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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
FOR FISCAL YEAR ENDED SEPTEMBER 30, 1999 OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (no fee required)
For the transition period from to .
COMMISSION FILE NUMBER: 0-25434
BROOKS AUTOMATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 04-3040660
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
15 ELIZABETH DRIVE, CHELMSFORD, MASSACHUSETTS 01824
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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978-262-2400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
Rights to Purchase Preferred Stock
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock, $0.01 par value,
held by nonaffiliates of the registrant as of November 30, 1999, was
$233,659,280 based on the closing price of $27.25 on that date on the Nasdaq
Stock Market. As of November 30, 1999, 12,766,076 shares of the registrant's
Common Stock, $0.01 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement involving the election of
directors, which is expected to be filed within 120 days after the end of the
registrant's fiscal year, are incorporated by reference in Part III of this
Report.
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PART I
ITEM 1. BUSINESS
Brooks Automation, Inc. ("Brooks" or the "Company") is a leading supplier
of tool and factory hardware and software automation solutions for the global
semiconductor, data storage and flat panel display manufacturing industries.
Founded in 1978, Brooks has distinguished itself as a technology and market
leader, particularly in the demanding cluster-tool vacuum-processing environment
and in integrated factory automation software applications. The Company's
offerings have evolved from individual robots used to transfer semiconductor
wafers in advanced production equipment to fully integrated automation solutions
from process tools to factory scheduling used to optimize fab performance. In
1998 and 1999 the Company diversified and entered the factory automation market,
beginning with the acquisition of FASTech Integration, Inc. Through a recent
series of acquisitions Brooks has emerged as one of the leading suppliers of
factory automation software and hardware solutions to end users in these
industries.
INDUSTRY BACKGROUND
Fabrication of semiconductors and flat panel displays requires a large
number of complex process steps in which electrically insulating or conductive
materials are deposited and etched into patterns on the surface of a substrate
or wafer. A flat panel display substrate may contain as few as two laptop
computer displays, while a wafer may contain more than 100 semiconductors. Flat
panel display substrates are typically rectangular in shape. Wafers are
circular, typically 200 mm or 300 mm in diameter. A simplified production
sequence consists of deposition, photolithography and etch processes. In
deposition, one or more layers of a film of material are deposited on a
substrate or wafer. Then, with photolithography the desired circuit pattern is
imaged on the deposited material. Finally, in the etch process, the material not
covered with the pattern is selectively removed. Each deposition,
photolithography or etch process requires the use of one or more process tools.
Semiconductor and flat panel display substrates must be handled in
ultraclean environments during this manufacturing process, either in a clean
room at atmospheric pressure levels, in controlled environments such as nitrogen
purged atmospheric or a vacuum environment. Physical vapor deposition, chemical
vapor deposition, etch and ion implant are typically conducted in a vacuum
environment. The types of semiconductor equipment operating at atmospheric,
rather than vacuum pressure, are much more diverse and encompass a range of
tools relating to steps before, during and after photolithography and a wide
range of process tools as well as inspection and metrology tools. Semiconductor
and flat panel display process tools generally use vacuum environments for
deposition and etch processes, and atmospheric environments for photolithography
and other processes.
The automation requirements of the wafer and substrate handling equipment
markets have resulted in two common architectural solutions -- cluster tools and
in-line handling systems. Cluster tool handling systems typically link together
multiple processes such as deposition, etch and heating and cooling of the
substrate using a transfer robot located in a central vacuum chamber. In-line
handling systems typically link together multiple processes such as photoresist
processing using a transfer robot located on an atmospheric horizontal
traverser. In these systems, the process tools are lined up rather than
clustered around an automation tool. The traversers in these systems move
substrates back and forth across the line of process tools. The in-line
architecture is now emerging in the stripping, cleaning and chemical mechanical
polishing process markets.
In a cluster tool, a standard cassette of up to 25 wafers enters the vacuum
environment through a vacuum cassette elevator load lock. The load lock is
sealed and pumped to vacuum and then opened to the central wafer handling
system. A central transfer robot then carries the wafers between the cassette
and the different process and conditioning modules through the central vacuum
chamber. After all the wafers have been processed within
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the cluster tool and returned to the cassette in the load lock, the load lock is
sealed from the vacuum central chamber and vented to atmospheric pressure. The
cassette of wafers is then removed from the cluster tool through the load lock.
Vacuum cluster tools often employ two load locks, with the wafers from one load
lock being actively transferred, conditioned and processed while wafers in the
other load lock are being brought to or removed from vacuum conditions. Although
cluster tool load lock doors are located in the most stringent and most
expensive clean room environments to avoid contamination of wafers when being
transferred into and out of a cluster tool, the main cluster tool platform and
its modules are located behind the clean room wall in an equipment bay in a less
stringent and less expensive atmospheric pressure clean room environment.
Production is made more difficult when operating in a vacuum environment.
Unlike atmospheric transfer robots, which often use vacuum suction to hold a
substrate in place when being carried, vacuum transfer robots use gravity and
the friction between the substrate and the robot's hand, known as an end
effector. Carrying a substrate in a vacuum requires sophisticated motion control
to maximize the speed of substrate transfer, while maintaining the substrate
position and placement accuracy. Production can also be improved through the use
of sophisticated software algorithms that carefully control the speed and
scheduling of substrate transfers within the cluster tool.
Vacuum environments create further challenges in constructing and operating
a highly reliable central handling system. Materials must be carefully selected
and surface finished to reduce and control particle and molecular contamination.
Many plastics and lubricants do not work in a vacuum as they emit gases that
contaminate the vacuum environment. Gears, pulleys and other mechanical
interfaces and moving parts, which are potential sources of particle
contamination within the vacuum environment, must be minimized. Pumping and
venting of load locks must be carefully controlled to reduce wafer
contamination.
From the overall factory perspective, semiconductor and flat panel display
manufacturers use a wide variety of hardware and software systems to automate
and control their operations. The factory information systems are utilized to
improve factory performance. Almost all wafer fabrication factories, known as
fabs, apply statistical process control to their processes and equipment.
Manufacturing execution system ("MES") applications coordinate and track the
activities of manufacturing resources, including equipment, material, operators,
engineers and software applications. Many fabs use sensors and software
applications to monitor equipment performance and provide automated notification
of out-of-control conditions and on-line help in troubleshooting. In addition,
many fabs use automated tracking systems to collect large amounts of data about
process and product conditions, equipment maintenance and operation history, lot
production history, and yield results. Engineers use applied statistical tools
to analyze large volumes of data from multiple sources in order to identify and
correct problems that negatively impact yields, equipment utilization and
throughput.
Material handling automation includes interbay, intrabay and step-level
automation. Interbay automation is the movement of lots between equipment bays
using automated guided vehicles (AGVs), or overhead tracks to transport lots
between stockers serving the bays. Intrabay automation concerns the movement of
lots between stockers and processing machines in the bay using AGVs or traveling
robot arms. Step-level automation includes the use of robot arms or tracks to
handle wafers or cassettes of wafers between lot box and processing chamber, or
between consecutive processing chambers.
PRODUCTS
TOOL AUTOMATION
Brooks offers a full complement of tool automation systems for
semiconductor and flat panel display substrate handling and products for data
storage. Brooks has developed comprehensive product lines that
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encompass automation modules, complete handling systems and integrated software
and controls for its targeted markets. Brooks' take out systems, robots and
modules are designed, developed and produced with similar technologies and can
use Brooks' ClusterLink software. Brooks uses the synergies of its complementary
products to respond to changing industry demands such as processing larger
diameter 300mm semiconductor wafers and the larger, fourth generation flat panel
display substrates.
Brooks believes its products and services for tool automation offer
significant advantages in a number of areas, including those set forth below:
Throughput. Throughput refers to the production of substrates within
specifications. Brooks' patented LeapFrog robots have been able to achieve
significant improvements in throughput compared to other robots. Brooks also has
been able to increase throughput by developing patented algorithms to calculate
efficient trajectories and acceleration and deceleration profiles known as time
optimal trajectories for its robot arms while reducing vibrations and
maintaining position control of the substrate being transported. Brooks has
developed system software to improve cluster tool throughput. By combining
digital signal processing technology with time optimal trajectory software,
Brooks believes that it has achieved additional reductions in transfer time.
Reliability. Brooks has developed and implemented a rigorous design and
test program to enhance and evaluate product reliability. Brooks' reliability
initiative is guided by the computer-based reliability models developed by
SEMATECH and Sandia National Laboratories. The magnetic drive in Brooks' latest
generation robots transmits force magnetically, without piercing the vacuum
barrier, and eliminates the need for moveable vacuum seals. By designing robots
with fewer moving parts and eliminating moveable seals, Brooks believes that it
will be able to increase the reliability of its transfer robots significantly.
Brooks' goal is to continue to increase mean time between equipment failures.
Accuracy. As wafer and substrate sizes increase and placement accuracy
becomes more demanding, it is becoming increasingly important to minimize
tracking errors, substrate sliding and the bending or wobbling of the robot arm.
Brooks' transfer robots contain a closed loop servo control, which monitors and
maintains placement accuracy in the rotational axis by obtaining constant
positioning feedback. Many other transfer robots use an open loop stepper
control system that commands a robot to move a specified number of steps with
limited or no feedback as to the final position of the robot. These stepper
systems can lead to misplacement of the robot arm if the number of steps is
miscounted. To further enhance tracking, Brooks has incorporated a closed loop
feedback system with a proprietary digital signal processing-based controller in
its latest generation of robots.
Contamination Control. Brooks has designed its wafer and flat panel
display substrate handling systems and modules to reduce contamination by using
several design criteria:
- limited moving parts within the tool environment and above the wafer or
substrate plane;
- picking and placing with a vertical motion to prevent wafer or substrate
sliding on process module surfaces and cassette slots;
- gentle handling motions which reduce relative wafer or substrate
vibration and movement on the transfer robot end effectors;
- controlled load lock pumping and venting;
- incorporation of materials that reduce contamination;
- assembly, test and packaging in Brooks' clean rooms.
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FACTORY AUTOMATION
Brooks develops and markets a suite of factory automation software
solutions, including manufacturing execution systems, cell control, process
control, systems process optimization systems and factory automation solutions.
MES software is designed to control plant floor operations and fill the gap
between control applications and enterprise resource planning systems. MES
applications coordinate and track the activities of manufacturing resources,
including equipment, material, operators, engineers and software applications.
Brooks provides integrated MES products for controlling complex manufacturing
processes, a flexible, distributed manufacturing execution system framework for
improved integration and adaptability to increases in the size of the framework,
and object-based software tools for customization and equipment integration.
Cell control applications provide the run-time coordination between factory
operators, process equipment and material identification and delivery systems.
In addition, Brooks offers software solutions for engineering data analysis,
advanced process control, design of experiments and process development and
optimization tools.
Brooks provides complete solutions for 200mm Standard Mechanical Interface
Facilities (SMIF) and MiniEnvironment and 300mm Front Opening Uniform Pod (FOUP)
automation. Brooks believes its factory interface solutions enhance return on
investment in new fabs, and in retrofit projects, as well as investment in
process tools, by providing solutions for full integration, automation and
ramp-up qualification of the manufacturing equipment.
Brooks believes its products and services for factory automation offer
significant advantages in a number of areas, including those set forth below:
Process Management. For factory automation, Brooks offers software
solutions for material control, work-in-progress, tracking, maintenance
management, process and equipment control, recipe management and process
optimization.
Throughput. Data from equipment and processes is captured in the
manufacturing execution system, to manage and optimize the flow of
work-in-progress throughout the factory. The Company's software solutions
support overall equipment utilization, process optimization and throughput.
Equipment Utilization. Brooks software solutions for equipment give early
warning of problems to minimize unscheduled downtime and manage preventative
maintenance cycles to improve equipment utilization.
Process Optimization. Data from the equipment is readily available to
engineers so they can identify significant process variations and respond to
them rapidly to enhance manufacturing processes.
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The following table lists Brooks' primary product offerings within each of the
markets it serves:
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TOOL AUTOMATION MARKETS PRODUCT LINES
Semiconductor Vacuum Products Central Wafer Handling Systems
Transfer Robots
Thermal Conditioning Modules (Cool and Degas)
Cassette Elevator Load Locks
Aligners
Semiconductor Atmospheric and Inert
Environment Products Central Wafer Handling Systems
In-line Wafer Handling Systems
Transfer Robots
Thermal Conditioning Modules (Cool)
Cassette Elevator Load Locks
Aligners
Flat Panel Display Products Central Substrate Handling Systems
Transfer Robots
Cassette Elevator Load Locks
Thermal Conditioning Modules (Degas)
Tool Buffers
Tool Control Software Clusterlink
ControlPower
ControlVision
FACTORY AUTOMATION MARKETS PRODUCT LINES
Factory Automation Software Customizable Cell Control Solutions
Integrated Manufacturing Execution System Solutions
Computerized Maintenance Management Software
Equipment Automation Solutions
Process Optimization Solutions
Engineering Data Analysis Tools
Advanced Process Control Solutions
Factory Interface Automation Standard Mechanical Interface Facilities (SMIF)
Front Opening Uniform Pods (FOUP) Interfaces
Equipment Front End Modules (EFEM)
Tool Stockers and Buffers
Substrate Sorters
Carrier Tracking Systems
Minienvironments
</TABLE>
TOOL AUTOMATION SEMICONDUCTOR VACUUM PRODUCTS
VACUUM CENTRAL WAFER HANDLING SYSTEMS
Brooks' family of Marathon Express vacuum central wafer handling systems
handle wafer sizes of 100mm to 300mm in diameter, are offered with four to eight
sides, referred to as ports, and have vacuum ranges of 10(-3) to 10(-8) torr.
Torr is a measure of vacuum pressure. Each port can accommodate process modules
meeting SEMI/MESC industry standards. Using a two-load lock configuration,
Brooks' Marathon Express 800 eight-sided central wafer handling system can
accommodate up to six process modules. Marathon Express systems typically
incorporate either Brooks' single or its dual frog-arm MagnaTran 7 vacuum
transfer robot, one or more of Brooks' vacuum cassette elevator load locks,
Brooks' TopLigner wafer aligner, and, if required, Brooks' TopCooler wafer
cooling module. The Company has been able to increase the availability of ports
for use with process
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modules by developing a wafer aligner and a cooling module which mount between a
vacuum cassette elevator load lock or process module and the central wafer
handling chamber.
In 1999, Brooks developed a next-generation 200mm and 300mm wafer handling
system, the Gemini Express 6000, which features the dual same-side LeapFrog
MagnaTran 7 robot, the newly-developed AcuTran 7 transfer robot and standardized
open cassette SMIF and FOUP interfaces. The system offers improvement in
flexibility to meet factory wafer carrier and size requirements, and permits
multiple wafer sizes to be handled concurrently.
VACUUM TRANSFER ROBOTS
Brooks' vacuum transfer robot, the MagnaTran 7, is a second generation
magnetic drive robot that incorporates the Company's patented time optimal
trajectory software algorithms to control and monitor its operation. The
MagnaTran 7 is smaller and lighter than its predecessor. Building on its
experience in developing robot wafer transfer technology, Brooks has developed
the dual, same-side LeapFrog high-productivity arm configuration. The LeapFrog
arm is only available on the MagnaTran 7 robot and is a feature of Brooks'
Marathon Express and Gemini Express central handling systems. These robots are
constructed to SEMI/MESC industry standards and are also sold separately for use
with other vacuum wafer handling applications. Brooks believes that the
technical advances implemented to meet the requirements of the flat panel
display industry enabled Brooks to adopt its MagnaTran robots, with minimal
technical modifications, to handle 300mm wafers.
VACUUM WAFER HANDLING AND CONDITIONING MODULES
Vacuum Cassette Elevator Load Locks. Brooks has developed a family of
vacuum cassette elevator load locks to hold, raise and lower cassettes of wafers
for cluster tools and other vacuum automation equipment. Brooks' VCE 6 200mm
cassette load lock features flexible and changeable interfaces, is field
upgradable and is available with either a manual or automatic door
configuration. The automatic door uses an innovative low particle, low profile
drive mechanism, which opens vertically below the cluster platform for
compatability with a number of methodologies for transporting batches of wafers
from destination to destination within the semiconductor fabrication facility.
These methodologies include standard mechanical interfaces, automated guided
vehicles and rail guided vehicles. Brooks has developed the VCE 5 for 300mm
wafers with a batch wafer transfer arm and a front opening unified pod
interface. Like cassettes, front opening unified pods are devices used to carry
wafers from process tool to process tool while maintaining a clean environment.
Brooks has developed the small volume facilities lock for 300mm wafers to
interface with Brooks' atmospheric, in-line handling system.
Vacuum Aligners. Wafer processing requires precise alignment and, often,
orientation of a wafer for processing. The Company's TopLigner wafer aligner
provides fast one-step wafer alignment by optically sensing the location of the
wafer on the aligner and communicating that position to the vacuum transfer
robot. Using this information, the transfer robot adjusts the placement of its
arm to pick up the wafer in the proper position. The TopLigner is designed for
intermodule mounting between a module, such as the cassette load lock and the
central wafer handling chamber, in order to conserve a port of the cluster tool.
Brooks' TopLigner is designed for 200mm and 300mm wafer alignment.
Vacuum Cool Modules. Brooks' TopCooler cool station cools wafers after hot
processing to a temperature that allows placement into a plastic wafer cassette.
Brooks' TopCooler is designed for 200mm and 300mm wafer applications.
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SEMICONDUCTOR ATMOSPHERIC AND INERT ENVIRONMENT PRODUCTS.
Building upon its vacuum wafer handling systems, Brooks is pursuing the
development of a broad line of products for atmospheric applications.
Atmospheric wafer handling systems may be segregated into two subcategories: the
traditional ambient atmospheric wafer handling systems and "inert," principally
nitrogen, environment wafer handling systems. The traditional atmospheric wafer
handling systems include fully integrated automated wafer handling platforms for
open, ambient air in-line wafer handling platforms. The inert environment wafer
handling systems include fully integrated, automated wafer handling platforms
for at or above atmospheric pressure cluster tools. Brooks' line of inert
environment products include the AX500, AX600 and AX6000, which were launched in
fiscal 1997.
ATMOSPHERIC WAFER HANDLING SYSTEMS
Brooks is developing its second generation atmospheric wafer handling
systems, the atmospheric front end, or AFE, to handle wafer sizes from 150mm to
300mm in diameter. The systems are expected to offer two to four unified pod
staging locations and may be operated in demanding clean room environments.
These configurations are being developed to meet broad market requirements. The
AFE is being designed for 200mm and 300mm wafer open cassettes, 200mm SMIF and
300mm FOUP applications. Brooks plans to incorporate its single SCARA arm
AcuTran 7 atmospheric transfer robot and AcuLigner wafer aligner into the AFE
systems.
ATMOSPHERIC TRANSFER ROBOTS
Building on its experience in developing transfer robots and employing its
magnetic direct drive technology, Brooks has developed the AcuTran 7, its
next-generation atmospheric transfer robot, to handle up to 300mm wafers in
ambient atmospheric environments. The Company plans for these robots to be a
standard feature of its AFE in-line wafer handling systems, to be constructed to
SEMI industry standards and to be sold separately for use with other atmospheric
wafer handling applications. Brooks has also developed a wet environment robot,
the AquaTran 7, which has the same features as the AcuTran 7 with the addition
of wet environment capability. Some wafer fabrication processes such as
cleaning, electroplating and chemical mechanical planarization operate in
environments with caustic solutions. These environments are known as wet
environments. Brooks' robots incorporate digital signal processing technology
and patented time optimal trajectory software to control and monitor their
operation.
OTHER ATMOSPHERIC WAFER HANDLING MODULES
Brooks' AcuLigner wafer aligner has been developed for fast one-step 150mm
to 300mm wafer alignment by optically sensing the location of the wafer on the
aligner and communicating that position to the vacuum transfer robot. Using this
information, the transfer robot adjusts the placement of its arm to pick up the
wafer in the proper position.
FLAT PANEL DISPLAY PRODUCTS
In 1994, Brooks introduced a family of vacuum central substrate handling
systems and modules for the flat panel display deposition and etch process
equipment markets, shipping its first Hercules central substrate handling system
for a flat panel display vacuum cluster tool in July 1994.
The Hercules systems can handle flat panel display substrates from 350mm x
460mm to 600mm x 720mm in size. The Hercules system includes Brooks' MagnaTran
70 magnetically driven frog-arm vacuum transfer robot with two or three axes of
motion and single or dual arm options, a single substrate load lock, or a 20 to
30 substrate cassette elevator load lock and a seven substrate batch degas
module.
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Brooks has developed a next generation magnetic drive robot, the MagnaTran
70, for the flat panel display market. The MagnaTran 70 robot series is smaller
and lighter and features an optional extended vertical axis for deployment in
Brooks' next generation platforms. The Company has also developed the MagnaTran
77 Long Z Axis and MagnaTran 74 long reach flat panel display robots.
TOOL CONTROL SOFTWARE
Brooks provides ClusterLink 3 tool control system software to control its
vacuum wafer handling systems, graphical user interface and process modules. The
software interfaces with process tool controllers and provides environment
control, load lock pumping and venting, error recovery diagnostics, safety
control and scheduling of wafer transfers. When providing a turn-key solution
that includes Brooks' system control and scheduling software, the Company is
able to provide guarantees relating to throughput and particle contamination.
FACTORY AUTOMATION PRODUCTS
FACTORY AUTOMATION SOFTWARE
CELLworks is a set of software tools for developing manufacturing
applications that manage, monitor and coordinate equipment, material and
operators. These object-based tools are designed to provide an integrated
environment for building and deploying applications that are independent of
specific manufacturing devices, hardware platforms and databases.
FACTORYworks is a set of integrated, graphical MES application modules that
allow customers to configure their factory resources and process plans, track
inventory and orders, collect and analyze production data, monitor equipment,
dispatch work orders to manufacturing operators and trace consumption of
components into finished products. These modules provide tools that are designed
to allow customers to define manufacturing workflow and extend and customize the
standard applications to meet site-specific needs.
STATIONworks is a packaged set of tools that integrates process and
production data from various equipment with a MES, including Brooks'
FACTORYworks product. STATIONworks includes a library of equipment interface
drivers (currently 150 unique drivers) that are provided as a part of the
Tool-Object-Model portion of the product. The product also provides a common
service design that gives customers the capability to develop customer services
that are re-usable across various applications.
Xsite is an integrated software package providing a computerized means of
controlling many aspects of maintenance activity, from breakdown analysis and
work order control to condition monitoring and preventive maintenance
scheduling. The product provides the ability to display and utilize charts,
diagrams and drawings.
Starfire is a software solution for process characterization and process
optimization. Starfire systematically leverages expertise of manufacturing
development teams and engineers to successfully employ statistical and analysis
methods.
RS/Series and Cornerstone provide applied statistical software for
engineers who manage complex manufacturing processes.
Patterns combines event recognition technology with traditional control
techniques to provide real-time equipment monitoring, fault detection, and
end-point detection. Patterns can be used with different types of equipment in
different manufacturing processes.
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FACTORY INTERFACE AUTOMATION
Brooks Automation factory interface hardware and software solutions include
a system of minienvironments and automated transfer mechanisms to isolate the
semiconductor wafer from the production environment. This isolation protects the
product from contamination, which can adversely affect its performance.
STANDARD MECHANICAL INTERFACE FACILITIES
Brook's 200 mm SMIF products can be divided into 2 major product lines. The
first product line consists of cassette loaders including ERGOSPEED 3800, which
was one of the first systems incorporating ergonomics designs. Brooks also
offers a second generation loader in this product line, ERGOSPEED II, which
offers improved footprint, ergonomics, loading time and communications. The
second 200mm SMIF product line offers a range of products including the
integrated SMIF Elevator, the ISE 200 and variations on these products. Both
SMIF product lines feature operator safety, reliability in operation and wafer
handling protection.
FRONT OPENING UNIFIED PODS
Brooks offers a wide and customizable range of FOUPs. Brooks' FOUPs
typically provide easy installation, ultra clean operation, fast cycle times,
reliability and operator safety. Brooks' FOUPs can be equipped with advanced
functionality, including features such as communication, ccd-mapping and carrier
identification. These products can handle wafers ranging from 100 mm to 300 mm.
Brooks' FIXLOAD is compliant with SEMI standards for 300mm FOUPs.
MINIENVIRONMENTS, STOCKERS, SORTERS AND BUFFER SYSTEMS
A minienvironment is made up of sealed containers that encapsulate wafer
cassettes with engineered airflows that surround process equipment and robotic
systems that transfer wafer cassettes into and out of process equipment. Brooks
provides technologically and dimensionally tailored minienvironments to
end-users and OEM customers.
Brook's factory interface product line also includes stockers and sorters
for interbay, intrabay and step-level automation. The minienvironment maintains
and controls cleanliness independent of the external room environment.
Brooks offers a sophisticated modular buffer system. The capacity and the
configuration of the buffer system is highly flexible and allows storage
capacities from 4 to 12 FOUPs. Typical buffers are used for process equipment
with high wafer throughput such as metrology, wet bench and furnace systems.
TRACKING SYSTEMS
In addition, the Company also provides carrier tracking systems, for
automated tracking and control of the wafers at the batch, lot and wafer level
throughout the manufacturing process. Brooks' IridNet advanced tracking system
provides efficient material management, shortens cycle times by minimizing
search time for work-in-process and the elimination of mis-processed lots.
Brooks' latest carrier identification (CID) product is the ReadPoint 300RF,
designed specifically for the needs of semiconductor manufacturing based on 300
mm wafers.
CUSTOMERS
Brooks' customers for wafer and flat panel display substrate handling
systems are primarily original equipment manufacturers and semiconductor
manufacturers who are constructing new and/or retrofitting existing
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vacuum and atmospheric automation of their process equipment or developing
advanced process equipment for internal use. Brooks' customers for factory
automation software and factory interface solutions are primarily semiconductor
manufacturers. The Company's current customers are primarily located in the
United States, Japan, South Korea, Taiwan, Singapore and Europe. Brooks markets
its developing family of atmospheric central wafer handling equipment to its
existing customers in the vacuum and flat panel display markets and to potential
new customers.
Relatively few customers account for a substantial portion of Brooks'
revenues. The following chart presents sales to the Company's ten largest
customers and sales to Lam Research Corporation, Brooks' largest customer, as a
percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1999 1998 1997
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<S> <C> <C> <C>
Ten largest customers 63% 61% 60%
Lam Research Corporation 15% 16% 17%
</TABLE>
A reduction or delay in orders from Lam or other significant customers
could have a material adverse effect on Brooks' results of operations. See Note
15, "Segment, Geographic, Significant Customers and Related Party Information,"
in Brooks' consolidated financial statements for further discussion of Brooks'
sales by geographic region.
Brooks derives a significant amount of direct foreign revenues. The
following chart presents foreign revenue as a percentage of total revenue for
the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
- ------------------------
1999 1998 1997
- ---- ------ ------
<S> <C> <C>
41% 41% 38%
</TABLE>
The Company expects foreign revenues to continue to represent a significant
percentage of total revenues in the foreseeable future. Brooks cannot guarantee
that geographical growth rates, if any, in the foreseeable future will be
comparable to those achieved in recent years. See "Item 7. Risk Factors --
Brooks Conducts Its Business Internationally, Which Exposes It to a Number of
Difficulties in Coordinating Its Activities Outside the United States and in
Dealing with Multiple Regulatory Environments" for a discussion of additional
factors which could adversely affect foreign revenues.
MARKETING, SALES AND CUSTOMER SUPPORT
Brooks markets and sells its tool and factory automation hardware and
software solutions for factory performance optimization in the United States,
Japan, South Korea, Taiwan, Singapore and Europe through its direct sales and
marketing organization. The selling process for Brooks' products is often
multilevel, involving a team comprised of individuals from sales, marketing,
engineering, operations and senior management. Each significant customer is
assigned a team that engages the customer at different organization levels to
provide planning and product customization and to assure open communication and
support. Brooks also utilizes a network of value-added integration partners to
provide implementation and integration services for its products.
The Company's marketing activities also include participation in trade
shows, publication of articles in trade journals, participation in industry
forums and distribution of sales literature. To enhance this communication and
support, particularly with its international customers, Brooks maintains
technology centers in the United States, British Columbia, Japan, South Korea,
Taiwan, Singapore and Germany. These facilities, together with Brooks'
headquarters, maintain demonstration equipment for customers to evaluate.
Customers are also encouraged to
10
<PAGE> 12
discuss the features and applications of Brooks' demonstration equipment with
Brooks' engineers located at these facilities. The Company maintains a number of
regional sales and service centers throughout the world.
In 1998, Brooks developed a new sales and marketing tool, a process tool
throughput simulator, to enable the evaluation of various wafer handling system
configurations to identify the preferred tool configuration for a specific
application. This tool simulates the movement of wafers with execution times,
scheduling algorithms, and flow sequences similar to those of actual process
tools and outputs this information visually. This tool is capable of comparing
multiple tool configurations simultaneously for preferred fit comparison.
Brooks provides support to its customers with:
- telephone technical support access 24-hours a day, 365 days a year;
- direct training programs; and
- operating manuals and other technical support information for Brooks'
products.
The Company maintains spare parts inventories in all of its locations to
enable its personnel to serve Brooks' customers and repair their products more
efficiently.
COMPETITION
The semiconductor and flat panel display process equipment manufacturing
industries are highly competitive and characterized by continual change and
improvement in technology. Although other independent companies sell vacuum and
atmospheric wafer and flat panel display substrate handling automation systems
and vacuum transfer robots to original equipment manufacturers, Brooks believes
that its primary competition is from the larger, integrated semiconductor and
flat panel display original equipment manufacturers that satisfy their substrate
handling needs in-house rather than by purchasing handling systems or modules
from an independent source such as Brooks. Such original equipment manufacturers
comprise the majority of Brooks' current and potential customers. Applied
Materials, Inc., the leading process equipment original equipment manufacturer,
develops and manufactures its own central wafer handling systems and modules.
Brooks believes that most vacuum central wafer handling systems and modules are
manufactured in-house by original equipment manufacturers. Many of the companies
in these industries have significantly greater research and development, clean
room manufacturing, marketing and financial resources than Brooks.
Many original equipment manufacturers have substantial resources and
expertise in substrate handling and automation in vacuum and atmospheric
environments and will only purchase Brooks' products if Brooks can demonstrate
improved product performance, as measured by throughput, reliability,
contamination control and accuracy, at an acceptable price. Brooks believes that
it competes favorably with original equipment manufacturers and other
independent suppliers with respect to all of these factors. However, Brooks
cannot guarantee that it will be successful in selling its products to original
equipment manufacturers that currently satisfy their wafer and flat panel
handling needs in-house or from other independent suppliers, regardless of the
performance or the price of Brooks' products.
Brooks' sale of its products for the flat panel display process equipment
market is heavily dependent upon its penetration of the Japanese market. Brooks
is continuing to expand its presence in the Japanese semiconductor process
equipment market. In addressing the Japanese markets, Brooks may be at a
competitive disadvantage to Japanese suppliers.
Brooks believes that the primary competitive factors in the end-user market
for factory automation software and process control software are product
functionality, price/performance, ease of use, hardware and software
11
<PAGE> 13
platform compatibility, vendor reputation and financial stability. Brooks
believes its products currently compete favorably with other systems on the
primary factors listed above. Brooks also believes that the relative importance
of these competitive factors may change over time. Brooks experiences direct
competition in the semiconductor industry from various competitors, including
Applied Materials-Consilium, PRI-Promis, SAS Institute and numerous small,
independent software companies.
Brooks believes that the competitive factors in the factory interface
market are technical and technological capabilities reliability,
price/performance, and global sales and support capability. Furthermore, Brooks
believes that it distinguishes itself from its competitors through product
innovations, technological experience and solid skill base, wide product range
and perceived excellence in performance of products and services, quality and
reliability. Brooks' robots are easy to use and flexible and are being
maintained by a globally trained, skilled field service support organization.
The effectiveness of marketing, sales and price secure the Company's competitive
position in the market. In this market, Brooks encounters direct competition
from Asyst, Fortrend, Kensington and Irvine. Some of these competitors have
extensive engineering, manufacturing and marketing capabilities.
RESEARCH AND DEVELOPMENT
Brooks' research and development efforts are focused on developing new
products for the semiconductor, data storage, and flat panel display process
equipment industries and further enhancing the functionality, reliability and
performance of existing products. Brooks' engineering, marketing, operations and
management personnel have developed close collaborative relationships with many
of its customer counterparts and have used these relationships to identify
market demands and target Brooks' research and development to meet those
demands. Brooks' current research and development efforts include the continued
development and enhancement of Brooks' semiconductor and flat panel display
products, including Gemini Express vacuum central wafer handling systems and
modules, fourth generation flat panel display substrate handling systems and
modules, 300mm loadport modules, integrated equipment front end modules,
atmospheric handling systems and modules, manufacturing execution system and
station control software and factory automation software solutions. The Company
also maintains relationships with IC manufacturers and equipment suppliers to
define hardware and software solutions for equipment front-end automation,
contamination control, logistic management, material tracking and equipment
integration.
MANUFACTURING
Brooks' manufacturing operations consist primarily of product assembly,
integration, and testing. Brooks has adopted stringent quality assurance
procedures that include standard design practices, component selection
procedures, vendor control procedures and comprehensive reliability testing and
analysis to assure the performance of its products. Brooks is ISO 9001
certified.
Brooks employs a just-in-time manufacturing strategy. Brooks believes that
this strategy, coupled with the outsourcing of non-critical subassemblies,
reduces fixed operating costs, improves working capital efficiency, reduces
manufacturing cycle times and improves flexibility to rapidly adjust its
production capacities. While Brooks often uses single source suppliers for
certain key components and common assemblies to achieve quality control and the
benefits of economies of scale, Brooks believes that these parts and materials
are readily available from other supply sources. Brooks also believes that its
software development and manufacturing facilities are more than adequate to
service foreseeable needs.
12
<PAGE> 14
PATENTS AND PROPRIETARY RIGHTS
Brooks relies upon trade secret laws, confidentiality procedures, patents,
copyrights, trademarks and licensing agreements to protect its technology. Due
to the rapid technological change that characterizes the semiconductor and flat
panel display process equipment industries, Brooks believes that the improvement
of existing technology, reliance upon trade secrets and unpatented proprietary
know-how and the development of new products may be more important than patent
protection in establishing and maintaining a competitive advantage. To protect
trade secrets and know-how, it is Brooks' policy to require all technical and
management personnel to enter into nondisclosure agreements.
Brooks has obtained patents and will continue to make efforts to obtain
patents, when available, in connection with its product development program.
Brooks cannot guarantee that any patent obtained will provide protection or be
of commercial benefit to Brooks. Despite these efforts, others may independently
develop substantially equivalent proprietary information and techniques. Brooks
cannot guarantee that these efforts will meaningfully protect its trade secrets.
As of September 30, 1999, Brooks had obtained 52 United States patents and had
48 United States patent applications pending on its behalf. In addition, Brooks
had obtained 12 foreign patents and had 87 foreign patent applications pending
on its behalf. Brooks' United States patents expire at various times from 2005
to 2018. Brooks cannot guarantee that its pending patent applications or any
future applications will be approved or that any patents will not be challenged
by third parties. Others may have filed and in the future may file patent
applications that are similar or identical to those of Brooks. These patent
applications may have priority over patent applications filed by Brooks.
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor related industries. Brooks has
in the past been, and may in the future be, notified that it may be infringing
intellectual property rights possessed by other third parties. Any patent
litigation would be costly and could divert the efforts and attention of Brooks'
management and technical personnel, which could have a material adverse effect
on Brooks' business, financial condition and results of operations. Brooks
cannot guarantee that infringement claims by third parties or other claims for
indemnification by customers or end users of Brooks' products resulting from
infringement claims will not be asserted in the future or that such assertions,
if proven to be true, will not materially and adversely affect Brooks' business,
financial condition and results of operations. If any such claims are asserted
against Brooks' intellectual property rights, the Company may seek to enter into
a royalty or licensing arrangement. Brooks cannot guarantee, however, that a
license will be available on reasonable terms or at all. Brooks could decide in
the alternative to resort to litigation to challenge such claims or to design
around the patented technology. Such actions could be costly and could divert
the efforts and attention of Brooks' management and technical personnel, which
could materially and adversely affect Brooks' business, financial condition and
results of operations.
Brooks had received notice from General Signal Corporation alleging
infringement of patents then owned by General Signal, relating to cluster tool
architecture, by certain of Brooks' products. The notification advised Brooks
that General Signal was attempting to enforce its rights to those patents in
litigation against Applied Materials. According to a press release issued by
Applied Materials in November 1997, Applied Materials settled its litigation
with General Signal by acquiring ownership of five General Signal patents.
Although not verified, these five patents would appear to be the patents
referred to by General Signal in its prior notice to Brooks. Applied Materials
has not contacted Brooks regarding these patents.
13
<PAGE> 15
BACKLOG
Backlog for Brooks' products as of September 30, 1999, totaled $48.9
million. Backlog consists of purchase orders for which a customer has scheduled
delivery within the next 12 months. Orders included in the backlog may be
canceled or rescheduled by customers without significant penalty. Backlog as of
any particular date should not be relied upon as indicative of Brooks' revenues
for any future period. A substantial percentage of current business generates no
backlog because the Company delivers its products and services in the same
period in which the order is received.
EMPLOYEES
At September 30, 1999, Brooks had approximately 850 employees. Brooks
believes its future success will depend in large part on its ability to attract
and retain highly skilled employees. Approximately 75 employees in the Company's
Jena, Germany facility are covered by a collective bargaining agreement. Brooks
considers its relationships with its employees to be good.
ITEM 2. PROPERTIES
Brooks has a seven year lease, ending August 2002, for its headquarters and
primary manufacturing facility in Chelmsford, Massachusetts. This facility is a
two-story brick structure with approximately 130,000 square feet of space. The
Company maintains additional manufacturing facilities in California, Colorado
and Germany. Brooks maintains hardware and software development facilities in
Massachusetts, California, Germany, South Korea and Canada. The Company
maintains sales and service offices in California, Arizona, Japan, South Korea,
Taiwan and the United Kingdom. Brooks maintains sales offices in Massachusetts,
Florida, Oregon, Texas, Germany, France and Singapore.
ITEM 3. LEGAL PROCEEDINGS
Brooks is not a party to any material pending legal proceedings. See
"Patents and Proprietary Rights," in Part I, Item 1, "Business," for a
description of certain potential patent disputes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended September 30, 1999, no matters were submitted to a
vote of security holders through the solicitation of proxies or otherwise.
14
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the Nasdaq National Market under
the symbol "BRKS." The following table sets forth, for the periods indicated,
the high and low sales prices per share of the Company's common stock, as
reported by the Nasdaq National Market:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal year ended September 30, 1999
First quarter $17.44 $ 8.25
Second quarter $26.38 $14.50
Third quarter $28.38 $16.75
Fourth quarter $31.00 $17.38
Fiscal year ended September 30, 1998
First quarter $41.13 $12.38
Second quarter $19.25 $13.00
Third quarter $17.50 $11.38
Fourth quarter $12.75 $ 8.13
</TABLE>
NUMBER OF HOLDERS
As of November 30, 1999, there were 336 holders of record of the Company's
Common Stock.
DIVIDEND POLICY
Other than dividends paid by Brooks Canada prior to its acquisition by the
Company, the Company has never paid or declared any cash dividends on its
capital stock and does not plan to pay any cash dividends in the foreseeable
future. The Company's current policy is to retain all of its earnings to finance
future growth.
ISSUANCE OF UNREGISTERED COMMON STOCK
On September 30, 1999, Brooks completed the acquisition of certain assets
of the Infab Division of Jenoptik AG in exchange for 914,286 shares of the
Company's common stock, subject to adjustment. The common stock issued in this
transaction was sold in reliance upon the exemption from registration set forth
in Section 4(2) of the Securities Act relating to sales by an issuer not
involving any public offering.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998(A) 1997(A) 1996(A) 1995(A)
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30,
Revenues(b) $103,906 $100,252 $109,427 $112,730 $68,488
Gross profit $ 46,029 $ 26,724 $ 44,117 $ 54,769 $34,404
Income (loss) from operations $(11,496) $(29,874) $ (2,996) $ 10,426 $ 6,312
Income (loss) before income taxes $ (8,899) $(27,244) $ (3,702) $ 10,390 $ 6,420
Net income (loss) $ (7,884) $(22,563) $ (4,169) $ 6,470 $ 4,715
Accretion and dividends on preferred
stock $ 654 $ 1,420 $ 1,005 $ 521 $ 521
Net income (loss) available to common
stockholders $ (8,538) $(23,983) $ (5,174) $ 5,949 $ 4,194
Diluted earnings (loss) per share $ (0.76) $ (2.32) $ (0.66) $ 0.65 $ 0.55
Shares used in computing diluted
earnings (loss) per share 11,192 10,337 7,880 9,161 7,685
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
1999 1998(a) 1997(a) 1996(a) 1995(a)
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
AS OF SEPTEMBER 30,
Total assets $177,145 $145,321 $166,292 $ 80,693 $66,379
Working capital $105,796 $103,238 $119,550 $ 35,826 $35,721
Current portion of long-term debt $ 537 $ 505 $ 803 $ 2,848 $ 1,759
Long-term debt (less current portion) $ 801 $ 3,344 $ 2,624 $ 1,052 $ 1,026
Redeemable convertible preferred
stock $ -- $ 3,562 $ 13,029 $ 9,831 $ 9,298
Stockholders' equity $142,146 $118,634 $128,797 $ 47,904 $38,883
</TABLE>
- ---------------
(a) Amounts have been restated to reflect the acquisition of Smart Machines Inc.
in a pooling of interests transaction effective August 31, 1999.
(b) Includes revenues from a related party of $15.3 million, $15.9 million,
$18.2 million, $19.1 million and $10.5 million in fiscal 1999, 1998, 1997,
1996 and 1995, respectively.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE EXPOSURE
Based on Brooks' overall interest exposure at September 30, 1999, including
all interest rate sensitive instruments, a near-term change in interest rates
within a 95% confidence level based on historical interest rate movements would
not materially affect the consolidated results of operations or financial
position.
CURRENCY RATE EXPOSURE
Brooks' foreign revenues are generally denominated in United States
dollars. Accordingly, foreign currency fluctuations have not had a significant
impact on the comparison of the results of operations for the periods presented.
The costs and expenses of Brooks' international subsidiaries are generally
denominated in currencies other than the United States dollar. However, since
the functional currency of Brooks' international subsidiaries is the local
currency, foreign currency translation adjustments do not impact operating
results, but instead are reflected as a component of stockholders' equity. To
the extent Brooks expands its international operations or changes its pricing
practices to denominate prices in foreign currencies, Brooks will be exposed to
increased risk of currency fluctuation.
STOCK PRICE
The stock prices of semiconductor equipment companies are subject to
significant fluctuations. Brooks' stock price may be affected by a variety of
factors that could cause the price of Brooks' common stock to fluctuate, perhaps
substantially, including: announcements of developments related to Brooks'
business; quarterly fluctuations of Brooks' actual or anticipated operating
results and order levels; general conditions in the semiconductor and flat panel
display industries or the worldwide economy; announcements of technological
innovations; new products or product enhancements by Brooks or its competitors;
developments in patents or other intellectual property rights and litigation;
and developments in Brooks' relationships with its customers and suppliers. In
addition, in recent years, both the stock market in general and the market for
shares of small capitalization and semiconductor industry-related companies in
particular have experienced extreme price fluctuations which have often been
unrelated to the operating performance of affected companies. Any such
fluctuations in the future could adversely affect the market price of Brooks'
common stock. There can be no assurance that the market price of the common
stock of Brooks will not decline.
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<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements in this Annual Report on Form 10-K constitute
"forward-looking statements" which involve known risks, uncertainties, and other
factors which may cause the actual results, performance, or achievements of
Brooks Automation, Inc. ("Brooks" or the "Company") to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such factors include the factors that may
affect future results set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations, which is included in this report.
Precautionary statements made herein should be read as being applicable to all
related forward-looking statements wherever they appear in this report.
OVERVIEW
The predecessor of Brooks was organized in February 1989 and acquired the
semiconductor wafer handling business of the Brooks Automation Division of
Aeronca Electronics, Inc., a subsidiary of Fleet Aerospace Corporation, in March
1989.
Brooks is a leading supplier of tool and factory hardware and software
automation solutions for the global semiconductor, data storage, and flat panel
display manufacturing industries. Founded in 1978, Brooks has distinguished
itself as a technology and market leader, particularly in the demanding
cluster-tool vacuum-processing environment and in integrated factory automation
software applications. The Company's offerings have evolved from individual
robots used to transfer semiconductor wafers in advanced production equipment to
fully integrated automation solutions from process tools to factory scheduling
used to optimize fab performance. In 1998 and 1999 the Company diversified and
entered the factory automation market, beginning with the acquisition of FASTech
Integration, Inc. Through a recent series of acquisitions Brooks has emerged as
one of the leading suppliers of factory automation software and hardware
solutions to end users in these markets.
In 1992, the Company introduced the family of vacuum central wafer handling
systems and modules that forms the foundation of the Company's current business.
In 1994, the Company introduced a similar family of systems and modules for flat
panel display substrates, including a next-generation magnetically driven vacuum
transfer robot. In 1996, the Company acquired Techware Systems Corporation
("Techware"), a designer and supplier of integrated equipment control software
for the semiconductor and related industries, expanding its software and control
capability. In 1997, the Company introduced a line of products for the
atmospheric handling market, including in-line and controlled environment
systems, robots, aligners and traversers. In 1998, the Company acquired FASTech
Integration, Inc. ("FASTech"), a designer and supplier of top-to-bottom
integrated Manufacturing Execution Systems ("MES") software solutions. Both of
these acquisitions were accounted for under the pooling of interests method.
The Company made several acquisitions during fiscal year 1999. On April 21,
1999, the Company completed the acquisition of Hanyon Technology, Inc.
("Hanyon"). Hanyon, based in Korea, provides MES systems integration services
and cell control automation solutions to the semiconductor and liquid crystal
display industries in Korea and Taiwan. On June 30, 1999, the Company completed
the acquisition of substantially all the assets and certain liabilities of
Domain Manufacturing Corporation ("Domain"). Domain is a leading developer of
process development, data analysis and advanced process control software. These
acquisitions were accounted for using the purchase method of accounting.
Accordingly, the Company's Consolidated Statements of Operations and of Cash
Flows include the results of Hanyon and Domain for the periods subsequent to
their respective dates of acquisition.
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<PAGE> 19
On August 31, 1999, the Company completed the acquisition of Smart Machines
Inc. ("Smart Machines"). Smart Machines produces process tool automation
components for semiconductor manufacturers. This acquisition was accounted for
as a pooling of interests. Accordingly, the Company's historical financial
results have been restated to include the results of Smart for all periods
presented.
On September 30, 1999, the Company completed the acquisition of certain
assets of the Infab Division ("Infab") of Jenoptik AG, a leading supplier of
advanced factory interface systems. This acquisition was accounted for using the
purchase method of accounting. Accordingly, the acquired assets are included in
the Company's Consolidated Balance Sheet as of September 30, 1999.
In June 1999, the Company formed a joint venture in Korea with Samsung
Electronics. This joint venture is 70% owned by the Company and 30% owned by
Samsung, and has been organized to design, develop, and manufacture atmospheric
flat panel display loaders along with other products. The Company consolidates
fully the financial position and results of operations of the joint venture and
accounts for the minority interest in the financial statements.
Many of the Company's customers purchase the Company's vacuum transfer
robots and other modules before purchasing the Company's vacuum central wafer
handling systems. The Company believes that once a customer has selected the
Company's products for a process tool, the customer is likely to rely on those
products for the life of that process tool model, which can be in excess of five
years. Conversely, losing a bid for a MES does not preclude the Company from
securing optimization products to fit with a competitor's manufacturing
execution systems.
The Company's product revenues include sales of hardware and software
products. The Company's service revenues include revenue from maintenance
contracts, fixed fee application consulting contracts, and time and material
based contracts.
The majority of the Company's revenues have been generated by sales to
customers in the United States, although the Company believes that a significant
portion of these customers incorporate the Company's products into equipment
sold to their foreign customers. The Company's foreign sales have occurred
principally in Japan, South Korea, Taiwan, Singapore and Europe.
The Company's foreign revenues are generally denominated in United States
dollars. Accordingly, foreign currency fluctuations have not had a significant
impact on the comparison of the results of operations for the periods presented.
The costs and expenses of the Company's international subsidiaries are generally
denominated in currencies other than the United States dollar. However, since
the functional currency of the Company's international subsidiaries is the local
currency, foreign currency translation adjustments are reflected as a component
of stockholders' equity. To the extent that the Company expands its
international operations or changes its pricing practices to denominate prices
in foreign currencies, the Company will be exposed to increased risk of currency
fluctuation.
The Company's business is highly dependent upon the capital expenditures of
semiconductor and flat panel display manufacturers which historically have been
cyclical, and the Company's ability to develop, manufacture and sell new
products and product enhancements. The Company's results will also be affected,
especially when measured on a quarterly basis, by the volume, composition and
timing of orders, conditions in industries served by the Company, competition
and general economic conditions.
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<PAGE> 20
RESULTS OF OPERATIONS
IMPACT OF ACQUISITION-RELATED, RESTRUCTURING AND OTHER COSTS
During the fourth quarter of fiscal 1999, the Company recorded $5.3 million
of acquisition-related, restructuring and other costs. These charges were
comprised of $1.0 million in inventory-related costs, $1.2 million for
transaction costs related to the Smart Machines acquisition, $1.9 million for
restructuring charges and $1.2 million of additional depreciation expense due to
shortening the lives of certain assets. The restructuring charges include costs
to terminate certain employees and the write-off of certain fixed assets during
fiscal 1999 under a plan approved and implemented by management during fiscal
1999. During fiscal 1998, the Company recorded acquisition-related,
restructuring and other costs of $11.8 million. These charges included $6.2
million of inventory-related costs, $2.4 million of FASTech acquisition-related
costs, $1.5 million of restructuring charges, $0.7 million of accounts
receivable reserves, $0.7 million of additional depreciation charges and $0.3
million of interest expense. The following table reflects the results of
operations for the three years ended September 30, 1999, including the effect of
the acquisition-related, restructuring and other costs for the years ended
September 30, 1999 and 1998:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 YEAR ENDED SEPTEMBER 30, 1998
----------------------------------------- -----------------------------------------
ACQUISITION- ACQUISITION-
RELATED, RELATED, AS REPORTED
RESTRUCTURING RESTRUCTURING YEAR ENDED
AND OTHER AND OTHER SEPTEMBER 30,
AS REPORTED COSTS PRO FORMA AS REPORTED COSTS PRO FORMA 1997
----------- ------------- --------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Product $ 82,437 $ -- $ 82,437 $ 80,856 $ -- $ 80,856 $89,063
Service 21,469 -- 21,469 19,396 -- 19,396 20,364
-------- -------- -------- -------- ------- -------- -------
Total revenues 103,906 -- 103,906 100,252 -- 100,252 109,427
-------- -------- -------- -------- ------- -------- -------
Cost of revenues
Product 44,311 (1,638)(a) 42,673 61,990 (6,579)(d) 55,411 52,953
Service 13,566 -- 13,566 11,538 -- 11,538 12,357
-------- -------- -------- -------- ------- -------- -------
Total cost of
revenues 57,877 (1,638) 56,239 73,528 (6,579) 66,949 65,310
-------- -------- -------- -------- ------- -------- -------
Gross profit 46,029 1,638 47,667 26,724 6,579 33,303 44,117
-------- -------- -------- -------- ------- -------- -------
Operating expenses
Research and
development 22,425 (339)(b) 22,086 25,376 (167)(b) 25,209 22,208
Selling, general
and
administrative 31,631 (185)(b) 31,446 27,500 (1,010)(e) 26,490 24,905
Amortization of
acquired
intangible assets 349 -- 349 -- -- -- --
Acquisition-related
and restructuring
costs 3,120 (3,120)(c) -- 3,722 (3,722)(f) -- --
-------- -------- -------- -------- ------- -------- -------
Total operating
expenses 57,525 (3,644) 53,881 56,598 (4,899) 51,699 47,113
-------- -------- -------- -------- ------- -------- -------
Loss from operations (11,496) 5,282 (6,214) (29,874) 11,478 (18,396) (2,996)
Interest (income) (3,150) -- (3,150) (3,629) -- (3,629) (234)
Interest expense 368 -- 368 999 (345)(g) 654 940
Other (income)
expense 225 -- 225 -- -- -- --
-------- -------- -------- -------- ------- -------- -------
Loss before income
taxes $ (8,939) $ 5,282 $ (3,657) $(27,244) $11,823 $(15,421) $(3,702)
======== ======== ======== ======== ======= ======== =======
</TABLE>
- ---------------
(a) Comprised of $1.0 million of inventory-related charges and $0.6 million of
additional depreciation expense.
(b) Additional depreciation expense.
19
<PAGE> 21
(c) Comprised of $1.2 million for transaction costs related to the Smart
Machines acquisition, $0.3 million for severance costs and $1.6 million for
the write-off of certain fixed assets.
(d) Comprised of $6.2 million of inventory-related charges, $0.1 million of
severance costs and $0.3 million of additional depreciation expense.
(e) Comprised of $0.7 million of additional accounts receivable reserves, $0.2
million of additional depreciation expense and $0.1 million for severance
and other transaction-related costs.
(f) Comprised of $1.4 million of costs to exit duplicate facilities, $1.0
million of legal, accounting and other transaction-related costs and $1.3
million for severance costs.
(g) Charges reflect interest expense incurred on retirement of debt in
conjunction with the Company's acquisition of FASTech.
FISCAL YEAR ENDED SEPTEMBER 30, 1999, COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 1998
REVENUES
Total revenues increased 3.6%, to $103.9 million in fiscal 1999, compared
to revenues of $100.3 million in fiscal 1998. Product revenues increased $1.6
million, or 2.0%, primarily as a result of improving 200mm revenues. Service
revenues increased $2.1 million, or 10.7%, primarily as a result of the
Company's acquisitions and the impact of the acquisitions on consulting services
associated with factory automation.
Foreign revenues for fiscal 1999 were $42.6 million (41.0% of revenues),
including $31.4 million of direct sales to Asian customers, compared with
foreign revenues of $41.3 million (41.2% of revenues), including $31.7 million
of direct sales to Asian customers in the prior fiscal year. The Company expects
that foreign revenues will continue to account for a significant portion of
total revenues in fiscal 2000. However, there can be no assurance that foreign
revenues, particularly from Asia, will remain a strong component of the
Company's total revenues.
GROSS PROFIT
Gross profit increased to 44.3% for fiscal 1999, compared to 26.7% for
fiscal 1998. Gross profit on product revenues increased to 46.3%, compared to
23.3% for fiscal 1998. Included in the cost of product revenues for fiscal 1999
and fiscal 1998 are charges of $1.6 million and $6.6 million, respectively, for
acquisition-related, restructuring and other costs. The fiscal 1999 charges are
comprised of a $1.0 million charge to provide additional reserves for
slow-moving and obsolete inventories and $0.6 million of additional depreciation
expense, while the fiscal 1998 charge was comprised of $6.2 million to provide
additional reserves for slow-moving and obsolete inventories, $0.3 million for
additional depreciation costs and $0.1 million for severance costs. Excluding
these costs, gross profit on product revenues was 48.2% for fiscal 1999, an
increase from 31.5% for fiscal 1998 due to improving manufacturing capacity
utilization and the acquisition of higher margin software
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product businesses. In future periods, gross profit may be adversely affected by
changes in the mix of products sold, continued pricing pressures or increases in
cost of product revenues.
Gross profit on service revenues was 36.8% for fiscal 1999, compared to
40.5% for fiscal 1998. Included in the cost of service revenues are global
customer support costs, consisting primarily of personnel costs and travel
expenses. Global customer support costs were $7.8 million and $6.0 million for
fiscal 1999 and fiscal 1998, respectively.
RESEARCH AND DEVELOPMENT
Research and development expenses decreased by 11.6%, to $22.4 million for
fiscal 1999, from $25.4 million in the prior year. Research and development
expenses also decreased as a percentage of revenues, to 21.6% in fiscal 1999,
compared to 25.3% in the prior year. The spending decrease was the effect of
reduced personnel costs and other related spending associated with the changing
mix of supported technologies. The Company believes that research and
development expenditures are essential to maintaining its competitive position
as a leading supplier of tool and factory hardware and software automation
solutions in the semiconductor, data storage and flat panel display
manufacturing industries; the Company expects gross expenditure levels to
continue at or above current levels in the future.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased by 15.0%, to $31.6
million (30.4% of revenues) in fiscal 1999, compared to $27.5 million (27.4% of
revenues) in fiscal 1998. Fiscal 1999 expenses included $0.2 million for
additional deprecation expense. Fiscal 1998 expenses included $1.0 million for
additional accounts receivable reserves and additional depreciation expense. The
spending increase over last year is due to expanded sales and marketing
activities as well as increased general and administration support costs
associated with the Company's recently completed acquisitions and infrastructure
improvements. The Company expects that future expenditure levels will continue
at or above current levels to support its worldwide sales and administrative
organizations.
ACQUISITION-RELATED AND RESTRUCTURING COSTS
In fiscal 1999, the Company incurred acquisition-related and restructuring
costs of $3.1 million, comprised of $1.2 million for transaction costs related
to the Smart Machines acquisition, $0.3 million for severance costs and $1.6
million for the write-off of certain fixed assets. The fiscal 1998
acquisition-related and restructuring costs of $3.7 million were comprised of
$1.4 million to exit duplicate facilities, $1.0 million for legal, accounting
and other transaction costs related to the FASTech acquisition and $1.3 million
for severance costs.
INTEREST INCOME AND INTEREST EXPENSE
Interest income decreased by 13.2%, to $3.2 million in fiscal 1999,
compared to $3.6 million in the prior fiscal year, due primarily to lower cash
and investment asset balances. Interest expense decreased by 63.2%, to $0.4
million in fiscal 1999, from $1.0 million in fiscal 1998, due primarily to 1998
costs for acquisition-related deferred financing costs to retire debt in
conjunction with the acquisition of FASTech and reduced borrowings.
INCOME TAX PROVISION (BENEFIT)
The Company recorded net tax benefits of $1.0 million and $4.7 million in
fiscal 1999 and fiscal 1998, respectively. These tax benefits are primarily due
to anticipated future tax benefit of domestic net operating losses and research
and development credits, which were partially offset by $1.6 million and $3.8
million increases in the deferred tax asset valuation allowance in fiscal 1999
and fiscal 1998, respectively.
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FISCAL YEAR ENDED SEPTEMBER 30, 1998, COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 1997
REVENUES
Total revenues decreased 8.4% to $100.3 million in fiscal 1998, compared
with revenues of $109.4 million in fiscal 1997. Product revenues decreased $8.2
million (9.2%) primarily as a result of a decrease in flat panel display
revenues and software revenues, which was partially offset by an increase in
200mm and 300mm revenues. Service revenues decreased $1.0 million (4.8%). The
decreases in product and services revenues are primarily the result of the
prolonged economic downturn which adversely impacted the semiconductor industry
and related tool and factory hardware and software automation sector.
Foreign revenues for fiscal 1998 were $41.2 million (41.2% of revenues),
including $31.7 million of direct sales to Asian customers, compared with
foreign revenues of $41.3 million (37.8% of revenues), including $33.3 million
of direct sales to Asian customers in the prior fiscal year.
GROSS PROFIT
Overall, gross profit as a percentage of revenues decreased to 26.7% for
fiscal 1998, compared with 40.3% for fiscal 1997. Gross profit as a percentage
of product revenues decreased to 23.3%, compared with 40.5% for fiscal 1997.
Included in the cost of product revenues for fiscal 1998 were $6.6 million of
charges related primarily to increased inventory reserves and severance costs.
The gross profit percentage for product revenues before these costs in fiscal
1998 was 31.5%. The decrease from the prior fiscal year was primarily a result
of continued underutilization of manufacturing capacity (due in part to customer
requested shipment delays primarily in the first half of fiscal 1998) and
pricing pressure from volume production customers.
Gross profit percentage on service revenues as a percentage of service
revenues was 40.5% for fiscal 1998, compared with 39.3% for the prior year.
Included in service revenues are global support costs, which decreased 7.7% to
$6.0 million for fiscal 1998, from $6.5 million in the prior fiscal year. Global
support costs consist primarily of personnel costs and travel expenses.
RESEARCH AND DEVELOPMENT
Research and development expenses increased 14.3%, to $25.4 million (25.3%
of revenues) from $22.2 million (20.3% of revenues) in the prior fiscal year.
The increase primarily resulted from incremental spending associated with the
launch of new atmospheric products and the transition to next generation vacuum
wafer handling products, as the Company continued to make investments in
research and development to enhance existing and develop new tool and factory
hardware and software automation solutions for the semiconductor, data storage
and flat panel display manufacturing industries.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 10.4% to $27.5
million (27.4% of revenues) for fiscal 1998, from $24.9 million (22.8% of
revenues) in the prior fiscal year. Fiscal 1998 expenses include $1.0 million
for additional accounts receivable reserves and additional depreciation expense.
Before these charges, selling, general, and administrative expenses increased
6.4% to $26.5 million (26.4% of revenues), primarily due to the worldwide
expansion of the Company's sales and administrative organizations during the
first half of the year.
ACQUISITION-RELATED AND RESTRUCTURING COSTS
In fiscal 1998 the Company incurred acquisition-related costs of $3.7
million that consisted principally of $1.4 million of costs to exit duplicate
facilities, $1.0 million of legal, accounting, and other transaction costs
related to the FASTech acquisition and $1.3 million of severance costs.
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INTEREST INCOME AND INTEREST EXPENSE
Interest income increased to $3.6 million for fiscal 1998, from $0.2
million in the prior fiscal year. The increase in interest income was due to
higher cash and investment balances during fiscal 1998, resulting primarily from
the Company's $80.8 million public stock offering in September 1997. Interest
expense of $1.0 million in fiscal 1998 remained relatively unchanged from $0.9
million in the prior fiscal year.
INCOME TAX PROVISION (BENEFIT)
The Company recorded a net tax benefit of $4.7 million for fiscal 1998,
primarily due to the anticipated future tax benefit of domestic net operating
losses and research and development tax credit carryforwards generated during
1998, which were partially offset by the $3.8 million increase in the deferred
tax asset valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $66.4 million at September 30, 1999, a
decrease of $3.1 million from September 30, 1998.
Cash provided by operations during the year ended September 30, 1999 was
$5.5 million, despite a net loss of $7.9 million for the year, and is primarily
attributable to depreciation and amortization of $10.4 million, as well as
decreases in inventories of $2.0 million and increases in accounts payable,
deferred revenue and accrued acquisition-related and restructuring costs of $1.6
million, $1.8 million and $1.7 million, respectively, offset by increases in
deferred income taxes and accounts receivable of $3.0 million and $4.4 million,
respectively.
Cash used in investing activities during the year ended September 30, 1999
was $10.6 million, and includes $5.7 million used for capital additions and cash
payments of $14.0 million for business acquisitions, partially offset by $9.4
million of cash from acquired companies.
Cash provided by financing activities was $1.7 million, and is primarily
attributable to proceeds of $1.7 million from the issuance of the Company's
common stock and $1.2 million of long-term borrowings, partially offset by
payments of long-term debt of $1.2 million.
On December 15, 1999, the Company entered into a definitive agreement to
acquire Auto-Soft Corporation and AutoSimulations, Inc. from their sole
stockholder, Daifuku America Corporation, the US affiliate of Daifuku Co., Ltd.,
subject to satisfaction of customary closing conditions. Upon the completion of
the transaction, which is expected to occur in January 2000, the Company will be
required to pay $27.0 million in cash, issue shares of common stock with an
aggregate value of $16.0 million and issue a Note in the amount of $16.0 million
payable one year after the date of Closing. The Note will be unsecured and bear
interest at 4% per year.
In September 1999, the Company obtained a commitment letter for an
unsecured revolving credit facility for borrowings and letters of credit up to
$30.0 million. The proposed credit facility will terminate at the end of two
years. The interest rates for borrowings under the proposed facility are
expressed in relation to LIBOR and a margin of 1.75% to 2.25% or from 0.25% to
0.75% above a base rate. The borrowings and letters of credit are expected to be
used for working capital and general purposes, including financing potential
acquisitions. The Company believes that this borrowing facility, together with
current cash and cash equivalent balances, will be adequate to fund the
acquisition of Auto-Soft Corporation and AutoSimulations, Inc., planned working
capital and capital expenditures and acquisition requirements for at least the
next twelve months. The Company cannot guarantee that it will obtain the
borrowing facility on favorable terms, if at all.
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YEAR 2000 READINESS DISCLOSURE
The year 2000 issue is the potential for system and processing failure of
date-related data as the result of computer-controlled systems using two digits
rather than four digits to define the applicable year. For example, computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
Internal infrastructure compliance. Brooks may be affected by year 2000 issues
related to non-compliant information technology systems and other systems
operated or sold by Brooks or by third parties. Brooks has completed the
assessment of its internal information technology systems and applications and
believes that all critical applications are year 2000 compliant. Brooks also has
evaluated its information technology hardware and its non-information technology
systems, including facilities and other operations, such as financial, security
and utility systems. Brooks believes these systems are year 2000 compliant.
Product compliance. Brooks has completed a Year 2000 readiness evaluation of
its current generation of released products and believes that products
distributed after December 31, 1998 are Year 2000 compliant. Brooks cannot
guarantee that product testing has identified all Year 2000 related issues that
could have an adverse affect on Brooks' financial condition and results of
operations.
Acquisitions. Brooks has acquired five businesses since September 1998
including: Infab, Smart Machines, Domain, Hanyon and FASTech. Brooks has signed
a definitive agreement to acquire Auto-Soft Corporation and AutoSimulations,
Inc., scheduled to close in January 2000 and is in various stages of negotiation
with respect to the acquisition of several additional businesses. As part of
Brooks' due diligence examination of completing acquisitions, the Company
conducted an evaluation of their year 2000 readiness. Brooks believes there are
no significant year 2000 related issues arising from the companies that it has
acquired. Brooks can give no assurance that it will properly identify year 2000
issues relating to any companies acquired in the future.
Third Party Compliance. Although Brooks believes that its own systems are year
2000 compliant, the Company utilizes third party equipment and software that may
not be year 2000 compliant. In addition, Brooks' products and software are often
sold, integrated into or interfaced with third party equipment or software.
Failure of third party equipment or software to operate properly with regard to
the year 2000 and thereafter could require Brooks to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
Brooks' business, results of operations and financial condition. Brooks may also
be vulnerable to any failures by its major suppliers, service providers and
customers to remedy their own internal information technology and non-
information technology systems year 2000 issues which could have a material
adverse effect on Brooks' supplies and orders. At this time, Brooks is unable to
estimate the nature or extent of any potential adverse impact resulting from the
failure of third parties, such as its suppliers, service providers and
customers, to achieve year 2000 compliance. Moreover, such third parties, even
if year 2000 compliant, could experience difficulties resulting from year 2000
issues that may affect their suppliers, service providers and customers. As a
result, although Brooks does not currently anticipate, based upon surveys and
discussions, that it will experience any material shipment delays from its major
product suppliers or any material sales delays from its major customers due to
year 2000 issues, although there can be no assurance that these third parties
will not experience year 2000 problems or that any such problems will not have
an adverse material effect on Brooks' business, results of operations and
financial condition. Because the cost and timing of year 2000 compliance by
third parties such as suppliers, service providers and customers is not within
Brooks' control, Brooks cannot give any assurance with
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respect to the cost or timing of such efforts or any potential adverse effects
on Brooks of any failure by these third parties to achieve year 2000 compliance.
Brooks relies on commercial and government suppliers for services related to
Brooks' infrastructure, including utilities, transportation, financial,
governmental, communications and other services. These suppliers pose an
undetermined risk to Brooks' facilities and operations worldwide. In some cases,
alternate suppliers of these services, such as electrical utilities, are
unavailable, and failure by a supplier could adversely impact Brooks.
Costs. Based on its investigation to date, Brooks does not expect the total
cost of its year 2000 assessment and planning to have a material adverse effect
on Brooks' business or financial results. On a cumulative basis, Brooks has
incurred approximately $0.8 million in year 2000 compliance costs.
Contingency Plan. Brooks has developed contingency plans, as appropriate, and
believes its year 2000 compliance efforts to be materially complete in the event
year 2000 problems relating to its operations arise. Brooks' failure to develop
a contingency plan could have a material adverse effect on Brooks' business,
results of operations and financial condition.
Worst Case Scenario. To the extent that Brooks does not identify any material
non-compliant information technology systems or non-information technology
systems operated by Brooks or by third parties, such as Brooks' suppliers,
service providers and customers, the most reasonably likely worst case year 2000
scenario is a systemic failure beyond the control of Brooks, such as a prolonged
telecommunications or electrical failure, or a general disruption in United
States or global business activities that could result in a significant economic
downturn. Brooks believes that the primary business risks, in the event of such
failure or other disruption, would include but not be limited to, loss of
customers or orders, increased operating costs, inability to obtain inventory on
a timely basis, disruptions in product shipments, or other business
interruptions of a material nature, as well as claims of mismanagement,
misrepresentation, or breach of contract, any of which could have a material
adverse effect on Brooks' business, results of operations and financial
condition.
RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS
In December 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-9, "Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions", which addresses
software revenue recognition as it applies to certain multiple-element
arrangements. SOP 98-9 also amends SOP 98-4, "Deferral of the Effective Date of
a Provision of SOP 97-2", to extend the deferral of application of certain
passages of SOP 97-2 through fiscal years beginning on or before March 15, 1999.
All other provisions of SOP 98-9 are effective for transactions entered into in
fiscal years beginning after March 15, 1999. The Company will comply with the
requirements of this SOP as they become effective and does not expect that its
revenues or earnings will be materially affected.
In June 1998 the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement was amended by the issuance
of SFAS 137, "Deferral of the Effective Date of FASB Statement No. 133", which
changed the effective date of SFAS 133 to all fiscal years beginning after June
15, 2000 (Fiscal 2001 for the Company) and requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. Management of
the Company anticipates that the adoption of SFAS No. 133 will not have a
significant effect on the Company's results of operations or financial position.
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FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company or statements made
by its employees may contain forward-looking information that involve
substantial risks and uncertainties that could cause actual results to differ
materially from targets or projected results.
Brooks' Dependence on the Cyclical Semiconductor Industry Materially
Affects the Demand for Brooks' Products. Brooks' business is significantly
dependent on capital expenditures by manufacturers of semiconductors. Brooks'
revenues in the past have been materially adversely affected by semiconductor
industry downturns or slowdowns and may be materially adversely affected by
future downturns. Brooks believes (on the basis of its experience during the
recent downturn) that downturns in the semiconductor manufacturing industry will
occur in the future, and will result in decreased demand for semiconductor
manufacturing equipment and factory automation products.
Brooks' Reliance on a Small Number of Customers For a Large Portion of Its
Revenues Could Have a Material Adverse Effect on Brooks' Results of
Operations. A significant portion of Brooks' revenues in each fiscal period
have been concentrated among a limited number of customers. If Brooks lost one
or more of these major customers, or if one or more major customers decreased
its orders, Brooks' business would be materially and adversely affected. Sales
to Brooks' ten largest customers accounted for 63% of total revenues in fiscal
1999 and 61% of total revenues in fiscal 1998. Approximately 15% of Brooks'
total revenues in 1999 and 16% in fiscal 1998 were derived from sales to Lam
Research Corporation, Brooks' largest customer and a related party. Brooks
expects that sales to Lam will continue to represent a significant portion of
the Company's revenues for the foreseeable future. Brooks' future operating
results depend on the success of these customers and Brooks' success in selling
products to them at somewhat lower percentages of total revenue.
Delays in Shipment of a Few Systems Could Substantially Decrease Revenues
For a Period. Brooks has historically derived a substantial portion of its
quarterly and annual revenues from the sale of a relatively small number of
semiconductor and flat panel display handling systems. These systems have
relatively high selling prices compared to its other products. As a result, the
precise timing of the recognition of revenue from an order for one or a small
number of systems can have a significant impact on Brooks' total revenues and
operating results for a particular period. Brooks' operating results for a
particular period could be adversely affected if orders for a small number of
systems are canceled or rescheduled by customers or cannot be filled in time to
recognize revenue during that period due to unanticipated delays in
manufacturing, testing, shipping or product acceptance. Similarly, timing of
signing software licenses could affect software revenue in any given period.
Brooks Has Significant Fixed Costs Which Are Not Easily Reduced If Revenues
Fall Below Expectations. Brooks' expense levels are based, in part, on its
expectations as to future revenues. Many of Brooks' expenses, particularly those
relating to capital equipment and manufacturing overhead, are relatively fixed.
Brooks' ability to reduce expenses is also constrained by the need for continual
investment in research and development and the need to maintain extensive
ongoing customer service and support capability for its existing customer base.
These investments create significant fixed costs that Brooks may be unable to
reduce rapidly, if at all, in the event of a semiconductor industry downturn or
other reduction in revenue. Accordingly, any downturn in revenue could have a
material adverse effect on Brooks' business, financial condition and results of
operations.
Brooks' Sales Volume is Affected by Its Original Equipment Manufacturing
Customers' Sales Volume. Brooks' products are principally sold to original
equipment manufacturers which incorporate Brooks' products into their equipment.
Due to the significant capital commitments usually incurred by semiconductor and
flat panel display manufacturers in their purchases of equipment from these
original equipment manufacturers, they demand highly
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reliable products which may require several years for the original equipment
manufacturers to develop. Brooks' revenues are therefore primarily dependent
upon the timing and effectiveness of the efforts of its customers in developing
and marketing equipment which incorporates Brooks' products. Similarly, the
growth of the Company's software business is predicated on the building of new
or significant upgrading of existing fabs. Should the volume of new fab
development and/or upgrades decrease, the Company's revenues could be adversely
affected.
Brooks' Lengthy Sales Cycle Requires Brooks to Incur Significant Expenses
With No Assurance That Brooks Will Generate Revenue. Brooks' new products are
generally incorporated into an original equipment manufacturers' customer's
process tools at the design stage. However, customer decisions to use Brooks'
products can often require significant expenditures by Brooks without any
assurance of success. These customer decisions often precede the generation of
volume sales, if any, by a year or more. Brooks cannot guarantee that it will
continue to achieve design wins or that the process tools manufactured by
Brooks' customers will be commercially successful. Brooks' or its customers'
failure to develop and introduce new products successfully and in a timely
manner could materially adversely affect Brooks' business and results of
operations.
Brooks' Operating Results Fluctuate Significantly. Brooks' operating
results have in the past fluctuated and may in the future continue to fluctuate
significantly depending upon a variety of factors. Some of these factors may
include:
- the level of demand for semiconductors in general;
- cyclicality in the market for semiconductor manufacturing equipment;
- the timing and size of orders from Brooks' customer base;
- the ability of Brooks to manufacture, test and deliver products in a
timely and cost effective manner;
- Brooks' success in winning competitions with competitors for orders;
- the timing of new product announcements and releases by Brooks and its
competitors;
- the mix of products sold by Brooks;
- competitive pricing pressures; and
- level of automation required in fab extensions, upgrades and new
facilities.
Brooks' Business Could be Materially Adversely Affected If Brooks Fails to
Adequately Integrate Acquired Businesses. The negotiation of potential
acquisitions and the integration of an acquired business diverts the time and
resources of Brooks' management from the day-to-day operation of Brooks'
business. Brooks has completed a number of acquisitions in a short period of
time, subjecting it to significant risks, including:
- difficulties in the assimilation of operations, products and corporate
cultures;
- difficulties in completing the development of acquired technologies;
- difficulties in managing geographically remote units;
- the risks of entering markets or types of businesses in which it has
limited or no direct experience; and
- the potential loss of key employees of the acquired companies.
Any delay or failure to integrate an acquired company, technology or
product line could result in the additional expenditure of money, charges to
income and increased demands on the time of Brooks' management.
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As a result of these and other risks, Brooks may not realize anticipated
benefits from recent acquisitions. Brooks' failure to achieve these benefits
could have a material adverse effect on Brooks' business, results of operations
or financial condition.
Future Acquisitions May Involve Expending Significant Funds, Incurring
Additional Debt or the Issuance of Additional Securities, Which May Materially
Affect Brooks' Results of Operations and be Dilutive to Shareholders. Future
acquisitions may involve expending significant funds, incurring additional debt
or the issuance of additional securities, which may materially adversely affect
Brooks' results of operations and be dilutive to Brooks shareholders. In
addition to the five acquisitions recently completed, in December 1999 the
Company signed a definitive agreement to acquire Auto-Soft Corporation and
AutoSimulations, Inc. for approximately $59 million, payable in cash, stock and
notes. If Brooks expends significant funds or incurs additional debt, its
ability to obtain financing for working capital or other purposes could decline
and Brooks may be more vulnerable to economic downturns and competitive
pressures.
Brooks Conducts Its Business Internationally, Which Exposes It to a Number
of Difficulties in Coordinating Its Activities Outside the United States and in
Dealing with Multiple Regulatory Environments. Approximately 41% of Brooks'
total revenues in both fiscal 1999 and fiscal 1998 were derived from customers
located outside the United States. Brooks anticipates that international sales
will continue to account for a significant portion of its revenues. Brooks'
international business may be materially adversely affected by:
- difficulties in staffing and managing operations in multiple locations in
many countries;
- greater difficulties in trade accounts receivable collection;
- possibly adverse tax consequences;
- governmental currency controls;
- changes in various regulatory requirements;
- political and economic changes and disruptions;
- currency exchange rate changes; and
- export/import controls; and tariff regulations.
To support its international customers, Brooks maintains subsidiaries in
several countries, including Japan, South Korea, Germany, United Kingdom,
France, Ireland, Malaysia, Netherlands, Taiwan and Singapore. Brooks cannot
guarantee that it will be able to manage these operations effectively or that
Brooks' investment in these activities will enable it to compete successfully in
international markets or to meet the service and support needs of its customers.
For the foreseeable future Brooks may continue to be affected by unstable Asian
economies, particularly those in Japan and South Korea. It is not possible to
determine the future effect a continuation of the Asian economic crisis may have
on Brooks' financial position and results of operations.
Although Brooks' international sales are primarily denominated in U.S.
dollars, changes in currency exchange rates can make it more difficult for
Brooks to compete with foreign manufacturers on price. If Brooks' international
sales increase relative to Brooks' total revenues, these factors could have a
more pronounced effect on Brooks' operating results.
Brooks Must Continually Improve Its Technology to Remain
Competitive. Technology changes rapidly in the semiconductor, data storage and
flat panel display manufacturing industries. Brooks believes that this will
continue to be true. Brooks' success will depend upon its ability to enhance its
existing products and to develop
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and market new products to meet customer requirements. Successful product
development and introduction depends on a number of factors, including accurate
new product definition, timely completion and introduction of new product
designs, and market acceptance of Brooks' products and its customers' products.
In order to address emerging industry requirements for larger diameter 300mm
wafer and fourth generation flat panel substrates, Brooks' current major
development programs include expanding its product offerings for data storage
manufacturers and for semiconductor and flat panel display substrate handling
systems, as well as wafer handling systems and modules for atmospheric process
tools. In addition, Brooks continues to develop and enhance its factory
automation software product offerings, including its manufacturing execution
systems, and equipment automation solutions and factory interface systems for
factory-wide integration. Brooks cannot guarantee that it will adjust to
changing market conditions or be commercially successful in introducing products
or product enhancements.
Brooks Faces Significant Competition Which Could Result in Decreased Demand
for Brooks' Products or Services. The markets for Brooks' products are intensely
competitive and Brooks may not be able to compete successfully. Brooks believes
that its primary competition is from integrated original equipment manufacturers
that satisfy their semiconductor and flat panel display handling needs in-house
rather than by purchasing systems or modules from an independent supplier such
as Brooks. Many of these original equipment manufacturers have substantially
greater resources than Brooks. Applied Materials, Inc., the leading process
equipment original equipment manufacturer, develops and manufactures its own
central wafer and flat panel display substrate handling systems and modules.
Brooks may not be successful in selling its products to original equipment
manufacturers that currently satisfy their substrate handling needs in-house,
regardless of the performance or the price of Brooks' products. Moreover,
integrated original equipment manufacturers may begin to commercialize their
handling capabilities and become competitors of Brooks.
Brooks May Have Difficulty Protecting Its Intellectual Property. Brooks'
ability to compete is heavily affected by its ability to protect its
intellectual property. Brooks relies primarily on trade secret laws,
confidentiality procedures, patents, copyrights, trademarks and licensing
arrangements to protect its intellectual property. The steps Brooks has taken to
protect its technology may be inadequate. Existing trade secret, trademark and
copyright laws offer only limited protection. Brooks patents could be
invalidated or circumvented. The laws of certain foreign countries in which
Brooks' products are or may be developed, manufactured or sold may not protect
Brooks' products or intellectual property rights to the same extent as do the
laws of the United States. This may make the possibility of piracy of Brooks'
technology and products more likely. There can be no assurance that the steps
taken by Brooks to protect its intellectual property will be adequate to prevent
misappropriation of Brooks' technology.
Brooks' Operations Could Infringe the Intellectual Property Rights of
Others. Particular aspects of Brooks' technology could be found to infringe on
the intellectual property rights or patents of others. Other companies may hold
or obtain patents on inventions or may otherwise claim proprietary rights to
technology necessary to Brooks' business. Brooks cannot predict the extent to
which it may be required to seek licenses. Brooks cannot guarantee that the
terms of any licenses Brooks may be required to seek will be reasonable.
Brooks' Business May Be Materially Adversely Affected By Infringement
Claims by General Signal. Brooks has received notice from General Signal
Corporation alleging infringements of its patent rights by certain of Brooks'
products. The notification advised Brooks that General Signal was attempting to
enforce its rights to those patents in litigation against Applied Materials, and
that, at the conclusion of that litigation, General Signal intended to enforce
its rights against Brooks and others. According to a press release issued by
Applied Materials in November 1997, Applied Materials settled its litigation
with General Signal by acquiring ownership of five
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General Signal patents. Although not verified by Brooks, these five patents
would appear to be the patents referred to by General Signal in its prior notice
to Brooks. Applied Materials has not contacted Brooks regarding these patents.
The Skilled Employees Brooks Needs Are Difficult To Hire And
Retain. Brooks needs to hire additional management level employees and
substantial numbers of employees with technical backgrounds for both Brooks'
hardware and software engineering and support staffs. The market for these
employees is becoming increasingly competitive, and Brooks has occasionally
experienced delays in hiring these personnel. Brooks' inability to recruit,
retain and train adequate numbers of qualified personnel on a timely basis could
adversely affect Brooks' ability to develop, manufacture, install and support
systems.
Brooks is Not Protected By Long-Term Contracts With Its Customers. Brooks
generally does not enter into long-term contracts with its customers and cannot
be certain as to future order levels from them. Brooks' customers, including Lam
Research Corporation, could reduce, delay or cease orders for products and
services at any time, which could materially adversely affect Brooks' business
and results of operations.
Provisions of Brooks' Certificate of Incorporation, Bylaws and Contracts
Make a Takeover of Brooks More Difficult, Which Could Discourage Attractive
Takeover Offers and Limit the Price Investors May be Willing to Pay for Brooks'
Common Stock. Brooks' Certificate of Incorporation and Bylaws contain
provisions that may make an acquisition of Brooks more difficult and discourage
changes in Brooks' management. These provisions could limit the price that
certain investors might be willing to pay in the future for shares of Brooks'
common stock. In addition, Brooks has adopted a rights plan (popularly known as
a "poison pill"). In many potential takeover situations, rights issued under the
plan become exercisable to purchase Brooks' common stock at a price
substantially discounted from the then applicable market price of Brooks' common
stock. Because of its possible dilutive effect to a potential acquiror, the
rights plan could generally discourage third parties from proposing a merger
with or tender offer for Brooks that is not approved by Brooks' board of
directors. Accordingly, the rights plan could have an adverse impact on
stockholders who might want to vote in favor of the merger or participate in the
tender offer. In addition, shares of Brooks' preferred stock may be issued upon
terms the board of directors deems appropriate without stockholders approval.
Brooks' ability to issue preferred stock in such a manner could enable its board
of directors to prevent changes in Brooks' management or control.
The Volatility of Brooks' Stock Price Could Adversely Affect an Investment
in Brooks' Stock. The market price of Brooks' common stock has fluctuated
widely. For example, between April 26, 1999 and April 28, 1999, the price of
Brooks' common stock dropped from approximately $27.88 to $19.63 per share.
Between January 25, 1999 and January 29, 1999, the price of Brooks' common stock
rose from approximately $17.06 to $24.06 per share. Consequently, the current
market price of Brooks' common stock may not be indicative of future market
prices, and Brooks may not be able to sustain or increase the value of an
investment in Brooks' common stock. Factors affecting Brooks' stock price may
include:
- variations in operating results from quarter to quarter;
- changes in earnings estimates by analysts or Brooks' failure to meet
analysts' expectations;
- market conditions in the industry;
- general economic conditions;
- low volume of trading of Brooks' common stock; and
- number of firms making a market in Brooks' common stock.
30
<PAGE> 32
In addition, the stock market has recently experienced extreme price and
volume fluctuations. These fluctuations have particularly affected the market
prices of the securities of many high technology companies like Brooks. These
market fluctuations could adversely affect the market price of Brooks' common
stock.
Year 2000 Readiness; Year 2000 Problems Could Disrupt Brooks'
Business. The year 2000 problem is the potential for system and processing
failure of date-related data as the result of computer-controlled systems using
two digits rather than four digits to define the applicable year. For example,
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in system
failure or miscalculations causing disruptions of operations, including, among
other things, temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Brooks has evaluated its internal software and products for year 2000
problems. Brooks believes that its products and business will not be
substantially affected by the year 2000 problem and that Brooks has no
significant exposure to liabilities related to the year 2000 problem for the
products Brooks has sold. Brooks has also communicated with others, including
vendors, suppliers and customers whose computer systems' functionality could
directly impact Brooks' operations.
Although Brooks believes its planning efforts are adequate to address its
year 2000 concerns, undetected year 2000 problems may cause Brooks to experience
negative consequences or significant costs. Brooks cannot be sure that its
vendors, suppliers, customers or businesses that it may acquire, including
AutoSoft, Inc. and AutoSimulations, Inc., will not experience similar
consequences or costs. Such consequences or costs could have a material adverse
effect on Brooks.
Availability of Financing. The Company may need to raise additional funds
through public or private debt or equity offerings in order to make other
acquisitions and otherwise implement its strategy. The Company is in the process
of seeking a $30.0 million unsecured credit facility. While the Company believes
that this facility will provide sufficient capital availability for the
foreseeable future, there can be no assurance the facility will be obtained, or
that sufficient capital for additional acquisitions or strategic initiatives
will be available on terms acceptable to the Company.
31
<PAGE> 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<S> <C>
Report of Independent Accountants 33
Consolidated Balance Sheets at September 30, 1999 and 1998 34
Consolidated Statements of Operations for the three years
ended September 30, 1999, 1998 and 1997 35
Consolidated Statements of Changes in Stockholders' Equity
for the three years ended September 30, 1999, 1998 and 1997 36
Consolidated Statements of Cash Flows for the three years
ended September 30, 1999, 1998 and 1997 37
Notes to Consolidated Financial Statements 39
FINANCIAL STATEMENT SCHEDULES:
Report of Independent Accountants on Financial Statement
Schedule 59
Schedule II -- Valuation and Qualifying Accounts and
Reserves 60
</TABLE>
32
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Brooks Automation, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity, and
of cash flows present fairly, in all material respects, the financial position
of Brooks Automation, Inc. and its subsidiaries at September 30, 1999 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended September 30, 1999, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 1999
33
<PAGE> 35
BROOKS AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------
1999 1998
----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 66,366 $ 69,479
Accounts receivable, net, including related party
receivables of $3,384 and $2,365, respectively 32,904 20,856
Inventories 28,917 20,170
Prepaid expenses and other current assets 2,999 3,631
Deferred income taxes 6,542 7,968
-------- --------
Total current assets 137,728 122,104
Fixed assets, net 17,434 18,949
Intangible assets, net 13,719 874
Deferred income taxes 4,192 494
Other assets 4,072 2,900
-------- --------
Total assets $177,145 $145,321
======== ========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt and capital lease
obligations $ 537 $ 505
Accounts payable 6,993 3,320
Deferred revenue 6,127 2,935
Accrued compensation and benefits 4,909 3,498
Accrued acquisition-related and restructuring costs 3,868 2,254
Accrued income taxes payable 2,093 2,359
Accrued expenses and other current liabilities 7,405 3,995
-------- --------
Total current liabilities 31,932 18,866
Long-term debt and capital lease obligations 801 844
Convertible notes -- 2,500
Deferred income taxes 174 915
Other long-term liabilities 632 --
-------- --------
Total liabilities 33,539 23,125
-------- --------
Commitments and contingencies
Minority interests 1,460 --
-------- --------
Redeemable convertible preferred stock, no par value,
3,249,511 shares authorized, 1,166,581 shares issued and
outstanding at September 30, 1998 -- 3,562
-------- --------
Stockholders' equity
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, none issued and outstanding at September 30,
1999 and 1998 -- --
Nonredeemable convertible preferred stock, no par value,
3,376,478 shares authorized, 3,331,478 shares issued and
outstanding at September 30, 1998, liquidation value at
September 30, 1998 -- $6,481 -- 6,467
Common stock, $0.01 par value, 21,500,000 shares
authorized, 12,760,084 and 11,007,281 shares issued and
outstanding, respectively 128 110
Additional paid-in capital 168,827 131,424
Deferred compensation (65) (119)
Accumulated other comprehensive loss (1,093) (536)
Accumulated deficit (25,651) (18,712)
-------- --------
Total stockholders' equity 142,146 118,634
-------- --------
Total liabilities, redeemable convertible preferred
stock and stockholders' equity $177,145 $145,321
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
34
<PAGE> 36
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------
1999 1998 1997
---------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues
Product, including related party revenues of $15,255,
$15,878 and $18,176, respectively $82,437 $ 80,856 $89,063
Services 21,469 19,396 20,364
------- -------- -------
Total revenues 103,906 100,252 109,427
------- -------- -------
Cost of revenues
Product 44,311 61,990 52,953
Services 13,566 11,538 12,357
------- -------- -------
Total cost of revenues 57,877 73,528 65,310
------- -------- -------
Gross profit 46,029 26,724 44,117
------- -------- -------
Operating expenses
Research and development 22,425 25,376 22,208
Selling, general and administrative 31,631 27,500 24,905
Amortization of acquired intangible assets 349 -- --
Acquisition-related and restructuring costs 3,120 3,722 --
------- -------- -------
Total operating expenses 57,525 56,598 47,113
------- -------- -------
Loss from operations (11,496) (29,874) (2,996)
Interest income 3,150 3,629 234
Interest expense 368 999 940
Other income (expense) (225) -- --
------- -------- -------
Loss before income taxes and minority interests (8,939) (27,244) (3,702)
Income tax provision (benefit) (1,015) (4,681) 467
------- -------- -------
Loss before minority interests (7,924) (22,563) (4,169)
Minority interests in earnings (loss) of consolidated
subsidiaries (40) -- --
------- -------- -------
Net loss (7,884) (22,563) (4,169)
Accretion and dividends on preferred stock (654) (1,420) (1,005)
------- -------- -------
Net loss attributable to common stockholders $(8,538) $(23,983) $(5,174)
======= ======== =======
Loss per share attributable to common stockholders
Basic $ (0.76) $ (2.32) $ (0.66)
Diluted $ (0.76) $ (2.32) $ (0.66)
Shares used in computing loss per share
Basic 11,192 10,337 7,880
Diluted 11,192 10,337 7,880
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
35
<PAGE> 37
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NONREDEEMABLE ACCUMULATED
CONVERTIBLE COMMON ADDITIONAL OTHER
PREFERRED STOCK AT PAID-IN DEFERRED COMPREHENSIVE COMPREHENSIVE
STOCK PAR VALUE CAPITAL COMPENSATION INCOME (LOSS) INCOME (LOSS)
-------------- --------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1996 $ 6,106 $ 77 $ 34,464 $(110) $ (179)
Public offering 23 80,739
Shares issued under stock option
and purchase plans 2 843
Deferred compensation 368 (368)
Amortization of deferred
compensation 62
Accretion and dividends on
preferred stock
Income tax benefit from stock
options 926
Comprehensive loss:
Net loss $ (4,169)
Currency translation adjustments 73 73
--------
Comprehensive loss $ (4,096)
========
Issuance of common stock and
warrants 2,887
Issuance of preferred stock 513
------- ---- -------- ----- -------
BALANCE AT SEPTEMBER 30, 1997 6,619 102 120,227 (416) (106)
Shares issued under stock option
and purchase plans 1 806
Common stock issued in acquisitions (152) 7 10,900
Deferred compensation (208) 208
Amortization of deferred
compensation 89
Accretion and dividends on
preferred stock
Income tax adjustment from stock
options (301)
Comprehensive loss:
Net loss $(22,563)
Currency translation adjustments (430) (430)
--------
Comprehensive loss $(22,993)
========
Elimination of FASTech net loss for
the three months ended
December 31, 1997
------- ---- -------- ----- -------
BALANCE AT SEPTEMBER 30, 1998 6,467 110 131,424 (119) (536)
Shares issued under stock option
and purchase plans 4 1,679
Common stock issued in acquisitions (6,467) 14 35,594
Amortization of deferred
compensation 54
Accretion and dividends on
preferred stock
Income tax benefit from stock
options 130
Comprehensive loss:
Net loss $ (7,884)
Currency translation adjustments (557) (557)
--------
Comprehensive loss $ (8,441)
========
Elimination of Smart Machines net
loss
------- ---- -------- ----- -------
BALANCE AT SEPTEMBER 30, 1999 FOR
THE THREE MONTHS ENDED DECEMBER
31, 1998 $ $128 $168,827 $ (65) $(1,093)
======= ==== ======== ===== =======
<CAPTION>
RETAINED
EARNINGS
(ACCUMULATED
DEFICIT) TOTAL
------------ --------
<S> <C> <C>
BALANCE AT SEPTEMBER 30, 1996 $ 7,545 $ 47,903
Public offering 80,762
Shares issued under stock option
and purchase plans 845
Deferred compensation --
Amortization of deferred
compensation 62
Accretion and dividends on
preferred stock (1,005) (1,005)
Income tax benefit from stock
options 926
Comprehensive loss:
Net loss (4,169) (4,169)
Currency translation adjustments 73
Comprehensive loss --
Issuance of common stock and
warrants 2,887
Issuance of preferred stock 513
-------- --------
BALANCE AT SEPTEMBER 30, 1997 2,371 128,797
Shares issued under stock option
and purchase plans 807
Common stock issued in acquisitions 147 10,902
Deferred compensation
Amortization of deferred
compensation 89
Accretion and dividends on
preferred stock (1,420) (1,420)
Income tax adjustment from stock
options (301)
Comprehensive loss:
Net loss (22,563) (22,563)
Currency translation adjustments (430)
Comprehensive loss --
Elimination of FASTech net loss for
the three months ended
December 31, 1997 2,753 2,753
-------- --------
BALANCE AT SEPTEMBER 30, 1998 (18,712) 118,634
Shares issued under stock option
and purchase plans 1,683
Common stock issued in acquisitions 29,141
Amortization of deferred
compensation 54
Accretion and dividends on
preferred stock (654) (654)
Income tax benefit from stock
options 130
Comprehensive loss:
Net loss (7,884) (7,884)
Currency translation adjustments (557)
Comprehensive loss --
Elimination of Smart Machines net
loss 1,599 1,599
-------- --------
BALANCE AT SEPTEMBER 30, 1999 FOR
THE THREE MONTHS ENDED DECEMBER
31, 1998 $(25,651) $142,146
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
36
<PAGE> 38
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1999 1998 1997
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(7,884) $(22,563) $ (4,169)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 10,443 8,545 6,496
Compensation expense related to common stock options 51 89 62
Deferred income taxes (3,017) (4,779) 285
Minority interests (40) -- --
Changes in operating assets and liabilities, net of the
effect of acquisitions:
Accounts receivable (4,396) 15,263 (3,734)
Inventories 1,962 4,134 (5,879)
Prepaid expenses and other current assets 1,213 (1,296) 133
Accounts payable 1,556 (4,265) 1,149
Deferred revenue 1,763 398 297
Accrued compensation and benefits 858 517 (15)
Accrued acquisition-related and restructuring costs 1,724 2,254 --
Accrued expenses and other current liabilities 1,299 (351) (501)
------- -------- --------
Net cash provided by (used in) operating activities 5,535 (2,054) (5,876)
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (5,716) (4,575) (7,994)
Cash paid in acquisitions (13,977) -- --
Cash received in acquisitions 9,361 -- --
Increase in other assets (252) (188) (2,007)
------- -------- --------
Net cash used in investing activities (10,584) (4,763) (10,001)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments of) borrowings under lines of credit -- -- (2,019)
Net increase (decrease) in short-term borrowings -- 825 --
Proceeds from issuance of convertible notes -- 2,500 --
Payments of long-term debt (1,165) (3,098) (850)
Issuance of long-term debt 1,154 -- 2,500
Proceeds from sale and leaseback of equipment - -- 258
Proceeds from issuance of preferred stock, net of issuance
costs -- -- 4,525
Proceeds from issuance of common stock, net of issuance
costs 1,683 807 82,241
------- -------- --------
Net cash provided by financing activities 1,672 1,034 86,655
------- -------- --------
Elimination of net cash activities of FASTech for the three
months ended December 31, 1997 -- (1,761) --
------- -------- --------
Elimination of net cash activities of Smart Machines for the
three months ended December 31, 1998 (63) -- --
------- -------- --------
Effects of exchange rate changes on cash and cash
equivalents 327 (310) (98)
------- -------- --------
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1999 1998 1997
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net increase (decrease) in cash and cash equivalents (3,113) (7,854) 70,680
Cash and cash equivalents, beginning of period 69,479 77,333 6,653
------- -------- --------
Cash and cash equivalents, end of period $66,366 $ 69,479 $ 77,333
======= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 338 $ 418 $ 896
Cash paid during the year for income taxes $ 1,049 $ 240 $ 1,517
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING
ACTIVITIES
Fixed assets acquired under capital lease $ -- $ -- $ 411
Deferred compensation related to stock options $ -- $ (208) $ 368
Accretion and dividends on preferred stock $ 654 $ 1,420 $ 1,005
</TABLE>
The Company utilized available funds and issued common stock in connection
with certain business combinations during the year ended September 30, 1999. The
fair values of the assets and liabilities of the acquired companies are
presented as follows:
<TABLE>
<S> <C>
Assets acquired $30,218
Liabilities assumed (8,414)
-------
Net assets acquired $21,804
=======
The acquisitions were funded as follows:
Cash $10,447
Stock 22,473
Transaction costs 2,391
Cash received (400)
-------
Total $34,911
=======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
38
<PAGE> 40
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF THE BUSINESS
Brooks Automation, Inc. (the "Company") is an independent supplier of tool
and factory hardware and software automation solutions for the global
semiconductor, data storage and flat panel display manufacturing industries.
Founded in 1978, the Company has distinguished itself as a technology and market
leader, particularly in the cluster-tool vacuum-processing environment and in
integrated factory automation software applications. In 1998 and 1999 the
Company has diversified and entered the factory automation market, beginning
with the acquisition of FASTech Integration, Inc. ("FASTech"). Through a recent
series of acquisitions, Brooks has emerged as one of the largest suppliers of
automation software solutions to end users in the semiconductor, electronics and
general discrete manufacturing industries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries. All significant intercompany accounts and
transactions are eliminated.
On April 2, and June 30, 1999, the Company completed the acquisitions of
Hanyon Technology, Inc. ("Hanyon") and certain assets and liabilities of Domain
Manufacturing Corporation ("Domain"), respectively. On September 30, 1999, the
Company acquired certain assets of the Infab Division ("Infab") of Jenoptik AG
(see note 3). These transactions were accounted for using the purchase method of
accounting. Accordingly, the Company's Consolidated Statements of Operations and
of Cash Flows include the results of these companies for the periods subsequent
to their respective dates of acquisition.
On August 31, 1999, the Company acquired Smart Machines Inc. ("Smart
Machines") in a transaction accounted for as a pooling of interests (see note
3). Accordingly, the accompanying consolidated financial statements and notes
thereto have been restated to include the financial position and results of
operations of Smart Machines for all periods prior to the acquisition.
Certain amounts in previously issued financial statements have been
reclassified to conform to current presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Although the Company regularly assesses these estimates, actual results
could differ from those estimates. Changes in estimates are recorded in the
period in which they become known.
REVENUE RECOGNITION
Revenue from product sales and software license sales is recorded upon
shipment to the customer provided that no significant obligations remain and
collection of the related receivable is probable. When insignificant obligations
remain after shipment of the product, the Company accrues the estimated costs of
such obligations upon shipment. A provision for product warranty costs is
recorded to estimate costs associated with such warranty
39
<PAGE> 41
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
liabilities. In the event significant post-shipment obligations or uncertainties
remain, revenue is deferred and recognized when such obligations are fulfilled
by the Company or the uncertainties are resolved.
Revenue from services is recognized as the services are rendered. Revenue
from fixed fee application consulting contracts is recognized using the
percentage-of-completion method of contract accounting based on the ratio that
costs incurred to date bear to estimated total costs at completion. Revisions in
revenue and cost estimates are recorded in the periods in which the facts that
require such revisions become known. Losses, if any, are provided for in the
period in which such losses are first identified by management. For maintenance
contracts, service revenue is recognized ratably over the term of the
maintenance contract.
CASH AND CASH EQUIVALENTS
The Company invests its excess cash in repurchase agreements with major
banks, U.S. government and corporate securities, and mutual funds that invest in
U.S. government securities, which are subject to minimal credit and market risk.
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. At September 30, 1999,
all cash and cash equivalents were classified as available-for-sale and as items
for which cost approximates fair value. At September 30, 1998, cash and cash
equivalents include $45.6 million and $23.9 million of securities which are
classified as available-for-sale and held to maturity, respectively, and for
which cost approximates fair value.
INVENTORIES
Inventories are stated at the lower of cost or market, cost being
determined using the first-in, first-out method. The Company provides inventory
reserves for excess, obsolete or damaged inventory based on changes in customer
demand, technology and other economic factors. While the Company often uses sole
source suppliers for certain key components and common assemblies to achieve
quality control and the benefits of economies of scale, the Company believes
that these parts and materials are readily available from several supply
sources.
FIXED ASSETS
Fixed assets are recorded at cost and depreciated over their estimated
useful lives, which range from 3 to 5 years for computer equipment and software,
5 to 7 years for machinery and equipment, and 3 to 10 years for furniture and
fixtures using the straight-line method. Equipment held under capital leases is
recorded at the lower of the fair market value of the equipment or the present
value of the minimum lease payments at the inception of the leases. Leasehold
improvements and equipment held under capital leases are amortized over the
shorter of their estimated useful lives or the term of the respective leases.
Repair and maintenance costs are expensed as incurred. Upon retirement or sale,
the cost of the assets disposed and the related accumulated depreciation are
removed from the accounts and any resulting gain or loss is credited or charged
to operations.
PATENTS
Patents includes capitalized direct costs associated with obtaining patents
as well as assets that were acquired as a part of purchase business
combinations. Capitalized patent costs are amortized using the straight-line
method over the shorter of seven years or the estimated economic life of the
patents. Acquired patent costs are amortized over three years using the
straight-line method. As of September 30, 1999 and 1998, the net book value of
the Company's capitalized costs, included in Intangible assets included in the
accompanying consolidated balance sheets, were $6.1 million and $0.9 million,
respectively. Amortization expense associated with recorded patents
40
<PAGE> 42
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
was $0.3 million and $0.2 million in the years ended September 30, 1999 and
1998, respectively. Accumulated amortization was $1.0 million and $0.7 million
at September 30, 1999 and 1998, respectively.
GOODWILL
The Company's net book value of excess of purchase cost over the fair value
of net assets of businesses acquired (goodwill) was $7.6 million at September
30, 1999. The Company had no goodwill recorded at September 30, 1998. Goodwill
is being amortized over the periods estimated to be benefitted, from three to
five years. Amortization expense was $0.3 million for the year ended September
30, 1999. The Company will periodically evaluate goodwill to determine if
impairment exists based upon estimated undiscounted future cash flows, net of
taxes, over the remaining useful life of the assets. The impairment, if any,
will be measured by the difference between carrying value and estimated
discounted future cash flows, net of taxes, and will be charged to expense in
the period identified.
RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Costs incurred in the research and development of the Company's products
are expensed as incurred, except for certain software development costs.
Software development costs are expensed prior to establishing technological
feasibility and capitalized thereafter until the related product is available
for general release to customers. Capitalized software development costs are
amortized to cost of sales on a product-by-product basis over the estimated
lives of the related products. Such costs have not been significant to date.
STOCK-BASED COMPENSATION
The Company's stock compensation plans are accounted for in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Under this method, compensation expense on stock option grants to
employees for a fixed number of shares is recognized only to the extent that the
exercise price on the date of grant is less than the current fair market value
of the Company's common stock. The Company has adopted the disclosure provisions
of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," ("FAS 123") for fixed stock-based awards to
employees. All non-employee stock-based awards are accounted for in accordance
with FAS 123.
INCOME TAXES
Deferred income tax assets and liabilities are recognized for the expected
future tax consequences, utilizing current tax rates, of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.
Deferred tax assets are recognized, net of any valuation allowance for the
estimated future tax effects of deductible temporary differences and tax
operating loss and credit carryforwards. Deferred income tax expense or benefit
represents the change in the net deferred tax asset and liability balances.
FOREIGN CURRENCY
The functional currency of the Company's international subsidiaries is the
local currency. Accordingly, foreign currency financial statements of the
Company's international subsidiaries are translated into U.S. dollars using
exchange rates in effect at period-end for assets and liabilities and at average
rates during the period for results of operations. The resulting foreign
currency translation adjustments are reflected as accumulated other
41
<PAGE> 43
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
comprehensive income (loss). Foreign currency translation adjustments are the
only component added to the Company's net loss in the calculation of
comprehensive net loss.
LOSS PER SHARE
Basic earnings per share is calculated based on the weighted average number
of common shares outstanding during the period. Diluted earnings per share is
calculated based on the weighted average number of common shares and dilutive
common equivalent shares assumed outstanding during the period. Shares used to
compute diluted earnings per share in loss years exclude common share
equivalents, as their inclusion would have an anti-dilutive effect. The
Company's net loss, for purposes of calculating basic and diluted loss per
share, has been adjusted by accretion and dividends related to the Company's
preferred stock.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-9, "Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions", which addresses
software revenue recognition as it applies to certain multiple-element
arrangements. SOP 98-9 also amends SOP 98-4, "Deferral of the Effective Date of
a Provision of SOP 97-2", to extend the deferral of application of certain
passages of SOP 97-2 through fiscal years beginning on or before March 15, 1999.
All other provisions of SOP 98-9 are effective for transactions entered into in
fiscal years beginning after March 15, 1999. The Company will comply with the
requirements of this SOP as they become effective and does not expect that its
revenues or earnings will be materially affected.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"). This statement was amended by the issuance of SFAS 137,
"Deferral of the Effective Date of FASB Statement No. 133", which changed the
effective date of SFAS 133 to all fiscal years beginning after June 15, 2000
(fiscal 2001 for the Company) and requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. Management of the
Company anticipates that the adoption of FAS 133 will not have a significant
effect on the Company's results of operations or financial position.
3. ACQUISITIONS
INFAB
On September 30, 1999, the Company acquired certain assets of Infab in
exchange for 914,286 shares of the Company's common stock. Infab is a worldwide
supplier of advanced factory automation systems headquartered in Germany. The
assets purchased principally included fixed assets, inventory, receivables,
patents and intellectual property.
42
<PAGE> 44
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the acquisition follows (in thousands):
<TABLE>
<S> <C>
Common stock $22,473
Transaction costs 1,476
-------
Total consideration 23,949
Estimated fair value of net tangible assets acquired 16,451
Estimated fair value of identifiable intangibles 5,154
-------
Excess of purchase price over fair value of net tangible
assets acquired $ 2,344
=======
</TABLE>
The excess of the purchase price over the fair value of the net tangible
and identifiable intangible assets acquired includes an accrual of $2.7 million,
consisting of $0.5 million of costs to exit certain duplicate facilities and
$2.2 million for severance costs to former Infab employees. The Company will
amortize both the identifiable intangibles and goodwill over three years using
the straight-line method. The excess of the purchase price over the fair value
of the net tangible and identifiable intangibles assets acquired has been
recorded based on a preliminary price allocation. Finalization of the allocation
of the purchase price to assets acquired will be made after analyses of their
fair values.
DOMAIN
On June 30, 1999, the Company acquired certain assets and certain
liabilities of Domain for $3.8 million in cash. Domain is a leading developer of
process development, data analysis and advanced process control solutions. The
excess of purchase price (including transaction costs of $0.3 million and $0.2
million of severance-related liabilities), over net assets acquired was $3.6
million, and was recorded as goodwill. The Company will amortize this goodwill
over five years using the straight-line method.
HANYON
On April 21, 1999, the Company purchased 90.5% of the issued and
outstanding capital stock of Hanyon for $6.6 million in cash. Hanyon, based in
Korea, provides MES and automation software and systems integration services to
the semiconductor and flat panel industries in Korea and Taiwan.
A summary of the acquisition follows (in thousands):
<TABLE>
<S> <C>
Cash $6,647
Transaction costs 715
------
Total consideration 7,362
Estimated fair value of assets acquired 5,353
------
Excess of purchase price over fair value of net assets
acquired $2,009
======
</TABLE>
The Company will amortize this goodwill over five years using the straight-line
method.
The acquisitions were accounted for using the purchase method of accounting
in accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations" ("APB 16"). Under APB 16, purchase price allocations are made to
the assets acquired and the liabilities assumed based on their respective fair
values.
The following pro forma results of operations have been prepared as though
the acquisitions had occurred as of the beginning of the fiscal year prior to
the acquisitions. This pro forma financial information does not purport to be
indicative of the results of operations that would have been attained had the
acquisitions been
43
<PAGE> 45
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
made as of those dates or of results of operations that may occur in the future
(in thousands except per share data):
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED SEPTEMBER 30,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues $129,611 $155,301
Loss from continuing operations $(15,144) $(49,717)
Loss attributable to common stockholders $(15,801) $(51,137)
Net loss per share applicable to common stockholders $ (1.31) $ (4.39)
</TABLE>
SMART MACHINES
On August 31, 1999, the Company acquired Smart Machines Inc. ("Smart
Machines") and issued 496,742 shares of common stock in exchange for all of the
outstanding common and preferred shares of Smart Machines. The transaction was
accounted for as a pooling of interests. Smart Machines is located in San Jose,
California, and manufactures direct drive Selectively Compliant Assembly Robot
Arm ("SCARA"), atmospheric and vacuum robots. In connection with this
acquisition, the Company incurred $1.2 million of costs, consisting primarily of
transaction costs to effect the acquisition.
The accompanying consolidated financial statements and notes thereto have
been restated to include the financial position and results of operations for
Smart Machines for all periods prior to the acquisition. As a result of
conforming dissimilar year ends, Smart Machines' results of operations for the
three months ended December 31, 1998 are included in both of the Company's
fiscal years 1999 and 1998. Accordingly, an amount equal to Smart Machines' net
loss applicable to common stockholders for the three months ended December 31,
1998, was eliminated from consolidated retained earnings for the year ended
September 30, 1999. Revenues, net loss and net loss applicable to common
stockholders for that quarter were $243,000, $1,374,000 and $1,599,000,
respectively.
Revenues and net loss for the previously separate companies are as follows
(in thousands):
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
JUNE 30, ------------------------
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Revenues
Brooks Automation, Inc. $69,449 $ 99,862 $108,741
Smart Machines Inc. 537 390 686
------- -------- --------
$69,986 $100,252 $109,427
======= ======== ========
Net loss
Brooks Automation, Inc. $ (185) $(18,361) $ (1,601)
Smart Machines Inc. (2,437) (4,202) (2,568)
------- -------- --------
$(2,622) $(22,563) $ (4,169)
======= ======== ========
</TABLE>
44
<PAGE> 46
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FASTech
On September 30, 1998, the Company acquired FASTech and issued 852,428
shares of common stock in exchange for all of the outstanding common and
preferred shares of FASTech. In connection with this acquisition, the Company
incurred $2.4 million of costs, consisting primarily of transaction costs to
effect the acquisition and costs to exit duplicate facilities. As a result of
conforming dissimilar year-ends, FASTech's results of operations for the three
months ended December 31, 1997 (including revenues, operating loss and net loss
of $5.0 million, $1.0 million and $2.8 million, respectively), are included in
both of the Company's fiscal years 1998 and 1997. Accordingly, an amount equal
to FASTech's net loss for the three months ended December 31, 1997, was
eliminated from consolidated retained earnings for the year ended September 30,
1998.
4. JOINT VENTURE
In June 1999 the Company formed a joint venture in Korea with Samsung
Electronics ("Samsung"). The Company's initial cash investment in this joint
venture was $3.5 million. This joint venture is 70% owned by the Company and 30%
owned by Samsung, and has been organized to design, develop and manufacture
atmospheric flat panel display loaders along with other products. The Company
consolidates fully the financial position and results of operations of the joint
venture and accounts for the minority interest in the financial statements.
5. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1999 1998
------- -------
<S> <C> <C>
Accounts receivable $34,591 $22,754
Less allowances 1,687 1,898
------- -------
$32,904 $20,856
======= =======
</TABLE>
6. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1999 1998
------- -------
<S> <C> <C>
Raw materials and purchased parts $14,655 $ 9,316
Work-in-process 10,154 7,958
Finished goods 4,108 2,896
------- -------
$28,917 $20,170
======= =======
</TABLE>
45
<PAGE> 47
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FIXED ASSETS
Fixed assets consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1999 1998
------- -------
<S> <C> <C>
Computer equipment and software $18,144 $17,302
Machinery and equipment 10,914 12,842
Furniture and fixtures 5,982 5,315
Leasehold improvements 6,513 5,526
------- -------
41,553 40,985
Less accumulated depreciation and amortization 24,119 22,036
------- -------
$17,434 $18,949
======= =======
</TABLE>
Included in the above amounts is computer equipment and software and
machinery and equipment acquired under capital leases of $2.7 million as of both
September 30, 1999 and 1998. Accumulated amortization on fixed assets under
capital lease was $2.6 million and $2.4 million at September 30, 1999 and 1998,
respectively. Amortization expense for fixed assets under capital leases was
$0.2 million, $0.6 million, and $0.7 million for the years ended September 30,
1999, 1998, and 1997, respectively. Depreciation expense was $7.0 million, $7.9
million and $6.0 million for the years ended September 30, 1999, 1998 and 1997,
respectively.
8. DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1999 1998
------ ------
<S> <C> <C>
Convertible notes $ -- $2,500
Credit facility for working capital borrowings at 8.92% per
annum, secured by assets, expiring December 31, 1999 1,209 980
Capital lease obligations at rates of 5% to 21% per annum,
secured by certain fixed assets, expiring at various dates
through November 2000 129 369
------ ------
1,338 3,849
Less current portion 537 505
------ ------
Long-term debt $ 801 $3,344
====== ======
</TABLE>
On June 15, 1998, Smart Machines issued convertible promissory notes in the
amount of $2.5 million. The notes were convertible into Smart Machines Series D
preferred stock and Smart Machines common stock. Interest at the rate of 7.00%
per year was payable in cash upon conversion of the notes. The outstanding
balance of the convertible promissory notes and related interest was converted
into the Company's common stock on August 31, 1999, in conjunction with the
acquisition of Smart Machines.
In November 1998, Smart Machines entered into a loan and security agreement
with a leasing company. The agreement, which expires December 31, 1999, allowed
for working capital borrowings of up to $2.0 million and equipment loans of up
to $0.5 million. All borrowings are collateralized by Smart Machines' assets,
have a stated interest rate of 8.92% per year for working capital borrowings,
and 8.63% per year for equipment loans. At September 30, 1999, the Company had
working capital loans outstanding, for $1,209,000 maturing through
46
<PAGE> 48
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
April 2002, respectively. The loans are payable in monthly installments of
principal and interest, with 10.0% principal payback due at the time of the
final payment. Annual principal payments due under these notes are $433,000,
$494,000 and $282,000 in the years ended September 30, 2000, 2001, and 2002,
respectively.
9. INCOME TAXES
The components of the income tax provision (benefit) are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------
1999 1998 1997
------- ------- ------
<S> <C> <C> <C>
Current:
Federal $ 272 $ (887) $ (987)
State 66 5 12
Foreign 1,664 (212) 1,157
------- ------- ------
2,002 (1,094) 182
------- ------- ------
Deferred:
Federal (2,403) (3,031) (41)
State (429) (554) 265
Foreign (185) (2) 61
------- ------- ------
(3,017) (3,587) 285
------- ------- ------
$(1,015) $(4,681) $ 467
======= ======= ======
</TABLE>
The components of income (loss) before income taxes, including minority
interests, are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Domestic $(11,052) $(26,880) $(5,293)
Foreign 2,153 (364) 1,591
-------- -------- -------
$ (8,899) $(27,244) $(3,702)
======== ======== =======
</TABLE>
47
<PAGE> 49
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of the net deferred tax asset are as follows (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1999 1998
------- -------
<S> <C> <C>
Reserves not currently deductible $ 7,227 $ 4,818
Federal and state tax credits 5,081 4,397
Capitalized research and development 2,894 1,953
Net operating loss carryforwards 6,525 6,255
Other -- 444
------- -------
Gross deferred tax assets 21,727 17,867
------- -------
Depreciation and amortization 174 881
Other -- 34
------- -------
Gross deferred tax liabilities 174 915
------- -------
Deferred tax asset valuation allowance 10,993 9,405
------- -------
Net deferred tax asset $10,560 $ 7,547
======= =======
</TABLE>
The differences between the income tax provision (benefit) and income taxes
computed using the applicable U.S. statutory federal tax rate are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Taxes computed at federal statutory rate $(3,115) $(9,536) $(1,296)
State income taxes, net of federal tax benefit (235) (494) (277)
Research and development tax credits (544) (840) (870)
Foreign sales corporation tax benefit -- -- (381)
Foreign income taxed at different rates 726 266 407
Nondeductible transaction expenses 371 195 --
Change in deferred tax asset valuation allowance 1,588 3,795 3,020
Permanent differences 309 90 50
Elimination of FASTech provision for the three months
ended December 31, 1997 -- 1,334 --
Other (115) 509 (186)
------- ------- -------
$(1,015) $(4,681) $ 467
======= ======= =======
</TABLE>
The Company does not provide for U.S. income taxes applicable to
undistributed earnings of its foreign subsidiaries since these earnings are
indefinitely reinvested. A valuation allowance has been established for certain
of the future domestic income tax benefits primarily related to income tax loss
carryforwards and temporary differences based on management's assessment that it
is more likely than not that such benefits will not be realized. The Company's
valuation allowance increased to $11.0 million at September 30, 1999.
As of September 30, 1999, the Company had federal and state net operating
losses of approximately $27.3 million and federal and state research and
development tax credit carryforwards of approximately $5.0 million
48
<PAGE> 50
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
available to reduce future tax liabilities, which expire at various dates
through 2019. The ultimate realization of the remaining loss carryforwards is
dependent upon the generation of sufficient taxable income in respective
jurisdictions.
10. REDEEMABLE CONVERTIBLE PREFERRED STOCK
The redeemable convertible preferred stock issued by Smart Machines was
converted into the Company's common stock on August 31, 1999, in conjunction
with the acquisition of Smart Machines by the Company. As of September 30, 1998,
Smart Machines redeemable convertible preferrred stock, no par value, recorded
at issuance price plus accumulated accretion and net of issuance costs,
consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------
<S> <C>
Series D, 2,287,250 shares authorized and issued, 1,166,581
shares outstanding $3,562
Series E, 962,261 shares authorized and issued, none
outstanding --
------
$3,562
======
</TABLE>
Each share of preferred stock was entitled to vote on an "as converted"
basis along with common shareholders. At any time after May 2, 2003, upon
written request from the holders of at least 66 2/3% of the Series D and Series
E preferred stock, Smart Machines would have been required to redeem the shares
specified in the request at a price of $3.50 and $4.25 per share, respectively,
plus $0.175 and $0.225 per share, compounded annually, per share of Series D and
Series E preferred stock, respectively. At September 30, 1998, the redemption
value of the outstanding redeemable convertible preferred stock was $4.1
million.
11. STOCKHOLDERS EQUITY
PREFERRED STOCK
As of September 30, 1999 and 1998, there were 1 million shares of preferred
stock, $0.01 par value per share authorized; but none were issued or
outstanding. Preferred stock may be issued at the discretion of the Board of
Directors without stockholder approval with such designations, rights, and
preferences as the Board of Directors may determine.
NONREDEEMABLE CONVERTIBLE PREFERRED STOCK
The Smart Machines Series A, Series B and Series C nonredeemable
convertible preferred stock was converted into the Company's common stock on
August 31, 1999, in conjunction with the acquisition of Smart Machines. As of
September 30, 1998, Smart Machines' nonredeemable convertible preferrred stock,
no par value, recorded at issuance price, net of issuance costs, consisted of
the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------
<S> <C>
Series A, 1,965,000 shares authorized, issued and
outstanding $1,965
Series B, 532,382 shares authorized, issued and outstanding 1,597
Series C, 879,096 shares authorized and issued, 834,096
shares outstanding 2,905
------
$6,467
======
</TABLE>
Each share of nonredeemable, convertible preferred stock was entitled to
vote on an "as converted" basis along with common shareholders. The preferred
stock was convertible, at the option of the holders, at any time, into common
stock on a one-to-one basis subject to certain adjustments. Conversion was
automatic upon the
49
<PAGE> 51
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
closing of a public offering of common shares for aggregate proceeds of not less
than $10.0 million, with an offering price of not less than $10.00 per share, or
the vote of a majority of the holders of the outstanding shares of Series A,
Series B and Series C preferred stock, voting together as a single class and the
vote of 75% of the holders of Series D and Series E preferred stock, voting
together as a single class.
12. LOSS PER SHARE
The following table is a summary of net loss attributable to common
stockholders used in the calculation of basic and diluted loss per share (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1999 1998 1997
------- -------- -------
<S> <C> <C> <C>
Net loss $(7,884) $(22,563) $(4,169)
Accretion and dividends on preferred stock (654) (1,420) (1,005)
------- -------- -------
Net loss attributable to common stockholders for basic
and diluted loss per share $(8,538) $(23,983) $(5,174)
======= ======== =======
</TABLE>
The following table is a summary of shares used in calculating basic and
diluted loss per share (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
1999 1998 1997
------ ------ -----
<S> <C> <C> <C>
Weighted average number of shares and share equivalents
used in computing basic loss per share 11,192 10,337 7,880
Dilutive securities:
Common stock options and warrants -- -- --
------ ------ -----
Shares used in computing diluted loss per share 11,192 10,337 7,880
====== ====== =====
</TABLE>
Options and warrants to purchase approximately 774,000, 635,000 and 965,000
shares of common stock were excluded from the computation of diluted loss per
share for the years ended September 30, 1999, 1998 and 1997, respectively, as
their effect would be antidilutive.
13. STOCK PLANS
1995 EMPLOYEE STOCK PURCHASE PLAN
On February 22, 1996, the stockholders approved the 1995 Employee Stock
Purchase Plan (the "1995 Plan") which enables eligible employees to purchase
shares of the Company's common stock. Under the 1995 Plan, eligible employees
may purchase up to an aggregate of 250,000 shares during six-month offering
periods commencing on January 1 and July 1 of each year at a price per share of
85% of the lower of the market price per share on the first or last day of each
six-month offering period. Participating employees may elect to have up to 10%
of base pay withheld and applied toward the purchase of such shares. The rights
of participating employees under the 1995 Plan terminate upon voluntary
withdrawal from the plan at any time or upon termination of employment. As of
September 30, 1999, 154,486 shares of common stock have been purchased under the
plan and 95,514 remain available for purchase under the plan.
50
<PAGE> 52
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1992 COMBINATION STOCK OPTION PLAN
Under the Company's 1992 Stock Option Plan (the "1992 Plan"), the Company
may grant both incentive stock options intended to qualify under Section 422 of
the Internal Revenue Code of 1986, as amended ("incentive stock options"), and
other options which are not qualified as incentive stock options ("nonqualified
stock options"). Incentive stock options may only be granted to persons who are
employees of the Company at the time of grant, which may include officers and
directors who are also employees. Nonqualified stock options may be granted to
persons who are officers, directors or employees of or consultants or advisors
to the Company or persons who are in a position to contribute to the long-term
success and growth of the Company at the time of grant. Options granted under
the 1992 Plan generally vest over a period of four years and generally expire
ten years from the date of grant. A total of 1,950,000 shares of Common Stock
has been reserved for issuance under the 1992 Plan. Of these shares, options on
1,062,043 have been granted and are outstanding and 262,925 shares remain
available for grant as of September 30, 1999.
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The purpose of the 1993 Nonemployee Director Stock Option Plan (the
"Directors Plan") is to attract and retain the services of experienced and
knowledgeable independent directors of the Company for the benefit of the
Company and its stockholders and to provide additional incentives for such
independent directors to continue to work for the best interests of the Company
and its stockholders through continuing ownership of its Common Stock. Each
director who is not an employee of the Company or any of its subsidiaries is
eligible to receive options under the Directors Plan. Under the Directors Plan,
each eligible director receives an automatic grant of an option to purchase
10,000 shares of Common Stock upon becoming a director of the Company and an
option to purchase 5,000 shares on July 1 each year thereafter. Options granted
under the Directors Plan generally vest over a period of four years and
generally expire ten years from the date of grant. A total of 190,000 shares of
Common Stock has been reserved for issuance under the Directors Plan. Of these
shares, options on 56,000 have been granted and are outstanding and 96,000
shares remain available for grant as of September 30, 1999.
1998 EMPLOYEE EQUITY INCENTIVE PLAN
The purpose of the 1998 Employee Equity Incentive Plan (the "1998 Plan"),
adopted by the Board of Directors of the Company in April 1998, is to attract
and retain employees and provide an incentive for them to assist the Company to
achieve long-range performance goals, and to enable them to participate in the
long-term growth of the Company. All employees of the Company, other than its
officers and directors, are eligible to participate in the 1998 Plan. Under the
1998 Plan, the Compensation Committee may award only nonqualified stock options.
Options granted under the 1998 Plan generally vest over a period of four years
and generally expire ten years from the date of grant. A total of 850,000 shares
of Common Stock have been reserved for issuance under the 1998 Plan. Of these
shares, options on 794,375 have been granted and are outstanding and 55,725
shares remain available for grant as of September 30, 1999.
STOCK OPTIONS OF ACQUIRED COMPANIES
In connection with the acquisition of Smart Machines, the Company assumed
8,889 options in August 1999. These assumed options were granted at prices equal
to the fair value at the date of grant, become exercisable in installments
(generally ratably over four years), and expire ten years from the date of
grant. The Company does not intend to issue any additional options under the
Smart Machines stock option plans.
51
<PAGE> 53
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the acquisition of FASTech, the Company assumed 80,351
options in September 1998. These assumed options were granted at prices equal to
the fair value at the date of grant, become exercisable in installments
(generally ratably over five years), and expire ten years from the date of
grant. The Company does not intend to issue any additional options under the
FASTech stock option plans.
Aggregate stock option activity for all plans for the years ended September
30, 1999, 1998 and 1997, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------
1999 1998 1997
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 1,059,155 $ 8.47 1,274,245 $ 8.20 1,347,378 $ 6.26
Granted 1,331,746 $18.31 172,710 $17.75 158,604 $19.97
Exercised (298,948) $ 3.77 (70,229) $ 3.01 (155,302) $ 2.00
Canceled (116,471) $16.75 (317,571) $13.64 (76,435) $10.93
--------- --------- ---------
Options outstanding at end
of year 1,975,482 $15.33 1,059,155 $ 8.47 1,274,245 $ 8.20
========= ========= =========
Options exercisable at end
of year 465,152 $ 7.32 553,063 $ 4.71 378,635 $ 3.18
========= ========= =========
Weighted average fair value
of options granted during
the period $13.07 $ 9.72 $15.78
Options available for
future grant 414,650
=========
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions for
grants made during fiscal 1999, fiscal 1998, and fiscal 1997: no dividend yield,
risk free interest rates of 5.5% to 6.3%, expected option term of four years,
expected forfeiture rate of 2.5%, and a volatility factor of 100%. The following
table summarizes information about stock options outstanding at September 30,
1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ------------------------
WEIGHTED-
AVERAGE
REMAINING WEIGHTED- WEIGHTED-
RANGE OF CONTRACTUAL LIFE AVERAGE EXERCISE AVERAGE
EXERCISE PRICES SHARES (YEARS) PRICE SHARES EXERCISE PRICE
--------------- --------- ---------------- ---------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.8330 - $ 1.6700 31,768 3.2 $ 0.9777 31,768 $ 0.9777
$ 2.2100 - $ 2.2130 233,750 4.9 $ 2.2110 230,150 $ 2.2110
$ 4.7070 - $10.5000 284,896 8.3 $ 9.3532 17,457 $ 5.0683
$11.0000 - $13.3750 372,525 7.1 $11.8061 151,125 $11.4298
$14.1200 - $20.0000 437,304 8.7 $15.1062 14,321 $17.9905
$20.2500 - $27.8750 582,323 8.9 $24.9831 5,839 $22.0725
$42.6700 - $47.0704 32,916 5.3 $46.1145 14,492 $45.8647
- ------------------------ --------- ---------------- ---------------- ------- --------------
$ 0.8330 - $47.0704 1,975,482 7.8 $15.3293 465,152 $ 7.3243
========= =======
</TABLE>
52
<PAGE> 54
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Had compensation expense for the Company's option grants to employees been
determined based on the fair value at the date of grant and for shares of common
stock purchased pursuant to the Employee Stock Purchase Plan, consistent with
the methods prescribed by FAS 123, the pro forma effect on the Company's net
income would have been as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR SEPTEMBER 30,
-------------------------------
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Pro forma net loss $(10,939) $(25,079) $(5,801)
Pro forma loss per share
Basic $ (0.98) $ (2.43) $ (0.74)
Diluted $ (0.98) $ (2.43) $ (0.74)
</TABLE>
Because most options vest over several years and additional option grants
are expected to be made subsequent to September 30, 1999, the results of
applying the fair value method may have a materially different effect on pro
forma net income in future years.
RIGHTS DISTRIBUTION
In July 1997, the Board of Directors declared a dividend of one preferred
share purchase right (a "right") for each share of common stock outstanding on
August 12, 1997. Each right entitles the registered holder to purchase from the
Company, upon certain triggering events, one one-thousandth of a share of Series
A Junior Participating Preferred Stock, par value $0.01 per share (the "Series A
Preferred Shares"), of the Company, at a purchase price of $135 per one
one-thousandth of a Series A Preferred Share, subject to adjustment. Redemption
of the rights could generally discourage a merger or tender offer involving the
securities of the Company that is not approved by the Company's Board of
Directors by increasing the cost of effecting any such transaction and,
accordingly, could have an adverse impact on stockholders who might want to vote
in favor of such merger or participate in such tender offer. The rights will
expire on the earlier of (i) July 31, 2007, or (ii) the date on which the rights
are redeemed. The terms of the rights may generally be amended by the Board of
Directors without the consent of the holders of the rights.
14. BENEFIT PLAN
The Company sponsors defined contribution plans that meet the requirements
of Section 401(k) of the Internal Revenue Code. All domestic employees of the
Company who meet minimum age and service requirements are eligible to
participate in the plan. The plan allows employees to invest on a pre-tax basis
a percentage of their annual salary subject to statutory limitations. The
Company's contribution expense was $0.2 million in each of the years ended
September 30, 1999, 1998 and 1997.
15. SEGMENT, GEOGRAPHIC, SIGNIFICANT CUSTOMERS AND RELATED PARTY INFORMATION
The Company has two reportable segments: tool automation and factory
automation. The tool automation segment provides a full complement of
semiconductor wafer and flat panel display substrate handling systems. Tool
automation product revenue is comprised of factory hardware and tool control
software products. Tool automation services revenue is comprised of spare parts
sales and tool control application consulting services. The factory automation
segment provides software products for the semiconductor manufacturing execution
system ("MES") market. Factory automation product revenues include factory
software and factory interface hardware product. Factory automation services
revenue primarily consists of revenues related to consulting and software
customization.
53
<PAGE> 55
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company evaluates performance and allocates resources based on revenues
and operating income. Operating income for each segment includes selling,
general and administrative expenses directly attributable to the segment and
excludes certain expenses which are managed outside of the reportable segments.
The tool automation segment includes the results of Smart Machines for all
periods presented and all of the Company's corporate general and administrative
expenses. Costs excluded from segments' operating income primarily consist of
amortization of acquired intangible assets, interest and income taxes, and
acquisition-related and restructuring costs. Segment assets exclude deferred
taxes, acquired intangible assets and investments in subsidiaries.
Financial information for the Company's business segments is as follows (in
millions):
<TABLE>
<CAPTION>
TOOL FACTORY
AUTOMATION AUTOMATION TOTAL
---------- ---------- --------
<S> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1999
Revenue:
Product $ 70,475 $11,962 $ 82,437
Services 9,246 12,223 21,469
-------- ------- --------
Total $ 79,721 $24,185 $103,906
======== ======= ========
Gross margin $ 27,694 $18,335 $ 46,029
Operating income (loss) $ (8,516) $ 489 $ (8,027)
Depreciation $ 5,628 $ 1,327 $ 6,955
Assets $134,116 $18,930 $153,046
YEAR ENDED SEPTEMBER 30, 1998
Revenue:
Product $ 70,806 $10,050 $ 80,856
Services 12,824 6,572 19,396
-------- ------- --------
Total $ 83,630 $16,622 $100,252
======== ======= ========
Gross margin $ 15,625 $11,099 $ 26,724
Operating loss $(20,396) $(5,756) $(26,152)
Depreciation $ 6,108 $ 1,812 $ 7,920
Assets $129,859 $ 7,000 $136,859
YEAR ENDED SEPTEMBER 30, 1997
Revenue:
Product $ 73,707 $15,356 $ 89,063
Services 13,388 6,976 20,364
-------- ------- --------
Total $ 87,095 $22,332 $109,427
======== ======= ========
Gross margin $ 27,151 $16,966 $ 44,117
Operating loss $ (2,486) $ (510) $ (2,996)
Depreciation $ 4,656 $ 1,329 $ 5,958
Assets $151,507 $11,259 $162,766
</TABLE>
54
<PAGE> 56
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the Company's reportable segment operating income and
segment assets to the corresponding consolidated amounts as of and for the years
ended September 30, 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Segment operating loss $ (8,027) $(26,152) $ (2,996)
Amortization of acquired intangibles 349 -- --
Acquisition-related and restructuring costs 3,120 3,722 --
-------- -------- --------
Total operating loss $(11,496) $(29,874) $ (2,996)
======== ======== ========
Segment assets $153,592 $136,859 $162,766
Deferred tax asset 10,734 8,462 3,526
Acquired intangible assets 12,819 -- --
-------- -------- --------
Total assets $177,145 $145,321 $166,292
======== ======== ========
</TABLE>
Net revenues by geographic area are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
North America $ 61,346 $ 59,003 $ 68,170
Asia 31,386 31,679 33,304
Europe 11,174 9,570 7,953
-------- -------- --------
$103,906 $100,252 $109,427
======== ======== ========
</TABLE>
Long-lived assets, including property, plant and equipment and intangible
assets are as follows (in thousands):
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
North America $19,095 $19,037 $21,204
Asia 2,965 772 604
Europe 9,093 14 16
------- ------- -------
$31,153 $19,823 $21,824
======= ======= =======
</TABLE>
One of the Company's directors is an executive with one of the Company's
customers. Net revenue recognized from this customer was $15.3 million, $15.9
million, and $18.2 million in fiscal 1999, 1998 and 1997, respectively. Amounts
due from this customer included in accounts receivable at September 30, 1999 and
1998, were $3.4 and $2.4 million, respectively. Related party amounts included
in accounts receivable are on standard terms and manner of settlement.
In fiscal 1999, two other customers each accounted for more than 10% of the
Company's revenues. The Company did not have any other single customer that
accounted for more than 10% of the Company's net revenues in fiscal 1998 or
fiscal 1997.
55
<PAGE> 57
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A financial instrument which potentially exposes the Company to
concentration of credit risk is accounts receivable, as the Company's customers
are concentrated in the semiconductor industry and relatively few customers
account for a significant portion of the Company's revenues. The Company
regularly monitors the creditworthiness of its customers and believes that it
has adequately provided for exposure to potential credit losses.
16. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases manufacturing and office facilities and certain
equipment under operating and capital leases that expire through 2005. Rent
expense under operating leases for fiscal 1999, fiscal 1998 and fiscal 1997 was
$4.1 million, $4.8 million and $3.3 million, respectively. Future minimum lease
payments under operating and capital leases with initial or remaining
noncancelable terms of one or more years are as follows as of September 30, 1999
(in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDED SEPTEMBER 30, LEASES LEASES
- ------------------------ ------- ---------
<S> <C> <C>
2000 $117 $ 4,274
2001 40 2,897
2002 -- 2,549
2003 -- 1,722
2004 -- 1,231
Thereafter -- 1,078
---- -------
Total minimum lease payments 157 $13,751
=======
Less amount representing interest 28
----
Net present value of minimum lease payments $129
====
</TABLE>
Total amounts to be received under subleases are $1.2 million in fiscal
2000.
CONTINGENCY
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor and related industries. The
Company has received notice from a third-party alleging infringements of such
party's patent rights by certain of the Company's products. The Company's patent
counsel is investigating the claim and the Company believes the patents claimed
may be invalid. In the event of litigation with respect to this claim, the
Company is prepared to vigorously defend its position. However, because patent
litigation can be extremely expensive and time consuming, the Company may seek
to obtain a license to one or more of the disputed patents. Based upon currently
available information, the Company would only do so if such license fees would
not be material to the Company's consolidated financial statements. Currently,
the Company does not believe that it is probable that future events related to
this threatened matter will have an adverse effect on the Company's business.
17. ACQUISITION-RELATED AND RESTRUCTURING COSTS
During fiscal 1999, the Company recorded acquisition-related and
restructuring costs of $3.1 million. These costs reflect $1.2 million of legal,
accounting and other costs associated with acquiring Smart Machines. In
56
<PAGE> 58
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
addition, the Company approved and implemented a restructuring program designed
to integrate its current year acquisitions. These actions involved 7 employees,
all of whom were terminated prior to September 30, 1999 and the write-off of
certain fixed assets prior to September 30, 1999. Accordingly, during fiscal
1999, the Company recorded a charge of $1.9 million related to the restructuring
program.
During fiscal year 1999, the Company recorded $2.9 million of costs in
purchase accounting transactions consisting of $2.4 million for severance costs
related to former employees and $0.5 million to exit certain duplicate
facilities.
During fiscal year 1998, the Company approved and implemented a
restructuring program designed to align the Company's cost structure with lower
revenue levels indicative of the recent decline in demand for semiconductor
equipment. These actions involved approximately 120 employees, all of whom were
terminated prior to September 30, 1998. Accordingly, during fiscal 1998, the
Company recorded a charge of $1.3 million related to the restructuring program,
primarily for employee severance costs.
In addition, during 1998, the Company recorded charges of $1.4 million in
connection with its acquisition of FASTech, reflecting estimated costs to exit
duplicate facilities. This amount is primarily comprised of estimated lease
costs on FASTech's former headquarters facility. The Company also recorded
charges of $1.0 million related to legal, accounting and other costs in
connection with the FASTech acquisition.
The activity related to the Company's acquisition-related and restructuring
liabilities is below (in thousands):
<TABLE>
<CAPTION>
FISCAL 1999 ACTIVITY
-----------------------------------------------------------------------
NEW INITIATIVES
BALANCE ---------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
1998 EXPENSE ACCOUNTING UTILIZATION 1999
------------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Facilities $1,294 $ -- $ 450 $ (599) $1,145
Depreciable assets -- 1,628 20 (1,648) --
Workforce-related 238 332 2,380 (238) 2,712
Other 722 1,160 -- (1,871) 11
------ ------ ------ ------- ------
$2,254 $3,120 $2,850 $(4,356) $3,868
====== ====== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1998 ACTIVITY
-----------------------------------------------------------------------
NEW INITIATIVES
BALANCE ---------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
1997 EXPENSE ACCOUNTING UTILIZATION 1998
------------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Facilities $-- $1,400 $-- $ (106) $1,294
Depreciable assets -- -- -- -- --
Workforce-related -- 1,300 -- (1,062) 238
Other -- 1,022 -- (300) 722
-- ------ -- ------- ------
$-- $3,722 $-- $(1,468) $2,254
== ====== == ======= ======
</TABLE>
18. SUBSEQUENT EVENTS (UNAUDITED)
In September 1999, the Company obtained a commitment letter for an
unsecured revolving credit facility for borrowings and letters of credit up to
$30.0 million. The credit facility will terminate at the end of two years.
57
<PAGE> 59
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The interest rates for borrowings are expressed in relation to LIBOR and a
margin of 1.75% to 2.25% or from 0.25% to 0.75% above a base rate. The letter of
credit margin rates are from 1.75% to 2.25%. The borrowings and letters of
credit are expected to be used for working capital and general corporate
purposes, including financing potential acquisitions.
On December 15, 1999, the Company entered into a definitive agreement to
acquire Auto-Soft Corporation and AutoSimulations, Inc. from their sole
stockholder, Daifuku America Corporation, subject to the satisfaction of
customary closing conditions. Upon completion of the transaction, the Company
will be required to pay $27.0 million in cash, issue shares of common stock with
an aggregate value of $16.0 million; such number of shares to be determined as
of the closing date in accordance with the agreement, and issue a note in the
amount of $16.0 million payable one year from the date of closing. The note will
be unsecured and bear interest at 4.0% per year. Auto-Soft Corporation develops
and markets custom designed software and standard software for automated
material handling applications. AutoSimulations, Inc. develops and markets
industrial simulation and semiconductor factory scheduling software. The
transaction is expected to be completed in January 2000 and will be accounted
for using the purchase method of accounting.
58
<PAGE> 60
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Stockholders and Board of Directors
of Brooks Automation, Inc.
Our audits of the consolidated financial statements referred to in our report
dated November 17, 1999 appearing in this Annual Report on Form 10-K also
included an audit of the Financial Statement Schedule listed in Item 14(a) of
this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 29, 1999
59
<PAGE> 61
BROOKS AUTOMATION, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND OTHER AND END
OF YEAR EXPENSES ACCOUNTS WRITE-OFFS OF YEAR
(IN THOUSANDS) ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended September 30,
1999 $1,898 $ 188 $(399) $ 1,687
1998 $ 776 $1,295 $(173) $ 1,898
1997 $ 840 $ 322 $(386) $ 776
Deferred tax asset valuation
allowance
Year ended September 30,
1999 $9,405 $1,588 $10,993
1998 $5,610 $3,795 $ 9,405
1997 $2,590 $3,020 $ 5,610
</TABLE>
60
<PAGE> 62
PART II (CONTINUED)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed by the Company
within 120 days after the close of its fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed by the Company
within 120 days after the close of its fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed by the Company
within 120 days after the close of its fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed by the Company
within 120 days after the close of its fiscal year.
PART IV
ITEM 14. EXHIBITS
(a) 1. and 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The consolidated financial statements of the Company and Schedule II
Valuation and Qualifying Accounts and Reserves of the Company are listed in the
index under Part II, Item 8, in this Form 10-K.
Other financial statement schedules are omitted because of the absence of
conditions under which they are required or because the required information is
given in the consolidated financial statements or notes thereto.
(a) 3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. REFERENCE
- ----------- ------------------------------------------------------------
<C> <S> <C>
2.01 Intentionally Omitted
2.02 Agreement and Plan of Merger relating to the combination of L**
FASTech Integration, Inc. with the Registrant
2.03 Stock for Cash Purchase Agreement Relating to the N**
Acquisition of Hanyon Tech. Co., Ltd. by the Registrant
2.04 Assets for Cash Purchase Agreement Relating to the O**
Acquisition of Substantially all of the Assets of Domain
Manufacturing Corporation and it's Subsidiary Domain
Manufacturing SARL by the Registrant
2.05 Agreement and Plan of Merger Relating to the Combination of P**
Smart Machines Inc. with the Registrant
</TABLE>
61
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT NO. REFERENCE
- ----------- ------------------------------------------------------------
<C> <S> <C>
2.06 Master Purchase Agreement Relating to the Acquisition of Q**
Substantially All of the Assets of the Infab Division of
Jenoptik AG by the Registrant
3.01 Certificate of Incorporation of the Registrant A**
3.02 Bylaws of the Registrant A**
3.03 Certificate of Designation of Series A Junior Participating H**
Preferred Stock
4.01 Specimen Certificate for shares of the Registrant's Common A**
Stock
4.02 Description of Capital Stock (contained in the Certificate A**
of Incorporation of the Registrant, filed as Exhibit 3.01)
4.03 Rights Agreement dated July 23, 1997 I**
10.01 Intentionally Omitted
10.02 Employment Agreement between the Registrant and Robert J. A**
Therrien dated as of October 1, 1994*
10.03 Intentionally Omitted
10.04 Intentionally Omitted
10.05 Intentionally Omitted
10.06 Form of Indemnification Agreement for directors and officers A**
of the Registrant
10.07 Intentionally Omitted
10.12 Intentionally Omitted
10.13 Intentionally Omitted
10.14 Intentionally Omitted
10.18 Lease Extension Agreement C**
10.19 Headquarters Lease B**
10.20 Intentionally Omitted
10.21 Intentionally Omitted
10.22 Intentionally Omitted
10.23 Intentionally Omitted
10.24 Intentionally Omitted
10.25 Intentionally Omitted
10.26 Intentionally Omitted
10.27 Intentionally Omitted
10.28 Employment Agreement between the Registrant and Ellen M**
Richstone*
10.29 Stockholder Agreement between Jenoptik AG, M+W Zander Q**
Holding GmbH, Robert Therrien and the Registrant
10.30 Form of Agreement between Executive Officers and Registrant Filed
Relating to Change of Control* herewith
10.31 Agreement between Ellen Richstone and Registrant Relating to Filed
Change of Control* herewith
10.32 Lease Agreement between the Registrant and Clearfield Filed
Investments, LLC for the Registrant's Colorado manufacturing herewith
facility
10.33 Transitional Services Agreement between the Registrant and Filed
Jenoptik AG relating to the Registrant's German herewith
manufacturing facility
10.34 Lease Agreement between a subsidiary of the Registrant and Filed
Montague Oaks Phase I & II for the Registrant's California herewith
manufacturing facility
</TABLE>
62
<PAGE> 64
<TABLE>
<CAPTION>
EXHIBIT NO. REFERENCE
- ----------- ------------------------------------------------------------
<C> <S> <C>
21.01 Subsidiaries of the Registrant Filed
herewith
23.01 Consent of PricewaterhouseCoopers LLP Filed
herewith
27.01 Financial Data Schedule as of and for the year ended Filed
September 30, 1999 herewith
27.02 Financial Data Schedule as of and for the year ended Filed
September 30, 1998 herewith
99.01 1993 Nonemployee Director Stock Option Plan J* **
99.02 1992 Combination Stock Option Plan K* **
99.03 1995 Employee Stock Purchase Plan E**
99.04 1998 Employee Equity Incentive Plan Filed
herewith
</TABLE>
- ---------------
A Incorporated by reference to the Company's registration statement on Form
S-1 (Registration No. 33-87296). The number set forth herein is the number
of the Exhibit in said registration statement.
B Incorporated by reference to the Company's registration statement on Form
S-1 (Registration No. 33-93102). The number assigned to each Exhibit above
is the same as the number assigned to the Exhibit in said registration
statement.
C Incorporated by reference to the Company's quarterly report on Form 10-Q
for the quarterly period ended March 31, 1995. The number assigned to the
Exhibit above is the same as the number assigned to the Exhibit in said
quarterly report.
E Incorporated by reference to the Company's registration statement on Form
S-8 (No. 333-07315). The number set forth herein is the number of the
Exhibit in said registration statement.
H Incorporated by reference to the Company's registration statement on Form
S-3 (No. 333-34487). The number assigned to each Exhibit above is the same
as the number assigned to the Exhibit in said registration statement.
I Incorporated by reference to the Company's current report on Form 8-K
filed on August 7, 1997.
J Incorporated by reference to the Company's registration statement on Form
S-8 (No. 333-22717). The number assigned to each Exhibit above is the same
as the number assigned to the Exhibit in said registration statement.
K Incorporated by reference to the Company's registration statement on Form
S-8 (No. 333-07313). The number assigned to each Exhibit above is the same
as the number assigned to the Exhibit in said registration statement.
L Incorporated by reference to the Company's current report on Form 8-K filed
on October 15, 1998.
M Incorporated by reference to the Company's annual report on Form 10-K for
the year ended September 30, 1998. The number assigned to the Exhibit is the
same as the number assigned to the Exhibit in said annual report.
N Incorporated by reference to the Company's current report on Form 8-K filed
on May 6, 1999.
O Incorporated by reference to the Company's current report on Form 8-K filed
on July 14, 1999.
P Incorporated by reference to the Company's current report on Form 8-K filed
on September 15, 1999.
63
<PAGE> 65
Q Incorporated by reference to the Company's current report on Form 8-K filed
on October 15, 1999.
* Management contract or compensatory plan or arrangement.
** In accordance with Rule 12b-32 under the Securities Exchange Act of 1934,
as amended, reference is made to the documents previously filed with the
Securities and Exchange Commission, which documents are hereby
incorporated by reference.
(b) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the last quarter of the
fiscal year ended September 30, 1999.
(1) Amended current report on Form 8-K/A filed on July 7, 1999 relating to
the acquisition of Hanyon Tech. Co., Ltd. by the Company.
- The following audited financial statements of Hanyon together with the
report thereon by Samil Accounting Corporation were filed with the
Form 8-K/A:
Balance Sheet as of December 31, 1998
Income Statement for the year ended December 31, 1998
Statement of Appropriation of Retained Earnings for the year ended
December 31, 1998
Statement of Cash Flows for the year ended December 31, 1998
Notes to the Financial Statements
- The following unaudited pro forma consolidated condensed financial
statements of the Company and Hanyon were filed with the Form 8-K/A:
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March
31, 1999
Unaudited Pro Forma Condensed Consolidated Income Statement for the
six months ended March 31, 1999
Unaudited Pro Forma Condensed Consolidated Income Statement for the
year ended September 30, 1998
Notes to the Unaudited Pro Forma Condensed Consolidated Financial
Statements
(2) Current report on Form 8-K filed on July 14, 1999 relating to the
acquisition of substantially all of the assets of Domain Manufacturing
Corporation and its subsidiary Domain Manufacturing SARL by the
Company.
(3) Current report on Form 8-K filed on September 15, 1999 relating to the
Combination of Smart Machines Inc. with the Company.
(4) Amended current report on Form 8-K/A filed on September 29, 1999
relating to the Combination of Smart Machines Inc. with the Company.
- The following audited Financial Statements of Smart Machines Inc. were
filed with the Form 8-K/A:
Smart Machines Inc. Balance Sheets as of December 31, 1998 and 1997;
Smart Machines Inc. Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 and for the period from October 1,
1994 (date of inception) to December 31, 1998;
Smart Machines Inc. Statements of Changes in Nonredeemable Preferred
Stock and Shareholders' Equity (Deficit) for the period from October
1, 1994 (date of inception) to December 31, 1998;
64
<PAGE> 66
Smart Machines Inc. Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 and for the period from October 1,
1994 (date of inception) to December 31, 1998;
Smart Machines Inc. Notes to Financial Statements;
Report of Independent Accountants;
Smart Machines Inc. Unaudited Condensed Balance Sheet as of March 31,
1999 and Condensed Balance Sheet as of December 31, 1998;
Smart Machines Inc. Unaudited Condensed Statements of Operations for
the three months ended March 31, 1999 and 1998, and for the period
from October 1, 1994 (date of inception) to March 31, 1999;
Smart Machines Inc. Unaudited Condensed Statements of Cash Flows for
the three months ended March 31, 1999 an 1998, and for the period
from October 1, 1994 (date of inception) to the March 31, 1999; and
Smart Machines Inc. Notes to Unaudited Condensed Financial
Statements.
- The following Unaudited Pro Forma Financial Information for the
Company and Smart Machines Inc. were filed with the Form 8-K/A
Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1999;
Pro Forma Condensed Consolidated Statements of Operations for the six
months ended March 31, 1999 and 1998, and the years ended September
30, 1998, 1997 and 1996; and
Notes to Pro Forma Condensed Consolidated Financial Statements.
65
<PAGE> 67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BROOKS AUTOMATION, INC.
Date: December 29, 1999 /s/ ROBERT J. THERRIEN
--------------------------------------
Robert J. Therrien, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ ROBERT J. THERRIEN Director and President December 29, 1999
- --------------------------------------------------- (Principal Executive Officer)
Robert J. Therrien
/s/ ELLEN B. RICHSTONE Senior Vice President and Chief December 29, 1999
- --------------------------------------------------- Financial Officer (Principal
Ellen B. Richstone Financial Officer)
/s/ STEVEN E. HEBERT Principal Accounting Officer December 29, 1999
- ---------------------------------------------------
Steven E. Hebert
/s/ ROGER D. EMERICK Director December 29, 1999
- ---------------------------------------------------
Roger D. Emerick
Director
- ---------------------------------------------------
Amin J. Khoury
/s/ JUERGEN GIESSMANN Director December 29, 1999
- ---------------------------------------------------
Juergen Giessmann
</TABLE>
66
<PAGE> 68
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S> <C>
10.30 Form of Agreement between Executive Officers and Registrant Filed
Relating to Change of Control* herewith
10.31 Agreement between Ellen Richstone and Registrant Relating to Filed
Change of Control* herewith
10.32 Lease Agreement between the Registrant and Clearfield Filed
Investments, LLC for the Registrant's Colorado manufacturing herewith
facility
10.33 Transitional Services Agreement between the Registrant and Filed
Jenoptik AG relating to the Registrant's German herewith
manufacturing facility
10.34 Lease Agreement between a subsidiary of the Registrant and Filed
Montague Oaks Phase I & II for the Registrant's California herewith
manufacturing facility
21.01 Subsidiaries of the Registrant Filed
herewith
23.01 Consent of PricewaterhouseCoopers LLP Filed
herewith
27.01 Financial Data Schedule as of and for the year ended Filed
September 30, 1999 herewith
27.02 Financial Data Schedule as of and for the year ended Filed
September 30, 1998 herewith
99.04 1998 Employee Equity Incentive Plan Filed
herewith
</TABLE>
<PAGE> 1
EXHIBIT 10.30
AGREEMENT
AGREEMENT by and between Brooks Automation, Inc., a Delaware
corporation (the "Company"), and _________________ (the "Executive"), dated as
of the 11th day of November, 1999.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat, or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall be the first date during the "Change
of Control Period" (as defined in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Company is terminated or the Executive ceases to
be an officer of the Company prior to the date on which a Change of Control
occurs, and it is reasonably demonstrated that such termination of employment
<PAGE> 2
(1) was at the request of a third party who has taken steps reasonably
calculated to effect the Change of Control or (2) otherwise arose in connection
with or in anticipation of the Change of Control, then for all purposes of this
Agreement the "Effective Date" shall mean the date immediately prior to the date
of such termination of employment.
(b) The "Change of Control Period" is the period commencing on the
date hereof and ending on the fifth anniversary of such date; provided, however
that commencing on the date four years after the date hereof, and on each fifth
year anniversary of such date (such date and each fifth year anniversary thereof
is hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended without any further action by the Company or the
Executive so as to terminate five years from such Renewal Date; provided,
however, that if the Company shall give notice in writing to the Executive, at
least sixty days prior to the Renewal Date, stating that the Change of Control
Period shall not be extended, then the Change of Control Period shall expire
five years from the last effective Renewal Date.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), other than Robert J. Therrien or any of his
affiliates (as defined in the Exchange Act) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent or
more of the then outstanding shares of stock of the Company entitled to vote in
the election of directors (the "Outstanding Company Common Stock"), whether in
one transaction or in multiple transactions which in the aggregate equal or
exceed thirty percent of the Outstanding Company Common Stock;
-2-
<PAGE> 3
provided, however, that (i) any acquisition by the Company or its subsidiaries,
or any employee benefit plan (or related trust) of the Company or its
subsidiaries of thirty percent or more of Outstanding Company Common Stock shall
not constitute a Change of Control; (ii) any acquisition by any individual,
entity or group of beneficial ownership of thirty percent or more but less than
forty percent of the Outstanding Company Common Stock may be deemed unanimously
by the Board of Directors of the Company as it is constituted as of the date of
this Agreement (the "Incumbent Board"), excluding any members of the Incumbent
Board affiliated with the acquiror, to not constitute a Change of Control, in
the Incumbent Board's sole and absolute discretion; and (iii) any acquisition by
a corporation with respect to which, following such acquisition, more than fifty
percent of the then outstanding shares of common stock of such corporation, is
then beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners of the Outstanding
Company Common Stock immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such acquisition, of
the Outstanding Company Common Stock, shall not constitute a Change of Control;
or
(b) Individuals who, as of the date of this Agreement, constitute
the members of the Incumbent Board cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date of this Agreement whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
-3-
<PAGE> 4
assumption of office is in connection with either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board; or
(c) Approval by the stockholders of the Company of (i) a
reorganization, merger or consolidation, in each case, with respect to which all
or substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock immediately prior to such
reorganization, merger or consolidation will not, following such reorganization,
merger or consolidation, beneficially own, directly or indirectly, more than 50%
of the then outstanding shares of common stock of the corporation resulting from
such a reorganization, merger or consolidation, other than a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) acquires 30% or more of Outstanding Company
Common Stock; or (ii) the sale or other disposition of all or substantially all
of the assets of the Company, excluding a sale or other disposition of assets to
a subsidiary of the Company and excluding a sale or license of a portion of the
business of the Company which is deemed by the Incumbent Board, acting in its
sole and absolute discretion, to not constitute a Change of Control.
Anything in this Agreement to the contrary notwithstanding, if an event
that would, but for this paragraph, constitute a Change of Control results from
or arises out of a purchase or other acquisition of the Company, directly or
indirectly, by a corporation or other entity in which
-4-
<PAGE> 5
the Executive has a greater than ten percent direct or indirect equity interest,
such event shall not constitute a Change of Control.
3. Employment Period. Subject to the terms and conditions hereof, the
Company hereby agrees to continue the Executive in its employ for the period
commencing on the Effective Date and ending on the last day of the twelfth month
following the month in which the Effective Date occurs (the "Employment
Period"). The Executive hereby agrees to remain in the employ of the Company for
the period commencing on the Effective Date and ending on the last day of the
sixth month following the month in which the Effective Date occurs (the "Six
Month Period").
4. Terms of Employment.
(a) Position and Duties.
(i) Except as provided in Section 4(c) below, during the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the one hundred eighty-day
period immediately preceding the Effective Date and (B) the Executive's services
shall be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than thirty-five
miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote his full business time to the business and affairs of the Company and,
to the extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or
-5-
<PAGE> 6
charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such activities (or the conduct
of activities similar in nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
at a biweekly rate, at least equal to twelve times the highest monthly base
salary paid or payable to the Executive by the Company in respect of the
twelve-month period immediately preceding the month in which the Effective Date
occurs. Any increase in Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. Annual Base Salary
shall not be reduced after any such increase and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year during the Employment Period,
an annual bonus (the "Annual Bonus") in cash at least equal to the average
annualized (for any fiscal year consisting of less than twelve full months or
with respect to which the Executive has been employed by the Company for less
than twelve full months) bonus (the "Average Annual Bonus") paid or payable to
the Executive by the Company in respect of the lesser of the three fiscal years
immediately
-6-
<PAGE> 7
preceding the fiscal year in which the Effective Date occurs or the number of
full fiscal years for which the Executive has been employed by the Company
immediately preceding the fiscal year in which the Effective Date occurs. Each
such Annual Bonus shall be paid no later than the end of the second month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus pursuant to deferral plans of the Company.
(iii) Incentive, Savings and Retirement Plans. In addition to
Annual Base Salary and Annual Bonus payable as hereinabove provided, the
Executive shall be entitled to participate during the Employment Period in all
incentive, savings and retirement plans, practices, policies and programs
applicable to other peer executives of the Company, but in no event shall such
plans practices, policies and programs provide the Executive with incentive,
savings and retirement benefits opportunities, in each case, less favorable, in
the aggregate, than the most favorable of those provided by the Company for the
Executive under such plans, practices, policies and programs as in effect at any
time during the one-year immediately preceding the Effective Date.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) and applicable to other peer executives of the Company, but in no
event shall such plans, practices, policies and programs provide benefits which
are less favorable, in the aggregate,
-7-
<PAGE> 8
than the most favorable of such plans, practices, policies and programs in
effect at any time during the one-year period immediately preceding the
Effective Date.
(v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in the conduct of the Company's business upon submission of
appropriate accountings in accordance with the most favorable policies,
practices and procedures of the Company in effect at any time during the
one-year period immediately preceding the Effective Date.
(vi) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company in effect at any time
during the one-year period immediately preceding the Effective Date. If at the
end of the Employment Period, the Company elects not to continue to employ
Executive for reasons other than for Cause, death or Disability, or if the
Executive shall terminate employment hereunder for Good Reason, the Company will
provide to Executive up to $15,000 in fees paid for out-placement assistance.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company at any time during the one-year period
immediately preceding the Effective Date.
(viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company as in effect at any time during
the one-year period immediately preceding the Effective Date.
-8-
<PAGE> 9
(c) Six Month Period. Notwithstanding anything to the contrary in
this Section 4, during the Six Month Period, the Company's obligations under
this Agreement are limited to employing the Executive in any capacity reasonably
assigned to Executive by the Company to assist in the transition caused by the
Change of Control at the location where the Executive was employed immediately
preceding the Effective Date or at any office or location less than thirty-five
miles from such location and providing to the Executive compensation and
benefits, as set forth in Section 4(b) hereof in accordance with the most
favorable plans, practices, policies and programs provided by the Company for
the Executive as in effect at any time during the one year period immediately
preceding the Effective Date.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of
"Disability" set forth below), it may give to the Executive written notice in
accordance with Section 10(b) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the thirtieth day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the thirty days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" means the absence of the Executive from the Executive's duties with
the Company on a full-time basis for 180 consecutive business days as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the
-9-
<PAGE> 10
Company or its insurers and acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for "Cause". For purposes of this Agreement,
"Cause" means (i) an act or acts of personal dishonesty taken by the Executive
and intended to result in substantial personal enrichment of the Executive at
the expense of the Company, (ii) repeated violations by the Executive of the
Executive's obligations under Section 4(a) of this Agreement (other than as a
result of incapacity due to physical or mental illness) which are demonstrably
willful and deliberate on the Executive's part, which are committed in bad faith
or without reasonable belief that such violations are in the best interests of
the Company and which are not remedied in a reasonable period of time after
receipt of written notice from the Company or (iii) the conviction of the
Executive of a felony involving moral turpitude.
(c) Good Reason. The Executive's employment may be terminated during
the Employment Period by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" means:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
-10-
<PAGE> 11
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) any failure by the Company to fulfill its obligations to
the Executive during the Six Month Period, as set forth in Section 4(c) of this
Agreement, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iv) the Company's requiring the Executive to be based at any
office or location other than that described in Section 4(a)(i)(B) hereof;
(v) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(vi) any failure by the Company to comply with and satisfy
Section 9(c) of this Agreement.
Notwithstanding the foregoing, during the Six Month Period, "Good
Reason" shall mean (iii), (iv), (v) or (vi) above only. For purposes of this
Section 5(c), any good faith determination of "Good Reason" after the Six Month
Period made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause or
without Cause or by the Executive for Good Reason shall be communicated by
Notice of Termination to the other party hereto given in accordance with Section
10(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, if applicable, (ii) to the extent
applicable, sets
-11-
<PAGE> 12
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated, and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than fifteen days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company
hereunder or preclude the Executive or the Company from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided however, that (i) if the Executive's employment is
terminated by the Company other than for Cause, death or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and (ii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
(a) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than payment of the sum of the following amounts:
(i) the Executive's Annual Base Salary through the Date of Termination to the
extent not theretofore paid, (ii) the product of (A) the greater of (x) the
Annual Bonus paid or payable (and annualized for any fiscal year consisting of
less than twelve full months or for which the Executive has been employed for
less than twelve full months) to the
-12-
<PAGE> 13
Executive for the Company's most recently completed fiscal year, and (y) the
Average Annual Bonus and (B) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and the
denominator of which is 365, and (iii) any compensation previously deferred by
the Executive (together with any accrued interest or earnings thereon) and any
accrued bonus amounts or vacation pay, in each case, to the extent not yet paid
by the Company (the amounts described in subparagraphs (i), (ii), and (iii) are
hereafter referred to as "Accrued Obligations" and shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
sixty days of the Date of Termination. Anything herein to the contrary
notwithstanding, the Executive's family shall be entitled to receive benefits at
least equal to the most favorable benefits provided by the Company to surviving
families of peer executives of the Company under such plans, programs, practices
and policies relating to family death benefits, if any, as in effect with
respect to other peer executives and their families at any time during the one
year period immediately preceding the Effective Date.
(b) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations of the Company to the
Executive, other than for payment of the Accrued Obligations (which shall be
paid in a lump sum in cash within sixty days of the Date of Termination).
Anything herein to the contrary notwithstanding, the Executive shall be entitled
after the Disability Effective Date to receive disability and other benefits at
least equal to the most favorable of those provided by the Company to disabled
executives and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect with respect
to other peer executives and their families at any time during the one year
period immediately preceding the Effective Date.
-13-
<PAGE> 14
(c) Cause, Other than for Good Reason. If the Executive's employment
shall be terminated by the Company for Cause or by the Executive other than for
Good Reason (and other than by reason of his death or Disability) during the
Employment Period, this Agreement shall terminate without further obligations of
the Company to the Executive other than the obligation to pay to the Executive
Annual Base Salary through the Date of Termination, plus the amount of any
compensation previously deferred by the Executive and any accrued and awarded
bonus amounts or vacation pay, in each case, to the extent theretofore unpaid.
In such case, such amounts shall be paid to the Executive in a lump sum in cash
within thirty days of the Date of Termination, except that accrued and awarded
bonus amounts, if any, shall be paid as previously scheduled at the time of the
award. The Executive shall, in such event, also be entitled to any benefits
required by law that are not otherwise provided by this Agreement.
(d) Good Reason; Other Than for Cause or Disability. If, during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause, death or Disability, or if the Executive shall terminate
employment under this Agreement for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within thirty days after the Date of Termination the aggregate of the following
amounts:
A. all Accrued Obligations; and
B. the amount (such amount shall be hereinafter referred
to as the "Severance Amount") equal to one year of
Annual Base Salary.
(ii) the Company shall timely pay and provide, for eighteen
months from the Date of Termination, medical benefits to the Executive and/or
the
-14-
<PAGE> 15
Executive's family at least equal to those which would have been provided in
accordance with the applicable plans (including the Company's 401(k), match and
profit-sharing plans), programs, practices and policies described in Section
4(b)(v) of this Agreement as if the Executive's employment had not been
terminated in accordance with the most favorable plans, practices, programs or
policies of the Company as in effect and applicable generally to other peer
executives and their families during the one year period immediately preceding
the Effective Date, provided, however, that if the Executive becomes re-employed
with another employer and is eligible to receive medical and dental benefits
under another employer provided plan, the medical and dental benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility and provided, further, that if any Company plan
would not allow Executive to participate, the Company shall provided to
Executive comparable tax-adjusted payments of an equivalent amount; and
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive and/or the Executive's family any
other amounts or benefits required to be paid or provided or which the Executive
and/or the Executive's family is eligible to receive pursuant to this Agreement
and under any plan, program, policy or practice or contract or agreement of the
Company as in effect and applicable generally to other peer executives of the
Company and their families, including up to $15,000 in fees paid for
out-placement assistance (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
7. Nonexclusivity of Rights. Except as provided in Section 6, nothing
in this Agreement shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus,
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<PAGE> 16
incentive or other plans, programs, policies or practices, provided by the
Company and for which the Executive may qualify, nor shall anything herein limit
or otherwise affect such rights as the Executive may have under any other
agreements with the Company. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of the Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program except as
explicitly modified by this Agreement.
8. Full Settlement.
(a) The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
6(d)(ii), such amounts shall not be reduced whether or not the Executive obtains
other employment. The Company agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement, unless a court of competent
jurisdiction determines that the Executive made such effort in bad faith), plus
in each case interest at the applicable Federal
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<PAGE> 17
rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986,
as amended (the "Code").
(b) If there shall be any dispute between the Company and the
Executive (i) in the event of any termination of the Executive's employment by
the Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good Reason was not made in
good faith, the Company shall pay all amounts, and provide all benefits, to the
Executive and/or the Executive's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
6(d) as though such termination were by the Company without Cause, or by the
Executive with Good Reason; provided, however, that the Company shall not be
required to pay any disputed amount pursuant to this paragraph except upon
receipt of an undertaking by or on behalf of the Executive to repay all such
amounts to which the Executive is ultimately adjudged by such court not to be
entitled.
9. Successors.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
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(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. In addition, Executive's outstanding stock options or stock
appreciation rights of the Company will continue to vest in accordance with
their terms during the period from the Effective Date until the termination of
the Executive's employment with the Company. The Executive shall be entitled,
upon exercise of any such outstanding stock options or stock appreciation rights
of the Company, to receive in lieu of shares of the Company's stock, shares of
such stock or other securities of such successor as the holders of shares of the
Company's stock received pursuant to the terms of the merger, consolidation or
sale.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive:
-----------------
-----------------
-----------------
If to the Company:
Brooks Automation, Inc.
15 Elizabeth Drive
Chelmsford, MA 01824
Attention: Chief Financial Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a waiver
of such provision or any other provision thereof.
(f) This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof and by
entering into this Agreement the Executive waives all rights he may have under
the Company's separation policy, provided that if the Company's separation
policy would provide greater benefits to the Executive than this Agreement, then
the Executive may elect to receive benefits under the Company's separation
policy in lieu of the benefits provided hereunder.
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(g) The Executive and the Company acknowledge that prior to the
Effective Date and following the end of the Employment Period, the employment of
the Executive by the Company is "at will" and may be terminated by either the
Executive or the Company at any time. Moreover, if prior to the Effective Date,
the Executive's employment with the Company terminates, then the Executive shall
have no further rights under this Agreement. Notwithstanding anything contained
herein, if, during the Employment Period, the Executive shall terminate
employment with the Company other than for Good Reason, the Executive shall have
no liability to the Company.
(h) As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or
otherwise.
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IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
BROOKS AUTOMATION, INC.
By:
--------------------------------
Name: Ellen B. Richstone
Title: Senior Vice President and Chief
Financial Officer
EXECUTIVE
-----------------------------------
-----------------
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EXHIBIT 10.31
AGREEMENT
AGREEMENT by and between Brooks Automation, Inc., a Delaware
corporation (the "Company"), and Ellen B. Richstone (the "Executive"), dated as
of the 11th day of November, 1999.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat, or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall be the first date during the "Change
of Control Period" (as defined in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Company is terminated or the Executive ceases to
be an officer of the Company prior to the date on which a Change of Control
occurs, and it is reasonably demonstrated that such termination of employment
<PAGE> 2
(1) was at the request of a third party who has taken steps reasonably
calculated to effect the Change of Control or (2) otherwise arose in connection
with or in anticipation of the Change of Control, then for all purposes of this
Agreement the "Effective Date" shall mean the date immediately prior to the date
of such termination of employment.
(b) The "Change of Control Period" is the period commencing on the
date hereof and ending on the fifth anniversary of such date; provided, however
that commencing on the date four years after the date hereof, and on each fifth
year anniversary of such date (such date and each fifth year anniversary thereof
is hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended without any further action by the Company or the
Executive so as to terminate five years from such Renewal Date; provided,
however, that if the Company shall give notice in writing to the Executive, at
least sixty days prior to the Renewal Date, stating that the Change of Control
Period shall not be extended, then the Change of Control Period shall expire
five years from the last effective Renewal Date.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), other than Robert J. Therrien or any of his
affiliates (as defined in the Exchange Act) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent or
more of the then outstanding shares of stock of the Company entitled to vote in
the election of directors (the "Outstanding Company Common Stock"), whether in
one transaction or in multiple transactions which in the aggregate equal or
exceed thirty percent of the Outstanding Company Common Stock;
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provided, however, that (i) any acquisition by the Company or its subsidiaries,
or any employee benefit plan (or related trust) of the Company or its
subsidiaries of thirty percent or more of Outstanding Company Common Stock shall
not constitute a Change of Control; (ii) any acquisition by any individual,
entity or group of beneficial ownership of thirty percent or more but less than
forty percent of the Outstanding Company Common Stock may be deemed unanimously
by the Board of Directors of the Company as it is constituted as of the date of
this Agreement (the "Incumbent Board"), excluding any members of the Incumbent
Board affiliated with the acquiror, to not constitute a Change of Control, in
the Incumbent Board's sole and absolute discretion; and (iii) any acquisition by
a corporation with respect to which, following such acquisition, more than fifty
percent of the then outstanding shares of common stock of such corporation, is
then beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners of the Outstanding
Company Common Stock immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such acquisition, of
the Outstanding Company Common Stock, shall not constitute a Change of Control;
or
(b) Individuals who, as of the date of this Agreement, constitute the
members of the Incumbent Board cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date of this Agreement whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
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<PAGE> 4
assumption of office is in connection with either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board; or
c) Approval by the stockholders of the Company of (i) a
reorganization, merger or consolidation, in each case, with respect to which all
or substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock immediately prior to such
reorganization, merger or consolidation will not, following such reorganization,
merger or consolidation, beneficially own, directly or indirectly, more than 50%
of the then outstanding shares of common stock of the corporation resulting from
such a reorganization, merger or consolidation, other than a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) acquires 30% or more of Outstanding Company
Common Stock; or (ii) the sale or other disposition of all or substantially all
of the assets of the Company, excluding a sale or other disposition of assets to
a subsidiary of the Company and excluding a sale or license of a portion of the
business of the Company which is deemed by the Incumbent Board, acting in its
sole and absolute discretion, to not constitute a Change of Control.
Anything in this Agreement to the contrary notwithstanding, if an event
that would, but for this paragraph, constitute a Change of Control results from
or arises out of a purchase or other acquisition of the Company, directly or
indirectly, by a corporation or other entity in which
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the Executive has a greater than ten percent direct or indirect equity interest,
such event shall not constitute a Change of Control.
3. Employment Period. Subject to the terms and conditions hereof, the
Company hereby agrees to continue the Executive in its employ for the period
commencing on the Effective Date and ending on the last day of the twelfth month
following the month in which the Effective Date occurs (the "Employment
Period"). The Executive hereby agrees to remain in the employ of the Company for
the period commencing on the Effective Date and ending on the last day of the
sixth month following the month in which the Effective Date occurs (the "Six
Month Period").
4. Terms of Employment.
(a) Position and Duties.
(i) Except as provided in Section 4(c) below, during the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the one hundred eighty-day
period immediately preceding the Effective Date, including without limitation,
the responsibilities described under the caption "Responsibilities" in the
letter from Robert J. Therrien, President and Chief Executive Officer of Brooks
Automation, Inc. to Ellen B. Richstone dated October 19, 1998 attached hereto
(the "Offer Letter") and (B) the Executive's services shall be performed at the
location where the Executive was employed immediately preceding the Effective
Date or any office or location less than thirty-five miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote his full business time to the business and affairs of the Company and,
to the extent necessary to discharge
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<PAGE> 6
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
at a biweekly rate, at least equal to twelve times the highest monthly base
salary paid or payable to the Executive by the Company in respect of the
twelve-month period immediately preceding the month in which the Effective Date
occurs. Any increase in Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. Annual Base Salary
shall not be reduced after any such increase and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year during the Employment Period,
an annual bonus (the "Annual Bonus") in cash at least equal to the average
annualized (for any fiscal year consisting of
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less than twelve full months or with respect to which the Executive has been
employed by the Company for less than twelve full months) bonus (the "Average
Annual Bonus") paid or payable to the Executive by the Company in respect of the
lesser of the three fiscal years immediately preceding the fiscal year in which
the Effective Date occurs or the number of full fiscal years for which the
Executive has been employed by the Company immediately preceding the fiscal year
in which the Effective Date occurs. Each such Annual Bonus shall be paid no
later than the end of the second month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus pursuant to deferral plans of
the Company.
(iii) Incentive, Savings and Retirement Plans. In addition to
Annual Base Salary and Annual Bonus payable as hereinabove provided, the
Executive shall be entitled to participate during the Employment Period in all
incentive, savings and retirement plans, practices, policies and programs
applicable to other peer executives of the Company, but in no event shall such
plans practices, policies and programs provide the Executive with incentive,
savings and retirement benefits opportunities, in each case, less favorable, in
the aggregate, than the most favorable of those provided by the Company for the
Executive under such plans, practices, policies and programs as in effect at any
time during the one-year immediately preceding the Effective Date.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
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<PAGE> 8
and programs) and applicable to other peer executives of the Company, but in no
event shall such plans, practices, policies and programs provide benefits which
are less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect at any time during the one-year
period immediately preceding the Effective Date.
(v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in the conduct of the Company's business upon submission of
appropriate accountings in accordance with the most favorable policies,
practices and procedures of the Company in effect at any time during the
one-year period immediately preceding the Effective Date.
(vi) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company in effect at any time
during the one-year period immediately preceding the Effective Date. If at the
end of the Employment Period, the Company elects not to continue to employ
Executive for reasons other than for Cause, death or Disability, or if the
Executive shall terminate employment hereunder for Good Reason, the Company will
provide to Executive up to $15,000 in fees paid for out-placement assistance.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company at any time during the one-year period
immediately preceding the Effective Date.
(viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and
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<PAGE> 9
practices of the Company as in effect at any time during the one-year period
immediately preceding the Effective Date.
(ix) Offer Letter. During the Employment Period, the Executive,
at a minimum, shall be entitled to the compensation set forth under the captions
"Base and Bonus Compensation," "Car Allowance," "Basic Benefits" and "Vacation
and Time Off" in the Offer Letter.
(c) Six Month Period. Notwithstanding anything to the contrary in
this Section 4, during the Six Month Period, the Company's obligations under
this Agreement are limited to employing the Executive in any capacity reasonably
assigned to Executive by the Company to assist in the transition caused by the
Change of Control at the location where the Executive was employed immediately
preceding the Effective Date or at any office or location less than thirty-five
miles from such location and providing to the Executive compensation and
benefits, as set forth in Section 4(b) hereof in accordance with the most
favorable plans, practices, policies and programs provided by the Company for
the Executive as in effect at any time during the one year period immediately
preceding the Effective Date.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of
"Disability" set forth below), it may give to the Executive written notice in
accordance with Section 10(b) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the thirtieth day after receipt of such
notice by the Executive (the "Disability Effective
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<PAGE> 10
Date"), provided that, within the thirty days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means the absence of the Executive from
the Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for "Cause". For purposes of this Agreement,
"Cause" means (i) an act or acts of personal dishonesty taken by the Executive
and intended to result in substantial personal enrichment of the Executive at
the expense of the Company, (ii) repeated violations by the Executive of the
Executive's obligations under Section 4(a) of this Agreement (other than as a
result of incapacity due to physical or mental illness) which are demonstrably
willful and deliberate on the Executive's part, which are committed in bad faith
or without reasonable belief that such violations are in the best interests of
the Company and which are not remedied in a reasonable period of time after
receipt of written notice from the Company or (iii) the conviction of the
Executive of a felony involving moral turpitude.
(c) Good Reason. The Executive's employment may be terminated during
the Employment Period by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" means:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this
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Agreement, or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iii) any failure by the Company to fulfill its obligations to the
Executive during the Six Month Period, as set forth in Section 4(c) of this
Agreement, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iv) the Company's requiring the Executive to be based at any office
or location other than that described in Section 4(a)(i)(B) hereof;
(v) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(vi) any failure by the Company to comply with and satisfy Section
9(c) of this Agreement.
Notwithstanding the foregoing, during the Six Month Period, "Good
Reason" shall mean (iii), (iv), (v) or (vi) above only. For purposes of this
Section 5(c), any good faith determination of "Good Reason" after the Six Month
Period made by the Executive shall be conclusive.
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(d) Notice of Termination. Any termination by the Company for Cause or
without Cause or by the Executive for Good Reason shall be communicated by
Notice of Termination to the other party hereto given in accordance with Section
10(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, if applicable, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than fifteen days after the giving of such
notice). The failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company
hereunder or preclude the Executive or the Company from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided however, that (i) if the Executive's employment is
terminated by the Company other than for Cause, death or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and (ii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
(a) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further
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obligations to the Executive's legal representatives under this Agreement, other
than payment of the sum of the following amounts: (i) the Executive's Annual
Base Salary through the Date of Termination to the extent not theretofore paid,
(ii) the product of (A) the greater of (x) the Annual Bonus paid or payable (and
annualized for any fiscal year consisting of less than twelve full months or for
which the Executive has been employed for less than twelve full months) to the
Executive for the Company's most recently completed fiscal year, and (y) the
Average Annual Bonus and (B) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and the
denominator of which is 365, and (iii) any compensation previously deferred by
the Executive (together with any accrued interest or earnings thereon) and any
accrued bonus amounts or vacation pay, in each case, to the extent not yet paid
by the Company (the amounts described in subparagraphs (i), (ii), and (iii) are
hereafter referred to as "Accrued Obligations" and shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
sixty days of the Date of Termination. Anything herein to the contrary
notwithstanding, the Executive's family shall be entitled to receive benefits at
least equal to the most favorable benefits provided by the Company to surviving
families of peer executives of the Company under such plans, programs, practices
and policies relating to family death benefits, if any, as in effect with
respect to other peer executives and their families at any time during the one
year period immediately preceding the Effective Date.
(b) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations of the Company to the Executive, other
than for payment of the Accrued Obligations (which shall be paid in a lump sum
in cash within sixty days of the Date of Termination). Anything herein to the
contrary notwithstanding, the Executive shall be entitled
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after the Disability Effective Date to receive disability and other benefits at
least equal to the most favorable of those provided by the Company to disabled
executives and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect with respect
to other peer executives and their families at any time during the one year
period immediately preceding the Effective Date.
(c) Cause, Other than for Good Reason. If the Executive's employment
shall be terminated by the Company for Cause or by the Executive other than for
Good Reason (and other than by reason of his death or Disability) during the
Employment Period, this Agreement shall terminate without further obligations of
the Company to the Executive other than the obligation to pay to the Executive
Annual Base Salary through the Date of Termination, plus the amount of any
compensation previously deferred by the Executive and any accrued and awarded
bonus amounts or vacation pay, in each case, to the extent theretofore unpaid.
In such case, such amounts shall be paid to the Executive in a lump sum in cash
within thirty days of the Date of Termination, except that accrued and awarded
bonus amounts, if any, shall be paid as previously scheduled at the time of the
award. The Executive shall, in such event, also be entitled to any benefits
required by law that are not otherwise provided by this Agreement.
(d) Good Reason; Other Than for Cause or Disability. If, during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause, death or Disability, or if the Executive shall terminate
employment under this Agreement for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within thirty days after the Date of Termination the aggregate of the following
amounts:
A. All Accrued Obligations; and
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B. the amount (such amount shall be hereinafter referred
to as the "Severance Amount") equal to the greater of
$250,000 or one year of Annual Base Salary.
(ii) the Company shall timely pay and provide, for eighteen
months from the Date of Termination, medical benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided in
accordance with the applicable plans (including the Company's 401(k), match and
profit-sharing plans), programs, practices and policies described in Section
4(b)(v) of this Agreement as if the Executive's employment had not been
terminated in accordance with the most favorable plans, practices, programs or
policies of the Company as in effect and applicable generally to other peer
executives and their families during the one year period immediately preceding
the Effective Date, provided, however, that if the Executive becomes re-employed
with another employer and is eligible to receive medical and dental benefits
under another employer provided plan, the medical and dental benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility and provided, further, that if any Company plan
would not allow Executive to participate, the Company shall provided to
Executive comparable tax-adjusted payments of an equivalent amount;
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive and/or the Executive's family any
other amounts or benefits required to be paid or provided or which the Executive
and/or the Executive's family is eligible to receive pursuant to this Agreement
and under any plan, program, policy or practice or contract or agreement of the
Company as in effect and
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applicable generally to other peer executives of the Company and their families,
including up to $15,000 in fees paid for out-placement assistance (such other
amounts and benefits shall be hereinafter referred to as the "Other Benefits");
and
(iv) all of Executive's options to purchase the Company's common
stock shall vest immediately.
7. Nonexclusivity of Rights. Except as provided in Section 6, nothing
in this Agreement shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plans, programs,
policies or practices, provided by the Company and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of the Company at or subsequent to
the Date of Termination shall be payable in accordance with such plan, policy,
practice or program except as explicitly modified by this Agreement.
8. Full Settlement.
(a) The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
6(d)(ii), such amounts shall not be reduced whether or not the Executive obtains
other employment. The Company agrees to pay promptly as incurred, to the full
extent permitted by
-16-
<PAGE> 17
law, all legal fees and expenses which the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement, unless a court of competent jurisdiction
determines that the Executive made such effort in bad faith), plus in each case
interest at the applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
(b) If there shall be any dispute between the Company and the
Executive (i) in the event of any termination of the Executive's employment by
the Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good Reason was not made in
good faith, the Company shall pay all amounts, and provide all benefits, to the
Executive and/or the
-17-
<PAGE> 18
(c) Executive's family or other beneficiaries, as the case may be,
that the Company would be required to pay or provide pursuant to Section 6(d) as
though such termination were by the Company without Cause, or by the Executive
with Good Reason; provided, however, that the Company shall not be required to
pay any disputed amount pursuant to this paragraph except upon receipt of an
undertaking by or on behalf of the Executive to repay all such amounts to which
the Executive is ultimately adjudged by such court not to be entitled.
9. Successors.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. In addition, Executive's outstanding stock options or stock
appreciation rights of the Company will continue to vest in accordance with
their terms during the period from the Effective Date until the termination of
the Executive's employment with the Company. The Executive shall be entitled,
upon exercise of any such outstanding stock options or stock appreciation rights
of the Company, to receive in lieu of
-18-
<PAGE> 19
shares of the Company's stock, shares of such stock or other securities of such
successor as the holders of shares of the Company's stock received pursuant to
the terms of the merger, consolidation or sale.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Ellen B. Richstone
67 Bullard Road
Weston, MA 02493
If to the Company:
Brooks Automation, Inc.
15 Elizabeth Drive
Chelmsford, MA 01824
Attention: Chief Financial Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
-19-
<PAGE> 20
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a waiver
of such provision or any other provision thereof.
(f) This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof and by
entering into this Agreement the Executive waives all rights he may have under
the Company's separation policy, provided that if the Company's separation
policy would provide greater benefits to the Executive than this Agreement, then
the Executive may elect to receive benefits under the Company's separation
policy in lieu of the benefits provided hereunder.
(g) The Executive and the Company acknowledge that prior to the
Effective Date and following the end of the Employment Period, the employment of
the Executive by the Company is subject to the terms of the Offer Letter.
Moreover, if prior to the Effective Date, the Executive's employment with the
Company terminates, then the Executive shall have no further rights under this
Agreement. Notwithstanding anything contained herein, if, during the Employment
Period, the Executive shall terminate employment with the Company other than for
Good Reason, the Executive shall have no liability to the Company.
(h) As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or
otherwise.
-20-
<PAGE> 21
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
BROOKS AUTOMATION, INC.
By:
---------------------------------
Name: Robert J. Therrien
Title: President
EXECUTIVE
-----------------------------------
Ellen B. Richstone
-21-
<PAGE> 1
Exhibit 10.32
LEASE AGREEMENT
between
CLEARFIELD INVESTMENTS, LLC
("Landlord")
and
JENOPTIK INFAB, INC.
("Tenant")
4725 Centennial Drive
Colorado Springs, Colorado
February 24, 1999
<PAGE> 2
LEASE AGREEMENT
TABLE OF CONTENTS
Page
----
Summary Page ................................................. ii
1. TERM ....................................................... 1
2. RENT ....................................................... 3
3. CONSTRUCTION AND OCCUPANCY. ................................ 5
4. COMMENCEMENT DATE CERTIFICATE .............................. 6
5. USE OF PREMISES ............................................ 6
6. PARKING .................................................... 7
7. INSURANCE .................................................. 7
8. FIRE OR CASUALTY ........................................... 7
9. SERVICES AND EXPENSES ...................................... 8
10. ALTERATIONS AND CARE OF PREMISES ........................... 8
11. PERMITTED USE OF HAZARDOUS MATERIALS ....................... 9
12. ENVIRONMENTAL .............................................. 10
13, DEFAULT AND REMEDIES ....................................... 12
14. ASSIGNMENT OR SUBLETTING ................................... 15
15. ENCUMBRANCES ............................................... 16
16. EMINENT DOMAIN ............................................. 17
17. MUTUAL WAIVER OF SUBROGATION ............................... 17
18. ADDITIONAL COVENANTS AND AGREEMENTS ........................ 18
19. NO PARTNERSHIP, JOINT VENTURE OR AGENCY .................... 20
20. HOLDING OVER ............................................... 20
21. QUIET ENJOYMENT ............................................ 20
22. LANDLORD'S RESERVED RIGHTS ................................. 20
23. FORCE MAJEURE .............................................. 21
24. MISCELLANEOUS .............................................. 21
EXHIBIT A - Legal Description
EXHIBIT B - Site Plan
EXHIBIT C - Tenant Improvement Costs
EXHIBIT D - Construction Schedule
EXHIBIT E - Landlord Services and Expenses
EXHIBIT F - Commencement Date Certificate
EXHIBIT G - Parking Agreement
EXHIBIT H - Guarantee of Lease Jenoptik AG
EXHIBIT I - Guarantee of Lease Meissner & Wurst U.S. Inc.
-i-
<PAGE> 3
LEASE AGREEMENT
SUMMARY PAGE
This Summary Page is attached to and made a part of that certain Lease
Agreement dated February 24, 1999 between Clearfield Investments, LLC, as
Landlord, and the Tenant listed below.
TENANT:
Name: Jenoptik INFAB, Inc.
Current Address: 7150 Campus Drive Colorado Springs, CO 80920
DEMISED PREMISES:
Suite Number:
Rentable Square Feet: Approximately 14,133.22 square feet
BUILDING:
Address: 4747 Centennial Drive, Colorado Springs, Colorado 80919
Total Rentable Square Feet: Approximately 79,847 square feet
INITIAL LEASE TERM:
Number of years: 5 years
Scheduled Term Commencement Date: April 15, 1999
BASIC RENT: See Section 2 of the Lease (first month payable upon receipt of
Commencement Date Certificate)
SECURITY DEPOSIT: $12,250.00 (security deposit payable upon execution,
see Section 2F)
TENANT'S PRO RATA SHARE OF OPERATING COSTS: 17.7004%
PARKING: 42 spaces (see Section 6 and Exhibit F)
PERMITTED USE: Office warehouse storage and light manufacturing
OPTIONS FOR ADDITIONAL SPACE: None
RENEWAL OPTION: One (1). Three (3) Year Renewal at Market
PLACEMENT OF PAYMENTS: 2850 Serendipity Circle West, Suite 100
Colorado Springs, CO 80917
Attention: C. William Kephart
GUARANTOR(S): Jenoptik AG
PARTICIPATING BROKERS: Olive Real Estate Group, Inc.
-ii-
<PAGE> 4
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease"), made and entered into
this 24th day of February, 1999, by and between CLEARFIELD INVESTMENTS, LLC, a
Colorado limited liability company (hereinafter called "Landlord"), and
JENOPTIK INFAB, INC, a Delaware Corporation (hereinafter called "Tenant").
WITNESSETH:
Landlord desires to lease to Tenant and Tenant desires to lease
from Landlord, that approximately 14,133.22 square foot portion (subject to
adjustment in accordance with the Plans described below) (hereinafter called the
"Leased Premises") in the approximately 79,042 square foot building (the
"Building") being constructed, together with related site improvements, on
approximately 5-1/2 acres of land (the "Land") described on Exhibit A attached
hereto, more commonly known as 4725 Centennial Drive, Colorado Springs,
Colorado, as shown on the site plan attached hereto as Exhibit B (such Building
and related site improvements sometimes collectively referred to herein as the
"Project"). The purpose of the site plan shown on Exhibit B is to show the
approximate location of the Building and the Leased Premises. Landlord reserves
the right at any time to relocate or make additions to the various buildings,
automobile parking areas and other common areas shown on said site plan.
NOW, THEREFORE, Landlord does hereby lease and demise unto
Tenant, and Tenant does hereby Lease from Landlord, the Leased Premises, upon
the terms and conditions hereinafter set forth.
1. TERM
A. The term of this Lease (the "Term" or "Lease Term") shall be
five (5) years, commencing on the date (the "Commencement Date") which shall be
computed from the earlier of (i) the date on which the Leased Premises are Ready
for Occupancy (as defined in Section 3B) or (ii) the date on which Tenant takes
possession of or commences use of the Leased Premises for any purpose (except as
provided in Section 3D), and ending sixty (60) months thereafter (the
"Termination Date"), unless extended or sooner terminated as provided herein.
B. Landlord hereby grants to Tenant one (1) three (3) year
option to renew this Lease ("Option to Renew") as specified herein. The Option
to Renew shall be exercisable by Tenant giving Landlord written notice of its
election to renew (the "Notice to Renew") at least six (6) months before the
expiration of the Lease Term, subject to the following terms and conditions:
(i) Tenant is not in default under any term of this Lease,
either at the time the Notice to Renew is given or when the renewal term
commences.
(ii) During the renewal term, all terms, covenants and
conditions of the Lease shall apply, except that the base rent payable during
such renewal term shall be determined as set forth in paragraph (iii) below.
<PAGE> 5
(iii) The monthly base rent during the renewal term shall be
equal to the greater of (a) the amount of the monthly base rent payable during
the last full month of the Lease Term then expiring, or (b) the fair rental
value of the Leased Premises at the time of the commencement of the renewal
period, as determined by agreement between Landlord and Tenant or by appraisal
in accordance with the provisions of paragraph (d). Within thirty (30) days of
receipt of the Notice to Renew, Landlord shall notify Tenant in writing of its
evaluation of the fair rental value of the Leased Premises ("Landlord's Rent")
for the period covered by the renewal term (expressed on a monthly basis).
Within thirty (30) days thereafter, Tenant shall send to Landlord a notice
("Tenant's Notice") stating either (1) Tenant's agreement with Landlord's Rent,
in which event such amount shall be fixed as the base rent payable by Tenant for
the renewal term, or (2) Tenant's evaluation of such fair rental value
("Tenant's Rent") (expressed on a monthly basis). If Landlord and Tenant are
unable to agree upon such fair rental value within thirty (30) days from the
date of sending the Tenant's Notice, the matter shall be determined by appraisal
in accordance with the provisions of paragraph (iv). The appraiser's
determination of the fair rental value of the Leased Premises for the renewal
term may not, in any event, be less than the base rent payable during the last
full month of the Lease Term then expiring.
(iv) In absence of agreement between Landlord and Tenant as to
the fair rental value pursuant to the procedures set forth in paragraph (iii)
above, within thirty (30) days after the Tenant's Notice, the fair rental value
shall be established by an appraisal of the Leased Premises performed as
follows. Landlord and Tenant each shall appoint an appraiser certified to
appraise commercial real property in the State of Colorado, and the two thus
appointed shall appoint a third such appraiser. Such three appraisers or, if
either Landlord or Tenant shall fail to appoint its respective appraiser within
sixty (60) days alter the Tenant's Notice, the appraiser timely appointed by the
other, shall conduct their or its appraisals independently, and the fair rental
value of the Leased Premises shall be (a) the average of the two closest of the
three (3) values determined by the three (3) appraisers, or (b) the value
determined by such single appraiser, as the case may be. The appraiser(s) shall
complete their (its) appraisal(s) within ninety (90) days after Tenant's
Notice. All costs of appraisal shall be shared equally by Landlord and Tenant,
unless Landlord or Tenant shall fail to timely appoint its appraiser. If the
appraiser selected by either one alone determines the fair rental value, the
other shall pay all costs of the appraisal.
(v) If for any reason the renewal term commences before the
base rent for such term is determined, Tenant, in the meantime, shall pay the
monthly installments of base rent (the "Prior Rent") in effect under this Lease
on the last day of the term being renewed. Immediately following such
determination, Tenant shall pay to Landlord the difference between the monthly
installments of the Prior Rent actually paid and those which should have been
paid on the basis of such determination. Tenant shall pay the base rent as so
determined.
(vi) Tenant shall accept the Leased Premises in the condition
then existing as of the commencement of the renewal term of this Lease. Landlord
shall not be responsible for performing any work or furnishing any materials to
the Leased Premises. If Tenant fails to give the required Notice to Renew
exercising its Option to Renew within the time and manner provided, such failure
or omission shall be deemed, without further notice or agreement between the
parties, to be an election by Tenant not to exercise such option.
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<PAGE> 6
2. RENT
A. Throughout the Term of this Lease, Tenant shall pay as rent for
the Leased Premises the base annual rent (sometimes referred to herein as "base
rent" or "rent") as provided in this Section. Rent shall be payable, at the
address set forth on the Summary Page, in equal monthly installments in advance
on the first day of each calendar month, in full, without deduction, abatement
or setoff, the first monthly payment to be made concurrently with the
Certificate of Occupancy being provided to the Tenant. Rent for any partial
month during the Term of this Lease shall be prorated on a per diem basis.
B. TENANT covenants and agrees to pay without prior demand thereof
a fixed minimum rental of $803,776.00 for the Leased Premises as follows:
<TABLE>
<CAPTION>
Rent/Sq. Foot Monthly Base Rent Base Annual Rent
<S> <C> <C> <C>
Year 1 $10.5000 $12,366.57 $148,398.81
Year 2 $10.9200 $12,861.23 $154,334.76
Year 3 $11.3568 $13,375.68 $160,508.15
Year 4 $11.8111 $13,910.74 $166,928.87
Year 5 $12.2835 $14,467.12 $173,605.41
</TABLE>
C. The base rent shall be adjusted effective each anniversary of
the Commencement Date. The base rent assumes that the rentable square feet of
the Leased Premises will be as set forth on the Summary Page and that the Tenant
Improvement Cost per square foot will be as set forth in Exhibit C attached
hereto. If the Commencement Date Certificate (described in Section 4) reflects a
different square footage and/or final Tenant Improvement Cost, the base rent
will be adjusted accordingly and reflected in such Commencement Date
Certificate.
D. As additional rent, Tenant shall pay Tenant's "Pro Rata Share"
as set forth on the Summary Page (or, if different, as contained in the
Commencement Date Certificate described in Section 4) (computed by multiplying
the Operating Costs by a fraction, the numerator of which is the number of net
rentable square feet of area in the Leased Premises and the denominator of which
is the total number of net rentable square feet of area in the Building) of
Landlord's Operating Costs (as defined in Exhibit E attached hereto). Tenant's
Pro Rata Share shall be increased or decreased in the event the rentable square
feet of the Leased Premises shall be increased or decreased, or if the rentable
area of the Building is increased or decreased (however such events may occur).
Landlord shall provide a reasonable estimate of the next yearly Operating Costs,
and Tenant shall pay 1/12th of the estimated Tenant's Pro Rata Share monthly on
the same date and at the same place as base rent is payable, commencing on the
Commencement Date and continuing through the Term. Landlord shall provide
Tenant, by April 15 of each year, a summary of factual Operating Costs for the
prior year and Landlord shall bill or credit to Tenant the difference of
Tenant's share of actual costs from the estimate. After the end of the Term of
this Lease, or the sooner termination thereof~ Landlord shall, within thirty
(30) days of such expiration or termination, provide Tenant with a summary of
actual Operating Costs for the last partial year, and if Tenant shall have
theretofore paid as Tenant's Pro Rata Share an amount greater than that
calculated to have been due pursuant to this Section for the calendar
-3-
<PAGE> 7
year in which the Term of this Lease terminates, Landlord shall refund the
overpayment to Tenant within thirty (30) days from the date of the determination
of the date of such overpayment. In the event that, after the end of the Term of
this Lease, or the sooner termination thereof, Tenant shall have theretofore
paid as Tenant's Pro Rata Share an amount less than that calculated to have been
due pursuant to this Section for the calendar year in which the Term of this
Lease terminates, Tenant agrees to pay to Landlord, within thirty (30) days of
Tenant's receipt of Landlord's bill, that amount calculated as actually owed by
Tenant to Landlord pursuant to this Section.
E. Any rent and other amounts due from Tenant to Landlord
hereunder which is not paid within twelve (12) days when due shall, upon notice
from Landlord, be subject to a five percent (5%) service charge and shall bear
interest at the rate of eighteen percent (18%) per annum from the date due to
the date paid, unless, within two (2) calendar days after receipt of such
notice, Tenant pays Landlord the full amount of the rent or other amount then
due. The parties agree that such late charge and default interest constitute a
reasonable estimate of the damages Landlord will suffer as a result of Tenant's
late payment, which damages include Landlord's additional administrative and
other costs associated with such late payment. The parties further agree that
such late charge and default interest shall in no event constitute a waiver of
Tenant's default with respect to such overdue amount, nor prevent Landlord from
exercising any of the other rights and remedies granted at law or equity or
pursuant to this Lease.
F. Upon Tenant's execution of this Lease Tenant shall pay to
Landlord a Security Deposit in the mount of $12,250. Upon the occurrence of any
event of default by Tenant, landlord may, from time to time, without prejudice
to any other remedy, use the Security Deposit to the extent necessary to make
good any arrears of rent and any other damage, injury, expense or liability
caused to Landlord by such event of default. If any portion of the Security
Deposit is so used or applied, Tenant shall, within five (5) days after written
demand therefor, deposit cash with Landlord in an amount sufficient to restore
the Security Deposit to its original amount. Tenant shall not be entitled to
interest on the Security Deposit. Landlord shall not be required to keep the
Security Deposit separate from its other accounts and no trust relationship is
created with respect to the Security Deposit. Tenant shall not grant anyone a
security interest of any kind in the Security Deposit and no such security
agreement shall be binding on Landlord. Each time the base rent is increased,
Tenant shall deposit additional funds with Landlord sufficient to increase the
Security Deposit to an amount that bears the same relationship to the adjusted
base rent as the initial Security Deposit bears to the initial base rent. If
Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it, the Security Deposit, or such balance thereof as may then be
remaining shall be returned to Tenant within sixty (60) days following the
termination of this Lease and upon Tenant's vacation of the Leased Premises. The
Security Deposit shall not be considered an advance payment of rental or a
measure of Landlord's damages in case of default by Tenant.
G. As additional rent, Tenant shall pay the "Unamortized Tenant
Improvement Costs" (sixth (6) year and seventh (7) year) in the sum of
$97,550.11 with the last month's rent. If the Tenant signs the three (3) year
renewal the sum of $97,550.11 will be forgiven by Landlord and the amount will
not be due and payable by Tenant.
-4-
<PAGE> 8
3. CONSTRUCTION AND OCCUPANCY
A. Landlord shall complete and improve the Leased Premises
substantially in accordance with (i) the preliminary Construction Schedule
attached hereto as Exhibit D. (ii) the plans and other specifications therefor
to be prepared by Landlord with input from tenant (collectively, the "Plans"),
which shall be subject to the reasonable approval of both Landlord and Tenant,
and (iii) a Work Letter to be entered into by Landlord and Tenant by the date
specified in Exhibit D. Landlord shall complete the Leased Premises in a
first-class workmanlike manner and in compliance with applicable laws and code
requirements. Landlord's obligation for completion of the Leased Premises shall
be defined and limited by the Plans and the Work Letter, and Landlord shall not
be required to furnish or install any item not included therein.
B. The Leased Premises shall be "Ready for Occupancy" on the date
on which all of the following have been received and presented to Tenant: (i) a
Certificate of Completion signed by the architect for the construction of the
Leased Premises, indicating that all improvement described in the approved Plans
have been completed in substantial compliance therewith (subject to clause (iii)
herein below; (ii) a Certificate of Occupancy for the Leased Premises issued by
the appropriate governmental agency, and (iii) Landlord's notification that the
Leased Premises have been substantially completed, except for items of work and
adjustment of equipment and fixtures that can be completed after occupancy has
been taken without causing substantial interference with Tenant's use of the
Leased Premises (i.e., so-called "punch list" items), which punch list items are
subject to the reasonable approval of Landlord and Tenant. Landlord shall
complete the punch list items within three (3) months alter the punch list is
completed (subject to availability of materials) after Tenant's taking
possession of the Leased Premises. If Landlord and Tenant cannot agree on the
punch list or as to incomplete work, the decision of Landlord's architect
preparing the working drawings as to such issues shall be considered by the
parties as final. It is expressly understood by the parties that Ready for
Occupancy does not include the installation of a telephone system by Landlord.
Any additional changes or improvements to the Leased Premises shall be at
Tenant's sole cost and expense.
C. The parties anticipate that the Leased Premises shall be Ready
for Occupancy by the Scheduled Term Commencement Date set forth on the Summary
Page. Landlord and Tenant shall use their best efforts and cooperate with each
other in order to expedite the preparation and completion of the Plans and the
Work Letter. Landlord agrees to use its reasonable best efforts to cause the
Leased Premises to be completed and available for Tenant's occupancy by the
Scheduled Term Commencement Date. However, in the event that the Leased Premises
shall not be Ready for Occupancy on the Scheduled Term Commencement Date,
Landlord shall, within ten (10) days prior to the Scheduled Term Commencement
Date, give written notice to Tenant of the anticipated date that the Leased
Premises will be Ready for Occupancy, but the failure to give such notice shall
not constitute a default hereunder by Landlord. In the event Landlord fails to
deliver possession of the Leased Premises to Tenant by the Scheduled Term
Commencement Date, this Lease shall not be void or voidable, nor shall Landlord
be liable to Tenant for any loss or damage resulting therefrom, except for
actual increases to Tenant's lease cost in Tenant's current occupancy for delays
over two (2) months from the Scheduled Term Commencement Date, but in such event
Tenant shall not be liable for
-5-
<PAGE> 9
rent until such time as the Leased Premises are Ready for Occupancy (except as
otherwise provided in Section 3.D. Any failure by Landlord to deliver possession
of the Leased Premises by the Scheduled Term Commencement Date, or delivery of
possession before the Scheduled Term Commencement Date, shall not in any way
affect the obligations of Tenant hereunder. Notwithstanding the foregoing and
except as provided in the next sentence and subject to Section 23, if the Leased
Premises are not Ready for Occupancy within two (2) months after the Scheduled
Term Commencement Date, then within the next ten (10) day period thereafter
ensuing, but not subsequent to the date Landlord delivers possession of the
Leased Premises to Tenant, Tenant may, by notice to Landlord, terminate this
Lease without any further obligation by Tenant or Landlord to the other.
D. Tenant may take partial possession of the Leased Premises ten
(10) days prior to the date the Leased Premises are estimated to be Ready for
Occupancy for the purpose of installing Tenant's furniture, fixtures, equipment
and other leasehold improvements, provided that such early occupancy by Tenant
shall not unreasonably interfere with the construction and completion of the
Project or the Leased Premises by Landlord or cause union jurisdictional
disputes; and provided further that such early occupancy shall be subject to all
the terms of this Lease, except that the payment of rent shall not be
accelerated. Tenant shall give Landlord notice at least twenty-four (24) hours
prior to the time Tenant intends to take such early partial possession of the
Leased Premises, and Tenant shall coordinate Tenant's activities relating to the
Leased Premises with Landlord's Project manager during such early occupancy
period.
E. Occupancy of the Leased Premises by Tenant shall be deemed
acceptance thereof by Tenant in good and suitable condition (other than punch
list items and latent defects) and acknowledgment of completion in full
accordance with the provisions hereof.
4. COMMENCEMENT DATE CERTIFICATE
Landlord and Tenant shall execute a Commencement Date Certificate
substantially in the form of Exhibit F, attached hereto, promptly following the
determination of the Commencement Date confirming the Commencement Date of the
Lease, the Termination Date of the Lease, the total rentable square feet of the
Leased Premises, the Final Tenant Improvement Cost, Tenant's Pro Rata Share of
Operating Expenses, the Initial Annual Rent, an estimate of the first year's
Operating Costs and such other matters as may be reasonably requested by
Landlord; provided however, that the failure of Landlord or Tenant to confirm
the same in writing shall not affect any obligation of Tenant hereunder or
Landlord's determination of the Commencement Date as provided in Section 3.B.
5. USE OF PREMISES
Tenant shall use the Leased Premises solely for the purposes set
forth on the Summary Page. Tenant will not occupy or use, nor permit any
portion of the Leased Premises to be occupied or used, for any other purpose or
for any purpose which is unlawful in part or in whole or deemed to be
disreputable in any manner, or which creates any safety hazard, nor shall Tenant
permit anything to be done which will in any way increase the rate of insurance
on the Building or contents, and in the event that, by reason of Tenant's acts
or conduct of business,
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there shall be any increase in the rate of insurance on the Building or
contents, then Tenant hereby agrees to pay such increase. Tenant will conduct
its business, and control its employees, agents, guests, invitees and licensees,
in such a manner so as not to create any nuisance or interfere with, annoy or
disturb other tenants or Landlord in the management of the Building.
6. PARKING
Tenant shall have the right to use the Building's parking
facilities in accordance with and subject to Exhibit G attached hereto.
7. INSURANCE
A. During the Lease Term, Tenant shall maintain a policy of
commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability for
bodily injury, property damage (including loss of property) and personal injury
arising out of the operation, use or occupancy of the Leased Premises, with a
combined single limit of not less than $2,000,000. Such insurance shall (i) name
Landlord as an additional insured, (ii) be primary and non-contributing, and
(iii) contain cross-liability endorsements. Tenant shall also secure and
maintain "all risk" or "multi-peril" insurance on all of Tenant's property, and
betterments in the Leased Premises, including, without limitation, all of
Tenant's furniture, fixtures and personal property and all improvement,
alterations and additions made by Tenant, for full replacement cost. All
insurance that Tenant is required to maintain by this Lease shall include a
provision that requires the insurance carrier to give Landlord at least thirty
(30) days prior written notice before the same may be altered or canceled.
Tenant shall deliver to Landlord yearly or upon request certificates evidencing
that the insurance required by this Section is in force and effect. The limits
of any insurance carried by Tenant shall not, under any circumstances, limit the
liability of Tenant hereunder.
B. During the Term of this Lease, Landlord shall obtain and keep
in full force and effect a policy or policies of (i) comprehensive general
liability insurance covering bodily injury and property damage with a combined
single limit of not less than $2,000,000 for the benefit of Landlord as named
insured, insuring against all personal injury and property liability of Landlord
and its authorized representatives arising out of or in connection with the
Project, (ii) "all risk" or "multi peril" property insurance insuring the
Project in an amount at least equal to the full replacement value of the
Project, (iii) loss of rents insurance in an amount equal to twelve (12) months
base rent, and (iv) flood and earthquake insurance or other insurance as
required by any lender holding a security interest in the Project or as Landlord
reasonably determines is necessary, or prudent for the Project. All insurance
premiums for Landlord's insurance shall be included in Operating Costs as
described in Section 2.D and Exhibit E.
8. FIRE OR CASUALTY
It is agreed that if, during the continuance of this Lease, the
Leased Premises shall be so damaged by fire or other casualty, not arising from
the fault or negligence of Tenant, or any employee, agent, guest, invitee or
licensee of Tenant, so that the Leased Premises shall thereby be rendered
untenantable, then and in such case, the rent herein reserved, or a just and
proportionate
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part thereof, according to the nature and extent of the damage which has been
sustained, shall be abated until the Leased Premises shall have been duly
repaired and restored, which work of repair and restoration shall be done by
Landlord with all reasonable diligence; provided, however, that should Tenant be
in default at the time same occurs Landlord shall have no such obligation.
Landlord's obligation to repair and restore shall be limited to repairing and
restoring the Leased Premises and the Project to substantially the same
condition as existed immediately prior to such casualty, excluding leasehold
improvements made or installed by Tenant. In no event in the case of any such
casualty or destruction shall Landlord be required to repair or restore
leasehold improvements, fixtures or floor coverings actually made or installed
by Tenant or Tenant's stock in trade, furnishings and equipment. In case the
Project shall be destroyed so that the Leased Premises are not restorable within
one hundred twenty (120) days, Landlord or Tenant shall have the right to cancel
this Lease and end the Term hereof, and in case of such cancellation, the rent,
and any other moneys due and owning to Landlord, shall be paid by Tenant to the
date the damage occurred, and all further obligations upon the part of either
party hereto shall cease, and the estate hereby created shall thereupon
terminate. In the event the Leased Premises are damaged by fire or other
casualty during the last two (2) years of the term of this Lease to an extent
which renders the Leased Premises untenantable, Landlord or Tenant may within
thirty (30) days following the day of such fire or other casualty, immediately
terminate this Lease and Landlord shall be relieved of any obligation to rebuild
or repair the Leased Premises.
9. SERVICES AND EXPENSES
The services of Landlord and the payment by Tenant for said
services and of operational expenses are described in Exhibit E attached hereto.
10. ALTERATIONS AND CARE OF PREMISES
A. Tenant will not alter the exterior of the Leased Premises
(including glass, window coverings and signs, if applicable) and shall have no
fight to make any change, alteration or addition to the Leased Premises without
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. All costs of such work shall be paid promptly by Tenant so
as to prevent the assertion of any liens for labor or materials.
B. Tenant agrees that it will take good care of the Leased
Premises, fixtures and appurtenances, and suffer no waste or injury, that it
will make all repairs to the Leased Premises, fixtures and appurtenances
necessitated by the fault of Tenant, its agents, employees, guests, invitees and
licensees; that it will indemnify and hold harmless Landlord from any liability
arising from injury to person or property caused by any act or omission of
Tenant, its agents, employees, guests, invitees or licensees; that it will
repair, at or before the end of the Term, or sooner if so requested by Landlord,
all injury done by the installation or removal of furniture or other property;
and that, subject to Section 8, it will surrender the Leased Premises at the
expiration of the Term (or the sooner termination thereof for any reason) in as
good condition as they were at the beginning of the Term, ordinary wear and tear
excepted.
C. All alterations, additions, or improvements on or in the
Leased Premises at the expiration of this Lease, except trade fixtures, shall,
at the option of Landlord, be and become
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a part of the Leased Premises, and shall, at the option of Landlord, remain upon
and be surrendered with the Leased Premises as a part thereof at the termination
of this Lease. Should Tenant fail to remove any furniture or fixtures or
personal property of any kind, then same shall be considered as abandoned and
become the property of Landlord. In the event Landlord may desire Tenant to
remove additions, alterations or improvements Tenant, at its expense, shall,
upon expiration of this Lease, restore the Leased Premises to the same and as
good order and condition as when the same were entered upon by Tenant, ordinary
wear and tear excepted, and in default thereof, Landlord may effect such
removals and repairs and Tenant shall pay Landlord the cost thereof, with
interest at the rate of eighteen percent (18%) per annum to the date of payment
by Tenant to Landlord. At the time Landlord gives its consent to any changes,
alterations or additions to the Leased Premises as required in Section 10.A
above, it shall notify Tenant whether the same shall become part of the Leased
Premises or are to be removed by Tenant at the expiration of the Lease. In no
event, however, shall Tenant be required to remove any tenant improvements
installed by Landlord pursuant to Section 3.D. Landlord shall not be liable for
any loss or damage to Tenant caused by vermin, sewerage, snow, hail or water
that may leak into or flow from any part of the Leased Premises through any
defects in the roof or plumbing or from any other source, except as may result
from Landlord's gross negligence or willful misconduct.
11. PERMITTED USE OF HAZARDOUS MATERIALS
A. Tenant shall have the right under this Lease to Manage
Permitted Materials on the Leased Premises. Tenant shall provide Landlord with
prior notification before causing, suffering, or permitting the storage,
treatment, use, generation or disposal of any Permitted Materials in, on, about
or from the Leased Premises (other than reasonable amounts of normal office
supplies).
B. By January 15 of each year, Tenant shall furnish to
Landlord a list of all Permitted Material Managed on the Leased Premises during
the prior year.
C. For purposes of this Lease, the following terms shall mean
the following:
"Permitted Materials" means reasonable amounts of Hazardous
Materials that are Managed in the ordinary course of Tenant's business and use
of the Leased Premises for the purposes set forth in the Summary Page, provided
such Permitted Materials are properly Managed in accordance with applicable
Environmental Laws.
"Hazardous Materials" means (i) asbestos in any form, (ii)
urea formaldehyde foam insulation, (iii) PCBs, (iv) any substance or waste which
may pose a hazard to the health or safety of the occupants of the Building, (v)
petroleum or petroleum byproducts, or (vi) any flammable explosives, radioactive
or hazardous material, hazardous or solid waste, hazardous or chemical
substance, or any pollutant or contaminant, defined in, listed, or regulated
pursuant to any Environmental Law.
"Manage" means to store, utilize, generate, handle, treat,
transport or dispose of.
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"Environmental Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.
Sections 9601 et seq), and the regulations promulgated pursuant thereto,
or any other federal, state or local environmental law, ordinance, rule,
directive, order, common law ruling, regulation or statute relating to pollution
or protection of human health or the environment.
"Environmental Liabilities" means all costs, expenses, and
liabilities with respect to the presence or Management of Hazardous Materials,
any Hazardous Materials Release or Response Action, including, without
limitation, permits and licenses required pursuant to Environmental Law; any
damages for injury to person, property or natural resources; claims for the cost
or performance of Response Actions; and discharge and satisfaction of all liens,
encumbrances and restrictions on the Leased Premises relating to the foregoing.
"Hazardous Materials Release" shall mean any actual or
threatened release, spill, leak, pumping, pouring, emitting, emptying,
discharge, injection, escaping, leaching dumping or disposing into the
environment (air, land or water) of any Hazardous Materials.
"Response Action" shall mean actions to investigate, study,
sample, test, remove, remediate, cleanup or take other actions in response to
the presence of Hazardous Materials.
12. ENVIRONMENTAL
A. Except for Permitted Materials, Tenant will not introduce, or
permit or suffer the introduction of, Hazardous Materials within the Leased
Premises or the Project.
B. In connection with its use and occupancy of the Leased
Premises, Tenant (i) shall comply with applicable Environmental Laws, (ii) shall
obtain, maintain and comply with all necessary permits required by Environmental
Laws for the operation of Tenant's business at the Leased Premises, (iii) shall
not Manage (or permit or acquiesce in the Management of) any Hazardous Materials
at or from the Leased Premises, except for Permitted Materials; (iv) will not
cause or allow any discharge or disposal of any Hazardous Materials, other than
Permitted Materials, to floors, floor drains, storm or sanitary sewer systems,
and will not cause or allow any discharge or disposal of Hazardous Materials to
surface or ground water or the Land surface; (v) shall cause its employees,
agents, licensees, invitees, contractors and other parties under the supervision
or control of Tenant (collectively, "Tenant's Agents") to comply with the
representations, warranties and covenants contained in Sections 11 and 12; and
(vi) shall provide information and documents within its possession or control
related to Tenant's compliance with Environmental Laws and the terms of Sections
11 and 12, upon the written request of Landlord.
C. In the event Tenant or any of Tenant's Agents violates or is
found to be in violation of any Environmental Law with respect to the Leased
Premises or their activities conducted thereon, Tenant shall promptly cure such
violation. In the event of any Hazardous Materials Release at, on, under, from
or about the Leased Premises or the Project caused by Tenant or any of Tenant's
Agents, Tenant shall promptly undertake such Response Actions as are necessary
to comply with Environmental Laws and restore the Leased Premises and any
affected property to their condition prior to such Hazardous Materials Release.
Tenant shall obtain
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Landlord's approval in advance of undertaking any Response Action at the Leased
Premises (except in the event of exigent circumstances, in which case Tenant
shall commence Response Actions immediately and promptly notify and seek
approval from Landlord) and shall promptly cure any violations and promptly
undertake and implement any Response Actions within a reasonable period of
time, but no later than any cure period allowed by law. Failure to do so shall
constitute a default under this Lease (without any notice to Tenant required),
and Landlord may (but shall not be obligated to) do whatever is necessary to
comply with Environmental Laws or respond to the Hazardous Materials Release,
acting either in its own name or in the name of Tenant pursuant to this
Section, and the reasonable cost thereof, shall be borne by Tenant and thereupon
become due and payable as additional rent hereunder. Tenant shall give to
Landlord and its agents and employees access to the Leased Premises for such
purposes and hereby specifically grants to Landlord a license to remove Tenant's
Hazardous Materials and take such other actions as are necessary or prudent to
comply with Environmental Laws, acting either in its own name or in the name of
the Tenant pursuant to this Section.
D. Landlord agrees to provide Tenant with a copy of a Phase I
Environmental Assessment prior to commencement of the Term. Landlord hereby
indemnifies and holds Tenant and each of its officers, directors, shareholders,
managers, employees and agents harmless from, against, for and in respect of,
Environmental Liabilities to the extent arising from the presence of Hazardous
Materials on the Leased Premises prior to commencement of the Term.
E. Tenant hereby indemnifies and holds Landlord and each of its
officers, directors, shareholders, managers, employees and agents harmless from,
against, for and in respect of, any and all damages, losses, orders, sanctions,
settlement payments, obligations, liabilities, claims, actions or causes of
actions, encumbrances, fines, penalties, and reasonable costs and expenses
suffered, sustained, incurred or required to be paid by any such indemnified
party (including, without limitation, reasonable fees and disbursements or
attorneys, engineers, laboratories, contractors and consultants) because of, or
arising out of or relating to (i) Tenant's breach of any of its
representations, warranties and covenants under this Section, and (ii) any
Environmental Liabilities to the extent caused by the acts or omissions of
Tenant or Tenant's Agents in connection with the Leased Premises.
F. Tenant shall immediately notify Landlord in writing of the
occurrence of any Hazardous Materials Release, violations of Environmental Laws,
pending or threatened regulatory actions, or claims made by any governmental
authority or third party relating to any Hazardous Materials or Hazardous
Materials Release at, on, under or from the Leased Premises, and shall promptly
furnish Landlord with copies of any correspondence, legal pleadings or other
documents in connection therewith. Landlord shall have the right (but not the
obligation) to notify any governmental authority of any information which comes
to its attention with respect to any Hazardous Materials or Hazardous Materials
Release on or from the Leased Premises.
G. Upon expiration of the Term, Tenant shall deliver the Leased
Premises to Landlord free of Hazardous Materials introduced by Tenant or
Tenant's Agents and free of any liens, encumbrances and restrictions relating to
Environmental Liabilities caused by or resulting from any act or omission of
Tenant or any of Tenant's Agents so that the environmental condition
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of the Leased Premises shall conform with all applicable Environmental Laws and
shall be substantially the same as at the beginning of the Term.
H. In the event a lien is filed against the Land or Building by
a governmental or quasi-governmental authority with respect to Environmental
Laws, arising from an intentional or unintentional act or omission of Tenant or
any of Tenant's Agents, Tenant shall, within twenty (20) days from the date that
Tenant is notified that the lien has been placed against the Land or Building or
within such shorter period if such government authority has commenced steps to
cause the Land or Building to be sold pursuant to the lien, either (i) cause
said lien to be removed from the Land or Building, and/or (ii) furnish a bond or
title insurance endorsement regarding such lien in form and substance
satisfactory to Landlord in Landlord's sole, absolute discretion.
I. Tenant agrees that Landlord and its agents and contractors
shaft have the right (but not the obligation) at reasonable times to conduct
such environmental inspections and tests ("Inspections") of the Leased Premises
as Landlord shall reasonably deem necessary or advisable, and Tenant hereby
grants to Landlord and its agents and contractors the right to enter the Leased
Premises to perform the same. Unless such Inspections could not be performed
effectively during non-business hours, they shall be conducted during
non-business hours. Landlord shall notify Tenant no less than forty-eight (48)
hours prior to any Inspection, except in emergencies, when no notice shall be
required. Landlord shall pay the cost of any Inspection unless the same
discloses a violation of Environmental Laws or the presence of any Hazardous
Materials other than Permitted Materials on the Leased Premises or any other
property caused by Tenant or any of Tenant's Agents, in which case Tenant shall
pay the cost thereof.
J. The foregoing indemnification and responsibilities of Tenant
under this Section shall survive the termination or expiration of this Lease,
except that the indemnification in Section 12.E shall expire two (2) years after
the Lease is terminated if Tenant, at its sole cost and expense, demonstrates to
Landlord that Tenant has no liability to Landlord under Section 12.E. Tenant
shall be deemed to have made the demonstration described in the previous
sentence if Tenant delivers to Landlord an environmental report prepared by an
environmental consultant acceptable to Landlord which concludes that there are
no Hazardous Materials at, on, under, or released from the Leased Premises that
could be attributed to the operations of Tenant or Tenant's Agents.
13. DEFAULT AND REMEDIES
A. The following events shall be deemed to be events of default
by Tenant under this Lease:
(i) Tenant shall have failed to pay any installment of rent
or any other charge provided herein, or any portion thereof, within five (5)
days after the same shall be due and payable and such failure shall continue for
seven (7) days after written notice from Landlord to Tenant of such failure;
provided, however, that Tenant shall not be entitled to more than two (2)
notices of such failure during any period of twelve (12) consecutive months and
if after two (2) such notices are given in any period of twelve (12) consecutive
months, Tenant fails, during such period of twelve (12) consecutive months,
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to pay any such amounts within five (5) days after the same shall become due or
payable, such failure shall constitute an event of default by Tenant without
further notice by Landlord; or
(ii) Tenant shall have failed to comply with any other provisions
of this Lease and shall not cure such failure within forty-five (45) days after
Landlord, by written notice, has informed Tenant of such noncompliance (in the
case of a default which cannot with due diligence be cured within a period of
forty-five (45) days, Tenant shall have such additional time to cure same as may
be reasonably necessary, provided Tenant proceeds promptly and with due
diligence to cure such default after receipt of said notice); or
(iii) Tenant or its Guarantor shall file in any court a petition
in bankruptcy or insolvency or for the reorganization or arrangement within the
meaning of the present or any future federal or state bankruptcy act for the
same or similar relief, or for the appointment of a receiver or trustee of all
or a portion of Tenant's or such guarantor's property; or
(iv) An involuntary petition of the kind referred to in
subparagraph (iii) herein shall be flied against Tenant or its Guarantor, and
such petition shall not be vacated or withdrawn within one hundred fifty (150)
days after the date of filing thereof, or
(v) Tenant or its Guarantor shall make an assignment for the
benefit of creditors; or
(vi) Tenant or its Guarantor shall be adjudicated a bankrupt; or
(vii) A receiver shall be appointed for the property of Tenant or
its Guarantor by a court of competent jurisdiction; or
(viii) Tenant shall cease to conduct its normal business
operations in the Leased Premises or shall vacate or abandon the Leased Premises
and leave same vacated or abandoned for a period of twenty (20) days; or
(ix) Tenant shall do or permit to be done anything which creates
a lien upon the Leased Premises which is not paid, discharged or bonded over
promptly after written notice to Tenant;
then Landlord may elect either (a) to cancel and terminate this Lease or (b) to
terminate Tenant's right to possession only without terminating the Lease.
B. In the event of Landlord's election to terminate Tenant's
right to possession only, Landlord may, at Landlord's option, enter into the
Leased Premises and take and hold possession thereof, without such entry into
possession terminating this Lease or releasing Tenant in whole or in part from
Tenant's obligation to pay the rent and other charges hereunder for the full
stated Term, such amounts shall continue to be due on the days such rent and
other charges are due under this Lease, except that the Unamortized Tenant
Improvement Cost shall be due and payable immediately upon demand by Landlord.
Upon such re-entry, Landlord may
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remove all persons and property from the Leased Premises and such property may
be removed and stored in a public warehouse or elsewhere at the cost of, and for
the account of Tenant, all without service of notice or resort to legal process
and without being deemed guilty of trespass, or becoming liable for any loss or
damage which may be occasioned thereby. Upon and after entry into possession
without termination of the Lease, Landlord shall as reasonable efforts to relet
the Leased Premises, or any part thereof, for the account of Tenant, to any
person, firm or corporation, other than Tenant, for such rent, for such time and
upon such terms as Landlord shall determine and deem proper, and Landlord shall
not be required to accept any tenant offered by Tenant or to observe any
instruction given by Tenant about such reletting. In any such case, Landlord may
clean, make repairs, and redecorate or remodel the premises to the extent deemed
by Landlord necessary or desirable, and Tenant shall, upon demand, pay the
reasonable costs thereof, together with Landlord's reasonable expenses of
reletting, including commissions. If the consideration collected by Landlord
upon any such reletting for Tenant's account, and after deducting all reasonable
expenses incident thereto, including brokerage fees and legal expenses, is not
sufficient to pay monthly the full amount of the rent provided in this Lease,
Tenant shall pay to Landlord the amount of each monthly deficiency upon demand.
In the event that Landlord shall have terminated Tenant's fight to possession
only, Landlord shall have the right to cancel and terminate this Lease by
serving three (3) days' written notice on Tenant of such further election and to
pursue any remedy provided in Section 13.C below.
C. In the event of Landlord's termination, Landlord may, in
addition to any. other remedy at law or in equity that may be available to
Landlord, hold Tenant liable for damages in an amount equal to the rent and
other charges that would have been owing by Tenant hereunder for the balance of
the Term had this Lease not been terminated, less the proceeds, if any, of any
reletting of the Leased Premises by Landlord subsequent to such termination,
deducting therefrom Landlord's reasonable costs and expenses of reletting as
provided in Section 13.B. Landlord shall be entitled to collect such damages
monthly from to Tenant on the days on which rent would have been payable
hereunder if the Lease had not been terminated, except that the Unamortized
Tenant Improvement Cost shall be due and payable immediately upon demand by
Landlord.
D. If Tenant shall fail to remove any of Tenant's personal
property upon the abandonment thereof or upon the termination of this Lease for
any cause whatsoever, Landlord, at its option, may remove the same in any
commercially reasonable manner that it shall choose and store the said effects
without liability to Tenant for toss thereof in any public or private warehouse,
and Tenant agrees to pay Landlord on demand any and all reasonable expenses
incurred in such removal, including court costs and reasonable attorney's fees
and storage charges on such personal property for any length of time the
personal property shall be in storage; or Landlord, at its option, without
notice, may sell said personal property, or any of the same, at public or
private sale and without legal process, for such prices as Landlord may obtain,
and apply the proceeds of such sale upon any amounts due under this Lease from
Tenant to Landlord and upon the expense incidental to the removal, storage and
sale of the personal property, any excess shall be retained by Landlord unless
demanded by Tenant within thirty (30) days after sale.
E. In the event of any breach hereunder by Tenant, Landlord may
immediately or at any time thereafter, without notice, cure such breach for the
account and at the expense of
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Tenant. If Landlord at any time by reason of such breach is compelled to pay, or
elects to pay, any reasonable sum of money or do any reasonable act which will
require the payment of any reasonable sum of money, or is compelled to incur any
expense, including reasonable attorney's fees, the sum or sums so paid by
Landlord, with interest thereon at the rate specified in Section 2.E from the
date of payment, thereof, shall be deemed to be due from Tenant to Landlord on
the first day of each month following the payment of such respective sums or
expenses.
F. If at any time or times hereafter, if by reason of default,
eviction or other action at law or equity, Landlord employs counsel for advice
with respect to this Lease or any related landlord-tenant law issue, or employs
counsel to intervene, file an eviction, complaint, notice, answer, motion or
other pleading in any suit or proceeding relating to this Lease or the tenancy
relationship, or to attempt to collect rents under or to enforce this Lease
against Tenant, its assign(s) or subtenant(s), then, in any of such events, all
of the reasonable attorney's fees arising from any such legal services, and any
expenses, costs and charges relating thereto, shall be an additional liability
owing hereunder by Tenant to Landlord and shall be payable on demand.
G. Tenant hereby expressly waives, to the full extent waivable,
any and all rights of redemption granted by or under any present or future laws
in the event of Tenant being evicted or dispossessed for any cause, or in the
event of Landlord obtaining possession of the Leased Premises by reason of the
violation by Tenant of any of the covenants or conditions of this Lease, or
otherwise.
H. In the event of Tenant's default hereunder, Landlord may, in
addition to all other rights and remedies, re-enter the premises, change any and
all of the locks on doors or other barriers, and distrain, seize, remove or
store all property upon the Leased Premises. Tenant hereby agrees that all such
acts by Landlord shall not constitute an eviction, constructive or otherwise,
shall not terminate this Lease, and shall not render Landlord liable for
trespass, forcible entry and detainer, conversion, or in any other way,
whatsoever. Tenant shall pay all reasonable costs and expenses incurred by
Landlord in doing such acts. If the default is not corrected within the time
periods set forth in Section 13.A, Landlord may dispose of Tenant's personal
property, without further notice to Tenant, as described in Section 13.D.
I. Tenant waives and disclaims any present or future right to
withhold any rental payment or any other payment due under this Lease, or to
set-off in any action for rental, against any obligation of Landlord, however
incurred, and Tenant hereby agrees that it will not claim or assert any right to
so withhold or set-off.
J. Should Landlord be in default under the terms of this Lease,
Landlord shall have reasonable and adequate time in which to cure the same after
written notice by Tenant to Landlord.
14. ASSIGNMENT OR SUBLETTING
A. It is agreed that neither the Leased Premises nor any part
thereof shall be sublet, nor shall this Lease be assigned, by Tenant without the
written consent of the Landlord having been first obtained, which consent shall
not be unreasonably withheld or delayed. No
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assignment for the benefit of creditors, or by operation of law, shall be
effective to transfer any rights to an assignee without the written consent of
Landlord having been first obtained. Notwithstanding the foregoing, Tenant may
assign this Lease or sublet the Leased Premises to any affiliated entity that
controls, is controlled by or is under common control with Tenant.
B. It is agreed that if this Lease be assigned without Landlord's
consent, or if the Leased Premises or any part thereof be sublet or occupied by
anyone other than Tenant without Landlord's consent, Landlord may collect rent
from the assignee, subtenant or occupant, and apply the net amount collected to
the rent herein specified, and no such collection shall be deemed a waiver of
the covenant herein against assignment and subletting, or the acceptance of the
assignee, subtenant or occupant as Tenant, or a release of Tenant from the
complete performance by Tenant of the covenants herein contained on the part of
Tenant to be performed. Notwithstanding any assignment or sublease, Tenant shall
remain fully liable on this Lease and shall not be released from performing any
of the terms, covenants and conditions of this Lease.
C. Landlord in any case (except to an affiliate of Tenant as
provided in subsection A) shall have the right, at its sole option, to terminate
this Lease with respect to that portion of the Leased Premises covered by any
assignment rather than have it assigned, in which event the base rent and
Tenant's Pro Rata Share of Operating Expenses shall be proportionally adjusted.
15. ENCUMBRANCES
A. It is agreed that this Lease is subject and subordinate to the
lien of any trust deeds or mortgages now on or which at any time may be made a
lien upon the Leased Premises, or the Project in which the Leased Premises are
situated, or Landlord's interest therein, and to all advances made or hereafter
to be made upon the security thereof. Tenant agrees to execute and deliver upon
request such further instrument or instruments subordinating this Lease to the
lien of any such trust deeds or mortgages as shall be reasonably required by any
mortgagee or proposed mortgagee. Tenant's subordination to a trust deed,
mortgage, trust or other encumbrances of the Project shall be contingent upon
Tenant's receipt from the holder thereof of a non-disturbance agreement prepared
on such holder's standard form; provided, however, receipt of such
non-disturbance agreement shall be conditioned upon Tenant not being in default
hereunder and holder's reasonable approval of Tenant's financial condition. Such
non-disturbance agreement will provide in substance that so long as Tenant
complies with the terms, covenants and conditions of this Lease, the party
succeeding to Landlord's interest will recognize this Lease.
B. At any time, and from time to time, Tenant and Landlord agree,
upon request in writing from the other party, to execute, acknowledge and
deliver to the other party a statement in writing certifying that this Lease is
unmodified and in full force and effect or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications and the dates to which rent, herein stipulated, and other charges
have been paid, or, if there exists any default under this Lease, describing the
nature of such default.
C. In the event of any sale of the Leased Premises by Landlord,
Landlord shall be and is hereby entirely freed and relieved of all liability
under any and all of its covenants and
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obligations contained in or derived from this Lease arising out of any act,
occurrence or omission occurring aider the consummation of such state; and the
purchaser, at such sale or any subsequent sale of the Leased Premises, shall be
deemed, without any further agreement between the parties or their successors in
interest or between the parties and any such purchaser, to have assumed and
agreed to carry out any and all of the covenants and obligations of Landlord
under this Lease.
16. EMINENT DOMAIN
A. If the whole of the Leased Premises shall be acquired or
condemned by eminent domain for any public or quasi-public use or purpose or
shall be conveyed in lieu thereof (in any such case a "taking"), or if any part
of the Leased Premises or the Project shall be taken and such partial taking
renders the Leased Premises unsuitable for the business of Tenant, then the Term
of this Lease shall cease and terminate as of the date of the transfer of title,
all rentals shall be paid up to that date, and Tenant shall have no claim
against Landlord for the value of any unexpired term of this Lease.
B. In the event of a partial taking of the Leased Premises or the
Project that is not extensive enough to render the Leased Premises unsuitable
for the business of Tenant, this Lease shall continue in full force and effect
with respect to that portion of the Leased Premises not taken, Landlord, to the
extent possible, shall promptly proceed to restore the Leased Premises to a
condition comparable to its condition immediately prior to such taking (less the
portion lost through the taking), and the rent payable by Tenant hereunder
shall be equitably abated during such period of restoration and proportionately
and equitably reduced thereafter.
C. All compensation or damages for any taking shall belong to and
be the property of Landlord without participation by Tenant; however, Tenant may
make any claim for loss or damages directly against the condemning authority,
provided that such claim does not diminish, delay or otherwise adversely affect
Landlord's award.
17. MUTUAL WAIVER OF SUBROGATION
Anything in this Lease to the contrary notwithstanding, neither
Landlord nor Tenant shall be liable to the other for any business interruption
or any loss or damage to property or injury to or death of persons occurring on
the Leased Premises or the adjoining properties, sidewalks, streets or alleys,
or in any manner growing out of or connected with Tenant's use and occupation
of, or Landlord's operation and maintenance of: the Leased Premises, or the
condition thereof: or of sidewalks, streets or alleys adjoining, caused by the
negligence or other fault of Landlord or Tenant or of their respective
employees, agents, guests, invitees, licensees, subtenants or assignees, to the
extent that such business interruption or loss or damage to property or injury
to or death of persons is covered by or indemnified by proceeds received from
insurance carried by the other party (regardless of whether such insurance is
payable to or protects Landlord or Tenant or both) or for which such party is
otherwise reimbursed; and Landlord and Tenant each hereby respectively waives
all right of recovery against the other, its employees, agents, guests,
invitees, licensees, subtenants and assignees, for any such loss or damage to
property or injury to or death of persons to the extent the same is covered or
indemnified by proceeds received from any such insurance, or for which
reimbursement is to otherwise received. Nothing in this Section
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contained shall be construed to impose any other or greater liability upon
either Landlord or Tenant than would have existed in the absence of this
Section. Landlord and Tenant will cause their respective insurers to issue
appropriate waiver of subrogation fights endorsements to all appropriate
policies of insurance carried in connection with the Project and the Leased
Premises or the contents of either of them whereby such insurers consent to the
mutual releases of liability contained in this Section.
18. ADDITIONAL COVENANTS AND AGREEMENTS
A. Tenant covenants and agrees to comply with all lawful orders,
regulations and requirements issued by any federal, state or municipal
government, or any department or division thereof, insofar as the same are
applicable to the possession and occupancy of the Leased Premises; Landlord
covenants and agrees to comply with all lawful orders, regulators and
requirements issued by any federal, state or municipal government or any
department or division thereof, insofar as the same are applicable to the
Project. Tenant further covenants not to use the Leased Premises for any
purposes now or hereafter prohibited by the laws of the United States, the state
in which the Project is located or applicable ordinances or for any purpose
inconsistent with a building of the type and nature of the Project.
Notwithstanding the foregoing, Tenant shall be responsible for all costs of
compliance with the Americans with Disabilities Act (ADA) as a result of
Tenant's occupancy of the Leased Premises and any additional costs incurred by
Landlord as a result of such occupancy shall be paid by Tenant.
B. Tenant covenants and agrees to indemnify and hold harmless
Landlord, its officers, directors, shareholders, managers, agents and employees,
from and against all liability, obligations, claims, damages, penalties, causes
of action, costs and expenses, including without limitation, reasonable
attorneys' fees, imposed upon, incurred by or asserted against Landlord or any
of its officers, agents or employees by reason of any of the following is
occasioned wholly or in part by any act or omission of Tenant or any of its
employees, agents, guests, invitees, licensees or anyone claiming by, through,
or under Tenant (and the term "Tenant" as used in this paragraph shall be deemed
to mean all such parties): (i) any accident, injury to or death of any person or
loss of or damage to any property occurring in, upon, at, or from the Leased
Premises or arising from or out of any occupancy by Tenant of the Leased
Premises; (ii) any act or omission of Tenant; (iii) any use which may be made
of, or condition existing upon, the Leased Premises; (iv) any improvements,
fixtures or equipment upon the Leased Premises; (v) any failure on the part of
Tenant to perform or comply with any of the provisions, covenants or agreements
of Tenant contained in this Lease; (vi) any violation of any law, ordinance,
order, rule or regulation of governmental authorities having jurisdiction over
Tenant, Tenant's employees, agents, guests, invitees or licensees or anyone
claiming by, through or under Tenant; or (vii)any repairs, maintenance,
improvement, alteration or addition to the Leased Premises made by, through or
under Tenant.
C. Tenant covenants and agrees that, in case any action, suit or
proceeding is brought against Landlord or any of its officers, agents or
employees by reason of any of Tenant's indemnification obligations under this
Lease, Tenant shall, upon notice from Landlord, at Tenant's sole cost and
expense, defend Landlord or such officer, agent or employee in any such action,
suit or proceeding by counsel reasonably satisfactory to Landlord.
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D. Tenant waives and releases any claims Tenant may have against
Landlord or Landlord's officers, agents or employees for loss, damage or injury
to person or property sustained by Tenant, Tenant's employees, agents, guests,
invitees or licensees or anyone claiming by, through or under Tenant, resulting
from any cause whatsoever other than Landlord's gross negligence or willful
misconduct. Neither Landlord nor its officers, agents or employees shall be
liable to Tenant for any damage by or from any act or negligence by any
co-tenant or other occupant of the Building or by any owner or occupant of
adjoining or contiguous property. Tenant acknowledges that Landlord has no
obligation to provide security for the Leased Premises or the Project. All
property belonging to Tenant or any occupant of the Leased Premises shall be
maintained at the sole risk of Tenant or such occupant, and neither Landlord nor
any of its officers, agents or employees shall be liable for any damage to or
theft or misappropriation of such property, nor for any damage to property
entrusted to any of Landlord's officers, agents or employees.
E. Without the prior written consent of Landlord and except as
provided in the Plans, Tenant shall not place or display any sign,
advertisement, notice or other lettering on any part of the outside of the
Leased Premises or the Project of which they form a part, or on the surface
of any exterior glass, attach any awning or other projections to the outside
walls of the Leased Premises, or install any window shades, blinds, drapes or
other window covering or any internal lighting that may be visible from the
exterior of the Leased Premises.
F. No act or thing done by Landlord or Landlord's agents during
the Term hereof, or any extension hereof, shall be deemed an acceptance of a
surrender of the Leased Premises, and no agreement to accept such surrender
shall be valid unless in writing signed by Landlord. No employee of Landlord or
of Landlord's agents shall have any power to accept the keys of the Leased
Premises prior to the termination of this Lease. The delivery of keys to any
employee of Landlord, or of Landlord's agents, shall not operate as a
termination of this Lease or a surrender of the Leased Premises. No payment by
Tenant, or receipt by Landlord, of a lesser amount than the rent and other
charges herein stipulated, shall be deemed to be other than on account of the
earliest stipulated rent, nor shall any endorsement or statement on any check or
any letter accompanying any check, or payment as rent, be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
available to Landlord.
G. Tenant agrees to furnish to Landlord annual audited financial
statements of the Guarantor, Jenoptik AG within one hundred fifty (150) days
after the end of each fiscal year. If additional information is required by
Landlord to secure a loan on the property, M & W Holding and/or Jenoptik AG will
furnish such information in a format that does not disclose any proprietary
information.
H. At the election of the encumbrancer, Tenant shall, in the
event of any foreclosure of any encumbrances, attorn to the purchaser upon any
such foreclosure sale and recognize such purchaser as the Landlord of this
Lease.
I. Tenant covenants and agrees that no diminution of light, air
or view by any structure that may hereafter be erected (whether or not by
Landlord) shall entitle Tenant to any
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reduction of rent or other charges under this Lease, result in any liability of
Landlord to Tenant, or in any way affect this Lease or Tenant's obligations
hereunder.
19. NO PARTNERSHIP, JOINT VENTURE OR AGENCY
It is expressly understood that Landlord and Tenant are not
partners or joint venturers and that Landlord has no right, title or interest in
and to the business of Tenant, and that Landlord has no right to represent or
bind Tenant in any respect whatsoever, and that nothing herein contained shall
be deemed, held or construed as making Landlord a partner, joint venturer or
associate of Tenant, nor as rendering Landlord liable for any debts, liabilities
or obligations incurred by Tenant. Neither is the relationship between Landlord
and Tenant that of principal and agent. It is expressly understood that the
relationship between the parties hereto is, and shall at all times remain, that
of Landlord and Tenant.
20. HOLDING OVER
It is agreed that if, after the expiration of this Lease, Tenant
shall, with Landlord's consent, remain in possession of the Leased Premises and
shall continue to pay rent without written agreement as to such possession,
Tenant shall be regarded as a tenant from month to month, at a monthly rental,
payable in advance, equal to two (2) times the monthly rental for the last full
month immediately prior to said expiration (unless at least six (6) months prior
to expiration of the Lease the Tenant, in writing, notifies Landlord of Tenants
desire to extend the Lease for an additional three (3) months, then for that
three (3) month period the monthly rental will be equal to 1.1 times the monthly
rental for the last full month immediately prior to said expiration), and shall
otherwise be subject to all the terms and conditions of this Lease.
21. QUIET ENJOYMENT
Upon payment by Tenant of the rents and other charges herein
provided, and upon the observance and performance of all of the covenants, terms
and conditions on Tenant's part to be observed and performed, Tenant shall
peaceably and quietly hold and enjoy the Leased Premises for the Term hereby
leased without hindrance or interruption by Landlord or any other person or
persons lawfully or equitably claiming by, through or under Landlord, subject,
nevertheless, to the terms and conditions of this Lease.
22. LANDLORD'S RESERVED RIGHTS
Landlord shall have the following rights, exercisable without
notice to Tenant (except as expressly provided herein) and without liability to
Tenant for damage or injury to persons, property or business (except to the
extent the same is caused by Landlord's gross negligence or willful misconduct)
and without being deemed an eviction or disturbance of Tenant's use or
occupancy of the Leased Premises or giving rise to any claim for setoff or
abatement of rent: (i) to change the building name or street address upon thirty
(30) days prior written notice to Tenant; (ii) to install, alter and maintain
signs on the exterior and/or interior of the Building and any place on the
Project, except within the Leased Premises; (iii) at any normal business hour,
to enter the Leased Premises to view and inspect the same, to exhibit the Leased
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Premises to prospective lenders, prospective purchasers or, within the last six
(6) months of the Term and upon reasonable notice to Tenant, prospective tenants
(with the understanding that Tenant may restrict viewing of or access to
confidential or proprietary processes), to post notices of non-responsibility,
to supply any service to be provided by Landlord or Tenant hereunder, and to
make such repairs, alterations, improvements and additions to the Leased
Premises or the Project that Landlord may deem necessary or desirable, and for
that purpose may erect scaffolding and other necessary structures where
reasonably required by the character of the work to be performed, always
providing that the entrance to the Leased Premises shall not be blocked thereby
and further providing that the business of Tenant shall not be interfered with
unreasonably; (iv) to enter the Leased Premises at all times for the purpose of
responding to an actual or apparent emergency, and in such event to use any and
all means that Landlord may deem proper to open doors and/or gates to obtain
entry to the Leased Premises; (v) to enter and alter, renovate and redecorate
the Leased Premises for reoccupancy either during the last month of the Term if,
during or prior to such time, Tenant has vacated the Leased Premises or any time
after Tenant abandons the Leased Premises; (vi)to grant to any party the
exclusive right to conduct any business or render any service in the Project,
provided such exclusive right shall not operate to exclude Tenant from using the
Leased Premises for the purpose expressly permitted by this Lease; (vii) to
place on the Project a sign or signs advertising the Project for sale or, during
the last six (6) months of the Term, the Leased Premises for lease, and (viii)
to make such reasonable rules and regulations, and amendments thereto, as
Landlord deems necessary or desirable, which shall be as binding on Tenant as if
set forth herein, provided they shall apply uniformly to all the tenants in the
Project and are not consistent with other terms and conditions of this Lease.
Nothing herein contained shall be deemed or construed to impose upon Landlord
any obligation, responsibility or liability whatsoever for the care, maintenance
or repair of the Project or any part thereof except as otherwise herein
specifically provided.
23. FORCE MAJEURE
Anything in this Lease to the contrary notwithstanding,
providing such cause is not due to the willful act or neglect of the party,
neither party shall be deemed in default with respect to the performance of any
of terms, covenants and conditions of this Lease if the same shall be due to any
strike, lockout, civil commotion, war-like operation, invasion, rebellion,
hostilities, military or usurped power, sabotage, governmental regulations,
controls, restrictions or delays, inability to obtain any materials, services,
zoning, Project permits, Acts of God, fire or other unavoidable casualty,
earthquake, floods, explosions, actions of the elements, extreme weather
conditions, undue precipitation, other weather conditions, delays caused by the
other party or other cause beyond the reasonable control of the party.
24. MISCELLANEOUS
A. It is understood by the parties hereto that neither this
Lease nor any memorandum hereof may be recorded by Tenant without Landlord's
prior written consent.
B. The submission of this Lease for examination or execution
does not constitute a reservation of or option for the Leased Premises, and this
Lease becomes effective as a lease only upon execution and delivery thereof by
Landlord and Tenant.
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<PAGE> 25
C. Any notice which may be required to be given hereunder from
either of the parties to the other shall be in writing and shall be personally
delivered, sent by a reputable courier service, or mailed by certified mail,
return receipt requested, with proper postage prepaid, addressed, if to Tenant
at the address set forth in the Summary Sheet prior to occupancy and at the
address of the Leased Premises after occupancy, and if to Landlord at the
address set forth in the Summary Sheet, or at such other address as either party
may hereafter fix, by notice in writing to the other. If notice is sent by
certified mail, said notice shall be effective upon being deposited in the
United States Mail; however, the time period in which a response to any such
notice must be given shall begin to run from the date of receipt on the return
receipt of the notice. Notice delivered by personal service or courier shall be
effective upon delivery to an officer, director or agent of Tenant or an
officer, manager or agent of Landlord. Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice was given
shall be deemed to be receipt of notice sent.
D. This Lease shall be construed as though the covenants herein
between Landlord and Tenant are independent and are not dependent and Tenant
shall not be entitled to any setoff of the rent or other amounts owing hereunder
against Landlord if Landlord fails to perform its obligations set forth herein.
E. No assent, expressed or implied, to any breach of any one or
more of the covenants or agreements hereof, nor the delay of Landlord in the
assertion of any rights hereunder, shall be deemed to be taken to be a waiver of
any succeeding or other breach. The various rights, remedies, powers, options
and elections of Landlord or Tenant reserved, expressed or contained in this
Lease are cumulative and no one of them shall be deemed to be exclusive of the
others or of such other rights, remedies, powers, options or elections as are
now or may hereafter be conferred upon Landlord or Tenant by law.
F. Tenant acknowledges and agrees that it has not relied upon
any statements, representations, agreements or warranties by Landlord, its
agents or employees, except such as are expressed herein,
G. Landlord and Tenant each covenant to pay, hold harmless and
indemnify the other from and against any and all cost, expense (including, but
not limited to, reasonable attorneys' fees) or liability for any compensation,
commission, charge or claim (whether or not meritorious) by any broker, finder
or other person with respect to this Lease or the negotiation thereof as a
result of the dealings of the indemnifying party, other than any broker listed
as a Participating Broker on the Summary Page. The Participating Broker shall be
compensated by Landlord.
H. Notwithstanding anything to the contrary herein, Landlord's
liability under the Lease shall be limited to Landlord's interest in the
Project.
I. No amendment or modification of this Lease, or any approvals
or contents of Landlord required under this Lease, shall be valid or binding
unless reduced to writing and executed by the parties hereto in the same manner
as the execution of this Lease.
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J. Notwithstanding any other provision contained herein, the
indemnification obligations of either party under any provision of this Lease
shall survive the expiration or earlier termination of this Lease.
K. The term "Landlord" means so far as obligations of Landlord
are concerned, only the owner of the Building at the time in question and, if
any transfer of the title occurs, Landlord herein named (and in the case of any
subsequent transfers, the then grantor) is automatically released from and after
the date of such transfer of all liability thereafter accruing as respects
performance of any obligations of Landlord thereafter to be performed. Any funds
in Landlord's possession at the time of transfer in which Tenant has an interest
will be turned over to the grantee and any amount then due Tenant under this
Lease will be paid to Tenant.
L. Time is of the essence with respect to every provision of
this Lease in which time or performance is a factor.
M. Wherever the words "Landlord" and "Tenant" are used in this
Lease, they shall include "Landlords" and "Tenants" and shall apply to persons,
both men and women, companies, associations, partnerships, corporations, limited
liability companies, trusts and other entities. The section headings are
inserted only as a matter of convenience and for reference, and in no way
define, limit or describe the scope or intent of this Lease.
N. The Exhibits and Addenda, if any be hereto attached, are made
a part hereof and shall be binding upon the parties hereto as if the same were
contained herein, and if any provision of any Exhibit or Addendum shall
conflict in any manner with any other provision of this Lease, the provision of
the Exhibit or Addendum shall prevail. The Summary Page attached hereto is made
a part hereof and shall be binding upon the parties hereto, and if any provision
thereof shall conflict in any manner with any other provision of this Lease or
any Exhibit or Addendum, the provision of Lease, Exhibit or Addendum shall
prevail.
O. All the terms, conditions and covenants to be observed and
performed by the parties hereto shall be applicable and binding upon their
heirs, executors, administrators, successors and assigns.
P. The invalidity or unenforceability of any provision of this
Lease shall not effect or impair the validity of any other provision. The laws
of the state in which the Project is located shall govern the interpretation,
validity, performance and enforcement of this Lease.
Q. In the event of any litigation or arbitration arising out of
this Lease between Landlord and Tenant, the prevailing party shall be awarded
all reasonable costs and expenses thereof, including attorneys' fees, in
addition to any other damages.
R. As a condition to Landlord's execution of this Lease,
Tenant's parent company, Jenoptik AG, a German corporation (the "Guarantor"),
shall unconditionally guarantee Tenant's obligations under this Lease by the
execution of the Guarantee of Lease attached hereto as Exhibit H and delivered
to Landlord with this Lease.
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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and year first above written.
Tenant:
JENOPTIK INFAB, INC.
By: /s/ Timothy H. Ramsey
-------------------------------
Name: Timothy H. Ramsey
-------------------------------
Title: President
-------------------------------
Landlord:
CLEARFIELD INVESTMENTS, LLC
By: /s/ C. William Kephart
---------------------------------
C. William Kephart - Manager
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EXHIBIT A
LEGAL DESCRIPTION
Lot 2 in CENTENNIAL BUSINESS CENTER NO. 1, in the City of Colorado Springs,
El Paso County, according to the plat thereof recorded in Plat Book Y-3 at
Page 72 as amended by Engineer's Statement recorded July 5, 1985 in
Book 5031 at Page 609.
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EXHIBIT B
SITE PLAN
B-1
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Photo Stencil Assigned Area
[Graphic not shown]
EXHIBIT B
SITE PLAN
<PAGE> 31
EXHIBIT C
TENANT IMPROVEMENT COSTS
Lease Rate is based on projected buildout cost of $22.00 per square
foot for a total of $310,930.80. Tenant Improvement Costs includes, but is not
limited to, (i) all architectural and engineering fees and expenses, (ii) all
contractor and construction manager costs and fees, (iii) all permits and taxes,
and (iv) all Landlord's legal fees incurred in conjunction with this lease.
Any increase or decrease in the actual Tenant Improvement Costs from
the $310,930.80 estimate will raise or lower the rent by the increase or
decrease in the estimate, plus a 10.0% interest charge or credit amortized over
the five (5) years of the lease. (e.g. assuming a $20,000 difference from the
estimate plus 10% interest over the five (5) year Lease term would result in a
$429.95 monthly adjustment to the monthly rent.)
Cost breakout by contractor will not be available until after project
is bid in early February 1999.
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[FLOOR PLAN Graphic not shown]
<PAGE> 33
EXHIBIT D
CONSTRUCTION SCHEDULE
The Leased Premises shall be "Ready for Occupancy" on April 15, 1999,
based on the following conditions (and subject to Section 3.C):
1. Agreement in principal by Jan. 23, 1999
2. Lease signed by Feb. 1, 1999
3. Plans and Work Letter finalized by Feb. 15, 1999
4. Project bid received by Feb. 22, 1999
5. Cost review and final modifications by Feb. 28, 1999
6. Building Permit by Mar. 1, 1999
7. Construction started by Mar. 1, 1999
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EXHIBIT E
LANDLORD SERVICES AND EXPENSES
1. LANDLORD SERVICES
Landlord covenants and agrees so long as the Tenant is not in default
under any of the covenants of this Lease to furnish for Tenant the following
services (to the extent not separately metered to the Leased Premises, payment
for which shall be Tenant's responsibility):
A. Heating and air conditioning in season, to the Common Area during
normal business hours, in such amounts and at such temperatures as are
considered by Landlord to be reasonable (heating and air conditioning will be
separately metered to the Leased Premises);
B. Water, hot and cold, at those points of supply on the Common Area
provided for general use of Tenants (water will be separately metered to the
Leased Premises);
C. Electric current for ordinary use to the Common Area (electricity
will be separately metered to the Leased Premises);
D. Janitorial services for cleaning of the Common Area (but not the
Leased Premises) five (5) days weekly;
E. Other utilities service for the Common Area of the Project in the
manner and to the extent deemed reasonable by Landlord;
F. Insurance for the Project as provided in Section 7.B.; Tenant,
however, shall, at its sole cost and expense, keep all furniture, fixtures,
decorations, interior glass, improvements and equipment in the Leased Premises
insured against loss or damage by fire with extended coverage;
G. Regular maintenance, including without limitation: landscape
maintenance, building, roof and parking lot maintenance, snow removal and
periodic window cleaning, so as to keep in good order, condition and repair, the
Project, Leased Premises and Common Area, except for any damage thereof caused
by an act of negligence of Tenant, its employees, agents, guests, licensees or
contractors.
In case Landlord is prevented or delayed in furnishing any service as set forth
above or otherwise by reason of any cause beyond Landlord's reasonable control,
Landlord shall not be liable to Tenant therefor nor shall Tenant be entitled to
any abatement or reduction in rent by reason thereof nor shall the same give
rise to a claim in Tenant's favor that such absence of service constitutes
actual or constructive, total or partial eviction or renders the Leased Premises
untenantable. Landlord reserves the right to stop any service or utility system,
when necessary by reason of accident or emergency, or until necessary repairs
have been completed, provided, however, that in each instance of stoppage,
Landlord shall exercise reasonable diligence to eliminate the cause thereof.
Except in case of emergency repairs, Landlord will give Tenant reasonable
advance notice of
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any contemplated stoppage and will use reasonable efforts to avoid unnecessary
inconvenience to Tenant by reason thereof.
2. COMMON AREAS.
The "Common Area" of the Project is that part of the Project designed
and available from time to time for the common use of all tenants, including
among other facilities, parking areas, sidewalks, landscaping, curbs, truckways,
delivery passages, enclosed and open malls, loading areas, private streets and
alleys, lighting facilities, drinking fountains, meeting rooms, public toilets,
hallways, lobbies, elevators, service rooms, equipment and the like. Landlord
reserves the right to change from time to time the dimensions and location of
the Common Area of the Project as well as the dimensions, identity and type of
any buildings (except the Leased Premises) of the Project and to construct
additional buildings or additional stories on existing buildings or other
improvements in the Project. Landlord also reserves the right to dedicate
portions of the Common Area and other portions of the Project (except the Leased
Premises) for street, park, utility and other public purposes. Tenant and its
employees, agents, guests, invitees, licensees, sublessees and assignees shall
have the non-exclusive right to use the Common Area, as constituted from time to
time, such use to be in common with Landlord, other tenants of the Project and
other persons entitled to use the same, and subject to such reasonable rules and
regulations governing use as they may be amended from time to time, including
the designation of specific areas in which automobiles owned by Tenant, its
employees, sublessees, concessionaires and licensees may be parked as provided
in Section 6 of the Lease. Tenant shall not take any action which would
interfere with the rights of other persons to use the Common Area. Landlord may
temporarily close any part of the Common Area for such periods of time as may
be necessary to prevent the public from obtaining prescriptive rights or to make
repairs or alterations, provided such closure does not unreasonably interfere
with Tenant's use or enjoyment of the Leased Premises.
3. LANDLORD OPERATING COSTS.
A. The Landlord "Operating Costs" shall be all costs of any kind or
nature paid or incurred by Landlord in operating, maintaining and managing the
Project in a manner required herein and otherwise deemed by Landlord to be
reasonable and appropriate, and shall include but not be limited to the
following:
(i) all costs of and charges for providing heat, ventilation
and air conditioning ("HVAC"), water (including sewer and sanitary and
storm drainage costs and taxes based on water consumption), gas,
electricity and other utilities (except metered utilities to the Leased
Premises, for which Tenant shall be responsible, and to other leased
premises in the Building, for which the tenants thereof will be
responsible);
(ii) real estate taxes and assessments levied upon or with
respect to the Project (except for income taxes or taxes based on
receipts of rentals, unless the same shall be in substitution for or in
lieu of a real estate tax or assessment); personal property taxes
imposed upon fixtures, machinery, equipment, apparatus, systems and
appurtenances in, upon or with respect to the Project;
E-2
<PAGE> 36
(iii) fees for required licenses and permits;
(iv) reasonable expenses incurred for tax consultants and in
contesting any taxes, assessments, impositions or license or other fees
with any governmental authority (and in the event of such protest, the
determination of Operating Costs shall be adjusted as applicable);
(v) costs of trash and garbage disposal, snow and ice removal,
janitorial and cleaning services, including window cleaning, and
security services, if any;
(vi) costs of inspection, maintenance, repairs and component
replacement of the Project, including the roof, plumbing and electrical
system, HVAC systems, other mechanical systems, structural components
and replacements of machinery and equipment used in connection
therewith;
(vii) costs of maintaining, installing, planting and
replacing landscaping, including sprinkler systems and medians;
(viii) costs of maintaining, repairing, replacing lighting,
restriping, repaving and painting parking areas, curbs, walkways,
drainage facilities and common areas;
(ix) costs for casualty, liability and other insurance carried
by Landlord on the Project or any component parts thereof,
(x) labor costs, including wages and other payments, fringe
benefits, withholding taxes, social security taxes, payroll taxes and
workers' compensation and disability insurance (to the extent not
accounted for under paragraphs (xi) and (xv) below);
(xi) professional building management fees and reasonable
legal, accounting, inspection and consultation fees incurred for the
normal and prudent operation of the Project;
(xii) costs of supplies, materials, equipment and tools used
in Project maintenance, including the cost of "relamping" all Project
lighting;
(xiii) costs of capital improvements and structural repairs
and replacements made in or to the Project required by any applicable
laws, ordinances, rules, regulations or orders of any governmental or
quasi-governmental authority;
(xiv) costs of capital improvements designed primarily to
reduce Operating Costs (the costs of which shall be amortized in
accordance with standard accounting practices and only the portion
amortized during the term of this Lease shall be included in Operating
Costs), together with a annual reserve of two percent (2%) of the
Operating Costs for all other capital improvements reasonably necessary
to permit Landlord to maintain the Project;
E-3
<PAGE> 37
(xv) administrative costs equal to ten percent (10%) of the
Operating Costs.
B. Operating Costs shall not include:
(i) income taxes and other impositions of a personal nature
charged or levied against Landlord (except to the extent described in
Paragraph 3.A(ii) above);
(ii) debt service payable by Landlord on any mortgage loans;
(iii) costs reimbursed by insurance proceeds;
(iv) leasing commissions, advertising expenses and other costs
related to entering into and enforcing leases with other tenants in the
Project;
(v) costs attributable to or paid by other tenants in the
Project (including sub-metered utilities to the leased premises of such
tenants);
(vi) interest or penalties resulting from delinquent payment
by Landlord of any taxes unless the taxes are being disputed in good
faith.
C. Tenant shall have the right to inspect or audit Landlord's books and
records relative to the Operating Costs assessed hereunder at any reasonable
time within one hundred eighty (180) days following receipt of an annual
reconciliation statement of such costs. In the event Tenant's inspection or
audit reflects that an error was made in the calculation of Tenant's Pro Rata
share of the Operating Costs, an appropriate adjustment shall be made between
the parties.
D. With respect to any of Landlord's services performed by third
parties, Tenant may request, no more frequently than once in each calendar year,
Landlord to obtain bids for such services from additional providers. Tenant
shall have the right to review such bids and to designate up to three (3)
additional providers from whom Landlord is to obtain bids. Tenant shall not,
however, have the right to approve or require Landlord to accept any bid. In no
event shall Landlord be required to obtain more than three (3) bids on any
particular service.
E-4
<PAGE> 38
EXHIBIT F
COMMENCEMENT DATE CERTIFICATE
THIS COMMENCEMENT DATE CERTIFICATE is made this _______________day of
____________________, 1999 by and between CLEARFIELD INVESTMENTS, LLC
(hereinafter referred to as "Landlord") and JENOPTIK INFAB, INC. (hereinafter
referred to as "Tenant") pursuant to Section 4 of the Lease Agreement
dated___________________ , 1999 (the "Lease") by and between Landlord and Tenant
with respect to the Leased Premises described therein.
WHEREAS, Landlord and Tenant have agreed to confirm, pursuant to and in
accordance with Section 4 of the Lease, (i) the Commencement Date of the Lease,
(ii) the Termination Date of the Lease, (iii)the total rentable square feet of
the Leased Premises, (iv)the final Tenant Improvement Cost, (v) Tenant's Pro
Rata Share of Operating Expenses, (vi) the initial annual rent, (vii) an
estimate of the first year's Operating Expenses, and (viii) such other matters
as may be reasonably requested by Landlord;
NOW, THEREFORE, in consideration of the Leased Premises and the mutual
promises and covenants herein contained, Landlord and Tenant hereby agree as
follows:
1. Tenant has possession of the Leased Premises and acknowledges that
the Commencement Date of the Lease shall be _________________and that the
Termination Date of the Lease shall be ___________________. It is understood and
agreed by Landlord and Tenant that any and all of Tenant's covenants and
obligations as by the Lease provided shall become effective as of the said
Commencement Date, including, but not limited to, the payment of base rent,
additional rent, insurance and all other rent and charges as designated by the
terms of the Lease.
2. It is agreed that the Leased Premises consists of ________rentable
square feet.
3. It is agreed that the final Tenant Improvement Cost is $
4. Tenant's Pro Rata Share of Operating Expenses is _____% and the
Operating Expenses for the balance of 1999 is estimated to be $___________
payable $________ per month as provided in Section 2D of the Lease.
5. The base annual rent throughout the initial five-year term of the
Lease shall be as follows:
F-1
<PAGE> 39
<TABLE>
<CAPTION>
Rent/Sq. Foot Monthly Base Rent Base Annual Rent
------------- ----------------- ----------------
<S> <C> <C> <C>
Year 1 $ $ $
Year 2 $ $ $
Year 3 $ $ $
Year 4 $ $ $
Year 5 $ $ $
</TABLE>
6. The Leased Premises have been accepted herewith by Tenant in their
"as is" condition upon the Commencement Date (subject to punch list items as
provided in Section 3.B of the Lease).
EXCEPT as may be modified hereby, all terms, provisions, covenants and
conditions of the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Agreement to
be executed by their duly authorized representatives on the day and year first
above written.
LANDLORD: TENANT:
CLEARFIELD INVESTMENTS, LLC JENOPTIK INFAB, INC.
By:
--------------------------- By: /s/ Timothy H. Ramsey
C. William Kephart -- Manager Its: President
ACKNOWLEDGED AND AGREED TO BY
THE UNDERSIGNED AS GUARANTOR OF
TENANT'S OBLIGATIONS UNDER THE
LEASE
JENOPTIK AG
By:
----------------------------
Its:
----------------------------
F-2
<PAGE> 40
EXHIBIT G
PARKING AGREEMENT
A. Tenant (and Tenant's Agents) shall have the right, at no charge, to
use the number of assigned parking spaces as set forth on the Summary Page in
the locations shown on the Site Plan attached to the Lease as Exhibit B by
Landlord (the "Spaces") in the surface parking lot in the Project (the "Parking
Lot"). The rights of Tenant to the Spaces shall be referred to herein as the
"Parking Privileges." Tenant's use of the Parking Lot shall be in common with
other tenants of the Building and any other parties permitted by Landlord to use
the Parking Lot. Tenant acknowledges that Landlord makes no representations
regarding the availability of unassigned spaces in the Parking Lot, except as
set forth in such Site Plan.
B. Tenant's right to the Parking Privileges shall commence at the
Commencement Date of the Lease and shall continue for the Lease Term unless
sooner terminated. The Parking Privileges shall automatically terminate upon the
expiration or earlier termination of the Lease Term or any extensions thereof.
Notwithstanding the foregoing, Tenant shall provide Landlord thirty (30) days
prior written notice if Tenant no longer wishes to use any of the Spaces.
C. Landlord shall have the right at any time to change the arrangement
or location of the Spaces, provided they shall be in substantially the same area
as shown on the Site Plan, or to regulate the use of the Spaces and the Parking
Lot without incurring any liability to Tenant or entitling Tenant to any
abatement of rent. Among other things, Landlord shall be entitled to assign
designated areas or spaces of the Parking Lot for use by particular persons or
groups of persons (and Tenant shall refrain from parking in such areas and
spaces), to number, renumber or otherwise identify spaces or to require decals
or other forms of identification for users of the Parking Lot.
D. Use of the Parking Lot is subject to the following rules, as well as
such additional or modified rules and regulations as may be adopted from time to
time by Landlord as provided in Section 22 of the Lease:
1. Tenant shall park only in parking spaces and not on ramps,
corridors, approaches or other areas which are not designated nor intended for
use as parking areas.
2. Tenant shall observe the special hours of opening, closing
and non-use of the Parking Lot when closings are necessitated for repairs,
cleaning and rehabilitation. Tenant is not entitled to any abatement in rent
should any repair or rehabilitation result in Tenant not being provided the
Spaces.
3. Tenant shall use the Parking Lot only for standard vehicle
parking.
4. Tenant shall not allow unauthorized vehicles to use the
Spaces and, except for emergencies, shall not repair nor authorize service to
vehicles parked in the Parking Lot.
G-1
<PAGE> 41
E. If any portion of the Parking Lot shall be damaged by fire or other
casualty or shall be taken by right of eminent domain or by condemnation or
shall be conveyed in lieu of any such taking, then the Parking Privileges shall
automatically cease and terminate until the Parking Lot is restored (if at all)
as provided in Sections 8 and 16 of the Lease.
F. Tenant shall not be permitted to assign the Spaces or any interest
therein without the prior written consent of Landlord (except to an affiliate of
Tenant in connection with the assignment of the Lease or a sublease of the
Leased Premises pursuant to Section 14.A of the Lease), which consent may be
granted or withheld in Landlord's sole discretion. Tenant shall remain primarily
liable for the performance of the obligations of Tenant hereunder
notwithstanding any assignment or occupancy arrangement permitted or consented
to by Landlord.
G. Neither Landlord nor its officers, agents or employees shall be
liable for any damage, fire, theft or loss to vehicles or other properties or
injuries to persons occurring in the Parking Lot or arising out of the use of
the Parking Lot, whether caused by theft, vandalism, collision, moving vehicle,
explosion or any other activity of occurrence. Tenant, its employees, agents,
guests, invitees and licensees, assume the risk of such loss or damage and shall
indemnify and hold harmless Landlord, its officers, agents and employees,
harmless from and against any and all claims and damages incurred by Landlord,
its officers, agents and employees, arising from use of the Parking Lot by
Tenant or its employees, agents, guests, invitees or licensees including all
costs, reasonable attorneys' fees, expenses and liability arising out of any
such claim or action. Tenant acknowledges that Landlord will not and shall not
be obligated to have an agent or attendant upon the Parking Lot at any time.
G-2
<PAGE> 42
EXHIBIT H
GUARANTEE OF LEASE
THIS GUARANTEE OF LEASE (this "Guarantee") made this 04 day of March
1999 by JENOPTIK AG, a German Corporation (hereinafter referred to as
"Guarantor").
WHEREAS, a certain Lease Agreement of even date herewith (the "Lease")
has been, or will be, executed by and between Clearfield Investments, LLC, a
Colorado limited liability company, therein referred to as "Landlord", and
Jenoptik INFAB, Inc., therein referred to as "Tenant" for the Leased Premises
located in the building located at 4725 Centennial Drive, Colorado Springs,
Colorado as more particularly described therein;
WHEREAS, Landlord under said Lease requires as a condition to its
execution of the Lease that the undersigned guarantee the full performance of
the obligations of Tenant under the Lease; and
WHEREAS, Guarantor is desirous that Landlord enter into said Lease with
Tenant;
NOW THEREFORE, in consideration of the execution of the Lease by the
parties thereto, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Guarantor hereby unconditionally
guarantees the full performance of each and every term, covenant and condition
of the Lease to be kept and performed by Tenant, including without limitation
the payment of all rentals and other charges to accrue thereunder and the
discharge of liens and the performance of Tenant's obligations under the Lease.
Guarantor further agrees as follows:
1. The covenants and agreements contained herein shall continue in favor
of Landlord notwithstanding any assignment, extension, modification, amendment
or alteration of the Lease entered into by and between the parties thereto, or
their successors or assigns, whether or not consented to by the undersigned, and
no assignment, extension, modification, amendment or alteration of the Lease
shall in any manner release or discharge the undersigned.
2. This Guarantee will continue unchanged by any bankruptcy,
reorganization or insolvency of Tenant or any successor or assignee thereof or
by any disaffirmance or abandonment by a trustee or other successor to Tenant.
3. In the event Landlord assigns or transfers the Lease, to the same
extent, Landlord may, without notice, assign this Guarantee in whole or part and
no assignment or transfer of the Lease or this Guarantee shall operate to
extinguish or diminish the liability of the Guarantor hereunder.
<PAGE> 43
4. The liability of Guarantor under this Guarantee shall be primary and
in any right of action which shall accrue to Landlord under the Lease, Landlord
may, at its option, proceed against Guarantor without having commenced any
action or having obtained any judgment against Tenant.
5. Guarantor shall pay Landlord's reasonable attorney's fees and all
costs and other expenses incurred in any collection or attempted collection or
in any negotiations relative to any collection with respect to the Lease or this
Guarantee.
Landlord may settle or compromise with Tenant and/or any other party or parties
liable with respect to the Lease, all or any part of Tenant's liability or
obligations thereunder, may exchange, release or surrender any security which it
may hold, and may waive compliance with any of the terms or provisions contained
in the Lease, all without in any way affecting Guarantor's obligation under this
Guarantee (except to the extent of any settlement or compromise) and without
notice to Guarantor. Guarantor hereby waives any rights of subrogation it may
have with respect to Tenant or this Guarantee.
In no case shall Guarantor be liable for any amounts due under this Lease, which
have been paid to Landlord or have been settled or compromised by Landlord.
8. In all cases, any and all correspondence with Jenoptik AG will also
be sent to Jenoptik Infab, Inc., via certified mail.
9. The use of the singular herein shall include the plural. The terms
and provisions of this Guarantee shall be binding upon and inure to the benefit
of the respective successors and assigns of the parties herein named.
10. This guarantee is limited to a maximum amount of $1,000,000.00 (one
million United States Dollars) and it ends latest at December 31 ,2005.
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
executed as of the 24th day of February, 1999.
GUARANTOR:
JENOPTIK, AG, Carl-Zeiss - Strasse 1,07743 Jena, Germany
By: /s/ Alexander von Witzleben /s/ Dr. Dietmar Kubis
-------------------------------------------------
Alexander von Witzleben Dr. Dietmar Kubis
-------------------------------------------------
Title: Vorstand Vorstand
-------------------------------------------------
<PAGE> 44
EXHIBIT I
GUARANTEE OF LEASE
THIS GUARANTEE OF LEASE (this "Guarantee") made this day of , 1999
by MEISSNER & WURST U.S. INC., (hereinafter referred to as "Guarantor").
WHEREAS, a certain Lease Agreement of even date herewith (the "Lease")
has been, or will be, executed by and between Clearfield Investments, LLC, a
Colorado limited liability company, therein referred to as "Landlord", and
Jenoptik INFAB, Inc., therein referred to as "Tenant" for the Leased Premises
located in the building located at 4725 Centennial Drive, Colorado Springs,
Colorado as more particularly described therein;
WHEREAS, Landlord under said Lease requires as a condition to its
execution of the Lease that the undersigned guarantee the full performance of
the obligations of Tenant under the Lease; and
WHEREAS, Guarantor is desirous that Landlord enter into said Lease with
Tenant;
NOW THEREFORE, in consideration of the execution of the Lease by the
parties thereto, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Guarantor hereby unconditionally
guarantees the full performance of each and every term, covenant and condition
of the Lease to be kept and performed by Tenant, including without limitation
the payment of all rentals and other charges to accrue thereunder and the
discharge of liens and the performance of Tenant's obligations under the Lease.
Guarantor further agrees as follows:
1. The covenants and agreements contained herein shall continue in
favor of Landlord notwithstanding any assignment, extension, modification,
amendment or alteration of the Lease entered into by and between the parties
thereto, or their successors or assigns, whether or not consented to by the
undersigned, and no assignment, extension, modification, amendment or alteration
of the Lease shall in any manner release or discharge the undersigned.
2. This Guarantee will continue unchanged by any bankruptcy,
reorganization or insolvency of Tenant or any successor or assignee thereof or
by any disaffirmance or abandonment by a trustee or other successor to Tenant.
3. In the event Landlord assigns or transfers the Lease, to the same
extent, Landlord may, without notice, assign this Guarantee in whole or part and
no assignment or transfer of the Lease or this Guarantee shall operate to
extinguish or diminish the liability of the Guarantor hereunder.
4. The liability of Guarantor under this Guarantee shall be primary and
in any right of action which shall accrue to Landlord under the Lease, Landlord
may, at its option,
I-1
<PAGE> 45
proceed against Guarantor without having commenced any action or having obtained
any judgment against Tenant.
5. Guarantor shall pay Landlord's reasonable attorney's fees and all
costs and other expenses incurred in any collection or attempted collection or
in any negotiations relative to any collection with respect to the Lease or this
Guarantee.
6. Landlord may settle or compromise with Tenant and/or any other party
or parties liable with respect to the Lease, all or any part of Tenant's
liability or obligations thereunder, may exchange, release or surrender any
security which it may hold, and may waive compliance with any of the terms or
provisions contained in the Lease, all without in any way affecting Guarantor's
obligation under this Guarantee (except to the extent of any settlement or
compromise) and without notice to Guarantor. Guarantor hereby waives any rights
of subrogation it may have with respect to Tenant or this Guarantee.
7. In no case shall Guarantor be liable for any amounts due under this
Lease, which have been paid to Landlord or have been settled or compromised by
Landlord.
8. In all cases, any and all correspondence with Meissner & Wurst U.S.
Inc. will also be sent to Jenoptik Infab, Inc., via certified mail.
9. The use of the singular herein shall include the plural. The terms
and provisions of this Guarantee shall be binding upon and inure to the benefit
of the respective successors and assigns of the parties herein named.
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
executed as of the 2nd day of March, 1999.
GUARANTOR:
MEISSNER & WURST U.S. INC.
By: /s/ Timothy H. Ramsey
Name (Typed): Timothy H. Ramsey
------------------
Title: President
------------------
Address: 901 S. Mopac, Bldg. 4, Ste. 200
-------------------------------
Austin, Texas 78746
-------------------------------
I-2
<PAGE> 1
Exhibit 10.33
TRANSITIONAL SERVICES AGREEMENT
This Transitional Services Agreement is made as of September 30, 1999
(the "Closing") by and among Brooks Automation, Inc., a Delaware Corporation
("Buyer") and Jenoptik AG, a corporation organized under the laws of the Federal
Republic of Germany ("Jenoptik").
WHEREAS, the parties have entered into a Master Purchase Agreement,
dated as of September 9, 1999 (the "MPA") by and among the parties and certain
direct and indirect subsidiaries of Jenoptik and Buyer, pursuant to which Buyer
has agreed to purchase the Infab Business in exchange solely for shares of
Buyer's Common Stock, par value $.01 per share, subject to the terms and
conditions set forth in the MPA;
WHEREAS, the MPA requires that the parties shall enter into an
agreement relating to certain services to be provided by Jenoptik or a
subsidiary of Jenoptik to Buyer or a subsidiary of Buyer with respect to certain
activities after the Closing under the MPA.
NOW, THEREFORE, in consideration of the MPA and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound, it is hereby agreed by and between the parties as
follows:
ARTICLE I DEFINITIONS
For purposes of this Agreement capitalized terms not otherwise defined
herein shall have the meanings given them in the MPA. All references to Buyer or
Jenoptik shall include any relevant direct or indirect Subsidiaries of Buyer and
Jenoptik respectively.
ARTICLE II TERM
The term of this Agreement shall commence on the Closing and shall
continue for one year (the "Initial Interim Period"). However, with respect to
any applicable lease term terminating prior to the expiration of the Initial
Interim Period ("Expired Facility Lease") this Agreement shall only apply to
such lease for the term of such lease. Apart from any Shared Facility (as
hereinafter defined) subject to an Expired Facility Lease, Buyer shall be
entitled to extend the Agreement for two additional one year periods (the
"Extended Interim Period") on the same terms and conditions. The Initial Interim
Period and any Extended Interim Period shall together be referred to as the
Interim Period. Buyer shall give notice of its election to extend the Agreement
within ninety (90) days prior to the end of the Initial Interim Period or any
Extended Interim Period. The Agreement may be terminated pursuant to the terms
of Article V.
ARTICLE III THE SHARED FACILITIES
3.1 OPERATING COSTS. Jenoptik agrees to grant Buyer the use at Buyer's
election of those facilities listed on Schedule A attached hereto (the "Shared
Facilities") throughout the Interim Period. Buyer agrees to share in all of the
costs of operating the Shared Facilities
- --------------------------------------------------------------------------------
TRANSITION SERVICES AGREEMENT
EXECUTION COPY 1
<PAGE> 2
(excluding costs of personnel), including, but not limited to, rent, personal or
real property taxes, common area maintenance charges, utilities (excluding any
utility used exclusively by either Buyer or Jenoptik), building security and
building or janitorial services (together, the "Operating Costs").
3.2 TRANSITIONAL SERVICES.
(a) In connection with the Buyer's occupation of the Shared Facilities,
during the Interim Period, Jenoptik agrees to provide Buyer, at Buyer's
election, use of those services described on Schedule B attached hereto and
those services listed on Schedule 5.13(a) paragraph (ii) under the caption Infab
(Germany) to the MPA (together, the "Transitional Services").
(b) The Transitional Services are based on Jenoptik's and Buyer's
understanding of the support, and other services reasonably required to be
provided by Jenoptik to Buyer in connection with the Shared Facility in Jena
(the "Jena Facility") as of the date of this Agreement and are intended to be
illustrative. If, following the Closing, Jenoptik and Buyer reasonably determine
that additional services should be provided by Jenoptik to Buyer for purposes of
operating the Infab Business, the parties agree to appropriately modify this
Agreement with respect to such additional Transitional Services; provided,
however, that any such additional services shall be provided on a basis
substantially consistent with the recent historical practices of Jenoptik. All
individuals providing services on behalf of Jenoptik pursuant to this Agreement
shall remain employees of Jenoptik and shall not be deemed for any purpose to be
employed by Buyer. Buyer shall have no liability to such individuals with
respect to any matter arising out of or relating to their employment by
Jenoptik, including, without limitation, claims for wages, salaries, benefits or
severance.
(c) Upon termination of this Agreement, Jenoptik will cooperate in
transferring to Buyer, and, at Buyer's request and cost, erasing from Jenoptik's
centralized computer system all proprietary information and data of Buyer stored
on Jenoptik's centralized computer system.
3.3 STORAGE AND DELIVERY OF PURCHASED ASSETS.
Buyer and Jenoptik agree that during the Interim Period, the
machinery, equipment and other personal property included among the Purchased
Assets and located at the Shared Facilities, may remain at such premises. During
the Interim Period, Buyer shall have the right to, at its expense, crate, remove
and transport the Purchased Assets or any property or goods developed,
manufactured or created with the aid of any of the Purchased Assets from the
Shared Facilities without damage to Jenoptik's property, provided that Jenoptik
shall reasonably cooperate with Buyer in effecting such process.
- --------------------------------------------------------------------------------
TRANSITION SERVICES AGREEMENT
EXECUTION COPY 2
<PAGE> 3
ARTICLE IV ALLOCATION OF COSTS.
4.1 PAYMENT OF SHARED FACILITIES COSTS.
(a) Unless otherwise provided in Schedule A, Buyer's proportionate
share of the Operating Costs allocable to any particular Shared Facility shall
be based upon Buyer's proportionate square meter use of such Shared Facility.
The costs for the Transitional Services incurred in connection with any Shared
Facility shall be divided between Jenoptik and Buyer in the manner set forth on
Schedule B. The Operating Costs and the costs for the Transitional Services
shall together be referred to as the "Shared Facilities Costs". Jenoptik shall
not increase the Shared Facilities Costs during the term of the Interim Period.
However, insofar as any costs included in the Shared Facilities Costs are
increased by a third party not affiliated with Jenoptik, Buyer shall be
responsible for its proportionate share of any such increase.
(b) Buyer shall pay to Jenoptik its share of any rental portion of
the Operating Costs as reflected on Schedule A on a monthly basis commencing one
month from the date of this Agreement. Buyer shall pay its share of all other
costs included within the Shared Facilities Costs within twenty (20) days of the
date Jenoptik has given Buyer notice that it has made a payment together with a
copy of the relevant invoice billed to Jenoptik by the utility, landlord or
service provider. If however, any cost for Transitional Services is payable
directly to Jenoptik, Buyer shall pay such cost within twenty (20) days after
Jenoptik has given Buyer notice that such payment is owed. On an annual basis,
for purposes of verifying the accuracy of charges for Transitional Services
supplied hereunder and to verify the proper performance of Transitional Services
by Jenoptik and its agents hereunder, Buyer shall be entitled, with respect to
any charges paid hereunder during such previous year, on reasonable notice and
during normal business hours to inspect the records of Jenoptik and its agents
providing services hereunder as may be reasonably necessary for such purpose.
(c) Apart from the Shared Facilities Costs, Buyer has no obligation
or liability with respect to any costs associated with any other facility or
premises maintained or used by Jenoptik.
4.2 CONDUCT OF BUSINESS. Jenoptik shall maintain insurance in
reasonable amounts insuring its operations, all in a manner that will comply
with any lease of a Shared Facilities and all material applicable laws and
regulations. Absent a written agreement signed by authorized representatives of
Jenoptik and Buyer prior to the incurrence of a cost outside the control of
Jenoptik, neither Jenoptik nor Buyer shall be required to share in any facility
costs incurred by the other outside of the ordinary course of business or
consistent with past practice, including, without limitation, build-out or
relocation costs, or HVAC or utility costs directly attributable to the work of
either Jenoptik or Buyer.
4.3 MAINTENANCE; REPAIRS; AND YIELD-UP. Jenoptik shall be responsible
for making any structural or other repairs that require replacement of any
component or system.
- --------------------------------------------------------------------------------
TRANSITION SERVICES AGREEMENT
EXECUTION COPY 3
<PAGE> 4
4.4 ENVIRONMENTAL. Jenoptik shall be responsible for the entire cost of
any remediation (including, without limitation, all costs and expenses,
including reasonable attorney fees) of any environmental problem affecting any
Shared Facility no matter when caused or discovered unless such environmental
problem is proved to be solely the result of Buyer's acts occurring from and
after the date of this Agreement.
4.5 INDEMNITY. Buyer shall indemnify Jenoptik against, and hold
Jenoptik free and harmless from all claims, losses, costs or damages (including
attorneys fees and costs) hereafter asserted against Jenoptik by any third party
with respect to the Shared Facilities (including, without limitation, any
employee, visitor, agent, invitee, vendor, customer and consultant of Buyer)
under any theory of law or equity whatsoever which are in any way based upon
acts, omissions or occurrences arising out of or in the course of this
Agreement; provided, however, the foregoing indemnity shall not apply to any
claims which arise principally due to the negligence or willful misconduct of
Jenoptik. Any sums payable by Buyer under this Section 4.5 shall be net of the
amount of any insurance proceeds, indemnity or contribution actually received by
Jenoptik and Jenoptik shall use commercially reasonable efforts to recover such
amounts. The indemnification provisions in this Section 4.5 shall,
notwithstanding any provision to the contrary contained elsewhere in this
Agreement, survive for a period of three (3) years following any termination of
this Agreement. The term "Jenoptik" as used in this Section 4.5 shall refer to
Jenoptik AG, and its subsidiaries and affiliates, and their successors, assigns,
officers, directors, employees and shareholders.
ARTICLE V TERMINATION
5.1 Buyer may, at any time, terminate this Agreement immediately upon
thirty days written notice to Jenoptik.
5.2 If Buyer shall fail adequately to perform in any material respect
any of its obligations under this Agreement, whether voluntarily or
involuntarily or as a result of any law or regulation or otherwise, Jenoptik
may, without prejudice to any other right which it may have, terminate this
Agreement provided that such breach shall not have been cured within thirty (30)
days of delivery to Buyer of written notice of such breach.
ARTICLE VI NOTICES
All notices, requests, demands and other communications shall be given
in accordance with the provisions contained in the MPA.
ARTICLE VII GENERAL
7.1 Neither Jenoptik nor Buyer shall act as an agent or representative
of the other without prior authorization. Jenoptik shall be free to exercise its
discretion and independent judgment as to the method and means of performance of
the Transitional Services contained in this Agreement.
- --------------------------------------------------------------------------------
TRANSITION SERVICES AGREEMENT
EXECUTION COPY 4
<PAGE> 5
7.2 This Agreement shall inure to the benefit of, and shall be binding
upon, the successors and permitted assigns of the parties hereto. In addition,
Jenoptik shall not sell, lease or assign any of the Shared Facilities (with the
exception of those situated in Germany) without the prior written consent of
Buyer, such consent not to be unreasonably withheld.
7.3 This Agreement constitutes the entire agreement of the parties with
respect to the occupancy of the Shared Facilities and the provision of the
Transitional Services. This Agreement may be amended or modified and any of the
terms or conditions hereof may be waived only by a written instrument executed
by the parties, or in the case of a waiver, by the party or parties waiving
compliance. Any waiver by a party of any condition, or of the breach of any
provision or term in any one or more instance, shall not be deemed to be nor
construed as a further or continuing waiver of any such condition, or of the
breach of any provision or term of this Agreement.
7.4 Nothing in this Agreement is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than Jenoptik
or Buyer and their respective successors and permitted assigns. Nothing in this
Agreement is intended to relieve or discharge the obligations or liability of
any third person to Jenoptik or Buyer. No provision of this Agreement shall give
any third persons any right of subrogation or action over or against Jenoptik or
Buyer.
7.5 This Agreement shall be governed by the laws of The Commonwealth of
Massachusetts (without regard to the laws that might be applicable under
principles of conflicts of law, and without regard to the jurisdiction in which
any action or special proceedings may be instituted) as to all matters,
including, but not limited to, matters of jurisdiction, validity, construction,
effect and performance.
7.6 The section headings in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
7.7 This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which shall constitute the same instrument.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
- --------------------------------------------------------------------------------
TRANSITION SERVICES AGREEMENT
EXECUTION COPY 5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in multiple counterparts as of the date set forth above by their duly
authorized representatives.
BROOKS AUTOMATION, INC.
By:
---------------------------------
Name:
Title:
JENOPTIK AG
By:
---------------------------------
Name:
Title:
- --------------------------------------------------------------------------------
TRANSITION SERVICES AGREEMENT
EXECUTION COPY 6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in multiple counterparts as of the date set forth above by their duly
authorized representatives.
BROOKS AUTOMATION, INC.
By:
---------------------------------
Name:
Title:
JENOPTIK AG
By:
---------------------------------
Name:
Title:
- --------------------------------------------------------------------------------
TRANSITION SERVICES AGREEMENT
EXECUTION COPY 7
<PAGE> 8
TRANSITIONAL SERVICE AGREEMENT SCHEDULE A - SHARED FACILITIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
No Location Jenoptik Entity Facility provision cost
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Jena Goeschwitzerstrasse M+W Zander GM Provide office, storage and rent costs fixed for 12 months;
GmbH manufacturing space (based on increase of rent in next 12 month
M+W Zander FM GmbH overview period up to max 3%; additional costs
Sept 24, 1999). Sufficient parking calculated at this time as the
lots for employees (approx. 130 maximum cost (re-pay at the end of
max), visitors and management year based on real costs).
(2) and 2 company vehicles for
Mfg/Stores/Service provided cost
free
- -----------------------------------------------------------------------------------------------------------------------------------
2 Colorado Springs, Colorado Jenoptik Infab, Inc. Per lease agreement dated Per lease agreement dated February
February 24, 1999 and referenced 24, 1999 and referenced in the MPA
in the MPA until lease until lease assignment properly
assignment properly executed executed and delivered
and delivered
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
total
operating
space in rent per add cost total per costs per
No building m2 m2 per m2 m2 month
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bau 9 (office and lab) 410 8.00 DM 6.00 DM 14.00 DM 5,740.00 DM
------------------------------------------------------------------------------------------------------
Bau 9 (stores) 345 5.00 DM 6.00 DM 11.00 DM 3,795.00 DM
------------------------------------------------------------------------------------------------------
1 Bau 13 (office) 81 10.00 DM 16.00 DM 26.00 DM 2,106.00 DM
------------------------------------------------------------------------------------------------------
Bau 13 (stores) 34 9.00 DM 10.00 DM 19.00 DM 646.00 DM
------------------------------------------------------------------------------------------------------
Bau 13 (aircon) 664 9.00 DM 30.00 DM 39.00 DM 25,896.00 DM
------------------------------------------------------------------------------------------------------
Bau 13 (cleanroom) 155 11.00 DM 30.00 DM 41.00 DM 6,355.00 DM
------------------------------------------------------------------------------------------------------
Bau 14 (office) 2187 11.00 DM 5.60 DM 16.60 DM 36,304.00 DM
------------------------------------------------------------------------------------------------------
TOTAL 3876 80,842.20 DM
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 9
TRANSITIONAL SERVICE AGREEMENT SCHEDULE B - ERP (SAP R3) SYSTEM
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Jenoptik
No Location Entity provision operating cost
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Jena Jenoptik AG Jenoptik AG (Systemhaus) will provide the cost per user (currently approx. 35
(Systemhaus) current used SAP R3 system to Brooks users over the year) up to the
with Oct 1, 1999. System will run in a JO maximum current monthly amount of
AG data processing centre or at the data DM 30.000, - for total SAP R3 usage
processing centre of the current JO AG
MIS service partner Siemens AG, SBI,
Nuernberg
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
No initial cost explanation
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
all data transfer and all necessary structure/body under this provision we understand the SAP
data to run SAP R3 as an separate legal entity to R3 modules to run the following functions:
1 be performed and established by JO AG without Finance, Controlling, Costing,
cost for Brooks. Cost for special Brooks Planning/Scheduling, Purchasing, Quality
requirements are to be covered by Brooks. Assurance, Manufacturing, Stores
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
TRANSITIONAL SERVICE AGREEMENT SCHEDULE B - CONT'D - MEISSNER + WURST ZANDER FRAME RELATED NETWORK PROVIDED TO BROOKS AUTOMATION
- ---------------------------------------------------------------------------------------------------------------------------------
JENOPTIK
NO LOCATION ENTITY PROVISION
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jena, Colorado, Austin, M+W Zander Until Dec 31, 1999 M+W Zander Stuttgart provides Brooks (the
1 Fremont, Japan, Stuttgart former INFAB part and employees as per Oct 1, 1999) access to
Taiwan. the M+W Zander Frame related network to access Internet and to
send/receive emails
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATING COST INITIAL/TERMINATION COST EXPLANATION
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
cost per user (currently DM 77. - per no initial cost; no termination cost BROOKS will operate their own Internet
month based on 1998 invoice) per end of Dec 99 access and world-wide network latest with
Jan 1, 2000. Termination agreed with M+W
Zander and already in process
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
Transitional Service Agreement Schedule B - Cont'd - Communication Services
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No Location Jenoptik Entity provision operating cost initial/termination cost explanation
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
to provide Brooks GmbH the
possibility of operating
1 Jena Jenoptik AG Jenoptik AG provides an an own switchboard Brooks
(alsad) internal telephone network, external communic- need a switchboard tele-
the end-user terminals and ation cost per phone terminal maximum Brooks GmbH will operate
the telephone mainframe, user and monthly 1,000 DM and the set-up an own switchboard
the JO AG switchboard telecom bill in the mainframe means no
service and the voicemail new terminal but own
service per telephone number maximum cost 1,000
number DM system. No costs for
Brooks GmbH to provide
this by JO AG
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
Jenoptik AG receives all
2 Jena Jenoptik AG invoices for German mobile stay with this because of
(alsad) phones (GSM phones) and as per invoice none better conditions for JO
submit the invoice on a AG and Brooks GmbH (volume
monthly basis to Brooks based)
Automation GmbH
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
Transitional Service Agreement Schedule B - Cont'd
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No Location Jenoptik Entity provision operating cost initial/termination cost explanation
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Jena Jenoptik AG Hourly services for patent JO AG, Herr Bertram will
work for INFAB in all 180 DM plus filing none be the contact person
countries and regions of fees and expenses further on taking care of
interest (additional all Filing related issues
representation outside INFAB for Brooks Jena products
appropriate to our accounting
per hour.
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
2 Jena Jenoptik AG Provide copy service for format A0=DM 12.- as currently provided by
drawings and documentation and format none Jenoptik AT
A4=DM 0.40
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
From Jan 1, 2000 on
content and price will be
adjusted as Brooks
3 Jena BGJ Provide personnel and per employee and Automation GmbH will have
payroll services month DM 97.- none an own person taking care
for some of the personnel
issues. Payroll will stay
with BGJ in anyway.
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
cleaning schedule as
4 Jena Jenoptik AG Cleaning of offices, stores none as included none currently operated. Any
and mfg areas in rental costs changes up/down will
reflect in rent
adjustments
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
Mail service to distribute
"yellow mail" and courier as per external
5 Jena Jenoptik AG mail (FedEx) from central cost; additional none
point to one defined Jena DM 1500.- per
office of Brooks Automation month for JO AG
GmbH and vice versa efforts
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
Maintaining and filing of all
6 Jena Jenoptik AG CAD drawings at a central DM 1500.- per none JO AT
point month
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
central maintenance
7 Jena Jenoptik AG of article number system DM 1125.- per none JO AT
(MARA) month
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
same cost for JO AG provides via an
8 Jena Jenoptik AG Use of the canteen for Brooks employees none external company canteen
Brooks employees as for JO services (Dussmann). Per
employees menu Brooks have to pay
DM 2.- as backing
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
9 Jena Jenoptik AG Environmental and work DM 10.913.- per 6 none provided by JO AG QS dept
security control services months
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
10 Jena Jenoptik AG onsite doctors service DM 1480.- per none
quarter
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
DM 150.- per hour
11 Jena Jenoptik AG provision of legal and for financial and none
financial services on DM 180.- per hour
request for legal services
- ---- -------- --------------- ----------------------------- ------------------ -------------------------- --------------------------
DM 85.- per hour
(normally 2 hours goods receiving services
12 Jena Jenoptik AG internal transportation and per day) for none due to volume might be
goods receiving services internal transpor- changed to do it by Brooks
tation and goods itself
receiving
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 10.34
MONTAGUE OAKS ASSOCIATES PHASE I & II,
a California general partnership
(Landlord)
and
SMART MACHINES, INC., a California corporation
(Tenant)
LEASE
<PAGE> 2
TABLE OF CONTENTS
Page
----
1. Use ..................................................... 1
2. Term .................................................... 1
3. Possession .............................................. 2
4. Monthly Rent ............................................ 2
(a) Basic Rent .................................... 2
(b) Common Area Charges ........................... 2
(c) Manner and Place of Payment ................... 3
(d) First Month's Rent ............................ 3
(e) Security Deposit .............................. 3
5. Intentionally Omitted ................................... 3
6. Restriction on Use ...................................... 3
7. Compliance with Laws .................................... 4
8. Alterations ............................................. 5
9. Repair and Maintenance .................................. 6
10. Liens ................................................... 7
11. Insurance ............................................... 7
12. Utilities and Service ................................... 9
13. Taxes and Other Charges ................................. 10
14. Entry by Landlord ....................................... 11
15. Common Area; Parking .................................... 12
16. Common Area Charges ..................................... 13
17. Damage by Fire; Casualty ................................ 14
18. Indemnification ......................................... 15
19. Assignment and Subletting ............................... 16
20. Default ................................................. 18
21. Landlord's Right to Cure Tenant's Default ............... 21
22. Eminent Domain .......................................... 21
-i-
<PAGE> 3
23. Notice and Covenant to Surrender ........................ 22
24. Tenant's Quitclaim ...................................... 23
25. Holding Over ............................................ 23
26. Subordination ........................................... 23
27. Certificate of Estoppel ................................. 24
28. Sale by Landlord ........................................ 24
29. Attornment to Lender or Third Party ..................... 24
30. Default by Landlord ..................................... 25
31. Construction Changes .................................... 25
32. Measurement of Premises ................................. 25
33. Attorney Fees ........................................... 26
34. Surrender ............................................... 26
35. Waiver .................................................. 26
36. Easements; Airspace Rights .............................. 26
37. Rules and Regulations ................................... 27
38. Notices ................................................. 27
39. Name .................................................... 27
40. Governing Law; Severability ............................. 27
41. Definitions ............................................. 28
42. Time .................................................... 29
43. Interest on Past Due Obligations; Late Charge ........... 29
44. Entire Agreement ........................................ 29
45. Corporate Authority ..................................... 29
46. Recording ............................................... 30
47. Real Estate Brokers ..................................... 30
48. Exhibits and Attachments ................................ 30
49. Environmental Matters.................................... 30
(a) Tenant's Covenants Regarding Hazardous Materials .... 30
-ii-
<PAGE> 4
(i) Hazardous Materials Handling ...................... 30
(ii) Notices ........................................... 31
(b) Indemnification of Landlord ........................... 31
(c) Survival .............................................. 32
50. Signage .................................................... 32
51. Submission of Lease ........................................ 33
52. Tenant Improvements ........................................ 33
53. Additional Rent ............................................ 33
54. option to Extend Term ...................................... 33
-iii-
<PAGE> 5
SUMMARY OF LEASE
1. DATE OF LEASE: June 7, 1995
2. LANDLORD: MONTAGUE OAKS ASSOCIATES PHASE I &
II 3945 Freedom Circle, suite 640 Santa
Clara, California 95054
3. TENANT: SMART MACHINES, INC.
4. PREMISES: 651 River Oaks Parkway
San Jose, California
5. SQUARE FEET: Nine Thousand Seven Hundred Twenty-
Eight (9,728)
6. PERMITTED USE: Sales, marketing, manufacturing and
distribution of semiconductor equipment
and software products and uses inciden-
tal to the foregoing uses
7. TERM: Three (3) years
(a) SCHEDULED COMMENCEMENT DATE: July 1, 1995
(b) SCHEDULED EXPIRATION DATE: June 30, 1998
8. RENT:
(a) BASIC RENT: $7,587.84 per month
(b) TENANT'S ESTIMATED SHARE OF
COMMON AREA CHARGES: $1,235.46
9. SECURITY DEPOSIT: $8,823.30
10. PARKING SPACES PROVIDED: Thirty-eight (38)
11. OTHER IMPORTANT PROVISIONS: Advance Rent
Option to Extend
Early Occupancy
THIS SUMMARY OF LEASE IS INTENDED TO SUMMARIZE CERTAIN KEY PROVISIONS IN THE
ATTACHED LEASE. IN THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE
PROVISIONS OF THIS SUMMARY AND THE LEASE, THE PROVISIONS OF THE LEASE SHALL
GOVERN.
<PAGE> 6
LEASE
THIS LEASE is made this 7th day of June, 1995, by and between MONTAGUE
OAKS ASSOCIATES PHASE I & II, a California general partnership ("Landlord") and
SMART MACHINES, INC., a California corporation ("Tenant").
WITNESSETH:
Landlord leases to Tenant and Tenant leases from Landlord those certain
premises outlined in red on Exhibit "A" (the "Premises") commonly known as 651
River Oaks Parkway, San Jose, California, which Landlord and Tenant hereby agree
consists of approximately nine thousand seven hundred twenty-eight (9,728)
square feet in the Project. As used herein the term Project shall mean and
include all of the land outlined in red on Exhibit "B" and all the buildings,
improvements, fixtures and equipment now or hereafter situated on said land.
Tenant covenants, as a material part of the consideration of this
lease, to perform and observe each and all of the terms, covenants and
conditions set forth below, and this lease is made upon the condition of such
performance and observance.
1. Use. Subject to the restrictions contained in paragraph 6 hereof,
Tenant shall use the Premises for sales, marketing, manufacturing, and
distribution of semiconductor equipment and software products and uses
incidental to the foregoing uses. Tenant shall not use or permit the Premises to
be used for any other purpose.
2. Term.
(a) The term shall be for three (3) years (unless sooner terminated
as hereinafter provided) and, subject to paragraph 3, shall commence on July 1,
1995 and end on June 30, 1998.
(b) Tenant shall have the right to occupy the Premises beginning on
June 9, 1995 ("Early Occupancy Period"). Such early occupancy by Tenant shall be
without payment of basic rent and common area charges, but shall otherwise be
subject to all of the terms and conditions of this Lease. Tenant acknowledges
that the tenant improvements will be constructed by Landlord while Tenant is in
occupancy of the Premises. Tenant further acknowledges that construction of the
tenant improvements may interfere or disrupt Tenant's use of the Premises and/or
its business conducted thereon. Landlord shall not be liable to Tenant and
Tenant hereby waives any and all claims against Landlord for interference or
disruption of Tenant's business, or for any injury to or death of any person or
damage to or destruction of property in or about the Premises or the Project by
or from Landlord's construction of the tenant improvements; provided, however,
that the foregoing waiver shall not extend to claims arising out of the gross
negligence or willful
-1-
<PAGE> 7
misconduct of Landlord. In no event shall Landlord be liable to Tenant for any
consequential damages arising out of Landlord's construction of the tenant
improvements while Tenant is in occupancy of the Premises.
3. Possession.
(a) Landlord anticipates that it will deliver possession of the
Premises to Tenant on or before June 9, 1995. If Landlord for any reason cannot
deliver possession of the Premises to Tenant by such date, this lease shall not
be void or voidable, Landlord shall not be liable to Tenant for any loss or
damage on account thereof and, unless Landlord's failure to deliver possession
of the Premises to Tenant by the scheduled commencement date set forth in
paragraph 2(a) is caused by Tenant caused delays as defined in Exhibit "C" to
this lease, Tenant shall not be liable for rent until Landlord delivers
possession of the Premises to Tenant. If the term commences on a date other than
the date specified in paragraph 2(a) above, then the parties shall immediately
execute an amendment to this lease stating the actual date of commencement and
the revised expiration date. The expiration date of the term shall be extended
by the same number of days that Tenant's possession of the Premises was delayed
from that set forth in paragraph 2(a).
(b) Tenant's inability or failure to take possession of the Premises
when delivery is tendered by Landlord shall not delay the commencement of the
term of this lease or Tenant's obligation to pay rent. Tenant acknowledges that
Landlord shall incur significant expenses upon the execution of this lease, even
if Tenant never takes possession of the Premises, including without limitation
brokerage commissions and fees, legal and other professional fees, the costs of
space planning and the costs of construction of improvements in the Premises.
Tenant acknowledges that all of said expenses shall be included in measuring
Landlord's damages should Tenant breach the terms of this lease.
4. Monthly Rent.
(a) Basic Rent. Tenant shall pay to Landlord as basic rent for the
Premises, in advance, the sum of Seven Thousand Five Hundred Eighty-seven
Dollars and Eighty-four Cents ($7,587.84) on or before the first day of the
first full calendar month of the term and on or before the first day of each and
every successive calendar month. Basic rent for any partial month shall be
payable in advance and shall be prorated at the rate of 1/30th of the monthly
basic rent per day.
(b) Common Area Charges. In addition to the above basic rent and as
additional rent, Tenant shall pay to Landlord, subject to adjustments and
reconciliation as provided in paragraph 16 of this lease, the sum of One
Thousand Two Hundred Thirty-five Dollars and Forty-six Cents ($1,235.46) on or
before the first day of the first full calendar month of the term and on the
first day of each
-2-
<PAGE> 8
and every successive calendar month, said sum representing Tenant's estimated
payment of its percentage share of common area charges as provided for in
paragraph 16 of this lease. Payment of common area charges for any partial month
shall be payable in advance and shall be prorated at the rate of 1/30th of the
monthly payment of common area charges per day.
(c) Manner and Place of Payment. All payments of basic rent and
common area charges shall be paid to Landlord, without deduction or offset, in
lawful money of the United States of America, at the office of Landlord at 3945
Freedom Circle, Suite 640, Santa Clara, California 95054, or to such other
person or place as Landlord may from time to time designate in writing.
(d) First Month's Rent. Concurrently with Tenant's execution of
this lease, Tenant shall deposit with Landlord the sum of Eight Thousand Eight
Hundred Twenty-three Dollars and Thirty Cents ($8,823.30) to be applied against
the basic rent and common area charges for the first lease month of the term.
(e) Security Deposit. Concurrently with Tenant's execution of this
lease, Tenant shall deposit with Landlord the sum of Eight Thousand Eight
Hundred Twenty-three Dollars and Thirty Cents ($8,823.30), which sum shall be
held by Landlord as a security deposit for the faithful performance by Tenant of
all of the terms, covenants and conditions of this lease to be kept and
performed by Tenant. If Tenant defaults with respect to any provision of this
lease, including but not limited to, the provisions relating to the payment of
basic rent and common area charges, Landlord may (but shall not be required to)
use, apply, or retain all or any part of this security deposit for the payment
of any amount which Landlord may spend by reason of Tenant's default or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of default. If any portion of said deposit is so used, Tenant shall,
within ten (10) days after written demand therefor, deposit cash with Landlord
in the amount sufficient to restore the security deposit to its original amount;
Tenant's failure to do so shall be a material breach of this lease. Landlord
shall not be required to keep this security deposit separate from its general
funds and Tenant shall not be entitled to interest on such deposit. If Tenant is
not in default at the expiration or termination of this lease, the security
deposit or any balance thereof shall be returned to Tenant after Tenant has
vacated the Premises. In the event of termination of Landlord's interest in this
lease, Landlord shall transfer said deposit to Landlord's successor in interest,
and Tenant agrees that Landlord shall thereupon be released from liability for
the return of such deposit or any accounting therefor.
5. Intentionally Omitted.
6. Restriction on Use. Tenant shall not do or permit to be done in or
about the Premises or the Project, nor bring or keep or permit to be brought or
kept in or about the Premises or Project,
-3-
<PAGE> 9
anything which is prohibited by or will in any way increase the existing rate
of, or otherwise affect, fire or any other insurance covering the Project or any
part thereof, or any of its contents, or will cause a cancellation of any
insurance covering the Project or any part thereof, or any of its contents.
Tenant shall not do or permit to be done anything in or about the Premises or
the Project which will constitute waste or which will in any material way
obstruct or interfere with the rights of other tenants or occupants of the
Project or injure or annoy them, or use or allow the Premises to be used for any
unlawful purpose, nor shall Tenant cause, maintain or permit any nuisance in or
about the Premises or the Project. No loudspeaker or other device, system or
apparatus which can be heard outside the Premises shall be used in or at the
Premises without the prior written consent of Landlord. Tenant shall not use the
Premises in any manner that will cause or emit any objectionable odor, noise or
light into the adjoining premises or Common Area. Tenant shall not do anything
on the Premises that will cause damage to the Project and Tenant shall not
overload the floor capacity of the Premises or the Project. No machinery,
apparatus or other appliance shall be used or operated in or on the Premises
that will in any manner injure, vibrate or shake the Premises. Landlord shall be
the sole judge, of whether such odor, noise, light or vibration is such as to
violate the provisions of this paragraph. No waste materials or refuse shall be
dumped upon or permitted to remain upon any part of the Premises or the Project
except in trash containers placed inside exterior enclosures designated for that
purpose by Landlord, or where otherwise designated by Landlord; and no toxic or
hazardous materials shall be disposed of through the plumbing or sewage system.
No materials, supplies, equipment, finished products or semi-finished products,
raw materials or articles of any nature shall be stored or permitted to remain
outside of the building proper. No retail sales shall be made on the Premises.
Tenant shall comply with any covenant, condition or restriction ("C.C. & R.'s")
affecting the Premises.
7. Compliance with Laws. Tenant shall, in connection with its use and
occupation of the Premises, at its sole cost and expense, promptly observe and
comply with (i) all laws, statutes, ordinances and governmental rules,
regulations and requirements of federal, state, county, municipal and other
governmental authorities, now or hereafter in effect, which shall impose any
duty upon Landlord or Tenant with respect to the use, occupancy or alteration of
the Premises, (ii) with the requirements of any board of fire underwriters or
other similar body now or hereafter constituted and (iii) with any direction or
occupancy certificate issued pursuant to law by any public authority; provided,
however, that no such failure shall be deemed a breach of these provisions if
Tenant, immediately upon notification, commences to remedy or rectify said
failure. The judgment of any court of competent jurisdiction or the admission of
Tenant in any action against Tenant (whether or not Landlord is a party thereto)
that Tenant has violated any such law, statute, ordinance or governmental rule,
regulation, requirement, direction or provision, shall be conclusive of that
fact as
-4-
<PAGE> 10
between Landlord and Tenant. This lease shall remain in full force and effect
notwithstanding any loss of use or other effect on Tenant's enjoyment of the
Premises by reason of any governmental laws, statutes, ordinances, rules,
regulations and requirements now or hereafter in effect.
8. Alterations. Tenant shall not make or suffer to be made any
alteration, addition or improvement to or of the Premises or any part thereof
(collectively referred to herein as "alterations") without (i) the prior written
consent of Landlord, (ii) a valid building permit issued by the appropriate
governmental authority and (iii) otherwise complying with all applicable laws,
regulations and requirements of governmental agencies having jurisdiction and
with the rules, regulations and requirements of any board of fire underwriters
or similar body. Landlord's consent to any requested alteration shall not create
on the part of Landlord or cause Landlord to incur any responsibility or
liability for such alteration's compliance with all laws, rules and regulations
of federal, state, county, municipal and other governmental authorities. Any
alteration made by Tenant (excluding moveable furniture and trade fixtures not
attached to the Premises) shall at once become a part of the Premises and belong
to Landlord. Without limiting the foregoing, all heating, lighting, electrical
(including all wiring, conduit, outlets, drops, buss ducts, main and subpanels),
air conditioning, partitioning, drapery and carpet installations made by Tenant,
regardless of how attached to the Premises, together with all other alterations
that have become an integral part of the Project in which the Premises are a
part, shall be and become part of the Premises and belong to Landlord upon
installation and shall not be deemed trade fixtures, and shall remain upon and
be surrendered with the Premises at the termination of the lease.
If Landlord consents to the making of any alteration by Tenant, the
same shall be made by Tenant at its sole risk, cost and expense and only after
Landlord's written approval of any contractor or person selected by Tenant for
that purpose, and the same shall be made at such time and in such manner as
Landlord may from time to time designate. Tenant shall, if required by Landlord,
secure at Tenant's cost a completion and lien indemnity bond for such work. Upon
the expiration or sooner termination of the term, Landlord may, at its sole
option, require Tenant, at Tenant's sole cost and expense, to promptly both
remove any such alteration made by Tenant and designated by Landlord to be
removed and repair any damage to the Premises caused by such removal, and
restore the Premises to the condition that existed prior to such alteration in
accordance with all applicable laws, statutes, building codes, and regulations
in effect as of the date of such restoration. Any moveable furniture and
equipment or trade fixtures remaining on the Premises at the expiration or other
termination of the term shall become the property of the Landlord unless
promptly removed by Tenant.
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If during the term any alteration, addition or change of the Premises
is required by law, regulation, ordinance or order of any public authority,
Tenant, at its sole cost and expense, shall promptly make the same. If during
the term any alterations, additions or changes to the Common Area or to the
Project in which the Premises is located is required by law, regulation,
ordinance or order of any public or quasi-public authority, and it is
impractical in Landlord's judgment for the affected tenants to individually make
such alterations, additions or changes, Landlord shall make such alterations,
additions or changes and the cost thereof shall be a common area charge and
Tenant shall pay its percentage share of such cost to Landlord as provided in
paragraph 16.
9. Repair and Maintenance. By entry hereunder, Tenant accepts the
Premises as being in good and sanitary order, condition and repair (excepting
only "punchlist items"). Except as expressly provided below, Tenant shall at its
sole cost keep and maintain the entire Premises and every part thereof
including, without limitation, the windows, window frames, plate glass, glazing,
elevators within the Premises, truck doors, doors and all door hardware, the
interior walls and partitions, lighting and the electrical, mechanical, and
plumbing systems. Tenant shall also repair and maintain the heating and air
conditioning systems (unless Landlord has elected to keep and maintain the
heating and air conditioning systems as provided below) which shall include,
without limitation, a periodic maintenance agreement with a reputable and
licensed heating and air conditioning service company. If Tenant's use of the
heating and air conditioning systems is limited to normal business hours (8:00
a.m. to 6:00 p.m.) such agreement shall provide for service at least as often as
every 60 days; if Tenant's use of the heating or air conditioning systems
extends beyond such normal business hours this service shall be as often as may
be required by Landlord and in any event such service shall meet all warranty
enforcement requirements of such equipment and comply with all manufacturer
recommended maintenance. Landlord may elect, at its option, to keep and maintain
the heating and air conditioning systems of the Premises and in such event,
Tenant shall pay to Landlord upon demand the full cost of such maintenance.
Subject to the provisions of paragraph 17, Landlord shall keep and
maintain the roof, structural elements, and exterior walls of the buildings
constituting the Project and Common Area in good order and repair.
Notwithstanding the foregoing, if any major repairs or replacements are required
to the heating and air conditioning systems of the Premises during the first
ninety (90) days after the Commencement Date (as defined in Paragraph 2(a)
above), Landlord shall make such repairs or replacements; provided, however,
that Tenant shall remain responsible for all routine maintenance of the heating
and air conditioning systems occurring during said ninety (90) day period.
Notwithstanding the foregoing, if any repairs or maintenance, including major
repairs or replacements to the heating and air conditioning systems are required
because of an act or omission of Tenant, or its agents, employees
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or invitees, Tenant shall pay the Landlord upon demand the full cost of such
repairs or maintenance. Tenant waives all rights under and benefits of
California Civil Code Sections 1932(1), 1941, and 1942 and under any similar
law, statute or ordinance now or hereafter in effect. The cost of the repairs
and maintenance which are the obligation of Landlord hereunder, including
without limitation, maintenance contracts and supplies, materials, equipment and
tools used in such repairs and maintenance shall be a common area charge and
Tenant shall pay its percentage share of such costs to Landlord as provided in
paragraph 16; provided, however, that if any repairs or maintenance is required
because of an act or omission of Tenant, or its agents, employees or invitees,
Tenant shall pay to Landlord upon demand the full cost of such repairs or
maintenance.
10. Liens. Tenant shall keep the Premises and the Project free from
any liens arising out of any work performed, materials furnished or obligations
incurred by Tenant, its agents, employees or contractors. Upon Tenant's receipt
of a preliminary twenty (20) day notice filed by a claimant pursuant to
California Civil Code Section 3097, Tenant shall immediately provide Landlord
with a copy of such notice. Should any lien be recorded against the Project,
Tenant shall give immediate notice of such lien to Landlord. In the event that
Tenant shall not, within ten (10) days following the imposition of such lien,
cause the same to be released of record, Landlord shall have, in addition to all
other remedies provided herein and by law, the right, but no obligation, to
cause the same to be released by such means as it shall deem proper, including
payment of the claim giving rise to such lien. All sums paid by Landlord for
such purpose, and all expenses (including attorneys' fees) incurred by it in
connection therewith, shall be payable to Landlord by Tenant on demand with
interest at the rate of twelve percent (12%) per annum or the maximum rate
permitted by law, whichever is less. Landlord shall have the right at all times
to post and keep posted on the Premises any notices permitted or required by
law, or which Landlord shall deem proper for the protection of Landlord, the
Premises and the Project and any other party having an interest therein, from
mechanics' and materialmen's liens and like liens. Tenant shall give Landlord at
least fifteen (15) days prior notice of the date of commencement of any
construction on the Premises in order to permit the posting of such notices. In
the event Tenant is required to post an improvement bond with a public agency in
connection with any work performed by Tenant on or to the Premises, Tenant shall
include Landlord as an additional obligee.
11. Insurance. Tenant, at its sole cost and expense, shall keep in
force during the term (i) commercial general liability and property damage
insurance with a combined single limit of at least $2,000,000 per occurrence
insuring against personal or bodily injury to or death of persons occurring in,
on or about the Premises or Project and any and all liability of the insureds
with respect to the Premises or arising out of Tenant's maintenance, use or
occupancy of the Premises and all areas appurtenant thereto,
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<PAGE> 13
(ii) direct physical loss-special insurance covering the leasehold improvements
in the Premises and all of Tenant's equipment, trade fixtures, appliances,
furniture, furnishings, and personal property from time to time located in, on
or about the Premises, with coverage in the amount of the full replacement cost
thereof, and (iii) Worker's Compensation Insurance as required by law, together
with employer's liability coverage with a limit of not less than $1,000,000 for
bodily injury for each accident and for bodily injury by disease for each
employee. Tenant's commercial general liability and property damage insurance
and Tenant's Workers Compensation Insurance shall be endorsed to provide that
said insurance shall not be canceled or reduced except upon at least thirty (30)
days prior written notice to Landlord. Further, Tenant's commercial general
liability and property damage insurance shall be primary and shall be endorsed
to provide that Landlord and McCandless Management Corporation, and their
respective partners, officers, directors and employees and such other persons or
entities as directed from time to time by Landlord shall be named as additional
insureds for all liability using ISO Bureau Form CG20111185 (or a successor
form) or such other endorsement form reasonably acceptable to Landlord; shall
contain a severability of interest clause and a cross-liability endorsement;
shall be endorsed to provide that the limits and aggregates apply per location
using ISO Bureau Form CG25041185 (or a successor form) or such other endorsement
form reasonably acceptable to Landlord; and shall be issued by an insurance
company admitted to transact business in the State of California and rated
A+VIII or better in Best's Insurance Reports (or a successor report). The
deductibles for all insurance required to be maintained by Tenant hereunder
shall be reasonably satisfactory to Landlord. The commercial general liability
insurance carried by Tenant shall specifically insure the performance by Tenant
of the indemnification provisions set forth in paragraph 18 of this lease
provided, however, nothing contained in this paragraph 11 shall be construed to
limit the liability of Tenant under the indemnification provisions set forth in
said paragraph 18. If Landlord or any of the additional insureds named on any of
Tenant's insurance, have other insurance which is applicable to the covered loss
on a contributing, excess or contingent basis, the amount of the Tenant's
insurance company's liability under the policy of insurance maintained by Tenant
shall not be reduced by the existence of such other insurance. Any insurance
carried by Landlord or any of the additional insureds named on Tenant's
insurance policies shall be excess and non-contributing with the insurance so
provided by Tenant. Landlord shall keep in force during the term a policy of
commercial general liability and property damage insurance insuring against
personal or bodily injury to or death of persons occurring in, on, or about the
common areas of the Project. The cost of such insurance, plus any charges for
deferred payment of premiums and the amount of any deductible incurred upon any
covered loss within the common area of the Project shall be a common area
charge.
Tenant shall, prior to the commencement of the term and at least thirty
(30) days prior to any renewal date of any insurance
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<PAGE> 14
policy required to be maintained by Tenant pursuant to this paragraph, provide
Landlord with a completed Certificate of Insurance, using a form acceptable in
Landlord's reasonable judgement, attaching thereto copies of all endorsements
required to be provided by Tenant under this lease. Tenant agrees to increase
the coverage or otherwise comply with changes in connection with said commercial
general liability, property damage, direct physical loss and Worker's
Compensation Insurance as Landlord or Landlord's lender may from time to time
reasonably require.
Landlord shall obtain and keep in force a policy or policies of
insurance covering loss or damage to the Premises and Project, in the amount of
the full replacement value thereof, providing protection against those perils
included within the classification of "all risk" insurance, with increased cost
of reconstruction and contingent liability (including demolition), plus a policy
of rental income insurance in the amount of one hundred percent (100%) of twelve
(12) months' rent (including sums paid as additional rent) and such other
insurance as Landlord or Landlord's lender may from time to time reasonably
require. Landlord may, but shall not be obligated to, obtain flood and/or
earthquake insurance. Landlord shall have no liability to Tenant if Landlord
elects not to obtain flood and/or earthquake insurance. The cost of all such
insurance purchased by Landlord, plus any charges for deferred payment of
premiums and the amount of any deductible incurred upon any covered loss within
the Project, shall be common area charges and Tenant shall pay to Landlord its
percentage share of such costs as provided in paragraph 16. If the cost of
insurance is increased due to Tenant's use of the Premises, then Tenant shall
pay to Landlord upon demand the full cost of such increase.
Landlord and Tenant hereby mutually waive any and all rights of
recovery against one another for real or personal property loss or damage
occurring to the Premises or the Project, or any part thereof, or to any
personal property therein, from perils insured against under fire and extended
insurance and any other property insurance policies existing for the benefit of
the respective parties so long as such insurance permits waiver of liability and
contains a waiver of subrogation without additional premiums.
If Tenant does not take out and maintain insurance as required pursuant
to this paragraph 11, Landlord may, but shall not be obligated to, take out the
necessary insurance and pay the premium therefor, and Tenant shall repay to
Landlord promptly on demand, as additional rent, the amount so paid. In
addition, Landlord may recover from Tenant and Tenant agrees to pay, as
additional rent, any and all reasonable expenses (including attorney fees) and
damages which Landlord may sustain by reason of the failure of Tenant to obtain
and maintain such insurance, it being expressly declared that the expenses and
damages of Landlord shall not be limited to the amount of the premiums thereon.
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12. Utilities and Service. Tenant shall pay for all water, gas, light,
heat, power, electricity, telephone, trash pickup, sewer charges and all other
services supplied to or consumed on the Premises. In the event that any service
is not separately metered or billed to the Premises, the cost of such utility
service or other service shall be a common area charge and Tenant shall pay its
percentage share of such cost to Landlord as provided in paragraph 16. In
addition, the cost of all utilities and services furnished by Landlord to the
Common Area shall be a common area charge and Tenant shall pay its percentage
share of such cost to Landlord as provided in paragraph 16.
If Tenant's use of any such utility or service is materially in excess
of the average furnished to the other tenants of the Project, and such utility
or service is not separately metered, then Tenant shall pay to Landlord upon
demand, as additional rent, the full cost of such excess use, or Landlord may
cause such utility or service to be separately metered, in which case Tenant
shall pay the full cost of such utility or service and reimburse Landlord upon
demand for the cost of installing the separate meter.
Landlord shall not be liable for, and Tenant shall not be entitled to
any abatement or reduction of rent by reason of, the failure of any person or
entity to furnish any of the foregoing services when such failure is caused by
accident, breakage, repairs, strikes, lockouts or other labor disturbances or
labor disputes of any character, governmental moratoriums, regulations or other
governmental actions, or by any other cause, similar or dissimilar, beyond the
reasonable control of Landlord. In addition, Tenant shall not be relieved from
the performance of any covenant or agreement in this lease because of any such
failure, and no eviction of Tenant shall result from such failure.
13. Taxes and Other Charges. All real estate taxes and assessments and
other taxes, fees and charges of every kind or nature, foreseen or unforeseen,
which are levied, assessed or imposed upon Landlord and/or against the Premises,
building, Common Area or Project, or any part thereof by any federal, state,
county, regional, municipal or other governmental or quasi-public authority,
together with any increases therein for any reason, shall be a common area
charge and Tenant shall pay its percentage share of such costs to Landlord as
provided in paragraph 16. By way of illustration and not limitation, "other
taxes, fees and charges" as used herein include any and all taxes payable by
Landlord (other than state and federal personal or corporate income taxes
measured by the net income of Landlord from all sources, and premium taxes),
whether or not now customary or within the contemplation of the parties hereto,
(i) upon, allocable to, or measured by the rent payable hereunder, including,
without limitation, any gross income or excise tax levied by the local, state or
federal government with respect to the receipt of such rent, (ii) upon or with
respect to the possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises or any part
thereof, (iii) upon
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<PAGE> 16
or measured by the value of Tenant's personal property or leasehold improvements
located in the Premises, (iv) upon this transaction or any document to which
Tenant is a party creating or transferring an interest or estate in the
Premises, (v) upon or with respect to vehicles, parking or the number of persons
employed in or about the Project, and (vi) any tax, license, franchise fee or
other imposition upon Landlord which is otherwise measured by or based in whole
or in part upon the Project or any portion thereof. If Landlord contests any
such tax, fee or charge, the cost and expense incurred by Landlord thereby
(including, but not limited to, costs of attorneys and experts) shall also be
common area charges and Tenant shall pay its percentage share of such costs to
Landlord as provided in paragraph 16. In the event the Premises and any
improvements installed therein by Tenant or Landlord are valued by the assessor
disproportionately higher than those of other tenants in the building or Project
or in the event alterations or improvements are made to the Premises, Tenant's
percentage share of such taxes, assessments, fees and/or charges shall be
readjusted upward accordingly and Tenant agrees to pay such readjusted share.
Such determination shall be made by Landlord from the respective valuations
assigned in the assessor's work sheet or such other information as may be
reasonably available and Landlord's determination thereof shall be conclusive.
Tenant agrees to pay, before delinquency, any and all taxes levied or
assessed during the term hereof upon Tenant's equipment, furniture, fixtures and
other personal property located in the Premises, including carpeting and other
property installed by Tenant notwithstanding that such carpeting or other
property has become a part of the Premises. If any of Tenant's personal property
shall be assessed with the Project, Tenant shall pay to Landlord, as additional
rent, the amount attributable to Tenant's personal property within ten (10) days
after receipt of a written statement from Landlord setting forth the amount of
such taxes, assessments and public charges attributable to Tenant's personal
property.
14. Entry by Landlord. Landlord reserves, and shall at all reasonable
times have, the right to enter the Premises (i) to inspect the Premises, (ii) to
supply services to be provided by Landlord hereunder, (iii) to show the Premises
to prospective purchasers, lenders or tenants and to put 'for sale' or 'for
lease' signs thereon, (iv) to post notices required or allowed by this lease or
by law, (v) to alter, improve or repair the Premises and any portion of the
Project, and (vi) to erect scaffolding and other necessary structures in or
through the Premises or the Project where reasonably required by the character
of the work to be performed. Landlord shall not be liable in any manner for any
inconvenience, disturbance, loss of business, nuisance or other damage arising
from Landlord's entry and acts pursuant to this paragraph (except the foregoing
shall not be deemed a waiver of claims against Landlord for its gross negligence
or willful conduct arising from Landlord's entry or such acts) and Tenant shall
not be entitled to an abatement or reduction of rent if Landlord
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<PAGE> 17
exercises any rights reserved in this paragraph. For each of the foregoing
purposes, Landlord shall at all times have and retain a key with which to unlock
all of the doors in, on and about the Premises (excluding Tenant's vaults, safes
and similar areas designated in writing by Tenant in advance), and Landlord
shall have the right to use any and all means which Landlord may deem proper to
open said doors in an emergency in order to obtain entry to the Premises. Any
entry by Landlord to the Premises pursuant to this paragraph shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into or
a detainer of the Premises or an eviction, actual or constructive, of Tenant
from the Premises or any portion thereof.
15. Common Area; Parking. Subject to the terms and conditions of this
lease and such rules and regulations as Landlord may from time to time
prescribe, Tenant and Tenant's employees and invitees shall, in common with
other occupants of the Project, and their respective employees and invitees and
others entitled to the use thereof, have the nonexclusive right to use the
access roads, parking areas and facilities within the Project provided and
designated by Landlord for the general use and convenience of the occupants of
the Project which areas and facilities shall include, but not be limited to,
sidewalks, parking, refuse, landscape and plaza areas, roofs and building
exteriors, which areas and facilities are referred to herein as "Common Area."
This right shall terminate upon the termination of this lease.
Landlord reserves the right from time to time to make changes in the
shape, size, location, amount and extent of the Common Area. Landlord shall also
have the right at any time to change the name, number or designation by which
the Project is commonly known. Landlord further reserves the right to promulgate
such rules and regulations relating to the use of the Common Area, and any part
thereof, as Landlord may deem appropriate for the best interests of the
occupants of the Project. The rules and regulations shall be binding upon Tenant
upon delivery of a copy of them to Tenant and Tenant shall abide by them and
cooperate in their observance. Such rules and regulations may be amended by
Landlord from time to time, with or without advance notice.
Tenant shall have the nonexclusive use of thirty-eight (38) parking
spaces in the Common Area as designated from time to time by Landlord. Landlord
reserves the right at its sole option to assign and label parking spaces, but it
is specifically agreed that Landlord is not responsible for policing any such
parking spaces. Tenant shall not at any time park or permit the parking of
Tenant's trucks or other vehicles, or the trucks or other vehicles of others,
adjacent to loading areas so as to interfere in any way with the use of such
areas; nor shall Tenant at any time park or permit the parking of Tenant's
vehicles or trucks, or the vehicles or trucks of Tenant's suppliers or others,
in any portion of the Common Area not designated by Landlord for such use by
Tenant. Tenant shall not park or permit any inoperative vehicle or equipment to
be parked on any portion of the Common Area.
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<PAGE> 18
Landlord shall operate, manage and maintain the Common Area in a
manner consistent with other similar industrial parks in the north San Jose
area. The expenditures for such operation, management and maintenance shall be
at the sole discretion of Landlord. The cost of such maintenance, operation and
management of the Common Area, including but not limited to landscaping, repair
of paving, parking lots and sidewalks, security and exterminator services and
salaries and employee benefits (including union benefits) of on-site and
accounting personnel engaged in such maintenance and operations management,
shall be a common area charge and Tenant shall pay to Landlord its percentage
share of such costs as provided in paragraph 16.
16. Common Area Charges. Tenant shall pay to Landlord, as additional
rent, an amount equal to eleven and nine one hundredths percent (11.09%) of the
total common area charges as defined below. Tenant's percentage share of common
area charges shall be paid as follows:
Tenant's estimated monthly payment of common area charges payable by
Tenant during the calendar year in which the term commences is set forth in
paragraph 4(b) of this lease. Prior to the commencement of each succeeding
calendar year of the term (or as soon as practicable thereafter), Landlord shall
deliver to Tenant a written estimate of Tenant's monthly payment of common area
charges. Tenant shall pay, as additional rent, on the first day of each month
during the term in accordance with paragraph 4(b) of this lease, its monthly
share of common area charges as estimated by Landlord. Within one hundred twenty
(120) days of the end of each calendar year and of the termination of this lease
(or as soon as practicable thereafter), Landlord shall deliver to Tenant a
statement of actual common area charges incurred for the preceding year. If such
statement shows that Tenant has paid less than its actual percentage then Tenant
shall on demand pay to Landlord the amount of such deficiency. If Tenant fails
to pay such excess amount due within ten (10) days after demand, Tenant shall
pay an additional ten percent (10%) of the amount due as a penalty. If such
statement shows that Tenant has paid more than its actual percentage share then
Landlord shall, at its option, promptly refund such excess to Tenant or credit
the amount thereof to the rent next becoming due from Tenant. Landlord reserves
the right to revise any estimate of common area charges if actual or projected
common area charged show an increase or decrease in excess of 10% from any
earlier estimate for the same period. In such event, Landlord shall deliver the
revised estimate to Tenant, together with an explanation of the reasons
therefor, and Tenant shall revise its payments accordingly. Landlord's and
Tenant's obligation with respect to adjustments at the end of the term or
earlier expiration of this lease shall survive such termination or expiration.
"Common area charges," as used in this lease, shall include,
but not be limited to, (i) all items identified in paragraphs 8,
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9, 11, 12, 13 and 15 as being common area charges; (ii) amortization of such
capital improvements having a useful life greater than one year as Landlord may
have installed for the purpose of reducing operating costs and/or to comply all
laws, rules and regulations of federal, state, county, municipal and other
governmental authorities now or hereinafter in effect (Tenant's share of any
such capital improvement shall equal Tenant's proportionate share of the
fraction of the cost of such capital improvement equal to the remaining term of
the lease over the useful life of such capital improvement); (iii) salaries and
employee benefits (including union benefits) of personnel engaged in the
operation and maintenance of the Project (or the building in which the Premises
are located) and payroll taxes applicable thereto; (iv) supplies, materials,
equipment and tools used or required in connection with the operation and
maintenance of the Project; (v) licenses, permits and inspection fees; (vi) a
reasonable reserve for repairs and replacement of equipment used in the
maintenance and operation of the Project; and (vii) all other operating costs
incurred by Landlord in maintaining and operating the Project.
17. Damage by Fire; Casualty. In the event the Premises are damaged by
any casualty which is covered under an insurance policy required to be
maintained by Landlord pursuant to paragraph 11, Landlord shall be entitled to
the use of all insurance proceeds and shall repair such damage as soon as
reasonably possible and this lease shall continue in full force and effect.
In the event the Premises are damaged by any casualty not covered
under an insurance policy required to be maintained pursuant to paragraph 11,
Landlord may, at Landlord's option, either (i) repair such damage, at Landlord's
expense, as soon as reasonably possible, in which event this lease shall
continue in full force and effect, or (ii) give written notice to Tenant within
thirty (30) days after the date of the occurrence of such damages of Landlord's
intention to cancel and terminate this lease as of the date of the occurrence of
the damages; provided, however, that if such damage is caused by an act or
omission of Tenant or its agent, servants or employees, then Tenant shall repair
such damage promptly at its sole cost and expense. In the event Landlord elects
to terminate this lease pursuant hereto, Tenant shall have the right within ten
(10) days after receipt of the required notice to notify Landlord in writing of
Tenant's intention to repair such damage at Tenant's expense, without
reimbursement from Landlord, in which event this lease shall continue in full
force and effect and Tenant shall proceed to make such repairs as soon as
reasonably possible. If Tenant does not give such notice within the ten (10) day
period, this lease shall be cancelled and terminated as of the date of the
occurrence of such damage. Under no circumstances shall Landlord be required to
repair any injury or damage to (by fire or other cause), or to make any
restoration or replacement of, any of Tenant's personal property, trade fixtures
or property leased from third parties, whether or not the same is attached to
the Premises.
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<PAGE> 20
If the Premises are totally destroyed during the term from any cause
(including any destruction required by any authorized public authority) whether
or not covered by the insurance required under paragraph 11, this lease shall
automatically terminate as of the date of such total destruction; provided,
however, that if the Premises can reasonably and lawfully be repaired or
restored within seven (7) months of the date of destruction to substantially the
condition existing prior to such destruction and if the proceeds of the
insurance payable to the Landlord by reason of such destruction are sufficient
to pay the cost of such repair or restoration, then the insurance proceeds shall
be so applied, Landlord shall promptly repair and restore the Premises and this
lease shall continue, without interruption, in full force and effect. If the
Premises are totally destroyed during the last twelve (12) months of the term,
either party may cancel and terminate this lease as of the date of occurrence of
such damage by giving written notice to the other party of the such party's
election to terminate within thirty (30) days after the occurrence of such
damage.
If the Premises are partially or totally destroyed or damaged and
Landlord or Tenant repair them pursuant to this lease, the rent payable
hereunder for the period during which such damage and repair continues shall be
abated only in proportion to the square footage of the Premises rendered
untenantable to Tenant by such damage or destruction. Tenant shall have no claim
against Landlord for any damage, loss or expense suffered by reason of any such
damage, destruction, repair or restoration. The parties waive the provisions of
California Civil Code sections 1932(2) and 1933(4) (which provisions permit the
termination of a lease upon destruction of the leased premises), and hereby
agree that the provisions of this paragraph 17 shall govern in the event of such
destruction.
18. Indemnification. Landlord shall not be liable to Tenant and Tenant
hereby waives all claims against Landlord for any injury to or death of any
person or damage to or destruction of property in or about the Premises or the
Project by or from any cause whatsoever except the failure of Landlord to
perform its obligations under this lease where such failure has persisted for an
unreasonable period of time after notice of such failure; provided, however,
that the foregoing waiver shall not extend to any such claims arising out of the
gross negligence or willful misconduct of Landlord. Without limiting the
foregoing, Landlord shall not be liable to Tenant for any injury to or death of
any person or damages to or destruction of property by reason of, or arising
from, any latent defect in the Premises or Project or the act or negligence of
any other tenant of the Project. Tenant shall immediately notify Landlord of any
defect in the Premises or Project.
Except as to injury to persons or damage to property the principal
cause of which is the failure by Landlord to observe any of the terms and
conditions of this lease, Tenant shall hold Landlord harmless from and defend
Landlord against any claim,
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liability, loss, damage or expense (including attorney fees) arising out of any
injury to or death of any person or damage to or destruction of property
occurring in, on or about the Premises from any cause whatsoever or on account
of the use, condition, occupational safety or occupancy of the Premises. Tenant
shall further hold Landlord harmless from and defend Landlord against any claim,
liability, loss, damage or expense (including attorney fees) arising (i) from
Tenant's use of the Premises or from the conduct of its business or from any
activity or work done, permitted or suffered by Tenant or its agents or
employees in or about the Premises or Project, (ii) out of the failure of Tenant
to observe or comply with Tenant's obligation to observe and comply with laws or
other requirements as set forth in paragraph 7, (iii) by reason of Tenant's use,
handling, storage, or disposal of toxic or hazardous materials or waste, (iv) by
reason of any labor or service performed for, or materials used by or furnished
to, Tenant or any contractor engaged by Tenant with respect to the Premises, or
(v) from any other act, neglect, fault or omission of Tenant or its agents or
employees.
The provisions of this paragraph 18 shall survive the expiration or
earlier termination of this lease.
19. Assignment and Subletting. Tenant shall not voluntarily assign,
encumber or otherwise transfer its interest in this lease or in the Premises, or
sublease all or any part of the Premises, or allow any other person or entity to
occupy or use all or any part of the Premises, without first obtaining
Landlord's written consent, which consent shall not be unreasonably withheld
subject to tenant's compliance with the requirements of this paragraph 19. Any
assignment, encumbrance or sublease without Landlord's consent, shall constitute
a default.
If Tenant desires to sublet or assign all or any portion of the
Premises, Tenant shall give Landlord written notice thereof, specifying the
projected commencement date of the proposed sublet or assignment (which date
shall be not less than thirty (30) days or more than ninety (90) days after the
date of such notice), the portions of the Premises proposed to be sublet or
assigned, and the identity of the proposed assignee or subtenant. Tenant shall
further provide Landlord with such other information concerning the proposed
assignee or subtenant as requested by Landlord. Any proposed assignee or
sublessee must agree to assume and agree to perform all the covenants and
conditions of Tenant under this lease. In the case of any proposed assignment,
or in the case of a proposed sublet of all of the Premises at a time when Tenant
has not occupied the Premises, or if the proposed sublet is for the entire
Premises for a sublet term ending within the last twelve (12) months of the term
of this lease, Landlord shall have the right, exercisable by written notice to
be delivered to Tenant within thirty (30) days of receipt of Tenant's notice, to
terminate this lease effective as of the date specified in Tenant's notice as
the proposed commencement date of the assignment or sublease. If Landlord does
not elect to terminate this lease and if Landlord
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consents in writing to the proposed assignment or sublet, Tenant shall be free
to assign or sublet all or a portion of the Premises subject to the following
conditions: (i) any sublease shall be on the same terms set forth in the notice
given to Landlord; (ii) no sublease shall be valid and no subtenant shall take
possession of the sublet premises until an executed counterpart of such sublease
has been delivered to Landlord; (iii) no subtenant shall have a further right to
sublet; (iv) any sums or other economic consideration received by Tenant as a
result of such assignment or sublet (except rental or other payments received
which are attributable to the amortization over the term of this lease of the
cost of leasehold improvements constructed for such assignees or subtenant, and
brokerage fees) whether denominated rentals or otherwise, which exceed, in the
aggregate, the total sums which Tenant is obligated to pay Landlord under this
lease (prorated to reflect obligations allocable to that portion of the Premises
subject to such sublease), shall be payable to Landlord as additional rent under
this lease without affecting or reducing any other obligation of Tenant
hereunder; and (v) no sublet or assignment shall release Tenant of Tenant's
obligation or alter the primary liability of Tenant to pay the rent and to
perform all other obligations to be performed by Tenant hereunder. Tenant shall
pay to Landlord promptly upon demand as additional rent, Landlord's actual
attorneys' fees and other costs (subject to a maximum of One Thousand Dollars
($1,000) incurred for reviewing, processing or documenting any requested
assignment or sublease, whether or not Landlord's consent is granted. Tenant
shall not be entitled to assign this lease or sublease all or any part of the
Premises (and any attempt to do so shall be voidable by Landlord) during any
period in which Tenant is in default under this lease.
If Tenant is a partnership, a withdrawal or change, voluntary or
involuntary or by operation of law, of any general partner or the dissolution of
the partnership shall be deemed an assignment of this lease subject to all the
conditions of this paragraph 19. If Tenant is a corporation any dissolution,
merger, consolidation or other reorganization of Tenant or the sale or other
transfer of a controlling percentage of the capital stock of Tenant or the sale
of more than fifty percent (50%) of the value of Tenant's assets shall be an
assignment of this lease subject to all the conditions of this paragraph 19. The
term "controlling percentage" means the ownership of, and the right to vote,
stock possessing more than 50% of the total combined voting power of all classes
of Tenant's capital stock issued, outstanding and entitled to vote. This
paragraph shall not apply if Tenant is a corporation the stock of which is
traded through an exchange. Notwithstanding anything contained in this paragraph
19, Tenant may, without Landlord's prior written consent and without triggering
any recapture right on the part of Landlord, sublet the Premises or assign the
lease to a (i) corporation controlled by Tenant, (ii) a successor corporation
related to Tenant by merger, consolidation, or other reorganization, or (iii) a
purchaser of all or substantially all of Tenant's assets, so long as Tenant
provides evidence satisfactory to Landlord, in Landlord's reasonable discretion,
that
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Tenant is a surviving entity, the net worth of the assignee or subtenant is
greater than or equal to the net worth of Tenant at the execution of this lease,
the use and occupancy of the Premises shall remain the same, and Tenant remains
fully liable under the lease.
The acceptance of rent by Landlord from any other person shall not be
deemed to be a waiver by Landlord of any provision hereof. Consent to one
assignment or sublet shall not be deemed consent to any subsequent assignment or
sublet. In the event of default by any assignee of Tenant or any successor of
Tenant in the performance of any of the terms hereof, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against
such assignee or successor. Landlord may consent to subsequent assignments or
sublets of this lease or amendments or modifications to this lease with
assignees of Tenant, without notifying Tenant, or any successor of Tenant, and
without obtaining its or their consent thereto and such action shall not relieve
Tenant of liability under this lease.
No interest of Tenant in this lease shall be assignable by operation
of law (including, without limitation, the transfer of this lease by testacy or
intestacy). Each of the following acts shall be considered an involuntary
assignment: (i) if Tenant is or becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors or institutes a proceeding under the
Bankruptcy Act in which Tenant is the bankrupt; or, if Tenant is a partnership
or consists of more than one person or entity, if any partner of the partnership
or other person or entity is or becomes bankrupt or insolvent, or makes an
assignment for the benefit of creditors; (ii) if a writ of attachment or
execution is levied on this lease; or (iii) if, in any proceeding or action to
which Tenant is a party, a receiver is appointed with authority to take
possession of the Premises. An involuntary assignment shall constitute a default
by Tenant and Landlord shall have the right to elect to terminate this lease, in
which case this lease shall not be treated as an asset of Tenant.
Tenant immediately and irrevocably assigns to Landlord, as security for
Tenant's obligations under this lease, all rent from any subletting of all or a
part of the Premises as permitted by this lease, and Landlord, as assignee and
as attorney-in-fact for Tenant, or a receiver of Tenant appointed on Landlord's
application, may collect such rent and apply it toward Tenant's obligations
under this lease; except that, until the occurrence of an act or default by
Tenant, Tenant shall have the right to collect such rent, subject to promptly
forwarding to Landlord any portion thereof to which Landlord is entitled
pursuant to this paragraph 19.
20. Default. The occurrence of any of the following shall constitute a
default by Tenant: (i) failure of Tenant to pay any rent or other sum payable
hereunder within three (3) days of when due; (ii) abandonment of the Premises
(Tenant's failure to occupy
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<PAGE> 24
and conduct business in the Premises for fourteen (14) consecutive days shall be
deemed an abandonment); or (iii) failure of Tenant to perform any other term,
covenant or condition of this lease if the failure to perform is not cured
within thirty (30) days after notice thereof has been given to Tenant (provided
that if such default cannot reasonably be cured within thirty (30) days, Tenant
shall not be in default if Tenant commences to cure such failure to perform
within the thirty (30) day period and diligently and in good faith continues to
cure the failure to perform). The notice referred to in clause (iii) above shall
specify the failure to perform and the applicable lease provision and shall
demand that Tenant perform the provisions of this lease within the applicable
period of time. No notice shall be deemed a forfeiture or termination of this
lease unless Landlord so elects in the notice. No notice shall be required in
the event of abandonment or vacation of the Premises.
In addition to the above, the occurrence of any of the following
events shall also constitute a default by Tenant: (i) Tenant fails to pay its
debts as they become due or admits in writing its inability to pay its debts, or
makes a general assignment for the benefit of creditors (for purposes of
determining whether Tenant is not paying its debts as they become due, a debt
shall be deemed overdue upon the earliest to occur of the following: thirty (30)
days from the date a statement therefor has been rendered; the date on which any
action or proceeding therefor is commenced; or the date on which a formal notice
of default or demand has been sent); (ii) Tenant fails to furnish to Landlord a
schedule of Tenant's aged accounts payable within ten (10) days after Landlord's
written request; or (iii) any financial statements given to Landlord by Tenant,
any assignee of Tenant, subtenant of Tenant, any guarantor of Tenant, or
successor in interest of Tenant (including, without limitation, any schedule of
Tenant's aged accounts payable) are materially false. At any time during the
term of this lease Landlord, at Landlord's option, shall have the right to
receive from Tenant, upon Landlord's request, a current annual balance sheet for
Landlord's review. If the balance sheet shows a negative net worth, Landlord may
terminate this lease by giving Tenant sixty (60) days prior written notice.
In the event of a default by Tenant, then Landlord, in addition to any
other rights and remedies of Landlord at law or in equity, shall have the right
either to terminate Tenant's right to possession of the Premises (and thereby
terminate this lease) or, from time to time and without termination of this
lease, to relet the Premises or any part thereof for the account and in the name
of Tenant for such term and on such terms and Conditions as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs to
the Premises.
Should Landlord elect to keep this lease in full force and effect,
Landlord shall have the right to enforce all of Landlord's rights and remedies
under this lease, including but not limited to the right to recover and to relet
the Premises and such other
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<PAGE> 25
rights and remedies as Landlord may have under California Civil Code Section
1951.4 or successor Code section or any other California statute. If Landlord
relets the Premises, then Tenant shall pay to Landlord, as soon as ascertained,
the costs and expenses incurred by Landlord in such reletting and in making
alterations and repairs. Rentals received by Landlord from such reletting shall
be applied (i) to the payment of any indebtedness due hereunder, other than
basic rent and common area charges, from Tenant to Landlord; (ii) to the payment
of the cost of any repairs necessary to return the Premises to good condition
normal wear and tear excepted, including the cost of alterations and the cost of
storing any of Tenant's property left on the Premises at the time of reletting;
and (iii) to the payment of basic rent or common area charges due and unpaid
hereunder. The residue, if any, shall be held by Landlord and applied in payment
of future rent or damages in the event of termination as the same may become due
and payable hereunder and the balance, if any at the end of the term of this
lease, shall be paid to Tenant. Should the basic rent and common area charges
received from time to time from such reletting during any month be less than
that agreed to be paid during that month by Tenant hereunder, Tenant shall pay
such deficiency to Landlord. Such deficiency shall be calculated and paid
monthly. No such reletting of the Premises by Landlord shall be construed as an
election on its part to terminate this lease unless a notice of such intention
is given to Tenant or unless the termination hereof is decreed by a court of
competent jurisdiction. Notwithstanding any such reletting without termination,
Landlord may at any time thereafter elect to terminate this lease for such
previous breach, provided it has not been cured.
Should Landlord at any time terminate this lease for any breach, in
addition to any other remedy it may have, it shall have the immediate right of
entry and may remove all persons and property from the Premises and shall have
all the rights and remedies of a landlord provided by California Civil Code
Section 1951.2 or any successor code section. Upon such termination, in addition
to all its other rights and remedies, Landlord shall be entitled to recover from
Tenant all damages it may incur by reason of such breach, including the cost of
recovering the Premises and including (i) the worth at the time of award of the
unpaid rent which had been earned at the time of termination; (ii) the worth at
the time of award of the amount by which the unpaid rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; (iii) the
worth at the time of the award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of such rental
loss that Tenant proves could be reasonably avoided; and (iv) any other amount
necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform its obligations under this lease or which in the
ordinary course of events would be likely to result therefrom. The "worth at the
time of award" of the amounts referred to in (i) and (ii) above is computed by
allowing interest at the rate of twelve percent (12%)
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per annum. The "worth at the time of award" of the amount referred to in (iii)
above shall be computed by discounting such amount at the discount rate of the
federal reserve bank of San Francisco at the time of award plus one percent
(1%). Tenant waives the provisions of Section 1179 of the California Code of
Civil Procedure (which Section allows Tenant to petition a court of competent
jurisdiction for relief against forfeiture of this lease). Property removed from
the Premises may be stored in a public or private warehouse or elsewhere at the
sole cost and expense of Tenant. In the event that Tenant shall not immediately
pay the cost of storage of such property after the same has been stored for a
period of thirty (30) days or more, Landlord may sell any or all thereof at a
public or private sale in such manner and at such times and places that
Landlord, in its sole discretion, may deem proper, without notice to or demand
upon Tenant.
21. Landlord's Right to Cure Tenant's Default. Landlord, at any time
after Tenant commits a default, may, but shall not be obligated to, cure the
default at Tenant's cost. If Landlord at any time, by reason of Tenant's
default, pays any sum or does any act that requires the payment of any sum, the
sum paid by Landlord shall be due immediately from Tenant to Landlord and shall
bear interest at the rate of twelve percent (12%) per annum or the maximum rate
permitted by law, whichever is less, from the date the sum is paid by Landlord
until Landlord is reimbursed by Tenant. Amounts due Landlord hereunder shall be
additional rent.
22. Eminent Domain. If all or any part of the Premises shall be taken
by any public or quasi-public authority under the power of eminent domain or
conveyance in lieu thereof, this lease shall terminate as to any portion of the
Premises so taken or conveyed on the date when title vests in the condemnor, and
Landlord shall be entitled to any and all payments, income, rent, award or any
interest therein whatsoever which may be paid or made in connection with such
taking or conveyance. Tenant shall have no claim against Landlord or otherwise
for the value of any unexpired term of this lease. Notwithstanding the
foregoing, Tenant shall be entitled to any compensation for depreciation to and
cost of removal of Tenant's equipment and fixtures and any compensation for its
relocation expenses necessitated by such taking, but in each case only to the
extent the condemning authority makes a separate award there for or specifically
identifies a portion of the award as being therefor. Each party waives the
provisions of Section 1265.130 of the California Code of civil Procedure (which
section allows either party to petition the Superior Court to terminate this
lease in the event of a partial taking of the Premises).
If any action or proceeding is commenced for such taking of the
Premises or any portion thereof or of any other space in the Project, or if
Landlord is advised in writing by any entity or body having the right or power
of condemnation of its intention to condemn the Premises or any portion thereof
or of any other space in the Project, and Landlord shall decide to discontinue
the use
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and operation of the Project or decide to demolish, alter or rebuild the
Project, then Landlord shall have the right to terminate this lease by giving
Tenant written notice thereof within sixty (60) days of the earlier of the date
of Landlord's receipt of such notice of intention to condemn or the commencement
of said action or proceeding. Such termination shall be effective as of the last
day of the calendar month next following the month in which such notice is given
or the date on which title shall vest in the condemnor, whichever occurs first.
In the event of a partial taking, or conveyance in lieu thereof, of the
Premises and fifty percent (50%) or more of tie number of square feet in the
Premises are taken then Tenant may terminate this lease. Any election by Tenant
to so terminate shall be by written notice given to Landlord within sixty (60)
days from the date of such taking or conveyance and shall be effective on the
last day of the calendar month next following the month in which such notice is
given or the date on which title shall vest in the condemnor, whichever occurs
first.
If a portion of the Premises is taken by power of eminent domain or
conveyance in lieu thereof and neither Landlord nor Tenant terminates this lease
as provided above, then this lease shall continue in full force and effect as to
the part of the Premises not so taken or conveyed and all payments of rent shall
be apportioned as of the date of such taking or conveyance so that thereafter
the amounts to be paid by Tenant shall be in the ratio that the area of the
portion of tie Premises not so taken bears to the total area of the Premises
prior to such taking.
23. Notice and Covenant to Surrender. On the last day of the term or
on the effective date of any earlier termination, Tenant shall surrender to
Landlord the Premises and all of Tenant's improvements and alterations in their
condition existing as of the commencement of the term (normal wear and tear
excepted) with all originally painted interior walls washed or repainted if
marked or damaged, interior vinyl covered walls cleaned and repaired or replaced
if marked or damaged, all carpets shampooed and cleaned, the air conditioning
and heating system serviced and repaired by a reputable and licensed service
firm (unless Landlord has elected to maintain such system pursuant to paragraph
9) and all floors cleaned and waxed; all to the reasonable satisfaction of
Landlord. On or prior to the last day of the term of the effective date or any
earlier termination, Tenant shall remove all of Tenant's personal property and
trade fixtures, together with improvements or alterations that Tenant is
obligated to remove pursuant to the provisions of paragraph 8, from the
Premises, repair any damage caused by such removal, and restore such areas to
the condition that existed prior to the installation of such trade fixtures or
alterations in accordance with all applicable laws, statutes, building codes,
and regulations in effect as of the date of such restoration. Any personal
property not removed shall be deemed abandoned. In addition, on or prior to the
expiration or earlier termination of this lease, Tenant shall remove, at
Tenant's sole
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cost and expense, all telephone, other communication, computer and any other
cabling and wiring of any sort installed in the space above the suspended
ceiling of the Premises or anywhere else in the Premises and shall promptly
repair any damage to the suspended ceiling, lights, light fixtures, walls and
any other part of the Premises resulting from such removal.
If the Premises are not surrendered as required in this paragraph,
Tenant shall indemnify Landlord against all loss, liability and expense
(including but not limited to, attorney fees) resulting from the failure by
Tenant in so surrendering the Premises, including, without limitation, any
claims made by any succeeding tenants. It is agreed between Landlord and Tenant
that the provisions of this paragraph shall survive termination of this lease.
24. Tenant's Quitclaim. At the expiration or earlier termination of
this lease, Tenant shall execute, acknowledge and deliver to Landlord, within
ten (10) days after written demand from Landlord to Tenant, any quitclaim deed
or other document required to remove the cloud or encumbrance created by this
lease from the real property of which the Premises are a part. This obligation
shall survive said expiration or termination.
25. Holding Over. Any holding over after the expiration or termination
of this lease with the written consent of Landlord shall be construed to be a
tenancy from month to month at the monthly rent, as adjusted, in effect on the
date of such expiration or termination. All provisions of this lease, except
those pertaining to the term and any option to extend, shall apply to the month
to month tenancy. The provisions of this paragraph are in addition to, and do
not affect, Landlord's right of reentry or other rights hereunder or provided by
law.
If Tenant shall retain possession of the Premises or any part thereof
without Landlord's consent following the expiration or sooner termination of
this lease for any reason, then Tenant shall pay to Landlord for each day of
such retention one hundred thirty-seven percent (137%) of the amount of the
daily rental in effect during the last month prior to the date of such
expiration or termination. Tenant shall also indemnify and hold Landlord
harmless from any loss, liability and expense (including, but not limited to,
attorneys fees) resulting from delay by Tenant in surrendering the Premises,
including without limitation any claims made by any succeeding tenant founded on
such delay. Acceptance of rent by Landlord following expiration or termination
shall not constitute a renewal of this lease, and nothing contained in this
paragraph shall waive Landlord's right of re-entry or any other right. Tenant
shall be only a Tenant at sufferance, whether or not Landlord accepts any rent
from Tenant, while Tenant is holding over without Landlord's written consent.
26. Subordination. In the event Landlord's title or leasehold interest
is now or hereafter encumbered in order to
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secure a loan to Landlord, Tenant shall, at the request of Landlord or the
lender, execute in writing an agreement subordinating its rights under this
lease to the lien of such encumbrance, or, if so requested, agreeing that the
lien of lender's encumbrance shall be or remain subject and subordinate to the
rights of Tenant under this lease. Tenant hereby irrevocably appoints Landlord
the attorney-in-fact of Tenant to execute, deliver and record any such
instrument or instruments for and in the name and on behalf of Tenant.
Notwithstanding any such subordination, Tenant's possession under this lease
shall not be disturbed if Tenant is not in default and so long as Tenant shall
pay all amounts due hereunder and otherwise observe and perform all provisions
of this lease. In addition, if in connection with any such loan the lender shall
request reasonable modifications of this lease as a condition to such financing,
Tenant will not unreasonably withhold, delay or defer its consent thereof,
provided that such modifications do not increase the obligations of Tenant
hereunder or materially adversely affect the leasehold interest hereby created
or Tenant's rights hereunder.
27. Certificate of Estoppel. Each party shall, within five (5) calendar
days after request therefor, execute and deliver to the other party, in
recordable form, a certificate stating that the lease is unmodified and in full
force and effect, or in full force and effect as modified and stating the
modifications. The certificate shall also state the amount of the monthly rent,
the date to which monthly rent has been paid in advance, the amount of the
security deposit and/or prepaid monthly rent, and, if the request is made by
Landlord, shall include such other items as Landlord or Landlord's lender may
reasonably request. Failure to deliver such certificate within such time shall
constitute a conclusive acknowledgment by the party failing to deliver the
certificate that the lease is in full force and effect and has not been modified
except as may be represented by the party requesting the certificate. Any such
certificate requested by Landlord may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises or Project. If Landlord
requests Tenant to execute an estoppel certificate pursuant to this paragraph
27, Landlord shall reimburse Tenant for reasonable attorneys' fees incurred by
Tenant in review and analysis of the estoppel certificate, not to exceed Five
Hundred Dollars ($500). Further, within five (5) calendar days following written
request made from time to time by Landlord, Tenant shall furnish to Landlord
current financial statements of Tenant.
28. Sale by Landlord. In the event the original Landlord hereunder, or
any successor owner of the Project or Premises, shall sell or convey the Project
or Premises, all liabilities and obligations on the part of the original
Landlord, or such successor owner, under this lease accruing thereafter shall
terminate, and thereupon all such liabilities and obligations shall be binding
upon the new owner. Tenant agrees to attorn to such new owner and to look solely
to such new owner for performance of any and all such liabilities and
obligations.
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29. Attornment to Lender or Third Party. In the event the interest of
Landlord in the land and buildings in which the Premises are located (whether
such interest of Landlord is a fee title interest or a leasehold interest) is
encumbered by deed of trust, and such interest is acquired by a lender or any
other third party through judicial foreclosure or by exercise of a power of sale
at private trustee's foreclosure sale, Tenant hereby agrees to release Landlord
of any obligation arising on or after any such foreclosure sale and to attorn to
the purchaser at any such foreclosure sale and to recognize such purchaser as
the Landlord under this lease.
30. Default by Landlord. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a reasonable
time, but in no event earlier than thirty (30) days after written notice by
Tenant to Landlord and to the holder of any first mortgage or deed of trust
covering the Premises specifying wherein Landlord has failed to perform such
obligations; provided, however, that if the nature of Landlord's obligations is
such that more than thirty (30) days are required for performance, then Landlord
shall not be in default if Landlord commences performance within such thirty
(30) day period and thereafter diligently prosecutes the same to completion.
If Landlord is in default of this lease, Tenant's sole remedy shall be
to institute suit against Landlord in a court of competent jurisdiction, and
Tenant shall have no right to offset any sums expended by Tenant as a result of
Landlord's default against future rent and other sums due and payable pursuant
to this lease. If Landlord is in default of this lease, and as a consequence
Tenant recovers a money judgment against Landlord, the judgment shall be
satisfied only out of the proceeds of sale received on execution of the judgment
and levy against the right, title and interest of Landlord in the Project of
which the Premises are a part, and out of rent or other income from such real
property receivable by Landlord or out of the consideration received by Landlord
from the sale or other disposition of all or any part of Landlord's right, title
and interest in the Project of which the Premises are a part. Neither Landlord
nor any of the partners comprising the partnership designated as Landlord shall
be personally liable for any deficiency.
31. Construction Changes. It is understood that the description of the
Premises and the location of ductwork, plumbing and other facilities therein are
subject to such changes as Landlord or Landlord's architect determines to be
desirable in the course of construction of the Premises and/or the improvements
constructed or being constructed therein, and no such changes or any changes in
plans for any other portions of the Project, shall affect this lease or entitle
Tenant to any reduction of rent hereunder or result in any liability of Landlord
to Tenant.
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32. Measurement of Premises. Tenant understands and agrees that any
reference to square footage of the Premises is approximate only and includes all
interior partitions and columns, one-half of exterior walls, and one-half of the
partitions separating the Premises from the rest of the Project, Tenant's
proportionate share of the Common Area and, if applicable, covered areas
immediately outside the entry doors or loading docks. Tenant waives any claim
against Landlord regarding the accuracy of any such measurement and agrees that
there shall not be any adjustment in basic rent or common area charges or other
amounts payable hereunder by reason of inaccuracies in such measurement.
33. Attorney Fees. If either party commences an action against the
other party arising out of or in connection with this lease, the prevailing
party shall be entitled to have and recover from the losing party all expenses
of litigation, including, without limitation, travel expenses, attorney fees,
expert witness fees, trial and appellate court costs, and deposition and
transcript expenses. If either party becomes a party to any litigation
concerning this lease, or concerning the Premises or the Project, by reason of
any act or omission of the other party or its authorized representatives, the
party that causes the other party to become involved in the litigation shall be
liable to the other party for all expenses of litigation, including, without
limitation, travel expenses, attorney fees, expert witness fees, trial and
appellate court costs, and deposition and transcript expenses.
34. Surrender. The voluntary or other surrender of this lease or the
Premises by Tenant, or a mutual cancellation of this lease, shall not work a
merger, and at the option of Landlord shall either terminate all or any existing
subleases or subtenancies or operate as an assignment to Landlord of all or any
such subleases or subtenancies.
35. Waiver. No delay or omission in the exercise of any right or
remedy of Landlord on any default by Tenant shall impair such right or remedy or
be construed as a waiver. The receipt and acceptance by Landlord of delinquent
rent or other payments shall not constitute a waiver of any other default and
acceptance of partial payments shall not be construed as a waiver of the balance
of such payment due. No act or conduct of Landlord, including, without
limitation, the acceptance of keys to the Premises, shall constitute an
acceptance of the surrender of the Premises by Tenant before the expiration of
the term. Only a written notice from Landlord to Tenant shall constitute
acceptance of the surrender of the Premises and accomplish a termination of this
lease. Landlord's consent to or approval of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.
Any waiver by Landlord of any default must be in writing and shall not be a
waiver of any other default concerning the same or any other provision of this
lease.
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36. Easements; Airspace Rights. Landlord reserves the right to alter
the boundaries of the Project and grant easements and dedicate for public use
portions of the Project without Tenant's consent, provided that no such grant or
dedication shall interfere with Tenant's use of the Premises or otherwise cause
Tenant to incur cost or expense. From time to time, and upon Landlord's demand,
Tenant shall execute, acknowledge and deliver to Landlord, in accordance with
Landlord's instructions, any and all documents, instruments, maps or plats
necessary to effectuate Tenant's covenants hereunder.
This lease confers no rights either with regard to the subsurface of or
airspace above the land on which the Project is located or with regard to
airspace above the building of which the Premises are a part. Tenant agrees that
no diminution or shutting off of light or view by a structure which is or may be
erected (whether or not by Landlord) on property adjacent to the building of
which the Premises are a part or to property adjacent thereto, shall in any way
affect this lease, or entitle Tenant to any reduction of rent, or result in any
liability of Landlord to Tenant.
37. Rules and Regulations. Landlord shall have the right from time to
time to promulgate rules and regulations for the safety, care and cleanliness of
the Premises, the Project and the Common Area, or for the preservation of good
order. On delivery of a copy of such rules and regulations to Tenant, Tenant
shall comply with the rules and regulations, and a violation of any of them
shall constitute a default by Tenant under this lease. If there is a conflict
between the rules and regulations and any of the provisions of this lease, the
provisions of this lease shall prevail. Such rules and regulations may be
amended by Landlord from time to time with or without advance notice.
38. Notices. All notices, demands, requests, consents and other
communications which may be given or are required to be given by either party to
the other shall be in writing and shall be sufficiently made and delivered if
personally served or if sent by United States first class mail, postage prepaid.
Prior to the commencement date, all such communications from Landlord to Tenant
shall be served or addressed to Tenant at 141 Lato Tierra Court, Los Gatos, CA
95032. On or after the commencement date, all such communications from Landlord
to Tenant shall be addressed to Tenant at the Premises. All such communications
by Tenant to Landlord shall be sent to Landlord at its offices at 3945 Freedom
Circle, suite 640, Santa Clara, California 95054. Either party may change its
address by notifying the other of such change. Each such communication shall be
deemed received on the date of the personal service or mailing thereof in the
manner herein provided, as the case may be.
39. Name. Tenant shall not use the name of the Project for any purpose,
other than as the address of the business conducted
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by Tenant in the Premises, without the prior written consent of Landlord.
40. Governing Law Severability. This lease shall in all respects be
governed by and construed in accordance with the laws of the State of
California. If any provision of this lease shall be held or rendered invalid,
unenforceable or ineffective for any reason whatsoever, all other provisions
hereof shall be and remain in full force and effect.
41. Definitions. As used in this lease, the following words and phrases
shall have the following meanings:
Authorized representative: any officer, agent, employee or
independent contractor retained or employed by either party, acting within
authority given him by that party.
Encumbrance: any deed of trust, mortgage or other written
security device or agreement affecting the Premises or the Project that
constitutes security for the payment of a debt or performance of an obligation,
and the note or obligation secured by such deed of trust, mortgage or other
written security device or agreement.
Lease Month: the period of time determined by reference to
the day of the month in which the term commences and continuing to one day short
of the same numbered day in the next succeeding month; e.g., the tenth day of
one month to and including the ninth day in the next succeeding month.
Lender: the beneficiary, mortgagee or other holder of
an encumbrance, as defined above.
Lien: a charge imposed on the Premises by someone other
than Landlord, by which the Premises are made security-for the
performance of an act. Most of the liens referred to in this lease
are mechanic's liens.
Maintenance: repairs, replacement, repainting and cleaning.
Monthly Rent: the sum of the monthly payments of basic rent
and common area charges.
Person: one or more human beings, or legal entities or other
artificial persons, including, without limitation, partnerships, corporations,
trusts, estates, associations and any combination of human being and legal
entities.
Provision: any term, agreement, covenant, condition, clause,
qualification, restriction, reservation or other stipulation in the lease that
defines or otherwise controls, establishes or limits the performance required or
permitted by either party.
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Rent: basic rent, common area charges, additional rent, and
all other amounts payable by Tenant to Landlord required by this lease or
arising by subsequent actions of the parties made pursuant to this lease.
Words used in any gender include other genders. If there be more than
one Tenant, the obligations of Tenant hereunder are joint and several. All
provisions whether covenants or conditions, on the part of Tenant shall be
deemed to be both covenants and conditions. The paragraph headings are for
convenience of reference only and shall have no effect upon the construction or
interpretation of any provision hereof.
42. Time. Time is of the essence of this lease and of each and all of
its provisions.
43. Interest on Past Due Obligations; Late Charge. Any amount due from
Tenant to Landlord hereunder which is not paid when due shall bear interest at
the rate of ten percent (10%) per annum from when due until paid, unless
otherwise specifically provided herein, but the payment of such interest shall
not excuse or cure any default by Tenant under this lease. In addition, Tenant
acknowledges that late payment by Tenant to Landlord of basic rent or common
area charges or of any other amount due Landlord from Tenant, will cause
Landlord to incur costs not contemplated by this lease, the exact amount of such
costs being extremely difficult and impractical to fix. Such costs include,
without limitation, processing and accounting charges, and late charges that may
be imposed on Landlord, e.g., by the terms of any encumbrance and note secured
by any encumbrance covering the Premises. Therefore, if any such payment due
from Tenant is not received by Landlord when due, Tenant shall pay to Landlord
an additional sum of five percent (5%) of the overdue payment as a late charge.
The parties agree that this late charge represents a fair and reasonable
estimate of the costs that Landlord will incur by reason of late payment by
Tenant. Acceptance of any late charge shall not constitute a waiver of Tenant's
default with respect to the overdue amount, nor prevent Landlord from exercising
any of the other rights and remedies available to Landlord. No notice to Tenant
of failure to pay shall be required prior to the imposition of such interest
and/or late charge, and any notice period provided for in paragraph 20 shall not
affect the imposition of such interest and/or late charge. Any interest and late
charge imposed pursuant to this paragraph shall be and constitute additional
rent payable by Tenant to Landlord.
44. Entire Agreement. This lease, including any exhibits and
attachments, constitutes the entire agreement between Landlord and Tenant
relative to the Premises and this lease and the exhibits and attachments may be
altered, amended or revoked only by an instrument in writing signed by both
Landlord and Tenant. Landlord and Tenant agree hereby that all prior or
contemporaneous oral agreements between and among themselves or their agents or
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<PAGE> 35
representatives relative to the leasing of the Premises are merged
in or revoked by this lease.
45. Corporate Authority. If Tenant is a corporation, each individual
executing this lease on behalf of the corporation represents and warrants that
he is duly authorized to execute and deliver this lease on behalf of the
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation and that this lease is binding upon said
corporation in accordance with its terms. If Tenant is a corporation, Tenant
shall deliver to Landlord, within ten (10) days of the execution of this lease,
a copy of the resolution of the Board of Directors of Tenant authorizing the
execution of this lease and naming the officers that are authorized to execute
this lease on behalf of Tenant, which copy shall be certified by Tenant's
president or secretary as correct and in full force and effect.
46. Recording. Neither Landlord nor Tenant shall record this lease or a
short form memorandum hereof without the consent of the other.
47. Real Estate Brokers. Each party represents and warrants to the
other party that it has not had dealings in any manner with any real estate
broker, finder or other person with respect to the Premises and the negotiation
and execution of this lease except BT Commercial Real Estate. Except as to
commissions and fees to be paid as provided in this paragraph, each party shall
indemnify and hold harmless the other party from all damage, loss, liability and
expense (including attorneys' fees and related costs) arising out of or
resulting from any claims for commissions or fees that may or have been asserted
against the other party by any broker, finder or other person with whom Tenant
or Landlord has or purportedly has dealt with in connection with the Premises
and the negotiation and execution of this lease. To the extent agreed to between
Landlord and BT Commercial Real Estate, Landlord shall pay all broker leasing
commissions to BT Commercial Real Estate incurred in connection with the
Premises and the negotiation and execution of this lease.
48. Exhibits and Attachments. All exhibits and attachments to this
lease are a part hereof.
49. Environmental Matters.
(a) Tenant's Covenants Regarding Hazardous Materials.
(i) Hazardous Materials Handling. Tenant, its agents,
invitees, employees, contractors, sublessees, assigns and/or successors shall
not use, store, dispose, release or otherwise cause to be present or permit the
use, storage, disposal, release or presence of Hazardous Materials (as defined
below) on or about the Premises or Project. As used herein "Hazardous Materials"
shall mean any petroleum or petroleum by-products, flammable explosives,
asbestos, urea formaldehyde, radioactive
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materials or waste and any "hazardous substance," "hazardous waste," "hazardous
materials," "toxic substance" or "toxic waste" as those terms are defined under
the provisions of the California Health and Safety Code and/or the provisions of
the Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 et seq.) as amended by the Superfund Amendments and
Reauthorization Act of 1986 (42 U.S.C. Section 9601 et seq.), or any other
hazardous or toxic substance, material or waste which is or becomes regulated by
any local governmental authority, the State of California or any agency thereof,
or the United States Government or any agency thereof.
(ii) Notices. Tenant shall immediately notify Landlord in
writing of: (i) any enforcement, cleanup, removal or other governmental or
regulatory action instituted, completed or threatened pursuant to any law,
regulation or ordinance relating to the industrial hygiene, environmental
protection or the use, analysis, generation, manufacture, storage, presence,
disposal or transportation of any Hazardous Materials (collectively "Hazardous
Materials Laws," (ii) any claim made or threatened by any person against Tenant,
the Premises, Project or buildings within the Project relating to damage,
contribution, cost recovery, compensation, loss or injury resulting from or
claimed to result from any Hazardous Materials; and (iii) any reports made to
any environmental agency arising out of or in connection with any Hazardous
Materials in, on or removed from the Premises, Project or buildings within the
Project, including any complaints, notices, warnings, reports or asserted
violations in connection therewith. Tenant shall also supply to Landlord as
promptly as possible, and in any event within five (5) business days after
Tenant first receives or sends the same, with copies of all claims, reports,
complaints, notices, warnings or asserted violations relating in any way to the
Premises, Project or buildings within the Project or Tenant's use thereof.
Tenant shall promptly deliver to Landlord copies of hazardous waste manifests
reflecting the legal and proper disposal of all Hazardous Materials removed from
the Premises.
(b) Indemnification of Landlord. Tenant shall indemnify,
defend (by counsel acceptable to Landlord), protect, and hold Landlord, and each
of Landlord's partners, employees, agents, attorneys, successors and assigns,
free and harmless from and against any and all claims, liabilities, penalties,
forfeitures, losses or expenses (including attorneys' fees) for death of or
injury to any person or damage to any property whatsoever (including water
tables and atmosphere) arising from or caused in whole or in part, directly or
indirectly, by (i) the presence in, on, under or about the Premises, Project or
buildings within the Project or discharge in or from the Premises, Project or
buildings within the Project of any Hazardous Materials to the extent caused by
Tenant, its employees, agents, assignees, subtenants, contractors, or
subcontractors, or Tenant's use, analysis, storage, transportation, disposal,
release, threatened release, discharge or generation of Hazardous Materials to,
in, on, under, about or from the Premises, Project or buildings within the
Project, or (ii)
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Tenant's failure to comply with any Hazardous Materials Laws whether knowingly,
unknowingly, intentionally or unintentionally. Tenant's obligations hereunder
shall include, without limitation, and whether foreseeable or unforeseeable, all
costs of any required or necessary repair, cleanup or detoxification or
decontamination of the Premises, Project or buildings within the Project, and
the preparation and implementation of any closure, remedial action or other
required plans in connection therewith. In addition, Tenant shall reimburse
Landlord for (i) losses in or reductions to rental income resulting from
Tenant's use, storage or disposal of Hazardous Materials, (ii) all costs of
refitting or other alterations to the Premises, Project or buildings within the
Project required as a result of Tenant's use, storage, or disposal of Hazardous
Materials including, without limitation, alterations required to accommodate an
alternate use of the Premises, Project or buildings within the Project, and
(iii) any diminution in the fair market value of the Premises, Project or
buildings within the Project caused by Tenant's use, storage, or disposal of
Hazardous Materials. For purposes of this paragraph 49, any acts or omissions of
Tenant, or by employees, agents, assignees, contractors or subcontractors of
Tenant or others acting for or on behalf of Tenant (whether or not they are
negligent, intentional, willful or unlawful) shall be strictly attributable to
Tenant.
(c) Survival. The provisions of this paragraph 49 shall
survive the expiration or earlier termination of the term of this lease.
50. Signage. Tenant shall not, without obtaining the prior written
consent of Landlord, install or attach any sign or advertising material on any
part of the outside of the Premises, or on any part of the inside of the
Premises which is visible from the outside of the Premises, or in the halls,
lobbies, windows or elevators of the building in which the Premises are located
or on or about any other portion of the Common Area or Project. If Landlord
consents to the installation of any sign or other advertising material, the
location, size, design, color and other physical aspects thereof shall be
subject to Landlord's prior written approval and shall be in accordance with
any sign program applicable to the Project. In addition to any other
requirements of this paragraph 50, the installation of any sign or other
advertising material by or for Tenant must comply with all applicable laws,
statutes, requirements, rules, ordinances and any C.C. & R.'s or other similar
requirements. With respect to any permitted sign installed by or for Tenant,
Tenant shall maintain such sign or other advertising material in good condition
and repair and shall remove such sign or other advertising material on the
expiration or earlier termination of the term of this lease. The cost of any
permitted sign or advertising material and all costs associated with the
installation, maintenance and removal thereof shall be paid for solely by
Tenant. If Tenant fails to properly maintain or remove any permitted sign or
other advertising material, Landlord may do so at Tenant's expense. Any cost
incurred by Landlord in connection with such maintenance or removal
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<PAGE> 38
shall be deemed additional rent and shall be paid by Tenant to Landlord within
ten (10) days following notice from Landlord. Landlord may remove any
unpermitted sign or advertising material without notice to Tenant and the cost
of such removal shall be additional rent and shall be paid by Tenant within ten
(10) days following notice from Landlord. Landlord shall not be liable to Tenant
for any damage, loss or expense resulting from Landlord's removal of any sign or
advertising material in accordance with this paragraph 50. The provisions of
this paragraph 50 shall survive the expiration or earlier termination of this
lease.
51. Submission of Lease. The submission of this lease to Tenant for
examination or signature by Tenant is not an offer to lease the Premises to
Tenant, nor an agreement by Landlord to reserve the Premises for Tenant.
Landlord will not be bound to Tenant until this lease has been duly executed and
delivered by both Landlord and Tenant.
52. Tenant Improvements. Improvements to the Premises shall be
constructed and installed in accordance with the plans and specifications, and
other terms and conditions, set forth in Exhibit "C" to this lease, the contents
of which is incorporated herein and made a part hereof by this reference. The
improvements shall be constructed and installed at the expense of Landlord
and/or Tenant as set forth in Exhibit "C" to this lease and in each case, shall
be performed in a diligent and workmanlike manner.
53. Additional Rent. All costs, charges, fees, penalties, interest and
other payments (including Tenant's reimbursement to Landlord of costs incurred
by Landlord) which Tenant is required to make to Landlord pursuant to the terms
and conditions of this lease and any amendments to this lease shall be and
constitute additional rent payable by Tenant to Landlord when due as specified
in this lease and any amendments hereto.
54. Option to Extend Term. Landlord grants to Tenant an option to
extend the term for a period of three (3) years (such extension is hereafter
referred to as the "Extended Term"). The Extended Term shall follow the
expiration of the initial term set forth in paragraph 2(a) ("Initial Term"). All
the provisions of this lease shall apply during the Extended Term except for the
amount of the basic rent. The basic rent for the Extended Term shall be adjusted
to ninety-five percent (95%) of the market rate; provided that in no event shall
the basic rent for the Extended Term be less than the basic rent in effect at
the expiration of the Initial Term. The option is further subject to the
following terms and conditions:
(a) Tenant must deliver its irrevocable written notice of
Tenant's exercise of the option to Landlord not less than six (6) lease months,
nor more than twelve (12) lease months, prior to the expiration of the Initial
Term. Time is of the essence with respect to the time period during which Tenant
must deliver to Landlord its written notice of exercise and, therefore, if
Tenant
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fails to give Landlord its irrevocable written notice of its exercise of the
option within the applicable time period provided above, then the option shall
expire and be of no further force or effect.
(b) The parties shall have thirty (30) days from the date
Landlord receives Tenant's notice of exercise in which to agree on the amount
constituting the market rate. If Landlord and Tenant agree on the amount of the
market rate, they shall immediately execute an amendment to this lease setting
forth the expiration date of the Extended Term and the amount of the basic rent
to be paid by Tenant during the Extended Term. If Landlord and Tenant are unable
to agree on the amount of the market rate within such time period, then the
option shall be of no further effect and this lease shall expire at the end of
the Initial Term.
(c) As used herein, the "market rate" shall be the monthly
rent (triple net) then obtained for three (3) year fixed rate leases of
comparable terms for premises in the Project and in buildings and/or projects
within the same geographical area of similar types and identity, quality and
location as the Project.
(d) Common area charges shall continue to be determined and
payable as provided in paragraph 16 of this lease.
(e) Neither party shall have the right to have any court or
other third party determine the market rate or the basic rent. Tenant shall not
assign or otherwise transfer this option or any interest therein and any attempt
to do so shall render this option null and void. Tenant shall have no right to
extend the term beyond the Extended Term. If Tenant is in default under this
lease at the date of delivery of Tenant's notice of exercise to Landlord, then
such notice shall be of no effect and this lease shall expire at the end of the
Initial Term. If Tenant is in default under this lease on the last day of the
Initial Term, then Landlord may in its sole discretion elect to have Tenant's
exercise of the option be of no effect, in which case this lease shall expire at
the end of the Initial Term.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered
this lease on the date first above written.
LANDLORD:
MONTAGUE OAKS ASSOCIATES
PHASE I & II, a California
general partnership
By: McCANDLESS GROUP (MONTAGUE), a
California general partnership,
a general partner
By: /s/ Birk S. McCandless
--------------------------------
Birk S. McCandless, as
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<PAGE> 40
Trustee of the Birk S.
McCandless and Mary
McCandless Intervivos Trust
dated February 17, 1982,
a general partner
By: 745 PROPERTY INVESTMENTS, a
Massachusetts voluntary trust,
a general partner
By:
---------------------------
Its: Vice President
---------------------------
TENANT:
SMART MACHINES, INC. ,
a California corporation
By: /s/ K. Charles Janae
--------------------------------
Its: President and CEO
--------------------------------
By:
--------------------------------
Its:
--------------------------------
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<PAGE> 41
[McCandless Office/ R & D Park/Montague Expressway & River Oaks Parkway]
[graphic not shown]
EXHIBIT B
<PAGE> 42
McCandless Management Corporation
651 River Oaks Parkway
9,278 Square Feet
[Graphic not shown]
Floor plans are representations only and may not be accurate in scale.
EXHIBIT A
<PAGE> 43
EXHIBIT "C"
WORK LETTER AGREEMENT
EXISTING SPACE - ALLOWANCE
This Work Letter Agreement (hereinafter "Exhibit 'C'") is attached to
and forms a part of that certain lease ("Lease") by and between Montague Oaks
Associates Phase I & II, a California general partnership ("Landlord"), and
Smart Machines, Inc., a California corporation ("Tenant"), pursuant to which
Landlord leases to Tenant those certain premises located at 651 River Oaks
Parkway, San Jose, California and consisting of approximately nine thousand
seven hundred twenty-eight (9,728) square feet ("Premises") . All capitalized
terms used herein shall have the meaning ascribed to them in the Lease unless
otherwise defined below. The Premises shall be improved in accordance with the
following:
1. Existing Improvements. Tenant accepts the Premises in their existing
condition and the improvements constructed therewith, and Tenant hereby approves
the same as installed, subject only to such changes as may subsequently be
agreed upon by Landlord and Tenant. Such improvements are hereafter called
"Existing Improvements."
2. Tenant Improvements. As used herein, "Tenant Improvements" shall
include those items and improvements set forth and described in Exhibit "C-l,"
attached hereto, exclusive of Existing Improvements. Landlord shall construct
Tenant Improvements in accordance with Exhibit "C-1" and the provisions of this
Exhibit "C." Unless otherwise specifically agreed to by Landlord in writing, the
installation, wiring, maintenance and removal of furniture partition systems,
telephone and other communication systems, data cabling, alarm and/or security
systems and any other systems not specifically set forth on Exhibit C-1, and all
cost and expense associated therewith, shall be the sole responsibility of
Tenant. In connection with the construction and installation of the Tenant
Improvements, Landlord or Landlord's general contractor shall have no obligation
to move any of Tenant's property located in or about the Premises including, but
not limited to, furniture, inventory and trade fixtures, at the time of such
construction and installation. If at the time of construction and installation
of the Tenant Improvements Tenant has property located in or about the Premises
that inhibits or prevents in any way the construction and installation of the
Tenant Improvements, Tenant shall immediately, upon receipt of notification
therefore from Landlord or Landlord's general contractor, at Tenant's sole cost
and expense, move such property to another location within the Premises or, upon
receipt of Landlord's prior approval, to another location within the Project
designated by Landlord in Landlord's sole discretion; Tenant's failure to
immediately move such property upon receipt of notification therefore from
Landlord or Landlord's general contractor shall be deemed a Tenant caused
delay subject to the
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EXHIBIT C
<PAGE> 44
provisions of paragraph 6 of this Exhibit "C." If at the time of construction
and installation of the Tenant Improvements Tenant has property located in or
about the Premises, Landlord and Landlord's general contractor shall incur no
liability to Tenant or any other party in the event such property is damaged,
destroyed or stolen during the construction and installation of the Tenant
Improvements. During the time of construction and installation of the Tenant
Improvements, Tenant shall allow Landlord's and Landlord's contractors access to
the Premises both during and after office hours.
3. Tenant Improvement Cost Estimates. Within fourteen (14) days after
the date hereof, Landlord shall prepare and deliver to Tenant an improvement
cost budget ("Improvement Cost Budget") setting forth the Total Cost of Tenant's
Improvements (as defined in Paragraph 4(b) below). Within three (3) days after
Tenant's receipt of the Improvement Cost Budget, Tenant shall, in writing,
approve or disapprove the Improvement Cost Budget. If Tenant does not deliver to
Landlord its written approval or disapproval within the three (3) day period,
Tenant will be deemed to have approved the Improvement Cost Budget. If Tenant
disapproves of the Improvement Cost Budget and Landlord and Tenant are unable,
within the three (3) day period, to agree on mutually acceptable changes to the
Improvement Cost Budget, or if Tenant approves of the Improvement Cost Budget
but does not deliver to Landlord, within three (3) days of its approval, signed
copies of the Improvement Cost Budget, then Landlord may terminate the Lease
upon written notice to Tenant. Upon Tenant's written approval of the Improvement
Cost Budget (or in the event Tenant is deemed to have approved the Improvement
Cost Budget as provided hereinabove), the Total Cost of Tenant's Improvements
set forth therein shall be deemed a fixed price for the Tenant Improvements
(said fixed price shall be referred to herein as the "Tenant Improvement Fixed
Cost"). The Tenant Improvement Fixed Cost shall be subject to adjustment for
increases in costs resulting from changes to the Tenant Improvements requested
or required pursuant to Paragraphs 5 and 6 below. Landlord shall not be
obligated to commence construction of the Tenant Improvements until the
following has occurred: the and Tenant Improvement Fixed Cost have been agreed
to by Landlord and Tenant; Tenant has indicated its approval of the Improvement
Cost Budget by signing copies thereof; and Landlord has executed a written
authorization to proceed with construction with Landlord's general contractor
based on the agreed Tenant Improvement Fixed Cost.
4. Tenant Improvement Allowance.
(a) Landlord agrees to grant to Tenant a Tenant Improvement
Allowance ("Allowance") of Twenty-nine Thousand One Hundred Eighty-four Dollars
($29,184) ($3.00/SF x 9,728 SF) to be applied toward the "Total Cost of Tenant's
Improvements" (as defined below) to be installed in accordance with this Exhibit
"C."
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<PAGE> 45
(b) As used herein, "Total Cost of Tenant's Improvements"
shall include: (i) the cost of Tenant Improvements and increases therein
pursuant to Paragraphs 5 and 6 below, if any, and all demolition costs incurred
in connection with preparing the Premises for the installation of the Tenant
Improvements; (ii) the cost of overtime or special expenditures required to
obtain and install the Tenant Improvements by the proposed commencement date;
(iii) all costs related to change orders; (iv) all costs related to changes
required or requested by governmental authority; (v) permit fees and other fees
not previously paid by Landlord as part of shell costs; (vi) the cost of
consultants and engineers; (vii) the costs of all alterations to the interior of
the Premises required by the Americans With Disabilities Act of 1990 (42 U.S.C.
sections 12101 et seq) ("ADA") to the extent necessary to obtain a building
permit from the City of San Jose; (viii) an amount equal to the actual cost of
supervision, administration and on-site facilities and equipment necessary to
perform the work; (ix) an amount equal to nine percent (9%) of the sum of items
(i) through (viii) above as and for the general contractor's overhead and
profit; and (x) the cost of architects hired by Landlord. Landlord does not
anticipate that a building permit will be required for the Tenant Improvements.
(c) In the event that the Tenant Improvement Fixed Cost
exceeds the Allowance (the amount by which the Tenant Improvement Fixed Cost
exceeds the Allowance shall be referred to herein as the "Excess Cost"), Tenant
shall pay fifty percent (50%) of such Excess Cost to Landlord within five (5)
days of Tenant's approval of the Improvement Cost Budget and the remaining fifty
percent (50%) of the Excess Cost within five (5) days of when Landlord notifies
Tenant that the Tenant Improvements are fifty percent (50%) completed. Tenant's
failure to make any payment of the Excess Cost when due, or to make any payment
with respect to change orders as set forth in Paragraph 5 of this Exhibit "C,"
shall be deemed a default under the Lease and the amount so delinquent shall be
deemed additional rent and Landlord may exercise all rights and remedies set
forth in Paragraph 20 of the Lease; and in addition, Landlord may delay
construction until such payment is made and such delay shall be deemed a Tenant
caused delay subject to the provisions of Paragraph 7 of this Exhibit "C."
(d) In the event Tenant causes delays, or requests changes
which cause delays in construction of the Tenant Improvements more then ninety
(90) calendar days, then Landlord shall not be obligated to grant to Tenant the
Allowance, or any balance remaining unused therein. In such case, Landlord shall
thereafter have no obligation to construct any Tenant Improvements for Tenant.
Furthermore, the cessation of Landlord's obligation to construct the Tenant
Improvements as permitted herein shall not affect Tenant's obligation to
commence payments of basic rent and common area charges or any other payments
due Landlord under the Lease. Tenant shall be entitled to no rent reduction or
credit at any time in the event that the Allowance or any portion thereof
remains unused for any reason whatsoever.
-3-
<PAGE> 46
(e) If Tenant requires improvements to the Premises in
addition to the Tenant Improvements, Tenant shall construct such improvements as
alterations subject to all of the terms and conditions set forth in paragraph 8
of the lease. Tenant shall be entitled to use any unused portion of the
Allowance remaining after completion of construction of the Tenant Improvements
("Unused allowance") to pay the cost of such alterations made to the Premises
prior to December 31, 1995. Landlord shall pay Tenant the Unused Allowance, or
any portion thereof, to pay the cost of alterations approved by Landlord in
accordance with paragraph 8 within thirty (30) days after Tenant has presented
Landlord with copies of paid invoices for such alterations, together with
unconditional lien waivers signed by all contractors or material suppliers
supplying labor or materials to the alterations. Landlord shall have no
obligation to disburse the Unused Allowance to pay the cost of alterations made
by Tenant after December 31, 1995.
5. Changes by Tenant. Tenant may request changes, deletions or
additions to the Tenant Improvements; provided, however, that the effectiveness
of any such requested change, deletion or addition shall be subject to written
approval by an authorized representative of Landlord and to obtaining any
required governmental permits or other approvals. If any such change, deletion
or addition increases the cost of construction and installation of the Tenant
Improvements, Tenant shall immediately pay to Landlord the full amount of such
increase in the cost of construction and installation of the Tenant
Improvements. In no event shall work on any change, deletion or addition
requested pursuant to this paragraph 5 commence prior to (i) Landlord and Tenant
approving, in writing, such change, deletion or addition, and (ii) Landlord's
receipt from Tenant of payment of the full amount of the increase in the cost of
construction and installation of the Tenant Improvements.
6. Changes by Authority. Tenant agrees that if any change, deletion or
addition to any of the improvements proposed to be constructed or installed is
required by any governmental authority in connection with obtaining any
governmental permit or approval, or otherwise, then such change, deletion or
addition shall promptly be made at Tenant's expense and Tenant shall,
immediately upon receipt of Landlord's demand therefor, pay such expense to
Landlord. Failure to obtain any required governmental approval or permit for the
Tenant Improvements desired by Tenant shall in no way be cause for Tenant to
terminate the Lease. Notwithstanding the foregoing, Landlord shall be
responsible for all alterations to the exterior of the Premises required to
comply with ADA.
7. Delays Caused by Tenant. If the commencement of the term is delayed
due in any respect to Tenant's failure to meet the schedule set forth in
paragraph 3 above, or due to construction delays related to any changes required
by Tenant, or due to any other failures by Tenant to perform its obligations
under this
-4-
<PAGE> 47
Exhibit "C" or otherwise under the Lease, then any such delays shall not effect
the commencement date or Tenant's obligations to pay base rent and common area
charges.
8. Punch List. Within ten (10) business days after the completion of
the Tenant Improvements, Landlord and Tenant shall conduct a walk-through
inspection of the Premises and shall jointly create a list of items ("Punch
List") that require completion or correction in order for the Premises to be
acceptable. Landlord shall commence to complete or correct the items as soon as
possible. If the parties do not conduct the walk-through and create the Punch
List within the ten (10) day period, Tenant shall be deemed to have accepted the
Premises and approved the construction. Nothing in this paragraph 8 shall delay
the commencement of the term or Tenant's obligation to pay rent or to make other
payments due Landlord under the Lease.
-5-
<PAGE> 48
EXHIBIT C-1
TENANT IMPROVEMENTS
Landlord's improvements for Smart Machines are as follows:
A. To be paid from the Tenant Improvement Allowance:
1. Demolish existing VCT floor and install a new VCT floor in
assembly room and lab. New VCT floor will be sealed with EDS
wax.
2. Remove both cabinets and sink from lab area and reinstall sink
cabinet in break room. Furnish and install new end cap for
cabinet.
3. Paint all walls throughout space with one coat of paint to
match existing. Paint with epoxy paint in lab and assembly
areas over smooth walls.
4. Steam clean carpet.
5. Replace damaged ceiling tiles as required with tiles from
assembly or lab areas. Do not replace ceiling tiles in
assembly or lab areas.
6. Install double doors in storage room, lab and demo room.
Relocate switch as needed.
7. Install floor to ceiling ten-foot wide (single mullion) glass
wall in demo room.
B. To be paid by Landlord or shared with Tenant:
1. Landlord to pay up to $2,000 toward the cost of one exterior
exit door in the rear concrete wall.
2. Landlord to pay up to $1,500 toward the cost of relocating
existing transformer in electrical closet to main electrical
room. If the cost exceeds $1,500, Tenant will pay the next
$1,500 from their Tenant Improvement Allowance. Any cost in
excess of $3,000 to be split 50/50 between the Landlord and
Tenant.
EXHIBIT C-1
<PAGE> 49
FIRST AMENDMENT TO LEASE
This First Amendment to Lease ("Amendment") is made and entered into as
of March 28, 1996 by and between MONTAGUE OAKS ASSOCIATES PHASE I & II~- a
California General partnership ("Landlord"), and SMART MACHINES, INC., a
California corporation ("Tenant").
RECITALS
A. Pursuant to that certain Lease dated June 7, 1995 (the "Lease"),
Tenant currently leases from Landlord that certain premises commonly known as
651 River Oaks Parkway, San Jose, California, consisting of approximately nine
thousand seven hundred twenty-eight (9,728) square feet, as more particularly
described in the Lease (the "Original Premises").
B. Tenant now desires to lease from Landlord and Landlord desires to
lease to Tenant that certain additional premises commonly known as 653 River
Oaks Parkway, San Jose, California, consisting of approximately five thousand
five hundred thirty (5,530) square feet, as shown in the floor plan attached as
Exhibit A hereto and in the location outlined in red on Exhibit B attached
hereto (the Additional Premises"). In addition, the term of the Lease expires
on June 30, 1998. Landlord and Tenant desire to extend the term of the Lease and
to amend certain other terms of the Lease to address the incorporation of the
Additional Premises into the Lease, all as more particularly described herein.
Capitalized terms used in this Amendment shall have the meanings ascribed to
such terms in the Lease, unless otherwise defined herein.
NOW, THEREFORE, the parties agree as follows:
1. Effective Date. This Amendment shall be effective as of June 1,
1996.
2. Premises. As of the Effective Date, the term "Premises" as used in
the Lease shall mean and include the Original Premises and the Additional
Premises, consisting of an aggregate of approximately fifteen thousand two
hundred fifty-eight (15,258) square feet.
3. Condition of Additional Premises. Landlord shall deliver possession
of the Additional Premises to Tenant on the Effective Date in its "as is"
condition. Tenant acknowledges that Landlord shall have no obligation to
construct additional improvements in or alterations to the Additional Premises.
-1-
<PAGE> 50
4. Term. The term of the Lease is hereby extended to November 30, 1998.
5. Basic Rent. As of the Effective Date, the monthly Basic Rent shall be
as follows:
<TABLE>
<CAPTION>
Period Original Additional Total Monthly
- ------ Premises Premises Basic Rent
-------- -------- ----------
<S> <C> <C> <C>
6/1/96-5/31/97 $7,587.84* $5,253.50 $12,841.34
6/1/97-5/31/98 $7,587.84 $5,530.00 $13,117.84
6/1/98-6/30/98 $7,587.84 $5,806.50 $13,394.34
7/1/98-11/30/98 $10,214.40 $5,806.50 $16,020.90
</TABLE>
Concurrently with Tenant's execution of this Amendment, Tenant shall deposit
with Landlord the sum of Six Thousand Eighty-three Dollars ($6,083) to be
applied against the monthly basic rent and common area charges for the
Additional Premises for the month of June, 1996.
6. Common Area Charges. As of the Effective Date, Section 16 of the
Lease is hereby amended by deleting the percentage "eleven and nine
one-hundredths percent (11.09%)" and replacing the same with the percentage
"seventeen and four tenths percent (17.4%)" In addition, as of the Effective
Date, the estimated payment of Tenant's percentage share of common area charges
as provided for in Section 16 of the Lease shall be the sum of Two Thousand Two
Hundred Eighty-eight Dollars and Seventy Cents ($2,288.70), subject to further
adjustment as set forth in Section 4(c) of the Lease.
7. Security Deposit. Concurrently with Tenant's execution of this
Amendment, Tenant shall deposit with Landlord the sum of Five Thousand Five
Hundred Thirty Dollars ($5,530), which sum shall be held by Landlord, together
with the Eight Thousand Eight Hundred Twenty-three Dollars and Thirty Cents
($8,823.30) currently held by Landlord, as a security deposit pursuant to the
terms of Section 4(e) of the Lease, for a total security deposit of Fourteen
Thousand Three Hundred Fifty-three Dollars ($14,353.30).
8. Parking Spaces. From and after the Effective Date, Tenant shall have
the non-exclusive use of sixty-one (61) parking spaces in the Common Area, in
accordance with Section 15 of the Lease.
9. Tenant Improvement Allowance. Landlord shall provide Tenant with a
tenant improvement allowance in the amount of One Thousand Two Hundred Fifty
Dollars ($1,250) to be applied toward tenant improvements to be constructed by
Tenant in the Additional Premises. Tenant may request disbursement of said
amount upon completion of construction of said tenant improvements and delivery
to Landlord of evidence reasonably satisfactory to Landlord of the expenditure
of such amount by Tenant in the construction of such tenant improvements
(including without limitation, paid invoices
-2-
<PAGE> 51
and receipts). Landlord shall disburse said amount to Tenant within twenty (20)
days after completion of construction and delivery by Tenant of the
above-described evidence of payment.
10. Option to Extend. From and after the Effective Date, an exercise of
the option to extend the term in accordance with Section 54 of the Lease shall
be deemed an extension of the term as to both the Original Premises and the
Additional Premises. For purposes of the Lease, the "Initial Term" shall expire
on November 30, 1998.
11. Brokers. Tenant represents and warrants to Landlord that, except for
BT Commercial, Tenant has had no dealings with any real estate broker or agent
in connection with the negotiation of this Amendment to whom a commission or fee
of any kind whatsoever is due, and that, except for BT Commercial, it knows of
no real estate broker or agent who is or might be entitled to a commission in
connection with this Amendment. Tenant shall be responsible for the payment of
any commission claimed due and owing by BT Commercial. Tenant shall indemnify,
defend and hold Landlord harmless from and against all damages, liabilities,
costs or expenses (including attorneys' fees) arising out of claims made by BT
Commercial or any other broker or individual for commissions or fees resulting
from a breach by Tenant of the foregoing warranty.
12. Corporate Authority. Each individual executing this Amendment on
behalf of Tenant represents and warrants that he or she is duly authorized to
execute and deliver this Amendment on behalf of Tenant in accordance with a duly
adopted resolution of the Board of Directors of Tenant and that this Amendment
is binding upon Tenant in accordance with its terms. Tenant shall deliver to
Landlord, within ten (10) days of the execution of this amendment, a copy of the
resolution of the Board of Directors of Tenant authorizing the execution of this
Amendment and naming the officers that are authorized to execute this Amendment
on behalf of Tenant, which copy shall be certified by Tenant's president or
secretary as correct and in full force and effect.
13. Effect of Amendment. Except as modified herein, the terms and
provisions of the Lease shall remain unmodified and continue in full force and
effect, and as of the Effective Date shall apply to the Additional Premises in
addition to the Original Premises. In the event of any conflict between the
terms and provisions of this Amendment and the terms and provisions of the
Lease, the terms and provisions of this Amendment shall govern and control the
intent and agreement of the parties.
-3-
<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have executed this Sixth
Amendment as of the date first set forth above.
LANDLORD:
MONTAGUE OAKS ASSOCIATES
PHASE I&II, a California
general partnership
By: McCANDLESS GROUP (MONTAGUE),
a California general
partnership,
a general partner
By: /s/ Birk S. McCandless
----------------------------
Birk S. McCandless as
Trustee of the Birk S.
McCandless and Mary
McCandless Inter Vivos Trust
Agreement dated February 17,
1982, a general partner
By: 745 PROPERTY INVESTMENTS,
a Massachusetts voluntary
trust, a general partner
By:
-------------------------------
Its: Vice President
-------------------------------
TENANT:
SMART MACHINES, INC.,
a California corporation
By: /s/ K. Charles Janae
-------------------------------
Its: President and CEO
-------------------------------
-4-
<PAGE> 53
653 River Oaks Parkway
San Jose, California
5,530 Square Feet
[Graphic not shown]
EXHIBIT A
<PAGE> 54
[McCANDLESS BUSINESS PARK SITE PLAN]
[GRAPHIC NOT SHOWN]
MCCANDLESS OFFICE / R&D PARK MONTAGUE EXPRESSWAY & RIVER OAKS PARKWAY
EXHIBIT B
The information contained herein has been obtained from sources we deem
reliable, however, we cannot guarantee it. All information should be verified
prior to purchase or lease.
<PAGE> 55
[McCandless Management Corporation Letterhead]
August 13, 1998
Mr. Charles Janae
SMART MACHINES, INC.
651 River Oaks Parkway
San Jose, CA 95134
Re: Second Amendment to Lease
651 River Oaks Parkway, San Jose, California
Montague Oaks, Phase I and II
Dear Mr. Janae:
Enclosed for your file is (I) one fully executed original Second Amendment to
Lease for Smart Machines, Inc.
Thank you for your attention to these documents. Should you have any questions,
please feel free to call.
Sincerely,
McCANDLESS MANAGEMENT CORPORATION
/s/ Tana L. De La Cruz
-------------------------------
Tana L. De La Cruz
Property Management Secretary
/tdc
Enclosure
co: File 675.00
<PAGE> 56
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease ("Second Amendment") is made and entered
into as of July 13, 1998 by and between MONTAGUE OAKS ASSOCIATES PHASE I & II, a
California general partnership ("Landlord"), and SMART MACHINES, INC., a
California corporation ("Tenant").
RECITALS
A. Pursuant to that certain Lease dated June 7, 1995 as amended by that
certain First Amendment to Lease ("First Amendment") dated March 28, 1996
(collectively, "Lease"), Tenant currently leases from Landlord those certain
premises commonly known as 651 and 653 River Oaks Parkway, San Jose, California,
consisting of approximately fifteen thousand two hundred fifty-eight (15,258)
square feet, as more particularly described in the Lease and First Amendment
(collectively, the "Premises").
B. Pursuant to Paragraph 54 of the Lease and Paragraph 10 of the First
Amendment, Tenant has exercised its option to extend the term of the Lease for a
period of three (3) years (the "Extended Term"). Tenant and Landlord desire to
amend the Lease to set forth certain terms as to the Extended Term.
C. Capitalized terms used in this Second Amendment shall have the
meaning ascribed to such terms in the Lease unless otherwise defined in this
Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Term. The Extended Term shall commence on December 1, 1998 and shall
terminate on November 30, 2001.
2. Basic Rent. As of December 1, 1998, the monthly basic rent for the
Premises shall be as follows:
<TABLE>
<CAPTION>
Months Monthly
------ Basic Rent
----------
<S> <C>
1-36 $26,091.18
</TABLE>
3. Security Deposit. The Security Deposit currently held by Landlord
pursuant to the terms of Paragraph 4(e) of the Lease and Paragraph 7 of the
First Amendment in the amount of Fourteen Thousand Three Hundred Fifty-three
Dollars ($14,353.30) shall continue to be held by Landlord during the Extended
Term, subject to the provisions of Paragraph 4(e) of the Lease and Paragraph 7
of the First Amendment.
4. Further Extension. Tenant shall have no further rights to extend the
term of the Lease after the Extended Term.
-1-
<PAGE> 57
5. Condition of Premises. Tenant acknowledges that landlord shall have
no obligation to construct additional improvements in or alterations to the
Premises or provide any refurbishment allowance to Tenant during the Extended
Term.
6. Brokers. Tenant represents and warrants to Landlord that, except for
McCandless Management Corporation ("McCandless"), Tenant has had no dealings
with any real estate broker or agent in connection with the negotiation of this
Second Amendment to whom a commission or fee of any kind whatsoever is due, and
that, except for McCandless, it knows of no real estate broker or agent who is
or might be entitled to a commission in connection with this Second Amendment.
Landlord shall be responsible for the payment of any commission claimed due and
owing by McCandless. Tenant shall indemnify, defend and hold Landlord harmless
from and against all damages, liabilities, costs or expenses (including
attorneys' fees) arising out of claims made by any broker or individual, other
than McCandless, for commissions or fees resulting from a breach by Tenant of
the foregoing warranty.
7. Corporate Authority. Each individual executing this Second Amendment
on behalf of Tenant represents and warrants that he or she is duly authorized to
execute and deliver this Second Amendment on behalf of Tenant and that this
Second Amendment is binding upon said corporation in accordance with its terms.
8. Effect of Second Amendment. Except as modified herein, the terms and
provisions of the Lease shall remain unmodified and continue in full force and
effect. In the event of any conflict between the terms and provisions of this
Second Amendment and the terms and provisions of the Lease, the terms and
provisions of this Second Amendment shall govern and control the intent and
agreement of the parties.
lN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as of the date first set forth above.
LANDLORD:
MONTAGUE OAKS ASSOCIATES
PHASE I & II, a California
general partnership
By: McCANDLESS GROUP (MONTAGUE),
a California general
partnership,
a general partner
By: /s/ Birk S. McCandless
-----------------------------
BIRK S. McCANDLESS as
Trustee of the Birk S.
McCandless and Mary
McCandless Inter Vivos Trust
Agreement dated February 17,
1982, a general partner
-2-
<PAGE> 58
By: 745 PROPERTY INVESTMENTS,
a Massachusetts voluntary
trust, a general partner
By: /s/ Gregg Meyer
--------------------
Name: Gregg Meyer
--------------------
Its: Director
--------------------
TENANT:
SMART MACHINES, INC.,
a California corporation
By: /s/ K. Charles Janae
--------------------
Name: K. Charles Janae
Its: President and CEO
--------------------
-3-
<PAGE> 1
EXHIBIT 21.01
BROOKS AUTOMATION, INC.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME JURISDICTION
- ---- --------------
<S> <C>
Brooks Automation Massachusetts Securities Corporation Massachusetts
Brooks Automation International Ltd. Barbados
Brooks Automation, Ltd. United Kingdom
Brooks Automation K.K. Japan
FASTech Integration, Inc. Delaware
FASTech International Ltd. Ireland
FASTech International, Inc. Delaware
FASTech Integration Asia Pte Ltd. Singapore
FASTech International, B.V. Netherlands
Brooks Automation GmbH Germany
Midas Software, Inc. Nevada
Brooks Automation Software Corp. Canada
Brooks Automation Taiwan Taiwan
Smart Machines Inc. California
Smart Machines of California, Inc. California
Hanyon Technologies Co. Ltd. Korea
Brooks Automation Korea, Ltd. Korea
Brooks Automation Asia, Ltd. Korea
Brooks Automation S.A.R.L. France
Brooks Automation SDN. BHD. Malaysia
</TABLE>
<PAGE> 1
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-95268, 333-07313, 333-07315, 333-22717,
333-66457, 333-66429, and 333-66455) of Brooks Automation, Inc. of our report
dated November 17, 1999, appearing in this Annual Report on Form 10-K. We
also consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS, CONSOLIDATED BALANCE SHEETS, NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE II, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
SEPTEMBER 30, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 66,366
<SECURITIES> 0
<RECEIVABLES> 34,591
<ALLOWANCES> 1,687
<INVENTORY> 28,917
<CURRENT-ASSETS> 137,728
<PP&E> 41,553
<DEPRECIATION> 24,119
<TOTAL-ASSETS> 177,145
<CURRENT-LIABILITIES> 31,932
<BONDS> 1,338
0
0
<COMMON> 128
<OTHER-SE> 142,018
<TOTAL-LIABILITY-AND-EQUITY> 177,145
<SALES> 82,437
<TOTAL-REVENUES> 103,906
<CGS> 44,311
<TOTAL-COSTS> 57,877
<OTHER-EXPENSES> 25,894
<LOSS-PROVISION> 188
<INTEREST-EXPENSE> 368
<INCOME-PRETAX> (8,939)
<INCOME-TAX> (1,015)
<INCOME-CONTINUING> (7,884)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,884)
<EPS-BASIC> (0.76)
<EPS-DILUTED> (0.76)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS, CONSOLIDATED BALANCE SHEETS, NOTES TO THE
FINANCIAL STATEMENTS AND SCHEDULE II AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30,
1999.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 69,479
<SECURITIES> 0
<RECEIVABLES> 22,754
<ALLOWANCES> 1,898
<INVENTORY> 20,170
<CURRENT-ASSETS> 122,104
<PP&E> 40,985
<DEPRECIATION> 22,036
<TOTAL-ASSETS> 145,321
<CURRENT-LIABILITIES> 18,866
<BONDS> 3,849
3,562
6,467
<COMMON> 110
<OTHER-SE> 112,057
<TOTAL-LIABILITY-AND-EQUITY> 145,321
<SALES> 80,856
<TOTAL-REVENUES> 100,252
<CGS> 61,990
<TOTAL-COSTS> 73,528
<OTHER-EXPENSES> 29,098
<LOSS-PROVISION> 1,295
<INTEREST-EXPENSE> 999
<INCOME-PRETAX> (27,244)
<INCOME-TAX> (4,681)
<INCOME-CONTINUING> (22,563)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,563)
<EPS-BASIC> (2.32)
<EPS-DILUTED> (2.32)
</TABLE>
<PAGE> 1
Exhibit 99.04
BROOKS AUTOMATION, INC.
1998 EMPLOYEE EQUITY INCENTIVE PLAN
Section 1. Name and Purpose
This plan shall be known as the Brooks Automation, Inc. 1998 Employee
Equity Incentive Plan (the "Plan"). The purpose of the Plan is to attract and
retain employees and provide an incentive for them to assist Brooks Automation,
Inc. (the "Company") to achieve long-range performance goals, and to enable them
to participate in the long-term growth of the Company.
Section 2. Definitions
(a) "Award" means any Option awarded under the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(d) "Committee" means the Stock Option Committee of the Board, or such
other committee of not less than three members of the Board appointed
by the Board to administer the Plan.
(e) "Common Stock" or "Stock" means the Common Stock, par value $.01 per
share, of the Company.
(f) "Company" means Brooks Automation, Inc. and any business entity in
which Brooks Automation, Inc. owns directly or indirectly 50% or more
of the total combined voting power or has a significant financial
interest as determined by the Committee.
(g) "Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Board, to receive amounts
due or exercise rights of the Participant in the event of the
Participant's death. In the absence of an effective designation by a
Participant, Designated Beneficiary shall mean the Participant's
estate.
(h) "Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the
Board in good faith or in the manner established by the Board from time
to time.
(i) "Nonqualified Stock Option" means an option to purchase shares of
Common Stock, awarded to a Participant under Section 6, which is not
intended to comply as an incentive stock option under Section 422 of
the Code or any successor provision.
(j) "Option" means a Nonqualified Stock Option.
(k) "Participant" means a person eligible pursuant to Section 4 hereof and
selected by the Board to receive an Award under the Plan.
-1-
<PAGE> 2
Section 3. Administration
The Plan shall be administered by the Committee. The Board shall have
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the operation of the Plan as it shall from time to time
consider advisable, and to interpret the provisions of the Plan. The Board's
decisions shall be final and binding. To the extent permitted by applicable law,
the Board may delegate to the Committee the power to make Awards to Participants
and all determinations under the Plan with respect thereto.
Section 4. Eligibility
All employees of the Company, other than officers and directors of the
Company, are eligible to be Participants in the Plan.
Section 5. Stock Available for Awards
(a) Subject to adjustment under subsection (b), Awards may be made under
the Plan of Options to acquire not in excess of 400,000* shares of
Common Stock. If any Award in respect of shares of Common Stock expires
or is terminated unexercised or is forfeited for any reason or settled
in a manner that results in fewer shares outstanding than were
initially awarded, including without limitation the surrender of shares
in payment for the Award or any tax obligation thereon, the shares
subject to such Award or so surrendered, as the case may be, to the
extent of such expiration, termination, forfeiture or decrease, shall
again be available for award under the Plan. Common Stock issued
through the assumption or substitution of outstanding grants from an
acquired Company shall not reduce the shares available for Awards under
the Plan. Shares of Common Stock issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.
(b) In the event that the Board determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, exchange of shares, warrants or rights offering
to purchase Common Stock at a price substantially below fair market
value, or other similar transaction affects the Common Stock such that
an adjustment is required in order to preserve the benefits or
potential benefits intended to be made available under the Plan, then
the Board, shall equitably adjust any or all of (i) the number and kind
of shares in respect of which Awards may be made under the Plan, (ii)
the number and kind of shares subject to outstanding Awards, and (iii)
the award, exercise or conversion price with respect to any of the
foregoing, and if considered appropriate, the Board may make provision
for a cash payment with respect to an outstanding Award, provided that
the number of shares subject to any Award shall always be a whole
number.
Section 6. Stock Options
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* Increased from 100,000 by special vote of the Board of Directors of the
Company dated October 2, 1998.
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(a) Subject to the provisions of the Plan, the Board may award Nonqualified
Stock Options and determine the number of shares to be covered by each
Option, the Option Price therefor and the conditions and limitations
applicable to the exercise of the Option.
(b) The Board shall establish the Option Price at the time each Option is
awarded.
(c) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Board may specify in the applicable Award
or thereafter. The Board may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable
federal or state securities laws, as it considers necessary or
advisable.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the Option Price therefor is received by the
Company. Such payment may be made in whole or in part in cash or, to
the extent permitted by the Board at or after the award of the Option,
by delivery of a note or shares of Common Stock owned by the
optionholder, including Restricted Stock, valued at their Fair Market
Value on the date of delivery, by the reduction of the shares of Common
Stock that the optionholder would be entitled to receive upon exercise
of the Option, such shares to be valued at their Fair Market Value on
the date of exercise, less their Option Price (a so-called "cashless
exercise"), or such other lawful consideration as the Board may
determine. In addition, an optionholder may engage in a successive
exchange (or series of exchanges) in which the shares of Common Stock
that such optionholder is entitled to receive upon the exercise of an
Option may be simultaneously utilized as payment for the exercise of an
additional Option or Options.
(e) The Board may provide for the automatic award of an Option upon the
delivery of shares to the Company in payment of an Option for up to the
number of shares so delivered.
Section 7. General Provisions Applicable to Awards
(a) Documentation. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and
conditions thereof and containing such other terms and conditions not
inconsistent with the provisions of the Plan as the Board considers
necessary or advisable to achieve the purposes of the Plan or comply
with applicable tax and regulatory laws and accounting principles.
(b) Board Discretion. The terms of each Award need not be identical, and
the Board need not treat Participants uniformly. Except as otherwise
provided by the Plan or a particular Award, any determination with
respect to an Award may be made by the Board at the time of award or at
any time thereafter. Without limiting the foregoing, an Award may be
made by the Board, in its discretion, to any 401(k), savings, pension,
profit sharing or other similar plan of the Company in lieu of or in
addition to any cash or other property contributed or to be contributed
to such plan.
(c) Settlement. The Board shall determine whether Awards are settled in
whole or in part in cash, Common Stock, other securities of the
Company, Awards or other property. The Board may permit a Participant
to defer all or any portion of a payment under the Plan, including
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the crediting of interest on deferred amounts denominated in cash and
dividend equivalents on amounts denominated in Common Stock.
(d) Termination of Employment. The Board shall determine the effect on an
Award of the disability, death, retirement or other termination of
employment of a Participant and the extent to which, and the period
during which, the Participant's legal representative, guardian or
Designated Beneficiary may receive payment of an Award or exercise
rights thereunder.
(e) Change in Control. In order to preserve a Participant's rights under an
Award in the event of a change in control of the Company, the Board in
its discretion may, at the time an Award is made or at any time
thereafter, take one or more of the following actions: (i) provide for
the acceleration of any time period relating to the exercise of the
Award, (ii) provide for the purchase of the Award upon the
Participant's request for an amount of cash or other property that
could have been received upon the exercise of the Award had the Award
been currently exercisable, (iii) adjust the terms of the Award in a
manner determined by the Board to reflect the change in control, (iv)
cause the Award to be assumed, or new rights substituted therefor, by
another entity, or (v) make such other provision as the Board may
consider equitable and in the best interests of the Company.
(f) Withholding. The Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required
by law to be withheld in respect of Awards under the Plan no later than
the date of the event creating the tax liability. In the Board's
discretion, such tax obligations may be paid in whole or in part in
shares of Common Stock, including shares retained from the Award
creating the tax obligation, valued at their Fair Market Value on the
date of delivery. The Company and its affiliates may, to the extent
permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to the Participant.
(g) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the
same or a different type, changing the date of exercise, provided that
the Participant's consent to such action shall be required unless the
Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
Section 8. Miscellaneous
(a) No Right To Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as
giving a Participant the right to continued employment. The Company
expressly reserves the right at any time to dismiss a Participant free
from any liability or claim under the Plan, except as expressly
provided in the applicable Award.
(b) No Rights As Shareholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights
as a shareholder with respect to any shares of Common Stock to be
distributed under the Plan until he or she becomes the holder thereof.
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(c) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of the State of Delaware.
(d) Indemnity. Neither the Board nor the Committee, nor any members of
either, nor any employees of the Company or any parent, subsidiary, or
other affiliate, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with
their responsibilities with respect to this Plan, and the Company
hereby agrees to indemnify the members of the Board, the members of the
Committee, and the employees of the Company and its parent or
subsidiaries in respect of any claim, loss, damage, or expense
(including reasonable counsel fees) arising from any such act,
omission, interpretation, construction or determination to the full
extent permitted by law.
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