problems.
Finally, the Company is examining its relationship with third parties whose
Year 2000 compliance could have material effect on the Company. The Company
considers third party suppliers and customers to pose the greatest Year 2000
risk to the Company, because the failure of such persons to become Year 2000
compliant in a timely manner, if at all, could result in the Company's inability
to obtain components in a timely manner, reductions in the quality of components
obtained, reductions, delays or cancellations of customer orders or delay in
payments by customers for products shipped. In addition, conversions by third
parties to become Year 2000 compliant might not be compatible with the Company's
systems. Any or all of these events could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company has circulated questionnaires to all of its significant vendors
and customers with respect to such persons' Year 2000 compliance programs and
status. The Company currently is in the process of analyzing the responses to
such questionnaires and expects to solicit more detailed and updated information
from its principal suppliers and customers over the next several months.
The Company has not yet developed a contingency plan to address the effects of
the failure of the Company or any of its principal suppliers or customers or
other third parties to become Year 2000 compliant in a timely manner, nor does
the Company have a timetable for preparing such a plan. In what the Company
believes to be the most likely worst case scenario, the Company would be unable
to obtain electronic components from its suppliers, because of such third
parties' failure to become Year 2000 compliant, and would be unable to
manufacture such components internally or to redesign its systems to accommodate
different components, because of the failure of the Company's engineering and
manufacturing systems to be Year 2000 compliant. See "Cautionary Statements-Risk
Factors--Supply Constraints and Dependence on Sole and Limited Source
Suppliers," and "--Significant Sales Are Concentrated Among a Few Customers"
discussed in the Company's 1997 Annual Report on Form 10-K.
Although the Company is continuing to assess Year 2000 costs, it does not
expect the costs associated with such projects to have a material effect on the
Company's financial results. The Company expects to spend less than five percent
of its total IT budget on Year 2000 costs. The Company has not identified any IT
projects that have been deferred
10
<PAGE>
due to its Year 2000 efforts. The Company's current estimates of the impact of
the Year 2000 problem on its operations and financial results do not include
costs and time that may be incurred as a result of any vendors' or customers'
failures to become Year 2000 compliant on a timely basis.
The foregoing beliefs and expectations are forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act, and are based in large part on certain statements and
representations made by persons outside the Company, any of which statements
or representations ultimately could prove to be inaccurate.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
SALES
Sales for the second quarter of 1998 were $26.2 million, a decrease of 20%
from second quarter of 1997 sales of $32.7 million. The decrease in sales
between such periods has resulted from decreased unit sales of the Company's
systems. Sales for the second quarter of 1998 also included sales by the
Company's wholly owned subsidiary Tower Electronics, Inc. ("Tower"), which was
acquired as of August 15, 1997. The decrease in sales was attributable mostly to
semiconductor capital equipment customers in the United States, particularly to
the Company's largest customer. The second quarter of 1998 reflected the impact
of the current downturn in the semiconductor capital equipment market and
continuation of the Asian financial crisis. Many of the customers to whom the
Company's OEM customers sell are located in Asia and Japan. In contrast, the
second quarter of 1997 was the first quarter of recovery from a previous
downturn in the semiconductor capital equipment industry that had begun during
the third quarter of 1996.
Sales by the Company to markets other than the semiconductor capital equipment
market remained relatively unchanged in total when the two periods are compared,
but changed significantly in mix. Sales to the data storage equipment market
decreased on a worldwide basis, though the decreases in sales to that industry
in the United States and Japan were partially offset by an increase in sales to
data storage equipment customers in Europe, particularly to the Company's
largest customer in that industry. Sales to the flat panel display industry in
Japan were one-third of the level of the comparable period last year. Sales to
industrial markets remained level not including Tower's sales. The Company sells
primarily to the semiconductor capital equipment, data storage and industrial
markets in the United States, to the flat panel display and data storage markets
in Japan, and to the data storage and industrial markets in Europe. Changes in
the economies of the countries in which the Company does business can impact the
geographic and industrial mixes of the sales by the Company.
11
<PAGE>
Sales by industry segment for the three months ended June 30, 1998 were as
follows: semiconductor capital equipment, $13.9 million; data storage, $4.5
million; flat panel display, $1.0 million; industrial, $6.8 million. For the
comparable period in 1997, sales by industry were: semiconductor capital
equipment, $21.1 million; data storage, $5.9 million; flat panel display, $1.8
million; industrial, $3.9 million.
Sales by geographic region for the three months ended June 30, 1998 were:
United States, $18.6 million; Europe, $6.1 million; Japan, $1.0 million; Pacific
Rim and other, $0.5 million. For the comparable period in 1997, sales by
geographic region were: United States, $23.8 million; Europe, $5.0 million;
Japan, $3.1 million; Pacific Rim and other, $0.8 million.
Sales for the second quarter of 1998 were down 29% from first quarter 1998
sales of $36.7 million. This decrease was due to decreased demand from most
markets the Company serves. The downturn in the semiconductor capital equipment
market accounted for the greatest decrease while the data storage capital
equipment market experienced the smallest decrease.
GROSS MARGIN
The Company's gross margin for the second quarter of 1998 was 26.9%, down from
38.4% in the second quarter 1997 and down from 30.3% in the first quarter of
1998. The decrease in gross margin from the second quarter of 1997 to the second
quarter of 1998 was due primarily to unfavorable absorption of manufacturing
overhead and higher material costs attributable to the product mix.
During the fourth quarter of 1997,the Company expanded into a new
manufacturing facility in Fort Collins, Colorado. In the second quarter of 1998,
the Company relocated part of its previously existing Fort Collins manufacturing
operations to a new facility in Austin, Texas. The expansion to new locations
was to provide service to one of the Company's largest customers whose primary
manufacturing facilities are in Austin, and accommodate the anticipated growth
of the semiconductor industry. Starting late in the fourth quarter of 1997, the
semiconductor industry started a downturn, which has continued through the
second quarter of 1998 and appears to be getting worse. The downturn in this
industry has significantly impacted the Company's financial results. The
combination of the expansion and lower sales has resulted in an over-capacity
situation for the Company, leading to unfavorable absorption. In addition, the
decline in sales to the semiconductor industry has resulted in a change in
product mix of sales to that industry, with an increase in sales of products
with lower gross margins, and a decrease in sales of products with higher gross
margins.
The Company initiated cost reduction measures during the first quarter of
1998, including a 10% reduction in executive salaries and certain scheduled
mandatory time off for all personnel, except those in critical functions. These
cost reduction measures were continued into the second quarter of 1998 and will
be continued through at least the
12
<PAGE>
fourth quarter of 1998. Other cost-reducing initiatives are being considered.
The Company expects that underutilization of manufacturing capacity will
continue to negatively impact gross margins until sales to the semiconductor
capital equipment market recover or until other markets the Company serves
experience significant growth.
The decrease in gross margin from the first quarter of 1998 to the second
quarter of 1998 was due primarily to unfavorable absorption of manufacturing
overhead resulting from the reduced sales volume and the change in product mix
that resulted in higher material costs.
RESEARCH AND DEVELOPMENT
The Company's research and development expenses are incurred researching new
technologies, developing new products and improving existing product designs.
Research and development expenses for the second quarter of 1998 were $4.8
million, an increase of 36% from $3.5 million in the comparable period in 1997.
The increase in expenses was attributable to increased spending for payroll and
materials and supplies for new product development, and to higher infrastructure
costs. As a percentage of sales, research and development expenses increased to
18.3% in the second quarter of 1998 from 10.8% in the second quarter of 1997,
reflecting the lower sales base in 1998.
Research and development expenses in the second quarter of 1998 were slightly
higher than first quarter of 1998 expenses of $4.6 million. The Company believes
continued research and development investment for development of new products is
critical to the Company's ability to serve new and existing markets. Since
inception, all research and development costs have been internally funded and
expensed.
SALES AND MARKETING
Sales and marketing expenses support domestic and international sales and
marketing activities that include personnel, trade shows, advertising, and other
marketing activities. Sales and marketing expenses for the second quarter of
1998 were $2.9 million, compared to $2.3 million in the second quarter of 1997,
representing an increase of 25%. The increase was attributable to higher payroll
costs incurred as the Company continues to strengthen its sales management and
product management teams. Additionally, the Company increased spending in 1998
to develop worldwide applications engineering capabilities, though sales and
marketing expenses for the second quarter of 1998 were slightly lower than first
quarter of 1998 expenses of $3.0 million. As a percentage of sales, sales and
marketing expenses increased to 11.1% in the second quarter of 1998 from 7.1% in
the second quarter of 1997, reflecting the lower sales base.
GENERAL AND ADMINISTRATIVE
General and administrative expenses support the worldwide financial,
administrative, information systems and human resources functions of the
Company. General and
13
<PAGE>
administrative expenses for the second quarter of 1998 were $1.9 million,
compared to $1.7 million in the second quarter of 1997, and would have
remained at the same level except for $0.25 million in 1998 of amortization
of goodwill. General and administrative expenses for the second quarter of
1998 were 11% lower than in the first quarter of 1998. As a percentage of
sales, general and administrative expenses increased to 7.3% in the second
quarter of 1998 from 5.2% in the second quarter of 1997, reflecting the lower
sales base.
The Company continues to implement its management system software, including
the replacement of existing systems in its domestic and foreign locations. The
Company expects that charges related to training and implementation of the
software will continue through 1998.
OTHER INCOME (EXPENSE)
Other income (expense) consists primarily of foreign exchange gains and losses
and interest income and expense. Other income for the second quarter of 1998 was
$0.2 million, attributable to $0.3 million of interest income from marketable
securities. In the comparable period in 1997, other income was $0.3 million,
attributable to a foreign currency exchange gain.
The Company experienced fluctuations in foreign currency exchange rates
during 1997 and the first six months of 1998, particularly against the Japanese
yen. As a hedge against currency fluctuations in the yen, the Company entered
into various forward foreign exchange contracts during 1997 to mitigate the
effect of potential depreciation in that currency. The Company continues to
evaluate various policies to minimize the effects of currency fluctuations.
PROVISION FOR INCOME TAXES
The income tax benefit of $0.9 million for the second quarter of 1998
represented an estimated effective rate of 38.0%, compared to an effective
income tax rate for the year 1997 of 39.2%. The higher effective tax rate for
1997 was attributed to nondeductible charges resulting from the acquisition of
Tower. The Company adjusts its provision for income taxes periodically, based
upon the anticipated tax status of all of its foreign and domestic entities.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
SALES
Sales for the first six months of 1998 were $62.8 million, an increase of 18%
from sales of $53.4 million in the comparable period in 1997. Sales to the
semiconductor capital equipment market, including the Company's largest
customer, remained at
14
<PAGE>
essentially the same level. Sales to the data storage equipment market were
essentially unchanged as well, while sales to the flat panel display market
decreased moderately. Sales to industrial markets increased significantly,
due primarily to the inclusion of Tower in 1998. Sales to customers in the
United States and Europe were higher while sales to Japan and other
geographic regions were lower.
Sales by industry segment for the six months ended June 30, 1998 were as
follows: semiconductor capital equipment, $33.9 million; data storage, $9.5
million; flat panel display, $3.1 million; industrial, $16.3 million. For the
comparable period in 1997, sales by industry were: semiconductor capital
equipment, $34.2 million; data storage, $9.0 million; flat panel display, $3.6
million; industrial, $6.6 million.
Sales by geographic region for the six months ended June 30, 1998 were: United
States, $46.2 million; Europe, $11.8 million; Japan, $3.6 million; Pacific Rim
and other, $1.2 million. For the comparable period in 1997, sales by geographic
region were: United States, $38.9 million; Europe, $7.9 million; Japan, $5.2
million; Pacific Rim and other, $1.4 million.
GROSS MARGIN
The Company's gross margin for the first six months of 1998 was 28.9%, down
from 37.6% in the comparable period in 1997. The decrease in gross margin
between the periods presented was due primarily to unfavorable absorption of
manufacturing overhead and higher material costs. The unfavorable absorption
resulted from underutilized capacity resulting from two additional
manufacturing facilities the Company opened between the periods presented,
including one in Fort Collins, Colorado during the fourth quarter of 1997 and
one in Austin, Texas, during the second quarter of 1998. The higher material
costs are a result of a shift in the mix of the products the Company sells.
RESEARCH AND DEVELOPMENT
Research and development expenses for the first six months of 1998 were $9.4
million, up from $6.3 million in the comparable period in 1997. The increase was
attributable to higher spending for payroll and materials and supplies for new
product development. As a percentage of sales, research and development expenses
increased to 15.0% in the first six months of 1998 from 11.9% in the comparable
period in 1997.
SALES AND MARKETING
Sales and marketing expenses for the first six months of 1998 were $5.9
million, up from $4.1 million in the comparable period in 1997. The increase
was attributable to higher spending for payroll to strengthen the Company's
sales management and product management teams. As a percentage of sales, sales
and marketing expenses increased to 9.4% in the first six months of 1998 from
7.7% in the comparable period in 1997.
15
<PAGE>
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the first six months of 1998 were
$4.1 million, up from $3.0 million in the comparable period in 1997. The
increase was attributable to higher spending for payroll, purchased services and
amortization of goodwill. As a percentage of sales, general and administrative
expenses increased to 6.5% in the first six months of 1998 from 5.5% in the
comparable period in 1997. The percentage for the first six months of 1998
would have been 5.7% without the amortization.
OTHER INCOME (EXPENSE)
Other income for the first six months of 1998 was $0.3 million, attributable
to $0.5 million of interest income from marketable securities. In the
comparable period in 1997, other expense was $0.1 million.
PROVISION FOR INCOME TAXES
The income tax benefit of $0.3 million for the first six months of 1998
represented an estimated effective rate of 38.0% compared to an effective
income tax rate for the year 1997 of 39.2%.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations, acquired
equipment and met its working capital requirements through cash flow from
operations, borrowings under its revolving line of credit, long-term loans
secured by property and equipment, and, since November 1995, proceeds from
underwritten public offerings.
Operations provided cash of $3.5 million in the first six months of 1998,
primarily as a result of depreciation, amortization, and decreases in accounts
receivable and inventories, partially offset by decreases in accounts payable
and accruals for payroll, employee benefits and income taxes. In the comparable
period in 1997, operations provided cash of $1.2 million, primarily as a result
of net income, depreciation and amortization and increases in accounts payable
and other accrued expenses, partially offset by increases in accounts
receivable and inventories.
Investing activities used cash of $2.8 million in the first six months of
1998, as a result of the purchase of property and equipment for $3.5 million
and investment in preferred stock of Litmas, Inc. ("Litmas") for $0.75 million,
partially offset by a decrease of marketable securities of $1.5 million. During
the second quarter of 1998, the Company opened a new manufacturing facility in
Austin, Texas, to accommodate the Company's largest customer in the
semiconductor capital equipment industry. In the comparable period in 1997,
investing activities used cash of $0.8 million due to the purchase of property
and equipment.
16
<PAGE>
Financing activities used cash of $0.8 million in the first six months of
1998 and $0.5 million in the comparable period of 1997. In both periods
presented the cash used was due primarily to net changes of notes payable
and repayment of capital lease obligations.
The Company plans to spend approximately $1.0 million through the remainder
of 1998 for the acquisition of manufacturing and test equipment and furnishings.
The Company also plans to invest an additional $0.25 million in preferred stock
of Litmas in the third quarter of 1998.
As of June 30, 1998, the Company had working capital of $64.3 million. The
Company's principal sources of liquidity consisted of $11.3 million of cash and
cash equivalents, $19.0 million of marketable securities, and a credit facility
consisting of a $30.0 million revolving line of credit, with options to convert
up to $10.0 million to a three-year term loan. Advances under the revolving line
of credit bear interest at either the prime rate (8.5% at July 31, 1998) minus
1.25% or the LIBOR 360-day rate (5.82813% at July 31, 1998) plus 150 basis
points, at the Company's option. All advances under the revolving line of credit
will be due and payable in December 2000; however, there were no advances
outstanding as of June 30, 1998.
The Company believes that its cash and cash equivalents, marketable
securities, cash flow from operations and available borrowings, will be
sufficient to meet the Company's working capital needs through the end of 1998.
After that time, the Company may require additional equity or debt financing to
address its working capital, capital equipment, or expansion needs. In addition,
any significant acquisitions by the Company may require additional equity or
debt financings to fund the purchase price, if paid in cash. There can be no
assurance that additional funding will be available when required or that it
will be available on terms acceptable to the Company.
17
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any material legal proceedings to which
it or any of its subsidiaries is a party.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1998 Annual Meeting of Stockholders on Wednesday, May
6, 1998, to vote on three proposals. Proxy statements were sent to all
shareholders. The first proposal was for the election of directors, including
Douglas S. Schatz, G. Brent Backman, Richard P. Beck, Elwood Spedden, Hollis L.
Caswell, Ph.D. and Arthur A. Noeth. All six directors were elected with the
following votes tabulated:
<TABLE>
<CAPTION>
TOTAL VOTE FOR TOTAL VOTE WITHHELD
NAME OF DIRECTOR EACH DIRECTOR FROM EACH DIRECTOR
<S> <C> <C>
Mr. Schatz 20,257,399 122,267
Mr. Backman 20,257,399 122,267
Mr. Beck 20,257,399 122,267
Mr. Spedden 20,257,099 122,567
Dr. Caswell 20,253,157 126,509
Mr. Noeth 20,257,099 122,567
</TABLE>
18
<PAGE>
The second proposal was for an amendment of the 1995 stock option plan to
increase the number of shares of common stock issuable thereunder from
3,500,000 to 4,625,000. The amendment was approved with the following votes
tabulated:
FOR AGAINST ABSTAIN
19,068,928 1,281,895 28,843
The third proposal was for the ratification of appointment of independent
auditors. The current auditors, Arthur Anderson, LLP, were retained, with the
following votes tabulated:
FOR AGAINST ABSTAIN
20,340,802 2,412 36,452
ITEM 5. OTHER INFORMATION
None.
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of June 1, 1998, by
and among the Company, Warpspeed, Inc., a wholly owned subsidiary
of the Company, and RF Power Products, Inc.
3.1 The Company's Restated Certificate of Incorporation(1)
3.2 The Company's Bylaws(1)
4.1 Form of Specimen Certificate for the Company's Common Stock(1)
4.2 The Company hereby agrees to furnish to the SEC, upon request, a
copy of the instruments which define the rights of holders of
long-term debt of the Company. None of such instruments not
included as exhibits herein represents long-term debt in excess of
10% of the consolidated total assets of the Company.
10.1 Comprehensive Supplier Agreement, dated May 18, 1998, between
Applied Materials Inc., and the Company+
10.2 Purchase Order and Sales Agreement, dated July 1, 1993, amended
September 16, 1995 between Lam Research Corporation and the
Company(1)+
19
<PAGE>
10.3 Purchase Agreement, dated November 1, 1995, between Eaton
Corporation and the Company(2)+
10.4 Amended and Restated Loan and Security Agreement, dated as of
November 17, 1995, between Silicon Valley Bank and the Company(1)
10.5 Loan and Security Agreement, dated August 15, 1997, among Silicon
Valley Bank, Bank of Hawaii and the Company(3)
10.6 Loan Agreement dated December 8, 1997, by and among Silicon Valley
Bank, as Servicing Agent and a Bank, and Bank of Hawaii, as a
Bank, and the Company, as borrower(4)
10.7 Equipment Line of Credit, dated July 11, 1994, between Silicon
Valley Bank and the Company(1)
10.8 Master Lease Purchase Agreement, dated January 20, 1989, as
amended, between MetLife Capital Corporation and the Company(1)
10.9 Lease Purchase Agreement, dated June 11, 1992, between MetLife
Capital Corporation and the Company(1)
10.10 Master Equipment Lease, dated July 15, 1993, as amended, between
KeyCorp Leasing Ltd. and the Company(1)
10.11 Lease, dated June 12, 1984, amended June 11, 1992, between
Prospect Park East Partnership and the Company for property in
Fort Collins, Colorado(1)
10.12 Lease, dated March 14, 1994, as amended, between Sharp Point
Properties, L.L.C., and the Company for property in Fort Collins,
Colorado(1)
10.13 Lease, dated May 19, 1995, between Sharp Point Properties, L.L.C.
and the Company for a building in Fort Collins, Colorado(1)
10.14 Form of Indemnification Agreement(1)
10.15 1995 Stock Option Plan, as amended and restated(4)*
10.16 Employee Stock Purchase Plan(1)*
10.17 1995 Non-Employee Directors' Stock Option Plan(1)*
10.18 Lease, dated April 15, 1998, between Cross Park Investors, Ltd.,
and the Company for property in Austin, Texas
10.19 Lease, dated April 15, 1998, between Cameron Technology Investors,
Ltd., and the Company for property in Austin, Texas
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule for the six-month period ended June 30,
1998.
27.2 Financial Data Schedule as restated for the year ended December 31,
1996; the three-month period ended March 31, 1997; the six-month
period ended June 30, 1997; and the nine-month period ended
September 30, 1997, respectively.
20
<PAGE>
27.3 Financial Data Schedule as restated for the year ended December 31,
1995; the three-month period ended March 31, 1996; the six-month
period ended June 30, 1996; and the nine-month period ended
September 30, 1996, respectively.
</TABLE>
(b) No reports on Form 8-K were filed or required to be filed by the Company
during the three-month period ended June 30, 1998.
_______________
(1) Incorporated by reference to the Company's Registration Statement
on Form S-1 (File No. 33-97188), filed September 20, 1995, as
amended.
(2) Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1996 (File No. 0-26966), filed
March 21, 1997, as amended.
(3) Incorporated by reference to the Company's Registration Statement
on Form S-3 (File No. 333-34039), filed August 21, 1997, as
amended.
(4) Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1997 (File No. 0-26966), filed
March 24, 1998.
* Compensation Plan
+ Confidential treatment has been requested for portions of this
agreement. Such portions have been omitted and filed separately
with the SEC.
++ Portions of these documents have been omitted in accordance with
an order by the SEC granting confidential treatment. Such omitted
material has been filed separately with the SEC.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADVANCED ENERGY INDUSTRIES, INC.
/S/ RICHARD P. BECK
Senior Vice President, Chief Financial August 7, 1998
Officer, Assistant Secretary and
Director (Principal Financial Officer
and Principal Accounting Officer)
22
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of June 1, 1998, by
and among the Company, Warpspeed, Inc., a wholly owned subsidiary
of the Company, and RF Power Products, Inc.
3.1 The Company's Restated Certificate of Incorporation(1)
3.2 The Company's Bylaws(1)
4.1 Form of Specimen Certificate for the Company's Common Stock(1)
4.2 The Company hereby agrees to furnish to the SEC, upon request, a
copy of the instruments which define the rights of holders of
long-term debt of the Company. None of such instruments not
included as exhibits herein represents long-term debt in excess of
10% of the consolidated total assets of the Company.
10.1 Comprehensive Supplier Agreement, dated May 18, 1998, between
Applied Materials, Inc. and the Company+
10.2 Purchase Order and Sales Agreement, dated July 1, 1993, amended
September 16, 1995 between Lam Research Corporation and the
Company(1)+
10.3 Purchase Agreement, dated November 1, 1995, between Eaton
Corporation and the Company(2)+
10.4 Amended and Restated Loan and Security Agreement, dated as of
November 17, 1995, between Silicon Valley Bank and the Company(1)
10.5 Loan and Security Agreement, dated August 15, 1997, among Silicon
Valley Bank, Bank of Hawaii and the Company(3)
10.6 Loan Agreement dated December 8, 1997, by and among Silicon Valley
Bank, as Servicing Agent and a Bank, and Bank of Hawaii, as a
Bank, and the Company, as borrower(4)
10.7 Equipment Line of Credit, dated July 11, 1994, between Silicon
Valley Bank and the Company(1)
10.8 Master Lease Purchase Agreement, dated January 20, 1989, as
amended, between MetLife Capital Corporation and the Company(1)
10.9 Lease Purchase Agreement, dated June 11, 1992, between MetLife
Capital Corporation and the Company(1)
10.10 Master Equipment Lease, dated July 15, 1993, as amended, between
KeyCorp Leasing Ltd. and the Company(1)
10.11 Lease, dated June 12, 1984, amended June 11, 1992, between
Prospect Park East Partnership and the Company for property in
Fort Collins, Colorado(1)
10.12 Lease, dated March 14, 1994, as amended, between Sharp Point
Properties, L.L.C., and the Company for property in Fort Collins,
Colorado(1)
10.13 Lease, dated May 19, 1995, between Sharp Point Properties, L.L.C.
and the Company for a building in Fort Collins, Colorado(1)
10.14 Form of Indemnification Agreement(1)
10.15 1995 Stock Option Plan, as amended and restated(4)*
10.16 Employee Stock Purchase Plan(1)*
23
<PAGE>
10.17 1995 Non-Employee Directors' Stock Option Plan(1)*
10.18 Lease, dated April 15, 1998, between Cross Park Investors, Ltd.,
and the Company for property in Austin, Texas
10.19 Lease, dated April 15, 1998, between Cameron Technology Investors,
Ltd., and the Company for property in Austin, Texas
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule for the six-month period ended June 30,
1998.
27.2 Financial Data Schedule as restated for the year ended December 31,
1996; the three-month period ended March 31, 1997; the six-month
period ended June 30, 1997; and the nine-month period ended
September 30, 1997, respectively.
27.3 Financial Data Schedule as restated for the year ended December 31,
1995; the three-month period ended March 31, 1996; the six-month
period ended June 30, 1996; and the nine-month period ended
September 30, 1996, respectively.
_______________
(1) Incorporated by reference to the Company's Registration Statement
on Form S-1 (File No. 33-97188), filed September 20, 1995, as amended.
(2) Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1996 (File No. 0-26966), filed
March 21, 1997, as amended.
(3) Incorporated by reference to the Company's Registration Statement on
Form S-3 (File No. 333-34039), filed August 21, 1997, as amended.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 (File No. 0-26966), filed
March 24, 1998.
* Compensation Plan
+ Confidential treatment has been requested for portions of this
agreement. Such portions have been omitted and filed separately
with the SEC.
++ Portions of these documents have been omitted in accordance with
an order by the SEC granting confidential treatment. Such omitted
material has been filed separately with the SEC.
</TABLE>
24
<PAGE>
EXHIBIT 2.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ADVANCED ENERGY INDUSTRIES, INC.,
WARPSPEED, INC.
AND
RF POWER PRODUCTS, INC.,
DATED AS OF JUNE 1, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT"), dated as of June 1,
1998, is made by and among Advanced Energy Industries, Inc., a Delaware
corporation ("PARENT"), Warpspeed, Inc., a New Jersey corporation and a wholly
owned subsidiary of Parent ("MERGER SUB"), and RF Power Products, Inc., a New
Jersey corporation (the "COMPANY").
R E C I T A L S
A. The Boards of Directors of Parent and the Company each have determined
that a business combination between Parent and the Company would enable the
companies to achieve long-term strategic and financial benefits and,
accordingly, is in the best interests of their respective stockholders. Each of
such Boards of Directors desires to effect the Merger (as defined herein), on
the terms and subject to the conditions set forth herein.
B. It is intended that the Merger qualify as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"CODE"), for federal income tax purposes.
C. It is intended that the Merger be accounted for as a pooling of
interests for financial accounting purposes.
D. Parent has incorporated and organized Merger Sub solely to facilitate the
Merger.
NOW, THEREFORE, in consideration of the mutual covenants and subject to the
terms and conditions set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1. THE BASIC TRANSACTION. On the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub
shall be merged with and into the Company in accordance with this Agreement, and
the separate corporate existence of Merger Sub shall thereupon cease (the
"MERGER"). The Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "SURVIVING CORPORATION"), and shall
become a wholly owned subsidiary of Parent. The Merger shall have the effects
specified in the New Jersey Business Corporation Act (the "NJBCA").
1.2. THE CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "CLOSING") shall take place (a) at the offices of
Thelen, Reid & Priest LLP, New York, New York at 10:00 a.m., local time, on the
first business day immediately following the day on which the last to be
fulfilled or waived of the conditions set forth in Article 6 shall be completely
fulfilled or waived in accordance herewith, or (b) at such other time, date or
place as Parent and the Company may agree. The date on which the Closing occurs
is hereinafter referred to as the "CLOSING DATE."
1.3. EFFECTIVE TIME. On the Closing Date, a Certificate of Merger meeting
the requirements of Section 14A:10-4.1 of the NJBCA shall be executed and filed
in the office of the New Jersey Secretary of State, in accordance with the
NJBCA. The Merger shall become effective at (a) the time of filing of the
Certificate of Merger with the New Jersey Secretary of State or (b) such later
time as agreed by the parties hereto and designated in the Certificate of Merger
as the effective time of the Merger (the "EFFECTIVE TIME").
1.4. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and By-laws of Merger Sub in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation and By-laws of the
Surviving Corporation, until duly amended in accordance with applicable law.
<PAGE>
1.5. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors
and officers of Merger Sub immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation until their successors are
duly appointed or elected in accordance with applicable law; and Joseph Stach,
president and chief executive officer of the Company, also shall become an
officer of the Surviving Corporation.
ARTICLE 2
CONVERSION AND EXCHANGE OF SECURITIES
2.1. MERGER SUB STOCK. At the Effective Time, each share of common stock,
par value $0.01 per share, of Merger Sub outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and non-assessable share of common stock, par value $0.01 per share,
of the Surviving Corporation.
2.2. COMPANY STOCK; OPTIONS.
(a) EXCHANGE RATIO. At the Effective Time, each share of common stock,
par value $0.01 per share, of the Company ("COMPANY COMMON STOCK") that is
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive the number of shares of
common stock, par value $0.001 per share, of Parent (the "PARENT COMMON
STOCK") that is equal to 3,750,000 divided by the number of shares of
Company Common Stock issued and outstanding immediately prior to the
Effective Time (the "EXCHANGE RATIO"); provided, however, that (A) if the
Closing Price (as defined in this Section 2.2) is less than or equal to
$12.11, then the Exchange Ratio shall be the result obtained by dividing
$3.74 by the Closing Price, but in no event shall the Exchange Ratio
computed pursuant to this clause (A) be greater than 4,000,000 divided by
the number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (the "EFFECTIVE TIME SHARE NUMBER")
and (B) if the Closing Price is greater than or equal to $16.39, the
Exchange Ratio shall be the result obtained by dividing, $5.06 by the
Closing Price, but in no event shall the Exchange Ratio computed pursuant to
this clause (B) be less than 3,500,000 divided by the Effective Time Share
Number. "CLOSING PRICE" means the average closing price of the Parent Common
Stock, as reported in The Wall Street Journal, Eastern Edition, for each of
the 10 consecutive Trading Days immediately preceding the third Trading Day
prior to the Stockholders Meeting (as defined in Section 5.4). "TRADING DAY"
means a day on which trading is conducted on the Nasdaq National Market.
(b) CANCELLATION OF COMPANY COMMON STOCK. At the Effective Time, as a
result of the Merger and without any action on the part of the holders
thereof, all shares of Company Common Stock shall cease to be outstanding,
shall be canceled and retired and shall cease to exist, and each holder of
shares of Company Common Stock shall thereafter cease to have any rights
with respect to such shares of Company Common Stock, except the right to
receive upon the surrender of a certificate (a "CERTIFICATE") representing
such shares of Company Common Stock (i) the number of shares of Parent
Common Stock determined in accordance with this Section 2.2, and (ii) cash,
without interest, payable (A) in lieu of any fractional shares of Parent
Common Stock, in accordance with Section 2.3(b), and (B) as Specified
Post-Closing Dividends (as defined in Section 2.3), in accordance with
Section 2.3(f).
(c) TREASURY SHARES AND SHARES HELD BY SUBSIDIARIES. At the Effective
Time, as a result of the Merger and without any action on the part of
Parent, Merger Sub or the Company, any and all shares of Company Common
Stock issued and held in the Company's treasury or held by a Subsidiary of
the Company shall cease to be outstanding, shall be canceled and retired
without payment of any consideration therefor and shall cease to exist.
(d) OPTIONS.
(i) At the Effective Time, as a result of the Merger and without any
action on the part of holder thereof, each option to purchase Company
Common Stock granted by the Company
<PAGE>
(collectively, "COMPANY OPTIONS") under one of its stock option plans
(collectively, "COMPANY OPTION PLANS") that remains outstanding and
unexercised as of the Effective Time, whether or not vested or
exercisable, shall be assumed by Parent and shall be converted into an
option to purchase Parent Common Stock (collectively, "SUBSTITUTED
OPTIONS").
(ii) Subject to subsection 2.2(d)(iii) below, (A) the number of
shares of Parent Common Stock underlying a Substituted Option shall be
equal to the number of shares of Company Common Stock underlying the
subject Company Option multiplied by the Exchange Ratio and rounded to
the nearest whole number, (B) the exercise price per share of a
Substituted Option shall be equal to the exercise price of the subject
Company Option divided by the Exchange Ratio and rounded to the nearest
cent, and (C) each Substituted Option shall be exercisable on the same
terms and subject to the same conditions as had been applicable to the
related Company Option, except to the extent the number of shares and
exercise price per share have been adjusted pursuant to (A) and (B),
respectively, of this subsection 2.2(d)(ii).
(iii) It is the intention of the parties that Company Options that
qualified as incentive stock options, within the meaning of Section 422
of the Code ("ISOS"), immediately prior to the Effective Time, be
converted, when assumed by Parent, into Substituted Options that qualify
as ISOs immediately following the Effective Time, to the extent permitted
by Section 422 of the Code and applicable terms of the Company Option
Plans. In furtherance of such intention, the formulae, terms and
conditions set forth in subsection 2.2(d)(ii) above may be applied to, or
modified for, such Substituted Options as deemed reasonably necessary by
Parent, so long as any such application or modification does not reduce
the benefit of the Substituted Option to the holder thereof.
(iv) On or prior to the Effective Time, Parent shall file with the
Securities and Exchange Commission (the "COMMISSION") a Registration
Statement on Form S-3 or Form S-8, as determined by Parent in its sole
discretion, relating to the issuance of the Parent Common Stock
underlying the Substituted Options or shall cause such Parent Common
Stock to be included in an effective Registration Statement on Form S-8
relating to one or more of Parent's stock option plans (collectively,
"PARENT OPTION PLANS"). So long as any Substituted Options remain
outstanding, Parent shall use its best efforts to maintain the
effectiveness of any Registration Statement or Statements relating to the
Substituted Options (and to maintain the current status of the prospectus
or prospectuses related thereto). At or prior to the Effective Time,
Parent shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Parent Common Stock for delivery upon
exercise of the Substituted Options.
2.3. EXCHANGE OF CERTIFICATES REPRESENTING COMPANY COMMON STOCK.
(a) As of the Effective Time, Parent shall deposit, or shall cause to be
deposited, with an exchange agent reasonably acceptable to the Company (the
"EXCHANGE AGENT"), for the benefit of the holders of Company Common Stock,
for exchange in accordance with this Article 2, (i) certificates
representing the shares of Parent Common Stock to be issued in connection
with the Merger ("MERGER CERTIFICATES"), and (ii) Parent's good faith
estimate of the cash in lieu of fractional shares expected to be payable in
connection with the Merger. Such cash and Merger Certificates are referred
to herein as the "EXCHANGE FUND."
(b) No fractional shares of Parent Common Stock shall be issued pursuant
hereto. In lieu of the issuance of any fractional share of Parent Common
Stock, cash will be paid in respect of any fractional share of Parent Common
Stock that would otherwise be issuable, and the amount of such cash shall be
equal to such fractional proportion of the Closing Price. No interest will
be paid or accrued on the cash payable to holders of shares of Company
Common Stock.
(c) Promptly after the Effective Time, Parent shall cause the Exchange
Agent to mail to each holder of record of Company Common Stock (i) a letter
of transmittal, in a form and having such
<PAGE>
provisions as Parent may reasonably specify ("LETTER OF TRANSMITTAL"), which
shall advise the holder that delivery of Merger Certificates shall be
effected, and risk of loss and title to such holder's shares of Company
Common Stock shall pass, only upon delivery of the Certificates representing
such shares to the Exchange Agent, and (ii) instructions for use in
effecting the surrender of such Certificates in exchange for Merger
Certificates and cash in lieu of fractional shares from the Exchange Fund.
(d) Upon surrender of a Certificate to the Exchange Agent for
cancellation, together with a duly executed and properly completed Letter of
Transmittal, (i) the holder of the shares of Company Common Stock
represented by such Certificate shall be entitled to receive in exchange
therefor from the Exchange Fund (A) a Merger Certificate representing that
number of whole shares of Parent Common Stock determined by multiplying the
number of shares of Company Common Stock represented by the Certificate by
the Exchange Ratio, and (B) a check representing (1) the amount of cash in
lieu of fractional shares of Parent Common Stock, if any, determined
pursuant to paragraph (b) of this Section 2.3, and (2) any Specified
Post-Closing Dividends, in each case less any applicable tax withholding,
and (ii) the Company Common Stock represented by the surrendered Certificate
shall thereupon be canceled.
(e) In the event of a transfer of ownership of Company Common Stock
which is not registered in the transfer records of the Company, a Merger
Certificate representing the proper number of shares of Parent Common Stock,
together with a check for the cash to be paid in lieu of fractional shares,
if any, may be issued to such transferee of such Company Common Stock, if
the Certificate representing such Company Common Stock is presented to the
Exchange Agent, accompanied by all documents, in form and substance
reasonably satisfactory to Parent and the Exchange Agent, required to
evidence and effect such transfer of Company Common Stock and to evidence
that any applicable stock transfer taxes have been paid. There shall be no
transfers on the transfer records of the Company, at or after the Effective
Time, of shares of Company Common Stock which were outstanding immediately
prior to the Effective Time.
(f) Notwithstanding any other provisions of this Agreement, no dividends
or other distributions declared after the Effective Time on Parent Common
Stock ("POST-CLOSING DIVIDENDS") shall be paid with respect to any shares of
Company Common Stock represented by a Certificate until such Certificate is
surrendered for exchange as provided herein. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time
of such surrender, the amount of Post-Closing Dividends with a record date
after the Effective Time theretofore payable with respect to such whole
shares of Parent Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon ("SPECIFIED POST-CLOSING
DIVIDENDS"), and (ii) at the appropriate payment date, the amount of
Post-Closing Dividends with a record date after the Effective Time but prior
to surrender and a payment date subsequent to surrender payable with respect
to such whole shares of Parent Common Stock, less the amount of any
withholding taxes which may be required thereon.
(g) Certificates surrendered for exchange by any person that is an
"affiliate" of the Company for purposes of Rule 145(c) under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), shall not be exchanged until
Parent has received a written agreement from such person as provided in
Section 5.11.
(h) One year after the Effective Time, the Exchange Agent shall deliver
to the Surviving Corporation any portion of the Exchange Fund (including the
proceeds of any investments thereof and any shares of Parent Common Stock)
that remains unclaimed by the former stockholders of the Company.
Thereafter, former stockholders of the Company that have not surrendered
their Certificates for exchange shall look to the Surviving Corporation for
delivery of Merger Certificates, cash in lieu of fractional shares and
unpaid Post-Closing Dividends which such former stockholder is entitled
<PAGE>
to receive in respect of the Company Common Stock represented by the
theretofore unsurrendered Certificates, in each case, without any interest
thereon.
(i) None of Parent, the Company, the Surviving Corporation, the Exchange
Agent or any other person shall be liable to any former stockholder of the
Company for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
2.4. LOST CERTIFICATES. In the event any Certificate shall have been lost,
stolen or destroyed, upon the making and delivery of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Parent Common Stock and cash deliverable in respect
thereof pursuant to this Agreement.
2.5. ADJUSTMENT OF EXCHANGE RATIO. In the event that, subsequent to the
date of this Agreement but prior to the Effective Time, the outstanding shares
of Parent Common Stock shall have been changed into a different number of shares
or a different class as a result of a stock split, reverse stock split, stock
dividend, subdivision, reclassification, combination, exchange, recapitalization
or other similar transaction, the Exchange Ratio shall be appropriately
adjusted.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered at or prior to the
execution hereof to Parent (the "COMPANY DISCLOSURE SCHEDULE") or the Company
Reports (as defined in Section 3.6) filed by the Company prior to the date of
this Agreement, the Company makes the following representations and warranties
to Parent and Merger Sub, as of the date of this Agreement. The term "COMPANY
MATERIAL ADVERSE EFFECT" has the meaning given to it in Section 8.14.
3.1. ORGANIZATION AND STANDING.
(a) The Company (i) is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation,
(ii) has all requisite corporate power and authority to own, operate and
lease its properties and carry on its business as now conducted, and (iii)
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to so qualify, or be
in good standing, would have a Company Material Adverse Effect.
(b) The Company does not have any Subsidiaries (as defined in Section
8.14) other than RFPP Foreign Sales Corporation, a corporation organized
under the United States Virgin Islands ("COMPANY SUBSIDIARY"). Company
Subsidiary (i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (ii) has all
requisite corporate power and authority to carry on its business as now
conducted, and (iii) is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure
to so qualify, or be in good standing, would have a Company Material Adverse
Effect. Company Subsidiary does not (x) own, operate or lease any real or
personal property, or (y) have any operations or engage in any activities
other than those related to coordination of export sales by the Company.
(c) Neither the Company nor Company Subsidiary has (i) filed or had
filed against it a petition in bankruptcy or a petition to take advantage of
any other insolvency act, (ii) admitted in writing its inability to pay its
debts generally, (iii) made an assignment for the benefit of creditors, (iv)
consented to the appointment of a receiver for itself or any substantial
part of its property, or (v) generally committed any act of insolvency
(including the failure to pay obligations as they become due) or bankruptcy.
<PAGE>
3.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 19,000,000
shares of Company Common Stock. As of May 27, 1998, there were 12,149,220
shares of Company Common Stock issued and outstanding. From such date to the
date of this Agreement, no additional shares of capital stock of the Company
have been issued, except pursuant to the exercise of Company Options. As of
May 27, 1998, Company Options to acquire 712,123 shares of Company Common
Stock were outstanding. From such date to the date of this Agreement, no
additional Company Options have been granted.
(b) All of the issued and outstanding shares of Company Common Stock
have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive or similar rights. Other than Company
Options, there are no existing and outstanding warrants, rights, options,
subscriptions, convertible securities or other agreements or commitments
which obligate the Company to issue, transfer or sell any shares of capital
stock of the Company or of the Company Subsidiary.
(c) Neither the Company nor Company Subsidiary has any outstanding
bonds, debentures, notes or other obligations pursuant to which the holders
thereof have the right to vote (or which are convertible into or exercisable
for securities having the right to vote) with the stockholders of the
Company on any matter.
3.3. AUTHORIZATION; ENFORCEABILITY; NO VIOLATION.
(a) The Company has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder.
(b) Subject only to the approval of this Agreement and the transactions
contemplated hereby by the stockholders of the Company in accordance with
the NJBCA, all corporate action necessary on the part of the Company for the
execution, delivery and performance of this Agreement has been duly taken.
(c) This Agreement constitutes (assuming this Agreement is a valid and
legally binding obligation of Parent and Merger Sub) a valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity and
public policy considerations (the "ENFORCEABILITY EXCEPTIONS") and
compliance with the Industrial Site Recovery Act, N.J.S.A. Section 13:1K-6
ET SEQ. and its implementing regulations ("ISRA").
(d) The execution, delivery and performance of this Agreement will not
result in any conflict with, breach or violation of or default (or an event
which, with notice or lapse of time or both, would constitute a default),
termination or forfeiture under (i) any terms or provisions of the
Certificate of Incorporation or the Bylaws of the Company, (ii) any statute,
rule, regulation, judicial, governmental, regulatory or administrative
decree, order or judgment applicable to the Company or Company Subsidiary,
or (iii) any agreement, lease, license, permit or other instrument to which
the Company is a party or to which any of its assets are subject, except
where any such breach, violation, default, termination or forfeiture would
not have or result in a Company Material Adverse Effect.
(e) There is no action, suit, proceeding or investigation pending or, to
the knowledge of the Company, threatened against the Company that questions
the validity of this Agreement or the right of the Company to enter into
this Agreement or to consummate the transactions contemplated hereby.
3.4. NO CONSENTS. No consent, approval, authorization, order,
registration, qualification or filing of or with any court or any regulatory
authority or any other governmental or administrative body is required on the
Company's part for the consummation by it of the transactions contemplated by
this Agreement, except (i) filings required in order to comply with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), (ii) notices and filings required in order to comply with the Securities
<PAGE>
Act, the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and
state securities or "blue sky" laws, (iii) the filing of the Certificate of
Merger with the New Jersey Secretary of State, and (iv) as may be required by
ISRA.
3.5. COMPLIANCE WITH LAWS. Except where the failure to so comply would not
have a Company Material Adverse Effect, the Company and Company Subsidiary (i)
have all valid and current permits, licenses, orders, authorizations,
registrations, approvals and other analogous instruments (collectively,
"PERMITS"), and each Permit is in full force and effect, and (ii) have made all
filings and registrations and the like, necessary or required by law to conduct
their respective businesses as currently conducted. Neither the Company nor
Company Subsidiary has received any governmental notice of any violation by such
company of any laws, rules, regulation or orders applicable to their respective
businesses. Except where the failure to comply would not have a Company Material
Adverse Effect, (a) neither the Company nor Company Subsidiary is in default or
is not in compliance under any Permits, and (b) the business and operations of
each of the Company and Company Subsidiary are in compliance with all applicable
foreign, federal, state, local and county laws, ordinances, regulations,
judgments, orders, decrees or rules of any court, arbitrator or governmental,
regulatory or administrative agency or entity.
3.6. COMPANY REPORTS.
(a) The Company has filed all reports, forms, registrations, schedules,
statements and other documents required to be filed by it with the
Commission since January 1, 1995 (the "COMPANY REPORTS"). As of their
respective dates, the Company Reports complied as to form in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the applicable rules and regulations promulgated
thereunder. Except to the extent that information contained in any Company
Report has been amended, revised or superseded by a Company Report
subsequently filed and publicly available prior to the date of this
Agreement, none of the Company Reports, when filed, contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company Reports (including the related
notes and schedules) fairly presents in all material respects the
consolidated financial position of the Company and Company Subsidiary as of
its date, and each of the consolidated statements of income, retained
earnings and cash flows of the Company included in or incorporated by
reference into the Company Reports (including any related notes and
schedules) fairly presents in all material respects the results of
operations and cash flows of the Company and Company Subsidiary for the
periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which would not be material in amount or
effect), in each case in accordance with U.S. generally accepted accounting
principles consistently applied during the periods involved ("GAAP"), except
as may be noted therein and subject to the fact that unaudited financial
statements do not contain full notes thereto. Neither the Company nor
Company Subsidiary has any liabilities or obligations required to be
disclosed in a consolidated balance sheet or the notes thereto prepared in
accordance with GAAP, except (i) liabilities or obligations reflected on, or
reserved against in, a consolidated balance sheet of the Company or in the
notes thereto, and included in the Company Reports, (ii) liabilities or
obligations incurred since February 28, 1998, in the ordinary course of
business, consistent with past practices, or (iii) liabilities disclosed in
a Company Report.
3.7. ABSENCE OF LITIGATION, ORDERS, JUDGMENTS.
(a) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened which involve transactions of or
otherwise relate to the Company, Company Subsidiary or either of their
businesses or properties, at law or in equity, or before any arbitrator of
any kind, or before or by any federal, state, municipal or other
governmental department, commission, board,
<PAGE>
bureau, agency or other instrumentality, domestic or foreign, that are
reasonably likely to have a Company Material Adverse Effect.
(b) There are no outstanding orders, writs, injunctions, decrees,
judgments, awards, determinations or directions, which involve transactions
of or otherwise relate to the Company, Company Subsidiary or either of their
businesses or properties, of any court or arbitrator or under any
outstanding order, regulation or demand of any federal, state, municipal or
other governmental instrumentality, domestic or foreign, that are reasonably
likely to have a Company Material Adverse Effect.
3.8. ABSENCE OF CERTAIN CHANGES. Since February 28, 1998, the Company has
conducted its business only in the ordinary course of such business, and there
has not been (i) any Company Material Adverse Effect or any event which is
reasonably likely to result in a Company Material Adverse Effect; (ii) any
declaration, setting aside or payment of any dividend or other distribution with
respect to its capital stock; or (iii) any material change in its accounting
principles, practices or methods.
3.9. TAXES. The Company (i) has timely filed all material federal, state
and foreign tax returns required to be filed by it for tax years ended prior to
the date of this Agreement or requests for extensions have been timely filed and
any such request shall have been granted and not expired, and all such returns
are complete in all material respects, (ii) has paid or accrued all taxes shown
to be due and payable on such returns and (iii) has properly accrued all such
taxes for such periods subsequent to the periods covered by such returns.
3.10. CONTRACTS. Each (a) agreement, contract and commitment, whether
written or oral, to which the Company is a party or by which it is bound and
which is filed as an exhibit to or described in a Company Report and (b)
material agreement, contract and commitment entered into by the Company, or by
which it became bound, after the date of the Quarterly Report on Form 10-Q most
recently filed by the Company (collectively, "COMPANY CONTRACTS"), is a valid
and legally binding obligation of the Company and, to the knowledge of the
Company, the other parties thereto, enforceable against the Company and, to the
knowledge of the Company, the other parties thereto, in accordance with its
terms, subject to the Enforceability Exceptions. The Company is not, and to the
knowledge of the Company no other party to any Company Contract is, in material
default thereof. The Company has not, and to the knowledge of the Company no
other party to any Company Contract has, performed any act or omitted to perform
any act which act or omission, with the giving of notice or passage of time or
otherwise, will become a material default thereunder.
3.11 INTELLECTUAL PROPERTY.
(a) "INTELLECTUAL PROPERTY" means:
(i) any and all issued patents, reissue or reexamination patents,
revivals of patents, utility models, certificates of invention,
registrations of patents, or extensions thereof, regardless of country or
formal name (collectively, "ISSUED PATENTS");
(ii) patent rights, including, without limitation, all United States
and foreign utility and design patents, and all published or unpublished
nonprovisional and provisional patent applications, including, without
limitation, any and all applications of additions, divisionals,
continuations, continuations-in-part, reexaminations, substitutions,
extensions, renewals, utility models, certificates of invention or
reissues thereof or therefor, invention disclosures and records of
invention abandoned patent applications (collectively "PATENT
APPLICATIONS" and with the Issued Patents, the "PATENTS");
(iii) all copyrights, copyrightable works, semiconductor topography
and mask work interests, including, without limitation, all rights of
authorship, use, publication, reproduction, distribution, performance,
transformation, moral rights and ownership of copyrightable works,
semiconductor topography works and mask works, and all rights to register
and obtain renewals and extensions
<PAGE>
of registrations, together with all other interests accruing by reason of
international copyright, semiconductor topography and mask work
conventions (collectively, "COPYRIGHTS");
(iv) trademarks, registered trademarks, applications for
registration of trademark, service marks, registered service marks,
applications for registration of service marks, trade names, registered
trade names, and applications for registrations of trade names
(collectively, "TRADEMARKS");
(v) any and all technology, ideas, inventions, designs, proprietary
information, unpublished research and development information,
manufacturing and operating information, know-how, formulae, trade
secrets and technical data, computer programs, and all hardware, software
and processes; and
(vi) all other intangible assets, properties and rights (whether or
not appropriate steps have been taken to protect, under applicable law,
such other intangible assets, properties or rights).
(b) The Company owns or has the right to use all Intellectual Property
used in the operation of its business as presently conducted, without any
interference or conflict with or misappropriation or infringement of the
Intellectual Property rights of others, other than any interference,
conflict, misappropriation or infringement which is not reasonably likely to
result in (i) a material adverse effect on the Company's ability to
manufacture or sell any of its material products or any material line of
products or otherwise to operate its business, (ii) a material liability of
the Company, or (iii) material redesign or other corrective costs to the
Company. The Company has taken reasonably necessary action to maintain and
protect its rights in the material Intellectual Property that it owns or
uses. Each material item of Intellectual Property owned or used by the
Company immediately prior to the Effective Time hereunder will be owned or
available for use by the Surviving Corporation on substantially identical
terms and conditions immediately subsequent to the Effective Time.
(c) Section 3.11 of the Company Disclosure Schedule sets forth all
Patents, registered Copyrights, registered Trademarks, joint development
agreements, licenses and agreements relating to Intellectual Property owned
or used by the Company that require a consent or waiver to consummate the
transactions contemplated by this Agreement.
(d) The Company has not, within the past four years, interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of others other than any interference,
infringement, misappropriation or conflict which did not and is not
reasonably likely to result in (i) a material adverse effect on the
Company's ability to manufacture or sell any of its material products or any
material line of products or otherwise to operate its business, (ii) a
material liability of the Company, or (iii) material redesign or other
corrective costs to the Company. The Company has not received, and has no
knowledge of, any charge, complaint, claim, demand or notice alleging any
such interference, infringement, misappropriation, or conflict (including,
without limitation, any claim that the Company must license or refrain from
using any Intellectual Property rights of any other person), or that the
Company's use of the Intellectual Property constitutes unfair competition.
(e) To the knowledge of the Company, no fraud or misrepresentation has
been made by the Company or any of its officers, directors or employees or
the relevant inventors during the prosecution of any of the Patents of the
Company, nor has any fraud or misrepresentation been included in any
documentation for or other disclosure of the Intellectual Property of the
Company.
3.12. EMPLOYEE BENEFIT PLANS.
(a) For purpose of this Agreement, (i) "COMPANY BENEFIT PLANS" means all
employee benefit plans and other benefit arrangements covering employees or
former employees of the Company and all employee agreements providing
compensation, severance or other benefits to any employee or former employee
of the Company; and (ii) "ERISA AFFILIATE" means any business or entity
which is a
<PAGE>
member of the same "controlled group of corporations," under "common
control" or an "affiliated service group" with an entity within the meanings
of Sections 414(b), (c) or (m) of the Code, or required to be aggregated
with the entity under Section 414(o) of the Code, or is under "common
control" with the entity, within the meaning of Section 4001(a)(14) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
any regulations promulgated or proposed under any of the foregoing Sections.
(b) With respect to each Company Benefit Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code, either
(i) the Internal Revenue Service (the "IRS") has issued a favorable
determination letter that has not been revoked, or (ii) an application for a
favorable determination letter was timely submitted to the IRS for which no
final action has been taken by the IRS. To the knowledge of the Company,
there is no reason that is not susceptible to cure why the qualified status
under Section 401(a) of the Code of any Company Benefit Plan would be denied
or revoked, whether retroactively or prospectively.
(c) Except as would not have a Company Material Adverse Effect, no
Company Benefit Plan, any fiduciary thereof, nor the Company has incurred
any liability or penalty under Section 4975 of the Code or Section 502(i) of
ERISA. Except as would not have a Company Material Adverse Effect, each
Company Benefit Plan has been maintained and administered in all material
respects in compliance with its terms and with ERISA and the Code, to the
extent applicable thereto.
(d) Except as would not have a Company Material Adverse Effect, neither
the Company nor any ERISA Affiliate (during the period of its affiliated
status) has any existing liability currently due and payable that has not
been satisfied in full under Title IV of ERISA or Section 412 of the Code.
To the knowledge of the Company, there are no current plans to terminate,
whether voluntarily or involuntarily, any materially underfunded pension
plan of the Company or any ERISA Affiliate that is subject to Title IV of
ERISA.
(e) Except as would not have a Company Material Adverse Effect, to the
knowledge of the Company, there are no pending or anticipated claims against
or otherwise involving any of the Company Benefit Plans and no suit, action
or other litigation (excluding claims for benefits incurred in the ordinary
course of the Company Benefit Plan activities) has been brought against or
with respect to any such Company Benefit Plan, except for any of the
foregoing which would not have a Company Material Adverse Effect.
(f) All material contributions required to be made as of the date hereof
to the Company Benefit Plans have been made or provided for.
(g) The execution of, and performance of the transactions contemplated
by, this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any benefit plan,
policy, arrangement or agreement or any trust or loan that will or is
reasonably likely to result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any employee of the Company.
(h) The Company has not entered into any severance agreements or adopted
any severance policies applicable to the Company or its employees.
3.13. NO BROKERS. The Company has not entered into any contract,
arrangement or understanding with any person or firm which will or is reasonably
likely to result in the obligation of the Company, Parent or Merger Sub to pay
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, except that the Company has retained
NationsBanc Montgomery Securities LLC as its financial advisor, the arrangements
with which have been disclosed in writing to Parent prior to the date hereof.
Other than the foregoing arrangements, the Company is not aware of any claim for
payment of any
<PAGE>
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
3.14. OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of NationsBanc Montgomery Securities LLC substantially to the effect that, as of
the date hereof, the Exchange Ratio is fair to the holders of Company Common
Stock from a financial point of view.
3.15. PARENT STOCK OWNERSHIP. Neither the Company nor any of its
Subsidiaries owns any shares of Parent Common Stock or other securities
convertible into Parent Common Stock.
3.16. POOLING OF INTERESTS; TAX REORGANIZATION. To the knowledge of the
Company, having sought and obtained the advice of its accounting advisors, the
Company has not taken (or as of the date hereof failed to take) any action which
would prevent the accounting for the Merger as a pooling of interests in
accordance with Accounting Principles Board Opinion No. 16 ("APB NO. 16"), the
interpretative releases issued pursuant thereto, and the pronouncements of the
Commission. To the knowledge of the Company, the Company has not taken or failed
to take any action which would prevent the Merger from constituting a
reorganization within the meaning of section 368 of the Code.
3.17. ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, (i) "ENVIRONMENTAL REQUIREMENTS"
means any applicable laws, regulations, ordinances or other provisions
having the force or effect of law, or any judicial, governmental, or
administrative orders, requests, or determinations, or any common law
requirements relating to the protection of human health or the environment
(both natural and workplace), including without limitation any Environmental
Requirements concerning (A) the use, generation, treatment, storage,
transportation, handling or disposal of toxic, injurious or hazardous
materials, substances or wastes, toxic pollutants or contaminants, including
petroleum products, crude oil or any by-products or derivatives thereof (as
any of the foregoing terms are defined in federal, state and local laws
applicable to the Company or Parent, as the case may be) (collectively,
"HAZARDOUS MATERIALS"), (B) the control of soil, surface or groundwater
pollution products, (C) air quality and emission standards, or (D) health,
safety and hazard communication matters; and (ii) "COMPANY REAL PROPERTIES"
means all real property ever owned, leased or occupied by the Company or any
Company Predecessor. For purposes of this Section 3.17, "COMPANY
PREDECESSOR" shall include the former operating entities of RF Power
Products, RF Plasma Products and any division or subsidiary of Plasmatherm
which operated a business at the current Company location, or at either of
the two previously disclosed locations: 701 Cooper Road, Voorhees, New
Jersey or 502 Gibbsboro Road, Voorhees, New Jersey.
(b) There has not been any violation of any Environmental Requirements
by the Company or, to the knowledge of the Company, any Company Predecessor,
nor to the knowledge of the Company has there been any third party claim or
demand based upon any Environmental Requirements against the Company or any
Company Predecessor, other than violations, claims or demands that have not
resulted, and are not reasonably likely to result, in a Company Material
Adverse Effect.
(c) The Company has not disposed of, stored or used any Hazardous
Materials on, nor has it transported any Hazardous Materials from, any of
the Company Real Properties owned, leased or occupied by the Company, in
violation of applicable Environmental Requirements other than a disposal,
storage, use or transport which has not resulted in and is not reasonably
likely to result in a Company Material Adverse Effect. To the knowledge of
the Company, no Company Predecessor has disposed of, stored or used any
Hazardous Materials on, nor has any such Company Predecessor transported any
Hazardous Materials from, any of the Company Real Properties owned, leased
or occupied by such Company Predecessor, in violation of applicable
Environmental Requirements.
(d) To the knowledge of the Company, none of the following exists at any
of the real property currently owned, leased or occupied by the Company or
existed at any of the Company Real
<PAGE>
Properties at the time the Company or the Company Predecessor operated
there: (i) underground storage tanks, (ii) asbestos-containing material in
any friable or damaged form or condition, (iii) materials or equipment
containing polychlorinated biphenyls (PCBs), or (iv) landfills or surface
impoundments.
(e) To the knowledge of the Company, none of the Company Real Properties
is or has been contaminated by any Hazardous Materials, in a manner that has
given or is reasonably likely to give rise to any material liability on the
part of the Company to any person, including without limitation any
governmental authority, for response costs, corrective action costs,
personal injury, property damage, natural resources damages or attorney
fees, pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), or the Solid Waste Disposal
Act, as amended ("SWDA"), or any other Environmental Requirements, whether
federal, state or locally imposed.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule delivered at or prior to the
execution hereof to the Company (the "PARENT DISCLOSURE SCHEDULE") or in the
Parent Reports (as defined in Section 4.6) filed with the Commission prior to
the date hereof, Parent and Merger Sub make the following representations and
warranties to the Company as of the date of this Agreement. The term "PARENT
MATERIAL ADVERSE EFFECT" has the meaning given to it in Section 8.14.
4.1. ORGANIZATION AND STANDING.
(a) Parent and each of its Significant Subsidiaries (i) is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (ii) has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business
as now conducted, and (iii) is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure
to so qualify, or be in good standing, would have a Parent Material Adverse
Effect.
(b) Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation. Merger
Sub was organized for purposes of consummating the transactions contemplated
by this Agreement. Merger Sub has not engaged in any activity other than as
provided in, or contemplated by, this Agreement and, as of the date hereof,
has no liabilities of any nature, contingent or otherwise, other than
liabilities or obligations that may arise from this Agreement or the
transactions contemplated hereby. The authorized capital stock of Merger Sub
consists of 1,000 shares of Merger Sub Common Stock, all of which are
validly issued, fully paid and nonassessable and are owned by Parent.
(c) Neither Parent nor any of its Subsidiaries (including without
limitation Merger Sub) has (i) filed or had filed against it a petition in
bankruptcy or a petition to take advantage of any other insolvency act, (ii)
admitted in writing its inability to pay its debts generally, (iii) made an
assignment for the benefit of creditors, (iv) consented to the appointment
of a receiver for itself or any substantial part of its property or (v)
generally committed any act of insolvency (including the failure to pay
obligations as they become due) or bankruptcy.
4.2 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 30,000,000 shares
of Parent Common Stock and 1,000,000 shares of preferred stock, par value
$0.001 per share ("PARENT PREFERRED STOCK"). As of May 31, 1998, there were
22,542,346 shares of Parent Common Stock, and no shares of Parent Preferred
Stock, issued and outstanding. From such date to the date of this Agreement,
no additional shares of capital stock of Parent have been issued, except
pursuant to the exercise of options to
<PAGE>
acquire Parent Common Stock granted by Parent ("PARENT OPTIONS"). As of May
31, 1998, Parent Options to acquire 1,550,683 shares of Parent Common Stock
were outstanding. From such date to the date of this Agreement, no
additional Parent Options have been granted.
(b) All of the issued and outstanding shares of Parent Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights. Other than Parent Options, there are no
existing and outstanding warrants, rights, options, subscriptions,
convertible securities or other agreements or commitments which obligate
Parent to issue, transfer or sell any shares of capital stock of Parent or
Merger Sub.
(c) All of the shares of Parent Common Stock issuable as consideration
in the Merger at the Effective Time, when issued in accordance with the
terms and conditions of this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and free of preemptive rights.
(d) Neither Parent nor any of its Subsidiaries (including without
limitation Merger Sub) has any outstanding bonds, debentures, notes or other
obligations pursuant to which the holders thereof have the right to vote (or
which are convertible into or exercisable for securities having the right to
vote) with the stockholders of Parent on any matter.
4.3. AUTHORIZATION; ENFORCEABILITY; NO VIOLATION.
(a) Each of Parent and Merger Sub has full corporate power and authority
to execute and deliver this Agreement, and to perform its respective
obligations hereunder.
(b) All corporate action necessary on the part of Parent and Merger Sub
for the execution, delivery and performance of this Agreement has been duly
taken. No approval of the stockholders of Parent is required by applicable
law or the rules of the Nasdaq National Market in connection with the
consummation by Parent or Merger Sub of the transactions contemplated
hereby.
(c) This Agreement constitutes (assuming this Agreement is a valid and
binding obligation of the Company), a valid and legally binding obligation
of each of Parent and Merger Sub, enforceable against Parent and Merger Sub,
as applicable, in accordance with its terms, subject to the Enforceability
Exceptions and compliance with ISRA.
(d) The execution, delivery and performance of this Agreement will not
result in any conflict with, breach or violation of or default (or an event
which, with notice or lapse of time or both, would constitute a default),
termination or forfeiture under (i) any terms or provisions of the
Certificate of Incorporation or the By-laws of Parent or any of its
Subsidiaries (including without limitation Merger Sub), (ii) any statute,
rule, regulation, judicial, governmental, regulatory or administrative
decree, order or judgment applicable to Parent or any of its Subsidiaries
(including without limitation Merger Sub), or (iii) any agreement, lease,
license, permit or other instrument to which Parent or any of its
Subsidiaries (including without limitation Merger Sub) is a party or to
which any of its assets are subject, except where any such breach,
violation, default, termination or forfeiture would not have or result in a
Parent Material Adverse Effect.
(e) There is no action, suit, proceeding or investigation pending or
threatened against Parent or any of its Subsidiaries that questions the
validity of this Agreement or the right of Parent or Merger Sub to enter
into this Agreement or to consummate the transactions contemplated hereby.
4.4. NO CONSENTS. No consent, approval, authorization, order,
registration, qualification or filing of or with any court or any regulatory
authority or any other governmental or administrative body is required on the
part of Parent or any of its Subsidiaries for the consummation by Parent and
Merger Sub of the transactions contemplated by this Agreement, except (i)
filings required in order to comply with the HSR Act, (ii) notices and filings
required in order to comply with the Securities Act, the Exchange Act and state
securities or "blue sky" laws, (iii) the filing of the Certificate of Merger
with the New Jersey Secretary of State, and (iv) as may be required by ISRA.
<PAGE>
4.5. COMPLIANCE WITH LAWS. Except where the failure to so comply would not
have a Parent Material Adverse Effect, Parent and each of its Subsidiaries (i)
have all valid and current Permits, and each Permit is in full force and effect,
and (ii) have made all filings and registrations and the like, necessary or
required by law to conduct their respective businesses as currently conducted.
Neither Parent nor any of its Subsidiaries has received any governmental notice
of any violation by such company of any laws, rules, regulation or orders
applicable to their respective businesses, which violation in the case of any
Subsidiary is reasonably likely to have a Parent Material Adverse Effect. Except
where the failure to comply would not have a Parent Material Adverse Effect, (a)
neither Parent nor any of its Subsidiaries is in default or is not in compliance
under any Permits, and (b) the business and operations of each of Parent and its
Subsidiaries are in compliance with all applicable foreign, federal, state,
local and county laws, ordinances, regulations, judgments, orders, decrees or
rules of any court, arbitrator or governmental, regulatory or administrative
agency or entity.
4.6. PARENT REPORTS.
(a) Parent has filed all reports, forms, registrations, schedules,
statements and other documents required to be filed by it with the
Commission since November 17, 1995 (the "PARENT REPORTS"). As of their
respective dates, the Parent Reports complied as to form in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the applicable rules and regulations promulgated
thereunder. Except to the extent that information contained in any Parent
Report has been amended, revised or superseded by a Parent Report
subsequently filed and publicly available prior to the date of this
Agreement, none of the Parent Reports, when filed, contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) Each of the consolidated balance sheets of Parent included in or
incorporated by reference into the Parent Reports (including the related
notes and schedules) fairly presents in all material respects the
consolidated financial position of Parent and its Subsidiaries as of its
date, and each of the consolidated statements of income, stockholders'
equity and cash flows of Parent included in or incorporated by reference
into the Parent Reports (including any related notes and schedules) fairly
presents in all material respects the income, stockholders' equity and cash
flows, as the case may be, of Parent and its Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments which would not be material in amount or effect),
in each case in accordance with GAAP, except as may be noted therein and
subject to the fact that unaudited financial statements do not contain full
notes thereto. Parent and its Subsidiaries do not have any liabilities or
obligations required to be disclosed in a consolidated balance sheet or the
notes thereto prepared in accordance with GAAP, except (i) liabilities or
obligations reflected on, or reserved against in, a consolidated balance
sheet of Parent or in the notes thereto, and included in the Parent Reports,
(ii) liabilities or obligations incurred since March 31, 1998 in the
ordinary course of business, consistent with past practices, or (iii)
liabilities disclosed in a Parent Report.
4.7. ABSENCE OF LITIGATION, ORDERS, JUDGMENTS.
(a) There are no actions, suits or proceedings pending or, to the
knowledge of Parent, threatened which involve transactions of or otherwise
relate to Parent or any of its Subsidiaries or any of such companies'
businesses or properties, at law or in equity, or before any arbitrator of
any kind, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or other
instrumentality, domestic or foreign, that are reasonably likely to have a
Parent Material Adverse Effect.
(b) There are no outstanding orders, writs, injunctions, decrees,
judgments, awards, determinations or directions, which involve transactions
of or otherwise relate to Parent or any of its Subsidiaries or any of such
companies' businesses or properties, of any court or arbitrator or under any
outstanding order, regulation or demand of any federal, state, municipal or
other governmental instrumentality, domestic or foreign, that are reasonably
likely to have a Parent Material Adverse Effect.
<PAGE>
4.8. ABSENCE OF CERTAIN CHANGES. Since March 31, 1998, Parent and its
Subsidiaries have conducted their businesses only in the ordinary course of such
businesses, except for any action conducted outside the ordinary course of
business which is not reasonably likely to result in a Parent Material Adverse
Effect, and there has not been (i) any Parent Material Adverse Effect or any
event which is reasonably likely to result in a Parent Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock; or (iii) any material change in
its accounting principles, practices or methods.
4.9. TAXES. Parent (a) has timely filed all material federal, state and
foreign tax returns required to be filed by it for tax years ended prior to the
date of this Agreement or requests for extensions have been timely filed and any
such request shall have been granted and not expired, and all such returns are
complete in all material respects, (b) has paid or accrued all taxes shown to be
due and payable on such returns and (c) has properly accrued all such taxes for
such periods subsequent to the periods covered by such returns.
4.10. CONTRACTS. Each (a) agreement, contract and commitment, whether
written or oral, to which Parent or any of its Subsidiaries is a party or by
which any of such companies is bound and which is filed as an exhibit to or
described in a Parent Report, and (b) agreement, contract and commitment that is
material to Parent and its Subsidiaries taken as a whole and that was entered
into by Parent or any of its Subsidiaries, or by which such company became
bound, after the date of the Quarterly Report on Form 10-Q most recently filed
by Parent (collectively, "PARENT CONTRACTS"), is a valid and legally binding
obligation of Parent or the Subsidiary party thereto and, to the knowledge of
Parent, the other parties thereto, enforceable against Parent or the Subsidiary
party thereto and, to the knowledge of Parent, the other parties thereto, in
accordance with its terms, subject to the Enforceability Exceptions. Neither
Parent nor any Subsidiary party to a Parent Contract is in material default of
such Parent Contract, and, to the knowledge of Parent, no other party to a
Parent Contract is in material default of such Parent Contract. Neither Parent
nor any Subsidiary party to a Parent Contract has performed any act or omitted
to perform any act which act or omission, with the giving of notice or passage
of time or otherwise, will become a material default thereunder. To the
knowledge of Parent, no other party to a Parent Contract has performed any act
or omitted to perform any act which act or omission, with the giving of notice
or passage of time or otherwise, will become a material default thereunder.
4.11. INTELLECTUAL PROPERTY.
(a) Parent and its Subsidiaries own or have the right to use all
Intellectual Property used by them in the operation of their respective
businesses, except to the extent that the failure to have such rights has
not and is not reasonably likely to result in (i) a material adverse effect
on Parent's or its Subsidiaries' ability to manufacture or sell any product
or line of products that is material to Parent and its Subsidiaries, taken
as a whole, (ii) a material adverse effect on Parent's or any of its
Subsidiaries' ability to operate its businesses, which inability to so
operate would have a Parent Material Adverse Effect, (iii) a liability of
Parent or any of its Subsidiaries, which liability would have a Parent
Material Adverse Effect, or (iv) material redesign or other corrective costs
to Parent or any of its Subsidiaries, which costs would be material to
Parent and its Subsidiaries, taken as a whole. Parent and its Subsidiaries
have taken reasonably necessary action to maintain and protect their rights
in the material Intellectual Property that they own or use.
(b) Parent has not, within the past four years, interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of others, other than any interference,
infringement, misappropriation or conflict with did not and is not
reasonably likely to result in (i) a material adverse effect on Parent's or
its Subsidiaries' ability to manufacture or sell any product or line of
products that is material to Parent and its Subsidiaries, taken as a whole,
(ii) a material adverse effect on Parent's or any of its Subsidiaries'
ability to operate its businesses, which inability to so operate would have
a Parent Material Adverse Effect, (iii) a liability of Parent or any of its
Subsidiaries, which liability would have a Parent Material Adverse Effect,
or (iv) material redesign
<PAGE>
or other corrective costs to Parent or any of its Subsidiaries, which costs
would be material to Parent and its Subsidiaries, taken as a whole. Parent
has not received, and has no knowledge of, any charge, complaint, claim,
demand or notice alleging any such interference, infringement,
misappropriation or conflict by Parent or any of its Subsidiaries.
(c) To the knowledge of Parent, no fraud or misrepresentation has been
made by (i) Parent or any of its Subsidiaries, (ii) any of their respective
officers, directors or employees or (iii) the relevant inventors during the
prosecution of any of the Patents of Parent or any of its Subsidiaries, nor
has any fraud or misrepresentation been included in any documentation for or
other disclosure of the Intellectual Property of Parent or any of its
Subsidiaries.
4.12 EMPLOYEE BENEFIT PLANS.
(a) For purpose of this Agreement, (i) "PARENT BENEFIT PLANS" means all
employee benefit plans and other benefit arrangements covering employees or
former employees of Parent and its Subsidiaries and all employee agreements
providing compensation, severance or other benefits to any employee or
former employee of Parent or one of its Subsidiaries.
(b) With respect to each Parent Benefit Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code, either
(i) the IRS has issued a favorable determination letter that has not been
revoked, or (ii) an application for a favorable determination letter was
timely submitted to the IRS for which no final action has been taken by the
IRS. To the knowledge of Parent, there is no reason that is not susceptible
to cure why the qualified status under Section 401(a) of the Code of any
Parent Benefit Plan would be denied or revoked, whether retroactively or
prospectively.
(c) Except as would not have a Parent Material Adverse Effect, no Parent
Benefit Plan, any fiduciary thereof, nor Parent has incurred any liability
or penalty under Section 4975 of the Code or Section 502(i) of ERISA. Except
as would not have a Parent Material Adverse Effect, each Parent Benefit Plan
has been maintained and administered in all material respects in compliance
with its terms and with ERISA and the Code, to the extent applicable
thereto.
(d) Except as would not have a Parent Material Adverse Effect, neither
Parent nor any ERISA Affiliate (during the period of its affiliated status)
has any existing liability currently due and payable that has not been
satisfied in full under Title IV of ERISA or Section 412 of the Code. To the
knowledge of Parent, there are no current plans to terminate, whether
voluntarily or involuntarily any materially underfunded pension plans of
Parent or any ERISA Affiliate that are subject to Title IV of ERISA.
(e) Except as would not have a Parent Material Adverse Effect, to the
knowledge of Parent, there are no pending or anticipated claims against or
otherwise involving any of the Parent Benefit Plans and no suit, action or
other litigation (excluding claims for benefits incurred in the ordinary
course of the Parent Benefit Plan activities) has been brought against or
with respect to any such Parent Benefit Plan, except for any of the
foregoing which would not have a Parent Material Adverse Effect.
(f) All material contributions required to be made as of the date hereof
to the Parent Benefit Plans have been made or provided for.
(g) The execution of, and performance of the transactions contemplated
by, this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any benefit plan,
policy, arrangement or agreement or any trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee of Parent or any of
its Subsidiaries.
<PAGE>
4.13. NO BROKERS. Neither Parent nor any of its Subsidiaries has entered
into any contract, arrangement or understanding with any person or firm which
will or is reasonably likely to result in the obligation of the Company, Parent
or Merger Sub to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that Parent has retained PaineWebber Incorporated as its financial advisor, the
arrangements with which have been disclosed in writing to the Company prior to
the date hereof. Other than the foregoing arrangements, Parent is not aware of
any claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
4.14. COMPANY STOCK OWNERSHIP. Neither Parent nor any of its Subsidiaries
owns any shares of Company Common Stock or other securities convertible into
Company Common Stock.
4.15. POOLING OF INTERESTS; TAX REORGANIZATION. To the knowledge of
Parent, having sought and obtained the advice of its accounting advisors,
neither Parent nor any of its Subsidiaries has taken (or as of the date hereof
failed to take) any action which would prevent the accounting for the Merger as
a pooling of interests in accordance with APB No. 16, the interpretative
releases issued pursuant thereto, and the pronouncements of the Commission. To
the knowledge of Parent, neither Parent nor any of its Subsidiaries has taken or
failed to take any action which would prevent the Merger from constituting a
reorganization within the meaning of section 368 of the Code.
4.16. ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, "PARENT REAL PROPERTIES" means all
real property ever owned, leased or occupied by Parent or any of its
Subsidiaries or any predecessor to their businesses (each, a "PREDECESSOR").
(b) There has not been any violation of any Environmental Requirements
by Parent or any of its Subsidiaries or, to the knowledge of Parent, any
Predecessor, nor to the knowledge of Parent has there been any third party
claim or demand based upon any Environmental Requirements against Parent or
any or its Subsidiaries or any Predecessor, other than violations, claims or
demands that have not resulted, and are not reasonably likely to result in,
a Parent Material Adverse Effect.
(c) Neither Parent nor any of its Subsidiaries has disposed of, stored
or used any Hazardous Materials on, nor has any of such companies
transported any Hazardous Materials from, any of the Parent Real Properties
owned, leased or occupied by Parent or any of its Subsidiaries, in violation
of applicable Environmental Requirements, other than a disposal, storage,
use or transport which has not resulted in and is not reasonably likely to
result in a Parent Material Adverse Effect. To the knowledge of Parent, no
Predecessor has disposed of, stored or used any Hazardous Materials on, nor
has any Predecessor transported any Hazardous Materials from, any of the
Parent Real Properties owned, leased or occupied by such Predecessor, in
violation of applicable Environmental Requirements.
(d) To the knowledge of Parent, none of the following exists at any of
the Parent Real Properties: (i) underground storage tanks, (ii)
asbestos-containing material in any friable or damaged form or condition,
(iii) materials or equipment containing polychlorinated biphenyls (PCBs), or
(iv) landfills or surface impoundments.
(e) To the knowledge of Parent, none of the Parent Real Properties is or
has been contaminated by any Hazardous Materials, in a manner that has given
or is reasonably likely to give rise to any material liability on the part
of Parent or any of its Subsidiaries to any person, including without
limitation any governmental authority, for response costs, corrective action
costs, personal injury, property damage, natural resources damages or
attorney fees, pursuant to CERCLA or SWDA or any other Environmental
Requirements, whether federal, state or locally imposed.
<PAGE>
ARTICLE 5
COVENANTS
5.1. ALTERNATIVE PROPOSALS.
(a) Upon execution and delivery of this Agreement, the Company, its
affiliates and their respective officers, directors, employees,
representatives and agents shall immediately cease any existing discussions
or negotiations, if any, conducted with any parties heretofore with respect
to any acquisition of all or any material portion of the assets of, or any
equity interest in, the Company or any business combination with the
Company.
(b) Prior to the Closing Date, the Company may, solely in response to
unsolicited requests therefor, furnish non-public information regarding
itself to any corporation, partnership, person or other entity or group in
respect of, and may participate in discussions and negotiate with such
entity or group concerning, a business combination, merger, sale of material
assets, sale of shares of capital stock or similar transaction involving the
Company (a "TRANSACTION"), PROVIDED that (i) such entity or group has
submitted a written proposal to the Board of Directors of the Company
relating to any such Transaction (an "ALTERNATIVE PROPOSAL"), (ii) the
entity or group enters into confidentiality agreements with the Company with
respect to such non-public information, and (iii) the Board of Directors of
the Company ("COMPANY BOARD"), by a majority vote, determines in its good
faith judgment, based as to legal matters on the advice of legal counsel,
that failing to take such action would constitute a breach of the Company
Board's fiduciary duty. The Company Board shall provide a copy of any such
written proposal to Parent and Merger Sub immediately after receipt thereof,
unless prohibited by the terms of such proposal.
(c) Neither the Company nor any of its affiliates, nor any of such
persons' respective officers, directors, employees, representatives or
agents, shall, directly or indirectly (i) encourage, solicit, participate in
or initiate discussions or negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group (other than
Parent and Merger Sub, any affiliate or associate of Parent and Merger Sub
or any designees of Parent and Merger Sub) concerning any Transaction, or
(ii) authorize, propose or announce an intention to authorize or propose any
Transaction (other than the Merger), unless and until the Company has
received an Alternative Proposal in writing and the Company Board, by
majority vote, has determined in its good faith judgment, based as to legal
matters on the advice of legal counsel, that failing to take such action
would constitute a breach of the Company Board's fiduciary duty; PROVIDED,
HOWEVER, that nothing herein shall prevent the Company Board from taking,
and disclosing to the Company's stockholders, a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any
tender offers; PROVIDED, FURTHER, that the Company Board shall not recommend
that the stockholders of the Company tender their shares in connection with
any such tender offer unless the Company Board by a majority vote determines
in its good faith judgment, based as to legal matters on the advice of legal
counsel, that failing to take such action would constitute a breach of the
Company Board's fiduciary duty.
(d) Nothing in this Section 5.1 shall (i) permit the Company to
terminate this Agreement (except as specifically provided in Article 7
hereof), (ii) permit the Company to enter into any agreement with respect to
a Transaction during the term of this Agreement (it being agreed that during
the term of this Agreement, the Company shall not enter into any agreement
with any person that provides for, or in any way facilitates, a Transaction,
other than a confidentiality agreement in customary form), or (iii) affect
any other obligation of the Company under this Agreement.
<PAGE>
5.2. INTERIM OPERATIONS OF THE COMPANY.
(a) Prior to the Effective Time, except as set forth in Section 5.2 of
the Company Disclosure Schedule or as contemplated by any other provision of
this Agreement, unless Parent has consented in writing thereto, the Company:
(i) shall, and shall cause Company Subsidiary to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(ii) shall use its reasonable efforts to preserve intact its
business organizations and goodwill, keep available the services of its
officers and employees and maintain satisfactory relationships with those
persons having business relationships with them;
(iii) shall not amend its Certificate of Incorporation or Bylaws or
the charter documents of Company Subsidiary;
(iv) shall promptly notify Parent of (A) any material adverse change
in its condition (financial or otherwise), business, properties, assets,
liabilities or the normal course of its business or of its properties,
(B) any material litigation or, to the extent known to the Company, any
material governmental complaints, investigations or hearings against or
otherwise involving the Company or Company Subsidiary (or communications
indicating that the same may be contemplated), or (C) the breach of any
Company representation or warranty contained herein;
(v) shall promptly deliver to Parent true and correct copies of any
report, statement or schedule filed by the Company with the Commission
subsequent to the date of this Agreement;
(vi) shall not enter into or amend any employment, severance or
similar agreements or arrangements with any of its or Company
Subsidiary's directors or executive officers, except (A) in the ordinary
course of business consistent with past practice, or (B) as otherwise
provided in this Agreement;
(vii) shall not, and shall not permit Company Subsidiary to,
authorize, propose or announce an intention to authorize or propose, or
enter into negotiations or an agreement with respect to any acquisition
of assets or securities, any disposition of assets or securities or any
release or relinquishment of any contract rights, which acquisitions,
dispositions, releases or relinquishments would be outside the ordinary
course of business and would involve aggregate consideration in excess of
$500,000;
(viii) shall not issue any shares of capital stock or securities,
except upon exercise of Company Options outstanding as of the date
hereof, or effect any stock split or otherwise change its capitalization;
(ix) shall not grant, confer or award any options, appreciation
rights, warrants, conversion rights, restricted stock, stock units,
performance shares or other rights, not existing on the date hereof, with
respect to any shares of its capital stock or other securities of the
Company;
(x) shall not take any actions which would, or would be reasonably
likely to, prevent the Merger from qualifying as a reorganization within
the meaning of Section 368 of the Code;
(xi) shall not take any actions which would, or would be reasonably
likely to, prevent the Merger from qualifying as a transaction to be
accounted for as a pooling of interests in accordance with APB No. 16;
(xii) except as required by applicable law (in which case prompt
notice shall be given by the Company to Parent), shall not amend in any
material respect the terms of the Company Benefit Plans, including
without limitation any employment, severance or similar agreements or
arrangements in existence on the date hereof, or adopt any new employee
benefit plans, programs or arrangements or any employment, severance or
similar agreements or arrangements;
<PAGE>
(xiii) shall not incur, create, assume or otherwise become liable for
borrowed money or assume, guarantee, endorse or otherwise become
responsible or liable for the obligations of any other individual,
corporation or other entity, except in the ordinary course of business;
(xiv) shall not make any loans or advances to any other person,
except in the ordinary course of business;
(xv) shall not make any material tax election other than in the
ordinary course, or without the consent of Parent, which shall not
unreasonably be withheld, settle or compromise any material tax
liability;
(xvi) shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock or other ownership interests;
(xvii) shall not directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock, or make any commitment for any
such action; and
(xviii) shall not agree, in writing or otherwise, to take any of the
foregoing actions or take any action which would make any representation
or warranty in Article 3 hereof untrue or incorrect in any material
respect as of the Closing Date.
5.3. INTERIM OPERATIONS OF PARENT.
(a) Prior to the Effective Time, except as contemplated by another
provision of this Agreement, unless the Company has consented in writing
thereto, Parent:
(i) shall, and shall cause its Subsidiaries to, conduct their
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted; PROVIDED, HOWEVER,
that any Subsidiary of Parent shall be permitted, and Parent shall be
permitted to cause such Subsidiary, without the written consent of the
Company, to take actions outside the usual, regular and ordinary course
of such Subsidiary's business if such actions do not have a material
effect on the operations of Parent and its Subsidiaries, taken as a
whole;
(ii) shall use its reasonable efforts (A) to preserve intact the
business organizations and goodwill of Parent and its Subsidiaries, (B)
to keep available the services of Parent's officers and employees and
each of its Subsidiaries' officers and key employees and (C) to maintain
satisfactory relationships with those persons having business
relationships with them;
(iii) shall not, and shall not permit any of its Subsidiaries to,
amend their respective Certificates of Incorporation or Bylaws or
comparable charter documents (other than amendments to the charter
documents of any Subsidiary, which amendments are not material to Parent
or to the consummation of the transactions contemplated by this
Agreement);
(iv) shall promptly notify the Company of (A) any material change in
its condition (financial or otherwise), business, properties, assets,
liabilities or the normal course of its business or of its properties,
(B) any material litigation or, to the extent known to Parent, material
governmental complaints, investigations or hearings against or otherwise
involving Parent or any of its Subsidiaries (or communications indicating
that the same may be contemplated), or (C) the breach by Parent or Merger
Sub of any of its representations or warranties contained herein;
(v) shall promptly deliver to the Company true and correct copies of
any report, statement or schedule filed by Parent with the Commission
subsequent to the date of this Agreement;
(vi) shall not, and shall not permit any of its Subsidiaries to,
authorize, propose or announce an intention to authorize or propose, or
enter into negotiations or an agreement with respect to any acquisition
of assets or securities, any disposition of assets or securities or any
release or
<PAGE>
relinquishment of any contract rights, which acquisitions, dispositions,
releases or relinquishments would be outside the ordinary course of
business and would involve aggregate consideration in excess of
$2,500,000;
(vii) shall not issue any shares of capital stock or securities,
except upon exercise of Parent Options outstanding as of the date hereof;
(viii) except in the ordinary course or business, shall not grant,
confer or award any options, appreciation rights, warrants, conversion
rights, restricted stock, stock units, performance shares or other
rights, not existing on the date hereof, with respect to any shares of
its capital stock or other securities of Parent;
(ix) shall not, and shall not permit any of its Subsidiaries
(including without limitation Merger Sub) to, take any actions which
would, or would be reasonably likely to, prevent the Merger from
qualifying as a reorganization within the meaning of section 368 of the
Code;
(x) shall not, and shall not permit any of its Subsidiaries
(including without limitation Merger Sub) to, take any actions which
would, or would be reasonably likely to, prevent the Merger from
qualifying as a transaction to be accounted for as a pooling of interests
in accordance with APB No. 16;
(xi) shall not incur, create, assume or otherwise become liable for
borrowed money or assume, guarantee, endorse or otherwise become
responsible or liable for the obligations of any other individual,
corporation or other entity, except in the ordinary course of business;
(xii) shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock;
(xiii) shall not directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock or make any commitment for any
such action; and
(xiv) shall not, and shall not permit any of its Subsidiaries to,
agree, in writing or otherwise, to take any of the foregoing actions or
take any action which would make any representation or warranty in
Article 4 hereof untrue or incorrect in any material respect as of the
Closing Date.
5.4. MEETING OF STOCKHOLDERS. The Company will take all action necessary
in accordance with applicable law and its Certificate of Incorporation and
Bylaws to convene a meeting of its stockholders (the "STOCKHOLDERS' MEETING") as
promptly as practicable to consider and vote upon the approval of this Agreement
and the transactions contemplated hereby. The Board of Directors of the Company
shall recommend such approval, and the Company shall take all lawful action to
solicit such approval, including, without limitation, timely mailing the Proxy
Statement/Prospectus (as defined in Section 5.9); PROVIDED, HOWEVER, that such
recommendation or solicitation shall not be required if and to the extent that
the Company Board determines, after the date hereof, and upon the advice of
outside counsel, that the making of such recommendation or solicitation would
involve a breach of its fiduciary duties to its stockholders imposed by law.
5.5. FILINGS; OTHER ACTIONS. Subject to the terms and conditions herein
provided, the Company and Parent shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
with respect to the Merger; (b) use all reasonable efforts to cooperate with one
another in (i) determining which other filings are required to be made prior to
the Effective Time with, and which other consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several states
and foreign jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and (ii)
timely making all such filings and timely seeking all such consents, approvals,
permits or authorizations; and (c) use all reasonable efforts to take, or cause
to
<PAGE>
be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement.
5.6. HSR ACT.
(a) The parties shall take all actions reasonably necessary or
appropriate to cause the prompt expiration or termination of any applicable
waiting period under the HSR Act in respect of the Merger, including without
limitation complying as promptly as practicable with any requests by the
Federal Trade Commission or Department of Justice for additional
information.
(b) In furtherance and not in limitation of the covenants in Sections
5.5 and 5.6(a), the parties shall use their reasonable best efforts to
resolve any objections that may be asserted under any Antitrust Law (as
defined in paragraph (d) of this Section 5.6) with respect to the Merger or
any other transactions contemplated by this Agreement, except that neither
Parent nor the Company nor any of its respective Subsidiaries shall be
required, by this paragraph (b) or otherwise, to sell, hold separate or
divest any of its (or any its Subsidiaries' or affiliates) businesses,
product lines, assets or properties (or to agree or commit to take any such
action) in order to resolve any such objections. If any administrative,
judicial or legislative action or proceeding is instituted (or threatened to
be instituted) challenging the Merger or any other transactions contemplated
hereby as violative of any Antitrust Law, the parties shall cooperate and
use their best efforts vigorously to contest and resist any such action or
proceeding, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and that restricts, prevents or prohibits
consummation of the Merger or any other transaction contemplated by this
Agreement, including without limitation by vigorously pursuing all available
avenues of administrative and judicial appeal and legislative action.
(c) Each of the Company, Parent and Merger Sub shall promptly inform the
other parties of any material communication received by such party from the
Federal Trade Commission, the Antitrust Division of the Department of
Justice or any other governmental or regulatory authority regarding any of
the transactions contemplated hereby. Parent and Merger Sub will advise the
Company promptly in respect of any understandings, undertakings or
agreements which Parent or Merger Sub propose to make or enter into with the
Federal Trade Commission, the Antitrust Division of the Department of
Justice or any other governmental or regulatory authority regarding any of
the transactions contemplated hereby.
(d) "ANTITRUST LAW" means the Sherman Act, as amended, the Clayton Act,
as amended, the HSR Act, the Federal Trade Commission Act, as amended, and
all other federal, state and foreign statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines and other laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade.
5.7. INSPECTION OF RECORDS. From the date hereof to the Effective Time,
each of the Company and Parent shall (a) allow all designated officers,
attorneys, accountants and other representatives of the other party reasonable
access at all reasonable times to its respective offices, records and files,
correspondence, audits and properties, as well as to all information relating to
its respective commitments, contracts, titles and financial position, or
otherwise pertaining to its respective business and affairs, (b) furnish to the
other party and the other party's counsel, financial advisors, auditors and
other authorized representatives such financial and operating data and other
information as such persons may reasonably request and (c) instruct its
respective employees, counsel and financial advisors to cooperate with the other
party in the other party's investigation of its respective business.
5.8. PUBLICITY. The initial press release relating to this Agreement shall
be a joint press release and thereafter the Company and Parent shall, subject to
their respective legal obligations (including requirements of stock exchanges
and similar self regulatory bodies), consult with each other, and use reasonable
efforts to agree upon the text of any press release, before issuing any such
press release or otherwise
<PAGE>
making public statements with respect to the transactions contemplated hereby
and in making any filings with any federal or state governmental or regulatory
agency or with any national securities exchange with respect thereto.
5.9. PROXY STATEMENT/PROSPECTUS.
(a) Parent and the Company shall cooperate and promptly prepare and
Parent shall file with the Commission as soon as practicable a Registration
Statement on Form S-4 under the Securities Act (the "REGISTRATION
STATEMENT"), with respect to the Parent Common Stock issuable in the Merger,
which Registration Statement shall contain the proxy statement with respect
to the meeting of the stockholders of the Company in connection with the
Merger (the "PROXY STATEMENT/PROSPECTUS"). Notwithstanding the foregoing,
the Company and Parent may elect to file the Proxy Statement/ Prospectus
pursuant to Section 14 of the Exchange Act on a confidential basis and to
receive, respond to and clear all Commission comments thereon, prior to
filing the Registration Statement.
(b) The parties will cause the Proxy Statement/Prospectus, and Parent
will cause the Registration Statement, to comply as to form in all material
respects with the applicable provisions of the Securities Act, the Exchange
Act and the rules and regulations thereunder. Parent shall use all
reasonable efforts, and the Company shall cooperate with Parent, (i) to have
the Registration Statement declared effective by the Commission as promptly
as practicable, and (ii) to obtain timely any and all necessary state
securities or "blue sky" permits or approvals required to carry out the
transactions contemplated by this Agreement.
(c) The information supplied by the Company for inclusion or
incorporation by reference in the Proxy Statement/Prospectus and the
Registration Statement shall not (i) at the time the Registration Statement
is declared effective, (ii) at the time the Proxy Statement/Prospectus (or
any amendment thereof or supplement thereto) is first mailed to holders of
Company Common Stock, (iii) at the time of the Stockholders' Meeting, and
(iv) at the Effective Time, 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, in the light of the circumstances under
which they are made, not misleading.
(d) The information supplied by Parent for inclusion or incorporation by
reference in the Proxy Statement/Prospectus and the Registration Statement
shall not (i) at the time the Registration Statement is declared effective,
(ii) at the time the Proxy Statement/Prospectus (or any amendment thereof or
supplement thereto) is first mailed to holders of Company Common Stock,
(iii) at the time of the Stockholders' Meeting, and (iv) at the Effective
Time, 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, in the light of the circumstances under which they are
made, not misleading.
(e) No amendment or supplement to the Proxy Statement/Prospectus will be
made by the Company or Parent without the approval of the other. Parent will
advise the Company, promptly after it receives notice thereof, of the time
when the Registration Statement has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of
the qualification of the Parent Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the
Commission for amendment of the Proxy Statement/ Prospectus or the
Registration Statement or comments thereon and responses thereto or requests
by the Commission for additional information.
5.10. LISTING APPLICATION. Parent shall promptly prepare and submit to the
Nasdaq National Market a listing application covering the shares of Parent
Common Stock issuable in the Merger, and shall use its best efforts to obtain,
prior to the Effective Time, approval for the listing of such Parent Common
Stock, subject to official notice of issuance.
5.11. AFFILIATE LETTERS. At least 30 days prior to the Closing Date, the
Company shall deliver to Parent a list of names and addresses of those persons
who were, in the Company's reasonable judgment, as
<PAGE>
of the record date for the Stockholders' Meeting, "affiliates" of the Company
within the meaning of Rule 145 of the rules and regulations promulgated under
the Securities Act (each such person, an "AFFILIATE"). The Company shall provide
Parent such information and documents as Parent shall reasonably request for
purposes of reviewing such list. The Company shall use all reasonable efforts to
deliver or cause to be delivered to Parent, prior to the Closing Date, from each
of the Affiliates of the Company identified in the foregoing list, an affiliate
letter in form and substance reasonably acceptable to the Company and Parent
(collectively, "AFFILIATE LETTERS"). Parent shall be entitled to place legends
as specified in such Affiliate Letters on the certificates evidencing any Parent
Common Stock to be received by such Affiliates pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the Parent Common Stock, consistent with the terms of such Affiliate
Letters.
5.12. EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except as
expressly provided herein and except that the filing fee in connection with the
filing of the Registration Statement or Proxy Statement/Prospectus with the
Commission and the expenses incurred in connection with printing and mailing the
Registration Statement and the Proxy Statement/Prospectus shall be shared
equally by the Company and Parent.
5.13. EMPLOYEE BENEFITS.
(a) For a period of two years following the Effective Time, Parent shall
provide to persons who are employees of the Company at the Effective Time
(the "COMPANY PERSONNEL") employee compensation and benefit plans, programs
and arrangements which collectively for the Company Personnel, as a whole,
are in the aggregate substantially comparable to the employee compensation
and benefit plans, programs and arrangements generally provided to the
employees of the Company immediately prior to the Effective Time; PROVIDED,
HOWEVER, that subject to the foregoing, Parent shall not be precluded from
amending or terminating any particular plan, program or arrangement, or from
substituting any such plans, programs or arrangements with plans, programs
or arrangements applicable and available to other employees of Parent and
its Subsidiaries.
(b) Following the Effective Time, Parent shall cause the benefit plans
covering the Company Personnel following the Effective Time (the "BENEFIT
PLANS") to continue to recognize the service credit of the Company Personnel
accrued as of the Effective Time under the Company Benefit Plans for
purposes of participation, eligibility and vesting of benefits, to the
extent permissible by the terms of such Benefit Plans.
(c) In the event of any change in coverage that applies generally to the
Company Personnel during the two-year period following the Effective Time
under any Benefit Plan that provides medical or health benefits, Parent
shall (i) cause such Benefit Plan to recognize credit toward satisfying
deductible expense requirements, out-of-pocket expense limits and maximum
lifetime benefit limits of such Company Personnel or their eligible
dependents, (ii) waive any pre-existing condition, exclusion or limitation,
as and to the extent any such matter would previously have been recognized
or waived (as the case may be) under the applicable Company Benefit Plan,
and (iii) waive any waiting period or minimum service requirements.
5.14. AGREEMENTS. Between the date hereof and the Closing Date, neither
Parent nor the Company shall enter into any agreement which Parent or the
Company, as the case may be, knows or has reason to know is reasonably likely to
cause any major customer of Parent or the Company (or their respective
subsidiaries) to terminate any material contracts, agreements or other
obligations that exist between that customer on the one hand, and Parent, the
Company (or Parent and the Company following the Merger) or any subsidiary of
either, on the other hand and Parent and the Company shall take all reasonable
action appropriate to an effort to avoid such termination.
5.15. TAKEOVER STATUTE. If any "fair price," "moratorium," "control share
acquisition" or other form of anti-takeover statute or regulation shall become
applicable to the transactions contemplated hereby, the
<PAGE>
Company and the Company Board shall grant such approvals and take such actions
as are reasonably necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
on the transactions contemplated hereby; PROVIDED, HOWEVER, that the Company and
the Company Board shall not be required to grant such approvals or take such
actions if the Company Board, by majority vote, determines in its good faith
judgment, based as to legal matters on the advice of legal counsel, that
granting such approvals or taking such actions would constitute a breach of the
Company's Board's fiduciary duties.
5.16. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) The Certificate of Incorporation and By-laws of the Surviving
Corporation shall contain the respective provisions that are set forth, as
of the date of this Agreement, in the Certificate of Incorporation and the
By-laws of the Company dealing with indemnification of officers and
directors of the Company, Company Personnel and other persons specified
therein, including without limitation Article VII of the Bylaws of the
Company (collectively, the "INDEMNIFICATION PROVISIONS"), which provisions
shall not be amended, repealed or otherwise modified for a period of six
years from the Effective Time in any manner that would affect adversely the
rights thereunder with respect to actions or events occurring prior to the
Effective Time of individuals who were entitled to such indemnification
prior to the Effective Time.
(b) The Surviving Corporation shall maintain in effect for at least six
years from the Effective Time directors' and officers' liability insurance
with an insurance company rated at least "A" by A.M. Best Company, covering
the persons who, as of the date of this Agreement, are covered by the
Company's directors' and officers' liability insurance policy (the "CURRENT
POLICY"). The coverage provided by the directors' and officers' liability
insurance maintained by the Surviving Corporation shall be substantially
similar to the coverage provided by the Current Policy.
(c) Parent shall guarantee the obligations of the Surviving Corporation
provided by this Section 5.16.
(d) This Section 5.16 shall survive the consummation of the Merger, is
intended to benefit the Company, the Surviving Corporation and each
indemnified party, and shall be enforceable by the indemnified parties.
5.17 BOARD OF DIRECTORS OF PARENT. Parent shall cause each of Gerald M.
Starek and Arthur Zafiropoulo to be appointed to the Board of Directors of
Parent as of the Effective Time, provided such person agrees to so serve, until
the next meeting of the stockholders of Parent at which directors are to be
elected, and until such person's successor has been elected and qualified.
ARTICLE 6
CONDITIONS TO CLOSING
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved by the requisite vote of the holders of the issued and
outstanding shares of capital stock of the Company.
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(c) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction in the United States which
prohibits the consummation of the transactions
<PAGE>
contemplated by this Agreement. In the event any such order or injunction
shall have been issued, each party agrees to use its best efforts to have
any such injunction lifted.
(d) The Registration Statement shall have become effective and shall be
effective at the Effective Time, and no stop order suspending effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the Commission to suspend the effectiveness
thereof shall have been initiated and be continuing, and all material
approvals under state securities laws relating to the issuance or trading of
the Parent Common Stock to be issued to the Company stockholders in
connection with the Merger shall have been received.
(e) The Parent Common Stock to be issued to the Company stockholders in
connection with the Merger shall have been approved for listing on the
Nasdaq National Market, subject only to official notice of issuance.
(f) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory
body required in connection with the execution, delivery and performance of
this Agreement (including without limitation ISRA) shall have been obtained
or made, except for filings in connection with the Merger and any other
documents required to be filed after the Effective Time and except where the
failure to have obtained or made any such consent, authorization, order,
approval, filing or registration would not have a material adverse effect on
the business of Parent (and its Subsidiaries) and the Company, taken as a
whole, following the Effective Time.
6.2. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) Parent shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the
Closing Date, the representations and warranties of Parent and Merger Sub
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct in all material respects as of the
Closing Date, except that those representations and warranties which address
matters only as of a particular date shall have been true and correct as of
such date, and the Company shall have received a certificate of the
President or a Senior Vice President of Parent, dated the Closing Date,
certifying to such effect.
(b) The Company shall have received, prior to the effective date of the
Registration Statement, the opinion of Dewey Ballantine LLP, counsel to the
Company, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization within the meaning of section 368(a) of the
Code, and that the Company, Parent and Merger Sub each will be a party to
that reorganization within the meaning of section 368(b) of the Code, and
such firm shall have reconfirmed such opinion as of the Closing Date. In
rendering such opinion, Dewey Ballantine LLP may require and rely upon such
certificates of the Company, Parent and Merger Sub and/or their respective
officers or principal stockholders as are customary for such opinions.
(c) The Company shall have received a letter of KPMG Peat Marwick LLP,
its independent public accountants, dated as of the Closing Date, in form
and substance reasonably satisfactory to the Company, stating that such
accountants concur with management's conclusion that the Merger will qualify
as a transaction to be accounted for in accordance with the pooling of
interests method of accounting under the requirements of APB No. 16.
(d) From the date of this Agreement through the Effective Time, there
shall not have occurred a Parent Material Adverse Effect.
<PAGE>
6.3 CONDITIONS TO OBLIGATION OF PARENT AND MERGER SUB TO EFFECT THE
MERGER. The obligations of Parent and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date, the representations and warranties of the Company
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct in all material respects as of the
Closing Date, except that those representations and warranties which address
matters only as of a particular date shall have been true and correct as of
such date, and Parent shall have received a certificate of the President or
a Senior Vice President of the Company, dated the Closing Date, certifying
to such effect.
(b) Parent shall have received, prior to the effective date of the
Registration Statement, the opinion of Thelen, Marrin, Johnson & Bridges LLP
(or its successor), counsel to Parent, to the effect that the Merger will be
treated for Federal income tax purposes as a reorganization within the
meaning of section 368(a) of the Code, and that the Company, Parent and
Merger Sub each will be a party to that reorganization within the meaning of
section 368(b) of the Code, and such firm shall have reconfirmed such
opinion as of the Closing Date. In rendering such opinion, Thelen, Marrin,
Johnson & Bridges LLP (or its successor) may require and rely upon such
certificates of the Company, Parent and Merger Sub and/or their officers or
principal stockholders as are customary for such opinions.
(c) Parent shall have received a letter of Arthur Andersen LLC, its
independent public accountants, dated as of the Closing Date, in form and
substance reasonably satisfactory to Parent, stating that such accountants
concur with management's conclusion that the Merger will qualify as a
transaction to be accounted for in accordance with the pooling of interests
method of accounting under the requirements of APB No. 16.
(d) The employment agreement, dated as of even date herewith, between
the Surviving Corporation and Joseph Stach, shall not have been terminated
prior to the Effective Time.
(e) From the date of this Agreement through the Effective Time, there
shall not have occurred a Company Material Adverse Effect.
ARTICLE 7
TERMINATION
7.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of the Company, by the
mutual consent of Parent and the Company.
7.2. TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Parent or the Company if (a) the Merger shall not have been
consummated by December 31, 1998, or (b) the approval of the Company's
stockholders required by Section 6.1(a) shall not have been obtained at the
Stockholders' Meeting or any adjournment thereof, or (c) a United States federal
or state court of competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable; PROVIDED, that the party seeking to terminate this
Agreement pursuant to this paragraph (c) shall have used all reasonable efforts
to remove such injunction, order or decree; and PROVIDED, in the case of a
termination pursuant to paragraph (a) of this Section 7.3, that the terminating
party shall not have breached in any material respect its obligations under this
Agreement in
<PAGE>
any manner that shall have proximately contributed to the failure to consummate
the Merger by December 31, 1998.
7.3. TERMINATION BY THE COMPANY. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption and approval by the stockholders of the Company referred to in
paragraph (a) of Section 6.1, by action of the Company Board, if (a) the Company
Board, by majority vote, determines in its good faith judgment, based as to
legal matters on the advice of legal counsel, that terminating this Agreement
and abandoning the Merger is required by the Company Board's fiduciary duties,
or (b) there has been a breach by Parent or Merger Sub of any representation or
warranty contained in this Agreement that has had or is reasonably likely to
have a Parent Material Adverse Effect, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by the Company to Parent, or (c) there has been a material breach of any
of the covenants or agreements set forth in this Agreement on the part of
Parent, which breach is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by the Company to Parent.
Notwithstanding the foregoing, the Company's ability to terminate this Agreement
pursuant to Section 7.2 or this Section 7.3 is conditioned upon the prior
payment by the Company of the Termination Fee (defined in Section 7.5), if
Section 7.5 so requires.
7.4. TERMINATION BY PARENT. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, by action of
the Board of Directors of Parent, if (a) the Company Board shall have (i)
withdrawn or modified in a manner materially adverse to Parent its approval or
recommendation of this Agreement or the Merger or (ii) recommended an
Alternative Proposal to the Company stockholders, or (b) there has been a breach
by the Company of any representation or warranty contained in this Agreement
that has had or is reasonably likely to have a Company Material Adverse Effect,
which breach is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by Parent to the Company, or (c) there
has been a material breach of any of the covenants or agreements set forth in
this Agreement on the part of the Company, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Parent to the Company.
7.5. EFFECT OF TERMINATION AND ABANDONMENT.
(a) If this Agreement is terminated by the Company or Parent pursuant to
Section 7.2(b), 7.3(a) or 7.4(a), and (x) prior to such termination, a
proposal with respect to a Transaction shall have been made, and (y) within
six (6) months after such termination, either the Company enters into any
agreement with respect to a Transaction, or any third party shall acquire
beneficial ownership of 50.1% or more of the Company's outstanding shares of
voting stock, then the Company shall pay Parent, by wire transfer of
immediately available funds, a fee (the "TERMINATION FEE") of Two Million
Dollars ($2,000,000) within two (2) business days after the execution of
such agreement or the consummation of such acquisition (whichever shall
first occur).
(b) The Company acknowledges that the agreements contained in this
Section 7.5 are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, Parent and Merger Sub would
not enter into this Agreement; accordingly, if the Company fails to promptly
pay the Termination Fee when due and, in order to obtain such payment,
Parent or Merger Sub commences a suit which results in a judgment against
the Company, the Company shall reimburse Parent for its costs and expenses
(including reasonable attorneys' fees) incurred in connection with such
suit, together with interest on the amount of the Termination Fee at the
prime rate, as then quoted in THE WALL STREET JOURNAL, from the date the
Termination Fee was required to be paid.
(c) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article 7, all obligations of the parties hereto
shall terminate, except (i) the obligations of the parties set forth in this
Section 7.5 and Section 5.12, (ii) the provisions of Sections 8.3, 8.6, 8.9
and 8.13, and (iii) the Confidentiality Agreement previously executed
between the Company and Parent (the "CONFIDENTIALITY AGREEMENT"). Moreover,
in the event of termination of this Agreement pursuant
<PAGE>
to Section 7.3 or 7.4, nothing herein shall prejudice the ability of the
nonbreaching party from seeking damages, after taking into account payment
of the Termination Fee, if such fee has been paid, from any other party for
any willful breach of this Agreement, including without limitation,
attorneys' fees and the right to pursue any remedy at law or in equity.
7.6. EXTENSION; WAIVER. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE 8
GENERAL PROVISIONS
8.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants in this Agreement or in any instrument
delivered pursuant to this Agreement shall not survive the Merger; PROVIDED,
HOWEVER, that the covenants contained in Article 2, the last sentence of Section
5.11, Section 5.12, Section 5.13, Section 5.16 and Section 5.17, and this
Article 8 shall survive the Merger, but not beyond the extent, if any, specified
therein.
8.2. NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
If to Parent or Merger Sub:
Advanced Energy Industries, Inc.
1625 Sharp Point Drive
Fort Collins, CO 80525
Attn.: Chief Executive Officer
Facsimile: 970-407-5300
with copies to:
Thelen, Marrin, Johnson & Bridges LLP
333 West San Carlos Street, 17th Floor
San Jose, CA 95110-2701
Attn.: Jay L. Margulies, Esq.
Facsimile: 408 287-8040
If to the Company:
RF Power Products, Inc.
1007 Laurel Oak Road
Voorhees, NJ 08043
Attn.: Chief Executive Officer
Facsimile:
<PAGE>
with copies to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019-6092
Attn.: Jonathan L. Freedman, Esq.
Facsimile:
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
8.3. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Section 5.13, 5.16 and 5.17, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
8.4. ENTIRE AGREEMENT. This Agreement, the Exhibits, the Company
Disclosure Schedule, the Parent Disclosure Schedule, the Confidentiality
Agreement and any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
8.5. AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of the Merger by the stockholders of the Company, but after any
such stockholder approval, no amendment shall be made which by law requires the
further approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
8.6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey without regard to its rules
of conflict of laws.
8.7. COUNTERPARTS. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
8.8. HEADINGS. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
8.9. INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations, partnerships and other
business entities and vice versa.
8.10. WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
<PAGE>
8.11. INCORPORATION OF EXHIBITS. The Company Disclosure Schedule, the
Parent Disclosure Schedule and all Exhibits attached hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
8.12. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.13. ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any Delaware Court, this being in addition to
any other remedy to which they are entitled at law or in equity.
8.14. CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized words shall have the meanings given to them in this Section 8.14,
except where the context otherwise requires:
(a) "COMPANY MATERIAL ADVERSE EFFECT" means a material adverse effect on
or change in the business, results of operations or financial condition of
the Company and Company Subsidiary, taken as a whole, other than any effects
or changes arising out of, resulting from or relating to (i) general
economic, financial or industry conditions, or (ii) a reduction in or
cancellation of customer orders or contracts other than a Material
Cancellation (as defined in paragraph (c) of this Section 8.14).
(b) "PARENT MATERIAL ADVERSE EFFECT" means a material adverse effect on
or change in the business, results of operations or financial condition of
Parent and its Subsidiaries, taken as a whole, other than any effects or
changes arising out of, resulting from or relating to (i) general economic,
financial or industry conditions, or (ii) a reduction in or cancellation of
customer orders or contracts other than a Material Cancellation.
(c) "MATERIAL CANCELLATION" means a reduction in or cancellation of
orders or contracts by a customer of the Company or Parent, as the case may
be, that results from: (i) the relevant company's products being designed
out of one or more of such customer's products, systems or platforms; (ii) a
dispute between the relevant company and such customer; (iii) discovery of a
defect in the relevant company's products that were being supplied to or
ordered by such customer; (iv) determination by a customer that the relevant
company's products are not of a quality adequate for use in such customer's
products, systems or platforms; (v) the relevant company's failure otherwise
to perform to the satisfaction of such customer and/or (v) any substantially
similar event or circumstance.
(d) "SUBSIDIARY" of a party means any corporation or other organization,
whether incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the board of directors or others performing similar functions with respect
to such corporation or other organization, or any organization of which such
party is a general partner.
(e) "SIGNIFICANT SUBSIDIARIES" of a party means Subsidiaries of such
party which constitute "significant subsidiaries" under Rule 405 promulgated
by the Commission under the Securities Act.
8.15 KNOWLEDGE. For purposes of this Agreement, (a) "to the knowledge of
the Company" or words of like import shall mean to the knowledge of Joseph
Stach, Paul Zaun or Kevin Wilson, and (b) "to the knowledge of Parent" or words
of like import shall mean to the knowledge of Douglas Schatz, Hollis Caswell or
Richard Beck.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year set forth in the
Preamble hereto.
<TABLE>
<CAPTION>
COMPANY: RF Power Products, Inc.
<S> <C>
By: /s/ Joseph Stach
-------------------------------------------
Name: Joseph Stach
----------------------------------------
Title: President, CEO & Chairman of the Board
-----------------------------------------
MERGER SUB: Warpspeed, Inc.
By: /s/ Douglas S. Schatz
-------------------------------------------
Name: Douglas S. Schatz
----------------------------------------
Title: President
----------------------------------------
PARENT: Advanced Energy Industries, Inc.
By: /s/ Douglas S. Schatz
-------------------------------------------
Name: Douglas S. Schatz
----------------------------------------
Title: President, CEO & Chairman of the Board
-----------------------------------------
</TABLE>
<PAGE>
THE MARK "[ * * * ]" IN THIS EXHIBIT 10.1 IS USED WHERE CONFIDENTIAL INFORMATION
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
Advanced Energy Comprehensive Supplier Agreement (CSA) # 965100
This Agreement dated MAY 18TH, 1998 is by and between Applied Materials,
Inc., ("Applied"), a Delaware corporation, having its place of business in Santa
Clara, California and Austin, Texas and ADVANCED ENERGY INDUSTRIES, INC., having
its place of business in FT. COLLINS, COLORADO.
The parties agree as follows:
1. SCOPE
1.2 INTENTION / DESCRIPTION OF COMPREHENSIVE SUPPLIER AGREEMENT PRINCIPLES
This Comprehensive Supplier Agreement ("CSA") serves as a tool to
manage the parts Applied purchases from Advanced Energy as well as
sub-assemblies Advanced Energy processes for Applied. Attachment 1
lists the part numbers covered by this agreement. Any updates to this
document will INCLUDE a current list of the part numbers covered by this
CSA.
The intention of this document is to guide the relationship between
Applied and Advanced Energy to ensure a consistent supply of material
that meets Applied's specifications and support Applied's Business
Objectives (e.g. HOSHINs). Decisions regarding future purchases from
Advanced Energy will be guided by their performance in this CSA, and
their achievement toward Applied's HOSHIN goals.
1.2 SUPPLIER DETAILS
Advanced Energy
1625 SHARP POINT DRIVE CHRIS FERGEN, BUSINESS UNIT DIRECTOR
FORT COLLINS, COLORADO, 80525 BRIAN CROWELL, AUSTIN SITE MANAGER
970-221-4670 MAIN LINE JIM GENTILCORE, VP SALES AND MARKETING
970-407-6655 MAIN FAX JIM PARKER, QUALITY ENGINEERING MANAGER
www.advanced-energy.com. FRED WEAVER, VP OF CUSTOMER SATISFACTION
1.3 ENTIRE AGREEMENT
This CSA, including the Standard Terms and Conditions (Exhibit 1), Hoshin Plan
(Exhibit 2) and any other Exhibits or Attachments which are incorporated by
reference into this CSA, together with any non-disclosure agreement sets forth
the entire understanding and agreement of the parties as to the subject matter
of this CSA and supersedes all prior agreements, understandings, negotiations
and discussions between the parties. No amendment to or modification of this
CSA will be binding unless in writing and signed by a duly authorized
representative of both parties. In the event of any conflict between the terms
of the CSA and the terms of the Exhibits and Attachments, the terms of the CSA
shall control.
1.3.1 Attachments and Exhibits
Attachments: Attachments cont.
1. Part Number Listing 10. Corrective Action Form
2. Applied Fiscal Year Calendar 11. Quality Data Form
3. Delivery Mechanics 12. Engineering Change Order
4. Rolling Forecast (ECO) Form
5. Bar Code Specifications 13. Supplier Problem Sheet
6. Packaging Specifications 14. Approved List of Secondary
7. Corporate Transportation Sup-pliers
Routing Guide 15. Supplier Performance Plan
8. Electronic Funds Transfer 16. Supplier World Wide Support
Process (in process) Cen-ter Listings
9. Non disclosure Agreement 17. Cycle Time sheets per part
Exhibits:
1. Standard Terms and Conditions
Advanced____Applied Materials____ 1 of 16
Date______
<PAGE>
2. Hoshin Plan
1.4 PART NUMBERS COVERED
In general, all part numbers supplied to Applied by Advanced Energy will
be covered by this agreement. The list of part numbers covered by this
CSA is shown in Attachment 1. New part numbers may be added to
Attachment 1 upon mutual agreement between Applied and Advanced Energy.
Part numbers may be removed from Attachment 1 by Applied from time to
time for legitimate reasons, including, but not limited to:
a. Specification changes the supplier is unable to comply with
b. Quality or delivery default
c. Obsolete parts due to replacement of the part (as opposed to
declining demand)
d. Outsourcing of the parent assembly
1.5 DURATION OF AGREEMENT
The effectivity date of this Service Agreement will be the later of two
signatures dated in Section 9 and will remain in effect through MAY 18TH, 2001
(the "Initial Term"). Upon conclusion or termination of the Initial Term,
Applied, at Applied's option, may extend this Agreement for at least an
additional 6 months subject to all terms and conditions of this Agreement.
1.6 RESPONSIBILITIES
1.6.1 Applied Responsibilities
Applied responsibilities for supporting this agreement include but are not
limited to:
- Providing demand signals to the supplier as defined in section 2.5.1
- Providing updated twenty-six week rolling forecasts to the supplier
- Measuring inventory levels and scoring compliance to days-of-supply
metric
- Receiving and inspecting parts from the supplier and measuring quality
for quality metric
- Notifying the supplier in timely manner of any discrepancies
- Working with the supplier to improve operation of this agreement
- Working with the supplier to reduce costs and improve quality of parts
purchased from the supplier
- Responding in a timely manner to any of the supplier's inquiries
- Working with the supplier to resolve any exceptions that may arise
- Working with the supplier in writing and recording action plans to
resolve exceptions
- Providing the supplier with supplier performance reports
1.6.2 Advanced Energy Responsibilities
Advanced Energy responsibilities for supporting this agreement include but
are not limited to:
- Producing high quality and highly reliable parts
- Delivering parts on time to Applied
- Responding in a timely manner to any of Applied's inquiries and
requests
- Continuously improving the supplier's operations to better serve
Applied's needs and support the Applied's HOSHIN goals
- Working with Applied to improve operation of this agreement
- Working with Applied to reduce costs and improve the quality for all
parts
the supplier produces for the Applied
- Routinely reviewing the updated twelve month forecasts to adjust the
supplier's operation for changes in Applied's plans
- Working with Applied to resolve any exceptions that may arise
- Completing any tasks assigned to resolve exceptions on time
- Meeting with Applied at a minimum of every six (6) months to review
performance
- Tracking and reporting Quality (Internal and External), Reliability and
Delivery Performance
Advanced____Applied Materials____ 2 of 16
Date______
<PAGE>
- Monitor and report to Applied, inventory levels of those finished good
parts that Applied might have liability under section 2.2.1.
2. LOGISTICS FRAMEWORK
2.1 OPERATION OF CSA
2.1.1 Operating calendar & holidays
This CSA operates by the Applied fiscal year calendar, shown in
Attachment 2. Recognized holidays are those holidays shown on the
Applied fiscal year calendar. Should any discrepancies between the
operating calendars of Applied and Advanced Energy arise, Advanced
Energy must make provisions so that Applied's operations are
unaffected.
2.1.2 Flowchart of day to day operations
(Reserved)
2.1.3 Forecasts
Advanced Energy's production of parts will be GUIDED by Applied's
most recent 12 WEEK rolling forecast, as provided by Applied to
Advanced Energy on a weekly basis ("Applied's Forecast") via EDI
transaction ID. Advanced Energy will plan, manufacture, and stock
inventory to meet Applied's forecast. Advanced Energy will keep each
of Applied's forecasts for audit purposes for a minimum of six (6)
months and may be asked to present this document for verification of
authorized inventory levels. Applied's forecast is Proprietary
Information to be used only by Advanced Energy to meet its obligations
to Applied under this Agreement.
2.1.4 Releases
Applied may require a part or parts on an accelerated basis, either in
addition to or in place of parts forecast for release or scheduled for
delivery at a later date. If feasible, as determined by Applied and
Advanced Energy, such parts will be provided by Advanced Energy to
meet Applied's requirements. Unless otherwise agreed to by Applied,
such accelerated deliveries will not affect the delivery schedule of
any parts currently allocated for forecast requirements. Lead times
for each accelerated release will be agreed upon by both parties.
2.1.5 Delivery Guidelines
2.1.5.1 General Delivery
Advanced Energy will exercise all efforts to meet Applied's
material requirements on time. Shipments to Applied by Advanced
Energy will be also in the right quantities ordered by Applied.
For Spot Buy purchases for production, deliveries will be
accepted on the requested date or up to 3 days before the
requested date. For Spot Buy purchases for spares, deliveries
will be accepted on the requested date or up to 2 days before
the requested date.
2.1.6 Replenishment Approach
Advanced Energy will be expected to supply parts using one or more of
the following replenishment approaches:
- Bus Route: Point of use delivery where specified.
- Kanban Replenishment Bins/Line Side Stocking
- Spot Buy
Advanced____Applied Materials____ 3 of 16
Date______
<PAGE>
The replenishment methodology to be used for a particular parts are
defined on Attachment 1. Specific delivery mechanics are outlined
on Attachment 3.
2.1.7 Electronic Commerce
Advanced Energy is required to communicate with Applied using EDI
ANSI X.12 standards and encouraged to use either GEIS or EDICT
software.
2.1.8 Changes to Logistics
Applied may on occasion change any aspect of any logistics
requirement. Applied will expect Advanced Energy to accommodate
these changes to the best of its ability. Advanced Energy will be
given at least three weeks notification prior to the change being
implemented. Applied will then consider all claims for adjustment in
the logistics framework if made within the three week notification
period in accordance with the AMAT standard terms and conditions.
Logistics refers to delivery, transportation and EDI requirements.
2.2 SERVICE LEVELS
2.2.1 Inventory Levels
Advanced Energy, if involved in supporting lean manufacturing, is
expected to hold inventory of the parts on Attachment 1 in order to
manage demand fluctuations. Advanced Energy will maintain a
minimum of [ * * * ] weeks and a maximum of [ * * * ] weeks of each
part for Applied's needs based on the most recent rolling forecast
(see Attachment 4). Advanced Energy may present a claim for
adjustment for payment of inventory manufactured in response to a
valid Applied purchase order, or an authorized demand signal, as
explained in Section 2.5.1. if Applied has not taken delivery of
the inventory within [ * * * ] from date of manufacture. This
claim must be made within thirty (30) days from the end of the
[ * * * ] time-frame. Applied is not responsible for payment to
Advanced Energy for inventory built without a valid Applied
purchase order or an authorized demand signal, as explained in
Section 2.5.1. An inventory goal of 2 weeks is targeted for 1998
and 1 week for 1999, per the HOSHIN plan. The contract will be
officially amended following the procedure set forth in Section 7,
"Amendments and Modifications" of this CSA.
Applied will not hold any financial responsibility for "off-the-shelf"
parts.
2.2.1.1 WIP Tracking
Suppliers are expected to monitor, track, and report their WIP
inventory. In the future, Applied will implement regular
reporting mechanisms which Advanced Energy will be expected to
participate.
2.2.1.2 Excess and Obsolete (E&O) Parts
Applied will not be responsible for excess and obsolete parts
other than the amounts specified in section 2.2.1 above.
Applied encourages Advanced Energy to make it's best effort to
take back excess and obsolete inventory regardless of the
reason for its not being required by Applied.
2.2.2 Response Requirements
Responses to the following types of inquiries are expected within the
time periods in the tables below.
Advanced____Applied Materials____ 4 of 16
Date______
<PAGE>
2.2.2.1 Advanced Energy Response Time
- ------------------------------------------------------------------------------
Inquiry Type Advanced Energy Advanced Energy
Response Time Contact
- ------------------------------------------------------------------------------
LEAD-TIME [ * * * ] MASTER PLANNER
- ------------------------------------------------------------------------------
TECHNICAL [ * * * ] MANUFACTURING
ENGINEER
- ------------------------------------------------------------------------------
QUOTATIONS: NPI [ * * * ] CUSTOMER SERVICE
REPEAT ORDER [ * * * ] REPRESENTATIVE
- ------------------------------------------------------------------------------
QUALITY [ * * * ] QUALITY ENGINEER
- ------------------------------------------------------------------------------
PRICE/INVOICE [ * * * ] CUSTOMER SERVICE
REPRESENTATIVE
- ------------------------------------------------------------------------------
COMPONENT FAILURE & FIELD [ * * * ] QUALITY ENGINEER
SAFETY
- ------------------------------------------------------------------------------
PRODUCT PROBLEMS [ * * * ] ACCOUNT MANAGER
- ------------------------------------------------------------------------------
2.2.2.2 Applied Response Time
- ------------------------------------------------------------------------------
Inquiry Type Applied Response Time Applied Contact
- ------------------------------------------------------------------------------
LEAD-TIME [ * * * ] SUPPLIER ACCOUNT
TEAM
LEAD/MEMBER
- ------------------------------------------------------------------------------
TECHNICAL [ * * * ] SUPPLIER ACCOUNT
TEAM
LEAD/MEMBER
- ------------------------------------------------------------------------------
QUALITY [ * * * ] SUPPLIER ACCOUNT
TEAM
LEAD/MEMBER
- ------------------------------------------------------------------------------
PRICE/INVOICE [ * * * ] SUPPLIER ACCOUNT
TEAM
LEAD/MEMBER
- ------------------------------------------------------------------------------
2.2.3 Flexibility Requirements
Advanced Energy is expected to perform regular capacity planning
and to demonstrate upside/downside flexibility in case of volume
changes at Applied. For Bus Route parts, Advanced Energy will
support unplanned sustained increases/decreases in demand
above/below the forecast as defined below. For Spot Buy parts,
Advanced Energy allows the following increases/decreases to
Purchase Order quantities above/below the quantities originally
requested:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
WEEKS UNTIL
DELIVERY DATE < 1 WEEK < 4 WEEKS < 8 WEEKS < 12 WEEKS 12+ WEEKS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
FLEXIBILITY (BUSROUTE) +/- [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
- ----------------------------------------------------------------------------------------
FLEXIBILITY (SPOT BUY) +/- [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
- ----------------------------------------------------------------------------------------
</TABLE>
2.2.4 On-site support requirements
As determined by Applied, Advanced Energy may be asked to provide
logistics, quality engineering, and new product development support
on-site at Applied's facilities. At the appropriate juncture,
Applied will require Advanced Energy to complete the On-site
Representative Agreement and processing PRIOR to issuing a building
badge to Advanced Energy's representatives.
Advanced____Applied Materials____ 5 of 16
Date______
<PAGE>
2.2.5 Global Support
For the parts listed in Attachment 1, and all other parts that
Advanced Energy provides to Applied, Advanced Energy will provide
support globally for Applied and Applied's customers. Advanced Energy
support centers contact names and phone numbers are listed in
Attachment 16. Repair rates will be outlined in Attachment 1.
Technical assistance and product support services shall be provided
at no additional charge during normal business hours. Advanced
Energy must have an established and deployed global service
capability. The required support services must be available
globally, however, the Supplier may utilize a Supplier distributor,
or other qualified entity designated by Supplier to meet this
requirement. Advanced Energy is expected to use best efforts to
provide a resolution to requests for assistance within the elapsed
time objectives described in 2.2.2.
2.2.6 Turn-around time for Repairs
Advanced Energy will supply Applied with repair parts within,
[ * * * ] days for parts in warranty and [ * * * ] days for parts
out warranty, of Applied's request. [ * * * ] will have a [ * * * ]
day repair part turn around time for parts in and out of warranty.
2.3 INFORMATION
2.3.1 Applied Planning Systems
Advanced Energy may be given electronic access to Applied's planning
data. This access can be used to facilitate production and delivery
of parts to support Applied's requirements.
2.3.3 Applied New Product Plans
Advanced Energy will, on occasion and at Applied's discretion, be
invited to forums in which Applied's new product plans are shared.
2.4 PACKAGING AND TRANSPORTATION
2.4.1 Packaging and Shipment
Advanced Energy will have all parts packaged "fit for use" in
accordance with Applied's packaging specification (Attachment 6).
Advanced Energy will mark and identify every item in compliance with
Applied's part identification specifications and requirements
(reference Attachment 6).
THE WORD "FIT" WAS USED TO REPLACE THE WORK "READY", SINCE "READY"
WAS NOT REFERENCED IN ATTACHMENT 6; REFERENCE PAGE 3-4 OF 0250-00098,
REV. K, PACKAGING SPECIFICATION.
2.4.2 Bar Coding
All shipments should be bar coded to Applied's specifications
(Attachment 5).
2.4.3 Transportation Mode
Parts will be transported, FOB Destination, Freight Collect in
accordance with Attachment A of Applied's Corporate Transportation
Routing Guide which is provided in Attachment 7.
Advanced____Applied Materials____ 6 of 16
Date______
<PAGE>
2.5 PAYMENT
2.5.1 Demand Signal
BUS ROUTE
Applied sends via EDI transmission an order sheet to Advanced Energy
containing Applied's material requirements information. This
information is organized at the part-number level and represents
Applied's daily purchase from Advanced Energy. This EDI
transmission constitutes an authorized demand signal.
SPOT BUY
As needed, Applied sends via fax an order sheet to Advanced Energy
containing Applied's material requirements information. This
information is organized at the part-number level and represents an
Applied purchase from Advanced Energy. This fax constitutes an
authorized demand signal.
2.5.2 Invoices
Invoices shall contain the following information: purchase order
number, line item number, Applied part number, description of
goods, sizes, quantities, unit prices, and extended totals in
addition to any other information requested. Applied's payment of
invoice does not represent unconditional acceptance of items and
will be subject to adjustment for errors, shortages, or defects.
Applied may at any time set off any amount owed by Applied to
Advanced Energy against any amount owed by Advanced Energy or any
of its affiliated companies to Applied.
All invoices must be sent directly to Accounts Payable in Austin:
Accounts Payable
Applied Materials
9700 US Highway 290 East M/S 4200
Austin, TX 78724-1199
2.5.3 Cash Discounts
Payment will be made [ * * * ] days from receipt of:
a. invoice, in form and substance acceptable to Applied, or
b. delivery and acceptance of the invoiced Item(s), whichever
is later.
2.6 DISASTER RECOVERY PLAN
Advanced Energy is expected to provide evidence of a disaster recovery
plan that includes emergency back up capacity and appropriate record
protection and recovery. Furthermore, Advanced Energy represents that
its information systems are year 2000 compatible and hereby grants
Applied the right to verify Advanced Energy's internal processes for
ensuring compliance with this provision.
Applied believes it is critical for suppliers to be prepared and
protected in case of disasters or interruptions to normal business
operations.
Advanced____Applied Materials____ 7 of 16
Date______
<PAGE>
2.7 MANAGING EXCEPTIONS TO COMPREHENSIVE SUPPLIER AGREEMENT (CSA)
2.7.1 Identifying constraints
Suppliers are responsible for identifying constraints to meeting CSA
objectives, informing Applied when those constraints occur, and
initiating action plans to resolve them. Constraints might typically
include:
a. Consumption over forecast
b. Consumption under forecast
c. Quality problems
d. Capacity/production problems
e. Supply Chain Management problems
f. Other business issues
2.7.2 Process for Exceptions
Applied will work with suppliers to determine the impact of an
exception and approve and execute the action plans. Advanced Energy
will notify the Supplier Account Team Lead as soon as exceptions are
identified.
3. QUALITY FRAMEWORK
3.1 SUPPLIER NON-CONFORMANCES AND CORRECTIVE ACTION
Advanced Energy's quality must meet all applicable Applied
specifications. Advanced Energy is required to replace or repair
defective parts at supplier's expense in a timely manner. Suppliers are
required to use the most expeditious manner possible to affect the
corrections including the use of overnight delivery services for
shipment of parts; at Applied's request, in certain circumstances,
suppliers may be asked to provide new parts in lieu of repairing a part
to ensure immediate corrective action.
Advanced Energy will be notified of defects with a corrective action
form, Attachment 10, to which they are expected to respond
appropriately. A corrective action process to resolve non-conformances
will be documented and used. In addition, Advanced Energy will
participate in continuous improvement plans and programs as defined by
Applied and Advanced Energy.
[ * * * ]
3.2 APPLIED NON-CONFORMANCES AND CORRECTIVE ACTION
Applied will return parts at Applied's expense that do not conform to
Applied's requirements due to Applied errors. These parts will be
returned for potential rework. Applied and Advanced Energy will agree
in advance on "standard" repair costs (labor, parts and freight) on
items not covered under warranty (Attachment 1).
To the extent that a "standard" repair cost has not been established,
Advanced Energy will assess rework costs and timing and inform Applied
before work is performed. The parties agree that under no circumstances
will the total price charged for repairing a part exceed 50% of the
current purchase price stated in Attachment 1.
Advanced____Applied Materials____ 8 of 16
Date______
<PAGE>
Advanced Energy agrees to repair and return all parts within five (5)
business days from receipt of damaged part. Applied shall have the
right to designate certain parts for "Same Day" or "24 Hour" repair
turnaround. Any premium charges for "Same Day" or "24 Hour" repair
turnaround will not exceed [ * * * ] per part.
Prior to return of repaired parts to Applied, Advanced Energy will mark
parts with Applied's part number, serial number, gas and range the part
has been exposed to if applicable. Applied shall bear the risk of loss
or damage during transit of Products whether or not the Product meets
warranty requirements.
In addition, a corrective action process to resolve non-conformances
will be documented and used.
3.3 QUALITY ASSURANCE
All goods purchased under this CSA will be subject to inspection and
test by Applied at the appropriate time and place, including the period
of manufacture and anytime prior to final acceptance. If inspection or
test is made by Applied on Advanced Energy's premises, Advanced Energy
will provide all reasonable facilities and assistance for the safety and
convenience of Applied's inspectors at no charge to Applied. No
preliminary inspection or test shall constitute acceptance. Records of
all inspection work shall be kept complete and available to Applied
during the performance of this order and for such further period as
Applied may determine.
Certificate of Conformance (COC): Seller agrees to certify that Items
have passed all production acceptance tests and configuration
requirements and provide a "Certificate of Conformance" and a
Calibration Data Report that will be included with each product during
shipment.
With regard to repair services, Advanced Energy shall maintain
documentation evidencing that all test inspections have been performed.
The documentation shall indicate the nature and number of observations
made, the quantities approved and rejected as well as the nature of the
corrective action taken. Advanced Energy's service centers shall be
responsible for submitting this data for Applied's review of the
delivery summaries. The data shall be submitted monthly not later than
five days after the close of each of Applied's fiscal months to
Applied's Contract Specialist and Applied's IBSS Repairs Purchasing
Group.
At Applied's request, Advanced Energy will provide a certificate and/or
a copy of the final inspection records showing compliance to applicable
specifications, contract requirements and any other required documents
stipulated in Applied's repair authorization. Advanced Energy also
agrees to provide Applied with copies of its current procedures relative
to repairs, range change and warranty repairs.
Advanced Energy will track and maintain reject rate by percentage of
assemblies, and/or part per million reject internally (through Advanced
Energy Quality Service Organization). Trend reporting and corrective
actions shall be furnished to Applied as requested by the Applied
Purchasing or Quality representatives. Advanced Energy will provide
quality data in the format, as shown in Attachment 11, and at the timing
required by Applied. Suppliers may also be required to provide
reasonable additional data to support qualification and certification
programs.
3.4 WARRANTY
Advanced Energy warrants that all goods and services delivered to
Applied will be free from defects in workmanship, material, and
manufacture; will comply with the requirements of this agreement, and,
where design is Advanced Energy's responsibility, will be free from
defects in design. ADVANCED ENERGY FURTHER WARRANTS ALL GOODS PURCHASED
OR REPAIRED WILL BE OF MERCHANTABLE QUALITY AND WILL BE FIT AND SUITABLE
FOR THE PURPOSE INTENDED BY APPLIED. These warranties are in addition to
all other warranties, whether expressed or implied, and will survive any
delivery, inspection, acceptance, or payment by Applied. If any goods
or services delivered by Advanced Energy do not meet the warranties
specified herein or otherwise applicable, Applied may, at its option :
(i) require Advanced Energy to correct at no cost to Applied
any defective or nonconforming goods or services by repair
or replacement, or
Advanced____Applied Materials____ 9 of 16
Date______
<PAGE>
(ii) return such defective or nonconforming goods at Advanced
Energy's expense to Advanced Energy and recover from
Advanced Energy the order price thereof, or
(iii) correct the defective or nonconformant goods or services
itself and charge Advanced Energy with the cost of such
correction. Maximum cost will not exceed [ * * * ] of
current purchase price in Attachment 1. Such units will
subsequently be maintained by Applied Materials.
(iv) There will be a [ * * * ] Re-test and Evaluate fee for
IBSS ONLY upon request.
(v) Advanced Energy will comply with IBSS tie wrap requirements
while maintaining Applied Materials logo on the tie wrap.
All warranties will run to Applied and to its customers. Applied's
approval of Advanced Energy's material or design will not relieve
Advanced Energy of the warranties established in this agreement. In
addition, if Applied waives any drawing or specification requirement for
one or more of the goods, it will not constitute a waiver of all
requirements for the remaining goods to be delivered unless stated by
Applied in writing. Warranty length for all parts is listed in
Attachment 1. The warranty on repaired Items will be [ * * * ] from
customer receipt of repaired Item or remainder of initial warranty
period, which ever is longer. For non-warranty repaired Items, the
repaired Item will be warranted from the date of customer receipt of the
repaired Item, for [ * * * ] for parts and labor or [ * * * ] for parts
only.
3.5 OTHER QUALITY PROGRAMS
(Reserved)
3.6 SAFETY
(Reserved)
4. PRICING FRAMEWORK
4.1 PRICING BY PART NUMBER COVERED IN THIS AGREEMENT
The pricing for the parts are shown in Attachment 1. Any modifications
to these must be made in accordance with Section 7. The total cost of
parts supplied by Advanced Energy should be reduced regularly, not just
the unit price. Advanced Energy commits to on-going cost improvement
during the period of this agreement.
At the time of the contract acceptance in Section 9, all open PO's are
to be revised to the contract price.
Specific circumstances may result in re-negotiation of contract terms,
including prices. These include, but are not limited to:
a. Volume increases resulting in an increase in contract value of over
[ * * * ]
b. Addition of part numbers to the contract increasing it in value
over [ * * * ]
c. Cost savings over and above those committed in the performance plan
4.2 COOPERATIVE PRICING MODELS/FORMULAS
(Reserved)
4.3 VOLUME
Advanced Energy will be provided a range of potential volumes that may
be purchased. Applied does not commit to buy a specific volume of a
part number from a supplier. Applied does not limit its ability to buy
the same part number from multiple sources.
4.4 EXPORT PRICING
Advanced____Applied Materials____ 10 of 16
Date______
<PAGE>
Advanced Energy should quote Applied in unit prices based upon delivery
FCA Free carrier. Advanced Energy is expected to prepare the export
paperwork and be the exporter of record. Advanced Energy must utilize
Applied's preferred carriers to arrange the export of the goods.
Applied will pay the freight charges based on Applied's rates with its
preferred carriers. Applied will be responsible for importing the goods
into the destination country.
4.5 CURRENCY
All prices are quoted in US dollars; prices for foreign manufactured
parts will not be adjusted to reflect changes in the exchange rate.
Advanced Energy is encouraged to obtain any necessary currency exchange
protection it deems appropriate.
4.6 PROTOTYPES
Advanced Energy is committed to price all parts consistent with contract
prices.
Advanced Energy agrees to provide prototype parts priced considering the
total value of Applied's business with the supplier. This may be
accomplished in several ways, including:
a. a specific number of prototype parts may be provided free of charge
b. parts may be priced at production levels
4.7 ADVANCES FOR RAW MATERIAL
Applied does not provide advance payment for the purchase of raw
material.
4.8 COST REDUCTION / VALUE ANALYSIS
Buyer and Seller will initiate and continue for the term of this
Agreement, value analysis, value engineering, and cost reduction efforts
for all Item(s) in accordance with the Supplier Performance Plan
(Attachment 15 and Section 6). Upon agreement on the incorporation of
changes resulting from these activities, Buyer will amend Attachment 1.
Seller will provide a 3 year plan indicating alignment with HOSHIN cost
reduction goals.
5. TECHNICAL FRAMEWORK
5.1 ENGINEERING CHANGE ORDERS
Applied may change its drawings, design, and specifications at any time.
The Applied Supplier Engineer will review with Advanced Energy all
proposed Engineering Change Orders (ECO's) that impact the form, fit, or
function of supplied material. Applied will, in writing, provide
approved ECO's (refer to Attachment 12) and state the effectivity dates
of all changes. Unless otherwise notified, Applied Receiving Inspection
will inspect to the latest revision in effect at the time of receipt.
Advanced Energy may request engineering changes via a Supplier Problem
Sheet (refer to Attachment 13). This form should be submitted to the
Applied Supplier Engineer. Changes will not be implemented by Advanced
Energy until written permission to proceed is given by Applied. Applied
will consider claims for adjustment in the terms of this Agreement if
made before the implementation of the changes.
5.2 TOOLING
Unless otherwise agreed to in writing, special dies, tools, patterns and
drawings used in the manufacture of parts shall be furnished by and at
the expense of, Advanced Energy.
Advanced Energy ______ Appled Materials _______ 11 of 16
Date ________
<PAGE>
5.3 DESIGN CHANGES AND RESOLUTION
For the term of this Agreement, Advanced Energy will not make changes to
the design of any critical part that may alter form, fit, function or
manufacturing process without a documented engineering change request
and prior written approval from Applied.
If Applied's design changes impact the pricing, delivery, lead-time, or
other terms and conditions of this Agreement, and agreement upon
alternate terms cannot be reached, then Applied may remove the subject
part(s) from this Agreement without affecting the remaining part(s).
5.4 PROCESS CHANGES AND RESOLUTION
Advanced Energy is expected to inform Applied of process and supplier
changes to any critical parts even when specifications are met.
Advanced Energy must receive approval in writing from Applied before
implementing changes. If no approval is forthcoming from Applied within
5 working days of notification, approval is granted. Suppliers must use
the "approved" list of secondary process suppliers (Attachment 14).
5.5 SUBCONTRACTING
Advanced Energy shall not subcontract for completed or substantially
completed parts supplied to Applied without prior written approval of
Applied. If no approval is forthcoming from Applied within 5 working
days of notification, approval is granted. All subcontractors to
Advanced Energy that have access (directly or indirectly) to Applied
specifications must be covered by an Applied Non-Disclosure agreement.
5.6 FIRST ARTICLES
A new part, part with revised drawings, or other changes as delineated
above, must have a first article evaluated and accepted by Applied (a
"First Article"). A part will not be authorized for deliveries until
acceptance of the First Article by Applied. Advanced Energy will
maintain First Article qualifications/evidence data file with content as
defined by Applied for the specific part. First Article data is to be
made available to Applied upon request and shall be retained by Advanced
Energy during the performance of this Agreement or subsequent agreements.
5.7 OUTSOURCING
Applied may at its discretion elect to outsource an assembly or module
to a third party ("Subassembler") and if the selected assembly or module
includes any part under this CSA (an "affected part"), Applied will use
reasonable efforts to provide Advanced Energy with the opportunity to
bid on the affected part as a supplier to the Subassembler. Although
Applied may, at its discretion and under no obligation to Advanced
Energy, direct a Subassembler to purchase any affected parts from
Advanced Energy, Advanced Energy understands that the selection and
responsibility for sourcing any affected parts will generally be the
responsibility of the Subassembler. If Advanced Energy is not selected
as the source for an affected part, any affected parts or applicable
quantities of affected parts may, at Applied's discretion, be removed
from this Agreement.
Advanced Energy ______ Appled Materials _______ 12 of 16
Date ________
<PAGE>
5.8 PRODUCT SUPPORT
Advanced Energy agrees to provide parts, and technical and service
support to Applied for all of the parts for a minimum of TEN years from
the date of final shipment of a part to Applied. Alternatively, the
parties may agree to establish a product support period less than ten
years provided that Advanced Energy agrees to grant to Applied a
non-exclusive license to make, have made, use, sell, and support the
parts.
5.9 COMMODITY SPECIFIC ISSUES
(Reserved)
5.10 TECHNOLOGY ROADMAP
(Reserved)
6. PERFORMANCE MANAGEMENT
6.1 SUPPLIER PERFORMANCE PLAN
As part of this Comprehensive Supplier Agreement, Applied and Advanced
Energy agree to jointly develop a supplier performance plan. Attachment
15 outlines the performance plan.
6.2 SUPPLIER PERFORMANCE MANAGEMENT
6.2.1 Metrics and Targets
Advanced Energy agrees to perform to the following operational
performance measures: quality, delivery, cost, manufacturing disruption
occurrences, cycle time, and flexibility. Performance targets for
FY2000 are listed. Intermediate performance targets are established in
the Supplier Performance Management Plan. The following defines how
Applied and Advanced Energy will measure performance metrics:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
MEASURE DEFINITION CALCULATION 1998 TARGET 1999 TARGET 2000 TARGET
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Quality ppm* Number of quality Number of DMR 1750 ppm 750 ppm 400 ppm
discrepancies detected occurrences recorded
prior to shipping a for all parts provided
completed system to an by the supplier
end customer, accumulated over the
expressed as parts per prior 13-week period,
million divided by the total
receipts for that part
over the same period
and multiplied by 1
million
- --------------------------------------------------------------------------------------------------------------
Field Failures Number of part quality Number of RMA 0 0 0
discrepancies detected occurrences recorded occurrences occurrences occurrences
in the field during for each part
installation or accumulated over the
routine repair prior 13-week period
- --------------------------------------------------------------------------------------------------------------
Late Delivery ppm* Number of parts Number of parts 20,000 ppm 10,000 ppm 5000 ppm
delivered later than received one day or with 0 ppm with 0 ppm with 0 ppm
the agreed upon more after the LESS THAN LESS THAN LESS THAN
OR EQUAL TO OR EQUAL TO OR EQUAL TO
4 days late 4 days late 4 days late
- --------------------------------------------------------------------------------------------------------------
Advanced Energy ______ Appled Materials _______ 13 of 16
Date ________
<PAGE>
- --------------------------------------------------------------------------------------------------------------
commit date commit date,
accumulated for
each part over a
rolling 13-week
period, divided by the
total number of parts
received over the same
period and multiplied
by 1 million
- --------------------------------------------------------------------------------------------------------------
Early Delivery Number of parts Total number of parts 0 ppm 0 ppm 0 ppm
ppm* received three or more received three or more
days before the commit days before the commit
date date, accumulated over
a rolling 13-week
period, divided by the
total number of parts
received over the same
13-week period,
multiplied by 1
million
- --------------------------------------------------------------------------------------------------------------
Percentage Cost Percentage difference Difference between the 10% 10% 10%
Reduction between the average total average unit reduction reduction reduction
unit price paid for cost of all parts
materials in the prior purchased from the
year and the price supplier in the
paid in the current current year and the
year total average unit
cost of all parts
purchased from the
supplier in the prior
year (for parts common
to both periods)
- --------------------------------------------------------------------------------------------------------------
Should-Cost Total variance between Difference between the Develop & +/- 5% of +/- 5% of
Deviation the should- cost average unit price for Execute Model should-cost should-cost
established by Applied the part and the +/- 5% of
Materials and the Applied Materials should-cost
average unit price should-cost target
paid by Applied (for critical parts
and parts introduced
through NPI activities
within the past 12
months)
- --------------------------------------------------------------------------------------------------------------
Order Fulfillment Consistent performance 2 weeks LESS THAN LESS THAN
Cycle Time to the delivery OR EQUAL TO OR EQUAL TO
Ref. 2.2.3 metrics identified 2 weeks 2 weeks
above
- --------------------------------------------------------------------------------------------------------------
Source Cycle Time Total cycle time to Elapsed time, as 60% parts 80% parts 80% parts
source all materials determined through w/4wk LT w/4wk LT w/2wk LT
required to produce an process audits and 20% parts 20% parts 20% parts
order supplier self- w/6-8wk LT w/4-8wk LT w/2-4wk LT
assessments 20% parts
- --------------------------------------------------------------------------------------------------------------
Advanced Energy ______ Appled Materials _______ 14 of 16
Date ________
<PAGE>
- --------------------------------------------------------------------------------------------------------------
w/8-12wk LT
- --------------------------------------------------------------------------------------------------------------
Make Cycle Time Total production time Elapsed time, as See Attach See Attach See Attach
Attachment 17 required to fulfill an determined through 17 17 17
order, including process audits and
manufacturing order supplier self-
release and build time assessments
- --------------------------------------------------------------------------------------------------------------
Manufacturing Number of times a Number of instances of 0
Disruption quality defect or late part unavailability at occurrences
Occurrence (MDO) delivery results in a line side due to
TBD disruption to the quality defects or
normal flow of Applied late shipments over
Materials the prior 13 week
manufacturing period
operations
- --------------------------------------------------------------------------------------------------------------
Supplier Upside Number of weeks Number of weeks from 2 weeks
Flexibility required to the occurrence of (25% volume
See Sect. 2.2.3 consistently meet Applied orders that increase)
delivery requirements exceed forecast volume 4 weeks
(including full order to the return of (50% volume
delivery) under quality and delivery increase)
sustained, performance to the 9 weeks
unanticipated demand levels achieved prior (75% volume
increases of 10%, 20%, to the increase increase)
and 50% of the 13 weeks
thirteen-week rolling (100% volume
forecast increase)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
7. AMENDMENTS AND MODIFICATIONS
This CSA may be revised by the mutual consent of Applied Materials and
Advanced Energy. Revisions to this CSA must be in writing, signed by both
Applied and Advanced Energy, traced by revision numbers and attached to this
original agreement. A change to one attachment of this agreement will
constitute a revision level change. The master copy of this CSA and any
revisions are to be maintained by Applied.
Updates to Section 2.2, Service levels, and changes may be communicated via
memos sent by mail or e-mail.
8. GLOSSARY (TBD)
Advanced Energy ______ Appled Materials _______ 15 of 16
Date ________
<PAGE>
9. ACCEPTANCE
Accepted:
Date: 5-18-98
----------------
/s/ Annette M. Palacios /s/ Chris Fergen
- ----------------------------------------- ---------------------------------
Annette M. Palacios , Supplier Engineer Chris Fergen, ABU Director
Applied Materials, Inc. Advanced Energy Industries, Inc.
Applied Materials OEM-Electrical SMO Applied Materials Business Unit
Advanced Energy ______ Appled Materials _______ 16 of 16
Date ________
<PAGE>
EXHIBIT 1
APPLIED MATERIALS TERMS AND CONDITIONS OF PURCHASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE TOPIC PAGE #
------- ----- ------
<C> <S> <C>
1 Acceptance 2
2 Confidential and Proprietary Information 2
3 Intellectual Property 3
4 Patent License 3
5 Press Releases/Public Disclosure not 4
Authorized
6 Favored Customer 4
7 Duty Drawback 4
8 ODC Elimination 5
9 Compliance with Laws 5
10 Equal Employment Opportunity 5
11 Applicable Law 5
12 Notice of Labor Disputes 6
13 Taxes 6
14 Responsibility for Goods 6
15 Insurance 6
16 Change of Control 7
17 Assignments 7
18 Gratuities 7
19 Insolvency 7
20 Waiver 8
21 Disclaimer and Limitation of Liability 8
22 Indemnity by Supplier 8
23 Force Majeure 8
24 Changes 9
25 Termination for Default 9
26 Termination for Convenience 9
</TABLE>
Page 1 Advanced Energy ____; Applied _____
Date:_____
<PAGE>
1. Acceptance
The terms and conditions stated in these Applied Materials Standard
Terms and Conditions of Purchase become the agreement between the
parties covering the purchase of the goods or services (collectively
referred to as "Items") ordered in the Purchase Agreement/Comprehensive
Supplier Agreement/Basic Supplier Agreement of which these Terms and
Conditions are a part when this Agreement is accepted by acknowledgment
or commencement of performance. This Agreement can be accepted only on
these terms and conditions. Additional or different terms proposed by
Supplier will not be applicable unless accepted in writing by the Buyer.
No change, modification, or revision of this Agreement will be
effective unless in writing and signed by duly authorized representative
of Buyer.
2. Confidential and Proprietary Information
Supplier will observe and is bound by the terms and conditions of any
and all Non-Disclosure Agreements (NDAs. Ref. Attachment 9) executed by
Supplier with or for the benefit of Buyer, whether now or hereafter in
effect. In addition, all schematics, drawings, specifications and
manuals, and all other technical and business information provided to
Supplier by Buyer during the term of, or in connection with the
negotiation, performance or enforcement of this Agreement shall be
deemed included in the definition (subject to any applicable exclusions
therefrom) of "Proprietary Information" for purposes of this Agreement.
Supplier may use Buyer's Proprietary Information only for the purpose of
providing Items, parts or components of Items or services to Buyer.
Supplier will not discuss and further will not use any of Buyer's
Proprietary Information, directly or indirectly, for any other purpose
including, without limitation, (a) developing, designing, manufacturing,
refurbishing, selling or offering for sale parts or components of Items
or parts, or providing services, for or to any party other than Buyer,
and (b) assisting any third party, in any manner, to perform any of the
activities described herein. All Proprietary Information shall (a) be
clearly marked by Supplier as Buyer's property and segregated when not
in use, and (b) be returned to Buyer promptly upon request.
Supplier acknowledges and agrees that Buyer would suffer irreparable
harm for which monetary damages would be an inadequate remedy if
Supplier were to breach its obligations under this provision. Supplier
further acknowledges and agrees that equitable relief, including
injunctive relief, would be appropriate to protect Buyer's rights and
interests if such a breach were to arise, or threatened, or were
asserted.
Supplier will use reasonable efforts to notify Buyer of any third party
requests to engage in any of the activities prohibited by this Article.
3. Intellectual Property
Nothing in this Agreement shall be deemed to grant to Supplier any
license or other right under any of Buyer's intellectual property
(including, without limitation, Buyer's patents, copyrights, trade and
service marks, trade secrets, and Proprietary Information) for
Supplier's own benefit or to provide or offer Items to any party other
than Buyer.
All Items supplied by Supplier and the sale of Items by Supplier and, as
applicable, use thereof by Buyer or its subsequent purchasers or
transferees will be free from liability for or claim by any persons of
royalties, patent rights, copyright, trademark, mechanics' liens or
other encumbrances, and trade secrets or confidential or proprietary
intellectual property rights (collectively "rights" and "encumbrances"),
and Supplier shall defend, indemnify and hold harmless Buyer against all
claims, demands, costs and actions for actual or alleged infringements
of patent, copyright, trademark or trade secret rights or other rights
and encumbrances in the use, sale or re-sale of any Item which are valid
at the time of or after the effective date of this Agreement; except to
the extent that the infringement was unavoidably caused by Supplier's
compliance with
Page 2 Advanced Energy ____; Applied _____
Date:_____
<PAGE>
a detailed design furnished and required by Buyer or by Buyer's
non-compliance with Supplier's prior written advice or warning of a
possible and likely infringement.
At the request of Buyer, Supplier will provide to Buyer the most current
and complete specifications and drawings (the "Drawings") for each Item
manufactured or produced for Buyer that is based on Buyer's design or
Drawings showing the complete specifications and design for the Item as
manufactured or produced by Supplier. All Drawings are the sole property
of Buyer.
Upon termination of this Agreement, Supplier will return all Applied
Proprietary Information and documentation to Buyer. Notwithstanding
this requirement, Supplier may request Buyer approval to destroy any
Proprietary Information of Buyer that has become obsolete or outdated
(e.g., financial projections, forecasts, et cetera); provided that
Supplier certifies to Buyer the destruction of such Proprietary
Information.
4. Patent LICENSE (PENDING MODIFICATION, 5/18/98, APPLIED _____, ADVANCED
ENERGY _____)
Supplier, as part consideration for this Agreement and without further
cost to Buyer, hereby grants to Buyer an irrevocable, non-exclusive,
paid-up world-wide right and license to make, have made, use, and sell
any inventions derivative works, improvements, enhancements, or
intellectual property (the "Inventions") made by or for Supplier in the
performance of this Agreement. Supplier shall cause any employee,
consultant, contractor or other persons who provides work for hire to
Supplier to assign to Supplier for licensing as above of any such
inventions. In addition, Buyer shall be entitled to license Buyer's
customers to use such inventions during the operation of Buyer's
products.
5. Press Releases/Public Disclosure Not Authorized
Supplier will not, without the prior written approval of Buyer, issue
any press releases, advertising, publicity, public statements or in any
way engage in any other form of public disclosure that indicates the
terms of this Agreement, Buyer's relationship with Supplier or implies
any endorsement by Buyer of Supplier or Supplier's products or services.
Supplier further agrees not to use, without the prior written consent
of Buyer, the name or trademarks (including, but not limited to Buyer's
corporate symbol). Any requests under this Section must be made in
writing and submitted to the parties designated by Buyer for the review
and authorization of such matters.
6. Favored Customer
Supplier does not presently sell or offer any Item that is similar in
form, fit or function to any Item to any third party for prices and
terms and conditions of sale (including, without limitation, warranties,
services or other benefits) (collectively, "Benefits") that are more
favorable than the equivalent prices and Benefits granted by Supplier to
Buyer in this Agreement If during the term of this Agreement, Supplier
enters into any arrangement with any third party providing more
favorable prices or Benefits for any Item than those available to Buyer
under this Agreement (a "Third Party Arrangement"), Supplier will notify
Buyer immediately of that price or Benefits for any Item than those
available to Buyer under this Agreement (a "Third Party Arrangement"),
Supplier will notify Buyer immediately of that price or Benefit and this
Agreement will be deemed amended to provide the same price or Benefit to
Buyer without any further action. However, Buyer, at its option, may
formally amend this Agreement to reflect such changes. If any deemed
amendment results in lowering the price to be paid by Buyer for any
Item, Supplier will refund or credit to Buyer the aggregate amount of
the price difference (including any taxes, fees and similar charges)
that Buyer has paid or been charged from the effective date of the Third
Party Arrangement. Such refund or credit shall be made within thirty
(30) days of the effective date of the Third Party Arrangement. In no
event shall Supplier quote prices to Buyer that would be unlawfully
discriminatory under any applicable law.
7. Duty Drawback
Page 3 Advanced Energy ____; Applied _____
Date:_____
<PAGE>
Supplier will provide Buyer with U.S. Customs entry data, including
information and receipts for duties paid directly or indirectly on all
Items that are either imported or contain imported parts or components,
that Buyer determines is necessary for Buyer to qualify for duty
drawback ("Duty Drawback Information"). This data will be provided to
Buyer within fifteen (15) days after each calendar quarter
[or fiscal year quarter of Buyer] and be accompanied by a completed
Certificate of Delivery of Imported Merchandise or Certificate of
Manufacture and Delivery of Imported Merchandise (Customs Form 331) as
promulgated pursuant to 19 CFR 191.
8. ODC Elimination
In the event Supplier's goods are manufactured with or contain Class I
ODCs as defined under Section 602 of the Federal Clean Air Act (42 USC
Section 7671a) and implementing regulations, or if Supplier suspects
that such a condition exists, Supplier shall notify Buyer prior to
performing any work against this Agreement. Buyer reserves the right
to: (a) terminate all Agreements for such goods without penalties, (b)
to return any and all goods delivered which are found to contain or have
been manufactured with Class I ODCs, or (c) to terminate any outstanding
Agreements for such goods without penalties. Supplier shall reimburse
Buyer all monies paid to Supplier and all additional costs incurred by
Buyer in purchasing and returning such goods.
9. Compliance With Laws
Supplier warrants that no law, rule, or ordinance of the United States,
a state, any other governmental agency, or that of any country has been
violated in supplying the goods or services ordered herein.
10. Equal Employment Opportunity
Supplier represents and warrants that it is in compliance with Executive
Agreement 11246, any amending or supplementing Executive Agreements, and
implementing regulations unless exempted.
11. Applicable Law, Consent to Jurisdiction, Venue
This Agreement shall be governed by, be subject to, and be construed in
accordance with the internal laws of the State of California, excluding
conflicts of law rules. The parties agree that any suit arising out of
this Agreement, for any claim or cause of action, whether in contract,
in tort, statutory, at law or in equity, shall exclusively be brought in
the United States District Court for the Northern District of California
or in the Superior or Municipal Courts of Santa Clara County,
California, or in the United States District Court for the Western
District of Texas, Austin Division, or the Texas State District Courts
of Travis County, Texas, provided that such court has jurisdiction over
the subject matter of the action. Each party agrees that each of the
named courts shall have personal jurisdiction over it and consents to
such jurisdiction. Supplier further agrees that venue of any suit
arising out of this Agreement is proper and appropriate in any of the
courts identified above; Supplier consents to such venue therein as
Buyer selects and to any transfer of venue that Buyer may seek to any of
such courts, without respect to the initial forum.
With respect to transactions to which the1980 United Nations Convention
of Contracts for the International Sale of Goods would otherwise apply,
the rights and obligations of the parties under the Agreement, including
these terms and conditions, shall not be governed by the provisions of
the 1980 United Nations Convention of Contracts for the International
Sale of Goods; instead, applicable laws of the State of California,
including the Uniform Commercial Code as adopted therein (but exclusive
of such 1980 United Nations Convention) shall govern.
12. Notice of Labor Disputes
Whenever an actual or potential labor dispute, or any government
embargoes, regulatory or tribunal proceedings relating thereto is
delaying or threatens to delay the timely performance of this Agreement,
Supplier will immediately notify Buyer of such dispute and furnish all
relevant details regardless of whether
Page 4 Advanced Energy ____; Applied _____
Date:_____
<PAGE>
said dispute arose directly, or indirectly, as a result of an actual or
potential dispute within the Supplier's subtier supply base or its own
operations.
13. Taxes
Unless otherwise specified, the agreed prices include all applicable
federal, state, and local taxes. All such taxes shall be stated
separately on Supplier's invoice.
14. Responsibility for Goods; Risk of Loss
Notwithstanding any prior inspections, Supplier shall bear all risks of
loss, damage, or destruction to the Items called for hereunder until
final acceptance by Buyer at Buyer's facility(s) delivery destination
specified in the Agreement, which risk of loss shall not be altered by
statement of any at F.O.B. point herein. These Supplier responsibilities
remain with respect to any Items rejected by Buyer provided, however,
that in either case, Buyer shall be responsible for any loss occasioned
by the gross negligence of its employees acting within the scope of
their employment. Items are not accepted by reason of any preliminary
inspection or test, at any location.
15. Insurance
A. Supplier shall maintain (i) comprehensive general liability
insurance covering bodily injury, property damage, contractual
liability, products liability and completed operations, (ii)
Worker's Compensation and employer's liability insurance, and (iii)
auto insurance, in such amounts as are necessary to insure against
the risks to Supplier's operations.
B. Minimally, Supplier will obtain and keep in force, insurance of the
types and in the amounts set forth below:
<TABLE>
<CAPTION>
Insurance Minimum Limits of Liability
--------- ---------------------------
<S> <C>
Worker's Compensation Statutory
Employer's Liability $1,000,000
Automobile Liability $1,000,000 per occurrence
Comprehensive General Liability $1,000,000 per occurrence
(including Products Liability)
Umbrella/Excess Liability $1,000,000 per occurrence
</TABLE>
All policies must be primary and non-contributing, and shall include
Buyer as an additional insured. Supplier also waives all rights of
subrogation. Supplier will also require and verify that each of its
subcontractors carry at least the same insurance coverage and minimum
limits or insurance as Supplier carries under this Agreement. Supplier
shall notify Buyer at least thirty (30) days prior to the cancellation
of or implementation of any material change in the foregoing policy
coverage that would affect the Buyer's interests. Upon request,
Supplier shall furnish to Buyer as evidence of insurance a certificate
of insurance stating that the coverage would not be canceled or
materially altered without thirty (30) days prior notice to the Buyer.
16. Change of Control
Supplier will notify Buyer immediately of any change of control or
change (including any change in person or persons with power to direct
or cause the direction of management or policies of Seller) or any
change (10% or more) in the ownership of Supplier, or of any materially
adverse change in Supplier's financial condition or in the operation of
Supplier's business, including, but not limited to, Supplier's net
worth, assets, production capacity, properties, obligations or
liabilities (fixed or contingent) (collectively, a "change of control").
Notwithstanding any other rights Buyer may have under this Agreement,
upon a change of control, Buyer may, in its discretion, renegotiate or
terminate for convenience this Agreement.
Page 5 Advanced Energy ____; Applied _____
Date:_____
<PAGE>
17. Assignments
A. No right or obligation under this Agreement shall be assigned by
Supplier without the prior written consent of Buyer, and any
purported assignment without such consent shall be void.
B. Buyer may assign this Agreement in whole or part at any time if
such assignment is considered necessary by Buyer in connection with
a sale of Buyer's assets, or a transfer of any of its contracts or
obligations under such contracts, or a transfer to a third party of
manufacturing activities previously conducted by Buyer.
18. Gratuities
Supplier warrants that it has not offered or given and will not offer or
give any gratuity to induce this or any other agreement. Upon Buyer's
written request, an officer of Supplier shall certify in writing that
Supplier has complied with and continues to comply with this Section.
Any breach of this warranty shall be a material breach of each and every
agreement and contract between Buyer and Supplier.
19. Insolvency
The insolvency of Supplier, the filing of a voluntary or involuntary
petition for relief by or against Supplier under any bankruptcy,
insolvency or like law, or the making of an assignment for the benefit
of creditors, by Supplier, shall be a material breach hereof and default.
20. Waiver
In the event Buyer fails to insist on performance of any of the terms
and conditions, or fails to exercise any of its rights or privileges
hereunder, such failure shall not constitute a waiver of such terms,
conditions, rights or privileges.
21. Disclaimer and Limitation of Liability
In no event shall Buyer be liable for any special, indirect, incidental,
consequential, or contingent damages (the foregoing being collectively
called "Damages"), whether or not Buyer has been advised of the
possibility of such damages, for any reason. Buyer excludes and
Supplier waives any liability of Buyer for any "Damages", as so defined.
22. Indemnity by Supplier
Supplier shall defend, indemnify and hold harmless Buyer from and
against, and shall solely and exclusively bear and pay, any and all
claims, suits, losses, penalties, damages (whether actual, punitive,
consequential or otherwise) and all liabilities and the associated costs
and expenses (including attorney's feesexpert's fees, and costs of
investigation (all of the foregoing being collectively called
"Indemnified Liabilities"), caused in whole or in part by Supplier's
breach of any term or provision of this Agreement, or in whole or in any
part by any negligent, grossly negligent or intentional acts, errors or
omissions by Supplier, its employees, officers, agents or
representatives in the performance of this Agreement or that are for,
that are in the nature of, or that arise under, strict liability or
products liability with respect to or in connection with the Items. The
indemnity by Supplier in favor of Buyer shall extend to Buyer, its
officers, directors, agents, and representatives and shall include and
is intended to include Indemnified Liabilities which arise from or are
caused by, in whole or in part, the concurrent negligence, including
negligence or gross negligence of Buyer or any person entitled to the
benefit of this indemnity or any other person. The indemnity of
Supplier shall not extend to liabilities and damages that are caused by
the sole negligence of Buyer.
23. Force Majeure
Page 6 Advanced Energy ____; Applied _____
Date:_____
<PAGE>
A failure by either party to perform due to causes beyond the control
and without the fault or negligence of the party is deemed excusable
during the period in which the cause of the failure persists. Such
causes may include, but not be limited to, acts of God or the public
enemy, acts of the Government in either sovereign or contractual
capacity, fires, floods, epidemics, strikes, freight embargoes and
unusually severe weather. If the failure to perform is caused by the
default of a subcontractor, and such default arises out of causes beyond
the control of both the Supplier and subcontractor, and without the
fault or negligence of either of them, the Supplier will not be liable
for any excess cost for failure to perform, unless the supplies or
services to be furnished by the subcontractor were obtainable from other
sources in sufficient time to permit the Supplier to meet the required
delivery releases. When Supplier becomes aware of any potential force
majeure condition as described in this Agreement, Supplier shall
immediately notify Buyer of the condition and provide relevant details.
24. Changes
Buyer may at anytime, by a written order and without notice to sureties
or assignees, suspend performance hereunder, increase or decrease the
Agreement quantities, or make changes within the general scope of this
Agreement in any one or more of the following:
(a) applicable drawings, designs, or specification;
(b) method of shipment or packing, and/or;
(c) place and date of delivery;
(d) place and date of inspection or acceptance.
If any such change causes an increase or decrease in the cost of or
time required for performance of the Agreement, an equitable adjustment
shall be made in the Agreement price or delivery schedule, or both, and
the Agreement shall be modified in writing accordingly. No claim by
Supplier for adjustment hereunder shall be valid unless asserted within
thirty (30) days from the date of receipt by Supplier of the
notification of change, provided, however, that such period may be
extended upon the written approval of Buyer. However, nothing in this
clause shall excuse Supplier from proceeding with the Agreement as
changed or amended.
25. Termination for Default
(a) Buyer may, by notice, terminate this Agreement in whole or in part
(i) if Supplier fails to deliver goods or services on agreed
delivery schedules or any installments thereof strictly within the
time specified; (ii) if Supplier fails to replace or correct
defective goods or services; (iii) if Supplier fails to comply
strictly with any provision of, or repudiates this agreement, or
(iv) Supplier defaults under, or any event or condition stated to
be a default occurs under, any provision of the Agreement,
including these Applied Materials Standard Terms and Conditions of
Purchase.
(b) In the event of termination pursuant to this Section:
(i) Supplier shall continue to supply any portion of the Items
contracted for under this Agreement that are not terminated;
(ii) Supplier shall be liable for additional costs, if any, for
the purchase of such similar goods and services to cover such
default;
(iii) At Buyer's request Supplier will transfer title and deliver
to Buyer (1) any completed goods, (2) any partially completed
goods and (3) all unique materials. Prices for partially
completed goods and unique materials so accepted shall be
negotiated. However, such prices shall not exceed the
Agreement price per item.
(c) Buyer's rights and remedies herein or otherwise stated in this
Agreement, any Purchase Order, Comprehensive Supplier Agreement or
Basic Supplier Agreement are in addition to and shall not limit or
preclude resort to any other rights and remedies provided by law or
in equity. Termination under this Agreement shall constitute
"cancellation" under the Uniform Commercial Code.
Page 7 Advanced Energy ____; Applied _____
Date:_____
<PAGE>
26. Termination for convenience
(a) Buyer may terminate, for convenience, work under this Agreement in
whole or in part, at any time by written or electronic notice.
Upon any such termination Supplier shall, to the extent and at the
time specified by Buyer, stop all work on this Agreement, place no
further orders hereunder, terminate work outstanding hereunder,
assign to Buyer all Supplier's interests under terminated
sub-contracts and Agreements, settle all claims thereunder after
obtaining Buyer's approval, protect all property in which Buyer has
or may acquire an interest, and transfer title and make delivery to
Buyer of all Items, materials, work in process, or other things
held or acquired by Supplier in connection with the terminated
portion of this Agreement. Supplier shall proceed promptly to
comply with Buyer's directions respecting each of the foregoing
without awaiting settlement or payment of its termination claim.
(b) Within six (6) months from such termination, Supplier may submit to
Buyer its written claim for termination charges, in the form and
with supporting data and detail prescribed by Buyer. Failure to
submit such claim within the prescribed time frame and with such
items shall constitute a waiver of all claims and a release of all
Buyer's liability arising out of such termination.
(c) The parties may agree upon the amount to be paid Supplier for such
termination. If they fail to agree, Buyer shall pay Supplier the
amount due for Items delivered prior to termination and in addition
thereto but without duplication, shall pay the following amounts:
(i) The contract price for all Items completed in accordance with
this Agreement and not previously paid for;
(ii) The actual costs for work in process incurred by Supplier
which are properly allocable or apportionable under Generally
Accepted Accounting Principles (GAAP) to the terminated
portion of this Agreement and a sum constituting a fair and
reasonable profit on such costs. The Supplier agrees to keep
true, complete, and accurate records in compliance with GAAP
for the purpose of determining allocability of Suppliers
costs under this agreement. Such records shall contain
sufficient detail to permit a determination of the accuracy
of the costs; Independent nationally recognized accountants
(the "Auditor") designated by Buyer and reasonably acceptable
to Supplier shall have the right, at Buyer's expense and upon
reasonable notice, to conduct audits of all of the relevant
books and records of Supplier in order to determine the
accuracy and allocability of costs submitted by Supplier to
Buyer under this provision.
(iii) The reasonable costs of Supplier in making settlement
hereunder and in protecting Items to which Buyer has or may
acquire an interest.
(d) Payments made under subparagraphs (c)(i) and (c)(ii) shall not
exceed the aggregate price specified in this Agreement, less
payment otherwise made or to be made. Buyer shall have no
obligation to pay for Items lost, damaged, stolen or destroyed
prior to delivery to Buyer.
(e) The foregoing paragraphs (a) to (d) inclusive, shall be applicable
only to a termination for Buyer's convenience and shall not affect
or impair any right of Buyer to terminate this Agreement for
Supplier's default in the performance hereof.
Page 8 Advanced Energy ____; Applied _____
Date:_____
<PAGE>
EXHIBIT 2: HOSHIN PRICING 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
ITEM AMAT DESCRIPTION MODEL CURRENT NEG. 2% ADDITIONAL VAE 98 TOTAL HOSHIN EST. % SVGS
PART STD PRICE TOTALS >> NEGOTIATED PRICE 1998 [* * *]
NUMBER
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
2 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
3 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
4 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
5 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
6 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
7 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
8 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
9 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
10 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
11 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
12 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
13 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
14 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
15 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
16 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
17 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
18 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
19 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
20 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
21 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
22 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
23 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
24 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
25 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<CAPTION>
- --------------------------------------------------------
ITEM EAU '98 CURRENT EXT. EXT. STD $$ SAVINGS
STD. 1998 CONTRACT [ * * * ]
1998 [ * * * ]
[* * *]
- --------------------------------------------------------
<S> <C> <C> <C> <C>
1 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
2 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
3 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
4 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
5 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
6 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
7 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
8 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
9 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
10 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
11 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
12 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
13 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
14 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
15 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
16 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
17 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
18 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
19 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
20 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
21 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
22 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
23 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
24 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
25 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
ITEM AMAT DESCRIPTION MODEL CURRENT NEG. 2% ADDITIONAL VAE 98 TOTAL HOSHIN EST. % SVGS
PART STD PRICE TOTALS >> NEGOTIATED PRICE 1998 [* * *]
NUMBER
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
26 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
27 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
28 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
29 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
30 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
31 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
32 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
33 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
34 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
35 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
36 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
37 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
38 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
39 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<CAPTION>
- --------------------------------------------------------
ITEM EAU '98 CURRENT EXT. EXT. STD $$ SAVINGS
STD. 1998 CONTRACT [ * * * ]
1998 [ * * * ]
[* * *]
- --------------------------------------------------------
<S> <C> <C> <C> <C>
26 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
27 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
28 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
29 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
30 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
31 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
32 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
33 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
34 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
35 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
36 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
37 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
38 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
39 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
</TABLE>
NOTES:
1. 1998 EAUs are from Applied Internal Website dated 4/28/98
2. [ * * * ] are expected to transition to P/N [ * * * ]
<PAGE>
EXHIBIT 2: HOSHIN PRICING 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
ITEM AMAT DESCRIPTION MODEL 1998 NEG. % VAE 99 TOTAL HOSHIN
PART STD TOTALS >> PRICE 1999
NUMBER PRICE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
2 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
3 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
4 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
5 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
6 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
7 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
8 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
9 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
10 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
11 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
12 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
13 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
14 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
15 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
16 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
17 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
18 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
19 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
20 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
21 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
22 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
23 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
24 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
25 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<CAPTION>
- -------------------------------------------------------------------
ITEM EST. % SVGS EAU '99 EXT. STD. 1999 EXT. 1999 $$ SAVINGS
[ * * * ] [ * * * ] CONTRACT [ * * * ]
PRICE
[ * * * ]
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
2 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
3 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
4 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
5 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
6 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
7 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
8 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
9 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
10 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
11 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
12 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
13 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
14 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
15 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
16 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
17 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
18 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
19 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
20 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
21 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
22 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
23 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
24 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
25 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------------
ITEM AMAT DESCRIPTION MODEL 1998 NEG. % VAE 99 TOTAL HOSHIN
PART STD TOTALS >> PRICE 1999
NUMBER PRICE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
26 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
27 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
28 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
29 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
30 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
31 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
32 [ * * * ] [ * * * ] [ * * * ]
33 [ * * * ] [ * * * ] [ * * * ]
34 [ * * * ] [ * * * ] [ * * * ]
35 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
36 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
37 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
38 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
39 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<CAPTION>
- -------------------------------------------------------------------
ITEM EST. % SVGS EAU '99 EXT. STD. 1999 EXT. 1999 $$ SAVINGS
[ * * * ] [ * * * ] CONTRACT [ * * * ]
PRICE
[ * * * ]
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
26 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
27 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
28 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
29 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
30 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
31 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
32
33
34
35 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
36 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
37 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
38 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
39 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
</TABLE>
NOTES:
1. 1999 EAUs are from original estimates 11/25/97
2. [ * * * ] are expected to become obsolete
3. The [ * * * ] PROJECT will combine P/Ns [ * * * ], into ONE part.
The combined price of [ * * * ] will drop to [ * * * ]
4. EAUs for P/Ns [ * * * ] have been adjusted down by [ * * * ] with
the anticipation of the transition to [ * * * ].
5. EAUs for [ * * * ] P/N is calculated off of [ * * * ] Usage and
represent [ * * * ] of [ * * * ] demand
6. EAUs for PVD are best estimates
<PAGE>
EXHIBIT 2: HOSHIN PRICING 2000
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ITEM AMAT DESCRIPTION MODEL 1999 NEG. % VAE 99 TOTAL HOSHIN EST. % SVGS
PART STD TOTALS >> PRICE 1999 [ * * * ]
NUMBER PRICE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
2 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
3 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
4 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
5 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
6 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
7 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
8 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
9 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
10 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
11 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
12 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
13 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
14 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
15 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
16 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
17 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
18 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
19 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
20 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
21 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
22 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
23 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
24 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
25 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
26 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<CAPTION>
- ------------------------------------------------------
ITEM EAU '00 EXT. STD. 2000 EXT. 2000 $$ SAVINGS
[ * * * ] CONTRACT [ * * * ]
PRICE
[ * * * ]
- ------------------------------------------------------
<S> <C> <C> <C> <C>
1 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
2 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
3 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
4 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
5 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
6 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
7 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
8 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
9 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
10 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
11 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
12 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
13 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
14 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
15 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
16 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
17 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
18 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
19 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
20 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
21 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
22 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
23 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
24 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
25 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
26 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ITEM AMAT DESCRIPTION MODEL 1999 NEG. % VAE 99 TOTAL HOSHIN EST. % SVGS
PART STD TOTALS >> PRICE 1999 [ * * * ]
NUMBER PRICE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
27 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
28 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
29 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
30 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
31 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
32 [ * * * ] [ * * * ] [ * * * ]
33 [ * * * ] [ * * * ] [ * * * ]
34 [ * * * ] [ * * * ] [ * * * ]
35 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
36 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
37 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
38 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
39 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<CAPTION>
- ------------------------------------------------------
ITEM EAU '00 EXT. STD. 2000 EXT. 2000 $$ SAVINGS
[ * * * ] CONTRACT [ * * * ]
PRICE
[ * * * ]
- ------------------------------------------------------
<S> <C> <C> <C> <C>
27 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
28 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
29 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
30 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
31 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
32
33
34 [ * * * ] [ * * * ] [ * * * ]
35 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
36 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
37 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
38 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
39 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
</TABLE>
NOTES:
1. 2000 EAUs are based on an expected [ * * * ] increase on top of 1999
usage
2. [ * * * ] will remain obsolete
3. The [ * * * ] PROJECT will combine P/Ns [ * * * ] into ONE part.
The combined price of [ * * * ] will drop to [ * * * ]
4. EAUs for P/Ns [ * * * ] have been adjusted down by [ * * * ] with
the anticipation of the transition to [* * *]
5. EAUs for [ * * * ] P/N is calculated off of [ * * * ] Usage and
represent [ * * * ] of [ * * * ] demand.
6. EAUs for PVD are best estimates
<PAGE>
Attachment 1:
ITEMS/WARRANTY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
ITEM AMAT PART DESCRIPTION UNIT PRICE 1998 UNIT PRICE 1999 UNIT PRICE 2000 UNIT LEAD TIME WARRANTY
NUMBER MONTHS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
2 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
3 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
4 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
5 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
6 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
7 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
8 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
9 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
10 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
11 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
12 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
13 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
14 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
15 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
16 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
17 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
18 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
19 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
20 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
21 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
22 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
23 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
24 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
25 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
26 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<CAPTION>
- ----------------------------------------------------
ITEM MAX LIABILITY EAU '98 EAU '99 EAU '00
[ * * * ]
- ----------------------------------------------------
<S> <C> <C> <C> <C>
1 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
2 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
3 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
4 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
5 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
6 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
7 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
8 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
9 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
10 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
11 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
12 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
13 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
14 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
15 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
16 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
17 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
18 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
19 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
20 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
21 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
22 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
23 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
24 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
25 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
26 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
ITEM AMAT PART DESCRIPTION UNIT PRICE 1998 UNIT PRICE 1999 UNIT PRICE 2000 UNIT LEAD TIME WARRANTY
NUMBER MONTHS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
27 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
28 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
29 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
30 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
31 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
32 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
33 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
34 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
35 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
36 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
37 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
38 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
39 [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ] [ * * * ]
<CAPTION>
- ----------------------------------------------------
ITEM MAX LIABILITY EAU '98 EAU '99 EAU '00
[ * * * ]
- ----------------------------------------------------
<S> <C> <C> <C> <C>
27 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
28 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
29 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
30 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
31 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
32 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
33 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
34 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
35 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
36 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
37 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
38 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
39 [ * * * ] [ * * * ] [ * * * ] [ * * * ]
</TABLE>
NOTES:
1. EAUs (Estimated Annual Usages) are ESTIMATES ONLY, based on
Applied's Forecast
2. 1998 EAUs are from Applied Internal Website dated 4/28/98
3. 1999 EAUs are from original estimates 11/25/97
4. 2000 EAUs are based on an expected [ * * * ] increase
5. Exhibit 2: HOSHIN PLAN, itemizes reduced pricing by part for VAE
Projects
6. 1999 Pricing is effective 1/1/99
<PAGE>
Standard Industrial Lease Agreement
Cross Creek Business Center Lease Form (4/6/98)
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between CROSS PARK
INVESTORS, LTD., hereinafter referred to as "Landlord", and ADVANCED ENERGY
INDUSTRIES, INC., hereinafter referred to as "Tenant".
1. PREMISES AND TERM. In consideration of the mutual obligations of
Landlord and Tenant set forth herein, Landlord leases to Tenant and Tenant
hereby takes from Landlord, certain leased premises situated within the
County of Travis, State of Texas, and known locally as SUITE 400, CROSS CREEK
BUSINESS CENTER, LOCATED AT 8601 CROSS PARK DRIVE AND CONSISTING OF
APPROXIMATELY 6,812 SQUARE FEET OF RENTABLE AREA AS MEASURED TO THE
BUILDING'S DRIP LINE and as more particularly described on EXHIBIT "A"
attached hereto and incorporated herein by reference (THE "PREMISES"), to
have and to hold, subject to the term, covenants and conditions in this
Lease. The term of this Lease shall commence on the COMMENCEMENT DATE as
hereinafter set forth and shall end on the last day of the month that is
TWELVE (12) months after the Commencement Date.
A. EXISTING BUILDING AND IMPROVEMENTS. The "Commencement Date" shall
be JUNE 1, 1998 or the date Fisher-Rosemount Systems, Inc. has vacated the
Premises and Tenant has begun to occupy the Premises, whichever should occur
earliest. Tenant acknowledges that (i) it has inspected and accepts the
Premises in its "as is" condition, (ii) the buildings and improvements
comprising the same are suitable for the purpose for which the Premises are
leased, (iii) the Premises are in good and satisfactory condition and (iv) no
representations as to the repair of the Premises, nor promises to alter,
remodel or improve the Premises have been made by Landlord (unless otherwise
expressly set forth in this Lease).
2. BASE RENT, SECURITY DEPOSIT AND ESCROW DEPOSITS.
A. BASE RENT. Tenant agrees to pay to Landlord rent for the Premises
in advance, without demand, deduction or set off, at the rate of:
MONTHS 1 THROUGH 12: FOUR THOUSAND FOUR HUNDRED TWENTY-SEVEN DOLLARS
AND 80/XX ($4,427.80) PER MONTH,
during the term hereof. One monthly installment of Base Rentt and other
monthly charges set forth in Paragraph 2C below, shall be due and payable on
the date hereof, and a like monthly installment shall be due and payable on
or before the first day of each calendar month succeeding the Commencement
Date, except that all payments due thereunder for any fractional calendar
month shall be prorated.
B. SECURITY DEPOSIT. In addition, Tenant agrees to deposit with
Landlord on the date hereof the sum of FIVE THOUSAND SEVEN HUNDRED AND NINETY
DOLLARS AND 20/XX ($5,790.20) which shall be held by Landlord, without
obligation for interest, as security for the performance of Tenant's
obligations under this Lease (the "Security Deposit"), it being expressly
understood and agreed that the Security Deposit is not an advance rental
deposit or a measure of Landlord's damages in case of Tenant's default. Upon
occurrence of an Event of Default, Landlord may use all or part of the
Security Deposit to pay past due rent or other payments due Landlord under
this Lease, or the cost of any other damage, injury, expense or liability
caused by such Event of Default, without prejudice to any other remedy
provided herein or provided by law. On demand, Tenant shall pay Landlord the
amount that will restore the Security Deposit to its original amount. The
Security Deposit shall be deemed the property of Tenant and any remaining
balance of the Security Deposit shall be returned by Landlord to Tenant when
all of Tenant's present and future obligations under this Lease have been
fulfilled.
C. ESCROW DEPOSITS. Without limiting in any way Tenant's other
obligations under this Lease, Tenant agrees to pay to Landlord its
Proportionate Share (as defined in this Paragraph 2C below) of (i) Taxes *
payable by Landlord pursuant to Paragraph 3A below, (ii) the cost of
utilities payable by Landlord pursuant to Paragraph 8 below, (iii) Landlord's
cost of maintaining insurance pursuant to Paragraph 9A below and (iv)
Landlord's cost of maintaining any common area charges payable by Tenant in
accordance with Paragraph 4B below (collectively, the "Tenant Costs").
During each month of the term of this Lease, on the same day that rent is due
hereunder, Tenant shall deposit in escrow with Landlord an amount equal to
1/12 of the estimated annual amount of Tenant's Proportionate Share of the
Tenant Costs. Tenant authorizes Landlord to use the funds deposited with
Landlord under this Paragraph 2C to pay such Tenant Costs. The initial
monthly escrow payments are based upon the estimated amounts for the year in
which the Commencement Date occurs, and shall be increased or decreased
annually to reflect the projected actual amount of all Tenant Costs. If the
Tenant's total escrow deposits for any calendar year are less than Tenant's
actual Proportionate Share of the Tenant Costs for such calendar year,
Tenant shall pay the difference to Landlord within thirty (30) days after
demand. If the total escrow deposits of Tenant for any calendar year are
more than Tenant's actual Proportionate Share of the Tenant Costs for such
calendar year, Landlord shall retain such excess and credit it against
Tenant's escrow deposits next maturing after such determination. In the
event the Premises constitute a portion of a multiple occupancy building (the
"Building"), Tenant's "Proportionate Share" with respect to the Building, as
used in this Lease, shall mean a fraction, the numerator of which is the net
rentable area contained in the Premises and the denominator of which is the
net rentable area contained in the entire Building. In the event the
Premises or the Building is part of a project or business park owned, managed
or leased by Landlord, or an affiliate of Landlord (the "Project"), Tenant's
"Proportionate Share" of the Project, as used in this Lease shall mean a
fraction, the numerator of which is the net rentable area contained in the
Premises and the denominator of which is the net rentable area contained in
all of the buildings (including the Building) within the Project. For the
purposes of this Lease, Tenant's proportionate share shall be defined as
ELEVEN AND TWO TENTHS PERCENT (11.2%).
3. TAXES.
A. REAL PROPERTY TAXES. Subject to reimbursement under Paragraph 2C
herein, Landlord agrees to pay all Taxes* that accrue against the Premises,
the Building and /or the land of which the Premises or the Building are a
part. If at any time during the term of this Lease, there shall be levied,
assessed or imposed on Landlord a capital levy or other tax directly on the
rents received therefrom and /or the land and improvements of which the
Premises are a part, then all such taxes, assessments, levies or charges, or
the part thereof so measured or based, shall be deemed to be included within
the term "Taxes" for the purpose hereof. The Landlord shall have the right
to employ a tax consulting firm to attempt to assure a fair tax burden on the
real property within the applicable taxing jurisdiction. Tenant agrees to
pay its Proportionate Share of the cost of such consultant.
B. PERSONAL PROPERTY TAXES. Tenant shall be liable for all taxes levied
or assessed against any personal property or fixtures placed in or on the
Premises. If any such taxes are levied or assessed against Landlord or
Landlord's property (i) Landlord pays the same or (ii) the assessed value of
Landlord's property is increased by inclusion of such personal property and
fixtures and Landlord pays the increased taxes, then Tenant shall pay to
Landlord, upon demand, the amount of such taxes.
4. LANDLORD'S REPAIRS AND MAINTENANCE.
A. STRUCTURAL REPAIRS. Landlord, at its own cost and expense, shall
maintain the roof, foundation and the structural soundness of the exterior
walls of the Building in good repair, reasonable wear and tear excluded. The
term "walls" as used herein shall not include windows, glass, or plate glass,
any doors, special store fronts or office entries, and the term "foundation"
as used herein shall not include loading docks. Tenant shall immediately
give Landlord written notice of defect or need for repairs, after which
Landlord shall have thirty (30) days to commence to effect such repairs or
cure such defect. In the event a defect occurs that seriously jeopardizes the
safety of persons occupying the Premises or threatens equipment or machinery
owned by Tenant within the Premises, and Landlord has failed to commence the
repairs for such defect within the thirty (30) day period outlined above,
Tenant shall be permitted to initiate the repair and Landlord will be
obligated to reimburse Tenant for the actual cost of the repair.
B. TENANT'S SHARE OF COMMON AREA CHARGES. Tenant agrees to pay its
Proportionate Share of the cost of (i) maintenance and/or landscaping
(including both maintenance and replacement of landscaping) of any property
that is a part of the Building and/or the Project; and (ii) operating,
maintaining and repairing any property, facilities or services (including
without limitation utilities and insurance therefor) provided for the
*For purposes of this Lease, "Taxes" means all taxes, assessments and
governmental charges (excluding any federal and state income taxes, franchise
taxes, profit taxes and lease taxes, so long as such federal and state income
taxes, franchise taxes, profit taxes or lease taxes are not assessed in lieu
of some or all of the customary ad valorem taxes being assessed against the
Project as of the date of this Lease).
C. REASSESSMENTS. At the reasonable request of Tenant, Landlord shall
vigorously challenge any increases in Taxes, arising from a reassessment of
Landlord's property or otherwise.
Landlord's Initials _____
Tenant's Initials _____
<PAGE>
use or benefit of Tenant or the common use or benefit of Tenant and other
lessees of the Project or the Building; and (iii) the reasonable cost of
property management and supervision which shall be at rates customary of the
property type and market conditions.
Landlord reserves the right to perform, in whole or in part and without
notice to Tenant, maintenance, repairs and replacements to the paving, common
area landscape replacement and maintenance, exterior painting, common sewage
line plumbing and any other items that are provided for the use or benefit of
Tenant or the common use or benefit of Tenant and other lessees of the
Project or the Building; in which event, Tenant shall be liable for its
Proportionate Share of the cost and expense of such repair, replacement,
maintenance and other such items.
5. TENANT'S REPAIRS.
A. MAINTENANCE OF PREMISES AND APPURTENANCES. Tenant at its own
cost and expense, shall (i) maintain all parts of the Premises and promptly
make all necessary repairs and replacements to the Premises (except those for
which Landlord is expressly responsible hereunder), and (ii) keep the parking
areas, driveways and alleys surrounding the Premises in a clean and sanitary
condition. Tenant's obligation to maintain, repair and make replacements to
the Premises shall cover, but not be limited to, pest control (including
termites), trash removal and the maintenance repair and replacement of all
HVAC, electrical, plumbing, sprinkler and other mechanical systems. For the
purposes of this Lease, Landlord shall assign all warranties received from
the general contractor who constructs the Tenant Improvements within the
Premises and Tenant shall look to the general contractor for warranty on all
repairs and replacements required within the Premises.
B. PARKING. Tenant and its employees, customers and licensees shall
have the right to use only its Proportionate share of any parking areas that
have been designated for such use by Landlord in writing, subject to (i) all
rules and regulations promulgated by Landlord; and (ii) rights of ingress and
egress of other lessees. Landlord shall not be responsible for enforcing
Tenant's parking rights against any third parties, and Tenant expressly does
not have the right to tow or obstruct improperly parked vehicles. Tenant
agrees not to park on any public streets or private roadways adjacent to or
in the vicinity of the Premises. For the purposes of this Lease, Tenant
shall be allotted twenty-five (25) parking spaces.
C. SYSTEM MAINTENANCE. Tenant at its own cost and expense, shall enter
into a regularly scheduled preventative maintenance/service contract with a
maintenance contractor approved by Landlord for servicing all hot water,
heating and air conditioning systems and equipment within the Premises. The
service contract must include all services suggested by the equipment
manufacturer in its operations/maintenance manual and must become effective
within thirty (30) days of the date Tenant takes possession of the Premises.
In the event of a failure to the heating and air conditioning system, Tenant
shall be obligated to pay the first two thousand dollars ($2,000.00) towards
any repair or replacement (per occurrence) of the heating and air
conditioning system. In the event the repair or replacement cost (per
occurrence) exceeds two thousand dollars ($2,000.00), Landlord and Tenant
shall share the cost equally for the repair or replacement.
6. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed. Tenant, at its
own cost and expense, may erect such shelves, bins, machinery and trade
fixtures as it desires, provided that (a) such items do not alter the basic
character of the Premises or the Building; (b) such items do not overload or
damage same; (c) such items may be removed without injury to the Premises;
and (d) the construction, erection or installation thereof complies with all
applicable governmental laws ordinances, regulations and with Landlord's
specifications and requirements. Tenant shall be responsible for compliance
with The American With Disabilities Act of 1990. Without implying any
consent of Landlord thereto, all alterations, additions, improvements and
partitions erected by Tenant shall be remain the property of Tenant during
the term of this Lease. All shelves, bins machinery and trade fixtures
installed by Tenant shall be removed on or before the earlier to occur of the
day of termination or expiration of this Lease or vacating the Premises, at
which time Tenant shall restore the Premises to their original condition,
normal wear and tear excepted. Alterations, installations, removals and
restorations shall be performed in a good and workmanlike manner so as not to
damage or alter the primary structure or structural qualities of the Building
or other improvements situated on the Premises or of which the Premises are a
part.
7. SIGNS. Any signage Tenant desires for the Premises shall be subject to
Landlord's written approval, which shall not be unreasonably withheld or
delayed and shall be submitted to Landlord prior to the Commencement Date of
this Lease. Tenant shall repair and/or replace the Building facia surface to
which its signs are attached upon Tenant's vacation of the Premises or the
removal or alteration of its signage. Tenant shall not, without Landlord'
prior written consent, (i) make any changes to the exterior of the Premises,
(ii) install any exterior lights, decorations, balloons, flags, pennants,
banners or painting, or (iii) erect or install any signs, windows or door
lettering, placards, decorations or advertising media of any type which can
be viewed from the exterior of the Premises. All signs, decorations,
advertising media, blinds, draperies and other window treatment or bars or
other security installations visible from outside the Premises shall conform
in all respects to the criteria established by Landlord or shall be otherwise
subject to Landlord's prior written consent. For the purposes of this Lease,
Tenant shall be permitted to use its company logo and colors so long as the
design, installation and location of the sign is consistent with the
requirements outlined in Exhibit "E", Sign Criteria.
8. UTILITIES. Landlord agrees to provide normal water and electricity
service to the Premises. Tenant shall pay for all water, gas, heat, light,
power, telephone, sewer, sprinkler charges and other utilities and services
used on or at the Premises, together with any taxes, penalties, surcharges or
the like pertaining to the Tenant's use of the Premises, and any maintenance
charges for utilities. Landlord shall have the right to cause any of said
services to be separately metered to Tenant, at Tenant's expense. Tenant
shall pay its pro rata share, as reasonably determined by Landlord, of all
charges for jointly metered utilities. Unless resulting from Landlord's
negligence or willful misconduct, Landlord shall not be liable for any
interruption or failure of utility service on the Premises and Tenant shall
have no rights or claims as a result of any such failure. In the event water
is not separately metered to Tenant, Tenant agrees that it will not use water
and sewer capacity for uses other than normal domestic restroom and kitchen
usage and Tenant further agrees to reimburse Landlord for the entire amount
of common water and sewer costs as additional rental if, in fact, Tenant uses
water or sewer capacity for uses other than normal domestic restroom and
kitchen uses without first obtaining Landlord's written permission,
including, but not limited to, the cost for acquiring additional sewer
capacity to service Tenant's excess sewer use. Furthermore, Tenant agrees in
such event to install at its own expense a submeter to determine Tenant's
usage.
9. INSURANCE.
A. LANDLORD'S INSURANCE. Subject to reimbursement under Paragraph 2C
herein, Landlord shall maintain insurance covering the Building in an amount
not less than eighty percent (80%) of the "replacement cost" thereof,
insuring against the perils of fire, lightning, flood, tornado, hail,
extended coverage, vandalism and malicious mischief.
B. TENANT'S INSURANCE. Tenant, at its own expense, shall maintain
during the term of this Lease a policy or policies of worker's compensation
and comprehensive general liability insurance, including personal injury and
property damage, with contractual liability endorsement, in the amount of
Five Hundred Thousand Dollars ($500,000.00) for property damage and One
Million dollars ($1,000,000.00) per occurrence and Two Million Dollars
($2,000,000.00) in the aggregate for personal injuries or deaths of persons
occurring in or about the Premises. Tenant, at its own expense, also shall
maintain during the term of this Lease, fire and extended coverage insurance
covering the replacement cost of (i) all alterations, additions, partitions
and improvements installed or placed on the Premises by Tenant or by Landlord
on behalf of Tenant and (ii) all of Tenant's personal property contained
within the Premises. Said policies shall (i) name Landlord as an additional
insured and insure Landlord's contingent liability under or in connection
with this Lease (except for the worker's compensation policy, which instead
shall include waiver of subrogation endorsement in favor of Landlord) (ii) be
insured by an insurance company which is acceptable to Landlord, and (iii)
provide that said insurance shall not be canceled unless thirty (30) days
prior written notice has been given to Landlord. Said policy or policies or
certificates thereof shall be delivered to Landlord by Tenant on or before
the Commencement Date and upon each renewal of said insurance.
C. PROHIBITED USES. Tenant will not permit the Premises to be used for
any purpose or in any manner that would (i) void the insurance thereon, (ii)
increase the insurance risk or cost thereof, or (iii) cause the disallowance
of any sprinkler credits; including without limitation, use of the Premises
for the receipt, storage or handling of any product, material or merchandise
that is explosive or highly inflammable. If any increase in the cost of any
insurance on the Premises or the Building is caused by Tenant's use of the
Premises, or because Tenant vacates the Premises, then Tenant shall pay the
amount of such increase to Landlord within thirty (30) days of written demand
therefor.
10. FIRE AND CASUALTY DAMAGE.
2 Landlord's Initials _____
Tenant's Initials _____
<PAGE>
A. TOTAL OR SUBSTANTIAL DAMAGE AND DESTRUCTION. If the Premises or
the Building should be damaged or destroyed by fire or other peril, Tenant
shall immediately give written notice to Landlord of such damage or
destruction. If the Premises or the Building should be totally destroyed by
any peril covered by the insurance to be provided by Landlord under Paragraph
9A above, or if they should be so damaged thereby that, in Landlord's
estimation, rebuilding or repairs cannot be completed within one hundred and
fifty (150) days after the date of such damage or after such completion there
is not enough time remaining under the terms of this Lease to fully amortize
such rebuilding or repairs, then Landlord shall so notify Tenant in writing
and this Lease shall terminate and the rent shall be abated during the
unexpired portion of this Lease, effective upon the date of the occurrence of
such damage.
B. PARTIAL DAMAGE OR DESTRUCTION. If the Premises or the Building
should be damaged by any perils covered by the insurance to be provided by
Landlord under Paragraph 9A above and, in Landlord's estimation, rebuilding
or repairs can be substantially completed within one hundred fifty (150) days
after the date of such damage, then this Lease shall not terminate and
Landlord shall restore the Premises to its previous condition, except that
Landlord shall not be required to rebuild, repair or replace any part of the
partitions, fixtures, additions and other improvements that may have been
constructed, erected or installed in or about the Premises for the benefit of
or by or for Tenant. In the event of partial damage to the Premises, rent
shall abate for the period of reconstruction for the portion of the Premises
that cannot be occupied due to the casualty.
C. LIENHOLDERS RIGHTS IN PROCEEDS. Notwithstanding anything herein to
the contrary, in the event the holder of any indebtedness secured by a
mortgagee or deed of trust covering the Premises requires that the insurance
proceeds be applied to such indebtedness, then Landlord shall have the right
to terminate this Lease by delivering written notice of termination to Tenant
within fifteen (15) days after such requirement is made known to Landlord by
any such holder, whereupon all rights and obligations hereunder shall cease
and terminate.
D. WAIVER OF SUBROGATION. Notwithstanding anything in this Lease to
the contrary, Landlord and Tenant hereby waive and release each other of and
from any and all rights of recovery, claims, actions or causes of action
against each other, or their respective agents, officers and employees, for
any loss or damage that may occur to the Premises, improvements to the
Building or personal property (Building contents) within the Building and/or
Premises, for any reason regardless of cause or origin. Each party to this
Lease agrees immediately after execution of this Lease to give written
notice of the terms of the mutual waivers contained in this subparagraph to
each insurance company that has issued to such party policies of fire and
extended coverage insurance and, if necessary, to have the insurance policies
properly endorsed to provide that the carriers of such policies waive all
rights of recovery under subrogation or otherwise against the other party.
11. LIABILITY AND INDEMNIFICATION. Except for any claims, rights of
recovery and causes of action that Landlord has released, Tenant shall hold
Landlord harmless from and defend Landlord against any and all claims or
liability for any injury or damage (i) to any person or property whatsoever
occurring in, on or about the Premises or any part thereof, the Building
and/or about the Premises or any part thereof, the Building and/or common
areas, the use of which Tenant may have in accordance with this Lease, if
(and only if) such injury or damage shall be caused in whole or in part by
the act, gross neglect, fault or willful omission of any duty by Tenant, its
agents, servant, employees or invitees, (ii) arising from the conduct or
management of any work done by the Tenant in or about the Premises, (iii)
arising from transactions of the Tenant, and (iv) all costs, counsel fees,
expenses and liabilities incurred in connection with any such claim or action
or proceeding brought thereon. The provisions of this Paragraph 11 shall
survive the expiration or termination of this Lease. Landlord shall not be
liable in any event for personal injury or loss of Tenant's property caused
by fire, flood, water leaks, rain, hail, ice, snow, smoke, lightning, wind,
explosion, interruption of utilities, or other occurrences unless resulting
from Landlord's acts. Landlord strongly recommends that Tenant secure
Tenant's own insurance, in excess of the amounts required elsewhere in this
Lease, to protect against the above occurrences if Tenant desires additional
coverage for such risks. Tenant shall give prompt notice to Landlord of any
significant accidents involving injury to persons or property. Furthermore,
Landlord shall not be responsible for lost or stolen personal property,
equipment, money or jewelry from the Premises or from the public areas of the
Building or the Project, or for any damages or losses caused by theft,
burglary, assault, vandalism, or other crimes. Landlord strongly recommends
that Tenant provide its own security systems and services and secure Tenant's
own insurance in excess of the amounts required elsewhere in this Lease, to
protect against the above occurrences if Tenant desires additional protection
or coverage for such risks. Tenant shall give Landlord prompt notice of any
criminal or suspicious conduct within or about the Premises, the Building or
the Project, and/or any personal injury or property damage caused thereby.
Landlord may, but is not obligated to, enter into agreements with third
parties for the provision of any courtesy patrols or similar services or fire
protective systems and equipment and, to the extent same is provided in
Landlord's sole discretion, Landlord shall not be liable to Tenant for any
damages, costs or expenses which occur for any reason in the event any such
system or equipment is not properly installed, monitored or maintained or any
such services are not properly provided, unless resulting from Landlord's
acts. Landlord shall use reasonable diligence in the maintenance of existing
lighting, if any, in the parking areas servicing the Premises, and Landlord
shall not be responsible for additional lighting or any security measures in
the Project, the Premises or other parking areas.
12. USE. The Premises shall be used only for the purpose of manufacturing,
sales, research and development, telephone support, design, receiving,
storing, shipping and selling (other than retail) products, materials and
merchandise made and/or distributed by Tenant and for such other lawful
purposes as may be directly incidental thereto. Outside storage, including
without limitation storage of trucks and other vehicles, is prohibited
without Landlord's prior written consent. Tenant shall comply with all
governmental laws, ordinances and regulations applicable to the use of the
Premises, and shall promptly comply with all governmental orders and
directives for the correction, prevention and abatement of nuisances in or
upon or connected with the Premises, all at Tenant's sole expense. Tenant
shall not permit any objectionable or unpleasant odors, smoke, dust, gas,
noise or vibrations to emanate from the Premises, nor take any other action
that would constitute a nuisance or would disturb, unreasonably interfere
with or endanger Landlord or any other lessees of the Building or the Project.
13. HAZARDOUS WASTE. The term "Hazardous Substances," as used in this
Lease, shall mean pollutants, contaminants, toxic or hazardous wastes,
radioactive materials or any other substances, the use and/or the removal of
which is required or the use of which is restricted, prohibited or penalized
by any "Environmental Law," which term shall mean any federal, state or local
statute, ordinance, regulation or other law of a governmental or
quasi-governmental authority relating to pollution or protection of the
environment or the regulation of the storage or handling of Hazardous
Substances. Limited to its actions only, Tenant hereby agrees that: (i) no
activity will be conducted on the Premises that will produce any Hazardous
Substance, except for such activities that are part of the ordinary course of
Tenant's business activities (the "Permitted Activities"), provided said
Permitted Activities are conducted in accordance with all Environmental Laws
and have been approved in advance in writing by Landlord, which approval
shall not be unreasonably withheld or delayed and, in connection therewith,
Tenant shall be responsible for obtaining any required permits or
authorizations and paying any fees and providing any testing required by any
governmental agency; (ii) the Premises will not be used in any manner for the
storage of any Hazardous Substances, except for the temporary storage of such
materials that are used in the ordinary course of Tenant's business (the
"Permitted Materials"), provided such Permitted Materials are properly stored
in a manner and location meeting all Environmental Laws and have been
approved in advance in writing by Landlord, which such approval shall not be
unreasonably withheld or delayed, and, in connection therewith, Tenant shall
be responsible for obtaining any required permits or authorizations and
paying any fees and providing any testing required by any governmental
agency; (iii) no portion of the Premises will be used as a landfill or a
dump; (iv) Tenant will not install any underground tanks of any type; (v)
Tenant will not allow any surface or subsurface conditions to exist or come
into existence that constitute, or with the passage of time may constitute, a
public or private nuisance; (vi) Tenant will not permit any Hazardous
Substances to be brought onto the Premises, except for the Permitted
Materials, and if so brought or found located thereon, the same shall be
immediately removed, with proper disposal, and all required clean-up
procedures shall be diligently undertaken by Tenant at its sole cost pursuant
to all Environmental Laws. Upon prior notice during normal business hours,
Landlord and Landlord's representatives shall have the right but not the
obligation to enter the Premises for the purpose of inspecting the storage,
use and disposal of any Permitted Materials to ensure compliance with all
Environmental Laws. Should it be determined, in Landlord's sole opinion,
that any Permitted Materials are being improperly stored, used or disposed
of, then Tenant shall immediately take such corrective action as requested by
Landlord. Should Tenant fail to take such corrective action within
twenty-four (24) hours, Landlord shall have the right to perform such work
and Tenant shall reimburse Landlord, on demand, for any and all costs
associated with said work. If at any time during or after the term of this
Lease, the Premises is found to be contaminated with Hazardous Materials,
Tenant shall diligently institute proper and thorough clean-up procedures, at
Tenant's sole cost. TENANT AGREES TO INDEMNIFY AND HOLD LANDLORD HARMLESS
FROM ALL CLAIMS, DEMANDS, ACTIONS, LIABILITIES, COSTS, EXPENSES, DAMAGES,
PENALTIES AND OBLIGATIONS OF ANY NATURE ARISING FROM OR AS A RESULT OF ANY
CONTAMINATION OF THE PREMISES WITH HAZARDOUS SUBSTANCES BY TENANT, OR
OTHERWISE ARISING FROM THE USE OF THE PREMISES BY TENANT. THE FOREGOING
INDEMNIFICATION AND THE RESPONSIBILITIES OF TENANT SHALL SURVIVE THE
TERMINATION OR EXPIRATION OF THIS LEASE.
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14. INSPECTION. Landlord's agents and representatives, upon notice to
Tenant, shall have the right to enter the Premises at any reasonable time
during business hours (or at any time in case of emergency) (i) to inspect
the Premises; (ii) to make such repairs as may be required or permitted
pursuant to this Lease; and/or (iii) during the last six (6) months of the
Lease term, for the purpose of showing the Premises. In addition, Landlord
shall have the right to erect a suitable sign on the Premises stating the
Premises are available for Lease. Tenant shall notify Landlord in writing at
least thirty (30) days prior to vacating the Premises and shall arrange to
meet with Landlord for a joint inspection of the Premises prior to vacating.
If Tenant fails to give such notice or to arrange for such inspection, then
Landlord's inspection of the Premises shall be deemed correct for the purpose
of determining Tenant's responsibility for repairs and restoration of the
Premises.
15. ASSIGNMENT AND SUBLETTING. Tenant shall not have the right to sublet,
assign or otherwise transfer or encumber this Lease, or any interest therein,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. Any attempted assignment, subletting,
transfer of encumbrance by Tenant in violation of the terms and covenants of
this paragraph shall be void. Any assignee, sublessee or transferee of
Tenant's interest in this Lease (all such assignees, sublessees and
transferees being hereinafter referred to as "Transferees"), by assuming
Tenant's obligations hereunder, shall assume liability to Landlord for all
amounts paid to persons other than Landlord by such Transferees to which
Landlord is entitled or otherwise in contravention of this Paragraph 15. No
assignment, subletting or other transfer, whether or not consented to by
Landlord or permitted hereunder, shall relieve Tenant of its liability under
this Lease. If an Event of Default occurs while the Premises or any part
thereof are assigned or sublet, then Landlord, in addition to any other
remedies herein provided or provided by law, may collect directly from such
Transferee all rents payable to the Tenant and apply such rent against any
sums due Landlord hereunder. No such collection shall be construed to
constitute a novation or a release of Tenant from the further performance of
Tenant's obligations hereunder. If Landlord consents to any subletting or
assignment by Tenant as hereinabove provided and any category of rent
subsequently received by Tenant under any such sublease is in excess of the
same category of rent payable under this Lease, or any additional
consideration is paid to Tenant by the assignee under any such assignment,
then Landlord may, at its option, declare such excess rents under any
sublease or such additional consideration for any assignment to be due and
payable by Tenant to Landlord as additional rent hereunder. The following
shall additionally constitute an assignment of this Lease by Tenant for the
purposes of this Paragraph 15.: (i) if Tenant is a corporation, any merger,
consolidation, dissolution or liquidation, or any change in ownership or
power to vote of thirty percent (30%) or more of Tenant's outstanding voting
stock; (ii) if Tenant is a partnership, joint venture or other entity, any
liquidation, dissolution or transfer of ownership of any interests totaling
thirty percent (30%) or more of the total interests in such entity; (iii)
the sale, transfer, exchange, liquidation or other distribution of more than
thirty percent (30%) of Tenant's assets, other than this Lease; or (iv) the
mortgage, pledge, hypothecation or other encumbrance of or grant of a
security interest by Tenant in this Lease, or of any of Tenant's rights
hereunder. For the purposes of this Lease, the merger or sale of a division
owned by Tenant shall not constitute an assignment under this Lease.
16. CONDEMNATION. If more than eighty percent (80%) of the Premises or the
required parking and access related thereto, are taken for any public or
quasi-public use under governmental law, ordinance or regulation, or by right
of eminent domain or private purchase in lieu thereof, and the taking
prevents or materially interferes with the use of the remainder of the
Premises for the purpose for which they were leased to Tenant, then this
Lease shall terminate and the rent shall be abated during the unexpired
portion of this Lease, effective on the date of such taking. If less than
eighty percent (80%) of the Premises are taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or
by right of eminent domain or private purchase in lieu thereof, or if the
taking does not prevent or materially interfere with the use of the
remainder of the Premises, parking, access and loading for the purpose for
which they were leased to Tenant, then this Lease shall not terminate,
but the rent payable hereunder during the unexpired portion of this Lease
shall be reduced to such extent as may be fair and reasonable under all
of the circumstances. All compensation awarded in connection with or as a
result of any of the foregoing proceedings shall be the property of
Landlord, and Tenant hereby assigns any interest in any such award to
Landlord: provided, however, Landlord shall have no interest in any award
made to Tenant for loss of business or goodwill or for the taking of Tenant's
trade fixtures and personal property, if a separate award for such items
is made to Tenant.
17. HOLDING OVER. At the termination of this Lease by its expiration or
otherwise, Tenant shall immediately deliver possession of the Premises to
Landlord with all repairs and maintenance required herein to be performed by
Tenant completed. If, for any reason, Tenant retains possession of the
Premises after the expiration or termination of this Lease, unless the
parties hereto otherwise agree in writing, such possession shall be deemed
to be a tenancy at will only, and all other terms and provisions of this
Lease shall be applicable during such period, except that Tenant shall pay
Landlord from time to time, upon demand, as rental for the period of such
possession, an amount equal to one and one-half times the rent in effect on
the date of such termination of this Lease, computed on a daily basis for
each day of such period. No holding over by Tenant, whether with or without
consent of Landlord, shall operate to extend this Lease except as otherwise
expressly provided. The preceding provisions of this Paragraph 17 shall not
be construed as consent for Tenant to retain possession of the Premises in
the absence of written consent thereto by Landlord.
18. QUIET ENJOYMENT. Landlord represents that it has the authority to enter
into this Lease and that, so long as Tenant pays all amounts due hereunder
and performs all other covenants and agreements herein set forth, Tenant
shall peaceably and quietly have, hold and enjoy the Premises for the term
hereof without hindrance or molestation from Landlord, subject to the terms
and provisions of this Lease.
19. EVENTS OF DEFAULT. The following events (herein individually referred to
as an "Event of Default") each shall be deemed to be default in or breach of
Tenant's obligations under this Lease:
A. Tenant shall fail to pay any installment of the rent herein
reserved when due, or any other payment or reimbursement to Landlord required
herein when due, and such failure shall continue for a period of ten (10)
days from the date Landlord provided written notice that such payment was due.
C. Tenant shall fail to discharge any lien placed upon the Premises in
violation of paragraph 22 hereof within twenty (20) days after any such lien
or encumbrance is filed against the Premises.
D. Tenant shall default in the performance of any of its obligations
under any other lease to Tenant from Landlord, or from any person or entity
affiliated with or related to Landlord, and same shall remain uncured after
the lapsing of any applicable cure period provide for under such other lease.
E. Tenant shall fail to comply with any term, provision or covenant of
this Lease (other than those listed above in this paragraph), and shall not
cure such failure within thirty (30) days after written notice thereof from
Landlord.
20. REMEDIES. Upon each occurrence an Event of Default, Landlord shall have
the option to pursue anyone or more of the following remedies without any
notice or demand:
(a) Terminate this Lease;
(b) Enter upon and take possession of the Premises without terminating
this Lease;
(c) Make such payments and/or take such action and pay and/or perform
whatever Tenant is obligated to pay or perform under the terms of this Lease,
and Tenant agrees that Landlord shall not be liable for any damages resulting to
Tenant from such action; and/or
(d) Alter all locks and other security devices at the Premises, with or
without terminating this Lease, and pursue, at Landlord's option, one or more
remedies pursuant to this Lease, and Tenant hereby expressly agrees that
Landlord shall not be required to provide to Tenant the new key to the
Premises, regardless of hour, including Tenant's regular business hours;
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and in any such event Tenant shall immediately vacate the Premises, and if
Tenant fails so to do, Landlord, without waiving any other remedy it may
have, may enter upon and take possession of the Premises and expel or remove
Tenant and any other person who may be occupying such Premises or any part
thereof, without being liable for prosecution or any claim of damages
therefor. In the event of any violation of Section 93.008 of the Texas
Property Code by Landlord or by any agent or employee of Landlord, Tenant
hereby expressly waives any and all rights Tenant may have under Paragraph
(g) of such Section 93.008.
A. DAMAGES UPON TERMINATION. If Landlord terminates this Lease, at
Landlord's option, Tenant shall be liable for and shall pay to Landlord the
sum of all rental and other payments owed to Landlord hereunder accrued to
the date of such termination, plus, as liquidated damages, an amount equal to
(1) the present value of the total rental and other payments owed hereunder
for the remaining portion of the Lease term, calculated as if such term
expired on the date set forth in Paragraph 1, less, (2) the present value of
the then fair market rental for the Premises for such period, provided that,
because of the difficulty of ascertaining such value and in order to achieve
a reasonable estimate of liquidated damages hereunder, Landlord and Tenant
stipulate and agree, for the purposes hereof, that such fair market rental
shall in no event exceed seventy-five percent (75%) of the rental amount for
such period set forth in Paragraph 2 above.
B. DAMAGES UPON REPOSSESSION. If Landlord repossesses the Premises
without terminating this Lease, Tenant, at Landlord's option, shall be liable
for and shall pay Landlord on demand all rental and other payments owed to
Landlord hereunder, accrued to the date of such repossession, plus all
amounts required to be paid by Tenant to Landlord until the date of
expiration of the term as stated in Paragraph 1, diminished by all amounts
actually received by Landlord through reletting the Premises during such
remaining term (but only to the extent of the rent herein reserved). Actions
to collect amounts due by Tenant to Landlord under this paragraph may be
brought from time to time, on one or more occasions, without the necessity of
Landlord's waiting until expiration of the Lease term.
C. COSTS OF RELETTING, REMOVING, REPAIRS AND ENFORCEMENT. Upon an
Event of Default, in addition to any sum provided to be paid under this
Paragraph 20, Tenant also shall be liable for and shall pay to Landlord (i)
brokers' fees and all other costs and expenses incurred by Landlord in
connection with reletting the whole or any part of the Premises; (ii) the
costs of removing, storing or disposing Tenant's or any other occupant's
property; (iii) the costs of repairing, altering, remodeling or otherwise
putting the Premises into condition acceptable to a new Tenant or Tenants:
(iv) any and all actual costs and expenses incurred by Landlord in effecting
compliance with Tenant's obligations under this Lease; and (v) all reasonable
expenses incurred by Landlord in enforcing or defending Landlord's rights
and/or remedies hereunder, including without limitation, all reasonable
attorneys' fees and all court costs incurred in connection with such
enforcement or defense.
D. LATE CHARGE. In the event Tenant fails to make any payment due
hereunder within five (5) days after such payment is due, including without
limitation any rental or escrow payment, in order to help defray the
additional cost to Landlord for processing such late payments and not as
interest, Tenant shall pay to Landlord on demand a late charge in an amount
equal to five percent (5%) of such payment. The provision for such late
charge shall be in addition to all of Landlord's other rights and remedies
hereunder or at law, and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner.
E. INTEREST ON PAST DUE AMOUNTS. If Tenant fails to pay any sum which
at any time becomes due to Landlord under any provision of this Lease as and
when the same becomes due hereunder, and such failure continues for ten (10)
days after the due date for such payment, then Tenant shall pay to Landlord
interest on such overdue amounts from the date due until paid at an annual
rate which equals the lesser of (i) eighteen percent (18%) or (ii) the
highest rate then permitted by law.
F. NO IMPLIED ACCEPTANCES OR WAIVERS. Exercise by Landlord of any one
or more remedies hereunder granted or otherwise available shall not be deemed
to be an acceptance by Landlord of Tenant's surrender of the Premises, it
being understood that such surrender can be effected only by the written
agreement of Landlord. Tenant and Landlord further agree that forbearance by
Landlord to enforce any of its rights under this Lease or at law or in equity
shall not be a waiver of Landlord's right to enforce any one or more of its
rights, including any right previously forborne, in connection with any
existing or subsequent default. No re-entry or taking possession of the
Premises by Landlord shall be construed as an election on its part to
terminate this Lease, unless a written notice of such intention is given to
Tenant, and, notwithstanding any such reletting or re-entry or taking
possession of the Premises, Landlord may at any time thereafter elect to
terminate this Lease for a previous default. Pursuit of any remedies
hereunder shall not preclude the pursuit of any other remedy herein
provided or any other remedies provided by law, nor shall pursuit
of any remedy herein provided constitute a forfeiture or waiver of any
rent due to Landlord hereunder or of any damages occurring to Landlord
by reason of the violation of any of the terms, provisions and covenants
contained in this Lease. Landlord's acceptance of any rent following
either an Event of Default hereunder shall not be construed as Landlord's
waiver of such Event of Default. No waiver by Landlord of any violation or
breach of any of the terms, provisions and covenants of this Lease shall be
deemed or construed to constitute a waiver of any other violation or
default.
G. RELETTING OF PREMISES. In the event of any termination of this
Lease and/or repossession of the Premises for an Event of Default,
Landlord shall use reasonable efforts to relet the Premises and to collect
rental after reletting, with no obligation to accept any lessee that
Landlord deems undesirable or to expend any funds in connection with such
reletting or collection of rents therefrom. Tenant shall not be entitled
to credit for or reimbursement of any proceeds of such reletting in excess of
the rental owed hereunder for the period of such reletting. Landlord may
relet the whole or any portion of the Premises for any period, to any
Tenant and for any use or purpose.
H. LANDLORD'S DEFAULT. If Landlord fails to commence to perform any
of its obligations hereunder within thirty (30) days after written notice
from Tenant specifying such failure, and such failure results in a defect
that seriously jeopardizes the safety of persons occupying the Premises or
threatens equipment or machinery owned by Tenant within the Premises, or such
defect impairs Tenant's ability to conduct its business within the Premises,
and Landlord has failed to commence to cure the default or obligation within
the thirty (30) day period outlined above, Tenant shall be permitted to cure
Landlord's default or obligation and Landlord will be obligated to reimburse
Tenant for the actual cost incurred to cure Landlord's default or obligation.
All obligations of Landlord hereunder will be construed as covenants, not
conditions; and all such obligations will be binding upon Landlord only
during the period of its possession of the Premises and not thereafter. The
term "Landlord" shall mean only the owner, for the time being of the Premises
and, in the event of the transfer by such owner of its interest in the
Premises, such owner shall thereupon be released and discharged from all
covenants and obligations of the Landlord thereafter accruing, provided that
such covenants and obligations shall be binding during the Lease term upon
each new owner for the duration of such owner's ownership. Notwithstanding
any other provision of this Lease, Landlord shall not have any personal
liability hereunder. In the event of any breach or default by Landlord in any
term or provision of this Lease, Tenant agrees to look solely to the equity
or interest then owned by Landlord in the Premises or the Building; however,
in no event, shall any deficiency judgment or any money judgment of any kind
by sought or obtained against any Landlord.
I. TENANT'S PERSONAL PROPERTY. If Landlord repossesses the Premises
pursuant to the authority herein granted, or if Tenant vacates or abandons
all or any part of the Premises, then, in addition to Landlord's rights under
Paragraph 29 hereof, Landlord shall have the right to (i) keep in place and
use or (ii) remove and store, all of the furniture, fixtures, and equipment
at the Premises, including that which is owned by Tenant, at all times prior
to any foreclosure thereon by Landlord or repossession thereof by any lessor
thereof or third party having a lien thereon. In addition to the Landlord's
other rights hereunder, Landlord may dispose of the stored property if Tenant
does not claim the property within twenty (20) days after the date the
property is stored. Landlord shall give Tenant at least ten (10) ten days
prior written notice of such intended disposition. Landlord shall also have
the right to relinquish possession of all or any portion of such furniture,
fixtures, equipment and other property to any person ("Claimant") who
presents to Landlord a copy of any instrument represented by Claimant to have
been executed by Tenant (or any predecessor of Tenant) granting Claimant
the right under various circumstances to take possession of such furniture,
fixtures, equipment or other property, without the necessity on the part of
Landlord to inquire into the authenticity or legality of said instrument. The
rights of Landlord herein stated shall be in addition to any and all other
rights that Landlord has or may hereafter have at law or in equity; and
Tenant stipulates and agrees that the rights granted Landlord under this
paragraph are commercially reasonable.
21. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting a
lien or charge upon the Premises or the improvements situated thereon or the
Building, provided, however, that
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if the mortgagee, trustee or holder of any such mortgage or deed of trust
elects to have Tenant's interest in this Lease superior to any such
instrument, then by notice to Tenant from such mortgagee, trustee or holder,
this Lease shall be deemed superior to such lien, whether this Lease was
executed before or after said mortgage or deed of trust. Tenant, at any time
hereafter on demand, shall execute any instruments, releases or other
documents that may be required by any mortgagee for the purpose of
subjecting and subordinating this Lease to the lien of any such mortgage,
provided the subordination does not change any of the Lease terms contained
within this Lease and the subordination agreement contains an attornment and
non-disturbance agreement. Tenant shall not terminate this Lease or pursue
any other remedy available to Tenant hereunder for any default on the part of
Landlord without first giving written notice by certified or registered mail,
return receipt requested, to any mortgagee, trustee or holder of any such
mortgage or deed of trust, the name and post office address of which Tenant
has received written notice, specifying the default in reasonable detail and
affording such mortgagee, trustee or holder a reasonable opportunity (but in
no event less than thirty days) to make performance, at its election, for and
on behalf of Landlord.
22. MECHANIC'S LIENS. Tenant has no authority, express or implied, to create
or place any lien or encumbrance of any kind or nature whatsoever upon, or in
any manner to bind the interest of Landlord or Tenant in the Premises. TENANT
WILL SAVE AND HOLD LANDLORD HARMLESS FROM ANY AND ALL LOSS, COST OR EXPENSE,
INCLUDING WITHOUT LIMITATION ATTORNEYS' FEES, BASED ON OR ARISING OUT OF
ASSERTED CLAIMS OR LIENS AGAINST THE LEASEHOLD ESTATE OR AGAINST THE RIGHT,
TITLE AND INTEREST OF THE LANDLORD IN THE PREMISES OR UNDER THE TERMS OF THIS
LEASE.
23. MISCELLANEOUS.
A. INTERPRETATION. The captions inserted in this Lease are for
convenience only and in no way define, limit or otherwise describe the scope
or intent of this Lease, or any provision hereof, or in any way affect the
interpretation of this Lease.
B. BINDING EFFECT. Except as otherwise herein expressly provided,
the terms, provisions and covenants and conditions in this Lease shall apply
to, inure to the benefit of and be binding upon the parties hereto and upon
their respective heirs, executors, personal representatives, legal
representatives, successors and assigns. Landlord shall have the right to
transfer and assign, in whole or in part, its rights and obligations in the
Premises and in the Building and other property that are the subject of this
Lease.
C. EVIDENCE OF AUTHORITY. Tenant agrees to furnish to Landlord,
promptly upon demand, a corporate resolution, proof of due authorization by
partners or other appropriate documentation evidencing the due authorization
of such party to enter into this Lease.
D. FORCE MAJEURE. Landlord shall not be held responsible for
delays in the performance of its oblations hereunder when caused by material
shortages, acts of God, labor disputes or other events beyond the control of
Landlord.
E. PAYMENTS CONSTITUTE RENT. Notwithstanding anything in this
Lease to the contrary, all amounts payable by Tenant to or on behalf of
Landlord under this Lease, whether or not expressly denominated as rent,
shall constitute rent.
F. ESTOPPEL CERTIFICATES. Tenant agrees, from time to time, within
ten (10) days after request of Landlord, to deliver to Landlord, or
Landlord's designee, an estoppel certificate stating that this Lease is in
full force and effect, the date to which rent has been paid, the unexpired
term of this Lease, any defaults existing under this Lease (or the absence
thereof) and such other factual or legal matters pertaining to this Lease as
may be requested by Landlord. It is understood and agreed that Tenant's
obligation to furnish such estoppel certificates in a timely fashion is a
material inducement for Landlord's execution of this Lease, provided it does
not alter the terms of this Lease.
G. ENTIRE AGREEMENT. This Lease constitutes obligations which have
the entire understanding and agreement of Landlord and Tenant with respect to
the subject matter of this Lease, and contains all of the covenants and
agreements of Landlord and Tenant with respect thereto. Landlord and Tenant
each acknowledge that no representations, inducements, promises or
agreements, oral or written, have been made by Landlord or Tenant, or anyone
acting on behalf of Landlord or Tenant, which are not contained herein, and
any prior agreements, promises, negotiations or representations not expressly
set forth in this Lease are of no force or effect. EXCEPT AS SPECIFICALLY
PROVIDED IN THIS LEASE, TENANT HEREBY WAIVES THE BENEFIT OF ALL IMPLIED
WARRANTIES, IT BEING UNDERSTOOD THAT LANDLORD WILL CONSTRUCT THE PREMISES
SPECIFICALLY FOR TENANT'S INTENDED USE AND IN ACCORDANCE WITH PLANS AND
SPECIFICATIONS, AND WITH RESPECT TO THE PREMISES, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR ANY
PARTICULAR PURPOSE. Landlord's agents and employees do not and will not have
authority to make exceptions, changes or amendments to this Lease, or factual
representations not expressly contained in this Lease. Under no
circumstances shall Landlord or Tenant be considered an agent of the other.
This Lease may not be altered, changed or amended except by an instrument in
writing signed by both parties hereto.
H. SURVIVAL OF OBLIGATIONS. All obligations of Tenant hereunder
not fully performed as of the expiration or earlier termination of the term
of this Lease shall survive the expiration or earlier termination of the term
hereof, including without limitation all payment obligations with respect to
taxes and insurance and all obligations concerning the condition and repair
of the Premises. Upon the expiration or earlier termination of the term
hereof, and prior to Tenant vacating the Premises, Tenant shall pay to
Landlord any amount reasonably estimated by Landlord as necessary to put the
Premises in good condition and repair, reasonable wear and tear excluded,
including without limitation the cost of repairs to and replacements of all
heating and air conditioning systems and equipment therein. Tenant shall
also, prior to vacating the Premises, pay to Landlord the amount, as
estimated by Landlord, of Tenant's obligation hereunder for real estate taxes
and insurance premiums for the year in which the Lease expires or terminates.
All such amounts shall be used and held by Landlord for payment of such
obligations of Tenant hereunder, with Tenant being liable for any additional
costs therefore upon demand by Landlord, or with any excess to be returned to
Tenant after all such obligations have been determined and satisfied, as the
case may be. Any Security Deposit held by Landlord may, at Landlord's
option, be credited against any amounts due from Tenant under this Paragraph
23H.
I. SEVERABILITY OF TERMS. If any clause or provision of this Lease
is illegal, invalid or unenforceable under present of future laws effective
during the term of this Lease, then, in such event, it is the intention of
the parties hereto that the remainder of this Lease shall not be affected
thereby, and it is also the intention of the parties to this Lease that in
lieu of each clause or provision of this Lease that is illegal, invalid or
unenforceable clause or provision as may be legal, valid and enforceable.
J. EFFECTIVE DATE. All references in this Lease to "the date
hereof" or similar references shall be deemed to refer to the last date in
point in time on which all parties hereto have executed this Lease.
K. BROKER'S COMMISSION. Tenant represents and warrants that it has
dealt with and will deal with no broker, agent or other persons other than
CHRIS WHITWORTH OF HILL PARTNERS AND SCOTT YOUNG AND CHAD MUELLER OF SCOTT
YOUNG PROPERTIES in connection with this transaction or future related
transactions and that no broker, agent or other person brought about this
transaction, and Tenant agrees to indemnify and hold Landlord harmless from
and against any claims by any other broker, agent or other person claiming a
commission or other form of compensation by virtue of having dealt with them
with regard to this leasing transaction.
L. AMBIGUITY. Landlord and Tenant hereby agree and acknowledge
that this Lease has been fully reviewed and negotiated by both Landlord and
Tenant, and that Landlord and Tenant have each had the opportunity to have
this Lease reviewed by their respective legal counsel, and, accordingly, in
the event of any ambiguity herein, Tenant does hereby waive the rule of
construction that such ambiguity shall be resolved against the party who
prepared this Lease.
M. JOINT AND SEVERAL LIABILITY. If there be more than one Tenant,
the obligations hereunder imposed upon Tenant shall be joint and several. If
there be a guarantor of Tenant's obligations hereunder, the obligations
hereunder imposed upon Tenant shall be joint and several obligations of
Tenant and such guarantor, and Landlord need not first proceed against Tenant
before proceeding against such guarantor, nor shall any such guarantor be
released from its guaranty for any reason whatsoever, including, without
limitation, in case of any amendments hereto, waivers hereof or failure to
give such guarantor any notices hereunder
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<PAGE>
N. THIRD PARTY RIGHTS. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give to any person or
entity, other than the parties hereto, any right or remedy under or by reason
of this Lease.
0. EXHIBITS AND ATTACHMENTS. All exhibits, attachments, riders and
addenda referred to in this Lease, and the exhibits listed herein below and
attached hereto, are incorporated into this Lease and made a part hereof for
all intents and purposes as if fully set out herein. All capitalized terms
used in such documents shall, unless otherwise defined therein, have the same
meanings as are set forth herein.
P. APPLICABLE LAW. This Lease has been executed in the State of
Texas and shall be governed in all respects by the laws of the State of
Texas. It is the intent of Landlord and Tenant to conform strictly to all
applicable state and federal usury laws. All agreements between Landlord and
Tenant, whether now existing or hereafter arising and whether written or
oral, are hereby expressly limited so that in no contingency or event
whatsoever shall the amount contracted for, charged or received by Landlord
for the use, forbearance or retention of money hereunder or otherwise exceed
the maximum amount which Landlord is legally entitled to contract for, charge
or collect under the applicable state or federal law. If, from any
circumstance whatsoever, fulfillment of any provision hereof at the time
performance of such provision shall be due shall involve transcending the
limit of validity prescribed by law, then the obligation to be fulfilled
shall be automatically reduced to the limit of such validity, and if from any
such circumstance Landlord shall ever receive as interest or otherwise an
amount in excess of the maximum that can be legally collected, then such
amount which would be excessive interest shall be applied to the reduction of
rent hereunder, and if such amount which would be excessive interest exceeds
such rent, then such additional amount shall be refunded to Tenant.
24. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with
reference to the sending, mailing or delivering of notice or the making of
any payment by Landlord to Tenant or with reference to the sending, mailing
or delivering of any notice or the making of any payment by Tenant to
Landlord shall be deemed to be complied with when and if the following steps
are taken:
(i) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address for Landlord
set forth below or at such other address as Landlord may specify from time to
time by written notice delivered in accordance herewith. Tenant's obligation
to pay rent and any other amounts to Landlord under the terms of this Lease
shall not be deemed satisfied until such rent and other amounts have been
actually received by Landlord.
(ii) All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address set forth below, or at
such other address within the continental United States as Tenant may specify
from time to time by written notice delivered in accordance herewith.
(iii) Except as expressly provided herein, any written notice,
document or payment required or permitted to be delivered hereunder shall be
deemed to be delivered when received or, whether actually received or not,
when deposited in the United States Mail, postage prepaid, Certified or
Registered Mail, addressed to the parties hereto at the respective addresses
set out below, or at such other address as they have theretofore specified by
written notice delivered in accordance herewith.
26. ADDITIONAL PROVISIONS. See EXHIBIT "B" attached hereto and incorporated
by reference herein.
EXECUTED BY LANDLORD, this 15th day of April, 1998.
CROSS PARK INVESTORS, LTD.
BY: CAMERON ROAD INVESTORS, LTD. A TEXAS LIMITED LIABILITY CO.
ITS: GENERAL PARTNER
BY:
---------------------------
ITS: MANAGING DIRECTOR
Address: C/O Scott Young Properties
P.O. Box 1525, Austin, Texas 78767
EXECUTED BY TENANT, this 8th day of April, 1998.
ADVANCED ENERGY INDUSTRIES, INC.
By:
---------------------------
Its: VP & CFO
--------------------------
Address: 1625 Sharp Point Drive
Fort Collins, CO 80525
Phone: 970-221-4670
Fax: 970-407-5243
EXHIBIT "A" Description of Premises
EXHIBIT "B" Additional Provisions
EXHIBIT "C" Rules and Regulations
EXHIBIT "D" Tenant Construction Standards
EXHIBIT "E" Sign Criteria
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EXHBIT "F" Construction Plans
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EXHIBIT "A"
Lots 5 and 6 of Block I, Walnut Creek Business Park, Phase A,
Section 1, Travis County, Texas, and locally known as 8601 Cross Park Drive,
Austin, Texas.
[MAP]
<PAGE>
EXHIBIT "B"
ADDITIONAL PROVISIONS
1. N-N-N CHARGES. In addition to the Base Rent as specified in paragraph
2. A and B of the Lease, Tenant shall escrow with Landlord on a monthly basis
along with the Base Rent payment, Tenant's pro rata share of the cost of Real
Property Taxes, Insurance and Common Area Maintenance. The initial estimated
monthly costs for these items based on preliminary estimates of cost for the
full year (and subject to increase or decrease) are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
EXPENSE PER SQUARE FOOT AMOUNT PER MONTH
- -------------------------------------------------------------------------------
<S> <C> <C>
Property Taxes $.10 $ 681.20
Insurance $.01 $ 68.12
CAM $.09 $ 613.08
- -------------------------------------------------------------------------------
TOTAL $.20 $1,362.40
- -------------------------------------------------------------------------------
</TABLE>
2. CONDITION OF THE PREMISES. Landlord shall deliver the Premises in an
"as-is" condition except that Landlord shall agree to clean the floors
and walls prior to occupancy by Tenant.
3. TENANT IMPROVEMENTS. At its' sole cost and expense and with Landlord's
prior consent as to the location and the installation technique, Tenant
shall be allowed to:
A) Install an approximately 12' x 12' fenced concrete pad at the rear
of the Premises. Landlord and Tenant shall agree on a mutually
acceptable location for the enclosure.
B) Install an air compressor and chilled water tower within the fenced
area behind the Premises.
C) Upgrade the existing electrical service, if necessary.
If required by Landlord, Tenant shall agree to restore the Premises to
its original condition, reasonable wear and tear excepted upon the
expiration of this Lease.
4. SHARED LOADING DOCK. Landlord will use good faith to obtain a written
agreement with Aera Corporation for the sharing of the dock-high loading
dock at the rear of the Aera Corporation lease space.
5. LEASE EXPIRATION. This Lease shall expire upon the earlier of the
following events occurring:
A) One (1) year from the Commencement Date of the Lease as specified in
the Lease.
B) The commencement of the lease term and the payment of rent by
Advanced Energy Industries, Inc. for a lease space within the
Cameron Technology Center.
6. LEASE EXTENSION. In the event the building shell to be constructed by
Cameron Technology Investors, Ltd. for Advanced Energy Industries, Inc.
within the Cameron Technology Center is not substantially complete by
February 15, 1999, Landlord shall agree to automatically extend this
Lease for a period of six (6) additional months from the date the Lease
would have otherwise expired as specified in this Lease. All other terms
and conditions within the Lease will remain the same during the Lease
Extension period.
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EXHIBIT "C"
BUSINESS PARK RULES AND REGULATIONS
The following rules and regulations shall apply where applicable, to the
Premises, the Building, the Project, the driveways and parking areas, the
land situated beneath the Premises, Building, and Project and the
appurtenances thereto:
1. Sidewalks, doorways, halls stairways and other similar areas shall not
be obstructed by Tenant or used by any Tenant for any purpose other than
ingress and egress to and from the Premises and for going from one to
another part of the Building.
2. Plumbing fixtures and appliances shall be used only for the purposes for
which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or placed therein. Damage resulting to any such
fixtures or appliances from misuse by a Tenant or such Tenant's agents,
employees or invitees, shall be paid by such Tenant, and Landlord shall
not in any case be responsible therefor.
3. No signs, advertisements or notices shall be painted or affixed on or to
any windows or doors or other exterior part of the Building or the
Premises except of such color, size and style and in such places as
shall be first approved by, Landlord. Landlord, at Tenant's sole cost
and expense, shall install all letters or numerals by or on doors in
such Tenants Premises, which letters or numerals shall be in building
standard graphics. No nails, hooks or screws shall be driven or inserted
in any part of the Building outside the Premises except by the Building
maintenance personnel nor shall any part of the Building be defaced by
Tenant. No curtains or other window treatments shall be placed between
the glass and the Building standard window treatments.
4. Landlord will provide and maintain a directory for all Tenants at the
end of each building and no other directory shall be permitted unless
previously consented to by Landlord in writing.
5. Two (2) keys to the locks on the exterior doors entering each Tenant's
Premises shall be furnished by Landlord free of charge, with any
additional keys to be furnished by Landlord to each Tenant, at Tenant's
cost. Tenant shall not place any additional lock or locks on any door in
or to its Premises without Landlord's prior written consent. All such
keys shall remain the property of Landlord. Landlord will reduce $20.00
per key from Tenant's Security Deposit account for each key issued and
not returned by Tenant at time of move out.
6. Landlord will provide within the Business Park a postal box for Tenants
receipt of letter mail only. Landlord will issue to the tenant two keys
to the postal box. The box keys are not to be duplicated by the Tenant.
Tenant is held accountable for the keys and will bear the cost or
re-keying the locks should the Tenant fail to return all keys at the end
of the Lease.
7. With respect to work being performed by Tenants in its Premises with the
approval of Landlord, all tenants will refer all contractors,
contractors' representatives and installation technicians rendering any
service to them to Landlord for Landlord's supervision, approval and
control before the performance of any contractual services. This
provision shall apply to all work performed in the Building including,
but not limited to, installations of telephones, telegraph equipment,
electrical devises and attachments, doors, entrance ways, and any and
all installations of every nature affecting floors, walls, woodwork,
trim, windows, ceilings, equipment and any other physical portion of the
Premises and Building.
8. Each tenant shall cooperate with Landlord's employees in keeping its
Premises neat and clean.
9. Tenant is responsible for janitorial service within its Premises.
10. Designated areas for trash containers are assigned to each tenant.
Tenants will be billed direct by a trash removal service approved by the
Landlord. Drums, pallets, equipment, vehicles, etc. are not allowed to
be stored outside of building. Trash in the common area will be removed
by the Landlord and the cost of removal prorated to the Tenants sharing
the common area.
11. Landlord shall not be responsible to the tenants, their agents,
employees, or invitees for any loss of property from the Premises or
public areas or for any damages to any property thereon from any cause
whatsoever.
12. Should a tenant require telegraphic, telephonic, annunicator or other
communication service, Landlord will direct the electrician where and
how wires are to be introduced and placed and none shall be introduced
or placed except as Landlord shall direct.
13. Tenant shall not make or permit any improper, objectionable or
unpleasant noises or odors in the Premises or Building or otherwise
interfere in any way with other tenants or persons having business with
them.
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14. No machinery of any kind shall be operated by Tenant in its Premises
without the prior written consent of Landlord, nor shall any tenant use
or keep in the Premises or Building any flammable or explosive fluid or
substance.
15. Nothing shall be swept or thrown into parking areas or driveways. No
birds or animals shall be brought into or kept in, or about any tenant's
leased premises.
16. Tenant, its agents, employees and invitees shall park only in those
areas designated by Landlord for parking by Tenant and shall not park on
any public or private streets contiguous to, surrounding or in the
vicinity of the Building without Landlord's prior written consent.
17. No portion of any tenant's Premises shall at any time be used or
occupied as sleeping or lodging quarters.
18. Landlord reserves the right to rescind any of these rules and
regulations and to make such other and further reasonable rules and
regulations as in its judgment shall from time to time be needful for
the safety, protection, care and cleanliness of the Building and
Project, the operation hereof, the preservation of good order therein
and the protection and comfort of the Tenants and their agents,
employees and invitees, which rules and regulations, when made and
written notice thereof is given to a Tenant, shall be binding upon it in
like manner as if originally herein prescribed.
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EXHIBIT "D"
TENANT CONSTRUCTION STANDARDS
TENANT SPACE DRAWINGS AND SPECIFICATION REQUIREMENTS
If Landlord's Architect does not prepare the drawings and specifications,
then Tenant agrees that they shall be prepared by a licensed Architect and
shall bear his registration seal, number, and signature. All documents must
be reviewed and approved by Landlord and his Architect prior to the start of
construction. The Tenant is required, upon completion of the construction,
to provide the Landlord with a marked up blue line complete set of prints
showing the conditions as built and a reproducible mylar complete set of
drawings with changes in ink and a copy of the building permit and
Certificate of Occupancy.
BUILDING CODES AND STANDARDS
All plans, specifications and construction for the Tenant's space must
conform to the following codes and standards and any other applicable codes,
standards, ordinances, and regulations.
1. Current Uniform Building Codes accepted by the City of Austin.
2. National Electrical Code.
3. City of Austin, Electrical Utility Department Code.
4. Uniform Mechanical Code.
5. City of Austin Health Department Code.
6. Department of Labor - Occupational Safety and Health Standards.
7. Consumer Product Safety Commission.
8. State of Texas Architectural Barriers Requirements.
9. Fire Marshall Requirements.
CONSTRUCTION ACCESS
Tenant shall use only the area immediately to the rear of its lease space for
construction access. Adjoining spaces shall not be used for any purpose.
Tenant shall be responsible for the repair of any damage done to the Project
or Building by Tenant's construction of its own lease space.
TEMPORARY UTILITIES
Tenant and/or his contractors and/or subcontractors are responsible for
temporary toilets and temporary utilities for their work, including payment
of all utility charges. All arrangements shall be made with City of Austin,
Southern Union Gas, and Southwestern Bell as applicable.
CONSTRUCTION TRASH
Trash, surplus construction materials, boxes, crates, debris, etc., from the
Tenant's construction shall be removed daily from the Premises and hauled off
the project site. Trash left on the project will be hauled off at the
Tenant's expense.
TENANT SEPARATION
Walls which abut another Tenant's space must be a minimum two (2) Hour rated
extending from floor to the roof deck with insulation. In the case where the
space is vacant adjacent to Tenant's demising wall(s), such a wall shall be
constructed of 3 1/2" metal studs spaced at 16" o.c. with minimum two (2)
layers of 5/8" thick type X gypsum wallboard on the Tenant's side with
staggered 2' joints. All penetrations to the demising wall(s) shall be
treated to maintain the minimum two (2) Hour rating.
TELEPHONE
It is each Tenant's responsibility to procure the telephone service to its
Premises. If any telephone equipment room is required by the Tenant, it
must be located within its Premises. Tenants shall be responsible for
routing its telephone service through the raceway system provided by Landlord
in the shell building.
HVAC
Space above ceilings may not be used as a return air plenum. All return air
shall be ducted from the conditioned space. The Landlord has the right to
approve or disapprove the HVAC design and Tenant shall select the HVAC
equipment from Landlord's standards. Location of roof top units shall be on
pads as provided in the shell building with the location approved by the
Landlord. Tenant shall indicate the actual weights and dimensions on their
working drawings for review and approval by the Landlord of roof mounted
equipment. Condensation lines shall drain into each Tenant's sewer
ROOF PENETRATIONS
All roof penetrations, equipment supports, pitch pans, flashing curbing, and
roofing repairs shall be as approved by Landlord and performed by a roofer
approved by Landlord at Tenant's expense. All roof penetrations shall occur
within the boundaries of the Premises.
WATER
A common water line and valve will be provided for each lease space. Tenant
water piping shall start at the point of the valve. All tenants requiring
more plumbing than the required toilet room facilities, drinking fountain
(1), service sink (1), employee bar type sink (1) shall be required to
furnish their own piping, meter, and installation. Should Tenant's water
consumption levels exceed typical levels, Landlord and Tenant agree that
Tenant shall supply a water flow meter of which Landlord shall read monthly
and bill back Tenant for Tenant's actual consumption.
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SANITARY SEWER
A sewer line will be installed under floor accessible to the Premises.
Tenant's sewer piping will start at the point of the sewer line tap in
Tenant's Premises.
ELECTRICITY
All electric service meter wireways will be installed in an area determined
by Landlord. Each Tenant shall furnish and install his meter at the
appropriate meter wireway as approved by Landlord. Tenant shall be
responsible for obtaining an electric meter at his cost. If the wattage
density exceeds that provided in the shell for Tenant's lease space, the
Tenant will pay the additional cost for larger service to be installed by
Landlord. Total power requirements shall be tabulated on the Tenant's
working drawings submitted for approval.
2 Landlord's Initials _____
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<PAGE>
EXHIBIT "E"
SIGN CRITERIA
1. COST OF THE SIGN(S). Identifying Tenant graphics for all leased Premises
are the responsibility of Tenant. All expenses for fabrication,
installation and sign maintenance shall be borne solely by Tenant.
2. APPROVAL OF SHOP DRAWINGS. Prior to the fabrication of any sign,
Tenant shall present to Landlord and to the Walnut Creek Improvement
Association for approval, shop drawings prepared by the manufacturer.
All shop drawings shall be dimensionally scaled with the proposed sign
located on a drawing of the building elevation; the shop drawings shall
indicate all dimensions; shall indicate the actual letter style or font;
if a logo is to be used, the actual logo shall be illustrated on the
building elevation; all actual materials, paint brand and color(s)
shall be specified; and the method of the sign attachment to the
Building shall be clearly denoted. Landlord does not represent or
warrant that these sign criteria contained herein will meet the specific
requirements of the Walnut Creek Improvement Association. Landlord
shall agree to use good faith to assist Tenant in securing the approval
of its sign from the Walnut Creek Improvement Association.
3. MATERIALS. Tenant sign graphics shall consist of individually cut
letters. Letters shall be cut from 1/8" Lexan mounted or laminated to a
three inch (3") width sign foam board or similar material. Letters
shall be primed and painted uniformly on face and sides with Benjamin
Moore Industrial grade paint or equivalent.
4. LOGOTYPES. Logotypes shall be cut from the same material as letters.
Logotype area shall not exceed eighteen inches (18") in height and the
sign or logotype length shall not exceed the lesser of fifty percent
(50%) of the width of Tenant's Premises or fifteen feet (15'). All
signs or logotypes shall be located above and appurtenant to the store
front of the Premises.
5. SIZE. No individual letter shall exceed eighteen inches (18") in height.
Letter line length shall not exceed the lesser of fifty percent (50%) of
the width of Tenant's Premises or fifteen feet (15'). Should Tenant's
sign contain more than one letter line, the total height of all letter
lines combined shall not exceed forty inches (40"). All signs or
logotypes shall be located above and appurtenant to the store front of
the Premises.
6. MOUNTING METHODS. All letters shall be mounted with clear silicone and
mounted flush to the exterior wall surface. Upon the expiration of the
Lease, Tenant shall remove all exterior signs from the Building and
shall restore the exterior of the Building to its original condition.
Should Tenant fail to do so, Landlord reserves the right to perform this
duty and deduct all costs associated with the removal of the sign and
restoration of the Building from the Security Deposit.
7. PROHIBITED MATERIALS. Pan signs, illuminated signs, neon or flashing
signs, banners, sandwich boards or any other sign type or material not
specifically allowed above.
8. DOORS AND WINDOW GRAPHICS. Vinyl door and window graphics are permitted.
Letter size shall not exceed 1-1/2" cap height. Line length shall not
exceed 20". All graphics shall be reverse cut from white 3M vinyl,
Sparcal vinyl or equivalent vinyl material and shall be mounted to the
interior of door glass or sidelight glass. Plaques, neon or paper signs
are prohibited at all times.
Landlord's Initials _____
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<PAGE>
Standard Industrial Lease Agreement Tenant: Advanced Energy Industries, Inc.
Cameron Technology Center (11/25/97) Square Feet: 19,800 square feet
Lease Commences: _______________
Lease Expires: _________________
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between CAMERON
TECHNOLOGY INVESTORS, LTD., hereinafter referred to as "Landlord", and
ADVANCED ENERGY INDUSTRIES, INC., hereinafter referred to as "Tenant".
1. PREMISES AND TERM. In consideration of the mutual obligations of
Landlord and Tenant set forth herein, Landlord leases to Tenant and Tenant
hereby takes from Landlord, certain leased premises situated within the
County of Travis, State of Texas, and known locally as SUITE 100, BUILDING 2,
CAMERON TECHNOLOGY CENTER, LOCATED AT 8900 CAMERON ROAD, AUSTIN, TEXAS AND
CONSISTING OF APPROXIMATELY 19,800 SQUARE FEET OF RENTABLE AREA as more
particularly described on EXHIBIT "A" attached hereto and incorporated herein
by reference (THE "PREMISES"), to have and to hold, subject to the term,
covenants and conditions in this Lease. The term of this Lease shall
commence on the COMMENCEMENT DATE as hereinafter set forth and shall end on
the last day of the month that is SIXTY (60) months after the COMMENCEMENT
DATE.
A. COMMENCEMENT DATE. The "Commencement Date" shall mean the date
on which the earlier of the following occurs: (i) the date Tenant takes
possession of the Premises for the operation of its business; or (ii) APRIL
1, 1999. Landlord shall notify Tenant in writing that the Commencement Date
has occurred. If for any reason the Building shell is not substantially
complete on FEBRUARY 15, 1999 this Lease and the obligations of Tenant shall
nonetheless commence and continue in full force and effect and Landlord shall
have no liability to Tenant; provided, however, if the Building shell is not
substantially complete for any reason other than omission, delay, or default
on the part of Tenant or anyone acting under or for Tenant, Tenant may
terminate this Lease by providing Landlord written notice not later than
MARCH 1, 1999 and the termination of this Lease shall constitute Tenant's
sole remedy and shall constitute full settlement of all claims that Tenant
might otherwise have against Landlord by reason of the Building shell not
being substantially complete by FEBRUARY 15, 1999. Landlord shall not be
liable to Tenant or any third party for any damage, claim, expense or loss,
actual or consequential, or direct or indirect, resulting from any delay by
Landlord to deliver the Building shell, except that Landlord shall refund any
rent or Security Deposit that has been pre-paid by Tenant under this Lease.
2. BASE RENT, SECURITY DEPOSIT AND ESCROW DEPOSITS.
A. BASE RENT. Tenant agrees to pay to Landlord rent for the
Premises in advance, without demand, deduction or set off, at the rate of:
MONTHS 1-12: FIFTEEN THOUSAND AND SEVENTY-TWO DOLLARS AND 20/XX
($15,072.20) PER MONTH;
MONTHS 13-24: FIFTEEN THOUSAND FOUR HUNDRED AND SIXTY-EIGHT DOLLARS AND
20/XX ($15,468.20) PER MONTH;
MONTHS 25-36: FIFTEEN THOUSAND EIGHT HUNDRED AND SIXTY-FOUR DOLLARS AND
20/XX ($15,864.20) PER MONTH;
MONTHS 37-48: SIXTEEN THOUSAND TWO HUNDRED AND SIXTY DOLLARS AND 20/XX
($16,260.20) PER MONTH;
MONTHS 49-60: SIXTEEN THOUSAND SIX HUNDRED AND FIFTY-SIX DOLLARS AND 20/XX
($16,656.20) PER MONTH,
during the term hereof. One monthly installment, plus the other monthly
charges set forth in Paragraph 2C below, shall be due and payable on the date
hereof, and a like monthly installment shall be due and payable on or before
the first day of each calendar month succeeding the Commencement Date, except
that all payments due thereunder for any fractional calendar month shall be
prorated.
B. SECURITY DEPOSIT. In addition, Tenant agrees to deposit with
Landlord on the date hereof the sum of SEVENTEEN THOUSAND SIX HUNDRED AND
TWENTY-TWO DOLLARS AND 00/XX ($17,622.00) which shall be held by Landlord,
without obligation for interest, as security for the performance of Tenant's
obligations under this Lease (the "Security Deposit"), it being expressly
understood and agreed that the Security Deposit is not an advance rental
deposit or a measure of Landlord's damages in case of Tenant's default. Upon
occurrence of an Event of Default, Landlord may use all or part of the
Security Deposit to pay past due rent or other payments due Landlord under
this Lease, or the cost of any other damage, injury, expense or liability
caused by such Event of Default, without prejudice to any other remedy
provided herein or provided by law. On demand, Tenant shall pay Landlord the
amount that will restore the Security Deposit to its original amount. The
Security Deposit shall be deemed the property of Landlord, but any remaining
balance of the Security Deposit shall be returned by Landlord to Tenant when
all of Tenant's present and future obligations under this Lease have been
fulfilled.
C. ESCROW DEPOSITS. Without limiting in any way Tenant's other
obligations under this Lease, Tenant agrees to pay to Landlord its
Proportionate Share (as defined in this Paragraph 2C below) of (i) Taxes*
payable by Landlord pursuant to Paragraph 3A below, (ii) the cost of
utilities payable by Landlord pursuant to Paragraph 8 below, (iii) Landlord's
cost of maintaining insurance pursuant to Paragraph 9A below and (iv)
Landlord's cost of maintaining the Premises pursuant to paragraph 5D below
and any common area charges payable by Tenant in accordance with Paragraph 4
below (collectively, the "Tenant Costs"). During each month of the term of
this Lease, on the same day that rent is due hereunder, Tenant shall deposit
in escrow with Landlord an amount equal to 1/12 of the estimated annual
amount of Tenant's Proportionate Share of the Tenant Costs. Tenant
authorizes Landlord to use the funds deposited with Landlord under this
Paragraph 2C to pay such Tenant Costs. The initial monthly escrow payments
are based upon the estimated amounts for the year in question, and shall be
increased or decreased annually to reflect the projected actual amount of all
Tenant Costs. If the Tenant's total escrow deposits for any calendar year
are less than Tenant's actual Proportionate Share of the Tenant Costs for
such calendar year, Tenant shall pay the difference to Landlord within ten
(10) days after demand. If the total escrow deposits of Tenant for any
calendar year are more than Tenant's actual Proportionate Share of the Tenant
Costs for such calendar year, Landlord shall retain such excess and credit it
against Tenant's escrow deposits next maturing after such determination. In
the event the Premises constitute a portion of a multiple occupancy building
(the "Building"), Tenant's "Proportionate Share" with respect to the
Building, as used in this Lease, shall mean a fraction, the numerator of
which is the gross rentable area contained in the Premises and the
denominator of which is the gross rentable area contained in the entire
Building. In the event the Premises or the Building is part of a project or
business park owned, managed or leased by Landlord, or an affiliate of
Landlord (the "Project"), Tenant's "Proportionate Share" of the Project, as
used in this Lease shall mean a fraction, the numerator of which is the gross
rentable area contained in the Premises and the denominator of which is the
gross rentable area contained in all of the buildings (including the
Building) within the Project. For the purposes of this Lease, Tenant's
proportionate share shall be defined initially as SIXTEEN AND SIX-TENTHS
PERCENT (16.6%).
3. TAXES.
A. REAL PROPERTY TAXES. Subject to reimbursement under Paragraph
2C herein, Landlord agrees to pay all taxes,* that accrue against the
Premises, the Building and /or the land of which the Premises or the Building
are a part. If at any time during the term of this Lease, there shall be
levied, assessed or imposed on Landlord a capital levy or other tax directly
on the rents received therefrom and /or the land and improvements of which
the Premises are a part, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based, shall be deemed to be included
within the term "Taxes" for the purpose hereof. The Landlord shall have the
right to employ a tax consulting firm to attempt to assure a fair tax burden
on the real property within the applicable taxing jurisdiction. Tenant
agrees to pay its Proportionate Share of the cost of such consultant.
B. PERSONAL PROPERTY TAXES. Tenant shall be liable for all taxes
levied or assessed against any personal property or fixtures placed in or on
the Premises. If any such taxes are levied or assessed against Landlord or
Landlord's property (i) Landlord pays the same or (ii) the assessed value of
Landlord's property is increased by inclusion of such personal property and
fixtures and Landlord pays the increased taxes, then Tenant shall pay to
Landlord, upon demand, the amount of such taxes.
4. LANDLORD'S REPAIRS AND MAINTENANCE.
A. STRUCTURAL REPAIRS. Landlord, at its own cost and expense,
shall maintain the roof, foundation and the structural soundness of the
exterior walls of the Building in good repair, reasonable wear and tear
excluded. The term "walls" as used herein shall not include windows, glass,
or plate glass, any doors, special store fronts or office entries, and the
term "foundation" as used herein shall not include loading docks. Tenant
shall immediately give Landlord written notice of defect or need for repairs,
after which Landlord shall have thirty (30) days to commence to
* For purposes of this Lease, "Taxes" means all taxes, assessments and
governmental charges (excluding any federal and state income taxes, franchise
taxes, profit taxes and lease taxes, so long as such federal and state income
taxes, franchise taxes, profit taxes or lease taxes are not assessed in lieu of
some or all of the customary ad valorem taxes being assessed against the Project
as of the date of this Lease).
C. REASSESSMENTS. At the reasonable request of Tenant, Landlord
shall virgorously challenge any increases in Taxes, arising from a
reassessment of landlord's property or otherwise.
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Tenant's Initials _____
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effect such repairs or cure such defect. In the event a defect occurs that
seriously jeopardizes the safety of persons occupying the Premises or
threatens equipment or machinery owned by Tenant within the Premises, and
Landlord has failed to commence the repairs for such defect within the thirty
(30) day period outlined above, Tenant shall be permitted to initiate the
repair and Landlord will be obligated to reimburse Tenant for the actual cost
of the repair.
B. TENANT'S SHARE OF COMMON AREA CHARGES. Tenant agrees to pay its
Proportionate Share of the cost of (i) maintenance and/or landscaping
(including both maintenance and replacement of landscaping) of any property
that is a part of the Building and/or the Project; and (ii) operating,
maintaining and repairing any property, facilities or services (including
without limitation utilities and insurance therefor) provided for the use or
benefit of Tenant or the common use or benefit of Tenant and other lessees of
the Project or the Building; and (iii) the reasonable cost of property
management and supervision which shall be at rates customary of the property
type and market conditions.
Landlord reserves the right to perform, in whole or in part and without
notice to Tenant, maintenance, repairs and replacements to the paving, common
area landscape replacement and maintenance, exterior painting, common sewage
line plumbing and any other items that are provided for the use or benefit of
Tenant or the common use or benefit of Tenant and other lessees of the
Project or the Building; in which event, Tenant shall be liable for its
Proportionate Share of the cost and expense of such repair, replacement,
maintenance and other such items.
5. TENANT'S REPAIRS.
A. MAINTENANCE OF PREMISES AND APPURTENANCES. Tenant at its own
cost and expense, shall (i) maintain all parts of the Premises and promptly
make all necessary repairs and replacements to the Premises (except those for
which Landlord is expressly responsible hereunder), and (ii) keep the parking
areas, driveways and alleys surrounding the Premises in a clean and sanitary
condition. Tenant's obligation to maintain, repair and make replacements to
the Premises shall cover, but not be limited to, pest control (including
termites), trash removal and the maintenance repair and replacement of all
HVAC, electrical, plumbing, sprinkler and other mechanical systems. For the
purposes of this Lease, Landlord shall assign all warranties received from
the general contractor who constructs the Tenant Improvements within the
Premises and Tenant shall look to the general contractor for warranty on all
repairs and replacements required within the Premises.
B. PARKING. Tenant and its employees, customers and licensees
shall have the right to use only its Proportionate share of any parking areas
that have been designated for such use by Landlord in writing, subject to (i)
all rules and regulations promulgated by Landlord; and (ii) rights of ingress
and egress of other lessees. Landlord shall not be responsible for enforcing
Tenant's parking rights against any third parties, and Tenant expressly does
not have the right to tow or obstruct improperly parked vehicles. Tenant
agrees not to park on any public streets or private roadways adjacent to or
in the vicinity of the Premises. For the purposes of this Lease, Tenant
shall be allotted a parking ratio of four (4) parking spaces per thousand
(1,000) square feet of rentable lease area contained within the Premises,
with such parking ratio not including areas within the truck court that may
be striped for parking from time to time.
C. SYSTEM MAINTENANCE. Tenant at its own cost and expense, shall
enter into a regularly scheduled preventative maintenance/service contract
with a maintenance contractor approved by Landlord for servicing all hot
water, heating and air conditioning systems and equipment within the
Premises. The service contract must include all services suggested by the
equipment manufacturer in its operations/maintenance manual and must become
effective within thirty (30) days of the date Tenant takes possession of the
Premises
6. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed. Tenant, at its
own cost and expense, may erect such shelves, bins, machinery and trade
fixtures as it desires, provided that (a) such items do not alter the basic
character of the Premises or the Building; (b) such items do not overload or
damage same; (c) such items may be removed without injury to the Premises;
and (d) the construction, erection or installation thereof complies with all
applicable governmental laws ordinances, regulations and with Landlord's
specifications and requirements. Tenant shall be responsible for compliance
with The American With Disabilities Act of 1990. Without implying any
consent of Landlord thereto, all alterations, additions, improvements and
partitions erected by Tenant shall be remain the property of Tenant during
the term of this Lease. All shelves, bins machinery and trade fixtures
installed by Tenant shall be removed on or before the earlier to occur of the
day of termination or expiration of this Lease or vacating the Premises, at
which time Tenant shall restore the Premises to their original condition,
normal wear and tear excepted. Alterations, installations, removals and
restorations shall be performed in a good and workmanlike manner so as not to
damage or alter the primary structure or structural qualities of the Building
or other improvements situated on the Premises or of which the Premises are a
part.
7. SIGNS. Any signage Tenant desires for the Premises shall be subject to
Landlord's written approval, which shall not be unreasonably withheld or
delayed and shall be submitted to Landlord prior to the Commencement Date of
this Lease. Tenant shall repair and/or replace the Building facia surface to
which its signs are attached upon Tenant's vacation of the Premises or the
removal or alteration of its signage. Tenant shall not, without Landlord'
prior written consent, (i) make any changes to the exterior of the Premises,
(ii) install any exterior lights, decorations, balloons, flags, pennants,
banners or painting, or (iii) erect or install any signs, windows or door
lettering, placards, decorations or advertising media of any type which can
be viewed from the exterior of the Premises. All signs, decorations,
advertising media, blinds, draperies and other window treatment or bars or
other security installations visible from outside the Premises shall conform
in all respects to the criteria established by Landlord or shall be otherwise
subject to Landlord's prior written consent. For the purposes of this Lease,
Tenant shall be permitted to use its company logo and colors so long as the
design, installation and location of the sign is consistent with the
requirements outlined within Exhibit "E", Sign Criteria.
8. UTILITIES. Landlord agrees to provide normal water and electricity
service to the Premises. Tenant shall pay for all water, gas, heat, light,
power, telephone, sewer, sprinkler charges and other utilities and services
used on or at the Premises, together with any taxes, penalties, surcharges or
the like pertaining to the Tenant's use of the Premises, and any maintenance
charges for utilities. Landlord shall have the right to cause any of said
services to be separately metered to Tenant, at Tenant's expense. Tenant
shall pay its pro rata share, as reasonably determined by Landlord, of all
charges for jointly metered utilities. Unless resulting from Landlord's
negligence or willful misconduct, Landlord shall not be liable for any
interruption or failure of utility service on the Premises and Tenant shall
have no rights or claims as a result of any such failure. In the event water
is not separately metered to Tenant, Tenant agrees that it will not use water
and sewer capacity for uses other than normal domestic restroom and kitchen
usage and Tenant further agrees to reimburse Landlord for the entire amount
of common water and sewer costs as additional rental if, in fact, Tenant uses
water or sewer capacity for uses other than normal domestic restroom and
kitchen uses without first obtaining Landlord's written permission,
including, but not limited to, the cost for acquiring additional sewer
capacity to service Tenant's excess sewer use. Furthermore, Tenant agrees in
such event to install at its own expense a submeter to determine Tenant's
usage.
9. INSURANCE.
A. LANDLORD'S INSURANCE. Subject to reimbursement under Paragraph
2C herein, Landlord shall maintain insurance covering the Building in an
amount not less than eighty percent (80%) of the "replacement cost" thereof,
insuring against the perils of fire, lightning, flood, tornado, hail,
extended coverage, vandalism and malicious mischief.
B. TENANT'S INSURANCE. Tenant, at its own expense, shall maintain
during the term of this Lease a policy or policies of worker's compensation
and comprehensive general liability insurance, including personal injury and
property damage, with contractual liability endorsement, in the amount of
Five Hundred Thousand Dollars ($500,000.00) for property damage and One
Million dollars ($1,000,000.00) per occurrence and Two Million Dollars
($2,000,000.00) in the aggregate for personal injuries or deaths of persons
occurring in or about the Premises. Tenant, at its own expense, also shall
maintain during the term of this Lease, fire and extended coverage insurance
covering the replacement cost of (i) all alterations, additions, partitions
and improvements installed or placed on the Premises by Tenant or by Landlord
on behalf of Tenant and (ii) all of Tenant's personal property contained
within the Premises. Said policies shall (i) name Landlord as an additional
insured and insure Landlord's contingent liability under or in connection
with this Lease (except for the worker's compensation policy, which instead
shall include waiver of subrogation endorsement in favor of Landlord) (ii) be
insured by an insurance company which is acceptable to Landlord, and (iii)
provide that said insurance shall not be canceled unless thirty (30) days
prior written notice has been given to Landlord. Said policy or policies or
certificates thereof shall be delivered to Landlord by Tenant on or before
the Commencement Date and upon each renewal of said insurance.
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Tenant's Initials _____
<PAGE>
C. PROHIBITED USES. Tenant will not permit the Premises to be used for
any purpose or in any manner that would (i) void the insurance thereon, (ii)
increase the insurance risk or cost thereof, or (iii) cause the disallowance
of any sprinkler credits; including without limitation, use of the Premises
for the receipt, storage or handling of any product, material or merchandise
that is explosive or highly inflammable. If any increase in the cost of any
insurance on the Premises or the Building is caused by Tenant's use of the
Premises, or because Tenant vacates the Premises, then Tenant shall pay the
amount of such increase to Landlord within thirty (30) days of written demand
therefor.
10. FIRE AND CASUALTY DAMAGE.
A. TOTAL OR SUBSTANTIAL DAMAGE AND DESTRUCTION. If the Premises or the
Building should be damaged or destroyed by fire or other peril, Tenant shall
immediately give written notice to Landlord of such damage or destruction.
If the Premises or the Building should be totally destroyed by any peril
covered by the insurance to be provided by Landlord under Paragraph 9A above,
or if they should be so damaged thereby that, in Landlord's estimation,
rebuilding or repairs cannot be completed within one hundred and fifty (150)
days after the date of such damage or after such completion there is not
enough time remaining under the terms of this Lease to fully amortize such
rebuilding or repairs, then Landlord shall so notify Tenant in writing and
this Lease shall terminate and the rent shall be abated during the unexpired
portion of this Lease, effective upon the date of the occurrence of such
damage.
B. PARTIAL DAMAGE OR DESTRUCTION. If the Premises or the Building
should be damaged by any perils covered by the insurance to be provided by
Landlord under Paragraph 9A above and, in Landlord's estimation, rebuilding
or repairs can be substantially completed within one hundred fifty (150) days
after the date of such damage, then this Lease shall not terminate and
Landlord shall restore the Premises to its previous condition, except that
Landlord shall not be required to rebuild, repair or replace any part of the
partitions, fixtures, additions and other improvements that may have been
constructed, erected or installed in or about the Premises for the benefit of
or by or for Tenant. In the event of partial damage to the Premises, rent
shall abate for the period of reconstruction for the portion of the Premises
that cannot be occupied due to the casualty.
C. LIENHOLDERS RIGHTS IN PROCEEDS. Notwithstanding anything herein to
the contrary, in the event the holder of any indebtedness secured by a
mortgagee or deed of trust covering the Premises requires that the insurance
proceeds be applied to such indebtedness, then Landlord shall have the right
to terminate this Lease by delivering written notice of termination to Tenant
within fifteen (15) days after such requirement is made known to Landlord by
any such holder, whereupon all rights and obligations hereunder shall cease
and terminate.
D. WAIVER OF SUBROGATION. Notwithstanding anything in this Lease to
the contrary, Landlord and Tenant hereby waive and release each other of and
from any and all rights of recovery, claims, actions or causes of action
against each other, or their respective agents, officers and employees, for
any loss or damage that may occur to the Premises, improvements to the
Building or personal property (Building contents) within the Building and/or
Premises, for any reason regardless of cause or origin. Each party to this
Lease agrees immediately after execution of this Lease to give written
notice of the terms of the mutual waivers contained in this subparagraph to
each insurance company that has issued to such party policies of fire and
extended coverage insurance and, if necessary, to have the insurance policies
properly endorsed to provide that the carriers of such policies waive all
rights of recovery under subrogation or otherwise against the other party.
11. LIABILITY AND INDEMNIFICATION. Except for any claims, rights of
recovery and causes of action that Landlord has released, Tenant shall hold
Landlord harmless from and defend Landlord against any and all claims or
liability for any injury or damage (i) to any person or property whatsoever
occurring in, on or about the Premises or any part thereof, the Building
and/or about the Premises or any part thereof, the Building and/or common
areas, the use of which Tenant may have in accordance with this Lease, if
(and only if) such injury or damage shall be caused in whole or in part by
the act, gross neglect, fault or willful omission of any duty by Tenant, its
agents, servant, employees or invitees, (ii) arising from the conduct or
management of any work done by the Tenant in or about the Premises, (iii)
arising from transactions of the Tenant, and (iv) all costs, counsel fees,
expenses and liabilities incurred in connection with any such claim or action
or proceeding brought thereon. The provisions of this Paragraph 11 shall
survive the expiration or termination of this Lease. Landlord shall not be
liable in any event for personal injury or loss of Tenant's property caused
by fire, flood, water leaks, rain, hail, ice, snow, smoke, lightning, wind,
explosion, interruption of utilities, or other occurrences unless resulting
from Landlord's acts. Landlord strongly recommends that Tenant secure
Tenant's own insurance, in excess of the amounts required elsewhere in this
Lease, to protect against the above occurrences if Tenant desires additional
coverage for such risks. Tenant shall give prompt notice to Landlord of any
significant accidents involving injury to persons or property. Furthermore,
Landlord shall not be responsible for lost or stolen personal property,
equipment, money or jewelry from the Premises or from the public areas of the
Building or the Project, or for any damages or losses caused by theft,
burglary, assault, vandalism, or other crimes. Landlord strongly recommends
that Tenant provide its own security systems and services and secure Tenant's
own insurance in excess of the amounts required elsewhere in this Lease, to
protect against the above occurrences if Tenant desires additional protection
or coverage for such risks. Tenant shall give Landlord prompt notice of any
criminal or suspicious conduct within or about the Premises, the Building or
the Project, and/or any personal injury or property damage caused thereby.
Landlord may, but is not obligated to, enter into agreements with third
parties for the provision of any courtesy patrols or similar services or fire
protective systems and equipment and, to the extent same is provided in
Landlord's sole discretion, Landlord shall not be liable to Tenant for any
damages, costs or expenses which occur for any reason in the event any such
system or equipment is not properly installed, monitored or maintained or any
such services are not properly provided, unless resulting from Landlord's
acts. Landlord shall use reasonable diligence in the maintenance of existing
lighting, if any, in the parking areas servicing the Premises, and Landlord
shall not be responsible for additional lighting or any security measures in
the Project, the Premises or other parking areas.
12. USE. The Premises shall be used only for the purpose of manufacturing,
sales, research and development, telephone support, design, receiving,
storing, shipping and selling (other than retail) products, materials and
merchandise made and/or distributed by Tenant and for such other lawful
purposes as may be directly incidental thereto. Outside storage, including
without limitation storage of trucks and other vehicles, is prohibited
without Landlord's prior written consent. Tenant shall comply with all
governmental laws, ordinances and regulations applicable to the use of the
Premises, and shall promptly comply with all governmental orders and
directives for the correction, prevention and abatement of nuisances in or
upon or connected with the Premises, all at Tenant's sole expense. Tenant
shall not permit any objectionable or unpleasant odors, smoke, dust, gas,
noise or vibrations to emanate from the Premises, nor take any other action
that would constitute a nuisance or would disturb, unreasonably interfere
with or endanger Landlord or any other lessees of the Building or the Project.
13. HAZARDOUS WASTE. The term "Hazardous Substances," as used in this Lease,
shall mean pollutants, contaminants, toxic or hazardous wastes, radioactive
materials or any other substances, the use and/or the removal of which is
required or the use of which is restricted, prohibited or penalized by any
"Environmental Law," which term shall mean any federal, state or local
statute, ordinance, regulation or other law of a governmental or
quasi-governmental authority relating to pollution or protection of the
environment or the regulation of the storage or handling of Hazardous
Substances. Limited to its actions only, Tenant hereby agrees that: (i) no
activity will be conducted on the Premises that will produce any Hazardous
Substance, except for such activities that are part of the ordinary course of
Tenant's business activities (the "Permitted Activities"), provided said
Permitted Activities are conducted in accordance with all Environmental Laws
and have been approved in advance in writing by Landlord, which approval
shall not be unreasonably withheld or delayed and, in connection therewith,
Tenant shall be responsible for obtaining any required permits or
authorizations and paying any fees and providing any testing required by any
governmental agency; (ii) the Premises will not be used in any manner for the
storage of any Hazardous Substances, except for the temporary storage of such
materials that are used in the ordinary course of Tenant's business (the
"Permitted Materials"), provided such Permitted Materials are properly stored
in a manner and location meeting all Environmental Laws and have been
approved in advance in writing by Landlord, which such approval shall not be
unreasonably withheld or delayed, and, in connection therewith, Tenant shall
be responsible for obtaining any required permits or authorizations and
paying any fees and providing any testing required by any governmental
agency; (iii) no portion of the Premises will be used as a landfill or a
dump; (iv) Tenant will not install any underground tanks of any type; (v)
Tenant will not allow any surface or subsurface conditions to exist or come
into existence that constitute, or with the passage of time may constitute, a
public or private nuisance; (vi) Tenant will not permit any Hazardous
Substances to be brought onto the Premises, except for the Permitted
Materials, and if so brought or found located thereon, the same shall be
immediately removed, with proper disposal, and all required clean-up
procedures shall be diligently undertaken by Tenant at its sole cost pursuant
to all Environmental Laws. Upon prior notice during normal business hours,
Landlord and Landlord's representatives shall have the right but not the
obligation to enter the Premises for the purpose of inspecting the storage,
use and disposal of any Permitted Materials to ensure compliance with all
Environmental Laws. Should it be determined, in Landlord's sole opinion,
that any Permitted Materials are being improperly stored, used or disposed
of, then Tenant shall immediately take such corrective action as requested by
Landlord. Should Tenant fail to take such corrective action within
twenty-four (24) hours, Landlord shall have the right to perform such work
and Tenant shall reimburse Landlord, on demand, for any
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and all costs associated with said work. If at any time during or after the
term of this Lease, the Premises is found to be contaminated with Hazardous
Materials, Tenant shall diligently institute proper and thorough clean-up
procedures, at Tenant's sole cost. TENANT AGREES TO INDEMNIFY AND HOLD
LANDLORD HARMLESS FROM ALL CLAIMS, DEMANDS, ACTIONS, LIABILITIES, COSTS,
EXPENSES, DAMAGES, PENALTIES AND OBLIGATIONS OF ANY NATURE ARISING FROM OR AS
A RESULT OF ANY CONTAMINATION OF THE PREMISES WITH HAZARDOUS SUBSTANCES BY
TENANT, OR OTHERWISE ARISING FROM THE USE OF THE PREMISES BY TENANT. THE
FOREGOING INDEMNIFICATION AND THE RESPONSIBILITIES OF TENANT SHALL SURVIVE
THE TERMINATION OR EXPIRATION OF THIS LEASE.
14. INSPECTION. Landlord's agents and representatives, upon notice to
Tenant, shall have the right to enter the Premises at any reasonable time
during business hours (or at any time in case of emergency) (i) to inspect
the Premises; (ii) to make such repairs as may be required or permitted
pursuant to this Lease; and/or (iii) during the last six (6) months of the
Lease term, for the purpose of showing the Premises. In addition, Landlord
shall have the right to erect a suitable sign on the Premises stating the
Premises are available for Lease. Tenant shall notify Landlord in writing at
least thirty (30) days prior to vacating the Premises and shall arrange to
meet with Landlord for a joint inspection of the Premises prior to vacating.
If Tenant fails to give such notice or to arrange for such inspection, then
Landlord's inspection of the Premises shall be deemed correct for the purpose
of determining Tenant's responsibility for repairs and restoration of the
Premises.
15. ASSIGNMENT AND SUBLETTING. Tenant shall not have the right to sublet,
assign or otherwise transfer or encumber this Lease, or any interest therein,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. Any attempted assignment, subletting,
transfer of encumbrance by Tenant in violation of the terms and covenants of
this paragraph shall be void. Any assignee, sublessee or transferee of
Tenant's interest in this Lease (all such assignees, sublessees and
transferees being hereinafter referred to as "Transferees"), by assuming
Tenant's obligations hereunder, shall assume liability to Landlord for all
amounts paid to persons other than Landlord by such Transferees to which
Landlord is entitled or otherwise in contravention of this Paragraph 15. No
assignment, subletting or other transfer, whether or not consented to by
Landlord or permitted hereunder, shall relieve Tenant of its liability under
this Lease. If an Event of Default occurs while the Premises or any part
thereof are assigned or sublet, then Landlord, in addition to any other
remedies herein provided or provided by law, may collect directly from such
Transferee all rents payable to the Tenant and apply such rent against any
sums due Landlord hereunder. No such collection shall be construed to
constitute a novation or a release of Tenant from the further performance of
Tenant's obligations hereunder. If Landlord consents to any subletting or
assignment by Tenant as hereinabove provided and any category of rent
subsequently received by Tenant under any such sublease is in excess of the
same category of rent payable under this Lease, or any additional
consideration is paid to Tenant by the assignee under any such assignment,
then Landlord may, at its option, declare such excess rents under any
sublease or such additional consideration for any assignment to be due and
payable by Tenant to Landlord as additional rent hereunder. The following
shall additionally constitute an assignment of this Lease by Tenant for the
purposes of this Paragraph 15.: (i) if Tenant is a corporation, any merger,
consolidation, dissolution or liquidation, or any change in ownership or
power to vote of thirty percent (30%) or more of Tenant's outstanding voting
stock; (ii) if Tenant is a partnership, joint venture or other entity, any
liquidation, dissolution or transfer of ownership of any interests totaling
thirty percent (30%) or more of the total interests in such entity; (iii)
the sale, transfer, exchange, liquidation or other distribution of more than
thirty percent (30%) of Tenant's assets, other than this Lease; or (iv) the
mortgage, pledge, hypothecation or other encumbrance of or grant of a
security interest by Tenant in this Lease, or of any of Tenant's rights
hereunder. For the purposes of this Lease, the merger or sale of a division
owned by Tenant shall not constitute an assignment under this Lease.
16. CONDEMNATION. If more than eighty percent (80%) of the Premises or the
required parking and access related thereto, are taken for any public or
quasi-public use under governmental law, ordinance or regulation, or by right
of eminent domain or private purchase in lieu thereof, and the taking
prevents or materially interferes with the use of the remainder of the
Premises for the purpose for which they were leased to Tenant, then this
Lease shall terminate and the rent shall be abated during the unexpired
portion of this Lease, effective on the date of such taking. If less than
eighty percent (80%) of the Premises are taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or
by right of eminent domain or private purchase in lieu thereof, or if the
taking does not prevent or materially interfere with the use of the
remainder of the Premises, parking, access and loading for the purpose for
which they were leased to Tenant, then this Lease shall not terminate,
but the rent payable hereunder during the unexpired portion of this Lease
shall be reduced to such extent as may be fair and reasonable under all
of the circumstances. All compensation awarded in connection with or as a
result of any of the foregoing proceedings shall be the property of Landlord,
and Tenant hereby assigns any interest in any such award to Landlord:
provided, however, Landlord shall have no interest in any award made to
Tenant for loss of business or goodwill or for the taking of Tenant's trade
fixtures and personal property, if a separate award for such items is made to
Tenant.
17. HOLDING OVER. At the termination of this Lease by its expiration or
otherwise, Tenant shall immediately deliver possession of the Premises to
Landlord with all repairs and maintenance required herein to be performed by
Tenant completed. If, for any reason, Tenant retains possession of the
Premises after the expiration or termination of this Lease, unless the
parties hereto otherwise agree in writing, such possession shall be deemed to
be a tenancy at will only, and all other terms and provisions of this Lease
shall be applicable during such period, except that Tenant shall pay Landlord
from time to time, upon demand, as rental for the period of such possession,
an amount equal to one and one-half times the rent in effect on the date of
such termination of this Lease, computed on a daily basis for each day of
such period. No holding over by Tenant, whether with or without consent of
Landlord, shall operate to extend this Lease except as otherwise expressly
provided. The preceding provisions of this Paragraph 17 shall not be
construed as consent for Tenant to retain possession of the Premises in the
absence of written consent thereto by Landlord.
18. QUIET ENJOYMENT. Landlord represents that it has the authority to enter
into this Lease and that, so long as Tenant pays all amounts due hereunder
and performs all other covenants and agreements herein set forth, Tenant
shall peaceably and quietly have, hold and enjoy the Premises for the term
hereof without hindrance or molestation from Landlord, subject to the terms
and provisions of this Lease.
19. EVENTS OF DEFAULT. The following events (herein individually referred to
as an "Event of Default") each shall be deemed to be default in or breach of
Tenant's obligations under this Lease:
A. Tenant shall fail to pay any installment of the rent herein
reserved when due, or any other payment or reimbursement to Landlord required
herein when due, and such failure shall continue for a period of ten (10)
days from the date Landlord provided written notice that such payment was due.
C. Tenant shall fail to discharge any lien placed upon the Premises in
violation of paragraph 22 hereof within twenty (20) days after any such lien
or encumbrance is filed against the Premises.
D. Tenant shall default in the performance of any of its obligations
under any other lease to Tenant from Landlord, or from any person or entity
affiliated with or related to Landlord, and same shall remain uncured after the
lapsing of any applicable cure period provide for under such other lease.
E. Tenant shall fail to comply with any term, provision or covenant of
this Lease (other than those listed above in this paragraph), and shall not cure
such failure within thirty (30) days after written notice thereof from Landlord.
20. REMEDIES. Upon each occurrence an Event of Default, Landlord shall have the
option to pursue anyone or more of the following remedies without any notice or
demand:
(a) Terminate this Lease;
(b) Enter upon and take possession of the Premises without terminating
this Lease;
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<PAGE>
(c) Make such payments and/or take such action and pay and/or
perform whatever Tenant is obligated to pay or perform under the terms of
this Lease, and Tenant agrees that Landlord shall not be liable for any
damages resulting to Tenant from such action; and/or
(d) Alter all locks and other security devices at the Premises,
with or without terminating this Lease, and pursue, at Landlord's option, one
or more remedies pursuant to this Lease, and Tenant hereby expressly agrees
that Landlord shall not be required to provide to Tenant the new key to the
Premises, regardless of hour, including Tenant's regular business hours;
and in any such event Tenant shall immediately vacate the Premises, and if
Tenant fails so to do, Landlord, without waiving any other remedy it may
have, may enter upon and take possession of the Premises and expel or remove
Tenant and any other person who may be occupying such Premises or any part
thereof, without being liable for prosecution or any claim of damages
therefor. In the event of any violation of Section 93.008 of the Texas
Property Code by Landlord or by any agent or employee of Landlord, Tenant
hereby expressly waives any and all rights Tenant may have under Paragraph
(g) of such Section 93.008.
A. DAMAGES UPON TERMINATION. If Landlord terminates this Lease, at
Landlord's option, Tenant shall be liable for and shall pay to Landlord the
sum of all rental and other payments owed to Landlord hereunder accrued to
the date of such termination, plus, as liquidated damages, an amount equal to
(1) the present value of the total rental and other payments owed hereunder
for the remaining portion of the Lease term, calculated as if such term
expired on the date set forth in Paragraph 1, less, (2) the present value of
the then fair market rental for the Premises for such period, provided that,
because of the difficulty of ascertaining such value and in order to achieve
a reasonable estimate of liquidated damages hereunder, Landlord and Tenant
stipulate and agree, for the purposes hereof, that such fair market rental
shall in no event exceed seventy-five percent (75%) of the rental amount for
such period set forth in Paragraph 2 above.
B. DAMAGES UPON REPOSSESSION. If Landlord repossesses the Premises
without terminating this Lease, Tenant, at Landlord's option, shall be liable
for and shall pay Landlord on demand all rental and other payments owed to
Landlord hereunder, accrued to the date of such repossession, plus all
amounts required to be paid by Tenant to Landlord until the date of
expiration of the term as stated in Paragraph 1, diminished by all amounts
actually received by Landlord through reletting the Premises during such
remaining term (but only to the extent of the rent herein reserved). Actions
to collect amounts due by Tenant to Landlord under this paragraph may be
brought from time to time, on one or more occasions, without the necessity of
Landlord's waiting until expiration of the Lease term.
C. COSTS OF RELETTING, REMOVING, REPAIRS AND ENFORCEMENT. Upon an
Event of Default, in addition to any sum provided to be paid under this
Paragraph 20, Tenant also shall be liable for and shall pay to Landlord (i)
brokers' fees and all other costs and expenses incurred by Landlord in
connection with reletting the whole or any part of the Premises; (ii) the
costs of removing, storing or disposing Tenant's or any other occupant's
property; (iii) the costs of repairing, altering, remodeling or otherwise
putting the Premises into condition acceptable to a new Tenant or Tenants:
(iv) any and all actual costs and expenses incurred by Landlord in effecting
compliance with Tenant's obligations under this Lease; and (v) all reasonable
expenses incurred by Landlord in enforcing or defending Landlord's rights
and/or remedies hereunder, including without limitation, all reasonable
attorneys' fees and all court costs incurred in connection with such
enforcement or defense.
D. LATE CHARGE. In the event Tenant fails to make any payment due
hereunder within five (5) days after such payment is due, including without
limitation any rental or escrow payment, in order to help defray the
additional cost to Landlord for processing such late payments and not as
interest, Tenant shall pay to Landlord on demand a late charge in an amount
equal to five percent (5%) of such payment. The provision for such late
charge shall be in addition to all of Landlord's other rights and remedies
hereunder or at law, and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner.
E. INTEREST ON PAST DUE AMOUNTS. If Tenant fails to pay any sum
which at any time becomes due to Landlord under any provision of this Lease
as and when the same becomes due hereunder, and such failure continues for
ten (10) days after the due date for such payment, then Tenant shall pay to
Landlord interest on such overdue amounts from the date due until paid at an
annual rate which equals the lesser of (i) eighteen percent (18%) or (ii) the
highest rate then permitted by law.
F. NO IMPLIED ACCEPTANCES OR WAIVERS. Exercise by Landlord of any
one or more remedies hereunder granted or otherwise available shall not be
deemed to be an acceptance by Landlord of Tenant's surrender of the Premises,
it being understood that such surrender can be effected only by the written
agreement of Landlord. Tenant and Landlord further agree that forbearance by
Landlord to enforce any of its rights under this Lease or at law or in equity
shall not be a waiver of Landlord's right to enforce any one or more of its
rights, including any right previously forborne, in connection with any
existing or subsequent default. No re-entry or taking possession of the
Premises by Landlord shall be construed as an election on its part to
terminate this Lease, unless a written notice of such intention is given to
Tenant, and, notwithstanding any such reletting or re-entry or taking
possession of the Premises, Landlord may at any time thereafter elect to
terminate this Lease for a previous default. Pursuit of any remedies
hereunder shall not preclude the pursuit of any other remedy herein provided
or any other remedies provided by law, nor shall pursuit of any remedy herein
provided constitute a forfeiture or waiver of any rent due to Landlord
hereunder or of any damages occurring to Landlord by reason of the violation
of any of the terms, provisions and covenants contained in this Lease.
Landlord's acceptance of any rent following either an Event of Default
hereunder shall not be construed as Landlord's waiver of such Event of
Default. No waiver by Landlord of any violation or breach of any of the
terms, provisions and covenants of this Lease shall be deemed or construed to
constitute a waiver of any other violation or default.
G. RELETTING OF PREMISES. In the event of any termination of this
Lease and/or repossession of the Premises for an Event of Default, Landlord
shall use reasonable efforts to relet the Premises and to collect rental
after reletting, with no obligation to accept any lessee that Landlord deems
undesirable or to expend any funds in connection with such reletting or
collection of rents therefrom. Tenant shall not be entitled to credit for or
reimbursement of any proceeds of such reletting in excess of the rental owed
hereunder for the period of such reletting. Landlord may relet the whole or
any portion of the Premises for any period, to any Tenant and for any use or
purpose.
H. LANDLORD'S DEFAULT. If Landlord fails to commence to perform
any of its obligations hereunder within thirty (30) days after written
notice from Tenant specifying such failure, and such failure results in a
defect that seriously jeopardizes the safety of persons occupying the
Premises or threatens equipment or machinery owned by Tenant within the
Premises, or such defect impairs Tenant's ability to conduct its business
within the Premises, and Landlord has failed to commence to cure the default
or obligation within the thirty (30) day period outlined above, Tenant shall
be permitted to cure Landlord's default or obligation and Landlord will be
obligated to reimburse Tenant for the actual cost incurred to cure Landlord's
default or obligation.
All obligations of Landlord hereunder will be construed as covenants, not
conditions; and all such obligations will be binding upon Landlord only
during the period of its possession of the Premises and not thereafter. The
term "Landlord" shall mean only the owner, for the time being of the Premises
and, in the event of the transfer by such owner of its interest in the
Premises, such owner shall thereupon be released and discharged from all
covenants and obligations of the Landlord thereafter accruing, provided that
such covenants and obligations shall be binding during the Lease term upon
each new owner for the duration of such owner's ownership. Notwithstanding
any other provision of this Lease, Landlord shall not have any personal
liability hereunder. In the event of any breach or default by Landlord in
any term or provision of this Lease, Tenant agrees to look solely to the
equity or interest then owned by Landlord in the Premises or the Building;
however, in no event, shall any deficiency judgment or any money judgment of
any kind by sought or obtained against any Landlord.
I. TENANT'S PERSONAL PROPERTY. If Landlord repossesses the Premises
pursuant to the authority herein granted, or if Tenant vacates or abandons all
or any part of the Premises, then, in addition to Landlord's rights under
Paragraph 29 hereof, Landlord shall have the right to (i) keep in place and use
or (ii) remove and store, all of the furniture, fixtures, and equipment at the
Premises, including that which is owned by Tenant, at all times prior to any
foreclosure thereon by Landlord or repossession thereof by any lessor thereof or
third party having a lien thereon. In addition to the Landlord's other rights
hereunder, Landlord may dispose of the stored property if Tenant does not claim
the property within twenty (20) days after the date the property is stored.
Landlord shall give Tenant at least ten (10) ten days prior written notice of
such intended disposition. Landlord shall also have the right to relinquish
possession of all or any portion of such furniture, fixtures, equipment and
other property to any person ("Claimant") who presents to Landlord a copy of
any instrument represented by Claimant to have been executed by Tenant (or any
predecessor of Tenant) granting Claimant the right under various circumstances
to take
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possession of such furniture, fixtures, equipment or other property, without
the necessity on the part of Landlord to inquire into the authenticity or
legality of said instrument. The rights of Landlord herein stated shall be in
addition to any and all other rights that Landlord has or may hereafter have
at law or in equity; and Tenant stipulates and agrees that the rights granted
Landlord under this paragraph are commercially reasonable.
21. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting
a lien or charge upon the Premises or the improvements situated thereon or
the Building, provided, however, that if the mortgagee, trustee or holder of
any such mortgage or deed of trust elects to have Tenant's interest in this
Lease superior to any such instrument, then by notice to Tenant from such
mortgagee, trustee or holder, this Lease shall be deemed superior to such
lien, whether this Lease was executed before or after said mortgage or deed
of trust. Tenant, at any time hereafter on demand, shall execute any
instruments, releases or other documents that may be required by any
mortgagee for the purpose of subjecting and subordinating this Lease to the
lien of any such mortgage, provided the subordination does not change any of
the Lease terms contained within this Lease and the subordination agreement
contains an attornment and non-disturbance agreement. Tenant shall not
terminate this Lease or pursue any other remedy available to Tenant hereunder
for any default on the part of Landlord without first giving written notice
by certified or registered mail, return receipt requested, to any mortgagee,
trustee or holder of any such mortgage or deed of trust, the name and post
office address of which Tenant has received written notice, specifying the
default in reasonable detail and affording such mortgagee, trustee or holder
a reasonable opportunity (but in no event less than thirty days) to make
performance, at its election, for and on behalf of Landlord.
22. MECHANIC'S LIENS. Tenant has no authority, express or implied, to create
or place any lien or encumbrance of any kind or nature whatsoever upon, or in
any manner to bind the interest of Landlord or Tenant in the Premises. TENANT
WILL SAVE AND HOLD LANDLORD HARMLESS FROM ANY AND ALL LOSS, COST OR EXPENSE,
INCLUDING WITHOUT LIMITATION ATTORNEYS' FEES, BASED ON OR ARISING OUT OF
ASSERTED CLAIMS OR LIENS AGAINST THE LEASEHOLD ESTATE OR AGAINST THE RIGHT,
TITLE AND INTEREST OF THE LANDLORD IN THE PREMISES OR UNDER THE TERMS OF THIS
LEASE.
23. MISCELLANEOUS.
A. INTERPRETATION. The captions inserted in this Lease are for
convenience only and in no way define, limit or otherwise describe the scope
or intent of this Lease, or any provision hereof, or in any way affect the
interpretation of this Lease.
B. BINDING EFFECT. Except as otherwise herein expressly provided,
the terms, provisions and covenants and conditions in this Lease shall apply
to, inure to the benefit of and be binding upon the parties hereto and upon
their respective heirs, executors, personal representatives, legal
representatives, successors and assigns. Landlord shall have the right to
transfer and assign, in whole or in part, its rights and obligations in the
Premises and in the Building and other property that are the subject of this
Lease.
C. EVIDENCE OF AUTHORITY. Tenant agrees to furnish to Landlord,
promptly upon demand, a corporate resolution, proof of due authorization by
partners or other appropriate documentation evidencing the due authorization
of such party to enter into this Lease.
D. FORCE MAJEURE. Landlord shall not be held responsible for
delays in the performance of its oblations hereunder when caused by material
shortages, acts of God, labor disputes or other events beyond the control of
Landlord.
E. PAYMENTS CONSTITUTE RENT. Notwithstanding anything in this
Lease to the contrary, all amounts payable by Tenant to or on behalf of
Landlord under this Lease, whether or not expressly denominated as rent,
shall constitute rent.
F. ESTOPPEL CERTIFICATES. Tenant agrees, from time to time, within
ten (10) days after request of Landlord, to deliver to Landlord, or
Landlord's designee, an estoppel certificate stating that this Lease is in
full force and effect, the date to which rent has been paid, the unexpired
term of this Lease, any defaults existing under this Lease (or the absence
thereof) and such other factual or legal matters pertaining to this Lease as
may be requested by Landlord. It is understood and agreed that Tenant's
obligation to furnish such estoppel certificates in a timely fashion is a
material inducement for Landlord's execution of this Lease, provided it does
not alter the terms of this Lease.
G. ENTIRE AGREEMENT. This Lease constitutes obligations which have
the entire understanding and agreement of Landlord and Tenant with respect to
the subject matter of this Lease, and contains all of the covenants and
agreements of Landlord and Tenant with respect thereto. Landlord and Tenant
each acknowledge that no representations, inducements, promises or
agreements, oral or written, have been made by Landlord or Tenant, or anyone
acting on behalf of Landlord or Tenant, which are not contained herein, and
any prior agreements, promises, negotiations or representations not expressly
set forth in this Lease are of no force or effect. EXCEPT AS SPECIFICALLY
PROVIDED IN THIS LEASE, TENANT HEREBY WAIVES THE BENEFIT OF ALL IMPLIED
WARRANTIES, IT BEING UNDERSTOOD THAT LANDLORD WILL CONSTRUCT THE PREMISES
SPECIFICALLY FOR TENANT'S INTENDED USE AND IN ACCORDANCE WITH PLANS AND
SPECIFICATIONS, AND WITH RESPECT TO THE PREMISES, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR ANY
PARTICULAR PURPOSE. Landlord's agents and employees do not and will not have
authority to make exceptions, changes or amendments to this Lease, or factual
representations not expressly contained in this Lease. Under no
circumstances shall Landlord or Tenant be considered an agent of the other.
This Lease may not be altered, changed or amended except by an instrument in
writing signed by both parties hereto.
H. SURVIVAL OF OBLIGATIONS. All obligations of Tenant hereunder
not fully performed as of the expiration or earlier termination of the term
of this Lease shall survive the expiration or earlier termination of the term
hereof, including without limitation all payment obligations with respect to
taxes and insurance and all obligations concerning the condition and repair
of the Premises. Upon the expiration or earlier termination of the term
hereof, and prior to Tenant vacating the Premises, Tenant shall pay to
Landlord any amount reasonably estimated by Landlord as necessary to put the
Premises in good condition and repair, reasonable wear and tear excluded,
including without limitation the cost of repairs to and replacements of all
heating and air conditioning systems and equipment therein. Tenant shall
also, prior to vacating the Premises, pay to Landlord the amount, as
estimated by Landlord, of Tenant's obligation hereunder for real estate taxes
and insurance premiums for the year in which the Lease expires or terminates.
All such amounts shall be used and held by Landlord for payment of such
obligations of Tenant hereunder, with Tenant being liable for any additional
costs therefore upon demand by Landlord, or with any excess to be returned to
Tenant after all such obligations have been determined and satisfied, as the
case may be. Any Security Deposit held by Landlord may, at Landlord's
option, be credited against any amounts due from Tenant under this Paragraph
23H.
I. SEVERABILITY OF TERMS. If any clause or provision of this Lease
is illegal, invalid or unenforceable under present of future laws effective
during the term of this Lease, then, in such event, it is the intention of
the parties hereto that the remainder of this Lease shall not be affected
thereby, and it is also the intention of the parties to this Lease that in
lieu of each clause or provision of this Lease that is illegal, invalid or
unenforceable clause or provision as may be legal, valid and enforceable.
J. EFFECTIVE DATE. All references in this Lease to "the date
hereof" or similar references shall be deemed to refer to the last date in
point in time on which all parties hereto have executed this Lease.
K. BROKER'S COMMISSION. Tenant represents and warrants that it has
dealt with and will deal with no broker, agent or other persons other than
CHRIS WHITWORTH OF HILL PARTNERS AND SCOTT YOUNG AND CHAD MUELLER OF SCOTT
YOUNG PROPERTIES in connection with this transaction or future related
transactions and that no broker, agent or other person brought about this
transaction, and Tenant agrees to indemnify and hold Landlord harmless from
and against any claims by any other broker, agent or other person claiming a
commission or other form of compensation by virtue of having dealt with them
with regard to this leasing transaction.
L. AMBIGUITY. Landlord and Tenant hereby agree and acknowledge
that this Lease has been fully reviewed and negotiated by both Landlord and
Tenant, and that Landlord and Tenant have each had the opportunity to have
this Lease reviewed by their respective legal counsel, and, accordingly, in
the event of any ambiguity herein, Tenant does hereby waive the rule of
construction that such ambiguity shall be resolved against the party who
prepared this Lease.
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M. JOINT AND SEVERAL LIABILITY. If there be more than one Tenant,
the obligations hereunder imposed upon Tenant shall be joint and several. If
there be a guarantor of Tenant's obligations hereunder, the obligations
hereunder imposed upon Tenant shall be joint and several obligations of
Tenant and such guarantor, and Landlord need not first proceed against Tenant
before proceeding against such guarantor, nor shall any such guarantor be
released from its guaranty for any reason whatsoever, including, without
limitation, in case of any amendments hereto, waivers hereof or failure to
give such guarantor any notices hereunder
N. THIRD PARTY RIGHTS. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give to any person or
entity, other than the parties hereto, any right or remedy under or by reason
of this Lease.
0. EXHIBITS AND ATTACHMENTS. All exhibits, attachments, riders and
addenda referred to in this Lease, and the exhibits listed herein below and
attached hereto, are incorporated into this Lease and made a part hereof for
all intents and purposes as if fully set out herein. All capitalized terms
used in such documents shall, unless otherwise defined therein, have the same
meanings as are set forth herein.
P. APPLICABLE LAW. This Lease has been executed in the State of
Texas and shall be governed in all respects by the laws of the State of
Texas. It is the intent of Landlord and Tenant to conform strictly to all
applicable state and federal usury laws. All agreements between Landlord and
Tenant, whether now existing or hereafter arising and whether written or
oral, are hereby expressly limited so that in no contingency or event
whatsoever shall the amount contracted for, charged or received by Landlord
for the use, forbearance or retention of money hereunder or otherwise exceed
the maximum amount which Landlord is legally entitled to contract for, charge
or collect under the applicable state or federal law. If, from any
circumstance whatsoever, fulfillment of any provision hereof at the time
performance of such provision shall be due shall involve transcending the
limit of validity prescribed by law, then the obligation to be fulfilled
shall be automatically reduced to the limit of such validity, and if from any
such circumstance Landlord shall ever receive as interest or otherwise an
amount in excess of the maximum that can be legally collected, then such
amount which would be excessive interest shall be applied to the reduction of
rent hereunder, and if such amount which would be excessive interest exceeds
such rent, then such additional amount shall be refunded to Tenant.
24. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with
reference to the sending, mailing or delivering of notice or the making of
any payment by Landlord to Tenant or with reference to the sending, mailing
or delivering of any notice or the making of any payment by Tenant to
Landlord shall be deemed to be complied with when and if the following steps
are taken:
(i) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address for Landlord
set forth below or at such other address as Landlord may specify from time to
time by written notice delivered in accordance herewith. Tenant's obligation
to pay rent and any other amounts to Landlord under the terms of this Lease
shall not be deemed satisfied until such rent and other amounts have been
actually received by Landlord.
(ii) All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address set forth below, or at
such other address within the continental United States as Tenant may specify
from time to time by written notice delivered in accordance herewith.
(iii) Except as expressly provided herein, any written notice,
document or payment required or permitted to be delivered hereunder shall be
deemed to be delivered when received or, whether actually received or not,
when deposited in the United States Mail, postage prepaid, Certified or
Registered Mail, addressed to the parties hereto at the respective addresses
set out below, or at such other address as they have theretofore specified by
written notice delivered in accordance herewith.
26. ADDITIONAL PROVISIONS. See EXHIBIT "B" attached hereto and incorporated by
reference herein.
EXECUTED BY LANDLORD, this 15th day of April, 1998.
CAMERON TECHNOLOGY INVESTORS, LTD.
BY: CAMERON ROAD INVESTORS, LTD. A TEXAS LIMITED
LIABILITY CO.
ITS: GENERAL PARTNER
BY:
------------------------------
ITS: MANAGING DIRECTOR
Address: C/O Scott Young Properties
P.O. Box 1525, Austin, Texas 78767
EXECUTED BY TENANT, this 8th day of April, 1998.
ADVANCED ENERGY INDUSTRIES, INC.
By:
------------------------------
Its:
-----------------------------
Address: 1625 Sharp Point Drive
Fort Collins, CO 80525
Phone: 970-221-4670
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Fax: 970-407-5243
EXHIBIT "A" Description of Premises
EXHIBIT "B" Additional Provisions
EXHIBIT "C" Rules and Regulations
EXHIBIT "D" Tenant Construction Standards
EXHIBIT "E" Sign Criteria
EXHBIT "F" Construction Plans
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<PAGE>
EXHIBIT "A"
[MAP]
<PAGE>
EXHIBIT "A-1"
[MAP]
<PAGE>
EXHIBIT "B"
ADDITIONAL PROVISIONS
1. N-N-N CHARGES. The initial estimated monthly costs for Tenant's
Proportionate Share of costs based on preliminary estimates of the total
operating costs of the Project for the first calendar year of the Lease are
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
EXPENSE PER SQUARE FOOT AMOUNT PER MONTH
- -------------------------------------------------------------------------------
<S> <C> <C>
Property Taxes $.09 $1,782.00
Insurance $.01 $198.00
CAM $.06 $1,188.00
- -------------------------------------------------------------------------------
TOTAL $.16 $3,168.00
- -------------------------------------------------------------------------------
</TABLE>
2. TENANT IMPROVEMENT AGREEMENT. Landlord shall cause to be performed the
improvements (the "TENANT IMPROVEMENTS") in the Premises in accordance with
plans and specifications approved by Tenant and Landlord (the "Plans"), which
approvals shall not be unreasonably withheld. The Tenant Improvements shall
be performed at the Tenant's cost, subject to the reimbursement of Landlord's
Contribution.
Tenant shall cause the Plans to be prepared, at Tenant's cost, by a
registered professional architect, and mechanical and electrical engineer(s)
with the design criteria developed in accordance with EXHIBIT "D", TENANTS
CONSTRUCTION STANDARDS attached and incorporated herein. Such engineer(s)
shall be approved in advance by the Landlord. Prior to close-of-business on
December 1, 1998, Tenant shall furnish the initial draft of the Plans to
Landlord for Landlord's review and approval. Landlord shall within two (2)
weeks after receipt either provide comments to such Plans or approve the
same. Landlord shall be deemed to have approved such Plans if it does not
timely provide comments on such Plans. If Landlord provides Tenant with
comments to the initial draft of the Plans, Tenant shall provide revised
Plans to Landlord incorporating Landlord's comments within one week after
receipt of Landlord's comments. Landlord shall within one week after receipt
then either provide comments to such revised Plans or approve such Plans.
Landlord shall be deemed to have approved such revised Plans if Landlord does
not timely provide comments on such Plans. The process described above shall
be repeated, if necessary, until the Plans have been finally approved by
Landlord. Tenant hereby agrees that the Plans for the Tenant Improvements
shall comply with all applicable Governmental requirements. Landlord's
approval of any of the Plans (or any modifications or changes thereto) shall
not impose upon Landlord or its agents or representatives any obligation with
respect to the design of the Tenant Improvements or the compliance of such
Tenant Improvement or the Plans with applicable Governmental Requirements.
Landlord, with consultation of Tenant, shall mutually select a contractor to
perform the construction of the Tenant Improvements. Such contractor shall be
selected by a competitive bid process between three contractors selected by
Landlord and Tenant. Landlord shall use commercially reasonable efforts to
cause the Tenant Improvements to be substantially completed, except for minor
"Punch List" items, on or before the Commencement Date specified in the
Lease, subject to Tenant Delay and Force Majeure.
Landlord, or an agent of Landlord, shall provide project management services
in connection with the construction of the Tenant Improvements and the Change
Orders (hereinafter defined). Such project management services shall be
performed, at Tenant's cost, for a fee of five percent (5%) of all costs
related to the preparation of the Plans and the construction of the Tenant
Improvements and the Change Orders.
A. CHANGE ORDERS. If, prior to the Commencement Date, Tenant shall
require improvements or changes (individually or collectively, "CHANGE
ORDERS") to the Premises in addition to, revision of, substitution for the
Tenant Improvements, Tenant shall deliver to Landlord for its approval plans
and specifications for such Change Orders. If Landlord does not approve of
the plans for Change Orders, Landlord shall advise Tenant of the revisions
required. Tenant shall revise and redeliver the plans and specifications to
Landlord within five (5) business days of Landlord's advice or Tenant shall
be deemed to have abandoned its request for such Change Orders. Tenant
shall pay for all preparations and revisions of plans and specifications, and
the construction of all Change Orders, subject to Landlord's Contribution.
B. LANDLORD'S CONTRIBUTION. Landlord shall contribute an amount up to
FIFTEEN DOLLARS ($15.00) PER SQUARE FOOT ("LANDLORD'S CONTRIBUTION") toward
the costs incurred for the Tenant Improvements and Change Orders. Landlord
has no obligation to pay for costs of the Tenant
1
<PAGE>
Improvements or Change Orders in excess of Landlord's Contribution; Tenant
shall pay such overage to Landlord prior to commencement of construction of
the Tenant Improvements and/or Change Orders.
C. COMMENCEMENT DATE DELAY. Commencement Date shall be delayed until the
Tenant Improvements have been substantially completed (the "COMPLETION
DATE"), except to the extent that the delay shall be caused by any one or
more of the following (a "TENANT DELAY"):
(i) Tenant's request for Change Orders whether or not any such Change
Orders are actually performed; or
(ii) Contractor's performance of any Change Orders; or
(iii) Tenant's request for materials, finishes or installations requiring
unusually long lead times; or
(iv) Tenant's delay in reviewing, revising or approving plans and
specifications beyond the periods set forth herein; or
(v) Tenant's delay in providing information critical to the normal
progression of the project. Tenant shall provide such information as soon as
reasonably possible, but in no event longer than one week after receipt of
such request for information from the Landlord; or
(vi) Tenant's delay in making payments to Landlord for costs of the
Tenant Improvements and/or Change Orders in excess of the Landlord's
Contribution; or
(vii) Any other act or omission by Tenant, its agents, contractors or
persons employed by any of such persons.
If the Commencement Date is delayed for any reason, then Landlord shall cause
the Architect to certify the date on which the Tenant Improvements would have
been completed but for such Tenant Delay, or were in fact completed without
any Tenant Delay.
3. RIGHT TO EXPAND AND RELOCATE. During the term of this Lease, should
Tenant's lease space requirements increase to the extent that expansion
within the Building containing the Premises is impossible, Landlord shall use
good faith in an attempt to relocate Tenant into a larger lease space within
the Cameron Technology Center or other office/warehouse space owned by
Landlord or in a building to be built by Landlord for Tenant on land mutually
agreed upon by Landlord and Tenant.
In such event, Landlord shall agree to lease such space to Tenant at a rental
rate indicative of the fair market rental rate prevalent at the time for
similarly constructed and located office-warehouse lease space in Austin,
Texas. Upon Tenant's relocation into the larger lease space owned or
developed by Landlord and upon the reletting of the Premises, this Lease
shall terminate and the new lease between Landlord and Tenant shall govern.
4. RIGHT OF FIRST REFUSAL. Tenant shall be granted the Right of First Refusal
for any contiguous lease space to the Premises that should become available
from time to time during the term of this Lease. Upon Landlord's receipt of
an acceptable written offer to lease from a bona fide third party which
desires to lease space contiguous to the Premises, Landlord shall immediately
notify Tenant as to the terms and conditions contained in the offer. Tenant
shall have ten (10) days from the date Landlord notifies Tenant of the third
party offer in which to accept or decline the same terms contained in the
third party offer. Should Tenant decline to match this offer, Landlord shall
be free to lease the available lease space to the third party.
5. MISCELLANEOUS. In addition to the provisions contained within this Lease
agreement, Landlord and Tenant mutually agree to the following:
A. DOCK DOORS. Landlord shall install an overhead, dock-high door for
each bay within the Premises at the rear of the Building unless Tenant
stipulates that an overhead door is unnecessary.
B. TENANT EQUIPMENT. Landlord will allow the Tenant to install at
Tenant's sole expense, a 12' X 12' concrete pad with a security fence
surrounding the pad at the rear of the Premises in a location mutually agreed
upon by Landlord and Tenant. This fenced area will store an air compressor
and chilled water tower. At the end of the Lease Term, Tenant shall remove
all equipment installed in or about the Premises or Building and the Premises
and/or Building shall be returned to its original condition, reasonable wear
and tear excepted.
2
<PAGE>
EXHIBIT "C"
BUSINESS PARK RULES AND REGULATIONS
The following rules and regulations shall apply where applicable, to the
Premises, the Building, the Project, the driveways and parking areas, the
land situated beneath the Premises, Building, and Project and the
appurtenances thereto:
1. Sidewalks, doorways, halls stairways and other similar areas shall not be
obstructed by Tenant or used by any Tenant for any purpose other than
ingress and egress to and from the Premises and for going from one to
another part of the Building.
2. Plumbing fixtures and appliances shall be used only for the purposes for
which designed, and no sweepings, rubbish, rags or other unsuitable material
shall be thrown or placed therein. Damage resulting to any such fixtures
or appliances from misuse by a Tenant or such Tenant's agents, employees
or invitees, shall be paid by such Tenant, and Landlord shall not in any
case be responsible therefor.
3. No signs, advertisements or notices shall be painted or affixed on or to
any windows or doors or other exterior part of the Building or the
Premises except of such color, size and style and in such places as shall
be first approved by, Landlord. Landlord, at Tenant's sole cost and
expense, shall install all letters or numerals by or on doors in such
Tenants Premises, which letters or numerals shall be in building standard
graphics. No nails, hooks or screws shall be driven or inserted in any
part of the Building outside the Premises except by the Building maintenance
personnel nor shall any part of the Building be defaced by Tenant. No
curtains or other window treatments shall be placed between the glass and
the Building standard window treatments.
4. Landlord will provide and maintain a directory for all Tenants at the end
of each building and no other directory shall be permitted unless
previously consented to by Landlord in writing.
5. Two (2) keys to the locks on the exterior doors entering each Tenant's
Premises shall be furnished by Landlord free of charge, with any
additional keys to be furnished by Landlord to each Tenant, at Tenant's
cost. Tenant shall not place any additional lock or locks on any door in
or to its Premises without Landlord's prior written consent. All such
keys shall remain the property of Landlord. Landlord will reduce $20.00
per key from Tenant's Security Deposit account for each key issued and
not returned by Tenant at time of move out.
6. Landlord will provide within the Business Park a postal box for Tenants
receipt of letter mail only. Landlord will issue to the tenant two keys
to the postal box. The box keys are not to be duplicated by the Tenant.
Tenant is held accountable for the keys and will bear the cost or
re-keying the locks should the Tenant fail to return all keys at the end
of the Lease.
7. With respect to work being performed by Tenants in its Premises with the
approval of Landlord, all tenants will refer all contractors,
contractors' representatives and installation technicians rendering any
service to them to Landlord for Landlord's supervision, approval and
control before the performance of any contractual services. This
provision shall apply to all work performed in the Building including,
but not limited to, installations of telephones, telegraph equipment,
electrical devises and attachments, doors, entrance ways, and any and all
installations of every nature affecting floors, walls, woodwork, trim,
windows, ceilings, equipment and any other physical portion of the
Premises and Building.
8. Each tenant shall cooperate with Landlord's employees in keeping its
Premises neat and clean.
9. Tenant is responsible for janitorial service within its Premises.
10. Designated areas for trash containers are assigned to each tenant. Tenants
will be billed direct by a trash removal service approved by the
Landlord. Drums, pallets, equipment, vehicles, etc. are not allowed to be
stored outside of building. Trash in the common area will be removed by
the Landlord and the cost of removal prorated to the Tenants sharing the
common area.
11. Landlord shall not be responsible to the tenants, their agents,
employees, or invitees for any loss of property from the Premises or
public areas or for any damages to any property thereon from any cause
whatsoever.
12. Should a tenant require telegraphic, telephonic, annunicator or other
communication service, Landlord will direct the electrician where and how
wires are to be introduced and placed and none shall be introduced or
placed except as Landlord shall direct.
13. Tenant shall not make or permit any improper, objectionable or unpleasant
noises or odors in the Premises or Building or otherwise interfere in any
way with other tenants or persons having business with them.
1 Landlord's Initials _____
Tenant's Initials _____
<PAGE>
SANITARY SEWER
- --------------
A sewer line will be installed under floor accessible to the Premises.
Tenant's sewer piping will start at the point of the sewer line tap in
Tenant's Premises.
ELECTRICITY
- -----------
All electric service meter wireways will be installed in an area determined
by Landlord. Each Tenant shall furnish and install his meter at the
appropriate meter wireway as approved by Landlord. Tenant shall be
responsible for obtaining an electric meter at his cost. If the wattage
density exceeds that provided in the shell for Tenant's lease space, the
Tenant will pay the additional cost for larger service to be installed by
Landlord. Total power requirements shall be tabulated on the Tenant's working
drawings submitted for approval.
2 Landlord's Initials _____
Tenant's Initials _____
<PAGE>
14. No machinery of any kind shall be operated by Tenant in its Premises
without the prior written consent of Landlord, nor shall any tenant use or
keep in the Premises or Building any flammable or explosive fluid or
substance.
15. Nothing shall be swept or thrown into parking areas or driveways. No
birds or animals shall be brought into or kept in, or about any tenant's
leased premises.
16. Tenant, is agents, employees and invitees shall park only in those areas
designated by Landlord for parking by Tenant and shall not park on any
public or private streets contiguous to, surrounding or in the vicinity
of the Building without Landlord's prior written consent.
17. No portion of any tenant's Premises shall at any time be used or occupied
as sleeping or lodging quarters.
18. Landlord reserves the right to rescind any of these rules and
regulations and to make such other and further reasonable rules and
regulations as in its judgment shall from time to time be needful for the
safety, protection, care and cleanliness of the Building and Project, the
operation hereof, the preservation of good order therein and the protection
and comfort of the Tenants and their agents, employees and invitees, which
rules and regulations, when made and written notice thereof is given to a
Tenant, shall be binding upon it in like manner as if originally herein
prescribed.
1 Landlord's Initials _____
Tenant's Initials _____
<PAGE>
EXHIBIT "D"
TENANT CONSTRUCTION STANDARDS
TENANT SPACE DRAWINGS AND SPECIFICATION REQUIREMENTS
If Landlord's Architect does not prepare the drawings and specifications,
then Tenant agrees that they shall be prepared by a licensed Architect and
shall bear his registration seal, number, and signature. All documents must
be reviewed and approved by Landlord and his Architect prior to the start of
construction. The Tenant is required, upon completion of the construction, to
provide the Landlord with a marked up blue line complete set of prints
showing the conditions as built and a reproducible mylar complete set of
drawings with changes in ink and a copy of the building permit and
Certificate of Occupancy.
BUILDING CODES AND STANDARDS
All plans, specifications and construction for the Tenant's space must
conform to the following codes and standards and any other applicable codes,
standards, ordinances, and regulations.
1. Current Uniform Building Codes accepted by the City of Austin.
2. National Electrical Code.
3. City of Austin, Electrical Utility Department Code.
4. Uniform Mechanical Code.
5. City of Austin Health Department Code.
6. Department of Labor - Occupational Safety and Health Standards.
7. Consumer Product Safety Commission.
8. State of Texas Architectural Barriers Requirements.
9. Fire Marshall Requirements.
CONSTRUCTION ACCESS
Tenant shall use only the area immediately to the rear of its lease space for
construction access. Adjoining spaces shall not be used for any purpose.
Tenant shall be responsible for the repair of any damage done to the Project
or Building by Tenant's construction of its own lease space.
TEMPORARY UTILITIES
Tenant and/or his contractors and/or subcontractors are responsible for
temporary toilets and temporary utilities for their work, including payment
of all utility charges. All arrangements shall be made with City of Austin,
Southern Union Gas, and Southwestern Bell as applicable.
CONSTRUCTION TRASH
Trash, surplus construction materials, boxes, crates, debris, etc., from the
Tenant's construction shall be removed daily from the Premises and hauled off
the project site. Trash left on the project will be hauled off at the
Tenant's expense.
TENANT SEPARATION
Walls which abut another Tenant's space must be a minimum two (2) Hour rated
extending from floor to the roof deck with insulation. In the case where the
space is vacant adjacent to Tenant's demising wall(s), such a wall shall be
constructed of 3 1/2" metal studs spaced at 16" o.c. with minimum two (2)
layers of 5/8" thick type X gypsum wallboard on the Tenant's side with
staggered 2' joints. All penetrations to the demising wall(s) shall be
treated to maintain the minimum two (2) Hour rating.
TELEPHONE
It is each Tenant's responsibility to procure the telephone service to its
Premises. If any telephone equipment room is required by the Tenant, it
must be located within its Premises. Tenants shall be responsible for
routing its telephone service through the raceway system provided by Landlord
in the shell building.
HVAC
Space above ceilings may not be used as a return air plenum. All return air
shall be ducted from the conditioned space. The Landlord has the right to
approve or disapprove the HVAC design and Tenant shall select the HVAC
equipment from Landlord's standards. Location of roof top units shall be on
pads as provided in the shell building with the location approved by the
Landlord. Tenant shall indicate the actual weights and dimensions on their
working drawings for review and approval by the Landlord of roof mounted
equipment. Condensation lines shall drain into each Tenant's sewer
ROOF PENETRATIONS
All roof penetrations, equipment supports, pitch pans, flashing curbing, and
roofing repairs shall be as approved by Landlord and performed by a roofer
approved by Landlord at Tenant's expense. All roof penetrations shall occur
within the boundaries of the Premises.
WATER
A common water line and valve will be provided for each lease space. Tenant
water piping shall start at the point of the valve. All tenants requiring
more plumbing than the required toilet room facilities, drinking fountain
(1), service sink (1), employee bar type sink (1) shall be required to
furnish their own piping, meter, and installation. Should Tenant's water
consumption levels exceed typical levels, Landlord and Tenant agree that
Tenant shall supply a water flow meter of which Landlord shall read monthly
and bill back Tenant for Tenant's actual consumption.
1 Landlord's Initials _____
Tenant's Initials _____
<PAGE>
EXHIBIT "E"
SIGN CRITERIA
1. COST OF THE SIGN(S). Identifying Tenant graphics for all leased Premises
are the responsibility of Tenant. All expenses for fabrication,
installation and sign maintenance shall be borne solely by Tenant.
2. APPROVAL OF SHOP DRAWINGS. Prior to the fabrication of any sign, Tenant
shall present to Landlord for approval, shop drawings prepared by the
manufacturer. All shop drawings shall be dimensionally scaled with the
proposed sign located on a drawing of the building elevation; the shop
drawings shall indicate all dimensions; shall indicate the actual letter
style or font; if a logo is to be used, the actual logo shall be
illustrated on the building elevation; all actual materials, paint brand
and color(s) shall be specified; and the method of the sign attachment to
the Building shall be clearly denoted
3. MATERIALS. Tenant sign graphics shall consist of individually cut letters.
Letters shall be cut from 1/8" Lexan mounted or laminated to a three inch
(3") width sign foam board or similar material. Letters shall be primed
and painted uniformly on face and sides with Benjamin Moore Industrial
grade paint or equivalent.
4. LOGOTYPES. Logotypes shall be cut from the same material as letters.
Logotype area shall not exceed eighteen inches (18") in height and the
sign or logotype length shall not exceed the lesser of fifty percent (50%)
of the width of Tenant's Premises or fifteen feet (15'). All signs or
logotypes shall be located above and appurtenant to the store front of the
Premises.
5. SIZE. No individual letter shall exceed eighteen inches (18") in height.
Letter line length shall not exceed the lesser of fifty percent (50%) of
the width of Tenant's Premises or fifteen feet (15'). Should Tenant's sign
contain more than one letter line, the total height of all letter lines
combined shall not exceed forty inches (40"). All signs or logotypes shall
be located above and appurtenant to the store front of the Premises.
6. MOUNTING METHODS. All letters shall be mounted with clear silicone and
mounted flush to the exterior wall surface. Upon the expiration of the
Lease, Tenant shall remove all exterior signs from the Building and shall
restore the exterior of the Building to its original condition. Should
Tenant fail to do so, Landlord reserves the right to perform this duty and
deduct all costs associated with the removal of the sign and restoration of
the Building from the Security Deposit.
7. PROHIBITED MATERIALS. Pan signs, illuminated signs, neon or flashing
signs, banners, sandwich boards or any other sign type or material not
specifically allowed above.
8. DOORS AND WINDOW GRAPHICS. Vinyl door and window graphics are permitted.
Letter size shall not exceed 1-1/2" cap height. Line length shall not
exceed 20". All graphics shall be reverse cut from white 3M vinyl,
Sparcal vinyl or equivalent vinyl material and shall be mounted to the
interior of door glass or sidelight glass. Plaques, neon or paper signs are
prohibited at all times.
Landlord's Initials _____
Tenant's Initials _____
<PAGE>
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Jurisdiction of
Incorporation or
Subsidiary Organization
- ---------- ----------------------
<S> <C>
Advanced Energy Industries, FSC U.S. Virgin Islands
Advanced Energy Industries Japan KK Japan
Advanced Energy Industries GmbH Germany
Advanced Energy Industries U.K. Limited United Kingdom
Advanced Energy Industries Korea Ltd. Korea
Tower Electronics, Inc. Minnesota
</TABLE>
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