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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0000950135-01-503858.txt : 20020413
<SEC-HEADER>0000950135-01-503858.hdr.sgml : 20020413
ACCESSION NUMBER: 0000950135-01-503858
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 12
CONFORMED PERIOD OF REPORT: 20010930
FILED AS OF DATE: 20011213
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BROOKS AUTOMATION INC
CENTRAL INDEX KEY: 0000933974
STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559]
IRS NUMBER: 043040660
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-25434
FILM NUMBER: 1813260
BUSINESS ADDRESS:
STREET 1: 15 ELIZABETH DR
CITY: CHELMSFORD
STATE: MA
ZIP: 01824
BUSINESS PHONE: 9782622400
MAIL ADDRESS:
STREET 1: 15 ELIZABETH DRIVE
CITY: CHELMSBORO
STATE: MA
ZIP: 01824
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>b40853bae10-k.txt
<DESCRIPTION>BROOKS AUTOMATION, INC.
<TEXT>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
<Table>
<C> <S>
(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, 2001
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 .
</Table>
COMMISSION FILE NUMBER: 0-25434
BROOKS AUTOMATION, INC.
(Exact Name of Registrant as Specified in Its Charter)
<Table>
<S> <C>
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)
</Table>
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 COMMON 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, 2001, was
$576,558,732.75 based on the closing price per share of $36.75 on that date on
the Nasdaq Stock Market. As of November 30, 2001, 19,913,483 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS
Brooks Automation, Inc. ("Brooks" or the "Company") is a leading supplier
of integrated tool and factory automation solutions for the global semiconductor
and related industries such as the data storage and flat panel display
manufacturing industries. 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 grown from individual robots used to transfer
semiconductor wafers in advanced production equipment to fully integrated
automation solutions that control the flow of resources in the factory from
process tools to factory scheduling and dispatching. In 1998, the Company began
an aggressive program of investment and acquisition. By the close of fiscal year
2000, Brooks had emerged as one of the leading suppliers of factory and tool
automation solutions for semiconductor and original equipment manufacturers.
During fiscal 2001, the Company continued its program of strategic investment
and acquisitions designed to broaden the depth and breadth of its offerings and
market position.
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 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. This basic sequence is repeated up to 25 times for complex
semiconductor devices. To become fully processed a bare silicon wafer will pass
through as many as 400 or more process steps.
State-of-the-art semiconductor manufacturing creates on-chip features 1,000
times narrower than a human hair, and it must control the dimensions of those
features to within 10%. A fabrication facility, or "fab", contains hundreds of
manufacturing tools. Wafer fabs process wafers in lots of 25. A flat panel
display substrate may contain as few as two laptop computer displays, while a
wafer may contain more than 500 semiconductor chips.
One manufacturing facility could at any moment be processing wafers that
will result in hundreds of different end products. The slightest drift or
malfunction in any of the tools at any of the process steps can cause a process
deviation. A manufacturing problem or deviation in a wafer fabrication plant can
ruin an entire lot of 25 wafers, or multiple lots. One lot of 300mm (i.e. about
12 inches in diameter) wafers can be worth up to $7 million.
As a result, semiconductor manufacturing has become and continues to be
increasingly automated. Today, almost every aspect of processing includes
automation, from material handling to tracking work-in-process to process
control and scheduling. Factory and tool automation directly impacts factory
performance. Factory performance, in turn, drives semiconductor manufacturers'
ability to:
- get to market first when product profitability is greatest; and
- drive manufacturing costs down to remain competitive in the face of
constant downward price pressure.
TOOL AUTOMATION SYSTEMS
Semiconductor and flat panel display substrates must be processed in
ultra-clean environments. This means that manufacturing is either in a clean
room at atmospheric pressure levels, a nitrogen purged atmospheric environment,
or in a vacuum environment. Semiconductor and flat panel display process tools
generally use vacuum environments for deposition and etch processes, and
atmospheric environments for photolithography and other processes. Vacuum
equipment is typically designed as cluster tools and atmospheric equipment is
typically designed as in-line handling systems.
<PAGE>
Cluster tool handling systems typically link together multiple processes
such as deposition, etch and heating/cooling of the substrate around a transfer
robot located in a central vacuum chamber. 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 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.
In-line handling systems often link together multiple processes such as
photo resist processing, using a transfer robot located on an atmospheric
horizontal traverser. In these systems, the process modules are lined up rather
than clustered around an automation handling system. Robotic traversers in these
systems move substrates back and forth across the line of process modules. The
in-line architecture is now emerging in the stripping, etch, cleaning and
chemical mechanical polishing process markets. Some in-line architectures have
their Process Modules loaded directly by an atmospheric robot (chemical
mechanical polishing ("CMP"), track). Others utilize a transport mechanism in a
vacuum load lock to load the process module (etch, rapid thermal processing
("RTP"), ashing).
FACTORY INTERFACE SOLUTIONS
Semiconductor manufacturers with 300mm, as well as advanced 200mm, projects
utilize mini-environment technology for their factories. Mini-environment
technology permits a factory to cost-effectively maintain the wafers in an
environment that is 1,000 times cleaner than one that is typically found in a
surgical operating room. The interface between a mini-environment that surrounds
a tool and the outside factory is a critical element of a factory's total
automation solution. Material handling automation includes sorters (moving
wafers within and between carriers), interbay (moving wafer carriers between
manufacturing areas), intrabay (moving wafer carriers from tool to tool within a
manufacturing area) and tool-level automation. Tool-level automation uses robot
arms or tracks to handle wafers or cassettes of wafers between lot box and
processing chamber, or between consecutive processing chambers.
FACTORY AUTOMATION SOLUTIONS
Driven by increased global competition, shorter product lifecycles, and
downward price pressures, semiconductor manufacturers are turning their
attention to reducing manufacturing costs by improving the operational
efficiencies of their manufacturing processes. This is evidenced by the
continued investment, even in a down market, in 300mm manufacturing facilities
on the basis of cost reduction. It is also supported by the strong push for more
and better-advanced process control, equipment performance tracking and other
optimization and manufacturing control applications.
Semiconductor manufacturers require factory automation systems that
document, control and report on the movement of material through the automated
factory. To achieve this requires a high degree of integration of the many
automation components. For example, the factory systems must simultaneously
setup and run processing equipment automatically, route work-in-process
dynamically based on the current state of the factory, collect process data,
modify process variables, monitor semiconductor processing equipment performance
and control the dispatching of work-in-process, to keep the factory at
acceptable performance levels.
As automation requirements have grown, semiconductor manufacturers'
automation solutions have changed from add-on systems that have evolved over
time, to full solutions that are specified, in detail, at the beginning of the
factory planning process. The increasing requirement for automation makes it
critical to semiconductor manufacturers that the automation systems they select
work together in an integrated fashion at the time of deployment.
2
<PAGE>
Semiconductor and flat panel display manufacturers use a wide variety of
hardware and software systems to automate and control their operations. To
improve factory performance, they use factory automation systems. Almost all
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, modify process parameters
automatically, provide automated notification of out-of-control conditions and
supply on-line help for 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. Finally,
capacity planning and scheduling solutions are used to manage all the
constraints in the factory, from limited resources during shift changes to
factors effecting machine efficiency. These solutions help increase throughput,
improve utilization of resources and reduce in-process inventory.
PRODUCTS
TOOL AUTOMATION SYSTEMS
Brooks provides vacuum and atmospheric tool automation systems for the
semiconductor, MEMS (Micro-electronic Machines Systems), opto-electronic, flat
panel display and data storage markets. Brooks has developed comprehensive
product lines that encompass automation modules, handling systems and integrated
software and controls. Brooks uses a common architectural foundation in the
design and production of systems, robots and modules. Shared technologies and
common software controls enable Brooks to respond to changing industry demands,
such as processing larger diameter 300mm semiconductor wafers and the larger,
fourth generation flat panel display substrates.
Brooks provides components to customers who build their own systems and
integrated systems to those customers who do not.
FACTORY INTERFACE SOLUTIONS
Brooks provides mini-environment and factory interface solutions that
support 200mm Standard Mechanical Interface Facilities ("SMIF"), as well as
solutions for 300mm factories, which utilize Brooks' Front Opening Unified Pod
("FOUP") technology. Brooks' Equipment Front-End Modules ("EFEMs") are compact
interface solutions that provide the equipment supplier with an integrated
system that consists of a mini-environment, load port(s), atmospheric robot(s),
tool control and software interface modules.
Brooks offers multi-cassette sorting systems. These sorters are often used
for the random sampling of wafers for statistical process control routines,
which, when coupled with metrology inspection, help assure the quality of the
process tool and the materials used in the fabrication process. Brooks also
provides advanced lot tracking that enables semiconductor manufacturers to
monitor the exact location of every wafer in the factory. Brooks believes that
its factory interface solutions enhance return on investment in new fabs,
retrofit projects, as well as in process tools, by providing integrated
automation solutions to manage the complex logistics of advanced semiconductor
factories.
FACTORY AUTOMATION SOLUTIONS
Electronics manufacturing often requires software systems for decision
support (reporting, planning, scheduling, dispatching, simulation, process
development), tracking/management (work in process ("WIP"), durables (i.e.
reticles and carriers), equipment, operators, recipes, maintenance, inventory),
equipment or cell control (process equipment, measurement equipment, material
handling systems, storage systems) and analysis (statistical process control,
advanced process control, engineering data analysis, yield management, equipment
performance tracking). As a result of the complexity of their processes and
intolerance of even minor deviations from those processes, semiconductor fabs
lead the way in driving the requirements for
3
<PAGE>
manufacturing automation software systems, often referred to as computer
integrated manufacturing ("CIM") system. The heart of this system is the MES.
Brooks offers a CIM solution that provides a unifying framework for factory
automation. Brooks' MES software provides decision support and WIP tracking and
management either stand-alone or as part of the CIM solution. Brooks' equipment
integration products connect the manufacturing equipment to the advanced process
control, factory automation, and other control applications. Brooks' solutions
provide integrated applications for material control and durables management,
WIP tracking and process optimization, maintenance management and equipment
performance tracking, advanced process control and process optimization, factory
scheduling and real-time dispatching, recipe management and engineering data
collection, and engineering data analysis and statistical process control. These
applications integrate, coordinate and track the activities of manufacturing
resources, including equipment, material, operators, engineers and software
applications.
Brooks' solutions may be both process-specific and facility-wide. Brooks
may deliver these solutions as a stand-alone product or as part of an
integrated, CIM solution including systems integration services. Brooks'
offerings address the automation software requirements for hi-tech manufacturing
markets including semiconductor fab assembly and test areas, liquid crystal
display, or LCD, MEMS, opto-electronics and data storage markets.
The following table lists the Company's primary product offerings within
each of the markets it serves:
<Table>
<Caption>
SEGMENT PRODUCT LINES
- ------- -------------
<S> <C>
TOOL AUTOMATION SYSTEMS
Vacuum Intra-Tool Automation Central Wafer Handling Systems
Transfer Robots
Thermal Conditioning Modules (Cooling)
Cassette Elevator Load Locks
Aligners
Atmospheric Intra-Tool Automation Wafer Handling Systems
Transfer Robots
Thermal Conditioning Modules (Cooling)
Aligners
Flat Panel Display Products Indexers
Substrate Handling Systems
Transfer Robots
Cassette Elevator Load Locks
Tool Communications Software 200mm/300mm Communications Software
200mm/300mm Test Software
e-Diagnostics Tool Interface Software
Tool Automation Software Material Handling Control Software
Cluster Tool Control Software
EFEM Control Software
Equipment Controllers
Integration and Consulting Solutions
Advanced Process Control Software APC Foundation Software
Patterns -- Fault Detection & Classification
(FDC) Software
Run-to-Run Software
</Table>
4
<PAGE>
<Table>
<Caption>
SEGMENT PRODUCT LINES
- ------- -------------
<S> <C>
FACTORY INTERFACE SOLUTIONS
Factory Interfaces and Wafer Sorters Standard Mechanical Interfaces (SMIF)
300mm Front Opening Unified Pod (FOUP)
Interfaces
Mini-environments
Pressure and Flow Controllers
Equipment Front End Modules (EFEM)
Sorters, Indexers
Carrier Tracking Systems
FACTORY AUTOMATION SOLUTIONS
CIM solutions FABready Suite for 300mm, FABready Suite for LCD
Manufacturing Execution Software ("MES") FACTORYworks
Reticle Management and Lithography PhotoStation, ReticleTrax
Automation Software
Scheduling and Dispatching Advanced Productivity Family
Material Control and Tracking CLASS MCS
Equipment and Cell Control STATIONworks, CELLworks
Engineering Data Analysis RS/Series, Cornerstone
Maintenance Management Xsite
Equipment Performance and Monitoring SEARAMS, Sentinel, iConnect
Process Development Starfire
Statistical Process Control SPACE inside Brooks
Advanced Process Control Patterns, ARRC, SMC, APCbuilder
</Table>
CUSTOMERS
Brooks' customers for tool automation systems are primarily original
equipment manufacturers ("OEMs") and semiconductor manufacturers who are
constructing new and/or retrofitting existing vacuum and atmospheric automation
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 customers are
primarily located in the United States, Japan, South Korea, Europe, Taiwan and
Southeast Asia. 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. In fiscal 2000 and fiscal 1999, Lam Research Corporation ("Lam") was
the Company's largest customer. In fiscal 2001, Novellus Systems, Inc.
("Novellus") was the Company's largest customer. Sales to the Company's ten
largest customers, Novellus and Lam, as a percentage of total sales, are as
follows:
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
-------------------------
2001 2000 1999
----- ----- -----
<S> <C> <C> <C>
Ten largest customers 37% 43% 52%
Novellus Systems, Inc. 10% 7% 9%
Lam Research Corporation 7% 11% 12%
</Table>
A reduction or delay in orders from Novellus, Lam or other significant
customers could have a material adverse effect on Brooks' results of operations.
See Note 11, "Segment and Geographic Information," of the consolidated financial
statements for further discussion of the Company's sales by geographic region
and revenues, income and assets by financial reporting segment.
5
<PAGE>
Brooks derives a significant amount of its total revenues from direct
foreign sales. Revenues outside the United States were approximately 50%, 48%
and 43% of total revenues for the years ended September 30, 2001, 2000 and 1999,
respectively.
The Company expects foreign revenues to continue to represent a significant
percentage of total revenues in the foreseeable future. Brooks cannot guarantee
that geographical revenue rates in the foreseeable future will be comparable to
those achieved in recent years. See "Factors That May Affect Future
Results -- Brooks' international business operations expose it to a number of
difficulties in coordinating its activities abroad 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,
Europe, Japan, South Korea, Southeast Asia and Taiwan 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 factory automation
software products.
The Company's marketing activities also include participation in trade
shows, publication of articles in trade journals, seminars, participation in
industry forums and distribution of sales literature. To enhance this
communication and support, particularly with its international customers, Brooks
maintains technology and implementation centers in the United States, British
Columbia, Japan, South Korea, Taiwan, Singapore, Malaysia, the United Kingdom
and Germany. These facilities, together with Brooks' headquarters, maintain
demonstration equipment for customers to evaluate. Customers are also encouraged
to 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 comparisons.
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 most 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
improvements 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
in this segment. Many of the companies in these
6
<PAGE>
industries have significantly greater research and development, clean room
manufacturing, marketing and financial resources than Brooks. Applied Materials,
Inc., the leading process equipment original equipment manufacturer, develops
and manufactures its own central wafer handling systems and modules.
Brooks believes its customers 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
continues 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 competitive factors in the factory interface
solutions market are technical and technological capabilities, reliability,
price/performance, ease of integration and global sales and support capability.
Brooks believes that its solutions compete favorably with respect to all these
factors. In this market, Brooks encounters direct competition from Asyst, Rorze,
Fortrend, Newport, TDK, Yasakawa and Hirata. Some of these competitors have
extensive engineering, manufacturing and marketing capabilities.
Brooks believes that the primary competitive factors in the end-user market
for factory automation software and process control solutions software are
product functionality, degree of integration, price/performance, ease of
implementation and installation, hardware and software platform compatibility,
costs to support and maintain, 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 factory automation market industry from various
competitors, including Applied Materials-Consilium, IBM, Si-view, Compaq, TRW,
Camstar and numerous small independent software companies.
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, degree of
integration, reliability and performance of existing products. Brooks'
engineering, marketing, operations and management personnel have developed close
collaborative relationships with many of their counterparts in customer
organizations 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, station control software,
advanced tool control solutions, advanced process control solutions, factory
scheduling and dispatching solutions and material handling control software.
Furthermore, the Company is investing in a common information systems framework
to provide ease of integration across these applications. The Company also
maintains relationships with integrated circuit 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
7
<PAGE>
the performance of its products. The Company's facilities in Chelmsford,
Massachusetts; Jena, Germany; Kiheung, Korea and Livingston, Scotland are ISO
9001 certified.
Brooks employs a just-in-time manufacturing strategy for a large portion of
its manufacturing process. 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.
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 cannot
guarantee that these efforts will meaningfully protect its trade secrets.
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. As of
September 30, 2001, Brooks had obtained 116 United States patents and had 34
United States patent applications pending on its behalf. In addition, Brooks had
obtained 152 foreign patents and had 199 foreign patent applications pending on
its behalf. Brooks' United States patents expire at various times from May 2004
to July 2019. 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
8
<PAGE>
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.
On October 10, 2001, the United States Court of Appeals for the Federal
Circuit ("CAFC") issued an order in Asyst Technologies, Inc. v. Empak, Inc., and
Emtrak, Inc., Jenoptik AG, Jenoptik Infab, Inc., Jenoptik GMBH and Infab U.S.
Operations, Inc,. and Meissner & Wurst (the "Asyst litigation"), that may
ultimately affect certain products sold by Brooks. The product that may be
affected is a transport system known as IridNet, which was acquired by Brooks as
part of the purchase of the assets of the Infab division of Jenoptik AG on
September 30, 1999. Asyst had filed suit against Jenoptik AG and other parties
(collectively the "defendants") in the Northern District of California charging
the defendants with infringing Asyst's U.S. Patent Nos. 4,974,166 and 5,097,421.
The District Court granted certain motions for summary judgment in favor of the
defendants and Asyst appealed. The order from the CAFC reversed the grant of
summary judgment and remanded the case to the District Court for further
proceedings regarding claim construction, infringement and invalidity of the
Asyst patents. Brooks has received notice that Asyst may amend its complaint to
name Brooks as an additional defendant. Based on Brooks' investigation of
Asyst's allegations, Brooks does not believe it is infringing any claims of
Asyst's patents. Brooks intends to continue to support Jenoptik to argue
vigorously, among other things, the position that the IridNet system does not
infringe the Asyst patents. If Asyst prevails in its case, Asyst may seek to
prohibit Brooks from developing, marketing and using the IridNet product without
a license. Brooks cannot guarantee that a license will be available to it on
reasonable terms, if at all. If a license from Asyst is not available Brooks
could be forced to incur substantial costs to reengineer the IridNet product,
which could diminish its value. In any case, Brooks may face litigation with
Asyst. Jenoptik has indemnified Brooks for losses Brooks may incur in this
action.
BACKLOG
Backlog for Brooks' products as of September 30, 2001, totaled $102.7
million. Backlog consists of purchase orders for which a customer has scheduled
delivery within the next 12 months. Backlog for the Company's tool automation
systems segment, factory interface solutions segment and factory automation
solutions segment was $37.4 million, $24.5 million and $40.8 million,
respectively, at September 30, 2001. Orders included in the backlog may be
cancelled 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, 2001, Brooks had approximately 1,900 employees. Brooks
believes its future success will depend in large part on its ability to attract
and retain highly skilled employees. Approximately 140 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.
9
<PAGE>
ITEM 2. PROPERTIES
Brooks corporate headquarters and primary manufacturing facility is located
in two buildings, comprising the Brooks campus, in Chelmsford, Massachusetts,
which the Company purchased in January 2001. This purchase included a third
building located at the same campus. The Company currently leases the third
building to an unrelated party. The term of that lease concludes in November
2002. Prior to its purchase, the Company had leased its facilities in
Chelmsford. Brooks maintains additional manufacturing facilities which are
described in the table below:
<Table>
<Caption>
SQUARE FOOTAGE
LOCATION FUNCTIONS (APPROX.) LEASE EXPIRATION
- -------- --------- -------------- ----------------
<S> <C> <C> <C>
Chelmsford, Massachusetts Corporate headquarters, 131,000 Owned
manufacturing, training, software
development
Chelmsford, Massachusetts Manufacturing, R&D-hardware and 80,000 Owned
software
Sylmar, California Manufacturing, R&D hardware 67,000 September 2011
Salt Lake City, Utah Software development, training, 45,900 September 2006
systems
Richmond, Canada Manufacturing, training 41,000 October 2002
Burbank, California Manufacturing, sales and support, 41,000 January 2002
R&D-hardware
Tewksbury, Massachusetts Manufacturing, R&D-hardware 35,100 December 2005
Kiheung, Korea Manufacturing, R&D hardware 28,400 September 2003
Jena, Germany Manufacturing 22,000 December 2002
Phoenix, Arizona Manufacturing, R&D hardware and 19,500 Owned
software
San Jose, California Manufacturing, R&D-hardware and 15,000 Month-to-month
software
Colorado Springs, Colorado Manufacturing, training, 14,000 April 2004
R&D-hardware and software
Tempe, Arizona Manufacturing 10,000 January 2002
</Table>
The Company's tool automation systems and factory interface solutions
segments utilize the manufacturing facilities in Massachusetts, Arizona,
California, Colorado, Germany, Korea and Canada. The Company's factory
automation solutions segment utilizes the manufacturing facilities in Arizona,
Utah, and Chelmsford.
Brooks maintains additional sales and support service offices in Florida,
Indiana, Massachusetts, Michigan, New Mexico, New York, Oregon, Pennsylvania,
Texas, France, Germany, Malaysia, Singapore, Japan, South Korea, Taiwan, China,
and the United Kingdom. Training is also provided at the majority of these
sites. The sales, service and training locations serve all of the Company's
segments.
The Company is in the process of renegotiating its lease in San Jose. The
operations in the Burbank facility are expected to relocate to Sylmar. The Tempe
facility operations are transferring to Valencia, California, the facility
occupied by General Precision Inc., which the Company acquired on October 5,
2001, upon the expiration of the Tempe lease.
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, 2001, no matters were submitted to a
vote of security holders through the solicitation of proxies or otherwise.
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<PAGE>
PART II
ITEM 5. MARKET FOR 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 close 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, 2001
First quarter $31.25 $20.25
Second quarter $44.39 $27.56
Third quarter $62.61 $35.45
Fourth quarter $52.25 $26.59
Fiscal year ended September 30, 2000
First quarter $34.25 $16.69
Second quarter $83.25 $29.75
Third quarter $91.88 $37.00
Fourth quarter $69.38 $29.63
</Table>
NUMBER OF HOLDERS
As of November 28, 2001, there were 364 holders on record of the Company's
Common Stock.
DIVIDEND POLICY
Other than dividends paid by one of our subsidiaries prior to its
acquisition by Brooks, Brooks 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. Brooks' current policy is to retain all of its earnings to finance
future growth.
ISSUANCE OF UNREGISTERED COMMON STOCK
On February 16, 2001, the Company acquired SEMY Engineering, Inc. in
exchange for cash and 73,243 shares of Brooks common stock. 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. The shares issued in this
transaction have been registered pursuant to an effective registration statement
on Form S-3.
On May 15, 2001, the Company acquired SimCon N.V. in exchange for cash and
13,741 shares of Brooks common stock. Under the acquisition agreement, Brooks is
also obligated to make a future payment of Brooks common stock worth $750,000 on
May 15, 2002. The common stock issued and to be issued in the future in this
transaction was sold in reliance upon the exemptions from registration set forth
in Section 4(2) of the Securities Act relating to sales by an issuer not
involving any public offering and Regulation S promulgated thereunder. The
shares issued in this transaction have been registered pursuant to an effective
registration statement on Form S-3.
On June 25, 2001, the Company completed the acquisition of CCS Technology,
Inc. in exchange for cash and 78,475 shares of Brooks common stock. The common
stock issued in this transaction was sold in reliance upon the exemptions from
registration set forth in Section 4(2) of the Securities Act relating to sales
by an issuer not involving any public offering. The shares issued in this
transaction have been registered pursuant to an effective registration statement
on Form S-3.
On June 26, 2001, the Company completed the acquisition of KLA-Tencor,
Inc.'s e-Diagnostics product business in exchange for a note payable and 331,153
shares of Brooks common stock. At the option of Brooks, the note payable may be
paid in cash or in an equivalent amount of Brooks common stock. There is also
the
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<PAGE>
potential for additional purchase consideration of up to $8.0 million in the
aggregate, contingent upon meeting certain performance objectives. At the option
of Brooks, any additional purchase price consideration may be paid in an
equivalent amount of Brooks common stock. The common stock issued and that may
be issued in the future 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. The shares
issued in this transaction have been registered pursuant to an effective
registration statement on Form S-3.
On July 12, 2001, the Company completed the acquisition of Progressive
Technologies, Inc. in exchange for 715,004 shares of Brooks common stock. The
common stock issued in this transaction was sold in reliance upon the exemptions
from registration set forth in Section 4(2) of the Securities Act relating to
sales by an issuer not involving any public offering. The shares issued in this
transaction have been registered pursuant to a registration statement on Form
S-3 which has not been declared effective as of the date of this report.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with our consolidated financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing elsewhere in this report.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30, 2001(4) 2000(1)(2) 1999(1)(3) 1998(1) 1997(1)
- ------------------------ -------- ---------- ----------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues $381,716 $337,184 $122,957 $123,459 $133,827
Gross profit $152,384 $160,725 $ 55,152 $ 37,280 $ 59,739
Income (loss) from operations $(43,904) $ 20,084 $(11,822) $(29,190) $ (1,362)
Income (loss) before income taxes and
minority interests $(36,523) $ 28,444 $(10,448) $(27,917) $ (2,857)
Net income (loss) $(29,660) $ 15,109 $ (9,534) $(23,268) $ (3,324)
Accretion and dividends on preferred
stock $ 90 $ 120 $ 774 $ 1,540 $ 1,125
Net income (loss) attributable to
common stockholders $(29,750) $ 14,989 $(10,308) $(24,808) $ (4,449)
Basic earnings (loss) per share $ (1.65) $ 0.96 $ (0.89) $ (2.32) $ (0.54)
Diluted earnings (loss) per share $ (1.65) $ 0.88 $ (0.89) $ (2.32) $ (0.54)
Shares used in computing basic earnings
(loss) per share 18,015 15,661 11,542 10,687 8,230
Shares used in computing diluted
earnings (loss) per share 18,015 17,192 11,542 10,687 8,230
</Table>
<Table>
<Caption>
AS OF SEPTEMBER 30, 2001 2000(1) 1999(1) 1998(1) 1997(1)
- ------------------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total assets $703,831 $519,786 $197,300 $160,143 $181,967
Working capital $288,036 $306,836 $106,803 $105,210 $120,067
Notes payable and revolving credit
facilities $ 17,122 $ 16,350 $ 6,183 $ 4,717 $ 4,070
Current portion of long-term debt and
capital lease obligations $ 392 $ 524 $ 544 $ 523 $ 1,379
Convertible subordinated notes $175,000 $ -- $ -- $ -- $ --
Long-term debt and capital lease
obligations (less current portion) and
senior subordinated note $ 31 $ 332 $ 804 $ 9,118 $ 6,264
Redeemable convertible preferred stock $ -- $ 2,601 $ 2,481 $ 5,923 $ 15,270
Members' capital $ -- $ -- $ 930 $ 1,134 $ 195
Stockholders' equity $424,169 $415,284 $137,913 $118,156 $129,963
</Table>
<Table>
<Caption>
FIRST SECOND THIRD FOURTH
YEAR ENDED SEPTEMBER 30, 2001 QUARTER(1) QUARTER(1) QUARTER(1) QUARTER
- ----------------------------- ---------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues $111,391 $111,987 $96,814 $ 61,524
Gross profit $ 50,619 $ 48,866 $45,068 $ 7,831
Net income (loss) $ 5,515 $ (2,592) $ 518 $(33,101)
Net income (loss) attributable to common
stockholders $ 5,485 $ (2,622) $ 488 $(33,101)
Diluted earnings (loss) per share $ 0.30 $ (0.14) $ 0.03 $ (1.76)
</Table>
13
<PAGE>
<Table>
<Caption>
FIRST SECOND THIRD FOURTH
YEAR ENDED SEPTEMBER 30, 2000 QUARTER(1) QUARTER(1) QUARTER(1) QUARTER(1)
- ----------------------------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues $57,632 $83,543 $92,877 $103,132
Gross profit $28,588 $38,880 $43,315 $ 49,942
Net income $ 3,434 $ 2,427 $ 3,322 $ 5,926
Net income attributable to common stockholders $ 3,404 $ 2,397 $ 3,292 $ 5,896
Diluted earnings per share $ 0.24 $ 0.15 $ 0.17 $ 0.31
</Table>
- ---------------
(1) Amounts have been restated to reflect the acquisition of Progressive
Technologies, Inc. in a pooling of interests transaction effective July 12,
2001.
(2) Amounts include results of operations of the Infab Division of Jenoptik AG
(acquired September 30, 1999); Auto-Soft Corporation and AutoSimulations,
Inc. (acquired January 6, 2000) and MiTeX Solutions (acquired June 23, 2000)
for the periods subsequent to their respective acquisitions.
(3) Amounts include results of operations of Domain Manufacturing Corporation
(acquired June 30, 1999) and Hanyon Technology, Inc. (acquired April 21,
1999) for the periods subsequent to their respective acquisitions.
(4) Amounts include results of operations of SEMY Engineering, Inc. (acquired
February 16, 2001), the KLA e-Diagnostics product business (acquired June
26, 2001), CCS Technology, Inc. (acquired June 25, 2001) and SimCon N.V.
(acquired May 15, 2001) for the periods subsequent to their respective
acquisitions.
14
<PAGE>
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 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 whenever they appear in this report.
OVERVIEW
Brooks Automation, Inc. ("Brooks" or the "Company") is a leading supplier
of integrated tool and factory automation solutions for the global semiconductor
and related industries, such as the data storage and flat panel display
manufacturing industries. 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 grown from individual robots used to transfer
semiconductor wafers in advanced production equipment to fully integrated
automation solutions that control the flow of resources in the factory from
process tools to factory scheduling and dispatching. In 1998, the Company began
an aggressive program of investment and acquisition. By the close of fiscal year
2000, Brooks had emerged as one of the leading suppliers of factory and tool
automation solutions for semiconductor and original equipment manufacturers.
During the fiscal year 2001, the Company continued its program of strategic
investment and acquisitions designed to broaden the depth and breadth of its
offerings and market position.
The Company's revenues are generally distributed equally between the United
States and foreign countries. The Company's foreign sales have occurred
primarily in Europe, Japan, Korea, Taiwan and Singapore.
BASIS OF PRESENTATION
On July 12, 2001, the Company acquired Progressive Technologies, Inc.
("PTI") in a transaction accounted for as a pooling of interests initiated prior
to June 30, 2001. Accordingly, the Company's consolidated financial statements
and notes thereto have been restated to include the financial position and
results of operations of PTI for all periods prior to the acquisition. PTI is
engaged in the development, production and distribution of air-flow regulation
systems for clean room and process equipment in the semiconductor industry.
Prior to its acquisition by the Company, PTI's fiscal year-end was December 31.
Accordingly, the Company's consolidated balance sheet as of September 30, 2000,
includes PTI's balance sheet as of December 31, 2000, and the Company's
consolidated statements of operations for the years ended September 30, 2000 and
1999 include PTI's results of operations for the years ended December 31, 2000
and 1999, respectively. As a result of conforming dissimilar year-ends, PTI's
results of operations for the three months ended December 31, 2000, are included
in both of the Company's fiscal years 2001 and 2000. An amount equal to PTI's
net income attributable to common stockholders for the three months ended
December 31, 2000 was eliminated from consolidated accumulated deficit for the
year ended September 30, 2001. PTI's revenues, net income and net income
attributable to common stockholders for that quarter were $3.8 million, $536,000
and $506,000, respectively.
On June 26, 2001, the Company completed the purchase of KLA-Tencor, Inc.'s
e-Diagnostics product business ("e-Diagnostics"). The e-Diagnostics programs
enable service and support teams to remotely access their tools in customer fabs
in real-time to diagnose and resolve problems quickly and cost-effectively. On
June 25, 2001, the Company acquired CCS Technology, Inc. ("CCST"), a supplier of
300mm automation test and certification software located in Williston, Vermont.
On May 15, 2001, the Company acquired SimCon N.V. ("SimCon"), a value-added
reseller for the Company's simulation, scheduling, production analysis and
dispatching software headquartered in Belgium. On February 16, 2001, the Company
acquired SEMY Engineering, Inc. ("SEMY"), a provider of advanced process and
equipment control systems for the
15
<PAGE>
semiconductor industry located in Phoenix, Arizona. On December 13, 2000, the
Company acquired substantially all of the assets of a scheduling and simulation
software and service distributor in Japan. These transactions were recorded
using the purchase method of accounting in accordance with Accounting Principles
Board Opinion No. 16, "Business Combinations" ("APB 16"). Accordingly, the
Company's Consolidated Statements of Operations and of Cash Flows for the year
ended September 30, 2001, include the results of these acquired entities for the
periods subsequent to their respective acquisitions.
On May 5, 2000, the Company completed the acquisition of Irvine Optical
Company LLC ("Irvine Optical") in a transaction accounted for as a pooling of
interests. Accordingly, the results of operations and financial position of
Irvine Optical are included in the Company's consolidated results for all
periods presented. Prior to its acquisition by the Company, Irvine Optical's
fiscal year-end was December 31. As a result of conforming dissimilar year-ends,
Irvine Optical's results of operations for the three months ended December 31,
1999, are included in both of the Company's fiscal years 2000 and 1999. An
amount equal to Irvine Optical's net income for the three months ended December
31, 1999, was eliminated from consolidated accumulated deficit for the year
ended September 30, 2000. Irvine Optical's revenues and net income for that
quarter were $4.1 million and $0.1 million, respectively.
The Company completed two acquisitions during fiscal year 2000 which were
accounted for using the purchase method of accounting in accordance with APB 16:
MiTeX Solutions ("MiTeX") on June 23, 2000 and Auto-Soft Corporation ("ASC") and
AutoSimulations, Inc. ("ASI") on January 6, 2000. The Company's Consolidated
Statements of Operations and of Cash Flows include the results of these entities
for the periods subsequent to their respective acquisitions.
On August 31, 1999, the Company completed the acquisition of Smart Machines
Inc. ("Smart Machines"). The acquisition was accounted for as a pooling of
interests. Accordingly, the results of operations and financial position of
Smart Machines are included in the Company's consolidated results for all
periods presented.
The Company completed several acquisitions during the year ended September
30, 1999, which were accounted for using the purchase method of accounting in
accordance with APB 16: the Infab Division ("Infab") of Jenoptik AG on September
30, 1999; Domain Manufacturing Corporation ("Domain") on June 30, 1999 and
Hanyon Technology, Inc. ("Hanyon") on April 21, 1999. Accordingly, the Company's
Consolidated Statements of Operations and of Cash Flows include the results of
these acquired entities for all periods subsequent to their respective
acquisitions.
In June 1999, the Company formed a joint venture in Korea. This joint
venture is 70% owned by the Company and 30% owned by third parties unaffiliated
with the Company. The Company consolidates fully the financial position and
results of operations of the joint venture and accounts for the minority
interest in the consolidated financial statements.
RECENT DEVELOPMENTS
On December 13, 2001, the Company acquired the Automation Systems Group of
Zygo Corporation in exchange for approximately $11 million of cash, net of
closing adjustments aggregating approximately $2 million. The Automation Systems
Group, located in Florida, is a manufacturer of reticle automation systems,
including reticle sorters, reticle macro inspection systems and reticle handling
solutions for the semiconductor industry. The transaction will be accounted for
as a purchase of assets.
On October 23, 2001, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") to acquire PRI Automation, Inc. ("PRI").
Pursuant to the Merger Agreement and subject to the terms and conditions
contained therein, holders of each share of PRI common stock will receive 0.52
shares of the Company's common stock.
The Merger, which is expected to close in the first calendar quarter of
2002, is contingent upon the fulfillment of certain conditions as provided in
the Merger Agreement including, but not limited to, all required regulatory
approvals, the approval of the Merger by the stockholders of PRI and the
approval of the issuance of the Company's common stock in the Merger by the
stockholders of the Company.
16
<PAGE>
PRI supplies advanced factory automation systems, software, and services
that optimize the productivity of semiconductor and precision electronics
manufacturers, as well as OEM process tool manufacturers.
On October 9, 2001, the Company acquired 90% of the capital stock of
Tec-Sem A.G., a Swiss company ("Tec-Sem") in exchange for $12.9 million in cash
and 131,750 shares of Brooks common stock, which had a value of approximately $4
million at the time of issuance, subject to post-closing adjustments. At the
same time, the Company obtained an option to acquire, and one of the selling
stockholders was given a put to sell, the remaining 10% of the stock of Tec-Sem
for $1.1 million in cash and 23,250 shares of Brooks common stock. The Company
also made stock grants to certain key non-owner employees of Tec-Sem. Tec-Sem is
a manufacturer of bare reticle stockers, tool buffers and batch transfer systems
for the semiconductor industry. The transaction will be accounted for as a
purchase of assets.
On October 5, 2001, the Company acquired substantially all of the assets of
General Precision, Inc. ("GPI"), in exchange for 850,000 shares of Brooks common
stock, with a market value of approximately $25 million at the time of issuance,
subject to post-closing adjustments. GPI, located in Valencia, California, is a
supplier of high-end mini-environment solutions for the semiconductor industry.
RESULTS OF OPERATIONS
The Company's business is significantly dependent on capital expenditures
by semiconductor manufacturers and OEMs, which are, in turn, dependent on the
current and anticipated market demand for semiconductors. The Company's revenues
grew substantially in fiscal 2000 compared to fiscal 1999 due in large part to
high levels of capital expenditures of semiconductor manufacturers. Demand for
semiconductors is cyclical and has historically experienced periodic downturns.
The semiconductor industry is currently experiencing such a downturn, which
began to significantly affect the Company in the second half of fiscal 2001 when
the demand for the Company's products and services decreased significantly as
semiconductor manufacturers sharply reduced capital expenditures. This downturn
impacted all of the Company's business segments in the second half of fiscal
2001, affecting revenues and gross margins due to pricing pressure and
underabsorbed costs. As a result of this downturn, the Company anticipates lower
shipments of its products in the next year, which may result in lower revenues
compared to the year ended September 30, 2001. During fiscal 2001, the Company
has taken selective cost reduction actions in many areas of its business in
response to this ongoing downturn. These cost management initiatives include
reductions to headcount, salary and wage reductions and reduced spending.
Although the Company will continue to take a proactive approach to cost
management in response to this downturn, it will continue to invest in those
areas which it believes are important to the long-term growth of the Company,
such as its infrastructure, customer support and new products.
YEAR ENDED SEPTEMBER 30, 2001, COMPARED TO YEAR ENDED SEPTEMBER 30, 2000
The Company reported a net loss of $29.7 million for the year ended
September 30, 2001, compared to net income of $15.1 million in the previous
year. The results for the year ended September 30, 2001, include $30.2 million
of amortization of acquired intangible assets, $9.3 million of restructuring and
acquisition-related charges and $17.2 million of other charges. These other
charges, recorded in the fourth quarter, include $13.7 million recorded to cost
of product sales, comprised of $13.1 million for valuation adjustments to
inventories and $0.6 million for additional warranty reserves; $1.0 million of
accelerated amortization of research and development expense; and $2.5 million
of sales, general and administrative expense for additional accounts receivable
allowances. The results for the previous year include $18.5 million of
amortization of acquired intangible assets and $0.6 million of
acquisition-related charges. After accretion and dividends on preferred stock of
$0.1 million in each year, the Company reported a net loss attributable to
common stockholders of $29.8 million in the year ended September 30, 2001 and
net income attributable to common stockholders of $15.0 million in the year
ended September 30, 2000.
17
<PAGE>
REVENUES
The Company has adopted the recommendations of Staff Accounting Bulletin
101, "Revenue Recognition in Financial Statements" ("SAB 101"), effective
October 1, 2000. The adoption of SAB 101 did not have any impact on the
Company's results of operations or financial position.
The Company reported revenues of $381.7 million in the year ended September
30, 2001, compared to $337.2 million in the previous year, a 13.2% increase. The
increase in revenues is principally attributable to incremental revenue from
acquisitions and the strength in the first half of fiscal 2001 in both the
original equipment manufacturer ("OEM") and end user markets, partially offset
by lower revenues in the second half of the fiscal year.
The Company's tool automation systems segment reported revenues of $171.3
million in the year ended September 30, 2001, an increase of 2.1% from the prior
year. This increase is primarily attributable to growth in the vacuum business
area earlier in fiscal 2001, partially offset by lower revenues in the last two
quarters of fiscal 2001. The Company's factory interface solutions segment
reported an increase of 11.1%, to $97.8 million in the year ended September 30,
2001, compared to the prior year, reflecting in part the strong growth in the
Company's Standard Mechanical Interface Facilities ("SMIF") and Front Opening
Uniform Pod ("FOUP") product lines. The Company's factory automation solutions
segment reported revenues of $112.6 million in the year ended September 30,
2001, an increase of 38.3% from the prior year, principally due to internal
growth, the acquisition of ASC and ASI on January 6, 2000 and the acquisition of
SEMY on February 16, 2001.
Product revenues increased $7.4 million, to $291.7 million, in the year
ended September 30, 2001, from $284.4 million in the previous fiscal year. This
growth is primarily attributable to the overall strength in the OEM and end user
markets in the first half of fiscal 2001 and the Company's recent acquisitions.
Service revenues increased $37.2 million, or 70.4%, to $90.0 million. This
increase is primarily attributable to internal growth and the Company's
acquisitions.
Revenues outside the United States were $191.6 million, or 50.2% of
revenues, and $161.5 million, or 47.9% of revenues, in the years ended September
30, 2001 and 2000, respectively. The absolute increase in revenues outside the
United States is primarily the result of the Company's expanded global presence
from its recent acquisitions, while the increase as a percentage of the
Company's revenues reflects lower sales in the United States, in particular OEM
sales in the second half of fiscal 2001, relative to the rest of the world. The
Company expects that foreign revenues will continue to account for a significant
portion of total revenues. However, the Company cannot guarantee that foreign
revenues, particularly from Asia, will remain a strong component of the
Company's total revenues.
GROSS MARGIN
Gross margin decreased to 39.9% for the year ended September 30, 2001,
compared to 47.7% for the previous year. Excluding other charges of $13.7
million referred to above, the Company's gross margin was 43.5% for the year
ended September 30, 2001. The Company's tool automation systems segment gross
margin decreased to 31.4% in the year ended September 30, 2001, from 42.1% in
the prior year. Excluding other charges of $4.9 million, gross margin for the
tool automation systems segment in the year ended September 30, 2001 was 34.3%.
The decrease is primarily the result of product mix, coupled with the effects of
the current downturn in the semiconductor industry. Gross margin for the
Company's factory interface solutions segment was 26.4% for the year ended
September 30, 2001, a decrease from 39.0% in the prior year. Excluding other
charges of $8.1 million, gross margin for this segment was 34.6%. The decrease
is primarily the result of product and services mix, combined with the current
downturn in the semiconductor industry. The Company's factory automation
solutions gross margin for the year ended September 30, 2001 decreased for the
factory automation solutions segment to 64.6%, compared to 68.6% in the prior
year. Excluding other charges of $0.7 million, gross margin for the year ended
September 30, 2001 was 65.3%. The decrease is primarily attributable to product
and services mix; specifically, a decrease in license revenues partially offset
by an increase in service revenues.
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Gross margin on product revenues was 42.9% for the year ended September 30,
2001, compared to 50.4% for the prior year. Excluding other charges aggregating
$13.7 million, gross margin on product revenues was 47.6% for the year ended
September 30, 2001. The decrease is primarily attributable to product mix,
coupled with the effects of the current downturn in the semiconductor industry,
which impact both pricing and cost absorption.
Gross margin on service revenues decreased to 30.2% for the year ended
September 30, 2001, from 33.0% in the previous year. The decrease is primarily a
result of business mix, combined with the effects of the current downturn in the
semiconductor industry.
In future years, gross margin may be adversely affected by changes in
product mix and/or price competition.
RESEARCH AND DEVELOPMENT
Research and development expenses for the year ended September 30, 2001,
were $60.9 million, an increase of $16.8 million, compared to $44.1 million in
the previous year. Research and development expenses also increased as a
percentage of revenues, to 16.0%, from 13.1% in the prior year. Excluding other
charges of $1.0 million, research and development expenses were 15.7% of
revenues in the current year. The increase in absolute spending is the result of
the research and development related to the Company's recent acquisitions as
well as incremental spending associated with the launch of new products. The
increase in these expenditures as a percentage of revenues is attributable in
part to the downturn currently affecting the semiconductor industry, which began
to impact the Company during the quarterly period ended March 31, 2001. To a
lesser extent, this increase is attributable to higher spending levels
associated with the Company's recent acquisitions. The Company plans to continue
to invest 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 were $95.9 million for the
year ended September 30, 2001, an increase of $18.5 million, compared to $77.4
million in the previous year. Selling, general and administrative expenses
increased as a percentage of revenues, to 25.1% in the year ended September 30,
2001, from 23.0% in the previous year. Excluding other charges of $2.5 million,
selling, general and administrative expenses were 24.5% of revenues in the year
ended September 30, 2001. The increase in absolute spending is the result of
expanded sales and marketing activities as well as general and administration
support costs associated with the Company's recently completed acquisitions and
infrastructure improvements, while the increase as a percentage of revenues is
attributable primarily to the downturn currently affecting the semiconductor
industry. The Company expects that future expenditure levels will continue at or
above current levels to support its worldwide sales and administrative
organizations.
AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
Amortization expense for acquired intangible assets totaled $30.2 million
for the year ended September 30, 2001, and relates to acquired intangible assets
from the acquisitions of the e-Diagnostics product business, CCST, SimCon and
SEMY in the current year, the acquisitions of MiTeX, ASC and ASI in fiscal 2000,
the Infab, Domain and Hanyon acquisitions in the second half of fiscal 1999 and
Irvine Optical's acquisition of a corporation in March 1997. For the year ended
September 30, 2000, amortization expense for acquired intangible assets was
$18.5 million, and relates to the fiscal 2000 and fiscal 1999 acquisitions and
the Irvine Optical acquisition discussed above.
ACQUISITION-RELATED AND RESTRUCTURING COSTS
The Company recorded $9.3 million of acquisition-related and restructuring
charges during the year ended September 30, 2001, comprised of $3.9 million of
acquisition-related costs and $5.4 million of restructuring charges. The
acquisition-related costs primarily relate to transaction costs incurred during
the
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Company's recent acquisition of PTI. On September 5, 2001, the Company's Board
of Directors approved a formal plan of restructure in response to the current
downturn in the semiconductor industry. To that effect, the Company recorded
restructuring charges of $5.4 million in the fourth quarter of the fiscal year.
Of this amount, $2.0 million is related to workforce reductions of approximately
140 employees which is expected to be paid in 2002 and $3.4 million for the
consolidation and strategic focus realignment of several facilities, of which
$0.1 million was paid in 2001, $1.7 million is expected to be paid in 2002 and
$1.6 million in the subsequent years. These measures were largely intended to
align the Company's capacity and infrastructure to anticipated customer demand.
Workforce charges, consisting principally of severance costs, were recorded
based on specific identification of employees to be terminated, along with their
job classifications or functions and their locations. The charges for the
Company's excess facilities were recorded to recognize the lower of the amount
of the remaining lease obligations, net of any sublease rentals, or the expected
lease settlement costs. These costs have been estimated from the time when the
space is expected to be vacated and there are no plans to utilize the facility
in the future. Costs incurred prior to vacating the facilities will be charged
to operations. Acquisition-related charges of $0.6 million in the year ended
September 30, 2000, relate primarily to transaction costs in connection with the
acquisition of Irvine Optical.
The activity related to the Company's acquisition-related and restructuring
accruals is below (in thousands):
<Table>
<Caption>
FISCAL 2001 ACTIVITY
-------------------------------------------------------------------
NEW INITIATIVES
BALANCE -------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
2000 EXPENSE ACCOUNTING UTILIZATION 2001
-------------- ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Facilities $507 $3,369 $-- $ (567) $3,309
Workforce-related 20 2,000 -- (68) 1,952
Other 11 3,945 -- (3,956) --
---- ------ -- ------- ------
$538 $9,314 $-- $(4,591) $5,261
==== ====== == ======= ======
</Table>
INTEREST INCOME AND EXPENSE
Interest income increased by $2.8 million, to $12.5 million, in the year
ended September 30, 2001, compared to an increase of $6.6 million to $9.7
million the previous year. This increase is due primarily to higher cash and
investment asset balances which resulted from investing the proceeds from the
Company's private placement of $175.0 million aggregate Convertible Subordinated
Notes in May 2001 and the public offering of shares of its common stock in March
2000. Interest expense of $4.1 million for the year ended September 30, 2001,
relates primarily to the 4.75% Convertible Subordinated Notes, imputed interest
on notes payable related to the e-Diagnostics and SimCon acquisitions and the
Company's note payable to Daifuku America in connection with the acquisition of
ASC and ASI, which was discharged on January 5, 2001. Interest expense in the
prior year primarily relates to Irvine Optical's debt, which was paid by Brooks
subsequent to the Company's acquisition of Irvine Optical, and the note payable
to Daifuku America.
INCOME TAX PROVISION (BENEFIT)
The Company recorded a net income tax benefit of $6.4 million in the year
ended September 30, 2001 and net income tax expense of $13.6 million in the year
ended September 30, 2000. The tax benefit recorded in fiscal 2001 is primarily
due to anticipated future tax benefit of domestic net operating losses and
research and development credits, partially offset by provisions for taxes on
overseas earnings. The fiscal 2000 tax provision is attributable to federal,
state, foreign and withholding taxes. Federal and state taxes have been reduced
for net operating losses, research and development tax credits and a foreign
sales corporation benefit.
The Company has recorded a deferred tax asset of $38.9 million. Realization
is dependent on generating sufficient taxable income prior to expiration of loss
carryforwards, which will expire at various dates through 2021. Although
realization is not assured, management believes it is more likely than not that
all of the
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deferred tax assets will be realized. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if estimates
of future taxable income during the carryforward period are reduced.
YEAR ENDED SEPTEMBER 30, 2000, COMPARED TO YEAR ENDED SEPTEMBER 30, 1999
The Company reported net income of $15.1 million for the year ended
September 30, 2000, compared to a net loss of $9.5 million in the previous year.
Net income attributable to common shareholders for the year ended September 30,
2000 include $18.5 million of amortization of acquired intangible assets, $0.6
million of acquisition-related charges and $0.1 million of accretion and
dividends on preferred stock. The Company's net loss attributable to common
stockholders in the previous year includes $0.6 million of amortization of
acquired intangible assets, $5.3 million of acquisition-related and
restructuring charges and other costs and $0.8 million of accretion and
dividends on preferred stock.
REVENUES
The Company reported revenues of $337.2 million in the year ended September
30, 2000, compared to $123.0 million in the previous year, a 174.2% increase.
The overall increase is principally attributable to the strength in both the
original equipment manufacturer ("OEM") and end user markets and incremental
revenue from acquisitions. The Company experienced growth in all of the
geographic regions in which it operates. Revenues for each of the Company's
segments increased from the prior year. Revenues for the tool automation systems
segment more than doubled, to $167.8 million, from $79.1 million in the prior
year. The Company's factory interface solutions segment had revenues of $88.1
million in the year ended September 30, 2000, more than four times the $19.6
million reported in the prior year. Revenues for the factory automation
solutions segment were $81.4 million, more than triple the $24.2 million
reported in the prior year.
Product revenues increased $182.9 million, or 180.2%, to $284.4 million in
the year ended September 30, 2000, from $101.5 million in the previous fiscal
year. This growth is primarily attributable to the overall strength in the OEM
and End User markets and acquisitions.
Service revenues increased $31.3 million, or 146.0%, to $52.8 million. This
increase is primarily attributable to internal growth and the Company's
acquisitions.
Revenues outside the United States were $161.5 million, or 47.9% of
revenues, and $53.1 million, or 43.2% of revenues, in the years ended September
30, 2000 and 1999, respectively. The increase is primarily the result of the
Company's expanded global presence from its recent acquisitions.
GROSS MARGIN
Gross margin increased to 47.7% for the year ended September 30, 2000,
compared to 44.9% for the previous year. The Company's tool automation systems
segment gross margin increased to 42.1% in the year ended September 30, 2000,
from 33.8% in the prior year, and is primarily the result of operational
efficiencies and change in product mix. This increase was partially offset by
decreases in gross margins for the Company's other segments. Gross margin for
the Company's factory interface solutions segment decreased to 39.0%, from 49.4%
in the prior year, while the factory automation solutions gross margin decreased
to 68.6%, from 77.4% in the prior year. The decline in the factory interface
solutions segment is primarily the result of change in product mix, while the
factory automation solutions segment is primarily attributable to the acquired
service business of ASC, which has a historically lower margin structure than
that of the segment.
Gross margin on product revenues was 50.4% for the year ended September 30,
2000. Gross margin on product revenues for the year ended September 30, 1999,
which included charges aggregating $1.6 million, comprised of $1.0 million to
provide additional reserves for slow-moving and obsolete inventories and $0.6
million of additional depreciation expense, was 46.6%. Excluding these charges,
gross margin for the year ended September 30, 1999, was 49.7%. The increase is
primarily attributable to improvements in manufacturing capacity utilization and
the acquisition of higher margin software product businesses, partially offset
by the Infab operations' historically lower margin structure.
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<PAGE>
Gross margin on service revenues decreased to 33.0% for the year ended
September 30, 2000, from 36.8% in the previous year. The decrease is primarily a
result of business mix, combined with ASC's historically lower margin structure.
Included in the cost of service revenues are global customer support costs,
consisting primarily of personnel costs and travel expenses.
RESEARCH AND DEVELOPMENT
Research and development expenses for the year ended September 30, 2000,
were $44.1 million, an increase of $19.6 million, compared to $24.5 million in
the previous year. However, research and development expenses decreased as a
percentage of revenues, to 13.1%, from 19.9% in fiscal 1999. The increase in
absolute spending is the result of the research and development efforts related
to the Company's acquisitions as well as incremental spending associated with
the launch of new atmospheric products and the transition to the next generation
vacuum wafer handling products, partially offset by the elimination of redundant
research and development programs.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $77.4 million for the
year ended September 30, 2000, an increase of $38.6 million, compared to $38.8
million in the previous year. However, selling, general and administrative
expenses decreased as a percentage of revenues, to 23.0% in the year ended
September 30, 2000, from 31.5% in the previous year. The increase in absolute
spending is the result of expanded sales and marketing activities as well as
general and administration support costs associated with the Company's
acquisitions and infrastructure improvements, while the improvement of these
costs as a percentage of revenues reflects the Company's efforts at expanding
its product offerings and customer base.
AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
Amortization expense for acquired intangible assets totaled $18.5 million
for the year ended September 30, 2000, and relates to acquired intangible assets
from the June 23, 2000 MiTeX acquisition, the January 6, 2000 ASC and ASI
acquisition, the Infab, Domain and Hanyon acquisitions, all of which occurred
during the second half of fiscal 1999 and Irvine Optical's acquisition of a
corporation in March 1997. Amortization expense for acquired intangible assets
was $0.6 million in the year ended September 30, 1999, and relates to the Domain
and Hanyon acquisitions and Irvine Optical's acquisition.
ACQUISITION-RELATED AND RESTRUCTURING COSTS
Acquisition-related charges of $0.6 million in the year ended September 30,
2000, relate primarily to transaction costs in connection with the acquisition
of Irvine Optical. 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.
INTEREST INCOME AND EXPENSE
Interest income increased by $6.6 million, to $9.7 million, in the year
ended September 30, 2000, compared to the previous year. This increase is due
primarily to higher cash and investment asset balances that resulted from the
Company's public offering of shares of common stock in March 2000. Interest
expense of $1.3 million and $1.6 million for the years ended September 30, 2000
and 1999, respectively, relates primarily to Irvine Optical's debt, which was
discharged on May 6, 2000. Fiscal 2000 interest expense also includes interest
on the Company's note payable to Daifuku America issued as part of the
consideration for the Company's acquisition of ASC and ASI.
INCOME TAX PROVISION (BENEFIT)
The Company recorded net income tax expense of $13.6 million for the year
ended September 30, 2000, and net income tax benefits of $0.9 million for the
year ended September 30, 1999. The fiscal 2000 tax
22
<PAGE>
provision is attributable to federal, state, foreign and withholding taxes.
Federal and state taxes have been reduced for net operating losses, research and
development tax credits and a foreign sales corporation benefit. The tax benefit
recorded in fiscal 1999 is primarily due to anticipated future tax benefit of
domestic net operating losses and research and development credits, partially
offset by a $1.6 million increase in the deferred tax asset valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, the Company had cash, cash equivalents and
marketable securities aggregating $329.7 million. This amount was comprised of
$160.2 million of cash and cash equivalents, $43.6 million of investments in
short-term marketable securities and $125.9 million of investments in long-term
marketable securities.
Cash and cash equivalents were $160.2 million at September 30, 2001, an
increase of $26.6 million from September 30, 2000. This increase in cash and
cash equivalents is primarily the result of proceeds of $169.5 million, net of
costs, from the Company's private placement of 4.75% Convertible Subordinated
Notes completed on May 23, 2001, partially offset by payment of net cash
consideration of $34.5 million for SEMY on February 16, 2001, payment of the
Company's $16.0 million note payable to Daifuku America on January 5, 2001 in
connection with its January 2000 acquisition of ASC and ASI, the purchase of the
Company's headquarters complex on January 29, 2001 for $28.9 million in cash and
net purchases of marketable securities of $66.4 million.
Cash provided by operations was $20.7 million for the year ended September
30, 2001, and is primarily attributable to a decrease in accounts receivable of
$8.4 million and an increase in gross inventories of $2.6 million, offset by
additional inventory valuation adjustments of $13.1 million. The Company's net
loss of $29.7 million included depreciation and amortization of $45.0 million,
and an increase to the Company's net deferred tax asset of $14.1 million. The
decrease in accounts receivable is primarily the result of lower sales in the
second half of the fiscal year due to the economic downturn currently affecting
the semiconductor industry.
Cash used in investing activities was $153.7 million for the year ended
September 30, 2001, and was principally comprised of $181.4 million invested in
marketable securities, $34.5 million for the purchase of SEMY on February 16,
2001, net of cash acquired, $4.7 million of cash payments for other
acquisitions, net of cash acquired and $53.7 million used for capital additions,
including $28.9 million for the purchase on January 29, 2001 of the Company's
headquarters complex located in Chelmsford, Massachusetts. These expenditures
were partially offset by the sale of $115.0 million of the Company's investments
in marketable securities and $6.0 million in cash payments to the Company for
settlements related to previous acquisitions the Company had made.
Cash provided by financing activities was $161.8 million for the year ended
September 30, 2001, and is primarily comprised of $169.5 million, net of costs,
received from the private placement of 4.75% Convertible Subordinated Notes on
May 23, 2001 and $9.1 million from the issuance of stock under the Company's
employee stock purchase plan and the exercise of options to purchase the
Company's common stock. These amounts were partially offset by $16.0 million
paid on January 5, 2001 to retire the Company's note payable to Daifuku America
in connection with the acquisition of ASC and ASI, $0.4 million for the
repayment of PTI's revolving credit facility and $0.5 million for the payment of
long-term debt.
In connection with the acquisition of the e-Diagnostics product business,
the Company issued a $17.0 million one-year note payable to the selling
stockholders. The note is payable in cash or common stock, or any combination
thereof, at the Company's discretion. The Company currently intends to settle
this note in common stock; however, if the Company elects to settle all or a
portion of the note in cash, up to $17.0 million would be required for payment
in June of 2002. Additional cash payments aggregating a maximum of $8.0 million
over the next three years could be required for payment of consideration
contingent upon meeting certain performance objectives, if the Company elected
to settle any or all potential contingent payments in cash.
23
<PAGE>
In connection with its acquisition of SimCon, the Company issued a note
payable to the selling stockholders for $750,000, payable in one year. This note
will be settled with shares of the Company's common stock. No cash payment will
be required.
On May 23, 2001, the Company completed the private placement of $175.0
million aggregate principal amount of 4.75% Convertible Subordinated Notes due
in 2008. The amount sold includes $25.0 million principal amount of notes
purchased by the initial purchaser upon exercise in full of their 30-day option
to purchase additional notes. The Company received net proceeds of $169.5
million from the sale.
Interest on the notes will be paid on June 1 and December 1 of each year,
with the first interest payment due on December 1, 2001. The notes will mature
on June 1, 2008. The Company may redeem the notes at stated premiums on or after
June 6, 2004, or earlier if the price of the Company's common stock reaches
certain prices. Holders may require the Company to repurchase the notes upon a
change in control of the Company in certain circumstances. The notes are
convertible at any time prior to maturity, at the option of the holders, into
shares of the Company's common stock, at a conversion price of $70.23 per share,
subject to certain adjustments. The notes are subordinated to the Company's
senior indebtedness and structurally subordinated to all indebtedness and other
liabilities of the Company's subsidiaries.
While the Company has no significant capital commitments, as it expands its
product offerings, the Company anticipates that it will continue to make capital
expenditures to support its business and improve its computer systems
infrastructure. The Company may also use its resources to acquire companies,
technologies or products that complement the business of the Company.
The Company terminated its $30.0 million unsecured revolving credit
facility and replaced it with a $10.0 million uncommitted demand promissory note
facility with ABN AMRO Bank N.V. ("ABN AMRO") on May 2, 2000. The Company
transferred all outstanding letters of credit, totaling approximately $1.1
million, to the new facility. ABN AMRO is not obligated to extend loans or issue
letters of credit under this new facility. At September 30, 2001, approximately
$1.2 million of the facility was in use, all of it for letters of credit.
The Company believes that its existing resources will be adequate to fund
the Company's currently planned working capital and capital expenditure
requirements for at least the next twelve months. The cyclical nature of the
semiconductor industry makes it very difficult for the Company to predict future
liquidity requirements with certainty. In addition, the Company may experience
unforeseen capital needs in connection with both its recently completed
acquisitions and its planned acquisition of PRI. The sufficiency of the
Company's resources to fund its needs for capital is subject to known and
unknown risks, uncertainties and other factors which may have a material adverse
effect on the Company's business, including, without limitation, the factors
discussed under "Factors That May Affect Future Results."
RECENT ACCOUNTING PRONOUNCEMENTS
In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 ("FAS 144"), "Accounting for the
Impairment or Disposal of Long-Lived Assets." FAS 144 supersedes FASB Statement
No. 121 ("FAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." FAS 144 applies to all long-lived assets
and consequently amends Accounting Principles Board Opinion No. 30 ("APB 30"),
"Reporting Results of Operations -- Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." FAS 144 is effective for financial statements issued
for fiscal years beginning after December 15, 2001. Management is currently
evaluating the effect, if any, FAS 144 will have on its financial position and
results of operations.
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141 ("FAS 141"), "Business Combinations" and
No. 142 ("FAS 142"), "Goodwill and Other Intangible Assets" effective for fiscal
years beginning after December 15, 2001. FAS 141 requires business combinations
initiated after June 30, 2001 to be accounted for using the purchase method of
accounting, and broadens the criteria for recording intangible assets separate
from goodwill. FAS 142 requires that goodwill
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<PAGE>
and identifiable intangible assets determined to have an indefinite life no
longer be amortized, but instead be tested for impairment at least annually.
The Company is required to adopt FAS 142 in the fiscal year beginning
October 1, 2002, at which time amortization of goodwill will cease. The Company
has evaluated the impact of adoption of FAS 142 in respect of acquisitions
accounted for as purchase transactions and completed prior to June 30, 2001. The
application of the separate recognition criteria for intangible assets and the
cessation of amortization of goodwill will result in goodwill of approximately
$67 million at September 30, 2001 being subject to an annual impairment test,
unless interim indicators indicate a need for an interim test, and a resulting
expected reduction of goodwill amortization expense of approximately $32
million, $22 million and $11 million in fiscal 2002, 2003 and 2004,
respectively.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by Brooks or statements made by its
employees may contain forward-looking information that involves substantial
known and unknown risks and uncertainties such as those described below that
could cause actual results to differ materially from targets or projected
results.
You should carefully consider the risks described below and the other
information in this report before deciding to invest in shares of our common
stock. While these are the risks and uncertainties we believe are most important
for you to consider, you should know that they are not the only risks or
uncertainties facing us or which may adversely affect our business. If any of
the following risks or uncertainties actually occur, our business, financial
condition and operating results would likely suffer. In that event, the market
price of our common stock could decline and you could lose all or part of the
money you paid to buy our common stock.
RISK FACTORS RELATING TO BROOKS' INDUSTRY
THE CYCLICAL DEMAND OF SEMICONDUCTOR MANUFACTURERS AFFECTS BROOKS' OPERATING
RESULTS AND THE ONGOING DOWNTURN IN THE INDUSTRY COULD SERIOUSLY HARM BROOKS'
OPERATING RESULTS.
Brooks' business is significantly dependent on capital expenditures by
semiconductor manufacturers. The level of semiconductor manufacturers' capital
expenditures is dependent on the current and anticipated market demand for
semiconductors. The semiconductor industry is highly cyclical and is currently
experiencing a downturn. Brooks anticipates the downturn will continue during
the next few quarters. Despite these industry conditions, Brooks plans to
continue to invest in those areas which Brooks believes are important to its
long-term growth, such as its infrastructure and information technology system,
customer support, supply chain management and new products. As a result,
consistent with its experience in downturns in the past, Brooks believes the
current industry downturn will lead to reduced revenues for it and may cause it
to incur losses.
INDUSTRY CONSOLIDATION AND OUTSOURCING OF THE MANUFACTURE OF SEMICONDUCTORS TO
FOUNDRIES COULD REDUCE THE NUMBER OF AVAILABLE CUSTOMERS.
The substantial expense of building or expanding a semiconductor
fabrication facility is leading increasing numbers of semiconductor companies to
contract with foundries, which manufacture semiconductors designed by others. As
manufacturing is shifted to foundries, the number of Brooks' potential customers
could decrease, which would increase its dependence on its remaining customers.
Recently, consolidation within the semiconductor manufacturing industry has
increased. If semiconductor manufacturing is consolidated into a small number of
foundries and other large companies, Brooks' failure to win any significant bid
to supply equipment to those customers could seriously harm its reputation and
materially and adversely affect its revenue and operating results.
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<PAGE>
RISK FACTORS RELATING TO BROOKS' OPERATIONS
BROOKS' SALES VOLUME SUBSTANTIALLY DEPENDS ON THE SALES VOLUME OF BROOKS'
ORIGINAL EQUIPMENT MANUFACTURER CUSTOMERS AND ON INVESTMENT IN MAJOR CAPITAL
EXPANSION PROGRAMS, RETROFITS AND UPGRADES BY END-USER SEMICONDUCTOR
MANUFACTURING COMPANIES.
Brooks sells a majority of its tool automation products to original
equipment manufacturers that incorporate Brooks' products into their equipment.
Therefore, Brooks' revenues depend on the ability of these customers to develop,
market and sell their equipment in a timely, cost-effective manner.
Brooks also generates significant revenues from large orders from
semiconductor manufacturing companies that build new plants or invest in major
automation retrofits and upgrades. Brooks' revenues depend, in part, on
continued capital investment by semiconductor manufacturing companies.
BROOKS RELIES ON A RELATIVELY LIMITED NUMBER OF CUSTOMERS FOR A LARGE PORTION OF
ITS REVENUES AND BUSINESS.
Brooks receives a significant portion of its revenues in each fiscal period
from a relatively limited number of customers. The loss of one or more of these
major customers, or a decrease in orders by one or more customers, could
adversely affect Brooks' revenue, business and reputation. Sales to Brooks' ten
largest customers accounted for approximately 37% of total revenues in fiscal
2001 and 43% of total revenues in fiscal 2000.
DELAYS IN OR CANCELLATION OF SHIPMENTS OF A FEW OF BROOKS' LARGE ORDERS COULD
SUBSTANTIALLY DECREASE ITS REVENUES OR REDUCE ITS STOCK PRICE.
Historically, a substantial portion of Brooks' quarterly and annual
revenues has come from sales of a small number of large orders. Some of Brooks'
products have high selling prices compared to Brooks' other products. As a
result, the timing of when Brooks recognizes revenue from one of these large
orders can have a significant impact on its total revenues and operating results
for a particular period and reduce its stock price because its sales in that
fiscal period could fall significantly below the expectations of financial
analysts and investors. This could cause the value of its common stock to fall.
Brooks' operating results could be harmed if a small number of large orders are
canceled or rescheduled by customers or cannot be filled due to delays in
manufacturing, testing, shipping or product acceptance.
DEMAND FOR BROOKS' PRODUCTS FLUCTUATES RAPIDLY AND UNPREDICTABLY, WHICH MAKES IT
DIFFICULT TO MANAGE ITS BUSINESS EFFICIENTLY AND CAN REDUCE ITS GROSS MARGINS
AND PROFITABILITY.
Brooks' expense levels are based in part on its expectations for future
demand. Many expenses, particularly those relating to capital equipment and
manufacturing overhead, are relatively fixed. The rapid and unpredictable shifts
in demand for Brooks' products make it difficult to plan manufacturing capacity
and business operations efficiently. If demand is significantly below
expectations, Brooks may be unable to rapidly reduce these fixed costs, which
can diminish gross margins and cause losses. A sudden downturn may also leave
Brooks with excess inventory, which may be rendered obsolete as products evolve
during the downturn and demand shifts to newer products. Brooks' ability to
reduce expenses is further constrained because it must continue to invest in
research and development to maintain its competitive position and to maintain
service and support for its existing global customer base. Conversely, in sudden
upturns, Brooks sometimes incurs significant expenses to rapidly expedite
delivery of components, procure scarce components and outsource additional
manufacturing processes. These expenses could reduce its gross margins and
overall profitability. Any of these results could seriously harm Brooks'
business.
BROOKS' LENGTHY SALES CYCLE REQUIRES IT TO INCUR SIGNIFICANT EXPENSES WITH NO
ASSURANCE THAT BROOKS WILL GENERATE REVENUE.
Brooks' tool automation products are generally incorporated into original
equipment manufacturer equipment at the design stage. To obtain new business
from its original equipment manufacturer customers, Brooks must develop products
for selection by a potential customer at the design stage. This often requires
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Brooks to make significant expenditures without any assurance of success. The
original equipment manufacturer's design decisions often precede the generation
of volume sales, if any, by a year or more. Brooks cannot guarantee that the
equipment manufactured by its original equipment manufacturing customers will be
commercially successful. If Brooks or its original equipment manufacturing
customers fails to develop and introduce new products successfully and in a
timely manner, Brooks' business and financial results will suffer.
Brooks also must complete successfully a costly evaluation and proposal
process before Brooks can achieve volume sales of Brooks factory automation
software to customers. These undertakings are major decisions for most
prospective customers and typically involve significant capital commitments and
lengthy evaluation and approval processes. Brooks cannot guarantee that it will
continue to satisfy evaluations by its end-user customers.
BROOKS' OPERATING RESULTS WOULD BE HARMED IF ONE OF ITS KEY SUPPLIERS FAILS TO
DELIVER COMPONENTS FOR BROOKS' PRODUCTS.
Brooks currently obtains many of its components on an as needed, purchase
order basis. Generally, Brooks does not have any long-term supply contracts with
its vendors and believes many of its vendors have been taking cost containment
measures in response to the industry downturn. When demand for semiconductor
manufacturing equipment increases, Brooks' suppliers face significant challenges
in delivering components on a timely basis. Brooks' inability to obtain
components in required quantities or of acceptable quality could result in
significant delays or reductions in product shipments. This could create
customer dissatisfaction, cause lost revenue and otherwise materially and
adversely affect Brooks' operating results. Delays on Brooks' part could also
cause it to incur contractual penalties for late delivery.
BROOKS MAY EXPERIENCE DELAYS AND TECHNICAL DIFFICULTIES IN NEW PRODUCT
INTRODUCTIONS AND MANUFACTURING, WHICH CAN ADVERSELY AFFECT ITS REVENUES, GROSS
MARGINS AND NET INCOME.
Because Brooks' systems are complex, there can be a significant lag between
the time Brooks introduces a system and the time it begins to produce that
system in volume. As technology in the semiconductor industry becomes more
sophisticated, Brooks is finding it increasingly difficult to design and
integrate complex technologies into its systems, to procure adequate supplies of
specialized components, to train its technical and manufacturing personnel and
to make timely transitions to high-volume manufacturing. Many customers also
require customized systems, which compound these difficulties. Brooks sometimes
incurs substantial unanticipated costs to ensure that its new products function
properly and reliably early in their life cycle. These costs could include
greater than expected installation and support costs or increased materials
costs as a result of expedited changes. Brooks may not be able to pass these
costs on to its customers. In addition, Brooks has experienced, and may continue
to experience, difficulties in both low and high volume manufacturing. Any of
these results could seriously harm Brooks' business.
Moreover, on occasion Brooks has failed to meet its customers' delivery or
performance criteria, and as a result Brooks incurred late delivery penalties
and had higher warranty and service costs. These failures could continue and
could also cause Brooks to lose business from those customers and suffer
long-term damage to its reputation.
BROOKS MAY BE UNABLE TO RECRUIT AND RETAIN NECESSARY PERSONNEL BECAUSE OF
INTENSE COMPETITION FOR HIGHLY SKILLED PERSONNEL.
Brooks needs to retain a substantial number of employees with technical
backgrounds for both its hardware and software engineering, manufacturing, sales
and support staffs. The market for these employees is intensively competitive,
and Brooks has occasionally experienced delays in hiring qualified personnel.
Due to the cyclical nature of the demand for its products and the current
downturn in the semiconductor market, Brooks recently reduced its workforce as a
cost reduction measure. If the semiconductor market experiences an upturn,
Brooks may need to rebuild its workforce. Due to the competitive nature of the
labor markets in which Brooks operates, this type of employment cycle increases
Brooks' risk of being unable to retain and recruit key personnel. Brooks'
inability to recruit, retain and train adequate numbers of qualified personnel
on
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a timely basis could adversely affect its ability to develop, manufacture,
install and support its products and may result in lost revenue and market share
if customers seek alternative solutions.
BROOKS' INTERNATIONAL BUSINESS OPERATIONS EXPOSE IT TO A NUMBER OF DIFFICULTIES
IN COORDINATING ITS ACTIVITIES ABROAD AND IN DEALING WITH MULTIPLE REGULATORY
ENVIRONMENTS.
Sales to customers outside North America accounted for approximately 50% of
Brooks' total revenues in fiscal 2001, 48% in fiscal 2000 and 43% in fiscal
1999. Brooks anticipates that international sales will continue to account for a
significant portion of its revenues. Many of Brooks' vendors are located in
foreign countries. As a result of its international business operations, Brooks
is subject to various risks, including:
- difficulties in staffing and managing operations in multiple locations in
many countries;
- difficulties in managing distributors, representatives and third party
systems integrators;
- challenges presented by collecting trade accounts receivable in foreign
jurisdictions;
- longer sales-cycles;
- possible adverse tax consequences;
- fewer legal protections for intellectual property;
- governmental currency controls and restrictions on repatriation of
earnings;
- changes in various regulatory requirements;
- political and economic changes and disruptions; and
- export/import controls and tariff regulations.
To support its international customers, Brooks maintains locations in
several countries, including Belgium, Canada, China, Germany, Japan, Malaysia,
Singapore, South Korea, Switzerland, Taiwan and the United Kingdom. Brooks
cannot guarantee that it will be able to manage these operations effectively.
Brooks cannot assure you that its investment in these international operations
will enable it to compete successfully in international markets or to meet the
service and support needs of its customers, some of whom are located in
countries where Brooks has no infrastructure.
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 its 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 its success depends in
part upon its ability to enhance its existing products and to develop and market
new products to meet customer needs, even in industry downturns. For example, as
the semiconductor industry transitions from 200mm manufacturing technology to
300mm technology, Brooks believes it is important to its future success to
develop and sell new products that are compatible with 300mm technology. If
competitors introduce new technologies or new products, Brooks' sales could
decline and its existing products could lose market acceptance. Brooks cannot
guarantee that it will identify and adjust to changing market conditions or
succeed in introducing commercially rewarding products or product enhancements.
The success of Brooks' product development and introduction depends on a number
of factors, including:
- accurately identifying and defining new market opportunities and
products;
- completing and introducing new product designs in a timely manner;
- market acceptance of Brooks' products and its customers' products;
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- timely and efficient software development, testing and process;
- timely and efficient implementation of manufacturing and assembly
processes;
- product performance in the field;
- development of a comprehensive, integrated product strategy; and
- efficient implementation and installation and technical support services.
Because Brooks must commit resources to product development well in advance
of sales, its product development decisions must anticipate technological
advances by leading semiconductor manufacturers. Brooks may not succeed in that
effort. Its inability to select, develop, manufacture and market new products or
enhance its existing products could cause it to lose its competitive position
and could seriously harm its business.
BROOKS FACES SIGNIFICANT COMPETITION WHICH COULD RESULT IN DECREASED DEMAND FOR
BROOKS' PRODUCTS OR SERVICES.
The markets for Brooks' products are intensely competitive. Brooks may be
unable to compete successfully. Brooks believes the primary competitive factors
in the tool automation systems segment are throughput, reliability,
contamination control, accuracy and price/performance. Brooks believes that its
primary competition in the tool automation market is from integrated original
equipment manufacturers that satisfy their semiconductor and flat panel display
handling needs internally rather than by purchasing systems or modules from an
independent supplier like Brooks. Many of these original equipment manufacturers
have substantially greater resources than Brooks does. Applied Materials, Inc.,
the leading process equipment original equipment manufacturer, develops and
manufactures its own central wafer handling systems and modules. Brooks may not
be successful in selling its products to original equipment manufacturers that
internally satisfy their wafer or substrate handling needs, regardless of the
performance or the price of Brooks products. Moreover, integrated original
equipment manufacturers may begin to commercialize their handling capabilities
and become Brooks competitors.
Brooks believes that the primary competitive factors in the end-user
semiconductor manufacturer market for factory automation and process control
solutions are product functionality, price/performance, ease of use, ease of
integration and installation, hardware and software platform compatibility,
costs to support and maintain, vendor reputation and financial stability. The
relative importance of these competitive factors may change over time. Brooks
directly competes in this market with various competitors, including Applied
Materials-Consilium, IBM, Si-view, Compaq, TRW, Camstar and numerous small,
independent software companies. Brooks also competes with the in-house software
staffs of semiconductor manufacturers like NEC, Texas Instruments and Intel.
Most of those manufacturers have substantially greater resources than Brooks
does.
Brooks believes that the primary competitive factors in the factory
interface market are technical and technological capabilities, reliability,
price/performance, ease of integration and global sales and support capability.
In this market, Brooks competes directly with Asyst, Rorze, Fortrend, Newport,
TOK, Yasakawa and Hirata. Some of these competitors have substantial financial
resources and extensive engineering, manufacturing and marketing capabilities.
MUCH OF BROOKS' SUCCESS AND VALUE LIES IN ITS OWNERSHIP AND USE OF INTELLECTUAL
PROPERTY, AND BROOKS' FAILURE TO PROTECT THAT PROPERTY COULD ADVERSELY AFFECT
ITS FUTURE OPERATIONS.
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 fully
protect Brooks' products. This may make the possibility
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of piracy of Brooks' technology and products more likely. Brooks cannot
guarantee that the steps Brooks has taken to protect its intellectual property
will be adequate to prevent misappropriation of its technology. Other companies
could independently develop similar or superior technology without violating
Brooks' proprietary rights. There has been substantial litigation regarding
patent and other intellectual property rights in semiconductor-related
industries. Brooks may engage in litigation to:
- enforce its patents;
- protect its trade secrets or know-how;
- defend itself against claims alleging it infringes the rights of others;
or
- determine the scope and validity of the patents or intellectual property
rights of others.
Any litigation could result in substantial cost to Brooks and divert the
attention of Brooks' management, which could harm its operating results and its
future operations. A party making such a claim could secure a judgment against
Brooks that requires it to pay substantial damages. A judgment could also
include an injunction or other court order that could prevent Brooks from
selling its products. Any of these events could seriously harm Brooks' business.
BROOKS' OPERATIONS COULD INFRINGE ON 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 or alter its products so that they no
longer infringe the rights of others. Brooks cannot guarantee that the terms of
any licenses it may be required to seek will be reasonable. Similarly, changing
Brooks' products or processes to avoid infringing the rights of others may be
costly or impractical or could detract from the value of its products.
BROOKS' BUSINESS MAY BE HARMED BY INFRINGEMENT CLAIMS OF GENERAL SIGNAL OR
APPLIED MATERIALS.
Brooks received notice from General Signal Corporation alleging certain of
Brooks' products infringed its patent rights. 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 us 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 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.
BROOKS DOES NOT HAVE LONG-TERM CONTRACTS WITH ITS CUSTOMERS AND BROOKS'
CUSTOMERS MAY CEASE PURCHASING BROOKS' PRODUCTS AT ANY TIME.
Brooks generally does not have long-term contracts with its customers. As a
result, Brooks' agreements with its customers do not provide any assurance of
future sales. Accordingly:
- Brooks' customers can cease purchasing its products at any time without
penalty;
- Brooks' customers are free to purchase products from Brooks' competitors;
- Brooks is exposed to competitive price pressure on each order; and
- Brooks' customers are not required to make minimum purchases.
BROOKS' SOFTWARE PRODUCTS MAY CONTAIN ERRORS OR DEFECTS THAT COULD RESULT IN
LOST REVENUE, DELAYED OR LIMITED MARKET ACCEPTANCE OR PRODUCT LIABILITY CLAIMS
WITH SUBSTANTIAL LITIGATION COSTS.
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Complex software products like Brooks' can contain errors or defects,
particularly when Brooks first introduces new products or when it releases new
versions or enhancements. Any defects or errors could result in lost revenue or
a delay in market acceptance, which would seriously harm Brooks' business and
operating results. Brooks has occasionally discovered software errors in its new
software products and new releases after their introduction, and Brooks expects
that this will continue. Despite internal testing and testing by current and
potential customers, Brooks' current and future products may contain serious
defects.
Because many of Brooks' customers use their products for business-critical
applications, any errors, defects or other performance problems could result in
financial or other damage to Brooks' customers and could significantly impair
their operations. Brooks' customers could seek to recover damages from Brooks
for losses related to any these issues. A product liability claim brought
against Brooks, even if not successful, would likely be time-consuming and
costly to defend and could adversely affect Brooks' marketing efforts.
BROOKS' FUTURE OPERATIONS COULD BE HARMED IF THE COMMERCIAL ADOPTION OF 300MM
WAFER TECHNOLOGY CONTINUES TO PROGRESS SLOWLY OR IS HALTED.
Brooks' future operations depend in part on the adoption of new systems and
technologies to automate the processing of 300mm wafers. However, the industry
transition from the current, widely used 200mm manufacturing technology to 300mm
manufacturing technology is occurring more slowly than expected. A significant
delay in the adoption of 300mm manufacturing technology, or the failure of the
industry to adopt 300mm manufacturing technology, could significantly impair
Brooks' operations. Moreover, continued delay in transition to 300mm technology
could permit Brooks' competitors to introduce competing or superior 300mm
products at more competitive prices. As a result of these factors, competition
for 300mm orders could become vigorous and could harm Brooks' results of
operations.
BROOKS' RECENT RAPID GROWTH IS STRAINING ITS OPERATIONS AND REQUIRING IT TO
INCUR COSTS TO UPGRADE ITS INFRASTRUCTURE.
During fiscal 2000 and 2001, Brooks experienced extremely rapid growth in
its operations, its product offerings and the geographic area of its operations.
The proposed merger with PRI will continue this trend. Brooks' growth has placed
a significant strain on its management, operations and financial systems.
Brooks' future operating results will depend in part on its ability to continue
to implement and improve its operating and financial controls and management
information systems. If Brooks fails to manage its growth effectively, its
financial condition, results of operations and business could be harmed.
BROOKS' SYSTEMS INTEGRATION SERVICES BUSINESS HAS GROWN SIGNIFICANTLY RECENTLY
AND POOR EXECUTION OF THOSE SERVICES COULD ADVERSELY IMPACT BROOKS' OPERATING
RESULTS.
The number of projects Brooks is pursuing for its systems integration
services business has grown significantly recently. This business consists of
integrating combinations of Brooks software and hardware products to provide
more comprehensive solutions for Brooks' end-user customers. The delivery of
these services typically is complex, requiring that Brooks coordinate personnel
with varying technical backgrounds in performing substantial amounts of services
in accordance with timetables. Brooks is in the early stages of developing this
business and it is subject to the risks attendant to entering a business in
which it has limited direct experience. In addition, Brooks' ability to supply
these services and increase its revenues is limited by its ability to retain,
hire and train systems integration personnel. Brooks believes that there is
significant competition for personnel with the advanced skills and technical
knowledge that it needs. Some of Brooks' competitors may have greater resources
to hire personnel with those skills and knowledge. Brooks' operating margins
could be adversely impacted if it does not effectively hire and train additional
personnel or deliver systems integration services to its customers on a
satisfactory and timely basis consistent with its budgets.
THE EFFECT OF TERRORIST THREATS ON THE GENERAL ECONOMY COULD DECREASE BROOKS'
REVENUES.
On September 11, 2001, the United States was subject to terrorist attacks
at the World Trade Center buildings in New York City and the Pentagon in
Washington, D.C. The potential near- and long-term impact
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these attacks may have in regards to Brooks' suppliers and customers, markets
for their products and the U.S. economy are uncertain. There may be other
potential adverse effects on Brooks' operating results due to this significant
event that Brooks cannot foresee.
BROOKS' BUSINESS MAY BE HARMED BY INFRINGEMENT CLAIMS OF ASYST TECHNOLOGIES,
INC.
Brooks acquired certain assets, including a transport system known as
IridNet, from the Infab division of Jenoptik AG on September 30, 1999. Asyst
Technologies, Inc. had previously filed suit against Jenoptik AG and other
parties (collectively, the "defendants"), claiming that products of the
defendants, including IridNet, infringe Asyst's patents. This ongoing litigation
may ultimately affect certain products sold by Brooks. Brooks has received
notice that Asyst may amend its complaint to name Brooks as an additional
defendant. Based on Brooks' investigation of Asyst's allegations, Brooks does
not believe it is infringing any claims of Asyst's patents. Brooks intends to
continue to support Jenoptik to argue vigorously, among other things, the
position that the IridNet system does not infringe the Asyst patents. If Asyst
prevails in prosecuting its case, Asyst may seek to prohibit Brooks from
developing, marketing and using the Iridnet product without a license. Because
patent litigation can be extremely expensive, time-consuming, and its outcome
uncertain, Brooks may seek to obtain licenses to the disputed patents. Brooks
cannot guarantee that licenses will be available to it on reasonable terms, if
at all. If a license from Asyst is not available, Brooks could be forced to
incur substantial costs to reengineer the IridNet product, which could diminish
its value. In any case, Brooks may face litigation with Asyst. Such litigation
could be costly and would divert Brooks management's attention and resources. In
addition, if Brooks does not prevail in such litigation, Brooks could be forced
to pay significant damages or amounts in settlement. Jenoptik has indemnified
Brooks for losses Brooks may incur in this action.
RISK FACTORS RELATING TO BROOKS' ACQUISITIONS
BROOKS HAS ANNOUNCED A MERGER WITH PRI, AND UNCERTAINTY REGARDING THE MERGER MAY
DISRUPT BROOKS' OPERATIONS AND ADVERSELY AFFECT ITS BUSINESS.
On October 24, 2001, Brooks announced its proposed merger with PRI
Automation, Inc. Brooks cannot guarantee that the merger will occur. The merger
will happen only if stated conditions are met, including approval of the
issuance of shares in the merger by Brooks' stockholders, approval of the merger
by PRI's stockholders, clearance of the merger under United States and foreign
antitrust laws, and the absence of any material adverse change in the business
of Brooks or PRI. Many of the conditions are outside the control of Brooks and
PRI, and both parties also have stated rights to terminate the merger agreement.
Accordingly, there may be uncertainty regarding the completion of the merger.
This uncertainty may cause customers, suppliers and channel partners to delay or
defer decisions concerning Brooks, which could negatively affect its business.
Customers, suppliers and channel partners may also seek to change existing
agreements with Brooks as a result of the merger. Any delay or deferral of those
decisions or changes in existing agreements could have a material adverse effect
on Brooks' business, regardless of whether the merger is ultimately completed.
Many costs related to the merger, such as legal, accounting, financial advisor
and financial printing fees, must be paid by Brooks regardless of whether the
merger is completed. If the merger is not completed for any reason, Brooks may
be subject to a number of risks, including a decline in the market price of
Brooks common stock, to the extent that the relevant current market price
reflects a market assumption that the merger will be completed, and substantial
disruption to Brooks' business and distraction of its workforce and management
team. In addition, employees who are uncertain about their future with the
combined company or who do not wish to work for the combined company may seek
employment elsewhere, which could impair Brooks' ability to operate its
business.
BROOKS' BUSINESS COULD BE HARMED IF BROOKS FAILS TO ADEQUATELY INTEGRATE THE
OPERATIONS OF THE BUSINESSES IT HAS ACQUIRED.
Brooks has completed a number of acquisitions in a short period of time.
Brooks' management must devote substantial time and resources to the integration
of the operations of its acquired businesses with its core businesses and with
each other. If Brooks fails to accomplish this integration efficiently, Brooks
may not realize the anticipated benefits of its acquisitions. The process of
integrating supply and distribution channels,
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research and development initiatives, computer and accounting systems and other
aspects of the operation of its acquired businesses, presents a significant
challenge to Brooks' management. This is compounded by the challenge of
simultaneously managing a larger entity. These businesses have operations and
personnel located in Asia, Europe and the United States and present a number of
additional difficulties of integration, including:
- assimilating products and designs into integrated solutions;
- informing customers, suppliers and distributors of the effects of the
acquisitions and integrating them into Brooks' overall operations;
- integrating personnel with disparate business backgrounds and cultures;
- defining and executing a comprehensive product strategy;
- managing geographically remote units;
- managing the risks of entering markets or types of businesses in which
Brooks has limited or no direct experience; and
- minimizing the loss of key employees of the acquired businesses.
If Brooks delays the integration or fails to integrate an acquired business
or experiences other unforeseen difficulties, the integration process may
require a disproportionate amount of Brooks management's attention and financial
and other resources. Brooks' failure to adequately address these difficulties
could harm its business and financial results.
BROOKS' BUSINESS MAY BE HARMED BY ACQUISITIONS BROOKS COMPLETES IN THE FUTURE.
Brooks plans to continue to pursue additional acquisitions of related
businesses. Brooks' identification of suitable acquisition candidates involves
risks inherent in assessing the values, strengths, weaknesses, risks and
profitability of acquisition candidates, including the effects of the possible
acquisition on Brooks' business, diversion of Brooks management's attention and
risks associated with unanticipated problems or latent liabilities. If Brooks is
successful in pursuing future acquisitions, Brooks may be required to expend
significant funds, incur additional debt or issue additional securities, which
may negatively affect Brooks' results of operations and be dilutive to its
stockholders. If Brooks spends significant funds or incurs additional debt,
Brooks' 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 cannot guarantee that it will be able to finance additional
acquisitions or that it will realize any anticipated benefits from acquisitions
that Brooks completes. Should Brooks successfully acquire another business, the
process of integrating acquired operations into Brooks' existing operations may
result in unforeseen operating difficulties and may require significant
financial resources that would otherwise be available for the ongoing
development or expansion of Brooks' existing businesses.
RISK FACTORS RELATING TO BROOKS' COMMON STOCK
BROOKS' OPERATING RESULTS FLUCTUATE SIGNIFICANTLY, WHICH COULD NEGATIVELY IMPACT
ITS BUSINESS AND ITS STOCK PRICE.
Brooks' revenues, margins and other operating results can fluctuate
significantly from quarter to quarter depending upon a variety of factors,
including:
- the level of demand for semiconductors in general;
- cycles in the market for semiconductor manufacturing equipment and
automation software;
- the timing, rescheduling, cancellation and size of orders from Brooks'
customer base;
- Brooks' ability to manufacture, test and deliver products in a timely and
cost-effective manner;
- Brooks' success in winning competitions for orders;
- the timing of Brooks' new product announcements and releases and those of
its competitors;
- the mix of products it sells;
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- the timing of any acquisitions and related costs;
- competitive pricing pressures; and
- the level of automation required in fab extensions, upgrades and new
facilities.
Brooks entered the factory automation software business in fiscal 1999.
Brooks believes a substantial portion of its revenues from this business will
depend on achieving project milestones. As a result, Brooks' revenue from this
business will be subject to fluctuations depending upon a number of factors,
including whether Brooks can achieve project milestones on a timely basis, if at
all, as well as the timing and size of projects.
BROOKS' STOCK PRICE IS VOLATILE.
The market price of Brooks' common stock has fluctuated widely. For
example, between April 4, 2001 and April 30, 2001, the closing price of Brooks'
common stock rose from approximately $35.45 to $62.61 per share and between
August 28, 2001 and September 28, 2001, the price of Brooks' common stock
dropped from approximately $48.15 to $26.59 per share. Consequently, the current
market price of Brooks' common stock may not be indicative of future market
prices, and Brooks may be unable to sustain or increase the value of an
investment in its 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;
- changes in the market price per share of Brooks' public company
customers;
- market conditions in the industry;
- general economic conditions;
- low trading volume of Brooks common stock; and
- the number of firms making a market in Brooks common stock.
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 high technology companies like Brooks. These market
fluctuations could adversely affect the market price of Brooks' common stock.
BECAUSE A LIMITED NUMBER OF STOCKHOLDERS, INCLUDING A MEMBER OF BROOKS'
MANAGEMENT TEAM, OWNS A SUBSTANTIAL NUMBER OF SHARES OF BROOKS COMMON STOCK AND
ARE PARTIES TO VOTING AGREEMENTS, THEIR DECISIONS MAY BE DETRIMENTAL TO YOUR
INTERESTS.
By virtue of their stock ownership and voting agreements, Robert J.
Therrien, Brooks' president and chief executive officer, and Jenoptik AG have
the power to significantly influence Brooks' affairs and are able to influence
the outcome of matters required to be submitted to stockholders for approval,
including the election of Brooks' directors, amendments to Brooks' certificate
of incorporation, mergers, sales of assets and other acquisitions or sales.
These stockholders may exercise their influence over Brooks in a manner
detrimental to your interests. As of December 7, 2001, Mr. Therrien and M+W
Zander Holding GmbH, a subsidiary of Jenoptik AG, beneficially owned
approximately 9.7% of Brooks' common stock.
Brooks has a stockholders agreement with Mr. Therrien, M+W Zander Holding
GmbH and Jenoptik AG under which M+W Zander Holding GmbH agreed to vote all of
its shares on all matters in accordance with the recommendation of a majority of
Brooks' board of directors.
PROVISIONS OF BROOKS' CERTIFICATE OF INCORPORATION, BYLAWS, CONTRACTS AND 4.75%
CONVERTIBLE SUBORDINATED NOTES DUE 2008 MAY DISCOURAGE TAKEOVER OFFERS AND MAY
LIMIT THE PRICE INVESTORS WOULD 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 investors might be
willing to pay for shares of Brooks' common stock. In addition, Brooks has
adopted a shareholder rights plan. In many potential takeover situations, rights
issued under the plan become exercisable
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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 acquirer, the rights plan would generally
discourage third parties from proposing a merger with or initiating a tender
offer for us that is not approved by Brooks' board of directors. Accordingly,
the rights plan could have an adverse impact on Brooks' stockholders who might
want to vote in favor of a merger or participate in a tender offer. In addition,
Brooks may issue shares of preferred stock upon terms the board of directors
deems appropriate without stockholder approval. Brooks' ability to issue
preferred stock in such a manner could enable its board of directors to prevent
changes in its management or control. Finally, upon a change of control of
Brooks, Brooks may be required to repurchase convertible subordinated notes at a
price equal to 100% of the principal outstanding amount thereof, plus accrued
and unpaid interest, if any, to the date of the repurchase. Such a repurchase of
the notes would represent a substantial expense; accordingly, the repayment of
the notes upon a change of control of Brooks could discourage third parties from
proposing a merger with, initiating a tender offer for or otherwise attempting
to gain control of Brooks.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE EXPOSURE
Based on Brooks' overall interest exposure at September 30, 2001, 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 under
the caption "Accumulated other comprehensive income (loss)". 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.
35
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<Table>
<S> <C>
Report of Independent Accountants........................... 37
Report of Independent Auditors.............................. 38
Consolidated Balance Sheets as of September 30, 2001 and
2000...................................................... 39
Consolidated Statements of Operations for the three years
ended September 30, 2001, 2000 and 1999................... 40
Consolidated Statements of Changes in Stockholders' Equity
for the three years ended September 30, 2001, 2000 and
1999...................................................... 41
Consolidated Statements of Cash Flows for the three years
ended September 30, 2001, 2000 and 1999................... 42
Notes to Consolidated Financial Statements.................. 44
Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts and
Reserves............................................... 70
</Table>
36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Brooks Automation, Inc.:
In our opinion, based on our audits and the report of other auditors, 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, 2001 and 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 2001 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
financial statement schedule listed in the accompanying index presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
did not audit the financial statements of Irvine Optical Company LLC, a wholly
owned subsidiary acquired through a pooling of interests during the year ended
September 30, 2000, which statements reflect total revenues of $11,049,000 for
the year ended December 31, 1999. Those statements were audited by other
auditors whose report thereon has been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for Irvine
Optical Company LLC, is based solely on the report of the other auditors. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, 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 and the report of other auditors provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 14, 2001, except for the first paragraph
of Note 15, as to which the date is December 13, 2001.
37
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Members
Irvine Optical Company, LLC
We have audited the balance sheets of Irvine Optical Company, LLC (the
Company) as of December 31, 1999 and 1998, and the related statements of
operations, members' deficit, and cash flows for the years then ended (not
presented separately herein). 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 audit.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1999 and 1998, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As more fully described in Note 1 to the financial
statements, the Company's ability to generate sufficient revenue and ultimately
achieve profitable operations is uncertain. The Company's future prospects
depend upon its ability to demonstrate sustained product sales and to generate
sufficient working capital through new financing and/or operating cash flows,
all of which raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or amounts and classification of liabilities that may result from the
outcome of this uncertainty.
/s/ Ernst & Young LLP
March 3, 2000, except for Note 4
as to which the date is March 31, 2000
38
<PAGE>
BROOKS AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
SEPTEMBER 30,
---------------------
2001 2000
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $160,239 $133,636
Marketable securities 43,593 88,034
Accounts receivable, net, including related party
receivables of $32 and $6,820, respectively 93,565 94,756
Inventories 49,295 58,607
Prepaid expenses and other current assets 9,836 8,464
Deferred income taxes 26,608 18,220
-------- --------
Total current assets 383,136 401,717
Property, plant and equipment
Buildings and land 31,910 1,573
Computer equipment and software 38,497 23,525
Machinery and equipment 17,349 20,747
Furniture and fixtures 11,240 7,089
Leasehold improvements 10,069 9,226
Construction in progress 11,026 491
-------- --------
120,091 62,651
Less: Accumulated depreciation and amortization (53,632) (37,499)
-------- --------
66,459 25,152
Long-term marketable securities 125,887 15,000
Intangible assets, net 100,916 60,335
Deferred income taxes 19,280 13,361
Other assets 8,153 4,221
-------- --------
Total assets $703,831 $519,786
======== ========
LIABILITIES, MINORITY INTERESTS, CONVERTIBLE REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 17,122 $ 16,000
Revolving line of credit -- 350
Current portion of long-term debt 392 524
Accounts payable 18,595 23,096
Deferred revenue 15,507 17,018
Accrued compensation and benefits 12,835 14,407
Accrued acquisition-related and restructuring costs 3,702 538
Accrued income taxes payable 7,691 9,045
Deferred income taxes 423 143
Accrued expenses and other current liabilities 18,833 13,760
-------- --------
Total current liabilities 95,100 94,881
Long-term debt 175,031 332
Deferred income taxes 6,546 5,064
Accrued long-term restructuring 1,559 --
Other long-term liabilities 664 438
-------- --------
Total liabilities 278,900 100,715
-------- --------
Commitments and contingencies (Note 14)
Minority interests 762 1,186
-------- --------
Series A convertible redeemable preferred stock, $0.01 par
value -- Authorized, issued and outstanding: none and
90,000 shares in 2001 and 2000, respectively -- 2,601
-------- --------
Stockholders' equity
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $0.01 par value, 43,000,000 shares
authorized, 18,903,165 and 17,588,911 shares issued and
outstanding at September 30, 2001 and 2000, respectively 189 176
Additional paid-in capital 471,991 433,249
Deferred compensation (5) (35)
Accumulated other comprehensive loss (2,586) (2,942)
Accumulated deficit (45,420) (15,164)
-------- --------
Total stockholders' equity 424,169 415,284
-------- --------
Total liabilities, minority interests, convertible
redeemable preferred stock and stockholders' equity $703,831 $519,786
======== ========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
39
<PAGE>
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
---------------------------------------
2001 2000 1999
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues
Product, including related party revenues of $13,966,
$36,934 and $15,255, respectively $291,727 $284,366 $101,488
Services 89,989 52,818 21,469
-------- -------- --------
Total revenues 381,716 337,184 122,957
-------- -------- --------
Cost of revenues
Product 166,471 141,088 54,239
Services 62,861 35,371 13,566
-------- -------- --------
Total cost of revenues 229,332 176,459 67,805
-------- -------- --------
Gross profit 152,384 160,725 55,152
-------- -------- --------
Operating expenses
Research and development 60,868 44,147 24,526
Selling, general and administrative 95,919 77,410 38,763
Amortization of acquired intangible assets 30,187 18,506 565
Acquisition-related and restructuring charges 9,314 578 3,120
-------- -------- --------
Total operating expenses 196,288 140,641 66,974
-------- -------- --------
Income (loss) from operations (43,904) 20,084 (11,822)
Interest income 12,534 9,707 3,150
Interest expense 4,063 1,345 1,553
Other expense, net (1,090) (2) (223)
-------- -------- --------
Income (loss) before income taxes and minority interests (36,523) 28,444 (10,448)
Income tax provision (benefit) (6,439) 13,609 (874)
-------- -------- --------
Income (loss) before minority interests (30,084) 14,835 (9,574)
Minority interests in loss of consolidated subsidiaries (424) (274) (40)
-------- -------- --------
Net income (loss) (29,660) 15,109 (9,534)
Accretion and dividends on preferred stock (90) (120) (774)
-------- -------- --------
Net income (loss) attributable to common stockholders $(29,750) $ 14,989 $(10,308)
======== ======== ========
Earnings (loss) per share
Basic $ (1.65) $ 0.96 $ (0.89)
Diluted $ (1.65) $ 0.88 $ (0.89)
Shares used in computing earnings (loss) per share
Basic 18,015 15,661 11,542
Diluted 18,015 17,192 11,542
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
40
<PAGE>
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<Table>
<Caption>
NONREDEEMABLE
COMMON CONVERTIBLE ADDITIONAL
COMMON STOCK STOCK AT PREFERRED PAID-IN DEFERRED COMPREHENSIVE
SHARES PAR VALUE STOCK CAPITAL COMPENSATION INCOME (LOSS)
------------ --------- ------------- ---------- ------------ -------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SEPTEMBER 30, 1998 11,357,510 $113 $ 6,467 $131,551 $(119)
Shares issued under stock option
and purchase plans 341,877 4 -- 1,679 --
Common stock issued in acquisitions 1,410,926 14 (6,467) 35,594 --
Amortization of deferred
compensation -- -- -- 54
Accretion and dividends on
preferred stock -- -- -- --
Revaluation of members' capital -- -- -- --
Income tax benefit from stock
options -- -- 130 --
Comprehensive loss:
Net loss -- -- -- -- $ (9,534)
Currency translation adjustments -- -- -- -- (557)
--------
Comprehensive loss -- -- -- -- $(10,091)
========
Elimination of Smart Machines net
loss attributable to common
stockholders for the three months
ended December 31, 1998 -- -- -- --
---------- ---- ------- -------- -----
BALANCE SEPTEMBER 30, 1999 13,110,313 131 -- 168,954 (65)
Shares issued under stock option
and purchase plans 558,195 6 -- 5,418 --
Common stock offering 3,070,500 31 -- 220,445 --
Common stock issued in acquisitions 849,903 8 -- 21,829 --
Amortization of deferred
compensation -- -- -- 30
Accretion and dividends on
preferred stock -- -- -- --
Income tax benefit from stock
options -- -- 6,738 --
Income tax benefit from
acquisitions -- -- 9,865 --
Comprehensive income:
Net income -- -- -- -- $ 15,109
Currency translation adjustments -- -- -- -- (1,849)
--------
Comprehensive income -- -- -- -- $ 13,260
========
Elimination of Irvine Optical net
income for the three months ended
December 31, 1999 -- -- -- --
---------- ---- ------- -------- -----
BALANCE SEPTEMBER 30, 2000 17,588,911 176 -- 433,249 (35)
Shares issued under stock option
and purchase plans and exercise
of warrants 470,239 5 -- 9,079 --
Common stock issued in acquisitions 844,015 8 -- 25,968 --
Amortization of deferred
compensation -- -- -- 30
Accretion and dividends on
preferred stock -- -- -- --
Income tax benefit from stock
options -- -- 3,695 --
Comprehensive loss:
Net loss -- -- -- -- $(29,660)
Currency translation adjustments -- -- -- -- 356
--------
Comprehensive loss -- -- -- -- $(29,304)
========
Elimination of Progressive
Technologies net income
attributable to common
stockholders for the three months
ended December 31, 2000 -- -- -- --
---------- ---- ------- -------- -----
BALANCE SEPTEMBER 30, 2001 18,903,165 $189 $ -- $471,991 $ (5)
========== ==== ======= ======== =====
<Caption>
ACCUMULATED
OTHER
COMPREHENSIVE ACCUMULATED
INCOME (LOSS) DEFICIT TOTAL
------------- ----------- --------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
BALANCE SEPTEMBER 30, 1998 $ (536) $(21,682) $115,794
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 -- (774) (774)
Revaluation of members' capital -- 377 377
Income tax benefit from stock
options -- -- 130
Comprehensive loss:
Net loss -- (9,534) (9,534)
Currency translation adjustments (557) -- (557)
Comprehensive loss -- -- --
Elimination of Smart Machines net
loss attributable to common
stockholders for the three months
ended December 31, 1998 -- 1,599 1,599
------- -------- --------
BALANCE SEPTEMBER 30, 1999 (1,093) (30,014) 137,913
Shares issued under stock option
and purchase plans -- -- 5,424
Common stock offering -- -- 220,476
Common stock issued in acquisitions -- -- 21,837
Amortization of deferred
compensation -- -- 30
Accretion and dividends on
preferred stock -- (120) (120)
Income tax benefit from stock
options -- -- 6,738
Income tax benefit from
acquisitions -- -- 9,865
Comprehensive income:
Net income -- 15,109 15,109
Currency translation adjustments (1,849) -- (1,849)
Comprehensive income -- -- --
Elimination of Irvine Optical net
income for the three months ended
December 31, 1999 -- (139) (139)
------- -------- --------
BALANCE SEPTEMBER 30, 2000 (2,942) (15,164) 415,284
Shares issued under stock option
and purchase plans and exercise
of warrants -- -- 9,084
Common stock issued in acquisitions -- -- 25,976
Amortization of deferred
compensation -- -- 30
Accretion and dividends on
preferred stock -- (90) (90)
Income tax benefit from stock
options -- -- 3,695
Comprehensive loss:
Net loss -- (29,660) (29,660)
Currency translation adjustments 356 -- 356
Comprehensive loss -- -- --
Elimination of Progressive
Technologies net income
attributable to common
stockholders for the three months
ended December 31, 2000 -- (506) (506)
------- -------- --------
BALANCE SEPTEMBER 30, 2001 $(2,586) $(45,420) $424,169
======= ======== ========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
41
<PAGE>
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
--------------------------------
2001 2000 1999
--------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (29,660) $ 15,109 $ (9,534)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 45,041 30,400 11,766
Compensation expense related to common stock options 30 30 54
Deferred income taxes (14,050) (8,801) (3,017)
Amortization of debt discount 214 -- --
Minority interests (424) (274) (40)
(Gain) loss on disposal of long-lived assets 1,524 (142) --
Changes in operating assets and liabilities:
Accounts receivable 8,425 (50,655) (5,799)
Inventories 10,529 (27,981) (2,321)
Prepaid expenses and other current assets (760) (7,702) 1,054
Accounts payable (5,514) 12,779 7,038
Deferred revenue (3,743) 8,385 1,763
Accrued compensation and benefits (3,318) 9,684 858
Accrued acquisition-related and restructuring costs 4,723 (680) 1,724
Accrued expenses and other current liabilities 7,668 8,641 1,638
--------- --------- --------
Net cash provided by (used in) operating activities 20,685 (11,207) 5,184
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (53,652) (13,879) (6,100)
Acquisition of businesses, net of cash acquired (33,142) (24,399) (4,476)
Purchases of marketable securities (181,402) (118,034) --
Sale/maturity of marketable securities 114,956 15,000 --
Proceeds from sale of long-lived assets 224 735 --
Increase in other assets (728) (1,550) (732)
--------- --------- --------
Net cash used in investing activities (153,744) (142,127) (11,308)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments of) borrowings under lines of credit and
revolving credit facilities (350) (1) 1,253
Net decrease in short-term borrowings (16,000) (5,263) (280)
Proceeds from issuance of convertible notes, net of
issuance costs 169,543 -- --
Payments of long-term debt and capital lease obligations (490) (562) (1,183)
Issuance of long-term debt -- -- 1,154
Proceeds from issuance of common stock, net of issuance
costs 9,106 225,900 1,683
--------- --------- --------
Net cash provided by financing activities 161,809 220,074 2,627
--------- --------- --------
Elimination of net cash activities on pooling of interest
transactions (1,119) 14 (63)
--------- --------- --------
Effects of exchange rate changes on cash and cash
equivalents (1,028) (149) 326
--------- --------- --------
Net increase (decrease) in cash and cash equivalents 26,603 66,605 (3,234)
Cash and cash equivalents, beginning of year 133,636 67,031 70,265
--------- --------- --------
Cash and cash equivalents, end of year $ 160,239 $ 133,636 $ 67,031
========= ========= ========
</Table>
42
<PAGE>
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
--------------------------------
2001 2000 1999
--------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 193 $ 1,432 $ 1,166
Cash paid during the year for income taxes, net of refunds $ 5,876 $ 10,450 $ 1,085
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING
ACTIVITIES
Accretion and dividends on preferred stock $ 90 $ 120 $ 774
The Company utilized available funds, issued common stock and issued notes in connection with
certain business combinations during the years ended September 30, 2001, 2000 and 1999. The
fair values of the assets and liabilities of the acquired companies are presented as
follows:
Assets acquired $ 11,682 $ 14,166 $ 30,218
Liabilities assumed (9,585) (17,364) (8,414)
--------- --------- --------
Net assets acquired (liabilities assumed) $ 2,097 $ (3,198) $ 21,804
========= ========= ========
The acquisitions were funded as follows:
Cash consideration $ 33,274 $ 27,300 $ 10,447
Common stock 23,363 15,027 22,473
Notes issued to sellers 16,906 16,000 --
Transaction costs 1,665 2,874 1,891
Cash received (1,797) (5,775) (7,862)
--------- --------- --------
$ 73,411 $ 55,426 $ 26,949
========= ========= ========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
43
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF THE BUSINESS
Brooks Automation, Inc. ("Brooks" or the "Company") is a leading supplier
of integrated tool automation, factory interface and factory automation
solutions for the global semiconductor and related industries such as the data
storage and flat panel display manufacturing industries. The Company's product
revenues include sales of hardware and software products. The Company's service
revenues are primarily comprised of tool control application consulting
services, software customization and spare parts sales.
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 July 12, 2001, the Company acquired Progressive Technologies, Inc.
("PTI") in a transaction accounted for as a pooling of interests initiated prior
to June 30, 2001. Accordingly, the Company's consolidated financial statements
and notes thereto have been restated to include the financial position and
results of operations of PTI for all periods prior to the acquisition. Prior to
its acquisition by the Company, PTI's fiscal year-end was December 31.
Accordingly, the Company's consolidated balance sheet as of September 30, 2000,
includes PTI's balance sheet as of December 31, 2000, and the Company's
consolidated statements of operations for the years ended September 30, 2000 and
1999 include PTI's results of operations for the years ended December 31, 2000
and 1999, respectively. As a result of conforming dissimilar year-ends, PTI's
results of operations for the three months ended December 31, 2000, are included
in both of the Company's fiscal years 2001 and 2000. An amount equal to PTI's
net income for the three months ended December 31, 2000 was eliminated from
consolidated accumulated deficit for the year ended September 30, 2001. PTI's
revenues, net income and net income attributable to common shareholders for that
quarter were $3.8 million, $536,000 and $506,000, respectively.
On June 26, 2001, the Company completed the purchase of KLA-Tencor, Inc.'s
e-Diagnostics product business ("e-Diagnostics"). The e-Diagnostics programs
enable service and support teams to remotely access their tools in customer fabs
in real-time to diagnose and resolve problems. On June 25, 2001, the Company
acquired CCS Technology, Inc. ("CCST"), a supplier of 300mm automation test and
certification software located in Williston, Vermont. On May 15, 2001, the
Company acquired SimCon N.V. ("SimCon"), a value-added reseller for the
Company's simulation, scheduling, production analysis and dispatching software
headquartered in Belgium. On February 16, 2001, the Company acquired SEMY
Engineering, Inc. ("SEMY"), a provider of advanced process and equipment control
systems for the semiconductor industry located in Phoenix, Arizona. On December
13, 2000, the Company acquired substantially all of the assets of a scheduling
and simulation software and service distributor in Japan. These transactions
were recorded using the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations" ("APB 16").
Accordingly, the Company's Consolidated Statements of Operations and of Cash
Flows for the year ended September 30, 2001 include the results of these
acquired entities for the periods subsequent to their respective acquisitions.
On May 5, 2000, the Company completed the acquisition of Irvine Optical
Company LLC ("Irvine Optical") in a transaction accounted for as a pooling of
interests. Accordingly, the results of operations and financial position of
Irvine Optical are included in the Company's consolidated results for all
periods presented. Prior to its acquisition by the Company, Irvine Optical's
fiscal year-end was December 31. As a result of conforming dissimilar year-ends,
Irvine Optical's results of operations for the three months ended December 31,
1999, are included in both of the Company's fiscal years 2000 and 1999. An
amount equal to Irvine Optical's net income for the three months ended December
31, 1999, was eliminated from consolidated
44
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accumulated deficit for the year ended September 30, 2000. Irvine Optical's
revenues and net income for that quarter were $4.1 million and $0.1 million,
respectively.
The Company completed two acquisitions during fiscal year 2000 which were
accounted for using the purchase method of accounting in accordance with APB 16:
MiTeX Solutions ("MiTeX") on June 23, 2000 and Auto-Soft Corporation ("ASC") and
AutoSimulations, Inc. ("ASI") on January 6, 2000. The Company's Consolidated
Statements of Operations and of Cash Flows include the results of these entities
for the periods subsequent to their respective acquisitions.
On August 31, 1999, the Company completed the acquisition of Smart Machines
Inc. ("Smart Machines"). The acquisition was accounted for as a pooling of
interests. Accordingly, the results of operations and financial position of
Smart Machines are included in the Company's consolidated results for all
periods presented.
The Company completed three acquisitions during the year ended September
30, 1999, which were accounted for using the purchase method of accounting in
accordance with APB 16: the Infab Division ("Infab") of Jenoptik AG on September
30, 1999; Domain Manufacturing Corporation ("Domain") on June 30, 1999 and
Hanyon Technology, Inc. ("Hanyon") on April 21, 1999. Accordingly, the Company's
Consolidated Statements of Operations and of Cash Flows include the results of
these acquired entities for all periods subsequent to their respective
acquisitions.
In June 1999, the Company formed a joint venture in Korea. This joint
venture is 70% owned by the Company and 30% owned by third parties unaffiliated
with the Company. The Company consolidates fully the financial position and
results of operations of the joint venture and accounts for the minority
interests in the consolidated financial statements.
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 revenues and expenses during the
reporting period. Significant estimates include revenues and costs under
long-term contracts, collectibility of accounts receivable, obsolescence of
inventory, recoverability of depreciable assets, intangibles and deferred tax
assets and the adequacy of acquisition-related and restructuring reserves.
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.
FOREIGN CURRENCY TRANSLATION
For non-U.S. subsidiaries, which operate in a local currency environment,
assets and liabilities are translated at period-end exchange rates, and income
statement items are translated at the average exchange rates for the period. The
local currency for all foreign subsidiaries is considered to be the functional
currency and accordingly, translation adjustments are reported in "Accumulated
other comprehensive income (loss)." To date, foreign currency translation
adjustments are the only component added to the Company's net income (loss) in
the calculation of comprehensive net income (loss).
45
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and highly liquid investments with
original maturities to the Company of three months or less. At both September
30, 2001 and 2000, all cash equivalents were classified as available-for-sale
and held at amortized cost, which approximates fair value.
MARKETABLE SECURITIES
The Company invests its excess cash in marketable debt securities and
records them as available-for-sale. The Company records these securities at fair
value in accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115").
For all periods presented, unrealized gains and losses are immaterial.
Marketable securities reported as current assets represent investments that
mature within one year. Long-term marketable securities represent investments
with maturity dates greater than one year from the balance sheet date. At the
time that the maturity dates of these investments become one year or less, the
values will be reclassified to current assets. At September 30, 2001, the
Company's marketable securities were comprised entirely of corporate debt
securities aggregating $169.5 million, with maturities to the Company not
exceeding three years. At September 30, 2000, the Company's marketable
securities were comprised of U.S. Government securities aggregating $53.3
million and corporate debt securities aggregating $49.7 million.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade receivables and temporary and
long-term cash investments in treasury bills, certificates of deposit and
commercial paper. The Company restricts its investments to 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'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.
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 other supply sources.
FIXED ASSETS
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method.
Depreciable lives are summarized below:
<Table>
<S> <C>
Buildings 20 - 40 years
Computer equipment and software 2 - 6 years
Machinery and equipment 2 - 10 years
Furniture and fixtures 3 - 10 years
</Table>
Equipment held under capital leases is recorded at the fair market value of
the equipment at the inception of the leases. Leasehold improvements and
equipment held under capital leases are amortized over the shorter
46
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of their estimated useful lives or the term of the respective leases. Equipment
used for demonstrations to customers is included in machinery and equipment and
is depreciated over its estimated useful life. Repair and maintenance costs are
expensed as incurred.
The Company periodically evaluates the recoverability of long-lived assets,
including intangibles, whenever events and changes in circumstances indicate
that the carrying amount of an asset may not be fully recoverable. When
indicators of impairment are present, the carrying values of the asset are
evaluated in relation to the operating performance and future undiscounted cash
flows of the underlying business. The net book value of the underlying asset is
adjusted to fair value if the sum of the expected discounted cash flows is less
than book value. Fair values are based on estimates of market prices and
assumptions concerning the amount and timing of estimated future cash flows and
assumed discount rates, reflecting varying degrees of perceived risk.
INTANGIBLE ASSETS
Patents include 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. The fair values of acquired patents are amortized over three to five
years using the straight-line method. As of September 30, 2001 and 2000, the net
book values of the Company's patents were $2.2 million and $4.1 million,
respectively.
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 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, typically three years. As of September 30, 2001,
the Company's capitalized software costs had been fully amortized and written
off. As of September 30, 2000, the net book value of the Company's capitalized
software costs were $0.6 million.
Goodwill represents the excess of purchase price over the fair value of net
tangible and identifiable intangible assets of businesses the Company has
acquired and has accounted for under the purchase method in accordance with APB
16. As of September 30, 2001 and 2000, the net book values of goodwill were
$60.1 million and $43.4 million, respectively.
Amortization expense for all intangible assets was $31.6 million, $19.6
million and $1.4 million for the years ended September 30, 2001, 2000 and 1999,
respectively.
The amortizable lives of intangible assets, including those identified as a
result of purchase accounting, are summarized as follows:
<Table>
<S> <C>
Patents 3 - 7 years
Completed technology 4 - 5 years
License agreements 5 years
Trademarks and trade names 2 - 5 years
Non-competition agreements 3 - 5 years
Assembled workforces 3 - 4 years
Customer relationships 4 years
Goodwill 3 - 15 years
</Table>
47
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
The Company has adopted the recommendations of Staff Accounting Bulletin
101, "Revenue Recognition in Financial Statements," ("SAB 101") effective
October 1, 2000. The adoption of SAB 101 did not have any impact on the
Company's results of operations or financial position.
Revenue from product sales are recorded upon transfer of title and risk of
loss to the customer provided there is evidence of an arrangement, fees are
fixed or determinable, no significant obligations remain, collection of the
related receivable is reasonably assured and customer acceptance criteria have
been successfully demonstrated. Revenue from software licenses is recorded
provided there is evidence of an arrangement, fees are fixed or determinable, no
significant obligations remain, collection of the related receivable is
reasonably assured and customer acceptance criteria have been successfully
demonstrated. Costs incurred for shipping and handling are included in cost of
sales. A provision for product warranty costs is recorded to estimate costs
associated with such warranty 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 and long-term contracts are
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. Generally, the terms of long-term contracts provide for progress
billing based on completion of certain phases of work. For maintenance
contracts, service revenue is recognized ratably over the term of the
maintenance contract.
In transactions that include multiple products and/or services, the Company
allocates the sales value among each of the deliverables based on their relative
fair values.
STOCK-BASED COMPENSATION
The Company's employee stock compensation plans are accounted for in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB 25") and related interpretations. Under this
method, no compensation expense is recognized as long as the exercise price
equals or exceeds the market price of the underlying stock on the date of the
grant. The Company elected the disclosure-only alternative permitted under
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.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) 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 exclude common share equivalents if
their inclusion would have an anti-dilutive effect.
48
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
investments in long- and short-term debt securities, accounts receivable,
accounts payable, accrued expenses and long- and short-term debt. The carrying
amounts reported in the balance sheets approximate their fair values at both
September 30, 2001 and 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 ("FAS 144"), "Accounting for the
Impairment or Disposal of Long-Lived Assets." FAS 144 supercedes FASB Statement
No. 121 ("FAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." FAS 144 applies to all long-lived assets
and consequently amends Accounting Principles Board Opinion No. 30 ("APB 30"),
"Reporting Results of Operations -- Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." FAS 144 is effective for financial statements issued
for fiscal years beginning after December 15, 2001. Management is currently
evaluating the effect, if any, FAS 144 will have on its financial position and
results of operations.
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141 ("FAS 141"), "Business Combinations" and
No. 142 ("FAS 142"), "Goodwill and Other Intangible Assets" effective for fiscal
years beginning after December 15, 2001. FAS 141 requires business combinations
initiated after June 30, 2001 to be accounted for using the purchase method of
accounting, and broadens the criteria for recording intangible assets separate
from goodwill. FAS 142 requires that goodwill and identifiable intangible assets
determined to have an indefinite life no longer be amortized, but instead be
tested for impairment at least annually. The Company is required to adopt FAS
142 in the fiscal year beginning October 1, 2002, at which time amortization of
goodwill on purchase transactions prior to July 1, 2001 will cease. The
application of the separate recognition criteria for intangible assets and the
cessation of amortization of goodwill and result in goodwill of approximately
$67 million at September 30, 2001 being subject to an annual impairment test,
unless interim indicators indicate a need for an interim test, and a resulting
reduction of goodwill amortization expense of approximately $32 million, $22
million and $11 million in fiscal 2002, 2003 and 2004, respectively.
3. BUSINESS ACQUISITIONS
POOLING OF INTERESTS TRANSACTIONS
PTI
On July 12, 2001, the Brooks acquired PTI in a transaction accounted for as
a pooling of interests initiated prior to June 30, 2001 in exchange for 715,004
shares of the Company's common stock. The acquisition has been accounted for as
a pooling of interests. PTI is engaged in the development, production and
distribution of air-flow regulation systems for clean room and process equipment
in the semiconductor industry.
The accompanying consolidated financial statements and notes thereto have
been restated to include the financial position and results of operations for
PTI for all periods prior to the acquisition. As a result of conforming
dissimilar year-ends, PTI's results of operations for the three months ended
December 31, 2000, are included in both of the Company's fiscal years 2001 and
2000. Accordingly, an amount equal to PTI's net income for the three months
ended December 31, 2000, was eliminated from consolidated retained earnings for
the year ended September 30, 2001. PTI's revenues, net income and net income
attributable to common stockholders for that quarter were $3.8 million, $536,000
and $506,000, respectively.
49
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Irvine Optical
On May 5, 2000, the Company acquired Irvine Optical in exchange for 309,013
shares of Brooks common stock. The acquisition was accounted for as a pooling of
interests. Irvine Optical is engaged principally in the design, engineering and
manufacturing of wafer handling and inspection equipment for sale primarily to
the semiconductor industry. In connection with this acquisition, the Company
incurred $0.6 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
Irvine Optical for all periods prior to the acquisition. As a result of
conforming dissimilar year-ends, Irvine Optical's results of operations for the
three months ended December 31, 1999, are included in both of the Company's
fiscal years 2000 and 1999. Accordingly, an amount equal to Irvine Optical's net
income for the three months ended December 31, 1999, was eliminated from
consolidated retained earnings for the year ended September 30, 2000. Irvine
Optical's revenues and net income for that quarter were $4.1 million and $0.1
million, respectively.
The results of operations previously reported by the separate companies
prior to their respective acquisitions and the combined amounts presented in the
accompanying Consolidated Statements of Operations are as follows (in
thousands):
<Table>
<Caption>
NINE MONTHS SIX MONTHS
ENDED ENDED YEAR ENDED SEPTEMBER 30,
JUNE 30, MARCH 31, ------------------------
2001 2000 2000 1999
----------- ----------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues
Brooks Automation, Inc. $310,085 $123,290 $310,436 $103,906
Irvine Optical LLC -- 10,663 10,663 11,049
Progressive Technologies, Inc. 10,107 7,222 16,085 8,002
-------- -------- -------- --------
$320,192 $141,175 $337,184 $122,957
======== ======== ======== ========
Net income (loss)
Brooks Automation, Inc. $ 2,580 $ 4,317 $ 12,193 $ (7,884)
Irvine Optical LLC -- 560 560 (1,958)
Progressive Technologies, Inc. 861 984 2,356 308
-------- -------- -------- --------
$ 3,441 $ 5,861 $ 15,109 $ (9,534)
======== ======== ======== ========
</Table>
Smart Machines
On August 31, 1999, the Company acquired Smart Machines and issued 496,640
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
affect 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 supplementary
consolidated retained earnings for the year ended September 30, 1999. Smart
Machines' revenues, net loss and net loss applicable to common stockholders for
that quarter were $0.2 million, $1.4 million and $1.6 million, respectively.
50
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PURCHASE TRANSACTIONS
e-Diagnostics
On June 26, 2001, the Company completed the purchase of KLA-Tencor's
e-Diagnostics product business. The e-Diagnostics programs enable service and
support teams to remotely access their tools in customer fabs in real-time to
diagnose and resolve problems. The acquisition was recorded using the purchase
method of accounting in accordance with APB 16. In consideration, the Company
issued 331,153 shares of Brooks common stock with a market value of $16.0
million at the time of issuance, and issued a $17.0 million one-year,
interest-free note payable to the selling stockholders. The note is payable in
cash or common stock, or any combination thereof, at the Company's discretion.
In addition, the Company issued 50,000 shares of its common stock, with certain
trading restrictions, to employees of the acquired business. These shares had a
market value of $2.2 million at the time of issuance. There is also purchase
consideration of up to $8.0 million in the aggregate over the next three years,
contingent upon meeting certain performance objectives. The contingent
consideration will be recorded as an addition to the purchase price at the time
it becomes probable that a payment will be required and the amount can be
reasonably estimated. In addition, there is also the potential for royalty
payments by the Company to KLA-Tencor over the next four years, contingent upon
meeting certain revenue levels. The royalties will be recorded as costs of sales
as earned. The contingent consideration and royalties are payable in cash or
Brooks common stock, or any combination thereof, at the Company's discretion. At
September 30, 2001, no amounts had been paid or were due under the royalty or
contingent consideration arrangements.
A portion of the excess of purchase price over fair value of net assets
acquired was allocated to certain identifiable intangible assets. The balance of
the excess was recorded as goodwill. The allocation of the $34.1 million of
excess purchase price over the fair value of net tangible assets acquired to
specific intangible assets and their estimated useful lives is as follows
(dollars in thousands):
<Table>
<Caption>
ESTIMATED
ALLOCATION USEFUL LIFE
---------- -----------
<S> <C> <C>
Completed technology $ 7,890 5 years
Assembled workforces 1,130 4 years
Goodwill 25,118 3 years
-------
$34,138
=======
</Table>
The intangible assets are being amortized using the straight-line method.
Pro forma results of operations are not presented as the amounts are not
material compared to the Company's historical results.
CCST
On June 25, 2001, the Company acquired CCST, a supplier of 300mm automation
test and certification software located in Williston, Vermont. The acquisition
was recorded using the purchase method of accounting in accordance with APB 16.
In consideration, the Company paid $1.2 million of cash and issued 78,475 shares
of Brooks common stock with a market value of $4.0 million at the time of
issuance.
A portion of the excess of purchase price over fair value of net
liabilities assumed was allocated to certain identifiable intangible assets. The
balance of the excess was recorded as goodwill. The allocation of the
51
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$7.4 million of excess purchase price over the fair value of net liabilities
assumed to specific intangible assets and their estimated useful lives is as
follows (dollars in thousands):
<Table>
<Caption>
ESTIMATED
ALLOCATION USEFUL LIFE
---------- -----------
<S> <C> <C>
Completed technology $4,580 4 years
Trademarks and trade names 60 2 years
Assembled workforces 480 4 years
Goodwill 2,235 3 years
------
$7,355
======
</Table>
The intangible assets are being amortized using the straight-line method.
Pro forma results of operations are not presented as the amounts are not
material compared to the Company's historical results.
SimCon
On May 15, 2001, Brooks acquired SimCon, a privately-held value-added
reseller for the Company's simulation, scheduling, production analysis and
dispatching software, headquartered in Belgium. The acquisition was recorded
using the purchase method of accounting in accordance with APB 16. In
consideration, the Company paid $1.1 million of cash, issued 13,741 shares of
Brooks common stock with a market value of $750,000 at the time of issuance and
provided for additional purchase consideration of up to $900,000 in the
aggregate through September 2002, contingent upon meeting certain performance
objectives. The contingent consideration will be recorded as an addition to
purchase price at the time it becomes probable that a payment will be required
and the amount can be reasonably estimated. In addition, the Company issued an
interest-free note payable to the selling stockholders for shares of Brooks
common stock with a market value of $750,000, due one year from the transaction
closing date. The Company has discounted and recorded the note payable at 4.75%,
to $714,375, for accounting purposes and is amortizing the resulting discount to
interest expense through the note's maturity date. The number of shares to be
issued will be based upon the market value of the Company's common stock at the
time of maturity. The excess of purchase price over net tangible assets acquired
of $2.1 million has been recorded as goodwill and will be amortized over three
years using the straight-line method. Pro forma results of operations are not
presented for the SimCon acquisition as the amounts are not material compared to
the Company's historical results. At September 30, 2001 there were no amounts
earned or due under contingent consideration.
SEMY
On February 16, 2001, the Company acquired SEMY, a wholly owned subsidiary
of Semitool, Inc. SEMY, located in Phoenix, Arizona, is a provider of advanced
process and equipment control systems for the semiconductor industry. In
consideration, the Company paid $36.0 million cash and issued 73,243 shares of
Brooks common stock with a market value of $2.7 million at the time of issuance.
The transaction was recorded using the purchase method of accounting in
accordance with APB 16.
A portion of the excess of purchase price over fair value of net assets
acquired was allocated to certain identifiable intangible assets based on the
report of an independent appraiser. The balance of the excess was
52
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recorded as goodwill. The allocation of the $33.6 million of excess purchase
price over the fair value of net assets acquired to specific intangible assets
and their estimated useful lives is as follows (dollars in thousands):
<Table>
<Caption>
ESTIMATED
ALLOCATION USEFUL LIFE
---------- -----------
<S> <C> <C>
Patents $ 300 5 years
Completed technology 14,600 5 years
Trademarks and trade names 700 5 years
Non-competition agreements 1,100 3 years
Assembled workforces 3,100 4 years
Goodwill 13,808 3 years
-------
$33,608
=======
</Table>
The assets are being amortized using the straight-line method.
ASI-Japan
On December 13, 2000, the Company acquired substantially all of the assets
of the business unit which acts as a distributor for ASI's software products
("ASI-Japan"), from Daifuku Co., Ltd. of Japan ("Daifuku"). The ASI-Japan
business unit provides direct sales and support for ASI's integrated factory
automation solutions to simulation and scheduling customers in Japan. In
consideration, the Company paid $1.1 million cash. The transaction was recorded
using the purchase method of accounting in accordance with APB 16. The estimate
of the excess of purchase price over net assets acquired of $1.1 million was
recorded as goodwill and is being amortized over three years using the
straight-line method. Pro forma results of operations are not presented for the
ASI-Japan acquisition as the amounts are immaterial compared to the Company's
historical results.
MiTeX
On June 23, 2000, the Company acquired substantially all of the assets of
MiTeX. MiTeX, located in Canton, Michigan, provides run-to-run controller
technology. In consideration, the Company paid $300,000 cash, 5,486 shares of
Brooks common stock with a market value of $0.3 million at the time of issuance
and the potential for an additional amount ("royalties") of up to $5.0 million
in the aggregate over the next five years. The royalties are calculated at the
end of each fiscal year based on net revenue and gross margin performance of the
MiTeX business unit. These royalties will be recorded to Cost of product
revenues in the year that the costs are incurred. Amounts recorded to Cost of
product revenues in the years ended September 30, 2001 and 2000 were immaterial.
The acquisition was accounted for using the purchase method of accounting in
accordance with APB 16.
ASC/ASI
On January 6, 2000, the Company completed the acquisition of the businesses
of ASC and ASI from Daifuku America. ASC is a material handling software and
systems integration company focusing on manufacturing and distribution of
logistic systems for the semiconductor industry. ASI develops, markets and sells
robotic and material handling simulation, scheduling and real time dispatching
software for the semiconductor industry. At closing, the Company paid $27.0
million in cash, issued 535,404 shares of Brooks common stock with a value of
$14.7 million and issued a $16.0 million promissory note payable in one year,
bearing interest at a rate of 4.0% per annum. The note was discharged on January
5, 2001. The acquisition was accounted for using the purchase method of
accounting in accordance with APB 16.
53
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The excess of purchase price over the fair value of net liabilities assumed
and identifiable intangible assets was recorded based upon analyses of their
fair values by an independent appraiser. The balance of the excess was recorded
as goodwill. In January 2001, the Company received $0.9 million of cash from the
selling stockholders as settlement for the shortfall in the net asset values
acquired. The Company recorded the cash receipt with a corresponding reduction
to acquired intangible assets.
Infab
On September 30, 1999, the Company acquired certain assets of Infab in
exchange for 868,572 shares of Brooks common stock in a purchase transaction.
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.
As part of the preliminary purchase price allocation recorded at September
30, 1999, the Company had established an accrual of $2.7 million related
primarily to severance costs and costs to exit certain duplicate facilities.
During the year ended September 30, 2000, review of these accruals determined
that the accruals were not required due to changed conditions and circumstances
subsequent to the preliminary purchase price allocation. Accordingly, these
accruals were reversed and recorded as a purchase accounting adjustment to
decrease goodwill. Additionally, during the year ended September 30, 2000, the
Company finalized its evaluation of the fair value of assets acquired and
liabilities assumed. This evaluation resulted in a reduction to the value of net
tangible assets acquired of $7.1 million, primarily related to inventories and
accounts receivable, and resulting in an increase to goodwill for the same
amount. As settlement of this shortfall during fiscal 2001, the Company received
$5.1 million of cash from the sellers and recorded a corresponding reduction to
acquired intangible assets. In addition, the Company adjusted goodwill by $1.1
million in the year ended September 30, 2001 in relation to 45,714 shares of its
common stock which had been held in escrow pending the post-closing review of
the assets purchased.
The following pro forma results of operations have been prepared as though
the acquisitions of SEMY and of ASC and ASI had occurred as of the beginning of
the fiscal year in which the respective acquisitions occurred. Pro forma results
of the other companies acquired during the years ended September 30, 2001 and
2000 were not material compared to the Company's historical results. 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 made as of
the beginning of the periods presented or of results of operations that may
occur in the future (in thousands, except per share data):
<Table>
<Caption>
YEAR ENDED
SEPTEMBER 30,
-------------------
2001 2000
-------- --------
(UNAUDITED)
<S> <C> <C>
Revenues $389,637 $362,474
Net income (loss) $(31,321) $ 5,181
Net income (loss) attributable to common stockholders $(31,411) $ 5,061
Net income (loss) per share attributable to common
stockholders $ (1.74) $ 0.28
</Table>
54
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. EARNINGS (LOSS) PER SHARE
Below is a reconciliation of earnings (loss) per share and weighted average
common shares outstanding for purposes of calculating basic and diluted earnings
(loss) per share (in thousands, except per share data):
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
-----------------------------
2001 2000 1999
-------- ------- --------
<S> <C> <C> <C>
Basic earnings (loss) per share:
Net income (loss) $(29,660) $15,109 $ (9,534)
Accretion and dividends on preferred stock (90) (120) (774)
-------- ------- --------
Net income (loss) attributable to common stockholders $(29,750) $14,989 $(10,308)
======== ======= ========
Weighted average common shares outstanding 18,015 15,661 11,542
======== ======= ========
Basic earnings (loss) per share attributable to
common stockholders $ (1.65) $ 0.96 $ (0.89)
======== ======= ========
Diluted earnings (loss) per share:
Net income (loss) used to compute diluted earnings
(loss) per share $(29,750) $15,109 $(10,308)
======== ======= ========
Weighted average common shares outstanding 18,015 15,661 11,542
Dilutive stock options, warrants and preferred stock
conversions -- 1,531 --
-------- ------- --------
Weighted average common shares outstanding for
purposes of computing diluted earnings (loss) per
share 18,015 17,192 11,542
======== ======= ========
Diluted earnings (loss) per share $ (1.65) $ 0.88 $ (0.89)
======== ======= ========
</Table>
Options to purchase and assumed conversions totaling approximately
3,921,000 shares of common stock were excluded from the computation of diluted
loss per share attributable to common stockholders for the year ended September
30, 2001, as their effect would be anti-dilutive. Options and warrants to
purchase approximately 291,000 shares of common stock were excluded from the
computation of diluted earnings per share attributable to common stockholders
for the year ended September 30, 2000, as their effect would be anti-dilutive.
Options and warrants to purchase approximately 887,000 shares of common stock
and 300,000 shares of preferred stock were excluded from the computation of
diluted loss per share attributable to common stockholders for the year ended
September 30, 1999, as their effect would be anti-dilutive. However, these
options, warrants and conversions could become dilutive in future periods.
55
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES
The components of the income tax provision (benefit) are as follows (in
thousands):
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
------------------------------
2001 2000 1999
-------- ------- -------
<S> <C> <C> <C>
Current:
Federal $ -- $ 9,685 $ 397
State 343 1,237 82
Foreign 7,268 7,737 1,664
-------- ------- -------
7,611 18,659 2,143
-------- ------- -------
Deferred:
Federal (11,916) (5,206) (2,403)
State (2,134) 55 (429)
Foreign -- 101 (185)
-------- ------- -------
(14,050) (5,050) (3,017)
-------- ------- -------
$ (6,439) $13,609 $ (874)
======== ======= =======
</Table>
The components of income (loss) before income taxes, but including minority
interests, are as follows (in thousands):
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
-------------------------------
2001 2000 1999
-------- ------- --------
<S> <C> <C> <C>
Domestic $(47,342) $21,930 $(12,601)
Foreign 10,819 6,514 2,153
-------- ------- --------
$(36,523) $28,444 $(10,448)
======== ======= ========
</Table>
The significant components of the net deferred tax asset are as follows (in
thousands):
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
-----------------------------
2001 2000 1999
------- ------- -------
<S> <C> <C> <C>
Reserves not currently deductible $35,770 $20,624 $ 7,417
Federal and state tax credits 11,721 8,203 5,195
Capitalized research and development 1,340 1,895 2,894
Net operating loss carryforwards 5,314 6,407 6,525
------- ------- -------
Deferred tax asset 54,145 37,129 22,031
------- ------- -------
Depreciation and amortization 5,780 5,088 174
Other 1,189 119 --
------- ------- -------
Deferred tax liability 6,969 5,207 174
------- ------- -------
Valuation reserve 8,257 5,548 11,297
------- ------- -------
Net deferred tax asset $38,919 $26,374 $10,560
======= ======= =======
</Table>
56
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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,
------------------------------
2001 2000 1999
-------- ------- -------
<S> <C> <C> <C>
Income tax provision (benefit) computed at federal
statutory rate $(12,783) $ 9,955 $(3,658)
State income taxes, net of federal taxes (benefit) (1,164) 813 (245)
Research and development tax credits (1,700) (1,085) (544)
Foreign sales corporation tax benefit (205) (582) (36)
Foreign income taxed at different rates 1,910 1,157 (81)
Nondeductible transaction expenses 1,004 379 371
Change in deferred tax asset valuation allowance 2,708 (553) 1,616
Permanent differences 86 307 7
Elimination of Acquisition
Corporation's provision -- -- 893
Nondeductible amortization of goodwill 5,057 3,751 --
Foreign tax credit carryforwards (2,708) (2,754) --
Withholding taxes 1,207 2,125 --
Other 149 96 803
-------- ------- -------
$ (6,439) $13,609 $ (874)
======== ======= =======
</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 Research and
Development and Foreign Tax Credits based on management's assessment that it is
more likely than not that such benefits will not be realized.
As of September 30, 2001, the Company had federal and state net operating
loss carryforwards of approximately $18.5 million and federal and state research
and development tax credit carryforwards of approximately $7.6 million and
foreign tax credit carryforwards of approximately $4.1 million available to
reduce future tax liabilities, which expire at various dates through 2021. The
ultimate realization of the remaining loss carryforwards is dependent upon the
generation of sufficient taxable income in respective jurisdictions. Although
realization is not assured, management believes it is more likely than not that
all of the deferred tax assets will be realized. The amount of the deferred tax
asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.
6. FINANCING ARRANGEMENTS
On May 23, 2001, the Company completed the private placement of $175.0
million aggregate principal amount of 4.75% Convertible Subordinated Notes due
in 2008. The amount sold includes $25.0 million principal amount of notes
purchased by the initial purchaser upon exercise in full of their thirty day
option to purchase additional notes. The Company received net proceeds of $169.5
million from the sale. Interest on the notes will be paid on June 1 and December
1 of each year, with the first interest payment due on December 1, 2001. The
notes will mature on June 1, 2008. The Company may redeem the notes at a premium
of 14.2% on or after June 6, 2004, or earlier if the price of the Company's
common stock reaches certain prices. Holders may require the Company to
repurchase the notes upon a change in control of the Company in certain
circumstances. The notes are convertible at any time prior to maturity, at the
option of the holders, into shares of the Company's common stock, at a
conversion price of $70.23 per share, subject to certain adjustments.
57
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The notes are subordinated to the Company's senior indebtedness and structurally
subordinated to all indebtedness and other liabilities of the Company's
subsidiaries.
The Company has a $10.0 million uncommitted demand promissory note credit
facility with ABN AMRO on May 2, 2000. The facility is payable on demand or on
December 31, 2001, whichever occurs first. ABN AMRO is not obligated to extend
loans or issue letters of credit under this facility. The interest rates for
borrowings and letters of credit under the facility are expressed in relation to
LIBOR and a margin of 1.75%, or at 0.75% above ABN AMRO's base rate.
Approximately $1.1 million in face amount of letters of credit outstanding under
the original facility were transferred to the replacement facility. At September
30, 2001, $1.2 million of the facility was in use, all of it for letters of
credit.
In connection with the acquisition of the e-Diagnostics product line
business, the Company issued a $17.0 million one-year note payable to the
selling stockholders. The note becomes due on June 25, 2002 and is payable in
cash or common stock, or any combination thereof, at the Company's discretion.
The Company has discounted the note payable using an imputed interest rate of
4.75%, to $16.2 million, for accounting purposes, and is amortizing the
resulting discount to interest expense through the note's maturity date.
In connection with the acquisition of SimCon, the Company issued a note
payable to the selling stockholders for $750,000, payable in one year. The note
becomes due on May 14, 2002 and is payable in common stock. The Company has
discounted the note payable using an imputed interest rate of 4.75%, to
$714,375, for accounting purposes and is amortizing the resulting discount to
interest expense through the notes maturity date.
In connection with the acquisition of ASC and ASI, the Company issued a
promissory note to Daifuku America in the amount of $16.0 million, bearing
interest at 4.0% per annum. The interest on the note was paid quarterly and the
note was repaid on January 5, 2001.
Debt consists of the following (in thousands):
<Table>
<Caption>
SEPTEMBER 30,
-------------------
2001 2000
-------- -------
<S> <C> <C>
Convertible subordinated notes at 4.75%, due on June 1, 2008 $175,000 $ --
Notes payable 17,122 16,000
Revolving line of credit -- 350
Credit facility for working capital borrowings at 8.92% per
annum, collateralized by assets 325 775
Capital lease obligations at rates of 5.0% to 21.0% per
annum, collateralized by certain fixed assets, expired
November 2000 -- 26
Other 98 55
-------- -------
192,545 17,206
Less current portion 17,514 16,874
-------- -------
Long-term debt $175,031 $ 332
======== =======
</Table>
At September 30, 2001, the Company had working capital loans of $0.3
million outstanding, maturing through April 2002. In November 1998, Smart
Machines entered into a loan and security agreement with a leasing company. The
agreement allowed for working capital borrowings of up to $2.0 million and
equipment loans of up to $0.5 million. The ability to borrow against this
facility expired on December 31, 1999. The loans are payable in monthly
installments of principal and interest, with a 10.0% principal payback due at
the time of the final payment. Annual principal payments due under these notes
are $0.3 million in the year ended September 30, 2002 after which the loans will
be paid in full. All borrowings are collateralized by Smart Machines' assets.
58
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. POSTRETIREMENT BENEFITS
The Company sponsors defined contribution plans that meet the requirements
of Section 401(k) of the Internal Revenue Code. All United States 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 for worldwide defined contribution plans
was $2.2 million, $1.1 million and $0.2 million in the years ended September 30,
2001, 2000 and 1999, respectively.
8. STOCKHOLDERS' EQUITY AND CONVERTIBLE REDEEMABLE PREFERRED STOCK
PREFERRED STOCK
At September 30, 2001 and 2000, there were one million shares of preferred
stock, $0.01 par value per share authorized; however, 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.
RESTRICTED COMMON STOCK
In connection with the acquisition of PTI by the Company, the Company
acquired 9,208 shares of PTI restricted common stock. The PTI restricted common
stock was nonvoting and was convertible into PTI common stock, and was
subsequently converted into Brooks common stock upon its acquisition by the
Company.
CONVERTIBLE REDEEMABLE PREFERRED STOCK
In connection with the acquisition of PTI, the Company acquired 90,000
shares of PTI Series A Convertible Redeemable Preferred Stock. The conversion
ratio was 1:3.48 PTI preferred shares to Brooks common shares. These shares were
converted into common shares of the Company upon the acquisition of PTI.
COMMON STOCK OFFERING
On March 7, 2000, the Company completed a public offering of 3,250,000
shares of its common stock, of which 2,750,000 shares were offered by the
Company and 500,000 were offered by selling stockholders. The Company realized
proceeds, net of $12.9 million of issuance costs, of $220.5 million on the sale
of the initial 2,750,000 shares and the additional 320,500 shares purchased by
the underwriters from the Company on March 23, 2000 to cover over-allotments of
shares. The Company did not receive any proceeds from the sale of shares by the
selling stockholders.
WARRANTS
Prior to its acquisition by the Company, PTI had issued warrants to
purchase 10,000 shares of PTI common stock at an exercise price of $1.60 per
share. These warrants were excercised for shares of PTI common stock on July 12,
2001 immediately prior to the acquisition of PTI by the Company. These shares
were then exchanged for approximately 31,000 shares of the Company's common
stock in connection with the acquisition. At September 30, 2001, there were no
warrants outstanding.
In connection with debt it had issued prior to its acquisition by the
Company, Smart Machines had issued warrants to purchase 10,000 shares of its
Series C preferred stock, 57,182 shares of its Series D preferred stock, 961,234
shares of its Series E stock and 42,658 shares of its common stock. These
warrants were converted into warrants to purchase the Company's common stock on
August 31, 1999, in conjunction with
59
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the acquisition of Smart Machines. The outstanding warrants expired on May 31,
2001. At September 30, 2000, warrants to acquire 84,691 shares of common stock
were outstanding, at an exercise price of $25.56 per share.
RIGHTS DISTRIBUTION
In July 1997, the Board of Directors declared a dividend of one preferred
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 (the "Series A Preferred Shares"), par
value $0.01 per share, of the Company, at a purchase price of $135.00 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 July 31, 2007, or 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.
9. STOCK PLANS
2000 COMBINATION STOCK OPTION PLAN
The purposes of the 2000 Combination Stock Option Plan (the "2000 Plan"),
adopted by the Board of Directors of the Company in February 2000, are to
attract and retain employees and to 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. Under the 2000 Plan the
Company may grant (i) incentive stock options intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended; and (ii) options that are
not qualified as incentive stock options ("nonqualified stock options"). All
employees of the Company or any affiliate of the Company are eligible to
participate in the 2000 Plan. Options under the 2000 Plan generally vest over
four years and expire seven years from the date of grant. A total of 1,000,000
shares of common stock were reserved for issuance under the 2000 Plan. Of these
shares, options to purchase 644,600 shares are outstanding and 355,400 shares
remain available for grant as of September 30, 2001.
1998 EMPLOYEE EQUITY INCENTIVE PLAN
The purposes of the 1998 Employee Equity Incentive Plan (the "1998 Plan"),
adopted by the Board of Directors of the Company in April 1998, are to attract
and retain employees and provide an incentive for them to assist the Company in
achieving 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, (including contractors, consultants, service providers
or others) who are in a position to contribute to the long-term success and
growth of the Company, are eligible to participate in the 1998 Plan. A total of
3,550,000 shares of common stock have been reserved for issuance under the 1998
Plan. Of these shares, options on 2,701,782 shares are outstanding and 602,645
shares remain available for grant as of September 30, 2001. Options under the
1998 Plan generally vest over a period of four years and generally expire ten
years from the date of grant. In order to align the 1998 Plan with its current
practices, in January 2000, the Board of Directors amended the 1998 Plan to
eliminate the Company's ability to award nonqualified stock options with
exercise prices at less than fair market value.
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
60
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Plan, eligible employees may purchase up to an aggregate of 750,000 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, 2001, 296,675 shares of common
stock have been purchased under the 1995 Plan and 453,325 remain available for
purchase.
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The purpose of the 1993 Non-Employee 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 five years and
generally expire ten years from the date of grant. A total of 190,000 shares of
common stock have been reserved for issuance under the Directors Plan. Of these
shares, options on 96,000 shares are outstanding and 41,000 shares remain
available for grant as of September 30, 2001.
1992 COMBINATION STOCK OPTION PLAN
Under the Company's 1992 Stock Option Plan (the "1992 Plan"), the Company
may grant both incentive stock options and 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 have been
reserved for issuance under the 1992 Plan. Of these shares, options on 693,288
shares are outstanding and 62,001 shares remain available for grant as of
September 30, 2001.
STOCK OPTIONS OF ACQUIRED COMPANY
In connection with the acquisition of PTI, the Company assumed a stock
option plan that was adopted by PTI on October 10, 1991. At acquisition, 32,018
options to purchase PTI common stock were outstanding and converted in 99,470
options to purchase the Company's common stock. The Company does not intend to
issue any additional options under the PTI stock option plan.
61
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTION ACTIVITY AND PRO FORMA INFORMATION
Aggregate stock option activity for all plans for the years ended September
30, 2001, 2000 and 1999 is as follows:
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------
2001 2000 1999
-------------------- -------------------- --------------------
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 3,399,313 $27.75 2,057,828 $14.77 1,157,038 $ 7.87
Granted 1,564,893 $31.73 2,094,033 $35.61 1,333,300 $18.29
Exercised (371,972) $18.14 (509,010) $ 8.52 (298,948) $ 3.77
Canceled (336,706) $30.37 (243,538) $25.73 (133,562) $14.81
--------- --------- ---------
Options outstanding at end of year 4,255,528 $29.85 3,399,313 $27.75 2,057,828 $14.77
========= ========= =========
Options exercisable at end of year 882,651 $24.95 425,615 $14.00 512,540 $ 6.76
========= ========= =========
Weighted average fair value of
options granted during the period $23.28 $25.97 $13.06
Options available for future grant 1,061,046
=========
</Table>
The following table summarizes information about stock options outstanding
at September 30, 2001:
<Table>
<Caption>
OPTIONS OUTSTANDING
-----------------------------------------
WEIGHTED- OPTIONS EXERCISABLE
AVERAGE ------------------------
REMAINING WEIGHTED- WEIGHTED-
RANGE OF CONTRACTUAL AVERAGE AVERAGE
EXERCISE PRICES SHARES LIFE (YEARS) EXERCISE PRICE SHARES EXERCISE PRICE
--------------- --------- ------------ -------------- ------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.5151 - $ 2.2100 91,377 5.95 $ 1.6285 71,957 $ 1.5815
$ 2.2130 - $ 9.6250 190,184 6.78 $ 8.3784 64,245 $ 7.1278
$ 9.8750 - $13.2500 191,400 5.67 $11.8749 139,250 $11.5454
$13.3750 - $23.3750 510,696 7.47 $17.6832 133,458 $18.0106
$23.5351 - $27.2500 338,168 7.25 $26.6704 124,449 $27.0718
$27.5630 870,950 6.26 $27.5630 0 $ 0.0000
$27.7500 - $30.1250 524,289 8.24 $30.0376 96,181 $30.0300
$30.2500 - $39.5000 420,909 7.44 $33.3293 43,267 $30.3667
$39.7500 442,750 6.19 $39.7500 110,686 $39.7500
$39.9600 - $52.1719 430,405 6.74 $43.3071 35,720 $44.7105
$53.7500 - $78.8750 244,100 6.80 $61.0640 63,363 $60.9617
$83.3750 300 5.55 $83.3750 75 $83.3750
- ------------------- --------- ---- -------- ------- --------
$ 0.5151 - $83.3750 4,255,528 6.91 $29.8478 882,651 $24.9477
========= =======
</Table>
Pro forma information regarding net income (loss) is required by FAS 123,
and has been calculated as if the Company had accounted for its employee stock
options and stock purchase plan under the fair value method of that Statement.
The fair value of each option grant was estimated on the date of grant; the fair
62
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
value of each employee stock purchase was estimated on the commencement date of
each offering period using the Black-Scholes option-pricing model with the
following assumptions:
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
-------------------------------------
2001 2000 1999
----------- ---------- ----------
<S> <C> <C> <C>
Risk-free interest rate 3.2% - 5.95% 6.3% - 6.6% 5.5% - 6.3%
Volatility 100% 103% 100%
Expected life (years) -- options 4.0 4.0 4.0
Dividend yield 0% 0% 0%
</Table>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands, except per share information):
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
------------------------------
2001 2000 1999
-------- ------ --------
<S> <C> <C> <C>
Pro forma net income (loss) $(43,056) $7,938 $(12,601)
Pro forma net income (loss) per share
Basic $ (2.39) $ 0.51 $ (1.09)
Diluted $ (2.39) $ 0.46 $ (1.09)
</Table>
Because most options vest over several years and additional option grants
are expected to be made subsequent to September 30, 2001, the results of
applying the fair value method may have a materially different effect on pro
forma net income in future years.
10. ACQUISITION-RELATED AND RESTRUCTURING COSTS AND ACCRUALS
The Company recorded $9.3 million of acquisition-related and restructuring
charges during the year ended September 30, 2001, comprised of $3.9 million of
acquisition-related costs and $5.4 million of restructuring charges. The
acquisition-related costs primarily relate to transaction costs incurred during
the Company's recent acquisition of PTI. On September 5, 2001, the Company's
Board of Directors approved a formal plan of restructure in response to the
current downturn in the semiconductor industry. To that effect, the Company
recorded restructuring charges of $5.4 million in the fourth quarter of the
fiscal year. Of this amount, $2.0 million is related to workforce reductions of
approximately 140 employees which is expected to be paid in 2002 and $3.4
million for the consolidation and strategic focus realignment of several
facilities of which $0.1 million was paid in 2001, $1.7 million is expected to
be paid in 2002 and $1.6 million in the subsequent years. These measures were
largely intended to align the Company's capacity and infrastructure to
anticipated customer demand. Workforce charges, consisting principally of
severance costs, were recorded based on specific identification of employees to
be terminated, along with their job classifications or functions and their
locations. The charges for the Company's excess facilities were recorded to
recognize the lower of the amount of the remaining lease obligations, net of any
sublease rentals, or the expected lease settlement costs. These costs have been
estimated from the time when the space is expected to be vacated and there are
no plans to utilize the facility in the future. Costs incurred prior to vacating
the facilities will be charged to operations.
During the year ended September 30, 2000, the Company recorded
acquisition-related costs of $0.6 million, primarily for legal, accounting and
other costs associated with acquiring Irvine Optical.
During the year ended September 30, 1999, the Company recorded
acquisition-related and restructuring costs of $3.1 million, including $1.2
million of legal, accounting and other costs associated with acquiring Smart
Machines. In addition, the Company approved and implemented a restructuring
program designed to
63
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
integrate its fiscal 1999 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. The Company also recorded $2.9 million of costs in purchase accounting
transactions consisting of $2.0 million for severance costs principally related
to former Infab employees, $0.6 million to exit certain duplicate facilities and
$0.3 million for other related costs.
The activity related to the Company's acquisition-related and restructuring
accruals is below (in thousands):
<Table>
<Caption>
FISCAL 2001 ACTIVITY
------------------------------------------------------------------
NEW INITIATIVES
BALANCE -------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
2000 EXPENSE ACCOUNTING UTILIZATION 2001
------------- ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Facilities $507 $3,369 $-- $ (567) $3,309
Workforce-related 20 2,000 -- (68) 1,952
Other 11 3,945 -- (3,956) --
---- ------ -- ------- ------
$538 $9,314 $-- $(4,591) $5,261
==== ====== == ======= ======
</Table>
<Table>
<Caption>
FISCAL 2000 ACTIVITY
------------------------------------------------------------------
NEW INITIATIVES
BALANCE -------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
1999 EXPENSE ACCOUNTING UTILIZATION 2000
------------- ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Facilities $1,325 $ -- $ (450) $ (368) $507
Workforce-related 2,332 -- (2,000) (312) 20
Other 211 578 (200) (578) 11
------ ---- ------- ------- ----
$3,868 $578 $(2,650) $(1,258) $538
====== ==== ======= ======= ====
</Table>
<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 $ -- $ 630 $ (599) $1,325
Depreciable assets -- 1,628 20 (1,648) --
Workforce-related 238 332 2,000 (238) 2,332
Other 722 1,160 200 (1,871) 211
------ ------ ------ ------- ------
$2,254 $3,120 $2,850 $(4,356) $3,868
====== ====== ====== ======= ======
</Table>
11. SEGMENT AND GEOGRAPHIC INFORMATION
The Company has three reportable segments: tool automation systems, factory
interface solutions and factory automation solutions. The tool automation
systems segment provides a full complement of semiconductor wafer and flat panel
display substrate handling systems, products and components and products for
data storage. The factory interface solutions segment provides hardware and
software solutions, including mini-environments and automated transfer
mechanisms, to isolate the semiconductor wafer from the production environment.
The factory automation segment provides software products for the semiconductor
manufacturing execution system ("MES") market, including consulting and software
customization.
The Company evaluates performance and allocates resources based on revenues
and operating income (loss). Operating income (loss) for each segment includes
selling, general and administrative expenses
64
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
directly attributable to the segment. Amortization of acquired intangible assets
and acquisition-related and restructuring charges are excluded from the
segments' operating income (loss). The Company's non-allocable overhead costs,
which include corporate general and administrative expenses, are allocated
between the segments based upon segment revenues. Segment assets exclude
deferred taxes, acquired intangible assets, all assets of the Company's
Securities Corporation and investments in subsidiaries.
Financial information for the Company's business segments is as follows (in
thousands):
<Table>
<Caption>
TOOL FACTORY FACTORY
AUTOMATION INTERFACE AUTOMATION
SYSTEMS SOLUTIONS SOLUTIONS TOTAL
---------- --------- ---------- --------
<S> <C> <C> <C> <C>
Year ended September 30, 2001
Revenues $171,351 $97,796 $112,569 $381,716
Gross margin $ 53,822 $25,799 $ 72,763 $152,384
Operating income (loss) $ 10,874 $(7,980) $ (7,297) $ (4,403)
Depreciation $ 9,790 $ 837 $ 2,792 $ 13,419
Assets $194,299 $41,608 $ 44,832 $280,739
Year ended September 30, 2000
Revenues $167,759 $88,052 $ 81,373 $337,184
Gross margin $ 70,572 $34,299 $ 55,854 $160,725
Operating income $ 24,416 $ 9,715 $ 5,037 $ 39,168
Depreciation $ 6,540 $ 1,290 $ 2,988 $ 10,818
Assets $128,713 $54,895 $ 37,858 $221,466
Year ended September 30, 1999
Revenues $ 79,135 $19,635 $ 24,187 $122,957
Gross margin $ 26,735 $ 9,707 $ 18,710 $ 55,152
Operating loss $ (5,064) $ (742) $ (2,331) $ (8,137)
Depreciation $ 7,604 $ 725 $ 1,794 $ 10,123
Assets $ 82,260 $20,410 $ 18,930 $121,600
</Table>
A reconciliation of the Company's reportable segment operating income and
segment assets to the corresponding consolidated amounts as of and for the year
ended September 30, 2001, 2000 and 1999 is as follows (in thousands):
<Table>
<Caption>
AS OF AND FOR THE
YEAR ENDED SEPTEMBER 30,
------------------------------
2001 2000 1999
-------- -------- --------
<S> <C> <C> <C>
Segment operating income (loss) $ (4,403) $ 39,168 $ (8,137)
Amortization of acquired intangibles 30,187 18,506 565
Acquisition-related and restructuring costs 9,314 578 3,120
-------- -------- --------
Total operating income (loss) $(43,904) $ 20,084 $(11,822)
======== ======== ========
Segment assets $280,739 $221,466 $121,600
Deferred tax asset 45,888 31,581 10,734
Acquired intangible assets 99,056 58,405 15,327
Securities Corporation assets 278,148 208,334 49,639
-------- -------- --------
Total assets $703,831 $519,786 $197,300
======== ======== ========
</Table>
65
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net revenues by geographic area are as follows (in thousands):
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
------------------------------
2001 2000 1999
-------- -------- --------
<S> <C> <C> <C>
North America $191,992 $175,874 $ 69,889
Asia/Pacific 122,000 114,302 40,128
Europe 67,724 47,008 12,940
-------- -------- --------
$381,716 $337,184 $122,957
======== ======== ========
</Table>
Long-lived assets, including property, plant and equipment and intangible
assets are as follows (in thousands):
<Table>
<Caption>
SEPTEMBER 30,
----------------------------
2001 2000 1999
-------- ------- -------
<S> <C> <C> <C>
North America $158,086 $74,569 $23,266
Asia/Pacific 5,052 4,948 2,965
Europe 4,237 5,970 9,093
-------- ------- -------
$167,375 $85,487 $35,324
======== ======= =======
</Table>
12. SIGNIFICANT CUSTOMERS AND RELATED PARTY INFORMATION
One of the Company's directors had previously also been a director of one
of the Company's customers. On January 23, 2001, this individual resigned his
position with the Company's customer. Accordingly, this customer is not
considered a related party in subsequent reporting periods. Revenues recognized
from this customer in the current fiscal year through January 23, 2001 were
$13.9 million. Revenues recognized from this customer in the years ended
September 30, 2000 and 1999 were $36.9 million and $15.3 million, or 11.0% and
12.4% of revenues, respectively.
The Company had no customer that accounted for more than 10% of revenues in
the year ended September 30, 2001 and no other customer that accounted for more
than 10% of revenues in the years ended September 30, 2000 or 1999.
On June 11, 2001, the Company appointed a new member to its Board of
Directors. This individual is also a director of one of the Company's customers.
Accordingly, this customer is considered a related party for the period
subsequent to June 11, 2001. Revenues from this customer for the period from
June 11, 2001 through September 30, 2001 were approximately $32,000. The amount
due from this customer included in accounts receivable at September 30, 2001 was
approximately $32,000.
Related party amounts included in accounts receivable are on standard terms
and manner of settlement.
66
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. OTHER BALANCE SHEET INFORMATION
Components of other selected captions in the Consolidated Balance Sheets
follow (in thousands):
<Table>
<Caption>
SEPTEMBER 30,
------------------
2001 2000
-------- -------
<S> <C> <C>
Accounts receivable $ 99,679 $96,745
Less allowances 6,114 1,989
-------- -------
$ 93,565 $94,756
======== =======
Inventories
Raw materials and purchased parts $ 35,021 $35,189
Work-in-process 12,099 13,938
Finished goods 2,175 9,480
-------- -------
$ 49,295 $58,607
======== =======
Intangible assets
Patents $ 4,579 $ 7,448
Capitalized software -- 1,805
Completed technology 31,575 4,505
License agreements 678 678
Trademarks and trade names 2,426 1,564
Non-competition agreements 2,133 1,033
Assembled workforces 10,590 5,880
Customer relationships 1,305 1,305
Goodwill 96,858 58,638
-------- -------
150,144 82,856
Less accumulated amortization 49,228 22,521
-------- -------
$100,916 $60,335
======== =======
</Table>
The fixed asset balance includes computer equipment and software and
machinery and equipment aggregating $2.9 million as of both September 30, 2001
and 2000 acquired under capital leases. These fixed assets were fully amortized
at both September 30, 2001 and 2000. Amortization expense for fixed assets under
capital leases was $0.1 million and $0.2 million for the years ended September
30, 2000 and 1999, respectively. Depreciation expense was $13.4 million, $10.8
million and $10.1 million for the years ended September 30, 2001, 2000 and 1999,
respectively.
14. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases manufacturing and office facilities and certain
equipment under operating leases that expire through 2011. Rental expense under
operating leases for the years ended September 30, 2001, 2000
67
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and 1999 was $4.8 million, $5.8 million and $4.9 million, respectively. Future
minimum lease commitments on non-cancelable operating leases, lease income and
sublease income are as follows (in thousands):
<Table>
<Caption>
LEASE AND
OPERATING SUBLEASE
LEASES INCOME
--------- ---------
<S> <C> <C>
Year ended September 30,
2002 $ 7,812 $781
2003 4,725 130
2004 3,250 --
2005 2,822 --
2006 2,117 --
Thereafter 3,750 --
------- ----
Total minimum lease payments $24,476 $911
======= ====
</Table>
These future minimum lease commitments include approximately $3.3 million
related to a facility the Company has elected to abandon in connection with its
restructuring initiatives.
On January 29, 2001 the Company purchased three buildings, two of which are
used as Brooks' corporate headquarters and primary manufacturing facility, and
the third is currently leased to an unrelated party. The term of that lease
concludes in November 2002.
As of September 30, 2001, the Company did not have any capital lease
obligations.
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 believes
the patents claimed are 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 it is probable that the
future events related to this threatened matter would have an adverse effect on
the Company's business.
15. SUBSEQUENT EVENTS
On December 13, 2001, the Company acquired the Automation Systems Group of
Zygo Corporation in exchange for approximately $11 million of cash, net of
closing adjustments aggregating approximately $2 million. The Automation Systems
Group, located in Florida, is a manufacturer of reticle automation systems,
including reticle sorters, reticle macro inspection systems and reticle handling
solutions for the semiconductor industry. The transaction will be accounted for
as a purchase of assets.
On October 23, 2001, the Company and PRI Automation, Inc. ("PRI") entered
into an Agreement and Plan of Merger (the "Merger Agreement"). PRI supplies
advanced factory automation systems, software, and services that optimize the
productivity of semiconductor and precision electronics manufacturers, as well
as OEM process tool manufacturers. Pursuant to the Merger Agreement and subject
to the terms and conditions contained therein, PRI common stockholders will
receive 0.52 shares of the Company's common stock for each share of PRI common
stock.
68
<PAGE>
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Merger, which is expected to close in the first calendar quarter of
2002, is contingent upon the fulfillment of certain conditions, including, but
not limited to, all required regulatory approvals, the approval of the Merger by
the stockholders of the Company and the stockholders of PRI and the approval of
the issuance of the Company's Common Stock in the Merger by the stockholders of
the Company. The Merger would be accounted for as a purchase of assets.
On October 9, 2001, the Company acquired 90% of the capital stock of
Tec-Sem A.G., a Swiss company ("Tec-Sem") in exchange for $12.9 million in cash
and 131,750 shares of Brooks common stock with a market value of approximately
$4 million at the time of issuance, subject to post-closing adjustments. At the
same time, the Company obtained an option to acquire, and one of the selling
stockholders was given an option to sell, the remaining 10% of the stock of
Tec-Sem for $1.1 million in cash and 23,250 shares of Brooks common stock. The
Company also made stock grants to certain key non-owner employees of Tec-Sem.
Tec-Sem is a leading manufacturer of bare reticle stockers, tool buffers and
batch transfer systems for the semiconductor industry. The transaction will be
accounted for as a purchase of assets.
On October 5, 2001, the Company acquired substantially all of the assets of
General Precision, Inc. ("GPI"), in exchange for 850,000 shares of Brooks common
stock, with a market value of approximately $25 million at the time of issuance,
subject to post-closing adjustments. GPI, located in Valencia, California, is a
leading supplier of high-end environmental solutions for the semiconductor
industry. The transaction will be accounted for as a purchase of assets.
69
<PAGE>
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
OF YEAR EXPENSES ACCOUNTS WRITE-OFFS YEAR
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended September 30,
2001 $ 1,989 $4,691 $ 6 $ (572) $ 6,114
2000 $ 1,785 $ 540 $ 256 $ (592) $ 1,989
1999 $ 2,087 $ 199 $ -- $ (501) $ 1,785
Deferred tax asset valuation allowance
Year ended September 30,
2001 $ 5,548 $3,603 $ -- $ (894) $ 8,257
2000 $11,297 $2,754 $1,242 $(9,745) $ 5,548
1999 $ 9,405 $1,892 $ -- $ -- $11,297
</Table>
70
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL 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 SCHEDULE
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.
71
<PAGE>
(b) 3. EXHIBITS
<Table>
<Caption>
EXHIBIT
NO. DESCRIPTION REFERENCE
- ------- ----------- ---------
<C> <S> <C>
2.01 Agreement and Plan of Merger dated September 21, 1998 A**
relating to the combination of FASTech Integration, Inc.
with the Company.
2.02 Stock for Cash Purchase Agreement dated March 31, 1999 B**
relating to the acquisition of Hanyon Tech. Co., Ltd. by the
Company.
2.03 Assets for Cash Purchase Agreement dated June 23, 1999 C**
relating to the acquisition of substantially all the assets
of Domain Manufacturing Corporation and its subsidiary
Domain Manufacturing SARL by the Company.
2.04 Agreement and Plan of Merger dated July 7, 1999 relating to D**
the combination of Smart Machines Inc. with the Company.
2.05 Master Purchase Agreement dated September 9, 1999 relating E**
to the acquisition of substantially all of the assets of the
Infab Division of Jenoptik by the Company.
2.06 Agreement and Plan of Merger dated January 6, 2000 relating F**
to the combination of AutoSimulations, Inc. and Auto-Soft
Corporation with the Company.
2.07 Interests for Stock Purchase Agreement dated May 5, 2000 G**
relating to the acquisition of Irvine Optical Company LLC by
the Company, as amended.
2.08 Stock Purchase Agreement dated as of February 16, 2001 H**
relating to the acquisition of SEMY Engineering, Inc. by the
Company.
2.09 Asset Purchase Agreement dated June 26, 2001 relating to the I**
acquisition of assets of the e-diagnostic infrastructure of
KLA-Tencor Corporation and its subsidiary KLA-Tencor
Technologies Corporation.
2.10 Agreement and Plan of Merger dated June 27, 2001 relating to J**
the combination of Progressive Technologies Inc. with the
Company.
2.11 Asset Purchase Agreement dated October 5, 2001 relating to K**
the acquisition of substantially all of the assets of
General Precision, Inc. and GPI-Mostek, Inc. by the Company.
2.12 Share Purchase Agreement dated October 9, 2001 relating to L**
the acquisition of Tec-Sem AG by the Company.
2.13 Agreement and Plan of Merger dated October 23, 2001 relating M**
to the acquisition of PRI Automation, Inc. by the Company.
3.01 Certificate of Incorporation, as amended, of the Company. N**
3.02 Bylaws of the Company. O**
3.03 Certificate of Designation of Series A Junior Participating P**
Preferred Stock.
4.01 Specimen Certificate for shares of the Company's common O**
stock.
4.02 Description of Capital Stock (contained in the Certificate N**
of Incorporation of the Company, filed as Exhibit 3.01).
4.03 Rights Agreement dated July 23, 1997. EE**
4.04 Amendment to Rights Agreement between the Company and Bank Filed herewith
Boston, N.A. as Rights Agent.
4.05 Registration Rights Agreement dated January 6, 2000. Filed herewith
4.06 Shareholder Agreement dated January 6, 2000 by and among the F**
Company, Daifuku America Corporation and Daifuku Co., Ltd.
4.07 Stockholders Agreement dated September 30, 1999 by and among E**
the Company, Jenoptik AG, M+W Zander Holding GmbH and Robert
J. Therrien.
4.08 Indenture dated as of May 23, 2001 between the Company and R**
State Street Bank and Trust Company (as Trustee).
</Table>
72
<PAGE>
<Table>
<Caption>
EXHIBIT
NO. DESCRIPTION REFERENCE
- ------- ----------- ---------
<C> <S> <C>
4.09 Registration Rights Agreement dated May 23, 2001 among the R**
Company and Credit Suisse First Boston Corporation and SG
Cowen Securities Corporation (as representatives of several
purchasers).
4.10 Form of 4.75% Convertible Subordinated Note of the Company R**
in the principal amount of $175,000,000 dated as of May 23,
2001.
4.11 Stock Purchase Agreement dated June 20, 2001 relating to the S**
acquisition of CCS Technology, Inc. by the Company.
10.01 Employment Agreement between the Company and Robert J. Filed herewith*
Therrien dated as of September 30, 2001.
10.02 Form of Indemnification Agreement for directors and officers O* **
of the Company.
10.03 Employment Agreement between the Company and Ellen B. T* **
Richstone.
10.04 Stockholder Agreement dated September 30, 1999 by and among E**
the Company, Jenoptik AG, M+W Zander Holding GmbH and Robert
J. Therrien relating to the acquisition of substantially all
of the assets of the Infab Division of Jenoptik AG by the
Company (filed as Exhibit 4.06).
10.05 Form of Agreement between Executive Officers and the Company U* **
Relating to Change of Control.
10.06 Agreement dated November 11, 1999 between Ellen B. Richstone U* **
and the Company Relating to Change of Control.
10.07 Lease Agreement dated February 24, 1999 between the Company U**
and Clearfield Investments, LLC for the Company's Colorado
manufacturing facility.
10.08 Transitional Services Agreement dated September 30, 1999 U**
between the Company and Jenoptik AG relating to the
Company's German manufacturing facility.
10.09 Lease Agreement dated June 7, 1995 between a subsidiary of U**
the Company and Montague Oaks Phase I & II for the Company's
California manufacturing facility.
10.10 Shareholder Agreement dated January 6, 2000 by and among the F**
Company, Daifuku America Corporation and Daifuku Co., Ltd.
relating to the acquisition of the businesses of Auto-Soft
Corporation and AutoSimulations, Inc. from Daifuku America
Corporation by the Company.
10.11 Corporate Noncompetition and Proprietary Information F**
Agreement dated January 6, 2000 by and among the Company,
Daifuku America Corporation and Daifuku Co., Ltd. relating
to the acquisition of the businesses of Auto-Soft
Corporation and AutoSimulations, Inc. from Daifuku America
Corporation by the Company.
10.12 Demand Promissory Note Agreement dated as of May 2, 2000, N**
between the Company and ABN AMRO Bank N.V.
10.13 Stockholder Agreement between the Company and M+W Zander W**
Holding AG.
10.14 Retention Agreement for J. Pelusi dated June 16, 2000. X* **
10.15 Purchase Agreement for the Company's headquarters dated Y**
January 17, 2001.
10.16 Lease between the Company and the Nasr Family Trust for K**
25000 Avenue Stanford, Valencia, California.
10.17 1993 Nonemployee Director Stock Option Plan. Z* **
10.18 1992 Combination Stock Option Plan. AA* **
10.19 1995 Employee Stock Purchase Plan, as amended. N* **
10.20 1998 Employee Equity Incentive Option Plan. N* **
10.21 2000 Combination Stock Option Plan. N* **
10.22 2001 Restricted Stock Purchase Plan for KLA Product Line BB* **
Acquisition.
</Table>
73
<PAGE>
<Table>
<Caption>
EXHIBIT
NO. DESCRIPTION REFERENCE
- ------- ----------- ---------
<C> <S> <C>
10.23 Progressive Technologies Inc. 1991 Stock Option and Stock CC* **
Purchase Plan.
10.24 Form of Voting Agreement between certain PRI Automation, DD**
Inc. stockholders and the Company dated as of October 23,
2001.
10.25 Lease dated May 30, 2001 between Silver Oaks, LLC and the Filed herewith
Company for 13931 Balboa Boulevard, Sylmar, California.
10.26 Lease dated July 18, 2000 by and between Progressive Filed herewith
Technologies Inc. and Ames Pond LLC for 200 Ames Pond,
Tewksbury, MA.
10.27 Lease between Bentall Properties LTD and Westminster Filed herewith
Management Corporation and Brooks Automation (Canada) Corp.
for Crestwood Corporate Centre, Richmond, B.C.
10.28 Asset Purchase Agreement by and among Brooks Automation, Filed herewith
Inc., NexStar Corporation, and Zygo Corporation dated
December 13, 2001
12.01 Calculation of Ratio of Earnings to Fixed Charges Filed herewith
21.01 Subsidiaries of the Company. Filed herewith
23.01 Consent of PricewaterhouseCoopers LLP. Filed herewith
23.02 Consent of Ernst & Young LLP, Independent Auditors. Filed herewith
</Table>
- ---------------
A. Incorporated by reference to the Company's registration statement on Form
S-4 (Registration No. 333-64037) filed on September 23, 1998.
B. Incorporated by reference to the Company's current report on Form 8-K filed
on May 6, 1999.
C. Incorporated by reference to the Company's current report on Form 8-K filed
on July 14, 1999.
D. Incorporated by reference to the Company's current report on Form 8-K filed
on September 15, 1999, and amended on September 29, 2000
E. Incorporated by reference to the Company's current report on Form 8-K filed
on October 15, 1999.
F. Incorporated by reference to the Company's current report on Form 8-K filed
on January 19, 2000.
G. Incorporated by reference to the Company's registration statement on Form
S-3 (Registration No. 333-42620) filed on July 31, 2000.
H. Incorporated by reference to the Company's current report on Form 8-K filed
on March 1, 2001.
I. Incorporated by reference to the Company's current report on Form 8-K filed
on July 9, 2001.
J. Incorporated by reference to the Company's current report on Form 8-K filed
on July 24, 2001.
K. Incorporated by reference to the Company's current report on Form 8-K filed
on October 19, 2001.
L. Incorporated by reference to the Company's current report on Form 8-K filed
on October 22, 2001.
M. Incorporated by reference to the Company's current report on Form 8-K filed
on October 26, 2001.
N. Incorporated by reference to the Company's quarterly report on Form 10-Q
filed on May 15, 2000 for the quarterly period ended March 31, 2000.
O. Incorporated by reference to the Company's registration statement on Form
S-1 (Registration No. 33-87296) filed on December 13, 1994.
P. Incorporated by reference to the Company's registration statement on Form
S-3 (Registration No. 333-34487) filed on August 27, 1997.
Q. Incorporated by reference to the Company's current report on Form 8-K filed
on January 19, 2000 and amended on February 14, 2000.
R. Incorporated by reference to the Company's current report on Form 8-K filed
on May 29, 2001.
S. Incorporated by reference to the Company's registration statement on Form
S-8 (Registration No. 333-67432) filed on August 13, 2001.
74
<PAGE>
T. Incorporated by reference to the Company's annual report on Form 10-K filed
on December 30, 1998 for the year ended September 30, 1998.
U. Incorporated by reference to the Company's annual report on Form 10-K filed
on December 29, 1999 for the annual period ended September 30, 1999.
V. Incorporated by reference to the Company's quarterly report on Form 10-Q
filed on February 14, 2000 for the quarterly period ended December 31, 1999.
W. Incorporated by reference to the Company's annual report on Form 10-K filed
on December 22, 2000 for the annual period ended September 30, 2000.
X. Incorporated by reference to the Company's quarterly report on Form 10-Q
filed on February 14, 2001 for the quarterly period ended December 31, 2000.
Y. Incorporated by reference to the Company's quarterly report on Form 10-Q
filed on May 11, 2001 for the quarterly period ended March 31, 2001.
Z. Incorporated by reference to the Company's registration statement on Form
S-8 (Registration No. 333-22717) filed on March 4, 1997.
AA. Incorporated by reference to the Company's registration statement on Form
S-8 (Registration No. 333-07313) filed on July 1, 1996.
BB. Incorporated by reference to the Company's registration statement on Form
S-8 (Registration No. 333-61928) filed on May 30, 2001.
CC. Incorporated by reference to the Company's registration statement on Form
S-8 (Registration No. 333-67432) filed on August 13, 2001.
DD. Incorporated by reference to the Schedule 13D filed by the Company on
November 2, 2001 with respect to certain shares of PRI Automation, Inc.
EE. Incorporated by reference to the Company's current report on Form 8-K filed
on August 7, 1997.
* 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.
(c) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the quarterly period
ended September 30, 2001:
(1) Current Report on Form 8-K filed on August 21, 2001 relating to the
Company's acquisition of Progressive Technologies, Inc. ("PTI") on July
12, 2001 and the Company's acquisition of Auto-Soft Corporation ("ASC")
and AutoSimulations, Inc. ("ASI") on January 6, 2000.
(i) The following supplementary financial information, restated to give
effect to the Company's acquisition of PTI in a pooling of
interests transaction effective July 12, 2001, was filed with the
Form 8-K:
- Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three years ended September 30, 2000,
1999 and 1998
- Report of Independent Accountants -- PricewaterhouseCoopers LLP
- Report of Independent Auditors -- Ernst & Young
- Report of Independent Public Accountants -- Arthur Andersen LLP
- Supplementary Consolidated Balance Sheets as of September 30, 2000
and 1999
- Supplementary Consolidated Statements of Operations for the years
ended September 30, 2000, 1999 and 1998
75
<PAGE>
- Supplementary Consolidated Statements of Changes in Stockholders'
Equity for the years ended September 30, 2000, 1999 and 1998
- Supplementary Consolidated Statements of Cash Flows for the years
ended September 30, 2000, 1999 and 1998
- Notes to Supplementary Consolidated Financial Statements for the
three years ended September 30, 2000, 1999 and 1998
(ii) The following supplementary financial information, restated to
give effect to the Company's acquisition of PTI in a pooling of
interests transaction effective July 12, 2001, was filed with the
Form 8-K:
- Supplementary Consolidated Balance Sheets as of June 30, 2001
(unaudited) and September 30, 2000
- Supplementary Consolidated Statements of Operations for the nine
months ended June 30, 2001 and 2000 (unaudited)
- Supplementary Consolidated Statements of Cash Flows for the nine
months ended June 30, 2001 and 2000 (unaudited)
- Notes to Supplementary Consolidated Financial Statements for the
nine months ended June 30, 2001 and 2000 (unaudited)
- Management's Discussion and Analysis of Financial Condition and
Results of Operations for the nine months ended June 30, 2001 and
2000
(iii) The following unaudited pro forma financial information giving
effect to the acquisition of ASC and ASI as if the transaction had
occurred on October 1, 1999, restated to give effect to the
Company's acquisition of PTI in a pooling of interests transaction
effective July 12, 2001, was filed with the Form 8-K:
- Unaudited Pro Forma Combined Condensed Statement of Operations for
the year ended September 30, 2000
- Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
(2) Current Report on Form 8-K filed on July 24, 2001 relating to the
Company's acquisition of PTI on July 12, 2001.
(3) Current Report on Form 8-K filed on July 9, 2001 relating to the
Company's acquisition of the e-Diagnostics product business from
KLA-Tencor, Inc.
76
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BROOKS AUTOMATION, INC.
<Table>
<S> <C>
Date: December 13, 2001 /s/ ROBERT J. THERRIEN
--------------------------------------------------------
Robert J. Therrien, President
</Table>
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 13, 2001
- ------------------------------------------------ (Principal Executive Officer)
Robert J. Therrien
/s/ ELLEN B. RICHSTONE Senior Vice President and December 13, 2001
- ------------------------------------------------ Chief Financial Officer
Ellen B. Richstone (Principal Financial Officer)
/s/ STEVEN E. HEBERT Principal Accounting Officer December 13, 2001
- ------------------------------------------------
Steven E. Hebert
/s/ ROGER D. EMERICK Director December 13, 2001
- ------------------------------------------------
Roger D. Emerick
/s/ AMIN J. KHOURY Director December 13, 2001
- ------------------------------------------------
Amin J. Khoury
/s/ JUERGEN GIESSMANN Director December 13, 2001
- ------------------------------------------------
Juergen Giessmann
/s/ JOSEPH MARTIN Director December 13, 2001
- ------------------------------------------------
Joseph Martin
</Table>
77
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.04
<SEQUENCE>3
<FILENAME>b40853baex4-04.txt
<DESCRIPTION>AMENDMENT TO RIGHTS AGREEMENT BANK BOSTON NA
<TEXT>
<PAGE>
Exhibit 4.03
BROOKS AUTOMATION, INC.
AMENDMENT TO RIGHTS AGREEMENT
This Amendment (this "Agreement"), dated as of October 23, 2001, to the
Rights Agreement dated as of July 23, 1997 (the "Rights Agreement"), between
Brooks Automation, Inc., a Delaware corporation (the "Company"), and Equiserve
Trust Company, N.A. successor Rights Agent (the "Rights Agent").
RECITALS
WHEREAS, the board of directors of the Company has approved a certain
agreement and plan of merger (the "Merger Agreement") by and among the Company,
PRI Automation, Inc., a Massachusetts corporation ("PRI"), Pontiac Acquisition
Corp., a Massachusetts corporation wholly owned by the Company ("Brooks Merger
Sub") at a meeting of the board of directors of the Company held on October 23,
2001 (the "Meeting"), pursuant to which Brooks Merger Sub will be merged with
and into PRI (the "Merger"), and the stockholders of PRI will become
stockholders of the Company.
WHEREAS, upon the effectiveness of the Merger, PRI may acquire more than
15% of the outstanding shares of the Company's Common Stock, $.01 par value per
share (the "Company's Common Stock").
WHEREAS, the acquisition of more than 15% of the outstanding shares of the
Company's Common Stock would result in the acquiring entity or entities being
deemed to be an "Acquiring Person" under the Rights Agreement, which would
trigger certain events pursuant to the terms of the Rights Agreement.
WHEREAS, at the Meeting the board of directors of the Company determined
that it is in the best interest of the Company to amend the Rights Agreement
prior to the Company entering into the Merger Agreement so that PRI and its
Affiliates will not become Acquiring Persons under the Rights Agreement.
WHEREAS, capitalized terms used but not otherwise defined in this
Amendment No. 1 shall have the meanings given them in the Rights Agreement.
NOW, THEREFORE, in consideration of the promises and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. AMENDMENT OF FIRST SUBPARAGRAPH OF SECTION 1. The first subparagraph of
Section 1, definition of "Acquiring Person," is hereby amended and restated so
that such subparagraph reads in its entirety as follows:
"Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares of the Company
then outstanding, but shall not
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<PAGE>
include (i) the Company, (ii) any Subsidiary of the Company, (iii)
any employee benefit plan of the Company or any Subsidiary of the
Company, (iv) any entity holding Common Shares for or pursuant to
the terms of any such employee benefit plan, (v) Robert J. Therrien,
any members of his immediate family or any of his or their
Affiliates or Associates, (vi) any person that is the Beneficial
Owner of 15% or more of the Common Shares of the Company outstanding
as of the close of the Nasdaq National Market on the date hereof;
provided, however, that after such date such person does not become
the Beneficial Owner of additional Common Shares of the Company in
an aggregate amount (net of any sales) of the greater of 200,000
Common Shares or the number of Common Shares equal to 2.6% of the
then outstanding Common Shares (as measured as of the date of the
then acquisition of Common Shares by the Beneficial Owner); and
provided, further that such person shall be treated as any other
holder of Common Shares of the Company and shall no longer be
entitled to the exclusion set forth in this clause (vi) after such
time as such person becomes the Beneficial Owner of less than 15% of
the Common Shares of the Company then outstanding or (vii) PRI
Automation, Inc., a Massachusetts corporation ("PRI"), or any of its
Affiliates if and only if, PRI or such Affiliates shall become the
Beneficial Owner of 15% or more of the Common Shares of the Company
then outstanding as a result of the execution of the Agreement and
Plan of Merger authorized and approved by the Board of Directors of
the Company at the meeting of the Board of Directors held on October
23, 2001, as it may be amended from time to time (the "Merger
Agreement"), or the consummation of the transactions contemplated
thereby, and/or any options to purchase or proxies to vote Common
Shares of the Company granted by the Company or any stockholder of
the Company to PRI in connection with the Merger Agreement or any
agreements or arrangements entered into by the Company and PRI in
connection therewith. Notwithstanding the foregoing, (1) no Person
shall become an "Acquiring Person" as the result of an acquisition
of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 15% or more of the Common
Shares of the Company then outstanding; provided, however, that if a
Person shall so become the Beneficial Owner of 15% or more of the
Common Shares of the Company then outstanding by reason of an
acquisition of Common Shares by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of an
additional 1% of the outstanding Common Shares of the Company, then
such Person shall be deemed to be an "Acquiring Person"; (2) if the
Board of Directors of the Company determines in good faith that a
Person who would otherwise be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this paragraph, has become
such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person
would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph, then such Person shall not
be deemed to have become an "Acquiring Person" for any purposes of
this Agreement; and (3) an underwriter or underwriters which become
the Beneficial Owner of 15% or more of the Common Shares of the
Corporation then outstanding in connection
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<PAGE>
with an underwritten public offering with a view to the public
distribution of such Common Shares shall not become an "Acquiring
Person" hereunder."
2. REAFFIRMATION OF RIGHTS AGREEMENT. Except as specifically amended by
this Amendment, the Rights Agreement shall remain in full force and effect.
[SIGNATURES ON NEXT PAGE]
Execution Copy
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
BROOKS AUTOMATION, INC.
By: /s/ Ellen B. Richstone
-----------------------------------------
Name: Ellen B. Richstone
Title: Senior Vice President of
Finance and Administration and
Chief Financial Officer
EQUISERVE TRUST COMPANY, N.A
By: /s/ Margaret Prentice
-----------------------------------------
Name: Margaret Prentice
Title: Managing Director
Execution Copy
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.05
<SEQUENCE>4
<FILENAME>b40853baex4-05.txt
<DESCRIPTION>REGISTRATION RIGHTS AGREEMENT
<TEXT>
<PAGE>
Exhibit 4.04
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement dated as of the 6th day of January,
2000, is entered into by and between Brooks Automation, Inc., a Delaware
corporation (the "Company"), and Daifuku America Corporation, an Illinois
corporation ( "Investor").
RECITALS
WHEREAS, the Company and the Investor are parties to a certain
Agreement and Plan of Merger dated December 15, 1999 among the Company, ASC
Merger Corp., ASI Merger Corp., Investor, and Daifuku Co., Inc. (the
"Purchase Agreement"); and
WHEREAS, the Purchase Agreement requires that the Investors and the
Company enter into a certain Shareholder Agreement dated January 6, 2000,
relating to voting and stock transfers by the Investor (the "Shareholder
Agreement"); and
WHEREAS, among the conditions to the consummation of the transactions
contemplated by the Purchase Agreement is the execution and delivery of a
Registration Rights Agreement providing certain registration rights for the
Investor; and
WHEREAS, the parties hereto desire to set forth herein the registration
rights of the Investor;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth and for other good and valuable consideration
the Company and Investor hereby agree as follows:
Section 1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Anniversary Date" means the first, second or third anniversary of the
Closing Date as defined in the Purchase Agreement.
"Charter" means the Certificate of Incorporation of the Company, as
amended.
"Commission" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act and the Exchange
Act.
"Common Stock" means (a) the Company's Common Stock, $.01 par value, as
authorized on the date of this Agreement, (b) any other capital stock of any
class or classes (however designated) of the Company, authorized on or after the
date hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current
Registration Rights Agreement -1-
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<PAGE>
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies or in the absence of any
provision to the contrary in the Company's Charter, be entitled to vote for the
election of a majority of directors of the Company (even though the right so to
vote may have been suspended by the happening of a contingency), and (c) any
other securities into which or for which any of the securities described in (a)
or (b) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
"Company Indemnified Person" means the Company, its directors, each of its
officers who have signed or otherwise participated in the preparation of the
registration statement, each underwriter of the Registrable Securities so
registered (including any broker or dealer through whom such of the shares may
be sold) and each Person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, and the rules
and regulations of the Commission thereunder, all as the same shall be in effect
at the time.
"Excluded Registration" means a registration under the Securities Act of
shares issued solely in connection with any acquisition of any entity or
business, shares issuable solely upon the exercise of stock options, or shares
issuable solely pursuant to employee benefit plans, including Registration
Statements on Form S-4, S-8 or any successor form.
"Investor Indemnified Person" means the Investor and each underwriter of
the Registrable Shares (including their officers, directors, affiliates and
partners) so registered (including any broker or dealer through whom such shares
may be sold) and each Person, if any, who controls such Investor or any such
underwriter within the meaning of Section 15 of the Securities Act.
"Liabilities" for purpose of Sections 6 and 7 of this Agreement includes
any claims, damages, losses, and liabilities or expenses.
"Material Adverse Effect" means (a) a material adverse effect on the
results of operations, business or financial condition of the Company, or (b)
any material limitation on the ability of the Company to perform its obligations
under, or the legality, validity or enforceability of, this Agreement.
"Person" means an individual, corporation, partnership, joint venture,
limited liability company, trust, or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Purchase Agreement" has the meaning indicated in the first Recital to
this Agreement.
"Purchased Shares" means the shares of Common Stock purchased by the
Investors pursuant to the Purchase Agreement.
Registration Rights Agreement -2-
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<PAGE>
"Registrable Securities" means the Purchased Shares; provided, however,
that Purchase Shares shall cease to be Registrable Securities upon any sale
pursuant to a registration statement under the Securities Act, Section 4(1) of
the Securities Act or Rule 144 promulgated under the Securities Act, or any
sale, transfer or assignment in any manner to any Person who, by virtue of
Section 13 hereof, is not entitled to the rights provided by this Agreement.
"Registration Statement" means a registration statement filed under the
Securities Act pursuant to this Agreement.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Shareholder Agreement" has the meaning indicated in the second Recital to this
Agreement.
Section 2. Short Form Demand Registrations.
(a) On the first, second and third Anniversary Dates, the number of the
Purchased Shares which remain subject to restrictions under Section 2.1 of the
Shareholder Agreement shall be reduced pursuant thereto. Not earlier than sixty
days prior to each Anniversary Date nor later than the later of (i) ninety days
after that Anniversary Date or (ii) sixty days after the expiration of any
stand-down period under paragraph (e) or Section 10 hereof, which prevented
exercise of registration rights the Investor may notify the Company in writing
that it intends to offer or cause to be offered for public sale all or any
portion (subject to paragraph (c) below) of the Registrable Securities which
previously have been released from the restrictions of Section 2.1 of the
Shareholder Agreement or will be released from those restrictions on that
Anniversary Date.
(b) Provided that the registration of Registrable Securities under the
Securities Act can be effected on Form S-3 (or any similar form promulgated by
the Commission which permits short form registration using extensive
incorporation by reference), the Company will use its best efforts to effect
qualification and registration under the Securities Act on said Form S-3 or
other short form registration of all or such portion of the Registrable
Securities as the Investor shall specify.
(c) Notwithstanding paragraph (a) above, the Company shall not be obligated
to effect any registration unless the market value of the Registrable Securities
to be sold in any such Registration Statement shall be estimated to be at least
$2,000,000 at the time of filing such Registration Statement.
(d) The obligations of the Company pursuant to this Section 2 shall expire
the later of (i) ninety days after the third Anniversary Date or (ii) sixty days
after the expiration of any stand-down period under paragraph (e) or Section 10
hereof.
(e) If, prior to the time of any request by Investor pursuant to this
Section 2, the Company has publicly announced its intention to register any of
its securities for a public offering under the Securities Act, no registration
of Registrable Securities shall be initiated
Registration Rights Agreement -3-
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<PAGE>
pursuant to this Section 2 until 120 days after the effective date of the
registration so announced, unless the Company is no longer proceeding diligently
to effect such registration.
(f) The Company may include in each Registration Statement under this
Section 2 any authorized but unissued shares of Common Stock (or authorized
treasury shares) for sale by the Company, and any other Persons having a
contractual, incidental "piggy back" right to include securities in a
Registration Statement may include in each such Registration Statement, that
Person's shares of Common Stock subject to such right (a); provided, however,
that any such shares of Common Stock to be offered by the Company or such other
Person shall be excluded from such Registration Statement to the extent that the
managing underwriter of the offering (if the offering is underwritten) or the
Investor (if the offering is not underwritten) (i) determines in good faith that
the inclusion of such shares will interfere with the successful marketing of the
Registrable Securities to be included in the Registration Statement and (ii)
provides written notice of such determination to the Company. If a requested
registration involves an underwritten public offering and the managing
underwriter of such offering determines in good faith that the number of
securities sought to be offered should be limited due to market conditions, then
the number of securities to be included in such underwritten public offering
shall be reduced to a number deemed satisfactory by such managing underwriter,
provided that the securities to be excluded shall be excluded in the following
order of priority: first, all or any portion of the securities held by any other
Persons (other than the Investor) having a contractual, incidental "piggy back"
right to include such securities in a Registration Statement; and second, all or
any portion of the securities offered on behalf of the Company.
Section 3. "Piggy-Back" Registrations.
(a) In addition to its rights under Section 2 hereof, if at any time prior
to the third Anniversary Date the Company shall determine to register any of its
securities, other than an Excluded Registration, under the Securities Act
(including pursuant to a demand of any stockholder of the Company exercising
registration rights whose contractual rights do not prohibit inclusion of the
Registrable Securities), the Company shall send to Investor written notice of
such determination as soon as practicable, but in any event not less than 20
business days prior to the effective date of the Registration Statement. Subject
to the terms of this Agreement, such notice shall offer the Investor the
opportunity to register such number of shares of Registrable Securities as such
Investor may request on the same terms and conditions as the other securities to
be registered. In the event that the Investor desires to have its Registrable
Securities included in such Registration Statement, it shall so advise the
Company, in writing, stating the number of Registrable Securities that it
desires be registered, within 10 business days after the date of such notice
from the Company. The Investor shall have the right to withdraw such request for
the inclusion of the Investor's Registrable Securities in a Registration
Statement pursuant to this provision by giving written notice thereof to the
Company of said withdrawal at least five business days prior to the effective
date of the subject Registration Statement. The Company will, subject to the
limits of this Section 3, use its best efforts to include in such Registration
Statement all or any part of the Registrable Securities Investor requests to be
registered therein. However, if, in connection with any offering involving an
underwriting of the Common Stock to be issued by the Company, the managing
underwriter shall impose in writing a
Registration Rights Agreement -4-
Execution Copy
<PAGE>
limitation on the number of shares of such Common Stock which may be included in
any such Registration Statement because it has determined in good faith that the
inclusion of such shares will interfere with successful marketing of the Common
Stock and there is excluded from such Registration Statement all shares of
Common Stock sought to be included therein (i) first by any holder thereof not
having any such contractual, incidental registration rights, and (ii) second by
any holder thereof having contractual, incidental registration rights
subordinate and junior to the rights of the Investor, then the Company shall be
obligated to include in such Registration Statement only the pro rata portion of
all remaining securities, including the Registrable Securities, the sum of which
equals the number of shares of Common Stock determined in good faith by the
managing underwriters.
(b) The rights granted by the Company under this Section 3 shall terminate
on the earlier of (i) the third Anniversary Date or (ii) the date when the
Company has effected two incidental piggy-back registrations for the benefit of
the Investor hereunder. Notwithstanding the foregoing, if the managing
underwriter limits the Registerable Securities to be registered pursuant to
incidental piggy-back registration rights such that the Investor is unable to
register at least 50% of the Registerable Securities it requested be included in
such registration, then such registration shall not be considered an incidental
piggy-back registration for the purposes of this Section 3(b)(ii).
Section 4. Registration Procedures. If and whenever the Company is
required by the provisions of this Agreement to effect the registration of
Registrable Securities under the Securities Act, the Company will:
(a) promptly prepare and file with the Commission within 90 days a
Registration Statement with respect to such securities, and use its best efforts
to cause such Registration Statement to become effective;
(b) maintain the effectiveness of the Registration Statement until the
earlier to occur of (i) the completion by the underwriters of the distribution
pursuant to such Registration Statement or (ii) ninety days after the
effectiveness of such Registration Statement;
(c) provide Investor and any underwriter with as many copies of the
preliminary and final prospectus as either party may reasonably request for the
period effectiveness is required to be maintained under paragraph (b) above;
(d) prepare and promptly file with the Commission any such amendment or
supplement to such Registration Statement or prospectus as may be necessary to
maintain effectiveness for the period under paragraph (b) or to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event shall
have occurred as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances in which they were made, not misleading;
Registration Rights Agreement -5-
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<PAGE>
(e) prepare and file with the Commission, promptly upon the request of
Investor, any amendments or supplements to such Registration Statement or
prospectus which, in the opinion of counsel for Investor (and concurred in by
counsel for the Company), is required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of the Registrable
Securities by Investor;
(f) promptly notify Investor and any underwriter and (if requested by any
such Person) confirm such notice in writing, of the happening of any event which
makes any statement made in the Registration Statement or related prospectus
untrue or which requires the making of any changes in such Registration
Statement or prospectus so that such document will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading; and, as promptly as
practicable thereafter, prepare and file with the Commission and furnish a
supplement or amendment to such prospectus so that, as thereafter deliverable to
the purchasers of such Registrable Securities, such prospectus will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(g) notify Investor promptly after the Company shall receive notice
thereof, of the time when such Registration Statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
(h) notify Investor promptly of any request by the Commission for the
amending or supplementing of such Registration Statement or prospectus or for
additional information;
(i) advise Investor promptly after the Company shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such Registration Statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued;
(j) furnish to Investor a copy of all documents filed and all
correspondence from or to the Commission in connection with any such offering of
securities;
(k) register or qualify the Registrable Securities covered by said
Registration Statement under the applicable securities or "blue sky" laws of
such jurisdictions as Investor may reasonably request; provided, that the
Company shall not be obligated to qualify to do business in any jurisdiction
where it is not then so qualified or to take any action which would subject it
to the service of process in suits other than those arising out of the offer or
sale of the securities covered by the registration statement in any jurisdiction
where it is not then so subject; and
(l) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
Registration Rights Agreement -6-
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<PAGE>
Section 5. Further Obligations of the Parties.
(a) Whenever the Company is required to register Registrable Securities
hereunder, it agrees that it shall also do the following:
(i) Upon three days' prior written notice and at reasonable times during
normal business hours and without undue interruption of the
Company's business or operations, permit Investor or its counsel or
other representatives to inspect and copy such corporate documents,
records and properties as may reasonably be requested by them to
enable them to exercise their due diligence responsibilities, and
cause the Company's officers and agents to supply any information
reasonably requested for that purpose;
(ii) Enter into any reasonable underwriting agreement required by the
proposed underwriters for the Investor and use its best efforts to
facilitate the public offering of the securities;
(iii) In connection with any underwritten public offering of such
Registrable Securities, furnish to each selling holder a copy of:
(A) an opinion of counsel for the Company, dated the effective
date of the registration Statement; and
(B) a "comfort letter" signed by the Company's independent public
accountants who have examined and reported on the Company's
financial statements included in the Registration Statement,
to the extent permitted by the applicable standards of the
American Institute of Certified Public Accountants;
in each case covering substantially the same matters with respect to
the Registration Statement (and the prospectus included therein) and
with respect to events subsequent to the date of the financial
statements, as are customarily covered in opinions of issuer's
counsel and in accountants' "comfort letter" delivered to the
underwriters in underwritten public offerings of securities in
accordance with Statement on Auditing Standards No. 72, but only to
the extent that the Company is required to deliver or cause the
delivery of such opinion or "comfort letter" to the underwriter in
the offering; and
(iv) Use its best efforts to insure the obtaining of all necessary
approvals from the National Association of Securities Dealers, Inc.
(g) Investor agrees to timely provide to the Company, at its request, such
information and materials as it may reasonably request in order to effect the
registration of such Registrable Securities. The Company shall not be obligated
to register Registrable Securities, pursuant to
Registration Rights Agreement -7-
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<PAGE>
Section 2 or Section 3 hereof if Investor fails promptly to provide the Company
such information.
Section 6. Indemnification of Investor Indemnified Persons.
(a) In the event that the Company registers any of the Registrable
Securities under the Securities Act, the Company will, to the extent permitted
by law, indemnify and hold harmless each Investor Indemnified Person from and
against any and all Liabilities, joint or several, to which they or any of them
become subject under the Securities Act or under any other statute or at common
law or otherwise, and, except as hereinafter provided, will reimburse the
Investor Indemnified Persons for any legal or other expenses reasonably incurred
by them or any of them in connection with investigating or defending any
actions, whether or not resulting in any Liability, insofar as such Liabilities
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
filing with any state securities authority, in any preliminary or amended
preliminary prospectus or in the final prospectus (or the Registration Statement
or prospectus as from time to time amended or supplemented by the Company) or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, or any violation by the Company of any rule
or regulation promulgated under the Securities Act or any state securities laws
or regulations applicable to the Company and relating to action or inaction
required of the Company in connection with such registration, unless (i) such
untrue statement or alleged untrue statement or omission or alleged omission was
made in the Registration Statement, preliminary or amended preliminary
prospectus or final prospectus in reliance upon and in conformity with
information furnished in writing to the Company in connection therewith by
Investor expressly for use therein or unless (ii) in the case of a sale directly
by Investor (including a sale of such Registrable Securities through any
underwriter retained by Investor to engage in a distribution solely on behalf of
Investor), such untrue statement or alleged untrue statement or omission or
alleged omission was contained in a preliminary prospectus and corrected in a
final or amended prospectus, and Investor failed to deliver a copy of the final
or amended prospectus at or prior to the confirmation of the sale of the
Registrable Securities to the Person asserting any such loss, claim, damage or
liability in any case where such delivery is required by the Securities Act or
any state securities laws.
(b) Promptly after receipt by any Investor Indemnified Person of notice of
the commencement of any action in respect of which indemnity may be sought
against the Company, such Investor Indemnified Person will notify the Company in
writing of the commencement thereof, and, subject to the provisions hereinafter
stated, the Company shall assume the defense of such action (including the
employment of counsel, who shall be counsel reasonably satisfactory to such
Investor Indemnified Person) and the payment of expenses insofar as such action
shall relate to any alleged Liabilities in respect of which indemnity may be
sought against the Company.
(c) Such Investor Indemnified Person shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
Company unless the employment of such counsel has
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<PAGE>
been specifically authorized by the Company. The Company shall not be liable to
indemnify any Investor Indemnified Person for any settlement of any such action
effected without the Company's consent. The Company shall not, except with the
approval of each Investor Indemnified Person being indemnified under this
Section 6, consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to the parties being so indemnified of a release from all liability in
respect to such claim or litigation.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which any Investor Indemnified
Person makes a claim for indemnification pursuant to this Section 6 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 6 provides for indemnification in
such case, then the Company and such Investor Indemnified Person will contribute
to the aggregate Liabilities to which they may be subject (after contribution
from others) in such proportion so that Investor Indemnified Person is
responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by the Registration
Statement bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; but if it is determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such allocation may not be enforced,
then the Company and such Investor Indemnified Person shall contribute to the
aggregate Liabilities as is appropriate to reflect the relative fault of the
Company on the one hand and of the Investor Indemnified Person on the other in
connection with the statements or omissions which resulted in such Liabilities,
as well as any other relevant equitable consideration. The relative fault of the
Company on the one hand and of the Investor Indemnified Person on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company on the one
hand or by the Investor Indemnified Person on the other, and each party's
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided, however, that, in any such case no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
Section 7. Indemnification of Company Indemnified Persons.
(a) In the event that the Company registers any of the Registrable
Securities under the Securities Act, the Investor, to the extent permitted by
law, will indemnify and hold harmless the Company Indemnified Persons from and
against any and all Liabilities, joint or several, to which they or any of them
may become subject under the Securities Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse
each such Company Indemnified Person for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions, whether or not resulting in any Liability, insofar as such
Liabilities arise out of or are based upon any untrue statement or alleged
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untrue statement of a material fact contained in the Registration Statement or
any filing with any state securities commission or agent, in any preliminary or
amended preliminary prospectus or in the final prospectus (or in the
Registration Statement or prospectus as from time to time amended or
supplemented) or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, but only insofar as any
such statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company in connection therewith by the
Investor expressly for use therein.
(b) Promptly after receipt of notice of the commencement of any action in
respect of which indemnity may be sought against such Company Indemnified
Person, the Company will notify Investor in writing of the commencement thereof,
and Investor shall, subject to the provisions hereinafter stated, assume the
defense of such action (including the employment of counsel, who shall be
counsel reasonably satisfactory to the Company) and the payment of expenses
insofar as such action shall relate to the alleged Liabilities in respect of
which indemnity may be sought against Investor.
(c) Each Company Indemnified Person shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall not be at the expense of Investor unless
employment of such counsel has been specifically authorized by Investor. The
Investor shall not be liable to indemnify any Company Indemnified Person for any
settlement of any such action effected without its consent. Investor shall not,
except with the approval of each party being indemnified under this Section 7,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to the parties being so indemnified of a release from all liability with respect
to such claim or litigation.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which the Company Indemnified
Person makes a claim for indemnification pursuant to this Section 7, but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding that this Section 7 provides for indemnification, in such case,
then, the Company and Investor will contribute to the aggregate Liabilities to
which they may be subject (after contribution from others) in such proportion so
that Investor is responsible for the portion represented by the percentage that
the public offering price of its Registrable Securities offered by the
Registration Statement bears to the public offering price of all securities
offered by such Registration Statement, and the Company is responsible for the
remaining portion; but if it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such allocation
may not be enforced, then the Investor and such Company Indemnified Person shall
contribute to the aggregate Liabilities as is appropriate to reflect the
relative fault of the Company on the one hand and of the Investor on the other
in connection with the statements or omissions which resulted in such
Liabilities, as well as any other relevant equitable consideration. The relative
fault of the Company on the one hand and of the Investor on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement
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<PAGE>
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or by the
Investor on the other, and each party's relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, however, that, in any such case, no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
Section 8. Rule 144. So long as the Company is subject to the reporting
requirements of either Section 13 or Section 15(d) of the Exchange Act, the
Company will use its best efforts to file timely with the Commission such
information as the Commission may require under either of said sections. The
Company shall use its best efforts to take all action as may be required as a
condition to the availability of Rule 144 under the Securities Act (or any
successor exemptive rule hereinafter in effect) with respect to such Common
Stock. The Company shall furnish to Investor forthwith upon request (i) a
written statement by the Company as to its compliance with the reporting
requirements of Rule 144, (ii) a copy of the most recent annual or quarterly
report of the Company as filed with the Commission, and (iii) such other reports
and documents as a Investor may reasonably request in availing itself of any
rule or regulation of the Commission allowing a holder to sell any such
Registrable Securities without registration.
Section 9. Expenses of Registration.
(a) In the case of any registration under Section 2 or 3 of this Agreement,
the Company shall bear all costs and expenses of each such registration,
including but not limited to printing, legal and accounting expenses, Securities
and Exchange Commission and National Association of Securities Dealers, Inc.
filing fees and expenses, and "blue sky" fees and expenses and the reasonable
fees and disbursements of not more than one counsel for the selling holders of
Registrable Securities in connection with the registration of their Registrable
Securities; provided, however, that the Company shall have no obligation to pay
or otherwise bear (i) the cost and expenses of procuring underwriters' insurance
in connection with the sale of Registrable Securities, (ii) any portion of the
fees or disbursements of more than one counsel for Investor in connection with
the registration of the Registrable Securities, (iii) any portion of the
underwriters' commissions or discounts attributable to the Registrable
Securities being offered and sold by the Investor, or (iv) in the case of the
registration under Section 2, any costs and expenses which (exclusive of
underwriters' commissions or discounts) exceed an amount equal to 3% of the
aggregate gross proceeds of the offering under the Registration Statement filed
pursuant to Section 2. Notwithstanding the foregoing, any underwriters'
commissions of any registration under Section 3 shall be borne pro rata by the
Company, the other stockholders registering securities and the Investor, based
upon the aggregate gross proceeds attributable to each such Person.
(b) The Company shall pay all expenses in connection with any registration
initiated pursuant to Section 2 or 3 which is withdrawn, delayed or abandoned at
the request of the Company, unless such registration is withdrawn, delayed or
abandoned solely because of any actions of the Investor.
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Section 10. Right of Company To Delay Registration. For a period not to
exceed 120 days, the Company shall not be obligated to prepare and file, or
prevented from delaying or abandoning, a Registration Statement pursuant to this
Agreement at any time when the Company, in its good faith judgment with advice
of counsel, reasonably believes:
(a) that the filing thereof at the time requested, or the offering of
Registrable Securities pursuant thereto, would materially and adversely affect
(a) a pending or schedule public offering of the Company's securities, (b) an
acquisition, merger, recapitalization, consolidation, reorganization or similar
transaction by or of the Company, (c) pre-existing and continuing negotiations,
discussions or pending proposals with respect to any of the foregoing
transactions, or (d) the financial condition of the Company, in view of the
disclosure of any pending or threatened litigation, claim, assessment or
governmental investigation which may be required; and
(b) that the failure to disclose any material information with respect to
the foregoing would cause a violation of the Securities Act or the Exchange Act.
Section 11. Conditions to Registration Obligations. The Company shall not
be obligated to effect the registration of Registrable Securities pursuant to
Section 2 or 3 unless all holders of shares being registered consent to such
reasonable conditions as the Company shall determine (with the advice of
counsel) are required by law, including without limitation:
(a) conditions prohibiting the sale of shares until the Registration
Statement shall have been effective for a specified period of time;
(b) conditions requiring the holder to comply with all prospectus delivery
requirements of the Securities Act and with all anti-stabilization,
anti-manipulation and similar provisions of Section 10 of the Exchange Act and
any rules issued thereunder by the Commission, and to furnish to the Company
information about sales made in such public offering;
(c) conditions prohibiting the holders upon receipt of telegraphic or
written notice from the Company (until further notice) from effecting sales of
shares, such notice being given to permit the Company to correct or update a
registration statement or prospectus;
(d) conditions requiring that at the end of the period during which the
Company is obligated to keep the Registration Statement effective under Section
4, the holders of shares included in the Registration Statement shall
discontinue sales of shares pursuant to such Registration Statement upon receipt
of notice from the Company of its intention to remove from registration the
shares covered by such Registration Statement that remain unsold, and requiring
them to notify the Company of the number of shares registered that remain unsold
immediately upon receipt of notice from the Company; and
(e) conditions requiring the Investor to enter into an underwriting
agreement in form and substance reasonably satisfactory to the Company, provided
that (i) any managing
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<PAGE>
underwriter engaged by the Company in any offering made pursuant to Section 3
shall require the approval in writing of Investor, which consent shall not be
unreasonably withheld, and (ii) any managing underwriter engaged by the Investor
in any offering made pursuant to Section 2 shall require the approval in writing
of the Company, which shall not be unreasonably withheld.
Section 12. Market Stand-Off Agreement.
(a) Investor agrees that in the event the Company proposes to offer for
sale to the public any of its equity securities and (i) if Investor holds
beneficially or of record five percent (5%) or more of the outstanding equity
securities of the Company, (ii) if requested by the Company and an underwriter
of Common Stock or other securities of the Company, and (iii) if all other
"affiliates" and such 5% stockholders are requested by the Company and such
underwriter to sign, and actually do sign, any agreement restricting the sale or
other transfer of shares of the Company, then it will not sell, assign, donate,
pledge, encumber, hypothecate, grant an option to, or otherwise transfer or
dispose of, whether in privately negotiated transactions or to the public in
open market transactions, any Common Stock or other securities of the Company
held by it (except those securities which are to be included in such
registration by the Company) during the 120 day period following the effective
date of the registration statement of the Company filed under the Securities
Act. Such agreement shall be in writing and in form and substance reasonably
satisfactory to the Investor, the Company and such underwriter and pursuant to
customary and prevailing terms and conditions. The Company may imposed
stop-transfer instructions with respect to the Shares (or securities) subject to
the foregoing restrictions until the end of said 120 day period.
Section 13. Transferability of Registration Rights. The registration rights
granted to Investor by this Agreement may not be assigned to any other Person,
except that they may be assigned: (i) to any business entity controlled by,
controlling, or under common control with Investor, (ii) to the ultimately
surviving or controlling Person in connection with any merger, consolidation,
sale of stock or sale of substantially all of the assets of Daifuku Co., Inc.,
or (iii) with the consent of the Company; provided in each case that such
assignee or transferee agrees in writing to be bound by all of the provision of
this Agreement. To the extent transferred or assigned as permitted herein, all
references to Investor shall be interpreted to include any such transferee or
assignee. Subject to this Section 13, this Agreement shall be binding upon and
inure to the benefit of the Company and the Investor and their respective heirs,
successors and assigns, except that the Company shall not have the right to
delegate its obligations hereunder or to assign its rights hereunder or any
interest herein without the prior written consent of the Investor.
Section 14. Miscellaneous.
(a) No Waiver; Cumulative Remedies. No failure or delay on the part of any
party to this Agreement in exercising any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
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(b) Amendments, Waivers and Consents. Changes in or additions to this
Agreement may be made and compliance with any covenant or provision set forth
herein may be omitted or waived by the written agreement of the Company and
Investor.
(c) Notices. All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
fax (with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses or fax numbers
set forth below (or to such other address, person's attention or fax number as a
party may designate by notice to the other parties given in accordance with this
Section):
(i) If to Company:
Brooks Automation, Inc.
15 Elizabeth Drive
Chelmsford, MA 01824
Telecopier No.: (617) 262-2500
Telephone No.: (617) 262-2600
Attention: Ellen B. Richstone
With a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
Telecopier No.: (617) 856-8201
Telephone No.: (617) 856-8200
Attention: Lawrence M. Levy, Esquire
(ii) If to the Investor:
Daifuku America Corporation
6700 Tussing Road
Reynoldsburg, Ohio 43068-5083
Tel: (614) 863-1888
Fax: (614) 863-9997
Attention: Mr. Natsuo Makino
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With a copy to:
Masuda, Funai, Eifert & Mitchell
Two Continental Towers
1701 Golf Road
Suite 800
Rolling Meadows, IL 60008-4254
Tel: (847) .734-8811
Fax: (847) 734-1089
Attention: Stephen M. Proctor, Esquire
(d) Prior Agreements. This Agreement, constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
(e) Severability. The provisions of this Agreement, are severable and, in
the event that any court of competent jurisdiction shall determine that any one
or more of the provisions or part of a provision contained in this Agreement,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement or such other
agreements; but this Agreement and such other agreements, shall be reformed and
construed as if such invalid or illegal or unenforceable provision, or part of a
provision, had never been contained herein, and such provisions or part reformed
so that it would be valid, legal and enforceable to the maximum extent possible.
(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware and without giving
effect to choice of laws provisions thereof.
(g) Headings. Articles, section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
(i) Further Assurances. From and after the date of this Agreement, upon the
request of any Investor or the Company, the Company and the Investor shall
execute and deliver such instruments, documents and other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
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In Witness Whereof, the parties hereto have executed, or caused to be
executed by their authorized official, effective as of the date first above
written.
BROOKS AUTOMATION, INC.
Address:
15 Elizabeth Drive
Chelmsford, MA 01824 By: /s/ Ellen B. Richstone
----------------------------------------
DAIFUKU AMERICA CORPORATION
Address:
6700 Tussing Road
Reynoldsburg, OH 43068 By: /s/ Itsuo Oyamatsu
----------------------------------------
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.01
<SEQUENCE>5
<FILENAME>b40853baex10-01.txt
<DESCRIPTION>EMPLOYMENT AGREEMETN - ROBERT J. THERRIEN
<TEXT>
<PAGE>
Exhibit 10.01
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into in
Chelmsford, Massachusetts by and between Brooks Automation, Inc., a Delaware
corporation (the "Company"), and Robert J. Therrien ("Executive"), as of
September 30, 2001 (the "Effective Date").
RECITALS
1. The Company entered into an employment agreement with Executive dated
October 1, 1994 that expires on September 30, 2001.
2. The Company desires to continue to retain Executive as its President
and Chief Executive Officer of the Company, to make secure for itself the
experience, abilities and services of Executive and to prevent the loss of such
experience, services and abilities.
3. On October 23, 2001, the Company, Pontiac Acquisition Corp., a
wholly-owned subsidiary of the Company and PRI Automation, Inc. ("PRI"),
entered into an agreement and plan of merger (the "Merger Agreement").
Following the consummation of the merger, PRI will become a wholly-owned
subsidiary of the Company (the "Merger").
4. In consideration of the employment to be provided hereby and the
amounts to be paid as provided herein, Executive desires to be employed by the
Company and to agree with the Company as further provided herein.
For and in consideration of the mutual promises, terms, provisions and
conditions contained in this Agreement, the parties hereby agree as follows:
1. Duties. The Company shall employ Executive during the Employment Term as
President and Chief Executive Officer of the Company. Executive shall have
general management and control of the business, affairs and property of the
Company and its direct and indirect subsidiaries and shall perform such duties
of such offices as are provided for in the bylaws of the Company subject to the
general supervision and direction of, and any policies and procedures
established from time to time by, the Directors of the Company (the "Board").
Further, Executive shall, in consultation with the Board, identify and recommend
to the Board a successor President and Chief Executive Officer prior to the
expiration of the Employment Term. If at any time during the Employment Term, as
defined herein, the Board appoints a new President and Chief Executive Officer,
then upon Executive's request, the Board shall appoint the Executive as Chairman
of the Board. As Chairman, Executive shall be an employee of the Company and
have duties consistent with such position and as mutually agreed upon by the
parties.
2. Term. Subject to Section 7 and the termination provisions contained therein,
the term of the Executive's employment under this Agreement shall begin on the
Effective Date and end on October 1, 2005 (the "Employment Term"). For all
purposes of this Agreement, Executive shall be considered an employee of the
Company whether Executive serves in the role of President and Chief Executive
Officer or the role of Chairman. If Executive is appointed to the position of
<PAGE>
Chairman, Executive may elect to reduce his time commitment to the Company to no
fewer than 2 days a week, provided Executive accepts a prorated reduction in his
Adjusted Base Salary. In such event, all other provisions of this Agreement
shall continue to apply and Executive shall continue to be deemed an employee of
the Company under this Agreement.
3. Other Activities. Subject to Section 6 and the Non-Competition provisions
contained therein, Executive may serve on corporate, civic, or charitable boards
or committees, fulfill speaking engagements or manage personal investments;
provided that such activities do not interfere or conflict with the performance
of his duties or obligations under this Agreement.
4. Performance. During the Employment Term, Executive shall use his business
judgment, skill and knowledge for the advancement of the Company's interests and
to the discharge of his duties and responsibilities hereunder. Executive shall
perform and discharge, faithfully, diligently and to the best of his ability,
his duties and responsibilities hereunder. Subject to Section 2 hereof,
Executive shall devote substantially all of his working time and efforts to the
business and affairs of the Company.
5. Compensation and Benefits.
5.1. Base Salary. As consideration for Executive's services performed
during the Employment Term, the Company agrees to pay Executive a base salary of
$500,000 per year (the "Base Salary") payable, in accordance with the payroll
practices of the Company for its executives, and subject to federal and state
tax withholding. The Base Salary shall be reviewed annually by the Compensation
Committee of the Company Board of Directors (the "Committee") and increased as
determined by the Committee (the Base Salary as adjusted from time to time shall
be referred to as the "Adjusted Base Salary"). Subject to Section 2 hereof, in
no event shall any adjustment reduce the Adjusted Base Salary below $500,000 per
year. If the Merger is consummated, then Executive's Adjusted Base Salary shall
be increased to $615,000 as of the effective date of the Merger. If the Merger
is not consummated, then the Committee shall review the Adjusted Base Salary at
that time.
5.2. Bonus. Executive may receive bonuses (the "Annual Bonus") from
the Company when, as and if determined from time to time by the Committee.
The Committee shall review the Annual Bonus annually. Any such Annual
Bonuses paid to Executive shall be in addition to the Adjusted Base Salary.
5.3. Benefits. During the Employment Term, Executive shall be eligible for
participation in and shall receive all benefits available under the Brooks
Automation, Inc. 401(k) Plan, welfare benefit plans, practices, policies and
programs (including medical, prescription, dental, disability, salary
continuance, group life, accidental death and travel accident insurance plans
and programs) normally available to other senior executives (except for any
other retirement plans not specifically provided for in this Section 5.3) of the
Company and the Supplemental Retirement Benefit described in Section 5.8 herein.
5.4. Medical Insurance. The Executive and his spouse shall be entitled to
continued medical, dental and vision insurance following the Termination Date
(as such term is defined in
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<PAGE>
Section 7.4 herein) until the later of the Executive's or his spouse's death.
The medical, dental and vision coverage shall be substantially equivalent to the
group medical insurance provided to Executive during the Employment Term.
5.5. Life Insurance. The Company shall, during the Employment Term,
maintain insurance protection on the life of Executive as follows: (i) a policy
with death benefits of not less than $2,000,000 payable to a beneficiary
selected by Executive, (ii) a policy with death benefits of not less than
$1,000,000 payable to the Company, (iii) two policies with combined death
benefits of not less than $5,000,000 held in the Brooks Automation, Inc. Rabbi
Trust (the "Rabbi Trust") dated January 1, 2000, subject to the terms and
conditions therein, and (iv) two divided ownership life insurance policies with
combined death benefits of not less than $1,241,572 payable in accordance with
the terms and conditions set forth in the Collateral Assignment Divided
Ownership Plan Agreements by and between the Executive and the Company dated
July 20, 1995. Executive shall be entitled upon the later of the expiration of
the Employment Term, or any subsequent employment agreement with the Company, to
assume ownership of the policies described in subsections (i) and (iv) of this
Section; provided that the transfer of the policies described in (iv) shall be
in accordance with the terms and conditions of the Collateral Assignment Divided
Ownership Plan Agreements.
5.6. Automobile. During the Employment Term, the Company shall
continue to provide Executive with an automobile of the type currently
provided to him for his use in connection with his employment hereunder, and
shall pay all expenses related thereto.
5.7. Business Expenses. Executive shall be entitled to receive prompt
reimbursement during the Employment Term for all reasonable
employment-related expenses incurred or paid by him in the performance of his
services, subject to reasonable substantiation and documentation.
5.8. Supplemental Retirement Benefit. Subject to Section 8, Executive
shall be entitled to the following Supplemental Retirement Compensation (the
"Supplemental Retirement Benefit") equal to the product of (i) the Final
Adjusted Base Salary as defined herein, (ii) times one and one-half, and (iii)
times the number of years of service by Executive to the Company, with
appropriate adjustment for his last year of service if it is less than a full
year ("Year of Service"). The Final Adjusted Base Salary shall equal either: (x)
if the PRI Merger is not consummated, the greater of (i) the Adjusted Base
Salary in effect immediately prior to the Termination Date, or (ii) $500,000; or
(y) if the Merger with PRI is consummated, then the Final Adjusted Base Salary
shall be the greater of (i) Adjusted Base Salary in effect immediately prior to
the Termination Date, or (ii) $615,000. For purposes of calculating the total
Supplemental Retirement Benefit, the Final Adjusted Base Salary shall be
appropriately adjusted only if at any time after the Effective Date through
October 1, 2003 the Executive reduces his work schedule, in which case the Final
Adjusted Base Salary shall be reduced to reflect the pro-rata reduction in Base
Salary as described in Section 2 herein. For purposes of calculating the total
Supplemental Retirement Benefit, there shall be no reduction of Final Adjusted
Base Salary for any periods after October 1, 2003 regardless of whether the
Executive reduces his work schedule as provided for in Section 2 herein. There
shall be no reduction to Final Adjusted Base Salary for any periods prior to the
Effective Date.
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<PAGE>
5.8.1. Merger/Funding. If the Merger with PRI is consummated, then
(A) the Company shall make a contribution to the Rabbi Trust, no later than the
end of the fiscal quarter following the Merger effective date, of an amount
equal to the then difference between (x) the total amount of assets held in the
Rabbi Trust and (y) Executive's accrued Supplemental Retirement Benefit; and (B)
the Company shall contribute, on a quarterly basis beginning with the quarter
following the Merger effective date, an amount to the Rabbi Trust sufficient to
provide that the then total amount of assets held in the Rabbi Trust are equal
to the value of Executive's then accrued Supplemental Retirement Benefit.
5.8.2. Payment. The Supplemental Retirement Benefit shall be payable
in an amount equal to 1/12 of his Final Adjusted Base Salary, for a period of
months equal to the product of (x) one and one half (y) times that number of
months in the Years of Service. The first payment shall be paid to the Executive
on the first day of the month next beginning after the Termination Date, except
that if the Termination Date falls on or after the twentieth day of a month,
such payment shall be paid on the first day of the second month next beginning.
5.8.3. Merger/Payment. If the Merger is consummated, then the
Supplemental Retirement Benefit shall be paid in a lump sum amount on the first
day of the month next beginning after the Termination Date, if the Merger is not
consummated, (i) the Committee shall review the Supplemental Retirement Benefit
payment provisions at that time, and (ii) in the event Executive dies or becomes
permanently disabled, Executive, or his heirs or attorney in fact if Executive
is deceased or incapable, physically or mentally, of so acting, may elect to
receive the entire Supplemental Retirement Benefit, or the remaining unpaid
balance thereof, over a period of not less than four (4) years upon written
notice to the Board.
6. Proprietary Rights and Non Competition.
6.1. Confidentiality. Executive will maintain in confidence and will not
disclose or use, either during or after the Employment Term, any proprietary or
confidential information or know-how belonging to the Company ("Proprietary
Information"), whether or not in written form, except to the extent required to
perform duties on behalf of the Company. For purposes of this Agreement,
"Proprietary Information" shall mean any information, not generally known in the
relevant trade or industry, which was obtained from the Company, or which was
learned, discovered, developed, conceived, originated or prepared by Executive
in connection with this Agreement. Such Proprietary Information includes,
without limitation, software, technical and business information relating to the
Company's inventions or products, research and development, production
processes, manufacturing and engineering processes, machines and equipment,
finances, customers, marketing and production and future business plans,
information belonging to customers or suppliers of the Company disclosed
incidental to Executive's performance under this Agreement, and any other
information which is identified as confidential by the Company, but only so long
as the same is not generally known in the relevant trade or industry.
6.2. Inventions. For purposes of this Agreement, "Inventions" shall mean
any new or useful art, discovery, contribution, finding or improvement, whether
or not patentable, and all related know-how. Inventions shall include, without
limitation, all designs, discoveries,
-4-
<PAGE>
formulae, processes, manufacturing techniques, semiconductor designs, computer
software, inventions, improvements and ideas.
6.3. Disclosure and Assignment of Inventions. Executive will promptly
disclose and describe to the Company all Inventions which he may solely or
jointly conceive, develop or reduce to practice during the Employment Term (i)
which relate at the time of conception, development, or reduction to practice of
the Invention to the Company's business or actual or demonstrably anticipated
research or development, (ii) which were developed, in whole or in part, on the
Company's time or with the use of any of the Company's equipment, supplies,
facilities or trade secret information, or (iii) which resulted from any work
performed by Executive for the Company (the "Company Inventions"). Executive
hereby assigns all of his right, title and interest worldwide in the Company
Inventions and in all intellectual property rights based upon the Company
Inventions; provided, however, that Executive does not assign or agree to assign
any Inventions, whether or not relating in any way to the Company business or
demonstrably anticipated research and development, which were made by him prior
to the date of this Agreement, or which were developed by him independently
during the term of this Agreement and not under the conditions stated in
subparagraph (ii) above.
6.4. Documents and Materials. Upon termination of this Agreement or at any
other time upon the Company's request, Executive will promptly deliver to the
Company, without retaining any copies, all documents and other materials
furnished to him by the Company, prepared by him for the Company or otherwise
relating to the Company's business, including, without limitation, all written
and tangible material in his possession incorporating any Proprietary
Information.
6.5. Competitive Employment. During the Employment Term and for a period
of two (2) years thereafter (collectively, the "Non-Competition Period"),
Executive will not engage, directly or indirectly, in any employment,
consulting, or other activity in any business competitive with the Company and
its subsidiaries, subject to the following exceptions: (i) that nothing in this
Section 6.5 shall preclude Executive from serving as a director of any other
corporation, and (ii) nothing in this Section 6.5, subject to Section 6.9
herein, shall preclude Executive from making passive investments in securities
of any unrelated business enterprise or, if the proposed investment is in a
related business enterprise, then after disclosure to and approval by the Board.
6.6. Nonsolicitation. In addition to and without limiting the foregoing,
during the term of the Non-Competition Period, Executive shall not attempt to or
assist any other person in attempting to do any of the following: (i) hire any
director, officer, Executive, or agent of the Company or any subsidiary or
affiliate, or encourage any such person to terminate such relationship with the
Company or any subsidiary or affiliate, as the case may be; (ii) encourage any
customer, client, supplier or other business relationship of the Company or any
subsidiary or affiliate to terminate or alter such relationship, whether
contractual or otherwise, to the disadvantage of the Company or any subsidiary
or affiliate; as the case may be; (iii) encourage any prospective customer or
supplier not to enter into a business relationship with the Company or any
subsidiary or affiliate; (iv) impair or attempt to impair any relationship,
contractual or otherwise, written or oral, between the Company or any subsidiary
or affiliate and any customer, supplier or other business relationship of the
Company or any subsidiary or affiliate or; (v) sell or
-5-
<PAGE>
offer to sell or assist in or in connection with the sale to any customer or
prospective customer of the Company or any subsidiary or affiliate any products
of the type sold or rendered by the Company or any subsidiary or affiliate, for
which products Executive had material dealings in the performance of Executive's
duties within the period two years before Executive's termination.
6.7. Acts to Secure Proprietary Rights.
6.7.1. Further Acts. Executive agrees to perform, during and after
the Employment Term, all acts deemed necessary or desirable by the Company to
permit and assist it, at its expense, in perfecting and enforcing the full
benefits, enjoyment, rights and title throughout the world in the Company
Inventions. Such acts may include, without limitation, execution of documents
and assistance or cooperation in the registration and enforcement of applicable
patents and copyrights or other legal proceedings.
6.7.2. Appointment of Attorney-in-Fact. In the event that the
Company is unable, for any reason whatsoever, to secure Executive's signature to
any lawful and necessary documents required to apply for or execute any patent,
copyright or other applications with respect to any the Company Inventions
(including improvements, renewals, extensions, continuations, divisions or
continuations in part thereof), Executive hereby irrevocably appoints the
Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to execute and file any such application and to do all other
lawfully permitted acts to further the prosecution and issuance of patents,
copyrights or other rights thereon with the same legal force and effect as if
executed by him, intending hereby to create a so-called "durable power" which
will survive any subsequent disability.
6.8. No Conflicting Obligations. Executive's performance of his duties and
obligations under this Agreement does not breach and will not breach any
agreement to keep in confidence proprietary information, knowledge or data
acquired by him.
6.9. Corporate Opportunities. Executive agrees that he will first present
to the Board, for its acceptances or rejection on behalf of the Company, any
opportunity to create or invest in any company which is or will be involved in
providing or furnishing semiconductor or flat panel display substrate handling
equipment, systems, components, products, software and services which comes to
his attention and in which he, or any affiliate, might desire to participate. If
the Board rejects the same or fails to act thereon in a reasonable time,
Executive shall be free to invest in, participate or present such opportunity to
any other person or entity.
7. Termination Events.
7.1. Termination by the Company. At the election of the Company, this
Agreement shall terminate and any and all rights and obligations of the Company
and Executive hereunder shall cease and be completely void except as
specifically set forth in this Agreement, upon the earliest to occur of the
following: (i) the death or "long-term disability" of Executive; or (ii) the
termination of Executive by the Company with "cause" under this Agreement and
delivery of written notice in accordance with Section 13.
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<PAGE>
7.1.1. Long-Term Disability. For purposes of this Agreement,
"long-term disability" shall mean the disability of Executive which prevents
Executive from devoting to the business of the Company his full-time subject to
Section 2 herein, best efforts, skill and attention, and such condition
continues for a period of two hundred seventy (270) consecutive days.
7.1.2. Cause. For purposes hereof, "cause" shall include,
without limitation, the occurrence of any of the following events during the
Employment Term of this Agreement:
(i) habitual neglect of material duties assigned to
Executive hereunder, which is not remedied within thirty
(30) days of receipt of written notice thereof from the
Company;
(ii) fraud or embezzlement committed by Executive
against the Company; and
(iii) conviction of a crime classified as a felony under
any Federal, state or local law with all appeals
relating thereto having been unsuccessfully exhausted
and all appeal periods being lapsed.
7.2. Termination Without Cause. This Agreement shall terminate and any and
all rights and obligations of the Company and Executive hereunder shall cease
and be completely void except as specifically set forth in this Agreement, upon
delivery of written notice by the Company to the Executive in accordance with
Section 13.
7.3. Termination by Executive for Good Reason. This Agreement shall
terminate and any and all rights and obligations of the Company or Executive
hereunder shall cease and be completely void except as specifically set forth in
this Agreement, upon the Executive's resignation for "good reason"; provided
that Executive shall provide the Company with written notice of the occurrence
of such action he believes constitutes Good Reason and the Company has failed to
remedy such action within thirty (30) days of its receipt of such notice
7.3.1. Good Reason. "Good Reason" shall mean the Company has taken
action that serves to adversely change Executive's status by a reduction in
title or a reduction in duties without Executive's consent.
7.4. Termination by Executive following a Change of Control. This
Agreement shall terminate and any and all rights and obligations of the Company
or Executive hereunder shall cease and be complete void except as specifically
set forth in the Agreement upon the Executive's resignation or termination
following a "change of control."
7.4.1. Change of Control. For purposes hereof a "change of control"
of the Company shall be deemed to have occurred if:
(i) any "person" or group of affiliated "persons" (as
such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act), becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities
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<PAGE>
representing more than 20% of the total voting power
represented by the Company's then outstanding voting
securities (except in connection with a merger, which
the Board approves and that the Executive consents to
and approves or a merger in respect of which, pursuant
to Section 251(f) of the Delaware General Corporation
law, as now in effect and as the same may be amended
from time to time, no vote of the stockholders of
Company is required);
(ii) the Board approves, and the stockholders of the
Company approve, if necessary, a plan of complete
liquidation of the Company, or the Company sells or
otherwise disposes of substantially all of its assets
to any "person" or group of affiliated "persons" (as
such term is used in Sections 13(d) and 14(d) of the
Exchange Act); or
(iii)individuals who, as of the date hereof, constitute
the Company Board (the "Incumbent Company Board") cease
for any reason to constitute at least a majority of the
Company Board, provided that any person becoming a
director subsequent to the date hereof whose election,
or nomination for election by Company's stockholders,
was approved by a vote of at least a majority of the
directors comprising the Incumbent Company Board shall
be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent
Company Board.
7.5. Termination Date. The term "Termination Date" shall mean the earlier
of (i) the expiration of the Employment Term or (ii) if the date Executive's
services are terminated (A) by his death, then the date of his death, or (B) by
his Long-Term Disability, then the date of the occurrence of his Long-Term
Disability, or (C) for any other reason, then the date on which such termination
is to be effective pursuant to the notice of termination to be given by the
party terminating the employment relationship.
8. Effect of Termination.
8.1. Termination for Death or Disability. It is expressly acknowledged and
agreed that if Executive's employment shall be terminated due to Executive's
death or Long-Term Disability, all of the obligations under Sections 1 through 5
of the Company and Executive shall cease except that the Company shall pay, or
provide the following benefits, to Executive or his estate, as the case may be,
without further recourse or liability to the Company:
(i) an amount equal to the sum of Executive's earned but unpaid
Adjusted Base Salary and prorata Annual Bonus, which shall be
the greater of (i) his prior year's Annual Bonus, or (ii) the
average of his most recent three year Annual Bonuses;
-8-
<PAGE>
(ii) an amount equal to the value of Executive's accrued
vacation pay;
(iii) his Supplemental Retirement Benefit in accordance with
Section 5.8;
(iv) in the event of Long Term Disability, continued life insurance
coverage in accordance with Section 5.5 until October 1, 2005;
and
(v) continued medical, dental and vision insurance in
accordance with Section 5.4.
8.2. Termination for Cause. It is expressly acknowledged and agreed that
if Executive is terminated by the Company for Cause, all of the obligations
under Sections 1 through 5 of the Company and Executive shall cease except that
the Company shall pay immediately after the Termination Date the following
amounts to the Executive without further recourse or liability to the Company:
(i) an amount equal to the sum of Executive's earned but unpaid
Adjusted Base Salary; and
(ii) an amount equal to the value of Executive's accrued
vacation days.
8.3. Termination Without Cause. It is expressly acknowledged and agreed
that if Executive's employment shall be terminated by Company for any reason,
except as set forth in Section 7.1, at any time prior to the expiration of the
Employment Term, all of the obligations under Sections 1 through 5 of the
Company and Executive shall cease except that the Company shall pay, or provide
the following benefits, to Executive without further recourse or liability to
the Company:
(i) an amount equal to the sum of the Executive's earned but
unpaid Adjusted Base Salary and prorata Annual Bonus, which
shall be the greater of (i) his prior year's Annual Bonus, or
(ii) the average of his most recent three year's Annual
Bonuses;
(ii) his then current Annual Base Salary and Annual Bonus, which in
no case shall be less than the average of his most recent
three year's Annual Bonuses determined in accordance with
Section 2 for the remaining balance of the Employment Term;
(iii) an amount equal to the value of Executive's accrued
vacation pay;
(iv) his Supplemental Retirement Benefit in accordance with
Section 5.8;
(v) continued life insurance coverage in accordance with
Section 5.5 until October 1, 2005;
(vi) continued medical, dental and vision insurance in
accordance with Section 5.4; and
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<PAGE>
(vii) immediately vest all options to purchase Company stock and,
notwithstanding the terms of any option agreement or option
plan to the contrary, the exercise period for all options,
except those options granted prior to September 30, 2001 the
extension of which would result in a charge to earnings or
other adverse accounting consequence determined in the
reasonable discretion of the Committee, shall expire upon the
earlier of (x) the last day of the 24th month following the
Termination Date, or (y) the expiration of the option term.
8.4. Termination by Executive For Good Reason. It is expressly
acknowledged and agreed that if Executive's employment shall be terminated
because the Executive resigns for Good Reason, all of the obligations under
Sections 1 through 5 of the Company and Executive shall cease except if the
Company shall pay, or provide the following benefits, to Executive without
further recourse or liability to the Company:
(i) an amount equal to the sum of the Executive's earned but
unpaid Adjusted Base Salary and prorata Annual Bonus, which
shall be the greater of (i) his prior year's Annual Bonus, or
(ii) the average of his most recent three year's Annual
Bonuses;
(ii) his then current Annual Base Salary and Annual Bonus, which in
no case shall be less than the average of his most recent
three year's Annual Bonuses determined in accordance with
Section 2 for the remaining balance of the Employment Term;
(iii) an amount equal to the value of Executive's accrued
vacation pay;
(iv) his Supplemental Retirement Benefit in accordance with
Section 5.8;
(v) continued life insurance coverage in accordance with
Section 5.5 until October 1, 2005;
(vi) continued medical, dental and vision insurance in
accordance with Section 5.4; and
(vii) immediately vest all options to purchase Company stock and,
notwithstanding the terms of any option agreement or option
plan to the contrary, the exercise period for all options,
except those options granted prior to September 30, 2001 the
extension of which would result in a charge to earnings or
other adverse accounting consequence determined in the
reasonable discretion of the Committee, shall expire upon the
earlier of (x) the last day of the 24th month following the
Termination Date, or (y) the expiration of the option term.
8.5. Termination by Executive following a Change of Control. It is
expressly acknowledged and agreed that if Executive's employment shall be
terminated because the Executive resigns following a Change of Control, all of
the obligations under Sections 1 through
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<PAGE>
5 of the Company and Executive shall cease except that the Company shall pay, or
provide the following benefits, to Executive without further recourse or
liability to the Company:
(i) a lump sum severance payment (the "Severance Payment") equal
to three (3) times Executive's Adjusted Base Salary and Annual
Bonus, which shall be the greater of (i) his prior year's
Annual Bonus, or (ii) the average of his most recent three
year's Annual Bonuses;
(ii) an amount equal to the sum of the Executive's earned but
unpaid Adjusted Base Salary and prorata Annual Bonus, which
shall be the greater of (i) his prior year's Annual Bonus, or
(ii) the average of his most recent three year's Annual
Bonuses;
(iii) an amount equal to the value of Executive's accrued
vacation pay;
(iv) his Supplemental Retirement Benefit in accordance with
Section 5.8;
(v) continued life insurance coverage in accordance with
Section 5.5 until October 1, 2005;
(vi) continued medical, dental and vision insurance in
accordance with Section 5.4; and
(vii) immediately vest all options to purchase Company stock and,
notwithstanding the terms of any option agreement or option
plan to the contrary, the exercise period for all options,
except those options granted prior to September 30, 2001 the
extension of which would result in a charge to earnings or
other adverse accounting consequence determined in the
reasonable discretion of the Committee, shall expire upon the
earlier of (x) the last day of the 24th month following the
Termination Date, or (y) the expiration of the option term.
8.6. Termination by Executive Without Good Reason. It is expressly
acknowledged and agreed that if Executive resigns without Good Reason, except as
set forth in Section 7.4, prior to the expiration of the Employment Term, all of
the obligations under Sections 1 through 5 of the Company and Executive shall
cease except that the Company shall pay, or provide the following benefits, to
Executive without further recourse or liability to the Company:
(i) an amount equal to the sum of the Executive's earned but
unpaid Adjusted Base Salary and prorata Annual Bonus, which
shall be the greater of (i) his prior year's Annual Bonus, or
(ii) the average of his most recent three year's Annual
Bonuses;
(ii) an amount equal to the value of Executive's accrued
vacation pay;
(iii) his Supplemental Retirement Benefit in accordance with
Section 5.8;
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<PAGE>
(iv) continued life insurance coverage in accordance with
Section 5.5 until October 1, 2005; and
(v) continued medical, dental and vision insurance in
accordance with Section 5.4.
8.7. 280G Protection. If any amounts payable under, or benefits resulting
from, this Agreement are subject to the excise tax imposed under Code Section
4999 on "excess parachute payments", the Company will in good faith compute the
excise tax imposed under Code Section 4999 (the "Excise Tax") and shall pay that
amount to the Executive, including any federal, state, local and excise taxes
imposed on the foregoing payment under this Agreement. The effect of such
calculation will be to provide the Executive with a payment under this Agreement
that is economically equivalent to the payment he would have received but for
the imposition of the excise tax. The calculations under this Section 8.7 will
be made in a manner consistent with the requirements of Code Section 280G and
4999, as in effect at the time the calculations are made.
(a) The Gross-up Payment or portion thereof
provided for above shall be paid no later than the thirtieth (30th) day
following the Termination Date; provided, however, that if the amount of such
Gross-up Payment or portion thereof cannot be finally determined on or before
such day, the Company shall pay to the Executive on such day an estimate, as
determined in good faith by an Independent Accountant (the "Accountant"), of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code), subject to further payments pursuant to subsection (c) hereof, as soon as
the amount thereof can reasonably be determined, but in no event later than the
ninetieth day after the occurrence of the event subjecting the Executive to the
Excise Tax. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth day after demand by
the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(b) In the event of any controversy with the
Internal Revenue Service (or other taxing authority) with regard to the Excise
Tax, the Executive shall permit the Company to control issues related to the
Excise Tax (at its expense), provided that such issues do not potentially
materially adversely affect the Executive, but the Executive shall control any
other issues. In the event the issues are interrelated, the Executive and the
Company shall in good faith cooperate so as not to jeopardize resolution of
either issue, but if the parties cannot agree an arbitrator, selected in
accordance with the procedure set forth in Section 14, shall make the final
determination with regard to the issues. In the event of any conference with any
taxing authority as the Excise Tax or associated income taxes, the Executive
shall permit the representative of the Company to accompany the Executive, and
the Executive and the Executive's representative shall cooperate with the
Company and its representative.
(c) The Company shall be responsible for all
charges of the Accountant.
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<PAGE>
(d) The Company and the Executive shall promptly
deliver to each other copies of any written communications, and summaries of any
verbal communications, with any taxing authority regarding the Excise Tax
covered by this section.
8.8. Fringe Benefits. To the extent any perquisite or fringe benefit that
Company is obligated to continue hereunder after the termination of Executive's
employment cannot be so continued due to legal impediment then, in such event,
Company shall, in lieu thereof, pay in cash to Executive the equivalent cost to
Company of such perquisite or fringe benefit, with any such payments to be made
at the time the payment of such perquisite or fringe benefit would normally be
paid.
9. Assignment. Neither the Company nor Executive may make any assignment of this
Agreement or any interest herein, by operation of law or otherwise, without the
prior written consent of the other party; provided, however, that the Company
may assign its rights and obligations under this Agreement without the consent
of Executive if the Company shall hereafter effect a reorganization, consolidate
with, or merge into any other entity or transfer all or substantially all of its
properties or assets to any other person or entity. This Agreement shall be
binding upon and inure to the benefit of the Company, Executive and their
respective successors, executors, administrators, heirs and permitted assigns.
10. Indemnification.
(a) To the maximum extent permitted under
Massachusetts law as from time to time in effect, the Company hereby agrees to
indemnify Executive and hold him harmless from, against and in respect of any
and all damages, deficiencies, actions, suits, proceedings, demands,
assessments, excise taxes, judgments, claims, losses, costs, expenses,
obligations and liabilities arising from or related to the performance of
Executive's duties and responsibilities under this Agreement.
(b) The Company agrees to continue and maintain a
directors' and officers' liability insurance policy covering Executive during
this employment and for six (6) years following the Termination Date. The amount
of coverage shall be reasonable in relation to Executive's position and
responsibilities during the Employment Term but in no event shall the amount of
coverage be less than $50,000,000 in the aggregate, provided that such coverage
is available at reasonable cost.
11. Waiver. The waiver by any party hereto of a breach of any provision of
this Agreement by any other party will not operate or be construed as a
waiver of any other or subsequent breach by such other party.
12. Severability. The parties agree that each provision contained in this
Agreement shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to scope, activity or subject, such provisions shall be construed by the
appropriate judicial
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<PAGE>
body by limiting and reducing it or them, so as to be enforceable to the extent
compatible with the applicable law.
13. Notices. Any notice or other communication in connection with this Agreement
shall be deemed to be delivered if in writing, addressed as provided below and
actually delivered at said address:
If to Executive, to him at the following address:
Robert J. Therrien
300 Boylston Street, #702
Boston, MA 02116
If to the Company, to it at the following address:
Brooks Automation, Inc.
15 Elizabeth Drive
Chelmsford, MA 01824
Attn: Senior Vice President Finance and Administration/Chief
Financial Officer
or to such other person or address as to which either party may notify the
other in accordance with this Section 13.
14. Arbitration. In the event of a dispute between the parties as to the meaning
or interpretation of this Agreement, or the performance of either party
hereunder, either party may submit the matter for arbitration in Boston,
Massachusetts, to the American Arbitration Association, which is expressly
permitted and required hereby, to include the reasonable costs of arbitration,
including attorney fees, of the prevailing party, in its decision. If the
nonprevailing party should then fail to comply with such decision, the
reasonable costs of enforcement, including attorneys fees, shall be paid to the
prevailing party. Such costs shall specifically include any judicial proceeding
to confirm such decision.
15. Applicable Law. This Agreement shall be interpreted and construed in
accordance with the laws of the Commonwealth of Massachusetts.
16. Remedies. Executive acknowledges that a breach of any of the promises or
agreements contained herein could result in irreparable and continuing damage to
the Company for which there may be no adequate remedy at law, and the Company
shall be entitled to seek injunctive relief and/or a decree for specific
performance, and such other relief as may be proper (including monetary damages
if appropriate).
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<PAGE>
17. Survival. Notwithstanding any provisions of this Agreement to the contrary,
the obligations of Executive and the Company pursuant to Sections 6 through 18
hereof shall each survive termination of this Agreement.
18. Effect of Headings. Any title of a section heading contained herein is for
convenience of reference only, and shall not affect the meaning of construction
or any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands, as
of the date first above written.
/s/ Robert J. Therrien
------------------------------------
Robert J. Therrien
BROOKS AUTOMATION, INC.
By: /s/ /Ellen B. Richstone
--------------------------------
Ellen B. Richstone
Senior Vice President Finance and
Administration/Chief Financial Officer
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.25
<SEQUENCE>6
<FILENAME>b40853baex10-25.txt
<DESCRIPTION>LEASE BETWEEN SILVER OAKS, LLC & THE COMPANY
<TEXT>
<PAGE>
Exhibit 10.25
LEASE
between
SILVER OAKS, LLC,
a California limited liability company
and
BROOKS AUTOMATION, INC.,
a Delaware corporation
13931 BALBOA BOULEVARD
SYLMAR, CALIFORNIA
<PAGE>
TABLE OF CONTENTS
<Table>
<Caption>
Page
----
<S> <C>
1. Parties .............................................................. 1
2. Premises ............................................................. 1
3. Term ................................................................. 1
3.1 Term ............................................................. 1
3.2 Delay in Possession .............................................. 1
3.3 Early Possession ................................................. 2
3.4 Tenant's Election to Complete .................................... 2
4. Rent ................................................................. 3
4.1 Base Rent ........................................................ 3
4.2 Certain Expenses ................................................. 3
4.3 Certain Capital Items ............................................ 4
4.4 Effect of Exercise of Option to Extend on Payment of Certain
Amounts Under Section 4.3 ...................................... 5
5. Security Deposit ..................................................... 6
6. Use .................................................................. 6
6.1 Use .............................................................. 6
6.2 Compliance with Law .............................................. 6
6.3 Condition of Premises ............................................ 7
7. Maintenance, Repairs and Alterations ................................. 8
7.1 Tenant's Obligations ............................................. 8
7.2 Surrender ........................................................ 9
7.3 Landlord's Rights ................................................ 9
7.4 Landlord's Obligations ........................................... 10
7.5 Alterations and Additions ........................................ 10
8. Insurance; Indemnity ................................................. 15
9. Damage or Destruction ................................................ 19
</Table>
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<PAGE>
9.1 Definitions.......................................................19
9.2 Partial Damage -- Insured Loss....................................19
9.3 Partial Damage -- Uninsured Loss..................................20
9.4 Total Destruction.................................................20
9.5 Damage Near End of Term...........................................21
9.6 Abatement of Rent; Tenant's Remedies..............................21
9.7 Termination -- Advance Payments...................................22
9.8 Waiver............................................................22
10. Real Property Taxes....................................................22
10.1 Definition of "Real Property Tax".................................22
10.2 Payment of Taxes..................................................23
10.3 Personal Property Taxes...........................................24
10.4 Additional Provisions Regarding Real Property Taxes...............24
11. Utilities..............................................................24
12. Assignment and Subletting..............................................25
12.1 Landlord's Consent Required.......................................25
12.2 Procedure.........................................................25
12.3 Tenants Other Than Individuals....................................26
12.4 Tenant Affiliate..................................................27
12.5 No Release of Tenant..............................................27
12.6 Terms and Conditions Applicable to Subletting.....................27
12.7 Attorney's Fees...................................................29
13. Defaults; Remedies.....................................................29
13.1 Defaults..........................................................29
13.2 Remedies..........................................................30
13.3 Default by Landlord...............................................32
13.4 Late Charges......................................................32
14. Condemnation...........................................................33
15. Broker's Commissions...................................................34
16. Estoppel Certificate...................................................34
17. Landlord's Liability...................................................35
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18. Severability...................................................... 36
19. Interest on Past-due Obligations.................................. 36
20. Time of Essence................................................... 36
21. Additional Rent................................................... 36
22. Incorporation of Prior Agreements; Amendments..................... 36
23. Notices........................................................... 37
24. Waivers........................................................... 38
25. Recording......................................................... 38
26. Holding Over...................................................... 38
27. Cumulative Remedies............................................... 39
28. Covenants and Conditions.......................................... 39
29. Binding Effect; Choice of Law..................................... 39
30. Subordination; Attornment; Non-Disturbance........................ 39
30.1 Subordination................................................ 39
30.2 Attornment................................................... 39
30.3 Non-Disturbance.............................................. 39
30.4 Self-Executing............................................... 40
31. Attorney's Fees................................................... 40
32. Landlord's Access................................................. 41
33. Auctions.......................................................... 41
34. Signs............................................................. 41
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<Table>
<S> <C> <C>
35. Merger................................................ 42
36. Consents.............................................. 42
37. [Intentionally Omitted]............................... 42
38. Quiet Possession...................................... 42
39. Options............................................... 42
39.1 Definition....................................... 42
39.2 Options Personal; Multiple Options............... 43
39.3 Effect of Default on Options..................... 43
39.4 First Option .................................... 43
39.5 Second Option ................................... 44
39.6 Fair Market Rent ................................ 45
40. [Intentionally Omitted] .............................. 47
41. Security Measures .................................... 47
42. Easements ............................................ 47
43. Performance Under Protest ............................ 48
44. Authority ............................................ 48
45. Cashier's Checks ..................................... 48
46. Amendments to Lease .................................. 48
47. Storage Tanks ........................................ 48
48. Tenant's Covenants Regarding Hazardous Materials ..... 49
48.1 Landlord's Prior Consent ........................ 49
48.2 Compliance with Hazardous Materials Laws ........ 50
48.3 Hazardous Materials Removal ..................... 51
48.4 Notices ......................................... 51
48.5 Indemnification of Landlord ..................... 52
48.6 Preexisting Conditions .......................... 52
</Table>
<PAGE>
<Table>
<S> <C> <C>
48.7 Studies .................................................. 52
49. [Intentionally Omitted] ....................................... 53
50. Easements and Restrictions of Record .......................... 53
51. Offer ......................................................... 53
52. Waiver of Trial by Jury ....................................... 53
53. ERISA ......................................................... 53
54. Parking ....................................................... 54
55. Landlord Shell Improvements ................................... 54
56. Tenant Improvements ........................................... 54
57. Additional Mezzanine Space .................................... 54
58. Self Help ..................................................... 54
</Table>
<Table>
<S> <C>
Exhibit "A" Premises (Paragraph 2)
Exhibit "B" Work Letter
Exhibit "C" Location and Design of Above-Ground Tank
Exhibit "D" Description of Initial Plans
Exhibit "E" Form of Memorandum of Lease
Exhibit "F" Form of Subordination Agreement
Exhibit "G" Certain Permitted Items
Exhibit "H" Assessment Allocation Mechanism
Exhibit "I" Certain CC&R Provisions
Exhibit "J" Hazardous Substance Reports
</Table>
<PAGE>
LEASE
1. Parties. This Lease (the "Lease"), dated, for reference purposes only; May
30, 2001, is made by and between SILVER OAKS LLC, a California limited liability
company (herein called "Landlord"), and BROOKS AUTOMATION, INC., a Delaware
corporation (herein called "Tenant").
2. Premises. Landlord hereby leases to Tenant and Tenant leases from Landlord
for the term, at the rental, and upon all of the conditions set forth herein,
that certain real property situated in the County of Los Angeles, State of
California, commonly known as 13931 Balboa Boulevard, Sylmar, California,
consisting of the building (the "Building") on the property containing 60,096
square feet of area (which area is comprised of a 6,000 square foot mezzanine
area and a 54,096 square foot building footprint) and adjacent land and more
particularly delineated on Exhibit "A" attached hereto and by this reference
incorporated herein. Said real property including the land and all improvements
therein, is herein called the "Premises." The Premises may from time to time be
under common ownership or management with one or more adjacent properties.
3. Term.
3.1 Term. The term of this Lease shall be for ten (10) years commencing on
October 1, 2001 (the "Commencement Date") and ending on September 30, 2011
unless extended or sooner terminated pursuant to any provision hereof.
3.2 Delay in Possession. Notwithstanding that Commencement Date, if for any
reason Landlord cannot deliver possession of the Premises to Tenant with
Landlord's Improvements (as defined below) substantially completed by September
15, 2001 (the "Out Date"), Landlord shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease or the
obligations of Tenant hereunder, but in such case, Tenant shall not be obligated
to pay rent until possession of the Premises is tendered to Tenant and the
initial term shall be extended one (1) day for every day between the
Commencement Date and the date on which Landlord delivers the Premises to Tenant
with Landlord's Improvements substantially completed; provided, however, that if
Landlord shall not have delivered possession of the Premises within thirty (30)
days after the Out Date, Tenant may, at Tenant's option, by notice in writing to
Landlord within ten (10) business days thereafter, cancel this Lease, in which
event the parties shall be discharged from all obligations hereunder; provided
further, however, that if such written notice of Tenant is not received by
Landlord within said ten (10) business day period, Tenant's right to cancel this
Lease hereunder shall
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terminate and be of no further force or effect. In addition to the delay in
commencement of rent as provided in this Paragraph 3.2, in the event that
substantial completion of Landlord's Work does not occur by the Out Date, then
Tenant shall be entitled to a rent credit equal to one (1) day's Base Rent for
each one (1) full day from the period from the Out Date until the date upon
which Landlord delivers possession of the Premises to Tenant with Landlord's
Improvements substantially completed. The Out Date shall be extended by one (1)
day far every day Landlord is delayed in substantially completing the Landlord
Improvements due to (a) the acts or omissions of Tenant or its agents,
employees, or contractors, (b) inability to obtain, or delays in obtaining,
necessary permits and/or (c) any other one or more events beyond Landlord's
reasonable control.
3.3 Early Possession. If Tenant occupies the Premises prior to said commencement
date, such occupancy shall be subject to all provisions hereof, such occupancy
shall not advance the termination date. Landlord shall reasonably cooperate with
Tenant in Tenant's efforts to obtain any municipal approvals required for
Tenant's early occupancy. Tenant shall be permitted to enter the Premises on the
date that is the later of (i) the date upon which Tenant obtains permits for
construction of the Tenant Improvements described in the Space Plans (as defined
in Exhibit "B"), or (ii) the first business day after full execution and
delivery of this Lease, and prior to the Commencement Date without the
obligation for payment of rent for the purpose of constructing the Tenant
Improvement; provided that (a) Tenant will not unreasonably interfere with
Landlord's construction of the Landlord Improvements, (b) Tenant first provides
Landlord with all insurance required by the terms of this Lease, and (c) all
construction by Tenant shall be performed in accordance with the terms of this
Lease. Without limiting any other provision of this Lease, Landlord shall not be
responsible for damages or loss to any work performed by Tenant or to Tenant's
personal property or the personal property of Tenant's contractor's, employees
or agents which occurs during such period of early access.
3.4 Tenant's Election to Complete. In the event that Landlord's Improvements are
not substantially completed by the Out Date, and Tenant has not exercised its
cancellation option under Paragraph 3.2, Tenant may at any time thereafter give
Landlord and Landlord's Lender (as defined below) written notice of Tenant's
intent to take over construction of the Landlord Improvements ("Tenant's Take
Over Notice"). In the event that the Landlord Improvements are not substantially
completed within thirty (30) days after Tenant's Take Over Notice, Tenant shall
have the right to complete Landlord's Improvements subject to the following
limitations: (a) Tenant must complete the Landlord's Improvements in accordance
with the then existing plans and specifications approved by Landlord; (b) Tenant
must use qualified contractors and subcontractors; (c) the work by Tenant on the
Landlord's Improvements must be
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prosecuted in a workmanlike manner; and (d) the work on the Landlord's
Improvements must be completed lien free in accordance with the terms of this
Lease.
4. Rent.
4.1 Base Rent. Tenant shall pay to Landlord as base rent for the Premises,
monthly payments ("Base Rent"), in advance, on the first day of each month of
the term hereof in accordance with the following schedule:
<TABLE>
<CAPTION>
Months Monthly Base Rent
------ -----------------
<S> <C>
1-12 $37,860.48
13-24 39,002.30
25-36 40,144.13
37-48 41,346.05
49-60 42,608.06
61-72 43,870.08
73-84 45,192.19
85-96 46,574.40
97-108 47,956.61
109-120 49,398.91
</TABLE>
Tenant shall deliver to Landlord upon the execution hereof $37,860.48 as Base
Rent for the first full month of the initial term. Rent for any period during
the term hereof which is for less than one month shall be a pro rata portion of
the monthly installment. Rent shall be payable in lawful money of the United
States to Landlord at the address stated herein or to such other persons or at
such other places as Landlord may designate in writing, without any offset or
deduction except as otherwise expressly set forth herein.
4.2 Certain Expenses. Tenant shall pay to Landlord during the term hereof,
in addition to the Base Rent and any additional rent and other amounts payable
by Tenant under this Lease all of the following costs and expenses within ten
(10) days after written demand from Landlord as additional rent:
(a) Any Assessments applicable to the Premises imposed or assessed
pursuant to the terms of that certain Amended and Restated Declaration of
Covenants, Conditions and Restrictions for Cascades Business Park, Los Angeles,
California, dated August 1, 2000 (the "CC&R's"). As used in this Section 4.2(a),
the term "Assessments" shall have the meaning given that term in the CC&R's. For
ease of
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reference, the definition of "Assessments," "Common Area," and "Common Expenses"
are reproduced in Exhibit "I" attached hereto. Any terms used in that Exhibit
but not otherwise defined shall have the meanings given those terms in the
CC&R's.
(b) A property management fee equal to 1.325% of the gross rentals
under this Lease.
Landlord agrees that no increase in the amount payable with respect to the
Premises under the CC&R's arising out of a modification or amendment of the
CC&R's shall be payable by Tenant under this Lease, except to the extent such
modification or amendment was approved by Tenant. Tenant agrees not to
unreasonably withhold, condition or delay any approval to a proposed amendment
to the CC&R's; provided that it shall not be deemed unreasonable for Tenant to
withhold its approval of a proposed amendment to the CC&R's if such amendment
shall result in an increase in the amount payable by Tenant under the CC&R's.
Landlord and Tenant agree that the methodology for determining the allocation of
costs under the CC&R's to the Premises shall be as outlined in Exhibit "H,"
attached hereto.
4.3 Certain Capital Items. As used herein, the term "Capital Item" means
an item, the cost of which under generally accepted accounting principles,
consistently applied, must be capitalized and not expensed. As used herein, the
term "Amortized Capital Cost" means a repair, maintenance, replacement,
alteration or improvement which (a) is a Capital Item, (b) either (i) costs
$15,000.00 or more with respect to a single Capital Item or (ii) has a cost that
when added to other Capital Items which are not Amortized Capital Costs would
cause the amount of costs for Capital Items that are not Amortized Capital Costs
and that are paid by Tenant to exceed $15,000.00 in any calendar year after the
fifth anniversary of the Commencement Date, (c) is undertaken after the fifth
anniversary of the Commencement Date, (d) is not related to or part of the
Tenant Improvements or any alterations by Tenant, (e) is not required due to
Tenant's particular use of the Premises, Tenant's breach of the Lease or any
alterations or other improvements to the Premises by Tenant, (f) is the
obligation of Tenant under this Lease, (g) has been approved by Landlord prior
to it having been incurred, and (f) is not a Landlord Structural Item (as
defined below). Landlord's approval under clause (g) of the previous sentence
shall not be unreasonably withheld consistent with the standards for making
capital improvements to comparable buildings of comparable age and design in Los
Angeles County, California. As used herein, the term "Useful Life" means the
useful life of the particular Capital Item determined under generally accepted
industry standards. As to each Capital Item that is a Amortized Capital Cost,
Tenant may give notice to Landlord of the proposed Capital Item, the amount of
the Amortized Capital Cost, Tenant's opinion of the Useful Life of the Capital
Item and that Tenant requires that Landlord reimburse Tenant for the entire
initial cost of the
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Amortized Capital Cost and agrees to repay Landlord on a monthly basis in a
monthly amount (the "Monthly Recovery Amount") which equals the monthly amount
that would fully amortize a loan having a principal balance equal to the
Amortized Capital Cost and an interest rate equal to the Amortization Interest
Rate (as defined below) in equal monthly payments over the number of months in
the Useful Life of the applicable Capital Item. After receipt of Tenant's
notice, Landlord may elect to perform the Capital Item constituting an Amortized
Capital Cost in lieu of reimbursing the Tenant for such Tenant Capital Cost. In
either event, commencing on the first day of the calendar month after the
calendar month in which the applicable Capital Item is completed and on the
first day of each month thereafter until the earlier of (A) the expiration of
the term of the Lease, or (B) the expiration of the number of months in the
item's Useful Life used to calculate the Monthly Recovery Amount, Tenant shall
pay Landlord as additional rent an amount equal to the Monthly Recovery Amount
as to each Amortized Capital Cost. As used herein, the term "Amortization
Interest Rate" means an interest rate equal to the LIBOR Rate plus 425 basis
points, where the "LIBOR Rate" means, for each month, the one (1) month LIBOR
(London Interbank Offered Rate) Rate published in The Wall Street Journal (the
"Reported Rate") on the first Publication Date (as defined below) of the
applicable month. If The Wall Street Journal (i) publishes more than one (1)
Reported Rate on any Publication Date, the average of such rates shall apply or
(ii) publishes a retraction or correction of any Reported Rate, the corrected
rate reported in such retraction or correction shall apply. If the Reported Rate
is no longer published at least monthly, the LIBOR Rate shall be deemed to be
such other London Interbank Offered Rate published in The Wall Street Journal as
most reasonably approximates the Reported Rate. As used herein, the term
"Publication Date" means any date on which the LIBOR Rate is published in The
Wall Street Journal. If Tenant makes the election under this paragraph 4-3, and
Landlord does not elect to perform the Capital Item constituting an Amortized
Capital Cost, Landlord shall reimburse Tenant for the entire cost of such
Capital Item within thirty (30) days after Tenant's notice to Landlord of
completion of the applicable Capital Item. As a condition to Landlord's
obligation to make the payments to Tenant described in this paragraph 4.3,
Tenant shall provide Landlord with reasonable evidence that the costs of such
Capital Item was paid and unconditional mechanic's lien releases in the form
required under California law from the contractor and subcontractors who
installed the Capital Item.
4.4 Effect of Exercise of Option to Extend on Payment of Certain Amounts
Under Section 4.3. In the event that Tenant exercises an option to extend
pursuant to paragraph 39, then with respect to Amortized Capital Costs under
paragraph 4.3 (other than Amortized Capital Costs with respect to the
replacement of the roof membrane), as to which it has not made a Monthly
Recovery Amount payment for the number of months in the Useful Life of the
applicable Capital Item, Tenant shall pay during the
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applicable Option Period a Monthly Recovery Amount until it has made monthly
payments for the number of months in the Useful Life of the applicable Capital
Item, taking into account all prior Monthly Recovery Amount payments made by
Tenant.
5. Security Deposit. Tenant shall deposit with Landlord upon execution hereof
$40,000.00 as security for Tenant's faithful performance of Tenant's obligations
hereunder (the "Security Deposit"). After the occurrence of an Event of Default,
Landlord may use, apply or retain all or any portion of the Security Deposit for
the payment of any rent or additional rent or for the payment of any other sum
to which Landlord may become obligated by reason of Tenant's default, or to
compensate Landlord for any loss or damage which Landlord may suffer thereby. If
Landlord so uses or applies all or any portion of the Security Deposit, Tenant
shall within ten (10) days after written demand therefor deposit cash with
Landlord in an amount sufficient to restore the Security Deposit to the full
amount thereof and Tenant's failure to do so shall be a material breach of this
Lease. Landlord shall not be required to keep the Security Deposit separate from
its general accounts. If Tenant performs all of Tenant's obligations hereunder,
the Security Deposit, or so much thereof as has not theretofore been applied by
Landlord, shall be returned, without payment of interest or other increment for
its use, to Tenant (or, at Landlord's option, to the last assignee, if any, of
Tenant's interest hereunder) within thirty (30) days after the later of (a) the
expiration of the term hereof, or (b) the date Tenant has vacated the Premises.
No trust relationship is created herein between Landlord and Tenant with respect
to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied for the manufacturing and
assembly of open and closed cassette wafer handling inspection and sorting tools
serving the semi-conductor industry, related office and engineering operations
and any other uses permitted by law and for no other purpose. Subject to
Tenant's obligations to comply with applicable law as provided in Section
6.2(b), Tenant shall have access to and may operate within the Premises seven
(7) days per week, twenty-four (24) hours per day, fifty-two (52) weeks per
year. Tenant shall be solely responsible for (a) determining if and to the
extent Tenant's use is permitted by applicable laws and regulations and (b)
obtaining and maintaining all permits and licenses required by applicable law
and regulations for such use.
6.2 Compliance with Law.
(a) Landlord warrants to Tenant to Landlord's actual knowledge that
the Premises, in the state existing on the date (the "Possession Date") that
Landlord
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tenders possession of the Premises to Tenant with the Landlord Improvements
substantially completed, but without regard to the Tenant Improvements construed
by Tenant pursuant to Exhibit "B," alterations by Tenant or to the use for which
Tenant will occupy the Premises, does not violate any covenants or restrictions
of record, or any applicable building code, law, rule, regulation, statute or
ordinance ("Applicable Law") in effect and enforceable against the Premises on
the Possession Date. In the event it is determined that this warranty has been
violated, then it shall be the obligation of the Landlord, after written notice
from Tenant, to promptly, at Landlord's sole cost and expense, rectify any such
violation. In the event Tenant does not give to Landlord written notice of the
violation of this warranty within one (1) year after the Possession Date, the
correction of same shall be the obligation of Tenant at Tenant's sole cost,
subject to Landlord's obligations under Paragraph 7.4(b) with respect to
Landlord's Structural Items.
(b) Except as provided in Paragraph 6.2(a), Tenant shall, at
Tenant's expense, comply promptly with all Applicable Laws, and requirements of
any fire insurance underwriters or rating bureaus, now in effect or which may
hereafter come into effect, whether or not they reflect a change in policy from
that now existing, during the term or any part of the term hereof, relating in
any manner to the Premises or the occupation and use by Tenant of the Premises.
Tenant shall not use nor permit the use of the Premises in any manner that will
tend to create waste or a nuisance.
6.3 Condition of Premises.
(a) Landlord shall deliver the Premises to Tenant clean and free of
debris, occupants, rodents, insects, and other pests on the Lease on the
Possession Date and Landlord warrants to Tenant to Landlord's actual knowledge
that the plumbing, lighting, air conditioning, heating, and loading docks and
doors in the Premises other than those portions constructed by Tenant shall be
in good operating condition on the Possession Date. In the event that it is
determined that this warranty has been violated, then it shall be the obligation
of Landlord, after receipt of written notice from Tenant setting forth with
specificity the nature of the violation, to promptly, at Landlord's sole cost,
rectify such violation. Tenant's failure to give such written notice to Landlord
within the Reporting Period (as defined below) shall cause the conclusive
presumption that Landlord has complied with all of Landlord's obligations
hereunder. As used in this Section 6.3(a), the term "Reporting Period" means the
period ending 30 days after the Commencement Date with respect to any violation
that is discoverable by a reasonable inspection of the Premises and the period
ending 90 days after the Commencement Date with respect to any other violation.
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<PAGE>
(b) Except as otherwise provided in this Lease, Tenant hereby
accepts the Premises in their condition existing as of the Possession Date,
subject to all applicable zoning, municipal, county and state laws, ordinances
and regulations governing and regulating the use of the Premises, and any
covenants or restrictions or easements of record, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
hereto. Tenant acknowledges that neither Landlord nor Landlord's agent has made
any representation or warranty as to the present or future suitability of the
Premises for the conduct of Tenant's business.
7. Maintenance, Repairs and Alterations.
7.1 Tenant's Obligations.
(a) Tenant shall keep in good order, condition and repair the
Premises and every structural or nonstructural part (other than the Landlord
Structural Items (as defined below)) thereof (whether or not such portion of the
Premises requiring repair, or the means of repairing the same are reasonably or
readily accessible to Tenant, and whether or not the need for such repairs
occurs as a result of Tenant's use, any prior use, the elements or the age of
such portion of the Premises) including, without limiting the generality of the
foregoing, all plumbing, heating and air conditioning (Tenant shall procure and
maintain, at Tenant's expense, an air conditioning system maintenance contract)
ventilating, electrical, lighting facilities and equipment within the Premises,
fixtures, walls (interior and exterior), ceilings, roofs (including without
limitation the composition roofing membrane), floors, windows, doors, plate
glass and skylights located within the Premises, and all driveways, parking
lots, fences and signs located on the Premises and sidewalks and parkways
adjacent to the Premises.
(b) Tenant shall maintain the Premises as provided in Paragraph
7.1(a) and in accordance with the requirements of the CC&R's; provided that a
copy of such covenants or restrictions are provided to Tenant in writing.
Tenant, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices and any damage or deterioration
shall not be deemed "ordinary wear and tear" if the same could have been
prevented by good maintenance practice. Tenant's obligations shall include
restorations, replacements or renewals when necessary and when determined not to
be due to ordinary wear and tear, in order to keep the Premises and all
improvements thereon or a part thereof in good order, condition and state of
repair. Notwithstanding anything contained in the Lease to the contrary, Tenant
shall make all repairs whatsoever on the Premises necessitated by the
negligence, misconduct or fault of Tenant, or its agents, licensees or agents.
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(c) If the term of this Lease, as the same may be extended or
renewed, exceeds five (5) years, Landlord shall have the right to require Tenant
to repaint the improvements every five (5) to seven (7) years, but not more
often than once every five (5) years, as reasonably necessary.
7.2 Surrender. On the last day of the term hereof, or on any sooner
termination, Tenant shall surrender the Premises to Landlord in the same
condition as when received, ordinary wear and tear and loss by casualty (to the
extent that Landlord is obligated to repair the same under this Lease) and
condemnation excepted, clean and free of debris; provided, however, that Tenant
may, but shall not be obligated to, remove any of the improvements described in
Exhibit "D" or any Alterations (as defined below) or Utility Installations (as
defined below) as to which Landlord has waived the obligation to remove such
items at the end of the term pursuant to Paragraph 7.5(a), below. Tenant shall
repair any damage to the Premises occasioned by the installation or removal of
Tenant's trade fixtures, furnishings and equipment. Notwithstanding anything to
the contrary otherwise stated in this Lease, upon the expiration of the term or
the earlier termination of this Lease, Tenant shall leave the air lines, power
panels, electrical distribution systems, mechanical systems, lighting fixtures,
air conditioning, plumbing, heating (including space heaters) and fencing on the
Premises in substantially the same condition and operating order as on the
Commencement Date, and Tenant shall within thirty (30) days after receipt of a
reasonably detailed invoice therefor pay to Landlord that portion of the cost to
restore such items to good condition and operating order as may be reasonably
allocable to Tenant's tenancy.
7.3 Landlord's Rights. Tenant shall provide to Landlord written reports
every six (6) months setting forth in reasonable detail the regularly scheduled
maintenance conducted by Tenant with respect to the Premises, which shall
include reasonable evidence of the actual performance and completion of such
scheduled maintenance. If Tenant fails to perform Tenant's obligations under
this Paragraph 7, or under any other paragraph of this Lease, Landlord may at
its option (but shall, not be required to) enter upon the Premises after ten
(10) days' prior written notice to Tenant (except in the case of an emergency,
in which case no notice shall be required), perform such obligations on Tenant's
behalf and put the same in good order, condition and repair, and the cost
thereof together with interest thereon at the Interest Rate (as defined below)
shall become due and payable as additional rental to Landlord together with
Tenant's next rental installment.
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7.4 Landlord's Obligations.
(a) Except for the obligations of Landlord under Paragraphs 6.2(a)
and 6.3(a) (relating to Landlord's warranty), Paragraph 9 (relating to
destruction of the Premises), under Paragraph 14 (relating to condemnation of
the Premises) Paragraph 7.4(b), it is intended by the parties hereto that
Landlord have no obligation, in any manner whatsoever, to repair and maintain
the Premises nor the Building located thereon nor the equipment therein, whether
structural or non structural, all of which obligations are intended to be that
of the Tenant under Paragraph 7.1 hereof. Tenant expressly waives the benefit of
any statute now or hereinafter in effect which would otherwise afford Tenant the
right to make repairs at Landlord's expense or to terminate this Lease because
of Landlord's failure to keep the Premises in good order, condition and repair.
(b) Landlord, at Landlord's sole cost and expense, and without
reimbursement as an Operating Expense, shall maintain, repair and replace the
structural elements of the foundations, exterior walls, roof structure and
improvements below grade (the "Landlord Structural Items"), subject to normal
wear and tear, provided however, if the need for such maintenance, repair or
replacement arises because of the negligence, misconduct or fault of Tenant, or
its agents, licensees or invitees, Tenant, subject to Paragraph 8.8 hereof,
shall reimburse Landlord for the cost thereof within thirty (30) days after
receipt of a reasonably detailed invoice therefor.
(c) In the event Landlord holds a warranty covering any work of
repair or maintenance Tenant is obligated to perform under this Lease, Landlord
shall, at Landlord's cost, assign such warranty to Tenant to the extent
necessary to allow Tenant to obtain the benefit of that warranty for that repair
or maintenance. Effective upon any termination of this Lease, any warranty to
the extent so assigned to Tenant is hereby reassigned by Tenant to Landlord. At
Tenant's request, Landlord will enforce such warranties against the applicable
parties making such warranties for the benefit of a Tenant.
7.5 Alterations and Additions.
(a) Tenant shall not, without Landlord's prior written consent,
which consent shall not be unreasonably withheld, conditioned or delayed, make
any Alterations (as defined below) or Utility Installations in, on or about the
Premises. Tenant may, however, make nonstructural Alterations or Utility
Installations to the interior of the Premises (excluding the roof) without such
consent but upon notice to Landlord, as long as they are not visible from the
outside, do not involve puncturing, relocating or removing the roof or any
existing walls and the cumulative costs thereof
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does not exceed $25,000.00 in each instance, and provided that this exception is
exercised in good faith by Tenant (i.e., Tenant does not artificially segregate
an Alteration or Utility Installation which by its nature is a single unit or
event into smaller increments for the purposes of avoiding the necessity of
obtaining Landlord's consent). Notwithstanding the foregoing, Landlord may
withhold its consent in its sole discretion with respect to any Alteration or
Utility Installation to the exterior of the Premises or the exterior of the
Building or which affects the structural elements of the Building. As used in
Paragraph 7.5, the term "Utility Installation" shall mean carpeting, window
coverings, air lines, power panels, electrical distribution systems, lighting
fixtures, space heaters, air conditioning, plumbing and fencing. As used in this
Paragraph 7.5, the term "Alteration" shall mean any modification of the
improvements on the Premises other than Utility Installations, whether by
addition or deletion. Subject to the following three sentences, Landlord may
require that Tenant remove any or all of said Alterations or Utility
Installations at the expiration or earlier termination of the term, and restore
the Premises to their prior condition. Prior to commencing any Alteration or
Utility Installation, Tenant may request that Landlord waive Tenant's obligation
to remove such Alteration or Utility Installation at the end of the term. Any
such waiver must be in writing and shall only apply to the Alteration or Utility
Installation described therein. Landlord hereby agrees that Tenant shall not be
obligated to remove the initial improvements described in Exhibit "D" upon the
expiration of the term. Landlord may require Tenant to provide Landlord, at
Tenant's sole cost and expense, a lien and completion bond in an amount equal to
one and one-half times the estimated cost of such improvements, to insure
Landlord against any liability for mechanic's and materialmen's liens and to
insure completion of the work; provided that Landlord agrees to waive the
requirement for such bond so long as the initially-named tenant or any Tenant
Affiliate (as defined below) is the Tenant under this Lease and in possession of
a portion of the Premises in which the work is being performed. Should Tenant
make any Alterations or Utility Installations as to which Landlord's consent is
required without the prior approval of Landlord, Landlord may, at any time
during the term of the Lease, require that Tenant remove any or all of the same.
(b) Any Alterations or Utility Installations made by Tenant during
the term of this Lease shall be done in a good and workmanlike manner and of
good and sufficient materials, and Tenant shall, within thirty (30) days after
completion of such Alteration or Utility Installation, provide Landlord with
as-built plans and specifications for same. Notwithstanding anything contained
in this Lease to the contrary, Paragraphs 7.5(d)(1)(ii) and (iii) shall apply to
Alterations or Utility Installations (other than racking, shelving and temporary
partitions) not requiring Landlord's consent under Paragraph 7.5(a).
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(c) Any Alterations or Utility Installations in, or about the
Premises that Tenant shall desire to make and which require the consent of the
Landlord shall be presented to Landlord in written form, with proposed detailed
plans. If Landlord shall give its consent, the consent shall be conditioned upon
Tenant acquiring a permit to perform such Alteration or Utility Installation
from appropriate governmental agencies, the furnishing of a copy thereof to
Landlord prior to the commencement of the work and the compliance by Tenant of
all conditions of said permit in a prompt and expeditious manner, and upon
satisfaction of all of the requirements set forth in Paragraph 7.5(d), below.
(d) For any Alterations or Utility Installations requiring
Landlord's prior written consent:
(1) Tenant shall:
(i) Request Landlord's approval in writing at least
thirty (30) days prior to proposed Alteration or Utility Installations.
(ii) Employ a California licensed architect, contractor
and structural engineer in connection with the proposed construction.
(iii) Be fully responsible for the acts of Tenant's
consultants, employees, contractors, subcontractors, invitees and agents,
and cause them to fully comply with any applicable terms of this Lease and
documents referred to by this Lease and all applicable laws, rules and
regulations.
(iv) Enter into written agreements with an architect and
general contractor. Copies of executed agreements will be forwarded to
Landlord within five (5) days of Landlord's request therefor.
(v) Cause to be obtained an applicable building permit
for any and all construction and modifications, and construct the
additions and alterations and perform the construction work in accordance
with all applicable laws, including without limitation the Americans With
Disabilities Act.
(2) Tenant's architect shall:
(i) Be licensed by the State of California.
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(ii) Incorporate the building standard details (if any)
supplied by Landlord onto the drawings.
(iii) Submit final plans for Landlord's written approval
prior to construction.
(iv) Be available for final inspection with Landlord at
job completion.
(v) Sign off on the as-built drawings as the Architect's
certification that the improvements have, in fact, been built as per the
Architect's design.
(3) Tenant's general contractor and/or subcontractors shall:
(i) Be licensed by the State of California.
(ii) Have substantial experience providing similar
quality and quantity of improvements.
(iii) Have a bonding capacity equal to or exceeding the
valuation of the job. Landlord may, at its sole option, require the job to
be bonded; provided that Landlord agrees to waive the requirement for such
bond so long as the initially-named tenant is the Tenant under this Lease
and in possession of a portion of the Premises in which the work is being
performed.
(iv) Maintain in full force and effect, throughout the
duration of its performance under the contract with the Tenant, a Worker's
Compensation insurance policy and a Commercial General Liability insurance
policy issued by an insurer satisfactory to Landlord with liability
coverage of not less than $1,000,000.00 for personal injury and
$500,000.00 to cover property damage. The Commercial General Liability
insurance policy shall include assumption of contractual liability.
Certificates of insurance containing a thirty (30) day cancellation clause
shall be furnished to Landlord prior to commencement of performance under
the construction contract naming Landlord and its managing agent as
additional insureds.
(v) Provide Landlord with as-built drawings of all
improvements.
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(e) All approvals by Landlord, as provided for in this
Paragraph 7.5, shall not be unreasonably withheld, conditioned or delayed. All
requests to be submitted to Landlord shall be submitted through Landlord's
managing agent. If Landlord shall give its consent, the consent shall be deemed
conditioned upon the compliance by Tenant in a prompt and expeditious manner of
all conditions of all permits obtained pursuant to Paragraph 7.5(d), above.
(f) Tenant shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Tenant at or for
use in the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Tenant shall
give Landlord not less than thirty (30) days' notice prior to the commencement
of any work in the Premises costing in excess of $5,000, and Landlord shall have
the right to post notices of non-responsibility in or on the Premises as
provided by law. If Tenant shall, in good faith, contest the validity of any
such lien, claim or demand, then Tenant shall, at its sole expense defend itself
and Landlord against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement thereof against the
Landlord or the Premises, upon the condition that if Landlord shall require,
Tenant shall furnish to Landlord a surety bond satisfactory to Landlord in an
amount equal to such contested lien claim or demand indemnifying Landlord
against liability for the same and holding the Premises free from the effect of
such lien or claim. In addition, Landlord may require Tenant to pay Landlord's
attorneys fees and costs in participating in such action if Landlord shall
decide it is in its best interest to do so.
(g) Unless otherwise agreed in writing pursuant to Paragraph
7.5(a) or otherwise, Landlord may require that any or all Alterations or Utility
Installations be removed by the expiration or earlier termination of this Lease,
notwithstanding their installation may have been consented to by Landlord, and
that the Premises be restored to their prior condition. Should Tenant make any
alterations, improvements, additions or Utility Installations without the prior
approval of Landlord, Landlord may require that Tenant remove any or all of the
same.
(h) Unless Landlord requires their removal, as set forth in
Paragraph 7.5(g), all Alterations and Utility Installations (whether or not such
Utility Installations constitute trade fixtures of Tenant), which may be made on
the Premises, shall become the property of Landlord and remain upon and be
surrendered with the Premises at the expiration or earlier termination of the
term. Notwithstanding the provisions of this Paragraph 7.5(h), Tenant's
machinery and equipment, other than that which is affixed to the Premises so
that it cannot be removed without material damage to the Premises, shall remain
the property of Tenant and may be removed by Tenant subject to the provisions of
Paragraph 7.2.
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8. Insurance; Indemnity
8.1 Tenant hereby agrees to indemnify, defend and hold harmless
Landlord, its successors, assigns, subsidiaries, directors, officers, agents and
employees from and against any and all damage, loss, liability or expense
including, but not limited to, attorney's fees and legal costs suffered by same
directly or by reason of any claim, suit or judgment brought by or in favor of
any person or persons for damage, loss or expense due to, but not limited to,
bodily injury, including death resulting anytime therefrom, and property damage
sustained by such person or persons which arises out of, is occasioned by or in
any way attributable to the use or occupancy of the Premises or other areas in
the Industrial Center by Tenant, the acts or omission of Tenant, its agents,
employees or any other contractors or invitees brought onto said Premises by
Tenant, or any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, except to the
extent finally determined by a court of competent jurisdiction to have been
caused by the gross negligence or wilful misconduct of Landlord, its employees,
and agents. If any action or proceeding is brought against Landlord by reason of
any such claim, Tenant, upon notice from Landlord, shall defend same at Tenant's
expense by counsel satisfactory to Landlord. Such loss or damage shall include,
but not be limited to, any injury or damage to Landlord's personnel (including
death resulting anytime therefrom) on the Premises. Tenant agrees that the
obligations assumed herein shall survive the termination of this Lease.
8.2 Tenant hereby agrees to maintain in full force and effect at all
times during the term of this Lease, at Tenant's own expense, for the protection
of Tenant, Landlord and Landlord's property manager, as their interest may
appear, policies of insurance issued by a responsible carrier or carriers which
afford the following coverages:
(a) Workers' Compensation with statutory limits.
(b) Employers' Liability insurance with the following minimum
limits:
<TABLE>
<S> <C>
Bodily injury by disease per person $1,000,000
Bodily injury by accident policy limit $1,000,000
Bodily injury by disease policy limit $1,000,000
</TABLE>
(c) Property insurance on a special causes of loss insurance
form covering any and all personal property of Tenant including but not limited
to improvements, betterments, furniture, fixtures, Utility Installations, and
equipment in
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an amount not less than their full replacement cost, with a deductible not to
exceed $10,000. This policy should contain a waiver of subrogation.
(d) Commercial General Liability Insurance including Broad
Form Property Damage and Contractual Liability with the following minimum
limits:
<TABLE>
<S> <C>
General Aggregate $2,000,000
Products/Completed Operations Aggregate $2,000,000
Each Occurrence $1,000,000
Personal & Advertising Injury $1,000,000
Medical Payments $5,000 per
person
</TABLE>
(e) Umbrella/Excess Liability on a following form basis with
the following minimum limits:
<TABLE>
<S> <C>
General Aggregate $10,000,000
Each Occurrence $10,000,000
</TABLE>
The limits of said insurance in this Paragraph 8(b)(i) shall
not however, limit the liability of Tenant hereunder.
8.3 Landlord shall, at all times during the term of this Lease,
maintain the following insurance:
(a) A policy or policies of all-risk property insurance,
issued by and binding upon some solvent insurance company, insuring for the full
replacement cost of the building on the Premises. Landlord shall not be
obligated to insure, and shall not assume any liability or risk of loss for, any
of Tenant's furniture, equipment, machinery, goods, supplies, utility
installations, improvements, or alterations upon the Premises. This policy shall
contain an agreed amount endorsement and be written with no coinsurance.
Landlord may, but shall not be obligated to, obtain earthquake and flood
insurance.
(b) Rent insurance on an all-risk basis in an amount equal to
all that is called for under Paragraph 4 of this Lease (Base Rent and any
additional rents payable under this Lease including tax and insurance costs) for
a period of at least twelve (12) months commencing with the date of loss.
(c) Boiler and Machinery insurance in an amount satisfactory
to Landlord on a comprehensive coverage form.
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(d) Commercial general liability insurance in addition to, and
not in lieu of, the commercial general liability insurance required to be
maintained by Tenant in an amount not less than $1 million per occurrence and $3
million general aggregate. Tenant shall not be named as an additional insured
therein.
Landlord may elect to have reasonable deductibles in connection with the
insurance specified in Paragraph 8.3, and Tenant shall be liable for such
deductible amount in the event of a claim thereunder.
8.4 The Tenant shall deliver to Landlord prior to the time such
insurance is first required to be carried by Tenant, and thereafter at least
thirty (30) days prior to expiration of such policy, certificates of insurance
evidencing the above coverage with limits not less than those specified above.
Insurance required hereunder shall be in companies holding a "General
Policyholders Rating" of at least A-VIII as set forth in the most current issue
of "A.M. Best's Insurance Guide". Such Certificates with the exception of
Worker's Compensation, shall name Landlord, its subsidiaries, directors, agents
and employees, and its property manager as additional insureds and shall
expressly provide that the interest of same herein shall not be affected by a
breach by Tenant of any insurance policy provision for which such Certificates
evidence coverage. Further, all Certificates shall expressly provide that no
less than thirty (30) days prior written notice shall be given to Landlord in
the event of material alteration to or cancellation of the coverage evidenced by
such Certificates.
8.5 Upon demand not more often than once in any calendar year, Tenant
shall provide Landlord, at Tenant's expense, with such increased amount of
existing insurance and such other insurance coverage in such limits as Landlord
may require in its reasonable judgment to afford Landlord adequate protection
consistent with the practices of institutional owners of comparable properties.
8.6 If, on account of the failure of Tenant to comply with the
foregoing provisions, Landlord is adjudged a co-insurer by the insurance
carrier, then any loss or damage Landlord shall sustain by reason thereof shall
be borne by Tenant and shall be immediately paid by Tenant upon receipt of bill
thereof and evidence of such loss.
8.7 Landlord makes no representation that the limits of liability
specified to be carried by Tenant under the term of this Lease are adequate to
protect Tenant against Tenant's undertaking under this Paragraph 8 and in the
event Tenant believes that any such insurance coverage called for under this
Lease is insufficient, Tenant shall provide, at its own expense, such additional
insurance as Tenant deems adequate.
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<PAGE>
8.8 Anything in this Lease to the contrary notwithstanding, Landlord
and Tenant hereby waive and release each other of and from any and all rights of
recovery, claims, action or cause of action, against each other, their agents,
officers and employees, for any loss or damage that may occur to the Premises,
improvements to the building of which the Premises are a part, personal property
(building contents) within the building on the Premises, any furniture,
equipment, machinery, goods or supplies not covered by this Lease which Tenant
may bring or obtain upon the Premises or any additional improvements which
Tenant may construct on the Premises, by reason of fire, the elements or any
other cause which could be insured against under the terms of all risk property
insurance policies, regardless of cause or origin, including negligence of
Landlord or Tenant and their agents, officers and employees. Because this
Paragraph will preclude the assignment of any claim mentioned in it by way of
subrogation (or otherwise) to an insurance company (or any other person) each
party to this Lease agrees immediately to give to each insurance company,
written notice of the terms of the mutual waivers contained in this Paragraph,
and to have the insurance policies properly endorses if necessary to prevent the
invalidation of the insurance coverages by reason of the mutual waivers
contained in this Paragraph.
8.9 Tenant shall pay to Landlord during the term hereof, additional
rent in the amount of any premiums for the insurance obtained under Paragraphs
8.3(a), 8.3(b), 8.3(c) and 8.3(d) and any other insurance which Landlord or
Landlord's lender deems necessary for the Premises and the amount of any
deductibles paid by Landlord under such policies. If Landlord elects to
self-insure or includes the Premises under blanket insurance policies covering
multiple properties, then Tenant's reimbursement obligation hereunder shall
include the portion of the reasonable cost of such self-insurance or blanket
insurance that is allocated to the Premises. Tenant shall pay any such premiums
to Landlord within thirty (30) days after receipt by Tenant of a copy of the
premiums statement or other evidence of the amount due. If the insurance
policies maintained hereunder cover other improvements in addition to the
Premises, Landlord shall also deliver to Tenant a reasonably detailed statement
of the amount of such premiums attributable to the Premises and showing in
reasonable detail the manner in which such amount was computed. If the term of
this Lease shall not expire concurrently with the expiration of the period
covered by such insurance, Tenant's liability for premiums shall be prorated on
an annual basis.
8.10 All insurance to be carried by Tenant shall be primary to and not
contributory with any similar insurance carried by Landlord, whose insurance
shall be considered excess insurance only.
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8.11 Tenant hereby agrees that Landlord shall not be liable for injury
to Tenant's business or any loss of income therefrom or for damage to the goods,
wares, merchandise or other property of Tenant, Tenant's employees, invitees,
customers, or any other person in or about the Premises, nor shall Landlord be
liable for injury to the person of Tenant, Tenant's employees, agents or
contractors, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, from the breakage, leakage, obstruction
or other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures, or from any other cause, whether said damage
or injury results from conditions arising upon the Premises, or from other
sources or places and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible to Tenant. Notwithstanding
Landlord's negligence or breach of this Lease, Landlord shall under no
circumstances be liable for injury to Tenant's business or for any loss of
income or profit therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is less than
50% of the then replacement cost of the Premises. "Premises Building Partial
Damage" shall herein mean damage or destruction to the building of which the
Premises are a part to the extent that the cost of repair is less than 50% of
the then replacement cost of such building as a whole.
(b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 50% or more
of the then replacement cost of the Premises. "Premises Building Total
Destruction" shall herein mean damage or destruction to the building of which
the Premises are a part to the extent that the cost of repair is 50% or more of
the then replacement cost of such building as a whole.
(c) "Insured Loss" shall herein mean damage or destruction
which was caused by an event required to be covered by the insurance described
in Paragraph 8.
9.2 Partial Damage -- Insured Loss. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is an Insured Loss and which falls into the classification of
Premises Partial Damage or Premises Building Partial Damage, then Landlord
shall, at Landlord's expense, repair such damage, but not Tenant's fixtures,
equipment or tenant
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improvements unless the same have become a part of the Premises pursuant to
Paragraph 7.5 hereof as soon as reasonably possible and this Lease shall
continue in full force and effect. Notwithstanding the above, if the insurance
proceeds received by Landlord are not sufficient to effect such repair, Landlord
shall give notice to Tenant of the amount required in addition to the insurance
proceeds to effect such repair. Tenant shall contribute the required amount to
Landlord within ten days after Tenant has received notice from Landlord of the
shortage in the insurance. When Tenant shall contribute such amount to Landlord,
Landlord shall make such repairs as soon as reasonably possible and this Lease
shall continue in full force and effect. Tenant shall in no event have any right
to reimbursement for any such amounts so contributed.
9.3 Partial Damage -- Uninsured Loss. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is not an Insured Loss and which falls within the classification
of Premises Partial Damage or Premises Building Partial Damage, unless caused by
a negligent or willful act of Tenant or its agents, contractors or invitees (in
which event Tenant shall make the repairs at Tenant's expense), Landlord may at
Landlord's option either (i) repair such damage as soon as reasonably possible
at Landlord's expense, 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 damage of Landlord's intention to cancel and
terminate this Lease, as of the date of the occurrence of such damage. In the
event Landlord elects to give such notice of Landlord's intention to cancel and
terminate this Lease, Tenant shall have the right within ten (10) days after the
receipt of such notice to give written notice to Landlord 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 such 10-day period this Lease shall be canceled
and terminated as of the date of the occurrence of such damage.
9.4 Total Destruction. If at any time during the term of this Lease
there is damage, whether or not an Insured Loss, (including destruction required
by any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, then Landlord
may at Landlord's option either (i) repair such damage or destruction, but not
Tenant's fixtures, equipment, tenant improvements or Utility Installations, as
soon as reasonably possible at Landlord's expense, and this Lease shall continue
in full force and effect, or (ii) give written notice to Tenant within thirty
(30) days after the date of occurrence of such damage of Landlord's intention to
cancel and terminate this Lease, in which case this Lease shall be canceled and
terminated as of the date of the occurrence of such damage.
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<PAGE>
9.5 Damage Near End of Term.
(a) If at any time during the last six months of the term of
this Lease there is damage, whether or not an Insured Loss, which falls within
the classification of the Premises Partial Damage, Landlord may at Landlord's
option cancel and terminate this Lease as of the date of occurrence of such
damage by giving written notice to Tenant of Landlord's election to do so within
30 days after the date of occurrence of such damage.
(b) Notwithstanding Paragraph 9.5(a) in the event that Tenant
has an option to extend or renew this Lease, and the time within which said
option may be exercised has not yet expired, Tenant shall exercise such option,
if it is to be exercised at all, no later than 20 days after the occurrence of
an Insured Loss falling within the classification of Premises Partial Damage
during the last six months of the term of this Lease. If Tenant duly exercises
such option during said 20 day period, Landlord shall, at Landlord's expense,
repair such damage, but not Tenant's fixtures, equipment or tenant improvements,
as soon as reasonably possible and this Lease shall continue in full force and
effect, provided Tenant first deposits with Landlord any shortfall in necessary
funds. If Tenant fails to exercise such option during said 20 day period, then
Landlord may at Landlord's option terminate and cancel this Lease as of the
expiration of said 20 day period by giving written notice to Tenant of
Landlord's election to do so within 10 days after the expiration of said 20 day
period, notwithstanding any term or provision in the grant of option to the
contrary.
9.6 Abatement of Rent; Tenant's Remedies.
(a) In the event of damage described in Paragraphs 9.2, 9.3 or
9.5 and Landlord or Tenant repairs or restores the Premises pursuant to the
provisions of Paragraph 9, the rent payable hereunder for the period during
which such damage, repair or restoration continues shall be abated in proportion
to the degree to which Tenant's use of the Premises is impaired to the extent
Landlord receives proceeds from rent abatement insurance. Except for abatement
of rent, if any, Tenant shall have no claim against Landlord for any damage
suffered by reason of any such damage, destruction, repair or restoration.
(b) If Landlord shall be obligated to repair or restore the
Premises under the provisions of Paragraph 9 and shall not commence such repair
or restoration within 90 days after such obligations shall accrue, Tenant may at
Tenant's option cancel and terminate this Lease by giving Landlord written
notice of Tenant's election to do so at any time prior to the commencement of
such repair or restoration. In such
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event this Lease shall terminate as of the date of such notice. In the event
that Landlord shall be obligated to repair or restore the Premises pursuant to
Paragraph 9 of this Lease and shall not commence such repair or restoration
within ninety (90) days after such obligation shall accrue, the right of
Tenant to terminate this Lease pursuant to this Paragraph 9.6 (b) shall be the
sole right and remedy of Tenant against Landlord, and Landlord shall have no
other liability to Tenant, for damages, specific performance or otherwise, in
connection with any such failure.
9.7 Termination -- Advance Payments. Upon termination of this Lease
pursuant to Paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Tenant to Landlord. Landlord
shall, in addition, return to Tenant so much of Tenant's security deposit as has
not theretofore been applied by Landlord.
9.8 Waiver. Landlord and Tenant waive the provisions of any statutes
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Definition of "Real Property Tax". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax imposed on the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, as against any legal or equitable interest
of Landlord in the Premises or in the real property of which the Premises are a
part, as against Landlord's right to rent or other income therefrom, and as
against Landlord's business of leasing the Premises. The term "real property
tax" shall also include any tax, fee, levy, assessment or charge (a) in
substitution of, partially or totally, any tax, fee, levy, assessment or charge
hereinabove included within the definition of "real property tax," or (b) the
nature of which was hereinbefore included within the definition of "real
property tax," or (c) which is imposed for a service or right not charged prior
to June 1,1978, or, if previously charged, has been increased since June 1,1978,
or (d) which is imposed as a result of a transfer, either partial or total, of
Landlord's interest in the Premises or which is added to a tax or charge
hereinbefore included within the definition of real property tax by reason of
such transfer, or (e) which is imposed by reason of this transaction, any
modifications or changes hereto, or any transfers hereof. The term "real
property tax" shall also include fees payable to tax consultants and attorneys
for consultation and contesting real property taxes. Notwithstanding the
foregoing, the
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term "real property tax" shall exclude inheritance taxes, personal income taxes,
estate taxes, gift, excise, franchise, capital levy, state payroll, stamp or
profit taxes, however designated. If any real property tax to be paid by Tenant
shall cover any period of time prior to the Commencement Date, such real
property taxes shall be equitably prorated to cover only the period of time
within the applicable tax fiscal year this Lease is in effect.
10.2 Payment of Taxes.
(a) Tenant shall pay the real property tax applicable to the
Premises during the term of this Lease. Subject to Paragraph 10.2(b), all such
payments shall be made at least ten (10) days prior to any delinquency date.
Tenant shall promptly furnish Landlord with satisfactory evidence that such
taxes have been paid. If any such taxes shall cover any period of time prior to
or after the expiration or termination of this Lease, Tenant's share of such
taxes shall be prorated to cover only that portion of the tax bill applicable to
the period that this Lease is in effect, and Landlord shall reimburse Tenant for
any overpayment. If Tenant shall fail to pay any required real property tax,
Landlord shall have the right to pay the same and Tenant shall reimburse
Landlord therefor upon demand.
(b) Advance Payment. In the event Tenant incurs a late charge
on a Rent payment more than two times during the term of this Lease, Landlord
may, at Landlord's option, estimate the current real property taxes, and require
that such taxes be paid in advance to Landlord by Tenant, either (i) in a lump
sum amount equal to the installment due, at least twenty (20) days prior to the
applicable delinquency date, or (ii) monthly in advance with the payment of Base
Rent. If Landlord elects to require payment monthly in advance, the monthly
payment shall be an amount equal to the amount of the estimated installment of
taxes divided by the number of months remaining before the month in which such
installment becomes delinquent. When the actual amount of the applicable tax
bill is known, the amount of such equal monthly advance payments shall be
adjusted as required to provide the funds needs to pay the applicable taxes. If
the amount collected by Landlord is insufficient to pay such real property taxes
when due, Tenant shall pay Landlord, upon demand such additional sums as are
necessary to pay such obligations. All monies paid to Landlord under this
paragraph may be intermingled with other monies of Landlord and shall not bear
interest. In the event of an Event of Default by Tenant in the performance of
its obligations under this Lease, any balance of funds paid to Landlord under
the provisions of this paragraph may, at the option of Landlord, be treated as
an additional Security Deposit.
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10.3 Personal Property Taxes.
(a) Tenant shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the Premises or elsewhere. When
possible, Tenant shall cause said trade fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Landlord.
(b) If any of Tenant's said personal property shall be
assessed with Landlord's real property, Tenant shall pay such taxes as part of
real property tax.
10.4 Additional Provisions Regarding Real Property Taxes. Landlord
shall have the sole right to contest or appeal any real property taxes or
assessments applicable to all or any portion of the Premises and to seek a
reduction in the assessed valuation of all or any portion of the Premises
(collectively, "Tax Contests"). Any refund of real property taxes resulting from
any such Tax Contest shall be applied first to reimburse Landlord for its costs
and expenses in connection with the Tax Contest (including, without limitation
attorneys' fees and the costs of consultants) and then, out of and to the extent
of the balance of such refund, Landlord shall reimburse to Tenant the portion of
such reduction attributable to the Premises and the term of this Lease, as and
to the extent previously paid by Tenant as part of Tenant's Share of Operating
Expenses. Fees payable to tax consultants and attorneys for consultation and
contesting real property taxes shall be an Operating Expense. In the event that
Landlord has not undertaken a Tax Contest with respect to the property taxes or
assessments for a tax fiscal year, Tenant may request that Landlord undertake
such a Tax Contest. In the event that Landlord does not commence such Tax
Contest within 90 days after receipt of Tenant's request or does not otherwise
agree to proceed with that Tax Protest, then Tenant may undertake a Tax Contest;
provided that no such Tax Contest by Tenant shall be made if the contested tax
or assessment may become a lien on the Building unless the contested amount is
paid prior to the Tax Contest by Tenant. Tenant shall indemnify and hold
Landlord harmless with respect to any increases in real property taxes or
assessments arising out of Tenant's conduct of a Tax Contest above the level
those real estate taxes or assessments would have been in the absence of such a
Tax Contest.
11. Utilities. Tenant shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. Landlord represents that the following utilities are
available stubbed up to the boundary of the Premises: natural gas, electrical,
water, and sewer.
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12. Assignment and Subletting.
12.1 Landlord's Consent Required. Tenant shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Tenant's interest in this Lease or in the Premises,
without Landlord's prior written consent, which Landlord shall not unreasonably
withhold, condition or delay. Landlord shall respond to Tenant's request for
consent hereunder in a timely manner and any attempted assignment, transfer,
mortgage, encumbrance or subletting without such consent shall be void, and
shall constitute a noncurable breach of this Lease, without the need for notice
to Tenant under Paragraph 13.1.
12.2 Procedure. If at any time or from time to time during the term of
this Lease, Tenant desires to assign or sublet all or any part of Tenant's
interest in this Lease or in the Premises to an entity other than a Tenant
Affiliate (as defined below), Tenant shall give prior written notice to Landlord
setting forth the terms of the proposed assignment or subletting and the space
so proposed to be assigned or sublet. Such assignment or sublease shall be
subject to, without limitation, all the conditions in Paragraph 12 and the
following conditions:
(a) The assignment or sublease shall be substantially on the
terms set forth in the notice given to Landlord. Any subsequent changes or
modifications will require Landlord's prior written consent.
(b) Tenant acknowledges that Landlord's agreement to lease
these Premises to Tenant at the rent and terms stated herein is made in material
reliance upon Landlord's evaluation of this particular Tenant's background,
experience and ability, as well as the nature of the use of the Premises by this
Tenant as set forth in Paragraph 6. In the event that Tenant shall request
Landlord's written consent to assign or sublease the Premises as required in
Paragraphs 12.1 and 12.2 hereof, then each such request for consent shall be
accompanied by the following:
(i) Financial statements of the proposed assignee or
sublessee, or if financial statements are not available, other
information concerning the financial condition of the proposed assignee
or sublessee that reasonably discloses and represents that financial
condition;
(ii) A statement of the specific uses for which the
Premises will be utilized by the proposed assignee or sublessee; and
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(iii) Preliminary plans prepared by an architect or
civil engineer for all alterations to the Premises that are
contemplated to be made by Tenant, the proposed assignee or sublessee.
(c) No assignment or sublease shall be valid and no assignee
or sublessee shall take possession of the Premises assigned or subleased until
an executed counterpart of such assignment or sublease has been delivered to
Landlord.
(d) No sublessee or assignee shall have a right further to
sublet or assign without Landlord's prior written consent as provided in this
Paragraph 12.
(e) In the case of an assignment, 50% of any sums or other
economic consideration received by Tenant as a result of such assignment shall
be paid to Landlord after first deducting the unamortized cost of leasehold
improvements paid for by Tenant in connection with such assignment and the cost
of any real estate commissions incurred by Tenant in connection with such
assignment.
(f) In the case of a subletting, 50% of any sums or economic
consideration received by Tenant as a result of such subletting shall be paid to
Landlord after first deducting (i) the rent due hereunder prorated to reflect
only rent allocable to the sublet portion of the Premises, (ii) the cost of
tenant improvements made to the sublet portion of the Premises at Tenant's cost
in connection with such sublease, which shall be amortized over the term of the
applicable sublease and (iii) the cost of any real estate commissions incurred
by Tenant in connection with such subletting, amortized over the term of the
sublease.
12.3 Tenants Other Than Individuals. [The provisions of this paragraph
12.3 shall not apply so long as the original named Tenant is the Tenant under
this Lease.]
(a) If Tenant is a partnership, a transfer of any interest of
a general partner, a withdrawal of any general partner from the partnership, or
the dissolution of the partnership, shall be deemed to be an assignment of this
Lease.
(b) If Tenant is a corporation, unless Tenant is a public
corporation whose stock is regularly traded on a national stock exchange, or is
regularly traded in the over-the-counter market and quoted on NASDAQ, any sale
or other transfer of a percentage of capital stock of Tenant which results in a
change of controlling persons, or the sale or other transfer of substantially
all of the assets of Tenant, shall be deemed to be an assignment of this Lease.
(c) Notwithstanding anything to the contrary contained in this
Lease, the initial listing for sale of Tenant's stock on a public exchange or
the sale of any
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number of shares of Tenant's stock on a public exchange, shall not be deemed to
be an assignment or other transfer requiring Landlord's consent under this Lease
12.4 Tenant Affiliate. Notwithstanding the provisions of Paragraph 12.1
hereof, Tenant may assign or sublet the Premises, or any portion thereof,
without Landlord's consent, to any corporation which controls, is controlled by
or is under common control with Tenant, or to any corporation resulting from the
merger or consolidation with Tenant, or to any person or entity which acquires
all the assets of Tenant as a going concern of the business that is being
conducted on the Premises (any of the foregoing, a "Tenant Affiliate"), provided
that (a) the transferee has a net worth, after the assignment or sublet, which
is equal to or greater than the net worth of Tenant at the date of this Lease;
(b) the transferee assumes, in full, the obligations of Tenant under this Lease;
and (c) a copy of the document effecting the sublet and evidencing the
transferee's assumption of Tenant's obligations hereunder is promptly delivered
to Landlord. Any such assignment shall not, in any way, affect or limit the
liability of Tenant under the terms of this Lease even if after such assignment
or subletting the terms of this Lease are materially changed or altered without
the consent of Tenant, the consent of whom shall not be necessary.
12.5 No Release of Tenant. Regardless of Landlord's consent, any
subletting or assignment shall not (a) be effective without the express written
assumption by such assignee or sublessee of the obligations of Tenant under this
Lease, (b) release Tenant of any of Tenant's obligations hereunder or (c) alter
the primary liability of Tenant to pay the rent and to perform all other
obligations to be performed by Tenant hereunder. The acceptance of rent by
Landlord from any other person shall not be deemed to be a waiver by Landlord of
any provision hereof or any default by Tenant. Consent to one assignment or
subletting shall not be deemed consent to any subsequent assignment or
subletting. In the event of default by any assignee of 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
said assignee. Landlord may consent to subsequent assignments or subletting of
this Lease or amendments or modifications to this Lease with assignees of
Tenant, without notifying Tenant, or an