CASCADE MICROTECH, INC.
(Exact name of registrant as specified in its charter)
OREGON 3825 93-0856709
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
|
ERIC W. STRID
CHIEF EXECUTIVE OFFICER
CASCADE MICROTECH, INC.
2430 N.W. 206TH AVENUE
BEAVERTON, OREGON 97006
(503) 601-1000
COPIES TO:
JACK W. SCHIFFERDECKER, JR., ESQ. CYNTHIA A. ROTELL, ESQ.
BYRON W. MILSTEAD, ESQ. LATHAM & WATKINS
ATER WYNNE LLP 633 W. FIFTH STREET, SUITE 4000
222 S.W. COLUMBIA, SUITE 1800 LOS ANGELES, CA 90071
PORTLAND, OR 97201 (213) 485-1234
(503) 226-1191
|
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, check the following box: / /
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 ("Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: / /
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PROPOSED MAXIMUM AGGREGATE OFFERING PRICE (1) AMOUNT OF REGISTRATION FEE Common Stock, $0.01 par value $69,000,000 $18,216 |
(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
SUBJECT TO COMPLETION, DATED October 2, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
SHARES
[LOGO]
COMMON STOCK
This is an initial public offering of shares of common stock of Cascade Microtech, Inc. We expect that the public offering price will be between $ and $ per share.
We have applied to have our common stock listed for trading and quotation on the Nasdaq National Market under the symbol "CCMT."
Our business involves significant risks. These risks are described under the caption "Risk Factors" beginning on page 8.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
PER
SHARE TOTAL
Public offering price.................................... $ $
Underwriting discounts and commissions................... $ $
Proceeds, before expenses, to Cascade Microtech.......... $ $
|
The underwriters may also purchase from us up to additional shares of our common stock at the public offering price, less the underwriting discounts and commissions, to cover over-allotments. The underwriters can exercise this right at any time within 30 days after the date of this prospectus.
The underwriters expect to deliver the shares in New York, New York on , 2000.
ADAMS, HARKNESS & HILL, INC.
FIRST SECURITY VAN KASPER
, 2000
Description of Inside Cover Art
The graphic is entitled: "Our Pyramid Probe cards test the
semiconductors..." and "...that enable today's most advanced communications
products" that frames, by placement at the top and bottom of the page, a photo
of our Pyramid Probe card--captioned "Pyramid Probe Card"--surrounded by
magnified probe card components, a semiconducter wafer and an array of photos of
end-user products that incorporate or are enabled by the types of semiconductors
that customers develop and test using our products. At the top left of the
Pyramid Probe card photo is a photo of two clean-room workers engaged in our
Pyramid Probe fabrication process which is captioned: "Pyramid Probe Thin Film
Fab." To the right of the Pyramid Probe card photo are a photo of our Pyramid
Probe core--captioned "Pyramid Probe Core"--and a photo of our magnified Pyramid
Probe tips--captioned "Pyramid Probe Tips (magnified 200x)." Directly beneath
the Pyramid Probe card photo is a photo of a semiconductor wafer--captioned
"Semiconductor Wafer"--and a photo of a semiconductor chip--captioned
"Integrated Circuit or Optoelectronic Device." Below the photo of the
semiconductor chip are four photos of products that incorporate or are enabled
by the types of semiconductors that customers develop and test using our
products: a photo of a video game controller, a photo of a personal digital
assistant, a stylized photo of a bundle of optical fibers and a photo of a cell
phone keypad. At the lower left is the Cascade Microtech logo with the tagline:
"Innovating Test Technologies for production probe cards."
TABLE OF CONTENTS
PAGE
----
Prospectus Summary................... 5
Risk Factors......................... 9
Note Regarding Forward-Looking
Statements......................... 20
Use of Proceeds...................... 21
Dividend Policy...................... 21
Capitalization....................... 22
Dilution............................. 23
Selected Consolidated Financial
Data............................... 24
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 25
|
Business............................. 34
Management........................... 50
PAGE
----
Certain Transactions................. 60
Principal Shareholders............... 63
Description of Capital Stock......... 64
Shares Eligible for Future Sale...... 67
Underwriting......................... 69
Legal Matters........................ 71
Experts.............................. 71
Where You Can Find More Information.. 71
Index to Consolidated Financial
Statements......................... F-1
|
UNTIL , 2000, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
OUR REGISTERED TRADEMARKS ARE THE CASCADE MICROTECH LOGO, AIR COPLANAR PROBE-REGISTERED TRADEMARK- AND MICROCHAMBER-REGISTERED TRADEMARK-. OUR TRADEMARKS ARE CASCADE MICROTECH, MICROSCRUB, PYRAMID PROBE AND INNOVATING TEST TECHNOLOGIES. THIS PROSPECTUS CONTAINS TRADEMARKS AND TRADE NAMES OF COMPANIES AND ORGANIZATIONS OTHER THAN CASCADE MICROTECH.
PROSPECTUS SUMMARY
THE FOLLOWING IS ONLY A SUMMARY. YOU SHOULD CAREFULLY READ THE MORE DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING THE CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES. OUR BUSINESS INVOLVES SIGNIFICANT RISKS. YOU SHOULD CAREFULLY CONSIDER THE INFORMATION UNDER THE HEADING "RISK FACTORS."
We are a worldwide leader in developing, manufacturing and selling leading-edge wafer probing solutions used to measure and test complex semiconductors in wafer form in both design and production environments. Customers use our solutions to develop and test advanced integrated circuits and optoelectronic devices, or chips, for a broad range of communications, consumer electronics and computing products. In particular, we believe we derived approximately one-half of our sales in the first six months of 2000 from customers who are developing and supplying wireless, broadband and other communications chips. Our products are used by design engineers to develop new chips and accelerate time-to-market, by production process engineers to improve chip fabrication processes, and by test engineers to assure chip quality and reliability. Approximately 400 customers purchased our products in the first half of 2000. Our top ten customers during this period were Agilent Technologies, Conexant Systems, Fujitsu, IBM, Infineon, Lucent Technologies, Matsushita, Mitsubishi, Nortel Networks and Taiwan Semiconductor Manufacturing Company.
As chips become smaller and faster and integrate more functions to meet the requirements of today's advanced electronics products, wafer probe testing of these complex chips is becoming increasingly challenging. As a result, we have developed proprietary technologies and products, including production probe cards, analytical probes and probe stations, to meet the specific wafer probing challenges faced by semiconductor designers and manufacturers.
We design our innovative, proprietary production probe cards, or Pyramid Probe cards, to test high-speed chips for products such as synchronous optical network, or SONET, equipment, Gigabit Ethernet equipment and cellular phones. Our Pyramid Probe cards are also used to test chips with small bond pads, or metallized electrical connection areas, such as liquid crystal display drivers and some application-specific integrated circuits, or ASICs. Our proprietary, lithography-based manufacturing process allows us to fabricate Pyramid Probe cards with microscopic probe tips that are accurately aligned and highly reproducible. We believe these features benefit production customers by enabling them to:
- test high-speed chips up to 20 GHz;
- achieve superior electrical signal integrity;
- accurately contact very small and closely spaced bond pads;
- reduce costly probe tip cleaning and maintenance; and
- improve production yields.
Our probe stations and analytical probes facilitate development of next-generation chips and chip production processes by enabling highly precise electrical and optical, or lightwave, measurements. These products are used throughout the semiconductor industry in engineering test to develop designs and fabrication processes for chips such as radio frequency chips, digital signal processors, telecommunications chips, advanced memory chips, microprocessors and microcontrollers, video graphics processors and ASICs. We believe our probe stations and analytical probes benefit customers by enabling them to:
- design and test high-speed chips up to 110 GHz;
- refine complex chip designs;
- reduce the time required to achieve desired production yields;
- increase engineering productivity; and
- accelerate time-to-market.
Our objectives are to become the leading provider of probe cards for production test and to expand our market leadership position in wafer probing solutions for engineering test. Our strategies to achieve these objectives are to:
- continue to develop next-generation technologies through ongoing research into electrical and lightwave measurement techniques and collaboration with our customers;
- target high-growth markets such as ICs and optoelectronic devices for broadband optical fiber communications networks and wireless devices and systems, and customer segments such as wafer foundries;
- drive adoption of our Pyramid Probe solution into targeted market segments by expanding our sales and application support activities and increasing our production capacity;
- emphasize development and sale of our consumable products, including both Pyramid Probe cards and analytical probes, which have reduced the effects of semiconductor cyclicality on our operations; and
- expand relationships with complementary technology suppliers, which broaden our opportunity to sell products.
We have provided wafer probing solutions to semiconductor suppliers since our inception in 1983. We were incorporated in Oregon in 1984, and perform the majority of our design and manufacturing at our facilities in Beaverton, Oregon. We have direct sales and service subsidiaries in Japan and the United Kingdom. Our principal executive office is located at 2430 NW 206th Avenue, Beaverton, Oregon 97006, and our telephone number is (503) 601-1000. Our web site address is WWW.CASCADEMICROTECH.COM. Information on our web site does not constitute part of this prospectus.
THE OFFERING
Common stock we are offering................................ shares
Common stock to be outstanding after this offering.......... shares
Use of proceeds............................................. We intend to use the net
proceeds for general corporate
purposes, including working
capital and capital
expenditures.
Proposed Nasdaq National Market symbol...................... CCMT
|
ASSUMPTIONS THAT APPLY TO THIS PROSPECTUS
Unless otherwise indicated, all information in this prospectus, including the outstanding share information above, is based on the number of shares outstanding as of June 30, 2000 and:
- gives effect to the automatic conversion of all outstanding shares of preferred stock into 3,596,486 shares of common stock upon the closing of this offering;
- excludes 1,524,678 shares of common stock issuable upon the exercise of options outstanding under our 1993 Stock Incentive Plan at June 30, 2000 at a weighted average exercise price of $2.69 per share;
- excludes 1,200,000 shares of common stock available for issuance under our 2000 Stock Incentive Plan, and 200,000 shares of common stock available for issuance under our 2000 Employee Stock Purchase Plan;
- excludes 25,000 shares of common stock issuable upon the exercise of a warrant at an exercise price of $3.80 per share;
- excludes 250,000 shares of redeemable convertible preferred stock issuable upon the exercise of a warrant at an exercise price of $10.00 per share;
- reflects the filing of our second amended and restated articles of incorporation; and
- assumes no exercise of the underwriters' over-allotment option.
All references in this prospectus to "we," "us," "our," "Cascade" and "Cascade Microtech" relate to Cascade Microtech, Inc. and our subsidiaries, unless the context indicates otherwise.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR ANY SALE OF OUR COMMON STOCK.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following tables summarize our consolidated financial data. For a more detailed explanation of our financial condition and operating results, you should read "Management's Discussion and Analysis of Financial Condition and Results of Operations," our consolidated financial statements and the notes to those statements included in this prospectus. Unaudited pro forma basic and diluted net income per share have been calculated assuming the conversion of all outstanding preferred stock into common stock as if the shares had converted immediately upon their issuance.
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales............................. $33,636 $37,798 $40,322 $41,597 $51,530 $20,762 $31,860
Gross profit.......................... 16,589 18,308 18,641 17,056 24,086 8,995 15,125
Income (loss) from operations......... 2,917 3,208 1,033 (1,576) 3,963 457 2,710
Net income (loss)..................... 2,005 1,928 671 (977) 2,474 229 1,833
Net income (loss) attributed to common
shareholders........................ $ 2,005 $ 1,928 $ 671 $ (977) $ 2,435 $ 229 $ 1,385
Net income (loss) per share:
Basic............................... $ 0.44 $ 0.42 $ 0.15 $ (0.21) $ 0.49 $ 0.05 $ 0.28
Diluted............................. $ 0.31 $ 0.29 $ 0.10 $ (0.21) $ 0.32 $ 0.03 $ 0.15
Shares used in computing net income
(loss) per share:
Basic............................... 4,509 4,553 4,568 4,711 4,988 4,974 5,023
Diluted............................. 6,477 6,696 6,590 4,711 7,577 7,159 9,472
Unaudited pro forma net income per
share:
Basic............................... $ 0.35 $ 0.16
Diluted............................. $ 0.32 $ 0.15
Unaudited shares used in computing pro
forma net income per share:
Basic............................... 6,992 8,619
Diluted............................. 7,577 9,472
|
JUNE 30, 2000
--------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
-------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short term investments........... $11,284 $11,284 $
Working capital............................................. 23,592 23,592
Total assets................................................ 41,304 41,304
Long-term obligations, net of current portion............... 506 506
Redeemable convertible preferred stock...................... 10,356 --
Shareholders' equity........................................ 19,502 29,858
|
The pro forma consolidated balance sheet data summarized above assumes the conversion of all outstanding shares of preferred stock into 3,596,486 shares of common stock upon closing of this offering on a one-to-one basis. The pro forma as adjusted data above adjusts the pro forma amounts to reflect the application of the net proceeds from the sale of shares of common stock in this offering at an assumed public offering price of $ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN INVESTMENT DECISION. YOU SHOULD ALSO REFER TO THE OTHER INFORMATION IN THIS PROSPECTUS, INCLUDING OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE THOSE THAT WE CURRENTLY BELIEVE MAY MATERIALLY AFFECT OUR COMPANY. ADDITIONAL RISKS AND UNCERTAINTIES OF WHICH WE ARE UNAWARE OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO BECOME IMPORTANT FACTORS THAT AFFECT OUR COMPANY.
RISKS RELATED TO OUR BUSINESS
THE CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY AFFECTS OUR SALES, AND AS A RESULT WE MAY EXPERIENCE REDUCED SALES OR OPERATING LOSSES.
The semiconductor industry is highly cyclical with recurring periods of oversupply. We have experienced operating losses in the past due, in part, to cyclical downturns in the semiconductor industry. Our business is heavily dependent on both the volume of semiconductor production by semiconductor manufacturers, as well as the development of new semiconductors and semiconductor designs. The volume of semiconductor production and development of new designs in turn depends on the demand for products using semiconductors. A significant portion of our sales depends on the capital expenditures made by semiconductor designers and manufacturers to purchase and maintain testing equipment, such as probe stations, which accounted for 77.3% of our net sales in 1999 and 74.2% of our net sales in the first six months of 2000. Semiconductor manufacturers in particular are known to sharply curtail their capital expenditures when confronted with an industry downturn, such as the downturn experienced from 1996 through 1998. We expect that the markets for future generations of semiconductors will also be subject to similar fluctuations. We cannot be certain that we will be able to achieve or maintain our current or prior levels of sales or growth rates. Any factor adversely affecting the semiconductor industry in general or particular segments within the semiconductor industry, will adversely affect our sales and could cause us to experience reduced sales or operating losses.
OUR PYRAMID PROBE CARD FABRICATION PROCESS IS COMPLEX AND SUBJECT TO NUMEROUS RISKS. IF WE ARE UNABLE TO SUCCESSFULLY FABRICATE OUR PYRAMID PROBE CARDS AND MEET CUSTOMER DEMAND IN A TIMELY MANNER, OUR GROWTH AND OPERATING RESULTS WILL BE MATERIALLY ADVERSELY AFFECTED.
Due to the complexity and ongoing development of our Pyramid Probe card fabrication process, combined with increases in Pyramid Probe card production volumes, we have at times experienced fabrication problems that have led to delays in shipping products. In some instances these delays have further resulted in a loss of or delay in subsequent sales to customers and an overall delay in the adoption of our Pyramid Probe cards. Fabrication problems may result from a number of factors, including:
- contamination in the process equipment;
- unknown sensitivities to process conditions, such as temperature, humidity, material properties and to the effects of combining these various process conditions;
- equipment failures;
- and other as yet unknown factors.
For example, we recently experienced a contamination problem in our fabrication facility due to the transition to our second generation Pyramid Probe card fabrication process. This contamination problem resulted in approximately four weeks of lost production time and delayed product shipments. Furthermore, we have not yet produced our Pyramid Probe cards in high volumes, which may result in
additional unforeseen fabrication difficulties and will require us to develop new fabrication processes and hire many new skilled designers, engineers and manufacturing and technical support employees. If we are unable to produce high quality Pyramid Probe cards in sufficient volumes, our growth and operating results will be materially adversely affected.
IF OUR PYRAMID PROBE CARDS DO NOT GAIN WIDESPREAD ADOPTION, OUR GROWTH AND OPERATING RESULTS WILL BE MATERIALLY HARMED.
Our future growth depends in significant part on market adoption of and demand for our Pyramid Probe cards, which utilize a proprietary new technology to address relatively new and emerging requirements in the production probe card market. Large-scale market adoption depends on our ability to increase customer awareness of the benefits of our Pyramid Probe cards and to prove their reliability and cost effectiveness in a production environment. Production customers are generally very reluctant to adopt new technologies which will affect their production output. Additionally, many potential customers have witnessed the failure of new probe card technologies from other companies, adding to their reluctance to adopt or evaluate new technologies. We will be the sole source supplier of our Pyramid Probe cards. Some customers may be unwilling to accept a sole source supplier relationship for a product as critical as a production probe card. If, for any reason, our Pyramid Probe cards are not adopted in the market at the levels we anticipate, our future growth and operating results will be materially harmed.
WE HAVE EXPERIENCED AND EXPECT TO CONTINUE TO EXPERIENCE SIGNIFICANT PERIOD-TO-PERIOD FLUCTUATIONS IN OUR REVENUE AND OPERATING RESULTS, WHICH MAY RESULT IN VOLATILITY IN OUR STOCK PRICE.
Our operating results have fluctuated in the past and will continue to do so in the future due to a variety of factors, some of which are beyond our control. These factors include, but are not limited to:
- customer demand, which is influenced, in part, by economic conditions in the semiconductor industry, demand for products that use semiconductors and market acceptance of our products and those of our customers;
- competition, such as competitive pressures on the prices, performance and reliability of our products, the introduction or announcement of new products by us or our competitors, and our competitors' intellectual property rights, which could prevent us from introducing products that compete effectively with their products;
- our product sales mix, average selling prices and geographic sales mix;
- seasonality, principally due to purchasing cycles in our international markets, particularly in Japan and Europe, that are different from the United States, which has caused our first quarter net sales typically to decline compared to our fourth quarter net sales of the previous year;
- timing, cancellation or delay of customer orders;
- our production capacity and availability and cost of materials, components and subassemblies;
- our ability to deliver reliable products in a timely manner;
- expenses incurred as a result of intellectual property claims, including the cost of litigation to defend and protect our patents and trade secrets, and expenses incurred in defending or resolving claims that we have infringed the proprietary technology of others;
- our product development costs, including research and development and sales and marketing expenses associated with new products or product enhancements and the costs of transitioning to new or enhanced products;
- our ability to hire and retain technical, sales, marketing and management personnel; and
- economic conditions in the United States and the worldwide markets we serve.
As a result of these or other factors, our future operating results may fluctuate significantly on a quarterly or annual basis, which may negatively impact our financial condition and the market price of our common stock.
WE HAVE DEVOTED, AND PLAN TO CONTINUE TO DEVOTE, SIGNIFICANT RESOURCES TO THE GROWTH AND DEVELOPMENT OF OUR PYRAMID PROBE CARD PRODUCT LINE, AND THESE EFFORTS MAY NOT BE SUCCESSFUL.
We have devoted significant resources to the development and growth of our Pyramid Probe card product line. To date these investments have exceeded the net sales of our Pyramid Probe cards, and our ongoing investments in research and development, as well as capacity expansion for our Pyramid Probe card line, may continue to exceed our sales from these products. We will need to expand capacity at our Pyramid Probe card fabrication facility to meet anticipated demand. We must make significant investments to increase our fabrication capacity 6 to 12 months before that capacity is available. Expanding capacity will require us to purchase new equipment, upgrade existing equipment, develop and implement new fabrication processes, and hire additional technical personnel. We may not be successful in effectively expanding our fabrication capacity or accurately estimating the demand for additional capacity. Furthermore, our cost structure relating to the manufacture of Pyramid Probe cards is unproven at higher volumes and fabrication capacity utilization, and we cannot assure you that we will be successful in manufacturing our Pyramid Probe cards at acceptable costs at higher volumes.
OUR BUSINESS IS GROWING AND EXPANDING, AND IF WE CANNOT SUCCESSFULLY MANAGE AND SUPPORT OUR FUTURE GROWTH, OUR BUSINESS MAY BE HARMED.
Our growth has placed and will continue to place significant demands on our management, operational, financial and technical resources, and our internal control, management information and reporting systems. Our future operating results will depend on our ability to:
- continue to improve our operations, customer support, financial controls and information systems;
- manage the growth of different product lines with different cost structures; and
- recruit, train, manage and motivate our employees to support our expanded operations.
We cannot predict whether these efforts will be successful or will occur in a timely or efficient manner. Failure to effectively manage our growth and the system and procedural transitions required by expansion could materially harm our business and our operating results.
WE OBTAIN SOME OF THE MATERIALS, COMPONENTS AND SUBASSEMBLIES USED IN OUR PRODUCTS FROM A SINGLE SOURCE OR LIMITED GROUP OF SUPPLIERS. IF THESE SUPPLIERS ARE UNABLE TO PROVIDE US WITH THESE MATERIALS, COMPONENTS OR SUBASSEMBLIES IN ADEQUATE QUANTITIES AND ON A TIMELY BASIS, WE MAY BE UNABLE TO MANUFACTURE OUR PRODUCTS OR MEET OUR CUSTOMERS' NEEDS.
We obtain some of the materials, components and subassemblies used in our products from a single source or a limited group of suppliers. From time to time, we experience difficulties in obtaining these materials, components and subassemblies from some suppliers, especially during periods of high demand for semiconductor capital equipment. The manufacture of some of the materials, components and subassemblies that we use in our products, such as thermal chucks and microscopes, is a complex process, and in the event that we cannot obtain an adequate supply of these components, it may be difficult and time-consuming to identify and qualify new suppliers. For example, we are currently
experiencing long leadtimes for and difficulties obtaining desired quantities of precision microscopes used in some probe stations. In June 1999, the sole supplier of the material that we use for making thin-films for our Pyramid Probe cards discontinued production of the material and has been unwilling to grant us a license to make the material. In response, we purchased additional quantities of the material and based on projected demand for our Pyramid Probe cards, we estimate that as of September 2000 we have approximately one year's supply of the material. This temporary supply may not be sufficient and the inventoried material, which is subject to deterioration, may not remain in usable condition. While we have identified and are currently testing a replacement material, this replacement material may not meet the requirements of our Pyramid Probe cards.
The delay in shipments from, or complete loss of, our suppliers could prevent us from producing and shipping our products, resulting in lost orders for our products and damage to our customer relationships, which would harm our results of operations. Furthermore, a significant increase in the price of one or more of these materials, components or subassemblies could materially adversely affect our results of operations.
OUR GROWTH DEPENDS ON THE GROWTH OF THE MARKETS FOR WIRELESS AND BROADBAND COMMUNICATIONS PRODUCTS.
During the first six months of 2000, we believe one-half of our sales resulted from the sale of products used in the design and manufacture of semiconductors for communications applications. Our growth will depend in large part on the continued growth of the communications markets in general and, in particular, the markets for integrated circuits and optoelectronic devices used in wireless and broadband communications. We cannot assure you that the markets for these products will continue to grow at historical rates or at all. If these markets do not continue to grow, or if they grow at a slow rate, growth in the demand for our products will diminish and our business, financial condition and results of operations will be materially adversely affected.
IF WE ARE UNABLE TO ANTICIPATE OUR CUSTOMERS' RAPIDLY CHANGING SEMICONDUCTOR TEST NEEDS AND DEVELOP NEW AND ENHANCED PRODUCTS TO MEET THESE NEEDS, WE MAY NOT GROW AND OUR BUSINESS MAY BE MATERIALLY HARMED.
Our future growth will depend, in significant part, on our ability to work effectively with and anticipate the testing needs of our customers and on our ability to design, develop, manufacture, assemble, test, market and support new products and product enhancements to meet these needs on a timely and cost-effective basis. Our customers' testing needs are becoming more challenging as the semiconductor industry continues to experience rapid technological change driven by the demand for integrated circuits and optoelectronic devices that are increasingly complex, or smaller, faster, more functional, and less expensive to produce. Our failure to meet our customers' testing requirements or anticipate and respond adequately to technological developments could result in a loss of competitiveness, which could materially harm our business and opportunities for growth. We cannot assure you that we will successfully develop and bring new products to market in a timely and cost-effective manner, that any product enhancement or new product developed by us will gain market acceptance or that products or technologies developed by others will not render our products or technologies obsolete or noncompetitive.
WE FACE ECONOMIC, POLITICAL AND OTHER RISKS ASSOCIATED WITH OUR INTERNATIONAL SALES AND OPERATIONS, WHICH COULD MATERIALLY HARM OUR OPERATING RESULTS.
In each of the last three years, we derived greater than 50% of our net sales from sales outside the United States. We expect international sales to continue to represent a substantial portion of our sales
for the foreseeable future. In the past, the economic climate in some foreign markets, particularly in Asia, has quickly and dramatically changed, resulting in a negative effect on our operating results. Some of the factors which impact our business in foreign markets include:
- economic and political instability;
- changes in domestic or foreign law or policy resulting in the need to comply with potentially burdensome government controls, tariffs, embargoes or export license requirements;
- longer payment cycles;
- differing labor regulations and practices; and
- difficulties staffing and managing our international operations.
In the past, there have been significant fluctuations in the exchange rates between the dollar and the currencies of countries in which we do business. Significant unfavorable fluctuations in the exchange rates between the U.S. dollar and foreign currencies could cause us to lower our prices and thus reduce our profitability. In addition, these fluctuations could cause customers to delay or cancel orders because of the increased cost of our products relative to those of our competitors who manufacture in other countries. For example, the recent decline in the value of the Euro relative to the U.S. dollar has made our products less competitive than those of our European competitors. Fluctuations in the exchange rate or the occurrence of or an unfavorable change in any of the factors identified above could have a material adverse effect on our business, financial condition and results of operations.
OUR CUSTOMERS' EVALUATION PROCESSES CAN LEAD TO LENGTHY SALES CYCLES, DURING WHICH WE MAY INCUR SIGNIFICANT COSTS THAT MAY NOT RESULT IN SALES.
Our customers typically expend significant efforts in evaluating and qualifying our products prior to placing an order, particularly for production probe cards and for large probe station orders. This evaluation and qualification process frequently results in a lengthy sales cycle, typically ranging from 3 to 12 months and sometimes longer. During the period in which our customers are evaluating our products, we may incur substantial sales, marketing, research and development expenses and expend significant management efforts. After completing this evaluation process, a potential customer may elect not to purchase our products. For example, many chip designs never reach production, including chip designs for which our Pyramid Probe cards are being evaluated. In addition, product purchases are frequently subject to unplanned processing and other delays, particularly with respect to larger customers for which our products represent a very small percentage of their overall purchase activity. In particular, the period of evaluation for Pyramid Probe cards depends in part on the customer's ability to devote resources to the evaluation. As a result of these factors, long sales cycles may negatively impact our operating results.
FAILURE TO RETAIN KEY MANAGERIAL, TECHNICAL, AND SALES AND MARKETING PERSONNEL, OR TO ATTRACT NEW KEY PERSONNEL COULD HAVE A MATERIAL NEGATIVE EFFECT ON OUR BUSINESS.
Our success depends on the continued services of our executive officers and other key management, technical, and sales and marketing personnel and on our ability to continue to attract, retain and motivate qualified personnel. The loss of key personnel could limit our ability to develop new products and adapt existing products to our customers' evolving requirements and may result in lost sales and a diversion of management resources. Furthermore, much of our competitive advantage and intellectual property is based on the expertise, experience and know-how of our key personnel. We do not have employment agreements or non-compete agreements with any of our employees except for an employment agreement with our Chief Financial Officer. To support our future growth, we will need
to attract and retain additional qualified management, technical, and sales and marketing employees. Competition for such personnel in our industry is intense, and we cannot assure you that we will be successful in attracting and retaining such personnel.
INTENSE COMPETITION IN THE SEMICONDUCTOR WAFER PROBING BUSINESS MAY REDUCE DEMAND FOR OUR PRODUCTS AND REDUCE OUR SALES.
The markets for our products are highly competitive, and we expect competition to continue in the future. We believe that our principal competitors are the major providers of production probe cards, analytical probes and probe stations. Our principal competitors in the probe card market are Cerprobe, Form Factor, GGB Industries, JEM Corporation, Micronics Japan and Probe Technology. Our principal competitor in the analytical probe market is GGB Industries and our principal competitors in the probe station market are Suss MicroTec, Micromanipulator, Wentworth Laboratories and Signatone. However, other potential competitors may have developed or may be developing technology of which we are unaware that may render our products uncompetitive. Some of our competitors have significantly greater financial, technical and marketing resources than we do. As a result, these competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, to devote greater resources to the development, promotion and sale of their products, or to deliver competitive products at lower prices. We cannot guarantee that we will maintain our current competitive position, or that any of our new products, including our Pyramid Probe cards, will achieve widespread acceptance in the market. Increased competition could result in pricing pressures, reduced sales, reduced margins or failure to achieve or maintain widespread market acceptance for our products, any of which could prevent us from growing our business or sustaining or increasing our profitability. New technologies are emerging due to increased competition and customer demand. The introduction of new products incorporating new technologies or the emergence of new industry standards could make our existing products noncompetitive. If one or more of our competitors develop new technologies before we do, we could lose market share and our business will suffer.
IF WE FAIL TO PROTECT OUR PROPRIETARY TECHNOLOGY, COMPETITORS MAY BE ABLE TO USE OUR TECHNOLOGIES, WHICH WOULD WEAKEN OUR COMPETITIVE POSITION AND COULD REDUCE OUR SALES.
Our success and competitive position depend in significant part on the technically innovative features of our products. We rely in part on patent, trade secret and trademark laws to protect the proprietary technology used in our products. Our patents may be challenged by third parties and held invalid, and any of our pending patent applications may not be approved. Additionally, we may not be able to develop additional proprietary technology that is patentable. Policing unauthorized use of our products is difficult and we may not be able to prevent the misappropriation and unauthorized use of our technologies. Furthermore, our existing and future patents may not be sufficiently broad to protect our proprietary technologies, may not provide us with competitive advantages and may be circumvented by the designs of third parties.
Some of our proprietary technology cannot be effectively protected by patents. In these cases, we rely on trade secret laws and confidentiality agreements to protect our confidential and proprietary information, processes and technology. However, our confidential and proprietary information, processes and technology could be independently developed by, or otherwise become known to, third parties, which would weaken our competitive position and could reduce our sales.
OUR EFFORTS TO PROTECT OUR PROPRIETARY TECHNOLOGY MAY BE LESS EFFECTIVE IN SOME FOREIGN COUNTRIES WHERE INTELLECTUAL PROPERTY RIGHTS ARE NOT AS WELL PROTECTED AS IN THE UNITED STATES.
During 1999 and the first six months of 2000, we derived greater than 50% of our net sales from purchases of our products by customers in foreign countries. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and many companies have encountered substantial problems in protecting their proprietary rights against infringement in such countries. Our means of protecting our proprietary rights may not be adequate in foreign countries. Our failure to adequately protect our intellectual property in foreign countries would make it easier for competitors to copy or circumvent our product designs and sell competing products in those countries.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS BY OR AGAINST US MAY RESULT IN LITIGATION. THE COSTS ASSOCIATED WITH THIS LITIGATION COULD BE SUBSTANTIAL AND WE COULD BE PREVENTED FROM SELLING OUR PRODUCTS.
The semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. We are currently the plaintiff in two patent infringement suits in the United States and a suit to invalidate the patent of a company in Germany relating to technology used in our probe stations. Prosecuting these actions requires considerable management time, resources and costs, and there can be no assurance that we will prevail in any of these actions.
Questions of infringement in the semiconductor industry involve highly technical and subjective analyses. Litigation may be necessary to determine the validity and scope of our proprietary rights, or to defend against claims of infringement or invalidity by third parties, and we may not prevail in any litigation. Any such litigation, whether or not determined in our favor or settled, could be costly, could harm our reputation and could divert the efforts and attention of our management and technical personnel from our normal business operations. Adverse outcomes in any such litigation could result in the loss of our proprietary rights, subject us to significant liabilities, require us to seek licenses from third parties or prevent us from manufacturing and selling our products, any of which could have an adverse effect on our business, financial condition and results of operations. Although we are not presently a defendant in any action asserting we have infringed the intellectual property rights of others, we have been notified in the past that our products may have infringed the intellectual property rights of others. For additional information, see "Business--Legal Proceedings."
WE MAY ENGAGE IN FUTURE ACQUISITIONS WHICH MAY BE COSTLY, DIFFICULT TO INTEGRATE WITH OUR OPERATIONS, DIVERT MANAGEMENT RESOURCES AND DILUTE SHAREHOLDER VALUE.
As part of our business strategy, we expect to make acquisitions of, or investments in, companies, products or technologies that complement our current product offerings, enhance our technical capabilities, expand our operations into new markets, or offer other growth opportunities. While we have no current agreements and no active negotiations underway with respect to any acquisitions, we may acquire companies, products or technologies in the future, which could pose risks to our operations including:
- difficulties assimilating the acquired operations, personnel, technologies, or products;
- diversion of management's attention from our existing business;
- adverse effects on relationships with our existing suppliers, customers or partners or those of companies we acquire;
- entrance into markets in which we have no or limited experience; and
- loss of key employees, particularly those of the acquired company.
In connection with these acquisitions or investments, we could:
- use a significant portion of our available cash, including the cash proceeds remaining from this offering;
- issue equity securities, which would dilute current shareholders' percentage ownership;
- incur substantial debt;
- incur or assume contingent liabilities, known or unknown;
- incur amortization expenses related to goodwill or other intangibles; and
- incur other significant charges, such as asset devaluations or restructuring charges.
For these reasons, future acquisitions may be costly and dilute shareholder value, and we cannot be certain what effect they may have on our business.
OUR SUCCESS DEPENDS ON OUR CONTINUED INVESTMENT IN RESEARCH AND DEVELOPMENT, THE LEVEL AND EFFECTIVENESS OF WHICH COULD REDUCE OUR PROFITABILITY.
We will continue to make investments in research and development to sustain and improve our competitive position and meet our customers' needs. These investments currently include refining Pyramid Probe fabrication processes, developing higher performance Pyramid Probe cards, and enhancing probe stations for 300 mm wafers. To maintain our competitive position we will need to increase our research and development investment which could reduce our profitability. In addition, we cannot assure you that we will achieve a return on these investments.
OUR EMPLOYMENT COSTS IN THE SHORT-TERM ARE TO A LARGE EXTENT FIXED, AND THEREFORE, ANY SHORTFALL IN SALES WOULD HARM OUR OPERATING RESULTS.
Our operating expense levels are based, in significant part, on our headcount. For a variety of reasons, particularly the high cost and disruption of layoffs, the costs of recruiting and training new personnel, and product delivery and service commitments to our customers, our headcount in the short-term is, to a large extent, fixed. Accordingly, we may be unable to reduce employment costs in a timely manner to compensate for any shortfall in our sales or gross margins, which could materially harm our operating results. For example, in 1998, we experienced a downturn in our business but deferred the layoff of personnel until the second half of that year, which contributed to our net losses in the second and third quarters of 1998.
WE RELY HEAVILY ON COMPUTER AND COMMUNICATIONS-BASED MANUFACTURING AND MANAGEMENT INFORMATION SYSTEMS AND THEREFORE SYSTEMS OUTAGES MAY HARM OUR BUSINESS.
In conducting our business we rely heavily on internal and external computer-based information, manufacturing and communications systems and on other computer-based systems and support services from third parties. These systems are subject to risks presented by electrical or telecommunications outages, computer viruses and hacking, as well as other problems which can result in general system failure. Given the pervasive and complex nature of these internal and external systems, problems may arise that are beyond our control. System-wide or local failures that affect our information, manufacturing or communications systems could harm our operating results. In addition, insurance coverage for these risks may be inadequate or unavailable.
WE RELY ON INDEPENDENT MANUFACTURERS' REPRESENTATIVES AND DISTRIBUTORS FOR A SIGNIFICANT PORTION OF OUR SALES AND A DISRUPTION IN OUR RELATIONSHIP WITH OUR MANUFACTURERS' REPRESENTATIVES OR DISTRIBUTORS WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR SALES.
Approximately 78% of our sales in 1999 were made through independent manufacturers' representatives and distributors, whose activities are not within our direct control. In addition, in some locations our manufacturers' representatives and distributors also provide field service to our customers. A reduction in the sales efforts or financial viability of these manufacturers' representatives and distributors, or a termination of our relationship with these representatives and distributors, would have a material adverse effect on our sales, financial results and ability to support our customers. Our manufacturers' representatives and distributors are not obligated to continue selling our products, and they may terminate their arrangements with us at any time with limited or no prior notice. Establishing alternative sales channels would consume substantial time and resources, decrease our sales and increase our expenses.
WE MANUFACTURE NEARLY ALL OF OUR PRODUCTS AT OUR OREGON FACILITIES, AND ANY DISRUPTION IN THE OPERATIONS OF THESE FACILITIES COULD MATERIALLY HARM OUR BUSINESS.
We manufacture nearly all of our products in three facilities located in Beaverton, Oregon. Our manufacturing processes are complex and require sophisticated and costly equipment and specially designed facilities. As a result, any prolonged disruption in the operations of our facilities, whether due to technical or labor difficulties, or destruction of or damage to the facility as a result of an earthquake, fire or any other reason, could materially and adversely affect our business, financial condition and results of operations.
WE MAY FAIL TO COMPLY WITH ENVIRONMENTAL REGULATIONS, WHICH COULD RESULT IN SIGNIFICANT COSTS.
We are subject to a variety of federal, state, and local laws, rules, and regulations related to the discharge or disposal of toxic, volatile, or other hazardous chemicals used in our thin-film fabrication facility and other manufacturing operations. The failure to comply with past, present or future regulations could result in substantial fines, suspension of production, or cessation of operations in extreme situations. These regulations could require us to purchase additional equipment or to incur substantial expenses to comply with environmental regulations. If we fail to control our use, discharge or disposal of hazardous substances, we could be subject to significant liabilities.
We do not own any real property. We lease real property and we have not conducted Phase I environmental assessments of our leased properties. Various environmental laws may make a current or previous operator of real property liable for the costs of removal or remediation of hazardous or toxic substances on, under, adjacent to, or in such property. These laws may impose liability whether or not the operator knew of, or was responsible for, the presence or consequence of the hazardous or toxic substances. Moreover, an operator may have liability or responsibility for personal or property damages under statutory or common laws related to hazardous environmental conditions.
OUR PRODUCTS MAY BE FOUND TO BE DEFECTIVE, AND PRODUCT LIABILITY CLAIMS MAY BE ASSERTED AGAINST US, RESULTING IN COSTLY LITIGATION FOR WHICH WE MAY NOT HAVE SUFFICIENT LIABILITY INSURANCE.
Our products may contain defects which could cause our sales to decline, divert management's attention and cause significant customer relations problems. Our customers may use our products in the testing of high reliability semiconductors for critical applications such as telecommunications infrastructure, military, medical and aerospace equipment. Defects or other problems with the performance of our products could result in financial or other damages to our customers. In addition,
some of our probe stations which operate at high voltage or extreme temperatures may cause death or injury to persons utilizing such equipment due to undetected design or manufacturing defects or due to improper use or maintenance by our customers. Although our product invoices and sales contracts generally contain provisions designed to limit our exposure to product liability claims, existing or future laws or unfavorable judicial decisions could negate these provisions. Product liability litigation against us, even if it were unsuccessful, could be time consuming and costly to defend. Additionally, although we carry product liability insurance, in some circumstances it may not be adequate to cover all claims.
RISKS RELATED TO THIS OFFERING
THERE IS CURRENTLY NO PUBLIC MARKET FOR OUR COMMON STOCK, AND FOLLOWING THIS OFFERING THE PRICE OF OUR COMMON STOCK COULD BE VOLATILE.
Prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which investor interest in our stock will lead to the development of a trading market or how liquid that market might become. The initial public offering price for our common shares will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the trading market. The trading price of our common stock could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including factors discussed elsewhere in this prospectus and the following:
- failure to meet the publicly disclosed expectations of securities analysts for a given quarterly period;
- changes in financial estimates by securities analysts;
- extreme fluctuations in the prices and trading volumes of the stock of high technology companies, particularly companies listed on the Nasdaq National Market;
- fluctuations in our financial results, including future reported bookings;
- conditions or developments in the semiconductor and capital equipment industry and the general economy;
- developments in our intellectual property rights, or those of our competitors or other companies;
- announcements of new products or product enhancements by us or our competitors;
- developments in our relationships with customers and suppliers;
- adverse reactions by securities analysts to acquisitions or investments we may announce;
- additions or departures of key personnel; and
- commencement of litigation by or against us, and the outcome of that litigation.
These broad market and industry factors may decrease the market price of our common stock regardless of our actual operating performance. In addition, in the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities, and newly public companies tend to experience more volatility in their stock price. We may be the target of similar litigation in the future. Securities litigation may result in substantial costs and divert management's attention and resources, which may seriously harm our business.
OUR OFFICERS AND DIRECTORS AND THEIR AFFILIATES WILL CONTROL THE OUTCOME OF MATTERS REQUIRING SHAREHOLDER APPROVAL.
Upon completion of this offering, our officers and directors and their affiliates will beneficially own approximately % of our outstanding shares of common stock based on their holdings as of September 30, 2000. These shareholders will have the ability, acting together, to control the election of our directors and the outcome of corporate actions requiring shareholder approval, such as a merger or a sale of our company, or a sale of all or substantially all of our assets. This concentration of voting power could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other shareholders. These shareholders will also have significant control over our business, policies and affairs.
OUR MANAGEMENT WILL RETAIN BROAD DISCRETION IN THE USE OF PROCEEDS FROM THIS
OFFERING AND MAY NOT OBTAIN A SIGNIFICANT RETURN ON THE USE OF THESE PROCEEDS.
The net proceeds of this offering will be utilized for general corporate purposes, including working capital, capital expenditures and research and development. We may also use a portion of the proceeds to acquire or make an investment in technologies or companies that are complementary to our business. Consequently, our management will have broad discretion as to how to spend the proceeds from this offering and may spend these proceeds in ways with which our shareholders may not agree. Management's allocation of the proceeds of this offering may not benefit our business and the investment of the proceeds may not yield a favorable return.
THE ANTI-TAKEOVER PROVISIONS OF OUR CHARTER DOCUMENTS AND OREGON LAW MAY INHIBIT A TAKEOVER OR CHANGE IN OUR CONTROL THAT SHAREHOLDERS MAY CONSIDER BENEFICIAL.
Provisions of our second amended and restated articles of incorporation and bylaws and provisions of Oregon law may have the effect of delaying or preventing a merger or acquisition of us, or making a merger or acquisition of us less desirable to a potential acquirer, even if the shareholders consider the merger or acquisition favorable. Our second amended and restated articles of incorporation provide for a staggered board of directors, which will make it more difficult for a group of shareholders to quickly change the composition of our board. Our second amended and restated articles of incorporation also make it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us or change our control. See "Description of Capital Stock" for more complete information.
YOU WILL EXPERIENCE AN IMMEDIATE AND SIGNIFICANT DILUTION IN THE BOOK VALUE OF YOUR INVESTMENT.
Because the initial public offering price is substantially higher than the book value per share of common stock, purchasers of the common stock in this offering will be subject to immediate and substantial dilution of $ per share. See "Dilution."
FUTURE SALES OF COMMON STOCK BY OUR EXISTING SHAREHOLDERS COULD CAUSE OUR STOCK PRICE TO DECLINE.
Future sales of the shares of common stock held by existing shareholders and option and warrant holders could cause our stock price to decline. Such sales could also make it more difficult for us to sell equity securities in the future at a time and price we deem appropriate. Upon completion of this offering, we expect that shares of common stock held by our existing shareholders and option and warrant holders will be eligible for sale into the public market, subject to compliance with
the resale volume limitations and other restrictions of Rule 144 under the Securities Act, beginning 180 days after the date of this prospectus.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities and
Exchange Act of 1934. These statements identify substantial risks and
uncertainties and relate to future events or our future financial performance.
In some cases, you can identify forward-looking statements by terminology such
as "may," "will," "could," "should," "expect," "intend," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or "continue," and similar
expressions, whether in the negative or affirmative. These statements are only
predictions and may be inaccurate. Actual events or results may differ
materially. In evaluating these statements, you should specifically consider
various factors, including the risks outlined under "Risk Factors" and in other
parts of this prospectus. These factors may cause our actual results to differ
materially from any forward-looking statement. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to confirm them to actual results
or to changes in our expectations.
USE OF PROCEEDS
Net proceeds from the sale of the shares of common stock in this offering will be approximately $ million after deducting underwriting discounts and commissions and our estimated offering expenses. If the underwriters exercise their over allotment option in full, our estimated net proceeds will be approximately $ million.
We expect to use the net proceeds for general corporate purposes, including working capital and capital expenditures. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." Although we may use a portion of the net proceeds to acquire or make an investment in technologies or companies that are complementary to our business, we have no current plans in this regard. Pending such uses, we plan to invest the net proceeds in interest-bearing, investment grade securities. Management will retain broad discretion in the allocation of the net proceeds of this offering. You will not have the opportunity to evaluate the economic, financial or other information from which we base our decisions on how to use the proceeds.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common or preferred stock. We currently expect to retain any future earnings to fund the operation and expansion of our business, and therefore, we do not currently expect to pay cash dividends in the foreseeable future.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2000:
- on an actual basis;
- on a pro forma basis to reflect the conversion of all outstanding shares of our preferred stock into 3,596,486 shares of our common stock; and
- on a pro forma as adjusted basis to reflect the net proceeds from the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
You should read the following table in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus.
JUNE 30, 2000
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
Long-term obligations, net of current portion............... $ 506 $ 506 $
Redeemable convertible preferred stock, $.01 par value:
1,500,000 shares authorized; 1,250,000 shares issued and
outstanding (actual); no shares issued and outstanding
(pro forma and pro forma as adjusted)..................... 10,356 -- --
Shareholders' equity:
Convertible preferred stock, $.01 par value:
2,500,000 shares authorized; 2,346,486 shares issued and
outstanding (actual); no shares issued and outstanding
(pro forma and pro forma as adjusted)................... 9,226 -- --
Common stock, $.01 par value:
12,000,000 shares authorized; 4,969,117 shares issued
and
outstanding (actual); 8,565,603 shares issued and
outstanding
(pro forma), shares issued and outstanding
(pro forma as adjusted)................................. 813 19,908
Deferred stock-based compensation........................... (143) (143)
Notes receivable for common stock........................... (264) (264)
Accumulated other comprehensive loss........................ (4) (4)
Retained earnings........................................... 9,874 10,361
------- ------- -----------
Total shareholders' equity................................ 19,502 29,858
------- ------- -----------
Total capitalization...................................... $30,364 $30,364 $
======= ======= ===========
|
The share information set forth above excludes:
- 1,524,678 shares of common stock issuable upon the exercise of options outstanding at June 30, 2000 with a weighted average exercise price of $2.69 per share;
- 1,200,000 shares of common stock available for issuance under our 2000 Stock Incentive Plan and 200,000 shares of common stock available for issuance under our 2000 Employee Stock Purchase Plan;
- 25,000 shares of common stock issuable upon the exercise of a warrant at an exercise price of $3.80 per share; and
- 250,000 shares of redeemable convertible preferred stock available for issuance upon the exercise of a warrant at an exercise price of $10.00 per share.
DILUTION
Our pro forma net tangible book value as of June 30, 2000 was $28.9 million or $3.38 per share. Pro forma net tangible book value per share is determined by dividing our pro forma tangible assets less total liabilities by our pro forma number of outstanding shares of common stock after giving effect to, on a pro forma basis, the automatic conversion of all outstanding preferred shares into 3,596,486 shares of common stock immediately prior to the completion of the offering. Dilution per share to new investors represents the difference between the amount per share paid by purchasers of our common stock in this offering and the pro forma net tangible book value per share of common stock immediately after the completion of this offering. After giving effect to our sale of shares of common stock in this offering at an assumed initial public offering price of $ per share and the receipt of the net proceeds of such sale, the pro forma net tangible book value as of June 30, 2000 would have been $ million, or $ per share. This amount represents an immediate increase in pro forma net tangible book value per share of $ to the current shareholders and an immediate dilution of $ per share to purchasers of common stock in this offering. The following table illustrates this per share dilution:
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of June 30,
2000.................................................... $3.38
Increase in pro forma net tangible book value per share
attributable
to this offering........................................
-----
Pro forma net tangible book value per share after this
offering..................................................
-----
Dilution per share to new investors......................... $
=====
|
If the underwriters exercise their over-allotment option in full, our adjusted pro forma net tangible book value as of June 30, 2000 would have been $ , or $ per share, representing an immediate increase in pro forma net tangible book value to our existing shareholders of $ per share and an immediate dilution to new investors of $ per share.
The following table summarizes, on a pro forma basis, as of June 30, 2000, the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by our existing shareholders and by the new investors in this offering, at an assumed initial public offering price of $ per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.
SHARES PURCHASED TOTAL CONSIDERATION
---------------------------- ---------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- ----------- ----------- -------------
Existing shareholders....... 8,565,603 % $20,081,446 % $ 2.34
New investors...............
----------- ----------- ----------- -----------
Total..................... 100.0% $ 100.0%
=========== =========== =========== ===========
|
The foregoing discussion and table assume no exercise of any stock options or warrants outstanding as of June 30, 2000. As of June 30, 2000, there were 1,524,678 shares of common stock issuable upon the exercise of options outstanding at a weighted average exercise price of $2.69 per share. Additionally, there were 25,000 shares of common stock available for issuance upon the exercise of a warrant at an exercise price of $3.80 per share and 250,000 shares of redeemable convertible preferred stock available for issuance upon the exercise of a warrant at an exercise price of $10.00.
If all options and warrants outstanding as of June 30, 2000 were exercised, the pro forma net tangible book value per share immediately after completion of the offering would be $ , which represents an immediate dilution per share of $ to purchasers of shares of common stock in this offering. See "Management--Employee Benefit Plans" and the notes to our consolidated financial statements for more information on our stock incentive plans.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus. We derived the consolidated statements of operations data for the years ended December 31, 1997, 1998 and 1999 and the consolidated balance sheet data as of December 31, 1998 and 1999 from our audited financial statements included elsewhere in this prospectus, which have been audited by KPMG LLP, independent auditors, whose report is also included elsewhere in this prospectus. We derived the consolidated statements of operations data for the years ended December 31, 1995 and 1996, and the consolidated balance sheet data as of December 31, 1995, 1996 and 1997 from audited financial statements not included elsewhere in this prospectus. We derived the consolidated statements of operations data for the six months ended June 30, 1999 and 2000 and the consolidated balance sheet data as of June 30, 2000 from unaudited consolidated financial statements included elsewhere in this prospectus which, in the opinion of management, include all adjustments necessary for a fair presentation of our financial position and operating results for these periods. The historical financial information presented below is not necessarily indicative of results to be expected for any future period.
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales............................................ $33,636 $37,798 $40,322 $41,597 $51,530 $20,762 $31,860
Cost of sales........................................ 17,047 19,490 21,681 24,541 27,444 11,767 16,735
------- ------- ------- ------- ------- ------- -------
Gross profit......................................... 16,589 18,308 18,641 17,056 24,086 8,995 15,125
Operating expenses:
Research and development........................... 3,771 4,874 5,911 6,194 5,887 2,430 3,725
Selling, general and administrative................ 9,901 10,226 11,697 12,438 14,236 6,108 8,690
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations........................ 2,917 3,208 1,033 (1,576) 3,963 457 2,710
Other income (expense), net.......................... 101 (30) 161 (131) (266) (73) 253
------- ------- ------- ------- ------- ------- -------
Income (loss) before provision (benefit) for income
taxes.............................................. 3,018 3,178 1,194 (1,707) 3,697 384 2,963
Provision (benefit) for income taxes................. 1,013 1,250 523 (730) 1,223 155 1,130
------- ------- ------- ------- ------- ------- -------
Net income (loss).................................... 2,005 1,928 671 (977) 2,474 229 1,833
Accretion of preferred stock redemption.............. -- -- -- -- 39 -- 448
------- ------- ------- ------- ------- ------- -------
Net income (loss) attributed to common
shareholders....................................... $ 2,005 $ 1,928 $ 671 $ (977) $ 2,435 $ 229 $ 1,385
======= ======= ======= ======= ======= ======= =======
Net income (loss) per share:
Basic.............................................. $ 0.44 $ 0.42 $ 0.15 $ (0.21) $ 0.49 $ 0.05 $ 0.28
Diluted............................................ $ 0.31 $ 0.29 $ 0.10 $ (0.21) $ 0.32 $ 0.03 $ 0.15
Shares used in computing net income (loss) per share:
Basic.............................................. 4,509 4,553 4,568 4,711 4,988 4,974 5,023
Diluted............................................ 6,477 6,696 6,590 4,711 7,577 7,159 9,472
Unaudited pro forma net income per share:
Basic.............................................. $ 0.35 $ 0.16
Diluted............................................ $ 0.32 $ 0.15
Unaudited shares used in computing pro forma net
income per share:
Basic.............................................. 6,992 8,619
Diluted............................................ 7,577 9,472
|
DECEMBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments....... $ 717 $ 2,978 $ 602
Working capital......................................... 7,654 10,372 9,764
Total assets............................................ 15,227 17,947 20,872
Long-term obligations, net of current portion........... 1,257 2,288 1,504
Redeemable convertible preferred stock.................. -- -- --
Shareholders' equity.................................... 8,571 10,385 10,962
DECEMBER 31,
------------------- JUNE 30,
1998 1999 2000
-------- -------- ---------
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments....... $ 368 $13,511 $11,284
Working capital......................................... 8,354 26,012 23,592
Total assets............................................ 20,549 38,114 41,304
Long-term obligations, net of current portion........... 1,513 859 506
Redeemable convertible preferred stock.................. -- 9,908 10,356
Shareholders' equity.................................... 10,540 18,965 19,502
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS PROSPECTUS. IN ADDITION TO HISTORICAL INFORMATION, THE FOLLOWING DISCUSSION AND OTHER PARTS OF THIS PROSPECTUS CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED BY FORWARD-LOOKING STATEMENTS DUE TO FACTORS DISCUSSED UNDER "RISK FACTORS," "BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We are a worldwide leader in developing, manufacturing and selling wafer probing solutions used to develop and test integrated circuits and optoelectronic devices, or chips, on semiconductor wafers. We sell production probe cards, analytical probes and probe stations. We design, manufacture and assemble our products in Beaverton, Oregon, with global sales, service and support centers in North America, Europe and Japan. We began our operations in 1983.
Probe stations and analytical probes have historically represented our core product lines. These product lines address the need for precise and accurate measurement of semiconductor electrical and optical, or lightwave, characteristics during chip design or when optimizing the chip fabrication process. Probe stations and analytical probes together have accounted for a substantial majority of our net sales to date, and we anticipate that these two product lines will continue to account for a majority of our net sales in the foreseeable future.
Our production probe card product line consists of our Pyramid Probe cards, which we developed to overcome new probing challenges in the production test environment. We introduced our first generation Pyramid Probe cards for production testing of aluminum bond pads in 1997. To address the evolving test requirements of chips that are smaller, faster and integrate more functions, we have continued to enhance our Pyramid Probe card fabrication process and design, and in early 2000, introduced our second generation Pyramid Probe products. To date, sales of our Pyramid Probe cards have represented a small, but growing, portion of our net sales.
Our products are primarily used by semiconductor manufacturers, research organizations and designers, including fabless semiconductor companies who design their own chips but outsource the manufacturing to third party semiconductor manufacturers. No single customer accounted for more than 10% of our net sales during the past three years or in the six months ended June 30, 2000. Our ten largest customers accounted for 30.1% of our net sales in 1997, 33.5% in 1998, 34.7% in 1999 and 35.6% in the six months ended June 30, 2000. In North America and Asia, excluding Japan, we sell our products primarily through manufacturers' representatives. In Japan, we sell through Cascade Microtech Japan, K.K., our direct sales and service subsidiary. In Europe we sell through manufacturers' representatives and distributors managed by Cascade Microtech Europe, Ltd., our direct sales and service subsidiary in the United Kingdom. In other countries, we typically sell through manufacturers' representatives or distributors. Approximately 78% of our 1999 net sales were through manufacturers' representatives and distributors.
International sales accounted for 55.2% of our net sales in 1997, 52.7% in 1998, 50.6% in 1999 and 50.2% in the six months ended June 30, 2000. Sales through our subsidiaries in Japan and Great Britain are denominated in yen and pound sterling, respectively, while other international sales are generally denominated in U.S. dollars. Our international operations give rise to exposures from changes in currency exchange rates. To reduce our Japanese currency risk, we have hedged future cash flows from firmly committed bookings denominated in yen. We believe our exposure to exchange rate fluctuations involving currencies other than yen has been minimal; therefore, we have not used derivative contracts to purchase or sell other currencies.
The semiconductor industry is cyclical and has from time to time experienced depressed business conditions. From 1996 through 1998, the semiconductor industry experienced worldwide overcapacity, which led to a slowdown in demand for semiconductors and, in turn, semiconductor capital equipment. Our operating results were negatively impacted by this slowdown, particularly in the second half of 1998 and the first half of 1999. While markets for semiconductors and semiconductor capital equipment have improved significantly, we cannot assure you that these conditions will continue.
We recognize revenue from product sales to customers that do not have acceptance criteria, including product sales to distributors, when a written purchase order has been obtained, the product is shipped, title has transferred and no obligations remain. We recognize revenue from customers who have acceptance criteria when all acceptance criteria are satisfied. We recognize revenue for installation services when the services are performed.
Our gross margin fluctuates due to a number of factors, including product line mix, geographic mix, pricing pressures and our utilization of current manufacturing capacity. Product line mix affects gross margin due to varying cost structures associated with our product lines. Sales of products with a high content of accessories built by other manufacturers may reduce gross margin. Geographic mix impacts gross margins due to the varying price structures and sales channels in different regions. Pricing pressures affect gross margin by reducing the price charged for a product and typically relate to a specific product or a specific geographic region. Finally, our gross margin will fluctuate depending on the utilization of our available manufacturing capacity. Generally, a higher utilization percentage will bring about greater manufacturing efficiencies and permit our manufacturing overhead expense to be spread over a greater number of products, thereby enhancing gross margin.
We have recorded deferred stock-based compensation of $0.1 million as of June 30, 2000, and we expect to record approximately $ million of deferred stock-based compensation on our balance sheet as of September 30, 2000. This deferred stock-based compensation is based on the difference between the deemed fair market value of our common stock and the exercise price of the option or stock on the grant date. Amortization of the deferred stock-based compensation for the years ended December 31, 2000, 2001, 2002, 2003 and 2004 is expected to be approximately $ million, $ million, $ million, $ million and $ million, respectively.
RESULTS OF OPERATIONS
The following table summarizes our historical consolidated results of operations as a percentage of net sales for the periods indicated.
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- --------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
Net sales................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................ 53.8 59.0 53.3 56.7 52.5
----- ----- ----- ----- -----
Gross profit............................................. 46.2 41.0 46.7 43.3 47.5
Operating expenses:
Research and development............................... 14.7 14.9 11.4 11.7 11.7
Selling, general and administrative.................... 29.0 29.9 27.6 29.4 27.3
----- ----- ----- ----- -----
Income (loss) from operations............................ 2.6 (3.8) 7.7 2.2 8.5
Other income (expense), net.............................. 0.4 (0.3) (0.5) (0.4) 0.8
----- ----- ----- ----- -----
Income (loss) before provision (benefit) for income
taxes.................................................... 3.0 (4.1) 7.2 1.8 9.3
Provision (benefit) for income taxes..................... 1.3 (1.8) 2.4 0.7 3.5
----- ----- ----- ----- -----
Net income (loss)........................................ 1.7% (2.3)% 4.8% 1.1% 5.8%
===== ===== ===== ===== =====
|
SALES BY PRODUCT LINE
The following table summarizes our consolidated net sales by product line, both in dollars and as a percentage of net sales, for the periods indicated.
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS)
Probe stations................................. $31,405 $32,384 $39,843 $15,531 $23,643
Analytical probes.............................. 7,136 7,329 8,442 3,937 5,613
Production probe cards......................... 1,781 1,884 3,245 1,294 2,604
------- ------- ------- ------- -------
$40,322 $41,597 $51,530 $20,762 $31,860
======= ======= ======= ======= =======
|
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
Probe stations.......................................... 77.9% 77.9% 77.3% 74.8% 74.2%
Analytical probes....................................... 17.7 17.6 16.4 19.0 17.6
Production probe cards.................................. 4.4 4.5 6.3 6.2 8.2
------- ------- ------- ------- -------
100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ======= =======
|
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 TO SIX MONTHS ENDED JUNE 30, 2000
NET SALES. Our net sales increased 53.5% from $20.8 million in the six months ended June 30, 1999 to $31.9 million in the same period in 2000. This increase in net sales was attributable to higher levels of capital spending by our semiconductor manufacturing and design customers, resulting in increased demand for our products. Of the $11.1 million increase in net sales, $8.1 million was due to a 52.2% increase in sales of probe stations, $1.7 million was due to a 42.6% increase in sales of analytical probes and $1.3 million was due to a 101.2% increase in sales of production probe cards. Domestic sales increased 52.9% from $10.4 million in the six months ended June 30, 1999 to $15.9 million in the same period in 2000. International sales increased 53.8% from $10.4 million to $16.0 million over the same periods.
GROSS PROFIT. Gross profit consists of net sales less cost of sales. Cost of sales includes materials, labor, warranty and overhead. Gross profit increased 68.1% from $9.0 million in the six months ended June 30, 1999 to $15.1 million in the same period in 2000. Gross profit as a percentage of net sales, or gross margin, increased from 43.3% in the six months ended June 30, 1999 to 47.5% in the same period in 2000. The gross profit and gross margin increases resulted from higher sales volume and a heavier concentration of higher margin products. The increase in gross margin was partially offset by higher manufacturing costs associated with expansion in the manufacturing capacity for our Pyramid Probe products.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development, or R&D, expenses include salaries and related expenses for engineering personnel and costs of materials associated with the design, development, testing and enhancement of our products. R&D expenses increased 53.3% from $2.4 million in the six months ended June 30, 1999 to $3.7 million in the same period in 2000. In the second half of 1998, we implemented cost reductions to respond to the semiconductor industry slowdown. As a result, we adjusted R&D expenses downward through the first six months of 1999. In mid-1999, we began hiring additional R&D personnel as the semiconductor industry improved, and, therefore, our R&D expenses in the first six months of 2000 increased. As a percentage of net sales, R&D expenses were 11.7% in both periods. We anticipate that spending for R&D will increase in
absolute dollars in future periods as we focus on growing opportunities in the communications market and as we continue to enhance our core technologies and products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative, or SG&A, expenses include salaries and related costs for administrative, financial, human resource, marketing and sales, and information technology functions, and for professional services. SG&A expenses increased 42.3% from $6.1 million in the six months ended June 30, 1999 to $8.7 million in the same period in 2000. The increase primarily resulted from higher payroll expenses and increased commissions paid to manufacturers' representatives. As a percentage of net sales, SG&A expenses decreased from 29.4% in the six months ended June 30, 1999 to 27.3% in the same period in 2000, primarily due to the increase in net sales. We expect SG&A expenses to increase in absolute dollars to support our Pyramid Probe card operations and additional costs associated with being a public company.
OTHER INCOME (EXPENSE), NET. Other income (expense), net includes interest earned on cash and cash equivalents, interest incurred on debt outstanding, and foreign currency gains and losses. Other income (expense), net was ($0.1) million in the six months ended June 30, 1999 compared to $0.3 million in the same period in 2000. The improvement is primarily due to interest income in the first six months of 2000 from equity financing received in the second half of 1999.
PROVISION (BENEFIT) FOR INCOME TAXES. Our effective tax rate decreased from 40.4% in the six months ended June 30, 1999 to 38.1% in the same period in 2000 due to a decrease in foreign tax rates. Our effective tax rate is sensitive to shifts in income and losses from our foreign subsidiaries.
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1999
NET SALES. Our net sales increased 23.9% from $41.6 million in 1998 to $51.5 million in 1999. This increase is primarily due to increased demand for our products resulting from the semiconductor industry's recovery and increased demand from the communications market. In addition, net sales in 1999 include one-time technology licensing fees of $2.0 million paid to us by a strategic partner. Of the $7.9 million increase in net sales, excluding the licensing fees, $5.4 million was due to a 16.9% increase in sales of probe stations, $1.1 million was due to a 15.2% increase in sales of analytical probes and $1.4 million was due to a 72.2% increase in sales of production probe cards. The $2.0 million of licensing fees are included in net sales of the probe stations product line. Domestic sales, excluding the licensing fees, increased 18.7% from $19.8 million in 1998 to $23.5 million in 1999. International sales increased 19.3% from $21.8 million in 1998 to $26.0 million in 1999.
GROSS PROFIT. Gross profit increased 41.2% from $17.1 million in 1998 to $24.1 million in 1999. This increase was primarily a result of higher sales volumes and the $2.0 million of licensing fees in 1999. Gross margin increased from 41.0% in 1998 to 46.7% in 1999. Excluding the licensing fees, gross margin was 44.6% in 1999. This gross margin increase was due to improved capacity utilization resulting from the improvement in the semiconductor industry.
RESEARCH AND DEVELOPMENT EXPENSES. R&D expenses decreased 5.0% from $6.2 million in 1998 to $5.9 million in 1999. R&D expenses relating to developing our 200 mm automatic probe station, or autoprober, decreased from 1998 due principally to completion of the project. R&D expenses also decreased in 1999 due to the cost reductions we implemented in the second half of 1998. These decreases were partially offset by increased spending for Pyramid Probe card development in 1999. As a percentage of net sales, R&D expenses decreased from 14.9% in 1998 to 11.4% in 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased 14.5% from $12.4 million in 1998 to $14.2 million in 1999. The increase was a result of increased commissions paid to manufacturers' representatives, higher patent-related costs and increased facility costs associated with our move to a new Pyramid Probe card fabrication facility. As a percentage of net sales, SG&A
expenses decreased from 29.9% in 1998 to 27.6% in 1999, primarily as a result of the increase in net sales and a reduction in average headcount.
OTHER INCOME (EXPENSE), NET. Other income (expense), net was ($0.1) million in 1998 compared to ($0.3) million in 1999. The change from 1998 to 1999 is primarily related to larger exchange losses resulting from our holdings of subsidiary monetary assets and liabilities denominated in yen and pound sterling. Translation of these assets and liabilities into U.S. dollars results in net gains or losses depending on the change in the exchange rate from period to period.
PROVISION (BENEFIT) FOR INCOME TAXES. Our income tax benefit in 1998 represents an effective tax rate of 42.8%. This compares to our income tax provision in 1999 representing an effective tax rate of 33.1%. The 1999 effective rate was favorably impacted by a reduction in the valuation allowance due to utilization of previously reserved net operating loss carryovers.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1998
NET SALES. Our net sales increased 3.2% from $40.3 million in 1997 to $41.6 million in 1998. In 1998, the semiconductor industry experienced worldwide overcapacity, worsened by economic recessions in various Asian economies. Sales increased in 1998 due to increased demand for our autoprober product, which was first introduced in late 1997, analytical probes and production probe cards. Partially offsetting these increases was a decrease in the average selling price of probe stations, excluding autoprobers. Of the $1.3 million increase in net sales, $1.0 million was due to a 3.1% increase in sales of probe stations, $0.2 million was due to a 2.7% increase in sales of analytical probes and $0.1 million was due to a 5.8% increase in sales of production probe cards. Domestic sales increased 10.0% from $18.0 million in 1997 to $19.8 million in 1998. International sales decreased 2.2% from $22.3 million in 1997 to $21.8 million in 1998.
GROSS PROFIT. Gross profit decreased 8.5% from $18.6 million in 1997 to $17.1 million in 1998. Gross margin decreased from 46.2% in 1997 to 41.0% in 1998. This gross margin decrease was due to lower selling prices for our probe stations, excluding autoprobers. In addition, lower margin autoprobers accounted for a higher percentage of 1998 sales. The gross margin decrease was also due to an increase in allocated occupancy costs associated with the relocation of our headquarters to a new facility in the second half 1998.
RESEARCH AND DEVELOPMENT EXPENSES. R&D expenses increased 4.8% from $5.9 million in 1997 to $6.2 million in 1998. The increase was primarily due to increased staffing for R&D and increased occupancy costs resulting from our move to a larger headquarters facility. As a percentage of net sales, R&D expenses increased slightly from 14.7% in 1997 to 14.9% in 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased 6.3% from $11.7 million in 1997 to $12.4 million in 1998. This increase was due to costs incurred to hire additional employees in the first half of 1998 and to move to the new headquarters facility in the second half of 1998. In addition, we incurred severance costs as headcount reductions were necessary in the second half of 1998 to respond to the effects of the semiconductor industry slowdown. As a percentage of net sales, SG&A expenses increased from 29.0% in 1997 to 29.9% in 1998.
OTHER INCOME (EXPENSE), NET. Other income (expense), net was $0.2 million in 1997 compared to ($0.1) million in 1998. The change from 1997 to 1998 is primarily related to exchange losses resulting from our holdings of subsidiary monetary assets and liabilities denominated in yen and pound sterling.
PROVISION (BENEFIT) FOR INCOME TAXES. Our income tax provision in 1997 represents an effective tax rate of 43.8%. This compares to our income tax benefit in 1998 representing an effective tax rate of 42.8%. The tax benefit in 1998 was a result of our net loss.
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following table presents our unaudited consolidated operating results for each of the six most recent quarters ended June 30, 2000 both in dollars and as a percentage of net sales for each quarter. The information for each of these quarters is unaudited and has been prepared on the same basis as the audited consolidated financial statements included in this prospectus. In the opinion of management, all necessary adjustments have been included to fairly present the unaudited quarterly results. The historical financial information presented below is not necessarily indicative of results to be expected for any future period.
QUARTER ENDED
-------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1999 1999 1999 1999 2000 2000
--------- -------- --------- -------- ---------- --------
(IN THOUSANDS)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales................................... $9,628 $11,134 $15,875 $14,893 $14,491 $17,369
Cost of sales............................... 5,412 6,355 8,025 7,652 7,646 9,089
------ ------- ------- ------- ------- -------
Gross profit................................ 4,216 4,779 7,850 7,241 6,845 8,280
Operating expenses:
Research and development.................. 1,240 1,190 1,595 1,862 1,952 1,773
Selling, general and administrative....... 2,823 3,285 4,178 3,950 3,708 4,982
------ ------- ------- ------- ------- -------
Income from operations...................... 153 304 2,077 1,429 1,185 1,525
Other income (expense), net................. (60) (13) (97) (96) 147 106
------ ------- ------- ------- ------- -------
Income before provision for income taxes.... 93 291 1,980 1,333 1,332 1,631
Provision for income taxes.................. 62 93 686 382 484 646
------ ------- ------- ------- ------- -------
Net income.................................. $ 31 $ 198 $ 1,294 $ 951 $ 848 $ 985
====== ======= ======= ======= ======= =======
|
QUARTER ENDED
-------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1999 1999 1999 1999 2000 2000
--------- -------- --------- -------- --------- ---------
AS A PERCENTAGE OF NET SALES:
Net sales................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................... 56.2 57.1 50.6 51.4 52.8 52.3
------ ------- ------- ------- ------- -------
Gross profit................................ 43.8 42.9 49.4 48.6 47.2 47.7
Operating expenses:
Research and development.................. 12.9 10.7 10.0 12.5 13.5 10.2
Selling, general and administrative....... 29.3 29.5 26.3 26.5 25.6 28.7
------ ------- ------- ------- ------- -------
Income from operations...................... 1.6 2.7 13.1 9.6 8.2 8.8
Other income (expense), net................. (0.6) (0.1) (0.6) (0.6) 1.0 0.6
------ ------- ------- ------- ------- -------
Income before income taxes.................. 1.0 2.6 12.5 9.0 9.2 9.4
Provision for income taxes.................. 0.6 0.8 4.3 2.6 3.3 3.7
------ ------- ------- ------- ------- -------
Net income.................................. 0.3% 1.8% 8.2% 6.4% 5.9% 5.7%
====== ======= ======= ======= ======= =======
|
Our quarterly results have fluctuated in the past and we expect them to fluctuate in future periods due to a variety of factors, including those discussed in the section captioned "Risk Factors." Net sales in the quarters ended September 30 and December 31, 1999 included one-time licensing fees of $1.5 million and $0.5 million, respectively. Due to seasonality in international markets, net sales in the quarter ended March 31, 2000 were essentially flat compared to net sales in the quarter ended December 31, 1999, excluding licensing fees. Sales in the first calendar quarter have generally been
lower than sales in the fourth calendar quarter due to this seasonality. Gross profit in the quarters ended September 30 and December 31, 1999 were favorably impacted by the one-time licensing fees. R&D expenses increased in the quarters ended September 30, 1999, December 31, 1999 and March 31, 2000 primarily due to costs associated with development of our Pyramid Probe cards and our 300 mm probe station. In addition, R&D expenses increased because we moved our Pyramid Probe fabrication to a new, larger facility in the quarter ended December 31, 1999. SG&A expenses decreased as a percentage of net sales in the quarters ended September 30 and December 31, 1999, primarily due to higher net sales from one-time licensing fees. SG&A expenses as a percentage of net sales remained lower in the quarter ended March 31, 2000, primarily due to the absence of major tradeshow expenses that were incurred in previous quarters, lower rent expense due to offsetting sublease income and lower amortization expense. SG&A expenses increased as a percentage of net sales in the quarter ended June 30, 2000 primarily due to expanded sales and marketing activity related to our Pyramid Probe cards.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations primarily through cash generated from operations and the private sale of preferred stock. At June 30, 2000, we had cash, cash equivalents and short-term investments of $11.3 million and working capital of $23.6 million. Other sources of liquidity available to us include a $5.0 million bank line of credit for which we signed a commitment letter in September 2000 and an existing $0.5 million bank line of credit through our subsidiary in Japan.
Net cash provided by operating activities was $0.6 million in 1998, $2.0 million in 1999 and $3.1 million in the six months ended June 30, 2000. Cash provided in 1998 was primarily from a decrease in inventories and accounts receivable, offset by a net loss, a decrease in accrued liabilities and an increase in prepaid expenses and other. Cash provided in 1999 was primarily from net income and an increase in accrued liabilities, offset by an increase in accounts receivable. Cash provided in the six months ended June 30, 2000 was primarily from net income and an increase in accounts payable, offset by increases in inventories and accounts receivable.
Net cash used in investing activities was $1.9 million in 1998, $1.6 million in 1999 and $10.2 million in the six months ended June 30, 2000. Cash used in 1998 and 1999 resulted primarily from leasehold and tenant improvements, equipment purchases to expand Pyramid Probe card fabrication capabilities and costs related to patent infringement litigation against a competitor. Capital expenditures were $1.5 million in 1998 and $1.4 million in 1999. Cash used in the six months ended June 30, 2000 resulted primarily from investments in marketable securities using proceeds from the private sale of preferred stock in 1999 and purchases of fixed assets primarily for manufacturing operations and engineering. Capital expenditures were $2.0 million in the six months ended June 30, 2000. We expect capital expenditures for the second half of 2000 to be approximately $2.6 million.
Net cash provided by financing activities was $1.1 million in 1998 and $12.8 million in 1999. Net cash used in financing activities was $1.6 million in the six months ended June 30, 2000. Cash provided in 1998 resulted from borrowings under a line of credit and proceeds received from the issuance of common stock. Cash provided in 1999 resulted from proceeds from the issuance of preferred stock offset by payments on our line of credit and principal payments on our long-term debt. Cash used in the six months ended June 30, 2000 resulted from the repurchase of common stock and principal payments on long-term debt.
On September 27, 2000, we signed a commitment letter with a bank for a $5.0 million revolving line of credit that will expire on September 30, 2001. All borrowings under this line will bear interest at the bank's prime rate. Alternately, we have the option to incur interest on borrowings under the line at LIBOR or quoted Bankers Acceptance rates plus a spread based on our ratio of debt to tangible net worth. The line of credit will be unsecured. The line of credit will require us to maintain quarterly
financial covenants, including a minimum tangible net worth, minimum quick ratio and maximum leverage ratio.
On September 27, 2000, we received a commitment letter for a foreign exchange facility with a bank that provides for issuance of forward and spot currency contracts up to $40.0 million. The facility allows for a maximum forward settlement date of 13 months, with maturity not to exceed March 31, 2002. Rates and availability are subject to current market conditions.
Cascade Microtech Japan, K.K. has a bank line of credit that provides borrowings up to approximately $0.5 million at the June 30, 2000 exchange rate. The line bears interest at 1.375%, has a six-month term, and is guaranteed by Cascade Microtech, Inc. The line will expire in October 2000 and is subject to renewal based on agreement between the parties. No amounts were outstanding under this line of credit at June 30, 2000.
We have one term loan with $1.0 million outstanding at June 30, 2000. The loan bears interest at 7.71% per annum, with monthly principal and interest payments. The loan expires in February 2002, is secured by accounts receivable, inventories, equipment and certain intangibles and contains a covenant for debt service coverage. We were in compliance with the covenant requirements at June 30, 2000.
We believe that the net proceeds from this offering, together with our existing cash and cash equivalents, will provide us with sufficient liquidity and capital resources to meet our current and future financial obligations, as well as to provide funds for our working capital, capital expenditures and other needs for at least the next 12 months. No assurance can be given, however, that this will be the case. We expect from time to time to evaluate potential acquisitions and equity investments complementary to our market strategy. To the extent we pursue such transactions, or in the event of an industry downturn or an unexpected adverse change in our business operations, we could require additional equity or debt financing to fund our activities or our working capital requirements. To the extent we require additional capital, we cannot assure you that additional financing will be available or, if available, will be available on terms satisfactory to us.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
FOREIGN CURRENCY EXCHANGE RISK
We are exposed to foreign currency fluctuations through our international operations. This exposure results from timing differences between incoming and outgoing cash flows denominated in a foreign currency. To manage this exposure, we enter into forward foreign exchange contracts to exchange yen for U.S. dollars. The contracts generally mature within six months. We do not currently use derivative financial instruments for speculative or trading purposes or buy or sell currencies other than yen. At inception, foreign exchange contracts are designated as hedges of firmly committed bookings for which we expect payment within six months. At June 30, 2000, foreign currency contracts to receive $3.7 million were outstanding with an estimated fair value of $3.7 million.
INTEREST RATE RISK
Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and long-term debt obligations. We maintain an investment policy which is designed to ensure the safety and preservation of our invested funds by limiting default risk, market risk, and reinvestment risk. At June 30, 2000, our investments consisted of municipal, U.S. agency, corporate finance obligations and money market funds with a total book value of $11.1 million. The investments held at June 30, 2000 mature through October 2001 and have a weighted-average effective interest rate of 5.4%.
We mitigate default risk by attempting to invest in high credit quality securities and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment
issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity and maintains a prudent amount of diversification.
The fair market value of long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The interest rate changes affect the fair market value but do not impact earnings or cash flows. The estimated fair value of our long-term debt at June 30, 2000 approximates carrying value, as stated interest rates do not differ significantly from current market rates. The effect of an immediate 10% change in interest rates would not have a material impact on our future operating results or cash flows.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards, or SFAS, No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, which establishes accounting and reporting standards for derivative instruments and hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value. The effective date for SFAS No. 133 is January 1, 2001. We are in the process of evaluating the potential impact of this standard on our financial position and results of operations.
In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin, or SAB, No. 101, "Revenue Recognition in Financial Statements," which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. We implemented the guidance provided by SAB No. 101 effective January 1, 2000. Based on our current understanding of SAB No. 101, the implementation of its guidance on revenue recognition, presentation and disclosure of revenue did not have a material impact on our financial statements or any material implications on how we have historically recognized revenue.
In March 2000, the Financial Accounting Standards Board issued Interpretation No. 44, or FIN 44, "Accounting for Certain Transactions involving Stock Compensation, an Interpretation of Accounting Principles Board, or APB, Opinion No. 25," which clarifies the application of APB Opinion No. 25, "Stock Issued to Employees," for certain issues including:
- the definition of an employee for purposes of applying APB Opinion No. 25;.
- the criteria for determining whether a plan qualifies as a noncompensatory plan;.
- the accounting consequences of various modifications to the terms of a previously fixed stock option or award; and
- the accounting for an exchange of stock compensation awards in a business combination.
FIN 44 became effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after December 15, 1998 or January 12, 2000. To the extent that FIN 44 covers events occurring during the period after December 15, 1998 or January 12, 2000, but before the effective date of July 1, 2000, the effects of applying FIN 44 are recognized on a prospective basis from July 1, 2000. We adopted the provisions of FIN 44 as of the required effective dates, and this adoption has not had a material impact on our financial statements.
BUSINESS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS."
OVERVIEW
We are a worldwide leader in developing, manufacturing and selling leading-edge wafer probing solutions used to test and measure complex semiconductors in wafer form in both design and production environments. Customers use our solutions to develop and test advanced integrated circuits and optoelectronic devices, or chips, for a broad range of communications, consumer electronics and computing products. In particular, we believe we derived approximately one-half of our sales in the first six months of 2000 from customers who develop and supply wireless, broadband and other communications chips. We sell production probe cards, analytical probes, and probe stations. Probe stations manually or automatically align wafers to probe cards or probes to electrically connect test equipment to each chip on a wafer, allowing a variety of electrical and optical, or lightwave, measurements to be taken. Our products are used by design engineers to develop new chips and accelerate time-to-market, by production process engineers to improve chip fabrication processes, and by test engineers to assure chip quality and reliability. Our production probe cards test chips for products such as synchronous optical network, or SONET, equipment, Gigabit Ethernet equipment, cellular phones, liquid crystal display drivers and some application-specific integrated circuits, or ASICs. Our probe stations and analytical probes are used throughout the semiconductor industry in engineering test to develop designs and fabrication processes for chips such as radio frequency chips, digital signal processors, telecommunications chips, advanced memory chips, microprocessors and microcontrollers, video graphics processors and ASICs. Approximately 400 customers purchased our products in the first half of 2000. Our top ten customers during this period were Agilent Technologies, Conexant Systems, Fujitsu, IBM, Infineon, Lucent Technologies, Matsushita, Mitsubishi, Nortel Networks and Taiwan Semiconductor Manufacturing Company.
INDUSTRY BACKGROUND
COMMUNICATIONS, CONSUMER ELECTRONICS AND COMPUTING PRODUCTS ARE DRIVING SEMICONDUCTOR CHIP GROWTH AND COMPLEXITY
In recent years, the proliferation of communications, consumer electronics and computing products has driven substantial growth in the semiconductor chip market. IC Insights, a market research firm, estimates that the worldwide market for integrated circuits, or ICs, will grow from $130.2 billion in 1999 to $264.4 billion in 2003, a compound annual growth rate, or CAGR, of 19%. In particular, the demand for chips used in communications products, such as cellular phones, optical fiber networking equipment and high-speed local area networking equipment, is generally growing at a faster rate. For example, Dataquest, a division of Gartner Inc., forecasts that the worldwide market for ICs for digital cellular handsets will grow from $13.9 billion in 1999 to $31.2 billion in 2003, representing a CAGR of 22%. In addition, the rapid growth in data traffic over broadband networks has resulted in increased demand for high-speed data transport ICs and optoelectronic devices. Optoelectronic devices for communications are components that convert electrical signals to optical, or lightwave, signals, or lightwave signals to electrical signals. International Data Corporation estimates that the worldwide market for SONET chips that transmit data at 2.4 gigabits per second or faster will grow from $219.0 million in 1999 to $846.2 million in 2003, representing a CAGR of 40%.
As demand grows for higher performance and less expensive electronics products, semiconductor suppliers must respond by producing chips that are less costly but more complex, meaning smaller, faster and integrating more functions. Chip suppliers are striving to meet this demand primarily by
shrinking chip feature sizes and by using new materials to manufacture chips. The result is more complex chips that are difficult to design and manufacture, and increasingly challenging to test.
WAFER PROBE TESTING OF CHIPS
Chips are tested multiple times throughout design and manufacturing to ensure the integrity of the chip design and the quality of the manufacturing process. Most chip testing occurs during manufacturing and is often referred to as production test. Chip testing that occurs during design or in support of production is often referred to as engineering test. Production test entails performing a limited number of tests at a rapid rate on a high volume of chips. Engineering test entails performing a wide variety of highly precise measurements on a low volume of chips.
Wafer probing, or testing chips while they are still in semiconductor wafer form, is critical to both engineering and production test. A typical wafer is currently 8 inches, or 200 mm, in diameter and usually contains 500 to 10,000 chips. Wafer probing entails establishing temporary electrical contact between test equipment and each individual chip on a wafer to determine whether each chip meets design and performance specifications. The test equipment transmits electrical signals to the chip and analyzes the signals that return. Wafer probing enables the manufacturer to avoid incurring the significant expense of assembling and packaging chips that do not meet specification by identifying flaws relatively early in the manufacturing process. The primary components of a wafer probing test system include:
- PROBES. A conventional probe is a single tapered metal needle, whose tip is positioned to "touch-down" on, or make electrical contact with, a metallized bond pad on the chip being tested. A typical bond pad ranges from 40 to 80 microns, or millionths of a meter, in width and 60 to 100 microns in length. Each chip contains numerous bond pads which connect to the chip circuitry so that electrical signals can be transmitted in and out of the chip. A probe used in engineering test is often called an analytical probe.
- PROBE CARD. A probe card is a complex printed circuit board that contains a customized arrangement of probe needles or probe tips to simultaneously contact all of the bond pads on one or more chips. Probe cards are primarily used in production testing.
- PROBE STATION. A probe station manually or automatically aligns the wafer to permit the probes to precisely contact the chip bond pads.
- TEST EQUIPMENT. Test equipment transmits electrical signals through the probes or probe card to the chip and evaluates the signals that return. Test equipment used in production test is often called automated test equipment, or ATE, and is designed specifically for high-volume testing.
The testing of each new chip design requires use of a custom probe card or a set of probes. In production, probe cards generally last for only 50,000 to 500,000 touch-downs due to wear of the probe tips. As a result, probe cards and probes are considered to be consumable products, or consumables, because they can only be used with a specific chip design and must be replaced due to wear. In contrast, probe stations and test equipment are used for many years, can be used to test many different chips and are typically purchased to increase production capacity. According to VLSI Research Inc., a market research firm, the worldwide market for probe cards was $365.9 million and for probe stations was $485.8 million in 1999.
CHALLENGES OF WAFER PROBE TESTING
As chips become more complex, wafer probing in both the production and engineering test environments becomes increasingly difficult. Greater chip functionality increases the number of bond pads, or pincount, on a chip. The pincount of a chip is typically several hundred and can be as high as 3,000. As feature sizes decrease, bond pads become smaller and the distance between the centers of
adjacent pads, or pitch, decreases. In addition, all probe touch-downs deform the bond pad metal and can cause damage to the material surrounding the bond pad if the probe tip is misaligned. Damage to material surrounding bond pads results in diminished yields, and excessive bond pad damage can cause unreliable electrical connections to the pads when the chip is packaged. Smaller pads make the chip more susceptible to such damage. In addition, as chip operating speeds increase, they often must be tested at their maximum operating speed because some defects are only detectable at those speeds. Testing a chip at its maximum operating speed requires wafer probes, probe cards and test equipment that can operate as fast as the chips.
More complex chips pose additional challenges specific to the engineering test environment and, in particular, require a greater variety of measurements and much greater measurement precision. For example, engineers developing advanced microprocessors or memory chips today need to measure various electrical characteristics of a single transistor, a task which often requires precision to a femtoamp, or a millionth of a billionth of an amp. Furthermore, to enable timely development and introduction of new chips, engineering test processes require higher productivity and increased automation.
LIMITATIONS OF CONVENTIONAL WAFER PROBE TESTING
Conventional wafer probe cards, which predominantly rely on manually assembled needles to contact chip bond pads, are now reaching their practical performance limits due to several factors:
- BOND PAD SIZE AND PITCH. Smaller bond pads with narrower pitch require more accurate probe tip touch-downs to avoid production yield loss from chip damage. Needle touch-down accuracy is limited by variations in the manual assembly process, by difficulties in measuring the needle probe tip position, by thermal instability of the needles and the circuit board to which they are attached and by mechanical instabilities resulting from application of force during touch-down.
- SPEED. Many communication chips and advanced microprocessor chips in production today require testing at frequencies of 2 GHz or higher, and some leading-edge communication chips already require testing at or above 10 GHz. Chips being prototyped in engineering test environments are now operating at 40 GHz or higher. Conventional needle probe technologies, however, can only probe effectively up to approximately 1 GHz, due primarily to loss of signal integrity as frequency increases.
- CONTACT INTEGRITY. Conventional needle contact methods generate debris and contaminate probe tips, resulting in impaired electrical contacts which can cause false test failures and contribute to production yield losses. The debris must be cleaned frequently from the probe tips, which causes costly production downtime.
As chip complexity increases, we believe the gap between conventional wafer probe capabilities and testing requirements will continue to widen.
OPPORTUNITY FOR NEW WAFER PROBE TESTING SOLUTIONS
Market pressures to produce more complex and less costly chips are driving chip suppliers to seek new wafer probing technologies capable of meeting the test requirements of increasingly complex chips while reducing the effective test cost per chip. Compounding these pressures, production engineers are expected to decrease their time-to-yield, or the time required to achieve acceptable yields for a new chip or manufacturing process, to reach economically productive levels in increasingly expensive fabrication facilities. Similarly, design engineers are expected to decrease their time-to-market for new chip designs and to minimize expensive chip redesigns.
OUR SOLUTIONS
We provide leading-edge wafer probing solutions that enable customers to test increasingly complex ICs and optoelectronic devices in both engineering and production test environments. We have provided wafer probing solutions to semiconductor suppliers since 1983 and have capitalized on our years of experience by continuing to introduce next-generation products that meet our customers' evolving testing needs. We believe our production probe cards, analytical probes and probe stations benefit our customers by enabling them to test increasingly complex chips, lower their effective test cost per chip, reduce their time-to-yield or accelerate their time-to-market, as described below.
WAFER PROBING SOLUTIONS FOR PRODUCTION TEST
We have developed an innovative, proprietary production probe card, called the Pyramid Probe card. Our Pyramid Probe cards are used to test chips operating at high speeds, such as chips used in SONET equipment, Gigabit Ethernet equipment and cellular phones, or chips with small bond pads, such as liquid crystal display, or LCD, drivers and some ASICs. In contrast to the technology and manufacturing process used to create conventional needle probe cards, we produce our Pyramid Probe cards using a proprietary, lithography-based manufacturing process, similar to lithography performed in semiconductor manufacturing. Our lithographic process uses light to precisely print and form probe tips and electrical interconnections on a flexible membrane. This process results in microscopic probe tips that are precisely spaced, accurately aligned and highly reproducible, and electrical interconnections that minimize signal distortions at high frequencies. We attach the membrane to a precision mechanical support, which we then insert into a custom-designed printed circuit board, thereby forming a Pyramid Probe card. We design our Pyramid Probe cards to integrate with leading automated probe stations, or autoprobers, and ATE to enable customers to configure a comprehensive production test solution. We believe our Pyramid Probe cards provide production test customers with the following key competitive advantages:
- HIGH-SPEED TESTING. As a result of their small interconnect circuitry on the membrane, our Pyramid Probe cards are currently capable of testing chips up to 20 GHz.
- SUPERIOR ELECTRICAL PERFORMANCE. Shorter and more precise electrical interconnections in the flexible membrane enable superior electrical signal integrity over a broader range of operating speeds.
- ACCURATE TESTING AT NARROW PITCH. The small size and precise alignment of our probe tips allow highly accurate touch-downs on smaller bond pads with narrower pitch. This allows semiconductor suppliers to decrease chip size and increase the number of chips per wafer, thereby lowering the effective test cost per chip.
- LESS CLEANING AND MAINTENANCE. Due to their small size and our MicroScrub technology, our probe tips generate less debris at touch-down. This results in less probe card cleaning and maintenance, which reduces costly production downtime.
- IMPROVED YIELDS. Our patented contact method, called MicroScrub, provides more consistent electrical contact to the bond pads, particularly aluminum bond pads, resulting in more reliable measurements and fewer false test fails, while minimizing yield loss due to damage to bond pads or surrounding material.
WAFER PROBING SOLUTIONS FOR ENGINEERING TEST
We believe we are the industry leader in wafer probing solutions for engineering test. Our engineering test solutions consist of a broad range of analytical probes and probe stations, which are used throughout the semiconductor industry to develop designs and processes for chips such as radio frequency, or RF, chips, digital signal processors, or DSPs, telecommunications chips, advanced memory
chips, microprocessors and microcontrollers, video graphics processors and ASICs. We design our products to facilitate development of next-generation chips and chip manufacturing processes by enabling highly precise electrical and lightwave measurements. We believe our engineering test solutions provide customers with the following key competitive advantages:
- DESIGN AND TEST OF HIGH-SPEED CHIPS. Our analytical probes can measure circuit elements or entire chips up to 110 GHz, facilitating design of higher-speed chips.
- REFINED COMPLEX CHIP DESIGNS. The advanced measurement capabilities afforded by our analytical probes and probe stations permit fine tuning of complex chip designs to maximize performance and yields.
- REDUCED TIME-TO-YIELD. Our probe stations and analytical probes facilitate highly precise circuit element measurements and high throughput testing over a wide temperature range. The information provided by these measurements is used to adjust manufacturing process parameters to more rapidly improve yields.
- GREATER ENGINEERING PRODUCTIVITY. Our probe stations include automation features which allow more tests to be performed more rapidly, leading to greater engineering productivity.
- ACCELERATED TIME-TO-MARKET. Our analytical probes and probe stations provide highly accurate test data, which accelerates chip design.
BUSINESS AND GROWTH STRATEGY
Our objective is to become the leading provider of probe cards for production test and to expand our market leadership position in wafer probing solutions for engineering test. Key elements of our strategy include:
- DEVELOP NEXT-GENERATION TECHNOLOGIES. We strive to be first to market with next-generation technologies through continued research into fundamental measurement techniques and collaboration with our customers. Since our inception, we have focused our efforts on the measurement requirements of our customers' most advanced products and processes because we believe this is where we deliver the most value. For example, we developed and introduced the first microwave probe for testing gallium arsenide chips; the first integrated environmental enclosure for probe stations, our MicroChamber; and the first lithographically-manufactured probe cards for production testing of chips operating at speeds above 1 GHz, our Pyramid Probe cards. These breakthroughs have contributed to our entry into new markets and our ability to deliver improved measurement capability and productivity to our customers.
- TARGET HIGH-GROWTH MARKETS AND CUSTOMER SEGMENTS. We focus our new product development and marketing efforts on ICs and optoelectronic devices for high-growth markets such as broadband optical fiber communications networks, wireless devices and systems, and LCDs. During the six months ended June 30, 2000, we believe we derived a majority of our net sales from the sale of products used to test chips for communications applications. In addition, we target fast growing customer segments, such as semiconductor wafer foundries. We intend to continue to target these markets and customer segments as they are driving significant semiconductor growth and complexity.
- DRIVE ADOPTION OF OUR PYRAMID PROBE SOLUTION. We intend to continue focusing substantial sales and applications support resources on demonstrating the benefits of our Pyramid Probe cards to drive adoption by customers. We believe our Pyramid Probe cards provide compelling advantages over competing solutions in performing production wafer testing of many of today's most advanced chips. As a result, we are targeting customers producing high-speed communications chips and chips with very small bond pads. We believe substantial additional
sales opportunities exist with customers that have yet to evaluate our technology or who are just beginning to produce chips for which conventional probe cards are proving inadequate. Consistent with our focus on growing this product line, we intend to expand design and application support at customer sites, enhance Pyramid Probe card performance to address even more complex chips, reduce leadtimes, and expand manufacturing capacity.
- EMPHASIZE CONSUMABLES TO REDUCE CYCLICALITY. We intend to continue devoting substantial development and marketing resources to consumable products, including both our analytical probes and Pyramid Probe cards. Because customers generally continue to purchase these products during cyclical semiconductor downturns to support chip production volumes and research and development, we believe these products mitigate the effects of cyclicality on our operations. For example, sales of our consumable products which represented 22.1% of our net sales in 1998, increased 3.2% in 1998 over 1997 while, according to Dataquest, investments in semiconductor wafer fabrication equipment declined by 28.1% during the same period. We have increased our sales from consumable products every year since our inception, and consumables comprised 25.8% of our net sales in the six months ended June 30, 2000.
- EXPAND RELATIONSHIPS WITH COMPLEMENTARY TECHNOLOGY SUPPLIERS. We have established relationships with several leading developers of complementary test technologies to provide our customers with comprehensive test solutions and support. We have a long-standing relationship with Agilent Technologies in which we jointly market and sell selected wafer probing test systems, comprised of products from both companies. In these worldwide sales, we provide the analytical probes, production probe cards, and probe stations while Agilent supplies the test equipment. We also work regularly with other providers of semiconductor test equipment and software to provide complete test solutions.
PRODUCTS
We design, manufacture and sell three product lines: production probe cards, analytical probes and probe stations.
PRODUCTION PROBE CARDS
We offer proprietary Pyramid Probe cards primarily for production testing, but they can also be used in engineering test. Each Pyramid Probe card consists of a tester interface board and at least one Pyramid Probe core that is inserted into the interface board. An interface board is a multi-layer circuit board customized to connect to ATE from various vendors. A Pyramid Probe core contains the probe tips that contact the chips on the wafer under test. Each customer chip design requires a unique, custom-designed and lithographically-printed Pyramid Probe core. We offer three families of Pyramid Probe cores, including Radio Frequency Core, or RFC, Large Scale Integration, or LSI, and Very Large Scale Rectangular, or VLSR. Selling prices range from $2,000 to $80,000 for Pyramid Probe cores, and from $2,000 to $20,000 for interface boards, depending upon chip complexity.
ANALYTICAL PROBES
We offer over 50 different analytical probe models primarily for engineering test. Our analytical probes incorporate coaxial, lightwave and needle technologies. Most of our analytical probes are coaxial, consisting of microscopic, flexible probe tips attached to miniature coaxial cables. Our coaxial probes, including our Air Coplanar and High Performance Characterization, or HPC, probe lines, are RF and microwave probes typically used for engineering test measurements of chips and optoelectronic devices used in applications such as wireless and broadband optical fiber communications. Our lightwave probes use optical fibers to illuminate or collect light from optoelectronic devices, such as photodiodes, laser diodes, and laser modulators. We employ needle probe technology for various low
electrical current and high temperature measurements for chips such as microprocessors, microcontrollers, advanced memory chips and video graphics processors. Our analytical probes support a wide range of analytical measurements, including the measurement of high-speed, broadband signals and extremely low currents on various devices. While our analytical probes are used primarily for engineering testing, several of our analytical probes are also used in production testing of some high-frequency devices. Selling prices for our analytical probes range from $200 to $5,000, depending on configuration and frequency range.
PROBE STATIONS
We offer four families of engineering probe stations:
- THE SUMMIT SERIES, both manual and semi-automated, an industry-leading probe station used for a wide range of transistor and chip measurements, circuit element modeling, and reliability tests;
- THE S300 SERIES, semi-automated, similar to the Summit series, with enhanced features and 300 mm wafer testing capability;
- THE PS21 SERIES autoprober, with high electrical measurement performance and wide temperature range; and
- THE ALESSI SERIES, both manual and semi-automated, a widely-used and versatile general-purpose probe station.
Engineering probe stations are highly configurable depending upon the size and type of wafer, chip being measured, measurements required, and test equipment used. We typically sell our engineering probe stations with various accessories, including analytical probes, probe micropositioners, a thermal controller and chuck, a microscope, a laser for cutting through chip layers, and test software. In addition to our four product families, we also design and build custom probe stations to meet customers' unique applications. An example of these unique requirements include probe stations for testing substrates as large as 24 X 24 inches. Selling prices of our probe stations range from $25,000 to $300,000, depending upon the automation level, measurement features, and accessories required by our customers.
The following table lists our primary product offerings, their basic features, chips they typically test, and the test environments in which they are used:
TYPICAL CHIPS TEST
PRODUCT FAMILY BASIC FEATURES AND DEVICES TESTED ENVIRONMENT
PRODUCTION PROBE CARDS
RFC Pyramid Probe cores Speeds to 20 GHz SONET chips Production and
Up to 250 probe tips Wireless chips Engineering
Low bond pad damage Optoelectronic devices
LSI Pyramid Probe cores Speeds to 10 GHz High-speed ASICs Production and
Up to 800 probe tips High-pincount ASICs Engineering
Low bond pad damage
VLSR Pyramid Probe cores Speeds to 3 GHz LCD driver chips Production
Up to 1200 probe tips
Low bond pad damage
Pyramid interface boards Speeds to 20 GHz Used with all cores to interface Production and
Customized test circuitry to various ATE Engineering
ANALYTICAL PROBES
Air Coplanar Probes Speeds to 110 GHz Test transistors Engineering and
and HPC Probes Low signal loss Broadband chip packages Production
High accuracy RF chips
RF filters
Other analytical probes Low current to Process control transistors Engineering and
less than 1 femtoamp Optoelectronic devices Production
High precision High-speed digital modules
Temp. -55 DEG. to
400 DEG.C
PROBE STATIONS
Summit analytical probers 200 mm semi-automated Test transistors Engineering
200 mm manual RF chips
Temp. -55 DEG. to Prototype logic chips
300 DEG.C Prototype memory chips
Low noise Prototype analog chips
Reliability test structures
S300 analytical probers 300 mm semi-automated Test transistors Engineering
Temp. -55 DEG. to Prototype microprocessors
200 DEG.C Prototype memory chips
Low noise Reliability test structures
PS21 autoprober 200 mm automated Prototype memory chips Engineering and
Temp. -55 DEG. to RF chips Production
200 DEG.C Process control monitor circuits
Low noise Process test group circuits
Alessi analytical probers 200 mm semi-automated Various chips on low yield wafers Engineering
200 mm manual Chips in opened packages
Highly versatile Optoelectronic devices
|
TECHNOLOGY
OUR CORE TECHNOLOGIES
Over our 17-year history, we have been a leading innovator in developing next-generation, proprietary probing technologies. We have focused our research and development on enabling our customers to take better electrical and lightwave measurements faster. Our core technologies include:
- BROADBAND/HIGH-FREQUENCY/HIGH SPEED INTERCONNECTS AND PROBING. We created the first microwave probes, in 1983, that enabled the first on-wafer 18 GHz measurements and accelerated the commercialization of gallium arsenide chips. Since then, the Defense Advanced Research Projects Agency, or DARPA, has awarded us various contracts that have helped us to further the state of the art in wafer probing, including studying the feasibility of 110 GHz Pyramid Probe cards. We use and maintain a wide variety of design, verification, fabrication, and calibration technologies for high-frequency probes and interconnections. These technologies include computer modeling, scale modeling, and rapid prototyping for design; proprietary in-house measurement and calibration fixtures for verifications; coaxial cable microfabrication, lithographically-defined probe tips and interconnects on rigid and flexible substrates, and various microassembly techniques for fabrication; and versatile software and patented calibration methods for electrical and lightwave measurement calibrations. We believe that these technologies provide us with a competitive advantage by allowing us to more effectively design and commercialize production probe cards and analytical probes.
- PRECISE LOW-LEVEL MEASUREMENTS. We were first to commercialize a shielded probe station, in 1993, utilizing our patented MicroChamber technology that increased thermal measurement productivities by 10 times and current measurement resolutions by 1,000 times. Many of our probe stations feature MicroChambers, which ensure a dark, electrically noise-free measurement environment to enable low-current measurements over a wide thermal range. Our probe stations also incorporate our proprietary low-noise thermal chuck technologies that increase measurement integrity and reduce the time required to take precise measurements, which increases throughput. Our analytical probes use technologies for low-level measurements across a wide temperature range.
- MICROFABRICATION. We have developed our own proprietary clean-room processes for depositing, lithographic patterning, etching and plating probe structures on flexible substrates that are similar to the processes used in making semiconductor chips. These processes have allowed us to develop Pyramid Probe cores with high frequency electrical connections, and probe tips that are close together to address narrow pitch requirements. These processes have also enabled us to develop our proprietary MicroScrub probe tip design, which improves probe contact while minimizing bond pad damage during touch-downs. The process of making a Pyramid Probe core begins with collecting chip geometries and test requirements from our customer, from which we design the circuitry for a custom probe core. We then produce this circuitry lithographically on a flexible membrane that enables precise placement of the probe tips relative to one another, excellent electrical performance and high manufacturing repeatability. The free-standing membrane is then attached to a precision mechanical support, forming the Pyramid Probe core, which is then inserted into the tester interface board. The final Pyramid Probe card is tested and shipped to the customer. In addition to lithography, we have also developed and use proprietary tools and assembly fixtures for micro-assembly tasks in the production of our Pyramid Probe cores and analytical probes.
WAFER PROBE TESTING IN THE CHIP DESIGN AND MANUFACTURING PROCESS
The following diagram illustrates the stages in a typical chip design and manufacturing process where wafer probe testing occurs. R&D wafers are probed during the design phase in engineering test.
Production wafers are probed at the parametric test stage for process control parameters as soon as they exit the wafer fabrication facility, or fab. Good wafers proceed to the chip sort test stage where defective chips on the wafer are identified. The wafer is then diced into individual chips, and defective chips are discarded and good chips are packaged. Throughout the process, some of the failed or defective wafers or chips are returned to engineering test for yield analysis, failure analysis or other tests.
[LOGO]
ENGINEERING TEST. Engineers use analytical probes and manual, semi-automated and automated probe stations to test the wafer fabrication process parameters; to define the operating parameters of, or characterize, the chip and fabrication process; to analyze low-yield wafers or failed chips; and to perform wafer-level reliability tests. We address this market segment with our Summit, Alessi and S300 probe stations, our PS21 autoprober, our analytical probes and various other accessories.
PARAMETRIC TEST (ALSO CALLED PROCESS CONTROL MONITOR OR E-TEST). After fabrication, a set of chip circuit elements, such as single transistors, on each wafer are measured for electrical parameters using ATE and production probe cards. Process control data for the wafer fab is derived from this testing and used to refine the manufacturing process to improve yields. We address this market segment with our low-current analytical probes and production probe cards. In addition, we have licensed some of our proprietary probe station technology designed to facilitate high-volume, low-current process monitoring measurements to Electroglas, Inc., a manufacturer of autoprobers. Electroglas may integrate our technology with its autoprobers and sell the combined solution for parametric test.
CHIP SORT TEST (ALSO CALLED WAFER SORT OR WAFER-LEVEL FUNCTIONAL TEST). After parametric testing, wafers are transferred to the main test floor, where each chip is functionally tested to eliminate defective chips. The majority of all autoprobers and probe cards are used in chip sort test. These autoprobers typically include wafer-handling robots, machine vision for precision alignments, automated wafer tracking, and other features for high-volume, automated testing. We address this market segment primarily with our Pyramid Probe cards and also with our Air Coplanar analytical probes.
CUSTOMERS
Our products are used by semiconductor manufacturers, research organizations and designers, including fabless semiconductor suppliers that do not manufacture their own semiconductors but purchase analytical probes and probe stations for research and development. Approximately 400
customers purchased our products in the first half of 2000. Our top 20 end-user customers during this period were:
Agilent Technologies Mitsubishi Conexant Systems Motorola Dallas Semiconductor NEC Fujitsu Nortel Networks Hitachi ST Microelectronics Hughes Space Systems Taiwan Semiconductor Manufacturing Company (TSMC) IBM Toshiba Infineon Triton Network Systems Lucent Technologies United Microelectronics Corporation (UMC) Matsushita Worldwide Semiconductor |
No single customer accounted for more than 10% of our net sales in 1997, 1998, 1999 or the six months ended June 30, 2000. Our top ten customers, which include end-user customers and distributors, accounted for approximately one-third of our net sales in each of 1997, 1998, 1999 and the six months ended June 30, 2000. International sales accounted for approximately one-half of our net sales in each of 1997, 1998, 1999 and the six months ended June 30, 2000.
SALES, MARKETING AND CUSTOMER SUPPORT
SALES
We sell our production probe cards, analytical probes and probe stations through a combination of manufacturers' representatives, distributors and direct sales people. In North America and Asia, excluding Japan, we sell our products through manufacturers' representatives. In Japan, we sell through Cascade Microtech Japan, K.K., our direct sales and service subsidiary. In Europe we sell through distributors and manufacturers' representatives managed by Cascade Microtech Europe, Ltd., our direct sales and service subsidiary in the United Kingdom. In other countries, we typically sell through manufacturers' representatives or distributors. Our sales managers oversee and manage these worldwide sales activities.
We work closely with our customers to select the most appropriate product or to configure a custom solution to best fit their applications. Sales of our production test solutions require significant interaction with customer production test managers, knowledge of their specific product details and hands-on application support, particularly for new customers. Our production customers generally undertake an extensive evaluation of new probe technology before adoption. Sales of our engineering test solutions require significant interaction with customer engineering labs, knowledge of customer product development schedules and systems, as well as on-site demonstration capability. We also may assist our customers in the design of their products to enhance testability. Our sales managers are experienced sales professionals with in-depth technical training, customer knowledge and industry expertise. The technical sophistication of our products requires substantial training for our manufacturers' representatives, distributors and sales staff. We devote considerable effort and resources to developing a highly trained sales force that is responsive to our customers' changing needs.
We participate in joint sales and marketing activities with complementary equipment and software vendors to offer our customers complete test solutions. These relationships benefit us because they can lead to broader awareness and increased sales of our products. In particular, we have a long-standing relationship with Agilent Technologies, in which the two companies jointly market and sell test system solutions comprised of compatible products from each company. Our direct sales force, manufacturers' representatives, and distributors also work with local Agilent sales personnel to identify, qualify and close orders worldwide.
MARKETING
We focus our marketing efforts on building awareness of our products among designers and manufacturers of complex semiconductors. We market our products and capabilities by participating in trade shows, providing product and technical information in print and on our website, hosting technical and product seminars, advertising in trade publications, and using direct mailings. In addition, our marketing staff performs market research and product planning.
CUSTOMER SUPPORT
We believe our customers consider timely customer service and support to be an important aspect of our relationship. Our probe stations are installed at customer sites either by us, our distributors or our manufacturers' representatives, depending on the complexity of the installation and the customer's geographic location. We assist our customers in the selection, integration and use of our products by providing engineering application support. We also provide worldwide on-site training, seminars and telephone support. Our distributors and manufacturers' representatives provide additional service and support.
RESEARCH AND DEVELOPMENT
Our growth depends upon our ability to rapidly develop new products that enable customers to improve their electrical and lightwave measurements and increase their productivity. As a result, we expect to continue to devote substantial resources to research and development. Our research and development expenses were $5.9 million in 1997, $6.2 million in 1998, $5.9 million in 1999 and $3.7 million in the six months ended June 30, 2000. We are currently devoting substantial resources to projects such as refining Pyramid Probe manufacturing processes, developing faster, higher frequency Pyramid Probe cards and enhancing probe stations for 300 mm wafers. At August 31, 2000, we employed 44 research and development engineers. We conduct research and development for all of our product lines at our Beaverton, Oregon facilities.
MANUFACTURING AND ASSEMBLY
Our manufacturing and assembly operations consist of the production of highly complex and sophisticated components and assemblies, many of which are customized to meet customers' needs and specifications. We perform nearly all of our manufacturing and assembly in Beaverton, Oregon at our manufacturing facility within our headquarters building, at our thin-film fabrication and Pyramid Probe assembly facility, and at our machine shop. Our thin-film fabrication facility includes a 10,000 square foot, Class 100 clean room. Our manufacturing strategy is to purchase components from vendors to the extent possible. However, we manufacture key components that we deem to be proprietary or that provide us with a competitive advantage. We depend on sole source suppliers for a number of materials, components and subassemblies used in our products.
Our product design and manufacturing process activities emphasize accurate electrical measurements, precise and reliable mechanical components and assemblies, and compliance with industry and governmental safety requirements. We prototype and test our new standard product designs and components to ensure high electrical signal integrity, mechanical accuracy and safety. In our manufacturing operations we perform electrical, mechanical and chemical tests and use statistical process control methods, internally developed manufacturing information systems and inspections of purchased components and products to monitor our product quality throughout the various stages of our manufacturing process.
COMPETITION
The markets for production probe cards, analytical probes, and probe stations are highly competitive. We anticipate that the markets for our products will continually evolve and be subject to rapid technological change.
PRODUCTION PROBE CARDS
Competition in the production probe card market is fragmented and characterized by many suppliers offering products based on differing technologies. Our Pyramid Probe cards compete with product offerings of other probe card vendors including Cerprobe, Form Factor, GGB Industries, JEM Corporation, Micronics Japan, Probe Technology, and others. At least two probe card vendors, Form Factor and Cerprobe, are also offering probe cards built using lithographic patterning. We believe that the primary competitive factors in the production probe market depend upon the type of chip being tested, but include probe tip touch-down accuracy, speed and frequency of the probe card, interconnect versatility, frequency of cleaning required, application support, customer service, delivery time and price.
ANALYTICAL PROBES
Our primary competitor in the analytical probe market is GGB Industries. We believe that the primary competitive factors in this market are breadth of probe types, probe frequency and electrical signal integrity, contact integrity and the related cleaning required, calibration support, applications support, delivery time and price.
PROBE STATIONS
Our primary competitor in the probe station market is Suss MicroTec AG (Karl Suss), but we also compete with Micromanipulator, Wentworth Laboratories and Signatone, among others. A related market niche is debugging tools for packaged devices, using electron beams, laser beams or other technologies. These tools are supplied by Schlumberger and Advantest. We believe that the primary competitive factors in the engineering wafer probe station market are measurement accuracy and versatility, throughput of typical tests, automation features, completeness of the measurement solutions, applications support, delivery time and price.
For additional information, see "Risk Factors--Intense competition in the semiconductor wafer probing business may reduce demand for our products and reduce our sales."
INTELLECTUAL PROPERTY
We have a significant portfolio of intellectual property, including patents and trade secrets, covering electrical measurement reliability and integrity, electrical shielding, Pyramid Probe contact structure and production process. In the United States, we currently have 33 issued patents and 18 pending patent applications. We also have 6 issued foreign patents and 30 pending foreign patent applications. In addition, we regard certain of our processes, information and know-how that we have developed and used to design and manufacture our products as trade secrets or proprietary.
Our policy is to seek patents where appropriate on inventions involving new products and improvements to existing products as part of our ongoing engineering and research and development activities. We cannot assure you that any of our pending patent applications will be approved, that we will develop additional proprietary technology that is patentable, that any patents owned by or issued to us will provide us with competitive advantages or that these patents will not be challenged by third parties. Furthermore, there can by no assurance that third parties will not design around our patents.
The semiconductor test industry is characterized by vigorous protection and pursuit of intellectual property rights and positions. To protect our intellectual property from infringement, we have from time to time initiated litigation against third parties and may be required to do so in the future. We cannot assure you that we will be successful in future intellectual property litigation and this litigation often is protracted and expensive. See "--Legal Proceedings."
In 1999, we entered into a Joint Development Agreement and a License with Electroglas, which permits Electroglas to incorporate some of our low-noise probe station technology into certain of its products for sale in the automated parametric production test market. This agreement provides for the payment of two initial license fees aggregating $2.0 million, which were paid to us in 1999, and royalties over the term of the license based on sales of products incorporating the licensed technology. To date, Electroglas has not sold any products incorporating our technology and, therefore, we have not received any royalty payments.
In 1997, we licensed certain low-noise probe station technology from Agilent Japan, which we incorporate into some of our probe stations. Under this license, we pay a fixed royalty to Agilent for each probe station sold in Japan that incorporates the licensed technology.
EMPLOYEES
As of June 30, 2000, we had a total of 270 employees: 44 in engineering and research and development; 55 in sales, marketing and customer support; 139 in manufacturing; and 32 in executive and administrative functions. Of these employees, 244 are located in the United States, 20 in Japan and 6 in Great Britain. Many of our employees are highly skilled and our future performance depends largely on our ability to continue to attract, train and retain qualified technical, sales, service, marketing and managerial personnel. None of our employees is subject to a collective bargaining agreement. We have not experienced any work stoppages and consider our relations with our employees to be good.
FACILITIES
We maintain our corporate headquarters in Beaverton, Oregon. This leased facility, comprised of one building totaling 86,800 square feet, contains corporate administration, sales and marketing, design, test, light manufacturing and assembly. Our lease of this facility expires in June 2008. Approximately 23,000 square feet of this building has been subleased until January 2002. Our Pyramid Probe thin-film manufacturing is conducted in a 58,817 square foot facility, that we lease in Beaverton, Oregon. Our lease of this facility expires August 2009. Approximately 20,000 square feet of this facility has been sub-leased until January 2001. We lease a small machine shop in Beaverton, Oregon and, through subsidiaries, lease sales and service offices in Tokyo, Japan and Banbury, England.
We have signed an agreement to lease 14,000 square feet in a newly constructed facility in Beaverton, Oregon, through January 2007. We intend to move our machine shop operations into this new facility upon the expiration of the current machine shop lease in December 2000.
Our future growth may require that we secure additional facilities or expand our current facilities further. If required, we may pursue acquisitions of existing facilities or lease suitable additional space on commercially acceptable terms to accommodate expansion.
LEGAL PROCEEDINGS
From time to time participants in our industry become involved in litigation over intellectual property rights and other matters.
In April 1997, we filed a patent infringement suit against The Micromanipulator Company, Inc. of Carson City, Nevada in the U.S. District Court in Portland, Oregon. Micromanipulator is one of our direct competitors in the probe station market. In our suit, we allege that Micromanipulator is
infringing four of our patents relating to the wafer enclosure and chuck assemblies used in our low-current analytical probe stations. We are seeking damages and an injunction halting sales by Micromanipulator of probe stations which infringe our patents. The parties have completed the discovery phase and are awaiting the setting of a trial date.
In June 1999, Mr. Erich Reitinger, the holder of two German patents relating to wafer enclosure on a probe station, petitioned the Bavarian District Court in Munich, Germany, alleging that we had infringed his patents and requesting a preliminary injunction to prevent us from selling infringing products in Germany. We denied any alleged infringement. Following a hearing, a three-judge panel ruled against granting the injunction, and Mr. Reitinger appealed the ruling. In October 1999, we filed a lawsuit against Mr. Reitinger in the German Federal Patents Court in Munich requesting a declaration of patent invalidity with respect to the patents held by Mr. Rietinger. We also filed a request at the German Patent and Trademark Office for cancellation of a Utility Model, or "petty patent," owned by Mr. Reitinger, which claims the same subject matter as the probe station patents. Before Mr. Reitinger's appeal was scheduled to be heard, the parties reached a settlement under which Mr. Reitinger withdrew his appeal and dismissed his suit. We agreed to hold non-binding discussions relating to a possible business relationship with ERS Elektronik, GmbH, a thermal chuck manufacturer controlled by Mr. Reitinger. As part of the settlement agreement, Mr. Reitinger retained the right to refile his infringement suit. Our lawsuit challenging the validity of his patents is pending.
In February 2000, we filed a patent infringement suit against Karl Suss America, Inc. of Waterbury Center, Vermont, and Karl Suss Dresden, GmbH, of Sacka, Germany, in the U.S. District Court in Portland, Oregon. These companies are our direct competitors in the probe station market. We have alleged that these two companies are infringing three of our patents relating to the wafer enclosure and chuck assemblies used in our low-current analytical probe stations. We are seeking damages and an injunction halting the sale by either or both of the defendants of probe stations which infringe our patents. In Oregon, Karl Suss America and Karl Suss Dresden have filed a motion to dismiss Karl Suss Dresden for lack of jurisdiction and to transfer the action against Karl Suss America to the U.S. District Court in Burlington, Vermont. In May 2000, both Karl Suss America and Karl Suss Dresden filed a lawsuit in the U.S. District Court in Burlington, Vermont, requesting a judgment declaring our patents invalid and a finding that they have not infringed our patents. Proceedings in the Vermont case have been suspended pending resolution of the motions in the Oregon action.
ENVIRONMENTAL MATTERS
In the conduct of our manufacturing operations, we have handled and continue to handle materials that are considered hazardous, toxic or volatile under federal, state and local laws; therefore, we are subject to regulations related to the use, storage, discharge and disposal of materials. We believe we are in substantial compliance with the environmental laws and regulations applicable to the conduct of our business and operations. The risk of accidental release of hazardous, toxic or volatile materials cannot be completely eliminated, and if such a release occurs, we could be held financially responsible for the clean up or other consequences of the release. We are subject to variable interpretations and governmental priorities concerning environmental laws and regulations. We may be required to incur costs to comply with current or future environmental laws or regulations, and our operations, business or financial condition could be adversely affected by such requirements.
We do not own any real property, however, we do lease real property. We have not conducted Phase I environmental assessments of our leased properties. Various environmental laws may make a current or previous operator of real property, including a lessee, liable for the costs of removal or remediation of hazardous or toxic substances on, under, adjacent to, or in such property. These laws may impose liability whether or not the operator knew of, or was responsible for, the presence or consequence of the hazardous or toxic substances. Moreover, an operator may have liability or
responsibility for personal or property damages under statutory or common laws relating to hazardous environmental conditions.
Since 1989 when we began processing our thin-film membranes, we have exceeded allowable daily maximums or monthly averages under discharge permits by insubstantial amounts on six occasions with respect to emissions of materials considered hazardous, toxic or volatile under federal, state and local laws. None of these discharges resulted in remediation costs, and the only monetary penalty was a fine of $150. Since we moved our thin-film operations to a new site in late 1999, we have experienced no instances of emissions exceeding allowable limits.
BACKLOG
At June 30, 2000, our backlog of unfilled orders for all products was $14.3 million, compared with $10.0 million at June 30, 1999. We generally ship our products within three months of receipt of a customer's purchase order. Accordingly, we expect to deliver nearly all of our June 30, 2000 backlog in 2000. While backlog is calculated on the basis of firm orders deliverable within 12 months, all orders are subject to cancellation or delay by the customer with limited or no penalty. We believe, therefore, that our backlog at any particular date is not necessarily indicative of actual sales for any succeeding period.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding our directors and executive officers, as of September 30, 2000:
NAME AGE POSITION(S)
---- -------- -----------
Eric W. Strid(1).................... 48 Chairman of the Board and Chief Executive Officer
Bruce A. McFadden................... 54 President and Chief Operating Officer
Craig M. Swanson.................... 58 Chief Financial Officer, Vice President of Finance,
Treasurer and Corporate Secretary
K. Reed Gleason..................... 55 Vice President of Advanced Development and Director
Emmons J. Miles..................... 64 Vice President of Operations
John E. Pence....................... 37 Vice President of Engineering Products
Mark L. Olen........................ 41 Vice President of Pyramid Probes
Ken R. Smith........................ 43 Vice President of Corporate Technology and Thin Film Fab
Operations
F. Paul Carlson(1)(2)............... 62 Director
George P. O'Leary(1)(2)............. 57 Director
William R. Spivey................... 53 Director
Curtis S. Wozniak(2)................ 45 Director
Scott R. Wright..................... 56 Director
|
(1) Member of the compensation committee.
(2) Member of the audit committee.
ERIC W. STRID co-founded Cascade Microtech and has served as our Chairman and Chief Executive Officer since our inception in 1983. He also served as our President from 1984 to January 1997. Prior to 1984, Mr. Strid served as a Principal Engineer with Tektronix, Inc. and with TriQuint Semiconductor, where he designed and evaluated high-frequency gallium arsenide integrated circuits. Mr. Strid holds a B.S. in Electrical Engineering from the Massachusetts Institute of Technology and an M.S. in Electrical Engineering from the University of California at Berkeley.
BRUCE A. MCFADDEN has served as our President and Chief Operating Officer since December 1996. From March 1992 to December 1996, Bruce was a management consultant for several high technology companies, including Cascade Microtech and AT&T Microelectronics. From April 1994 until November 1996, Bruce served as Chief Financial Officer and Corporate Secretary of Barrett Enclosures, Inc., a manufacturer of custom marine and architectural enclosures. From September 1986 to January 1992, Bruce served as Vice President of Graco, Inc., a fluid handling equipment company with responsibility for its industrial equipment division. From June 1980 to September 1986, Mr. McFadden was the Managing Director of European Silicones Operation for General Electric. Prior to joining General Electric, he worked as a consultant with Booz Allen & Co. and was an engineer with Exxon Corporation. Mr. McFadden holds a B.S. in Chemical Engineering from Virginia Polytechnic Institute and State University and an M.S. in Management from the Sloan School at Massachusetts Institute of Technology.
K. REED GLEASON co-founded Cascade Microtech and has served as a director and as our Vice President of Advanced Development since our inception in 1983. Prior to 1983, Mr. Gleason was a Senior Physicist at Tektronix and at TriQuint Semiconductor, conducting research into high-frequency gallium arsenide devices and integrated circuits. He began his career as an engineer with the U.S.
Naval Research Laboratory in Washington, D.C. Mr. Gleason holds a B.S. in Electrical Engineering from the California Institute of Technology.
CRAIG M. SWANSON has served as our Vice President of Finance, Chief Financial Officer, Corporate Secretary and Treasurer since October 1999. From October 1988 to October 1999, he served as the Vice President, Finance, and Chief Financial Officer for Protocol Systems, Inc., a designer and manufacturer of vital signs monitoring systems. During 1987, Mr. Swanson served as the President and Chief Operating Officer of Receptor, Inc., a development stage biotechnology company. Previously, Mr. Swanson spent ten years in public accounting with Price Waterhouse and Arthur Young & Company. Mr Swanson holds a B.A. in Political Science and a Master of Public Administration from the University of Washington.
JOHN E. PENCE has served as our Vice President of Engineering Products since May 2000. From April 1997 to February 2000, he served as our Vice President of Probing Systems. From 1993 to April 1997, Mr. Pence served us as a Product Marketing Manager. Prior to joining Cascade Microtech, Mr. Pence worked as an engineer in the Space and Communications Division of Hughes Aircraft Company. Mr. Pence holds a B.S. and an M.S. in Electrical Engineering from Cornell University.
EMMONS J. MILES has served as our Vice President of Operations since 1992. He joined Cascade Microtech in 1991 as Vice President of Engineering and held that position until he was appointed our Vice President of Operations a year later. Prior to joining Cascade Microtech, Mr. Miles co-founded and served for three years as the Vice President of Operations for Support Technology, Inc., a designer and manufacturer of printed circuit boards. He previously spent five years with Floating Point Systems, Inc. as its Vice President of Engineering, and was a co-founder and served as an officer of Computer Automation, Inc. from 1967 to 1976. Mr. Miles holds a B.S. in Electrical Engineering from Fresno State University.
MARK L. OLEN has served as our Vice President of Pyramid Probes since February 2000. From April 1998 to February 2000, he served as the Vice President of Sales and Marketing for Fluence Technology, Inc., a subsidiary of Credence, Inc., specializing in semiconductor test software. From July 1993 to March 1998, Mr. Olen served as the General Manager of the Design For Test unit of Mentor Graphics Corporation. Previously, Mr. Olen held various sales and marketing positions at Teradyne, Inc., a semiconductor test company, and Megatest Corporation, a semiconductor handler company. Mr. Olen holds a B.S. in Electrical Engineering from the Massachusetts Institute of Technology.
KENNETH R. SMITH has served as our Vice President of Corporate Technology and Thin Film Fab Operations since February 2000. He joined us in 1990 as a Product Marketing Manager and was promoted to our Vice President of Membrane Probes in 1997 and served in that capacity until February 2000. Prior to joining Cascade Microtech, Mr. Smith served as the Director of Manufacturing for Cogent Research, Inc., a development-stage computer manufacturer, and also held various management and engineering positions in the Hybrid Circuits Division of Tektronix, Inc. Mr. Smith holds a B.S. in General Engineering from Oregon State University.
F. PAUL CARLSON has served as a director since 1992. In 1991, he founded and has since served as President and Chief Executive Officer of The Carlson Group of Companies, specializing in business re-engineering and re-structuring, and the financing and development of early stage companies. From 1988 to 1991, Mr. Carlson served as the Vice President of Strategy and Business Development for Honeywell, Inc. He also served as the President and Chief Executive Officer of the Oregon Graduate Institute from 1980 to 1985. Previously, he served as a Professor of Electrical Engineering at the University of Washington for 10 years, where he also received a Ph.D. in Electrical Engineering. Mr. Carlson also serves as a director of the Frank Russell Trust Company.
GEORGE P. O'LEARY has served as a director since 1988. From 1972 to 1987, Mr. O'Leary was employed by Floating Point Systems, Inc., where he served as Chief Operating Officer and a director from 1986 until his retirement in 1987. He previously held positions as the Vice President of Engineering and Vice President of European Operations of Floating Point Systems. Mr. O'Leary was a Professor of Physics at the Oregon Graduate Institute from 1969 to 1972. He received his Ph.D. in Physics from Yale University.
WILLIAM R. SPIVEY has served as a director since July 1998. Since July 2000, Mr. Spivey has served as the President and Chief Executive Officer of Luminent, Inc., a provider of fiber-optic components to the communications industry. From October 1997 to July 2000, Mr. Spivey served as Group President of the Network Products group of Lucent Technologies. From February 1994 to September 1997, he served as Vice President of the Systems and Components Group, Member of the Office of the President and Co-chair of the Executive Committee of AT&T Microelectronics. Mr. Spivey holds a B.S. in Physics from Duquesne University, an M.S. in Physics from Indiana University in Indiana, Pennsylvania and a Ph.D. in Administration/Management from Walden University. Bill also serves as a director of Lyondell Chemical Co., Novellus Systems, Inc. and Raytheon Company.
CURTIS S. WOZNIAK has served as a director since July 1999. Since April 1996, he has served as Chairman and Chief Executive Officer of Electroglas, Inc., a manufacturer of production probing systems for the semiconductor industry. From August 1994 to April 1996, he served as President and Chief Executive Officer of Xilinx, Inc., a semiconductor manufacturer. From 1984 to 1994, he held various management positions including Vice President of Marketing and Vice President of Engineering at Sun Microsystems, Inc. Mr. Wozniak is a graduate of the General Motors Institute and currently serves as a director of the Semiconductor Industry Suppliers Association (formerly SEMI/ SEMATECH).
SCOTT R. WRIGHT has served as a director since May 1996. Since November 1999, he has served as Vice President and General Manager of the Component Test Unit of Agilent Technologies, Inc. (formerly Hewlett Packard Co.) in Santa Rosa, California and Kobe, Japan. From 1967 until November 1999, Mr. Wright held a variety of engineering, marketing, and management positions with Hewlett Packard Co. Mr. Wright holds a B.S. in Electrical Engineering from the University of Oklahoma and an M.S. in Business Administration from Santa Clara University.
BOARD OF DIRECTORS
Our articles of incorporation provide for a variable three to nine person board of directors. Our bylaws provide that the exact number of directors shall be fixed by resolution of our board. Our board currently consists of seven members. Prior to the closing of this offering, the terms of office of the board of directors will be divided into three classes. As a result, a portion of our board of directors will be elected each year. The division of the three classes, the initial directors and their respective election dates will be as follows:
- the class I directors will be Messrs. Strid and Carlson, and their term will expire at the annual meeting of shareholders to be held in 2001;
- the class II directors will be Messrs. Gleason, O'Leary and Wright, and their term will expire at the annual meeting of shareholders to be held in 2002; and
- the class III directors will be Messrs. Spivey and Wozniak, and their term will expire at the annual meeting of shareholders to be held in 2003.
At each annual meeting of our shareholders, the successors to directors whose terms will then expire, will be elected to serve from the time of election and qualification until the third annual meeting following their election. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will
consist of one-third of the directors. This classification of the board of directors may have the effect of delaying or preventing changes in our control or management.
BOARD COMMITTEES
Our board of directors has a compensation committee and an audit committee. Our compensation committee consists of Messrs. Strid, Carlson and O'Leary. The compensation committee reviews and makes recommendations to our board of directors regarding our compensation policies and all forms of compensation to be provided to our executive officers and directors, including annual salaries, bonuses, stock options and other incentive compensation agreements. The compensation committee also administers and makes recommendations to our board of directors regarding our 1993 Stock Incentive Plan, our 2000 Stock Incentive Plan and our 2000 Employee Stock Purchase Plan.
Our audit committee consists of Messrs. Carlson, O'Leary and Wozniak. The audit committee reviews the scope and results of our audit by our independent auditors, recommends the appointment of our independent auditors, reviews and approves the audit fees for the independent auditors and reviews the adequacy of our systems of internal control and accounting policies and procedures and our compliance with legal matters that have a significant impact on our financial reports. The audit committee also consults with our management and our independent auditors prior to the presentation of financial statements to shareholders and, as appropriate, initiates and supervises inquiries into aspects of our financial affairs.
DIRECTOR COMPENSATION
At the time of their first election to the board of directors, each of our directors received an option to purchase between 5,000 and 15,000 shares of our common stock immediately exercisable at a price equal to the fair market value of our common stock on the option grant date. Our directors are currently not entitled to receive any cash compensation for serving on our board. Directors are reimbursed for their out-of-pocket expenses incurred in connection with such services.
Immediately following this offering, our non-employee directors will each receive an option to purchase 2,000 shares of our common stock exercisable immediately at the per share price of this offering. In addition, upon election to the board of directors, beginning with the election of the class I directors in 2001, each non-employee director will receive an option to purchase 6,000 shares of our common stock, with one-third of the shares vesting on each anniversary of the option grant date. On the date of the 2001 annual shareholders' meeting, each non-employee director in classes II and III will receive an option to purchase 2,000 shares of common stock for each year of his remaining term, with 2,000 shares vesting on each anniversary of the option grant date. The non-employee director options will be exercisable at 100% of the fair market value of our common stock on the option grant date and will expire, if unexercised, ten years from that date. In addition to the option grants, non-employee directors will receive $1,000 for each board meeting they attend in person. They will also receive $500 for each board meeting they attend by telephone, and each subcommittee meeting they participate in, whether in person or by telephone.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year end December 31, 1999, the members of the compensation committee of our board of directors were Messrs. Strid, Carlson and O'Leary. Messrs. Carlson and O'Leary have at no time been officers or employees of Cascade Microtech. Mr. Carlson is sole manager of Maristeth Ventures, LLC, the managing member of Maristeth Fund III, LLC. In March 1999, we issued and sold 416,667 shares of our Series B preferred stock to Maristeth Fund in a private placement transaction at a purchase price of $6.00 per share. As a result of this transaction, Mr. Carlson is the beneficial owner of more than 5.0% of our then outstanding capital stock. Mr. Strid co-founded Cascade Microtech and
has served as our Chairman and Chief Executive Officer since our inception in 1983. Mr. Strid holds approximately 21.0% of our capital stock.
EXECUTIVE OFFICERS
Our executive officers are elected by, and serve at the discretion of, our board of directors. There are no family relationships among our directors or officers.
EXECUTIVE COMPENSATION
The following table sets forth information for 1999 regarding the compensation awarded to or earned by our Chief Executive Officer and each of our other four most highly compensated executive officers whose salary and bonus for 1999 exceeded $100,000 on an annual basis. We sometimes refer to these officers as the "named executive officers."
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS OPTIONS COMPENSATION
---------------------------- -------- -------- ------------ ------------
Eric W. Strid ................................. $192,932 $152,286 -- $ 957(2)
Chairman and Chief Executive Officer
Bruce A. McFadden ............................. 173,638 101,500 5,000 1,005(3)
President and Chief Operating Officer
Craig M. Swanson .............................. 39,423(1) 32,000 120,000 70(4)
Chief Financial Officer
John E. Pence ................................. 133,437 67,458 8,000 2,204(5)
Vice President, Engineering Products
Emmons J. Miles ............................... 126,935 47,972 -- 3,080(6)
Vice President, Operations
|
(1) Mr. Swanson joined Cascade Microtech as our Chief Financial Officer in October 1999. His 1999 salary on an annualized basis was $175,000.
(2) Consists of $522 of insurance premiums and $435 of 401(k) matching contributions.
(3) Consists of $749 of insurance premiums and $256 of 401(k) matching contributions.
(4) Consists of insurance premiums.
(5) Consists of $2,090 of 401(k) matching contributions and $114 of insurance premiums.
(6) Consists of $1,939 of 401(k) matching contributions and $1,141 of insurance premiums.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides summary information regarding stock options we granted during 1999 to each of the named executive officers. Stock options are generally granted at an exercise price equal to the fair market value of our common stock as determined by our board of directors as of the date of the option grant. In establishing these prices, our board considered many factors, including recent arms' length transactions, our financial condition and operating results, its assessment of our competitive position and future prospects, the value of comparable companies and the lack of a public market for our common stock. The term of each option grant is generally 10 years from the option grant date.
Options may terminate before their expiration dates, if the optionee's status as an employee is terminated or upon the optionee's death or disability.
INDIVIDUAL GRANTS
------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES PRICE PER EXPIRATION -----------------------
NAME GRANTED IN 1999 SHARE DATE 5% ($) 10% ($)
---- ---------- ---------- --------- ---------- ---------- ----------
Eric W. Strid........................... -- --% $ -- -- $ -- $ --
Bruce A. McFadden....................... 5,000 2.0 3.80 11/12/09 11,949 30,281
Craig M. Swanson........................ 120,000(2) 48.1 3.80 10/11/09 286,776 726,747
John E. Pence........................... 8,000 3.2 3.80 11/12/09 19,118 48,450
Emmons J. Miles......................... -- -- -- -- -- --
|
(1) Amounts represent hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. These gains are based on assumed rates of appreciation of 5% and 10% compounded annually from the date the respective options were granted based upon the fair market value on the date of grant. These assumptions do not represent our estimate of future appreciation of our share price. Actual gains, if any, on option exercises will depend on the future performance of our common stock.
(2) Options granted to Mr. Swanson in 1999 are exercisable over five years, with one-tenth of the option shares exercisable every six months from the grant date and accelerated vesting of 24,000 shares upon completion of this offering or termination of Mr. Swanson's employment in connection with a sale of all or substantially all of our assets or our merger into another company that our shareholders do not control.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END-OPTION VALUES
The following table sets forth for each of the named executive officers' information concerning the number and value of shares subject to both exercisable and unexercisable options held at December 31, 1999. None of the named executive officers exercised any stock options in 1999. Actual gains on exercise, if any, will depend on the value of our common stock on the date on which the options are exercised.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Eric W. Strid.................................. 6,291 -- $ $ --
Bruce A. McFadden.............................. 95,000 75,000
Craig M. Swanson............................... -- 120,000 --
John E. Pence.................................. 48,000 45,000
Emmons J. Miles................................ 10,600 6,400
|
(1) There was no public trading market for our common stock as of December 31, 1999. The value of unexercised in-the-money options represents the difference between the fair market value of the shares underlying the options using $ per share, the midpoint of the filing range for the price of our stock in this offering, less the applicable exercise price of the option, multiplied by the number of shares underlying the option.
EMPLOYMENT AGREEMENTS
We entered into an employment agreement with Craig M. Swanson on October 11, 1999, the date he became our Vice President of Finance and Chief Financial Officer. We also paid him a starting bonus of $32,000. In consideration for Mr. Swanson's services, we agreed to pay him an annual salary of $175,000, periodic cash bonuses consistent with our standard executive bonus plan, and our standard employee benefits. In addition, we granted him 120,000 options under our 1993 Stock Incentive Plan. If we terminate Mr. Swanson without cause, as defined in the agreement, then he is entitled to severance pay equal to one year's salary, reimbursement for premiums to maintain his group health coverage for 12 months and reimbursement of up to $23,000 in outplacement services. Upon completion of this offering, or if Mr. Swanson is terminated for any reason other than death, disability or cause, within 12 months after we sell all or substantially all of our assets or are merged into another company that our shareholders do not control, then the lesser of 24,000 or the entire remaining portion of his unexercisable option shares shall become immediately exercisable. As a condition of his employment, Mr. Swanson entered into our standard employee invention and confidentiality agreement pursuant to which he may not divulge any of our proprietary information other than as permitted as part of his employment with us.
EMPLOYEE BENEFIT PLANS
2000 STOCK INCENTIVE PLAN
Our 2000 Stock Incentive Plan, which was approved by our shareholders on October , 2000, provides for grants of both incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, the Code, and nonqualified stock options, which are not qualified for treatment under Section 422 of the Code. The 2000 Stock Incentive Plan also provides for direct stock grants and sales to our employees and consultants. The purposes of the 2000 Stock Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentives to our employees and consultants and to promote the success of our business. The 2000 Stock Incentive Plan is administered by the board of directors or a committee of the board. The 2000 Stock Incentive Plan provides for the issuance of 1.2 million shares.
The term of each incentive option granted under the 2000 Stock Incentive Plan will generally be ten years from the date of grant, or such shorter period as may be established at the time of the grant. An option granted under the 2000 Stock Incentive Plan may be exercised at such times and under such conditions as determined by the board of directors. If a person who has been granted an incentive stock option ceases to be employed by or on a consulting basis with us, such person may exercise that option only during the exercise period established by the board of directors at the time we grant the options, which shall not exceed 90 days after the date of termination, and only to the extent that the option was exercisable on the date of termination. Nonqualified stock options may be exercised during a period determined by the board of directors. If a person who has been granted an option ceases to be an employee or consultant as a result of such person's total and permanent disability, such person may exercise that option at any time within twelve months after the date of termination, but only to the extent that the option was exercisable on the date of termination. No option granted under the 2000 Stock Incentive Plan is transferable other than at death, and each option is exercisable during the life of the optionee only by the optionee. In the event of the death of a person who has received an option, the option generally may be exercised by a person who acquired the option by bequest or inheritance during the twelve month period after the date of death to the extent that such option was exercisable at the date of death. Outstanding options may terminate before their expiration date and be returned to the plan for subsequent grant, if the optionee's status as an employee is terminated or upon the optionee's death or disability.
The exercise price of incentive stock options granted under the 2000 Stock Incentive Plan is established by the board of directors but may not be less than the fair market value of a share of common stock on the last market trading day prior to the date of grant of the option and incentive stock options granted to greater than 10% shareholders may not be granted for less than 110% of fair market value. The exercise price of nonqualified stock options is established by the board of directors. The consideration to be paid upon exercise of an option, including the method of payment, will be determined by the board of directors and may consist entirely of cash, check, shares of common stock or any combination of such methods of payment as permitted by the board of directors.
The 2000 Stock Incentive Plan will continue in effect until October , 2010 unless earlier terminated by the board of directors, but such termination will not affect the terms of any options outstanding at that time. Amendments that would materially increase the number of shares that may be issued, materially modify the requirements as to eligibility for plan participation, or materially increase the benefits to plan participants must be approved by our shareholders. As of the date of this prospectus, no options have been granted or shares issued under the plan.
1993 STOCK INCENTIVE PLAN
Our 1993 Stock Incentive Plan, which was approved by our shareholders on April 29, 1993, was substantially similar to our 2000 Stock Incentive Plan. In connection with establishing our 2000 Stock Incentive Plan, we terminated the 1993 Stock Incentive Plan effective October , 2000, but such termination has not affected the terms of any outstanding options granted under the 1993 Stock Incentive Plan at that time. No further options are available for grant under the 1993 Stock Incentive Plan and any options which terminate before their expiration as a result of termination of the optionee's status as an employee or upon the optionee's death or disability, shall not be returned to the plan for subsequent grant.
At October , 2000, there were options to purchase shares of common stock outstanding under our 1993 Stock Incentive Plan and no shares remained available under the plan.
2000 EMPLOYEE STOCK PURCHASE PLAN
Our 2000 Employee Stock Purchase Plan, was adopted by our shareholders on October , 2000 to become effective on the date of this offering. We have reserved 400,000 shares of our common stock for issuance under the Employee Stock Purchase Plan. Beginning in 2002 and continuing each year thereafter, we will increase the number of shares reserved for issuance under the Employee Stock Purchase Plan 1.5% of the outstanding shares of our common stock on the first day of our fiscal year or a lesser amount determined by our board of directors.
The compensation committee of our board of directors will administer the Employee Stock Purchase Plan and will have full and exclusive authority to interpret the terms of the plan and determine eligibility.
The Employee Stock Purchase Plan contains 24-month offering periods, with each offering period divided into four six-month purchase periods. The offering periods generally start on the first trading day on or after February 1 and August 1 of each year, except for the first offering period, which commences on the date of this offering and ends on the last trading day on or before January 31, 2002.
Employees who are employed by us or any participating subsidiary for more than five months in any calendar year and work at least 20 hours per week are eligible to participate in our Employee Stock Purchase Plan. However, employees who own shares representing 5% or more of the total combined voting power or value of all classes of our capital shares may not participate in the plan. In addition, no employee may be granted an option to purchase shares under the plan to the extent that that person's right to purchase shares under all of our Employee Stock Purchase Plans accrues at a rate
that exceeds $25,000 worth of shares for each calendar year. Furthermore, no employee is permitted to purchase more than 2,500 shares during a six-month purchase period. The Employee Stock Purchase Plan permits participants to purchase shares of common stock through payroll deductions in 1% increments not less than 2% or greater than 15% of the participant's compensation, which includes the participant's base straight time gross earnings and commissions, but excludes payments for overtime, profit sharing payments, shift premium payments, incentive compensation, incentive payments and bonuses.
Amounts deducted and accumulated under the Employee Stock Purchase Plan are used to purchase shares of common stock at the end of each six-month purchase period. The price of shares purchased under the plan is 85% of the lower of the fair market value of the shares of common stock at the beginning of the offering period or after a purchase period ends. If the offering period commences on the date of this offering, the price of the shares purchased shall be the lower of 85% of the price to the public of the shares offered in this offering or 85% of the fair market value of the shares of common stock after the purchase period ends. In the event the fair market value at the end of a purchase period is less than the fair market value at the beginning of the offering period, participants will be withdrawn from the current offering period following their purchase of shares on the purchase date and will be automatically re-enrolled in a new offering period. In addition, in the event the fair market value at the end of a purchase period is less than the fair market value at the beginning of the offering period, a participant is limited to purchasing no more than 200% of the number of shares that the participant would have purchased at 85% of the fair market value at the beginning of the offering period. Participants may end their participation at any time during an offering period and will be paid their payroll deductions to date. Participation ends automatically upon termination of employment with us. Rights granted under the Employee Stock Purchase Plan are not transferable by a participant other than by will, the laws of descent and distribution, or as otherwise provided under the plan.
The Employee Stock Purchase Plan provides that, in the event that we merge with or into another corporation or sell substantially all of our assets, each outstanding right to purchase shares under the plan during the offering period then in progress may be assumed or substituted for by the successor corporation. If the successor corporation refuses such assumption or substitution, the offering period then in progress will be shortened and a new purchase date will be set at or prior to the closing of that transaction after which time the Employee Stock Purchase Plan will terminate.
The Employee Stock Purchase Plan will terminate in October 2010. The board has the authority to amend or terminate the plan, except that no such action may adversely affect any outstanding rights to purchase shares under the plan.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
As an Oregon corporation, we are subject to the Oregon Business Corporation Act, or OBCA, and the exculpation from liability and indemnification provisions contained therein. Pursuant to Section 60.047(2)(d) of the OBCA, Article 5 of our second amended and restated articles of incorporation eliminates the liability of our directors to us or our shareholders, except for any liability related to breach of the duty of loyalty, actions not in good faith and certain other liabilities.
Section 60.387 et seq. of the OBCA allows corporations to indemnify their directors and officers against liability where the director or officer has acted in good faith and with a reasonable belief that actions taken were in the best interests of the corporation or at least not adverse to the corporation's best interests and, if in a criminal proceeding, the individual had no reasonable cause to believe the conduct in question was unlawful. Under the OBCA, corporations may not indemnify against liability in connection with a claim by or in the right of the corporation but may indemnify against the reasonable expenses associated with such claims. Corporations may not indemnify against breaches of the duty of
loyalty. The OBCA provides for mandatory indemnification of directors against all reasonable expenses incurred in the successful defense of any claim made or threatened whether or not such claim was by or in the right of the corporation. Finally, a court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances whether or not the director or officer met the good faith and reasonable belief standards of conduct set out in the statute. Article 6 of our Second Amended and Restated Articles requires us to indemnify our directors and officers to the fullest extent not prohibited by law.
The OBCA also provides that the statutory indemnification provisions are not deemed exclusive of any other rights to which directors or officers may be entitled under a corporation's articles of incorporation or bylaws, any agreement, general or specific action of the board of directors, vote of shareholders or otherwise.
We also have entered into indemnity agreements with each of our executive officers and each member of our board of directors. These indemnity agreements provide for indemnification of the indemnitee to the fullest extent allowed by law.
CERTAIN TRANSACTIONS
SERIES B PREFERRED STOCK FINANCING
On March 30, 1999, we sold 416,667 shares of our Series B preferred stock to Maristeth Fund III, LLC and 87,500 shares to Agilent Technologies, formerly Hewlett-Packard Co., at $6.00 per share for an aggregate purchase price of $3,025,000. As of August 31, 2000, Maristeth Fund III was the holder of approximately 4.9% of our stock. F. Paul Carlson, one of our directors since 1992, is the sole manager of Maristeth Ventures LLC, the managing member of Maristeth Fund III. As of August 31, 2000, Agilent was the holder of 16.65% of our stock. Furthermore, Scott R. Wright, one of our directors since 1996, was Vice President and General Manager of the Component Test Unit of Agilent Technologies. The Series B preferred stock will automatically convert on a one-for-one basis into shares of our common stock upon consummation of this offering.
In accordance with the terms of a letter of intent with Electroglas, Inc. dated April 30, 1999, we completed a second closing of our Series B preferred stock and sold 505,000 shares to Electroglas on July 21, 1999 at $6.00 per share for an aggregate purchase price of $3,030,000. Concurrently with the closing of this financing. Curtis S. Wozniak, the Chairman and Chief Executive Officer of Electroglas, became a member of our board of directors. As of August 31, 2000, Electroglas was the holder of approximately 5.9% of our stock. The Series B preferred stock will automatically convert on a one-for-one basis into shares of our common stock upon consummation of this offering.
ELECTROGLAS, INC. JOINT VENTURE
We entered into a Joint Development Agreement with Electroglas, Inc. on June 18, 1999, and subsequently entered into a License with Electroglas on July 21, 1999, which together permit Electroglas to incorporate some of our low-noise probe station technology into certain of its products for sale in the automated parametric production test market. The License provided for the payment of two initial license fees aggregating $2.0 million, which Electroglas paid to us in the third and fourth quarters of 1999. The License also provides for the payment of royalties over the life of the license based on sales of products incorporating the licensed technology. To date, Electroglas has not sold any products incorporating our technology and, therefore, we have not received any royalty payments. We believe that these arrangements with Electroglas will leverage our technologies into the production test market. As of August 31, 2000, Electroglas was the holder of approximately 5.9% of our stock.
SERIES C PREFERRED STOCK FINANCING
On December 16, 1999, we sold 1,250,000 shares of our Series C preferred stock at $8.00 per share and a Warrant to purchase 250,000 additional shares of our Series C preferred stock to Teachers Insurance Annuity Association of America, or TIAA, for an aggregate purchase price of $10,000,000. As of August 31, 2000, TIAA was the holder of approximately 17.5% of our stock. The exercise price of the Warrant is between $6.00 and $18.00 per share depending on the total sales received from the sale of our Pyramid Probe cards in fiscal 2000. The Series C preferred stock will automatically convert on a one-for-one basis into shares of our common stock upon consummation of this offering.
INVESTORS' RIGHTS AGREEMENT
We have entered into an Investors' Rights Agreement with our founders, Eric Strid, Reed Gleason and Dale Carlton, as well as the holders of our Series A, Series B and Series C preferred stock. This agreement provides these shareholders with certain rights relating to the registration of their shares, including shares of common stock issuable upon conversion of the preferred stock. See "Description of Capital Stock--Registration Rights." The preferred stock will automatically convert into common stock on a one-for-one basis immediately upon consummation of this offering. The Investors' Rights
Agreement also entitles the holders of our preferred stock the following rights, all of which terminate upon consummation of this offering:
- the right to receive financial information regarding us;
- the right of first refusal to purchase their pro rata portion of any shares we subsequently issue;
- the right to participate in any sale of shares held by our founders, except Dale Carlton, by selling a portion of their shares to the proposed purchaser;
- solely with respect to Agilent Technologies, the right to remain equal to our largest non-employee shareholder and the right to make a competing offer to purchase us should we propose to merge with another company or sell all or substantially all of our assets, which offer must be accepted if it is of equal or greater value than the proposed offer.
- solely with respect to Teacher's Insurance and Annuity Association, the right after December 16, 2004, to require us to redeem its shares of Series C preferred stock at a price of $8.00 per share plus any declared but unpaid dividends provided we have legally available funds with which to make the redemption.
Scott R. Wright, one of our directors, is affiliated with Agilent Technologies, the sole holder of our Series A preferred stock and a holder of our Series B preferred stock. F. Paul Carlson, one of our directors, is affiliated with Maristeth Fund III, LLC, a holder of our Series B preferred stock. Curtis S. Wozniak, one of our directors is affiliated with Electroglas, a holder of our Series B preferred stock.
VOTING AGREEMENT
On November 12, 1999, in connection with the Series B preferred stock financing, Cascade Microtech, Maristeth Fund III, LLC, Eric W. Strid, our Chief Executive Officer, and his wife Cynthia Strid, and K. Reed Gleason, our Vice President of Advanced Development, entered into a Voting Agreement whereby each party agreed to vote their shares in the election of directors to cause one designee of Maristeth, one designee of Mr. and Mrs. Strid, and one designee of Mr. Gleason, to be elected to the board of directors. The Voting Agreement will terminate by its terms upon consummation of this offering.
SALE OF PRODUCTS TO LUCENT TECHNOLOGIES
In 1999, we sold products totaling $2,642,606 in net sales to Lucent Technologies. This amount represented approximately 5.1% of our consolidated net sales for that year. William J. Spivey, one of our directors, was President of the Network Products Group at Lucent Technologies in 1999.
PURCHASE OF STOCK FROM K. REED GLEASON
On May 24, 2000, we purchased 142,857 shares of our common stock at $7.00 per share aggregating $999,999 from Mr. Gleason, one of our directors and our Vice President of Advanced Development.
STOCK PUT AGREEMENT WITH DALE E. CARLTON AND CYNTHIA A. CROW-CARLTON
We are party to a Stock Put Agreement dated October 2, 1992, with Dale E. Carlton, one of our co-founders, and his wife Cynthia A. Crow-Carlton who together own approximately 6.02% of our common stock. The Stock Put Agreement gives the Carltons an annual right to require us to purchase up to $150,000 of our common stock from them based on the value established by our board of directors in good faith. Pursuant to the exercise of their put right under the agreement, on July 1, 2000, we purchased 21,429 shares from the Carltons at a price of $7.00 per share, aggregating $150,003. No shares were purchased in 1998 or 1999 under the agreement as the Carlton's elected not to exercise
their put right. The Stock Put Agreement will terminate by its terms upon consummation of this offering.
TRANSACTION WITH EMMONS J. MILES
On July 22, 1998, we loaned $144,000 to Emmons J. Miles, our Vice President of Operations, to exercise options to purchase 171,000 shares of our common stock. The loan is evidenced by a full recourse promissory note of Mr. Miles payable to us. The note bears interest at 5.51% per annum from the date of the note and calls for quarterly payments of interest only commencing on July 22, 2000. The full principal amount of the note and any unpaid interest is due on July 22, 2002. The note is secured by 18,822 shares of our common stock issued in the name of Mr. Miles. The maximum amount of principal and accrued interest owed by Mr. Miles under the note was $159,000, and $147,000 of principal and accrued interest was outstanding at August 31, 2000.
PRINCIPAL SHAREHOLDERS
The following table lists the beneficial ownership of our common stock as of August 31, 2000 by owners of more than 5% of our common stock that are known to us, each of our directors, each of our named executive officers and all our directors and executive officers as a group.
The ownership percentages are based on 8,557,894 shares of common stock outstanding at August 31, 2000, giving effect to the conversion of our preferred stock into common stock immediately prior to the closing of this offering, and shares outstanding after this offering, assuming no exercise of the underwriters' over-allotment options.
We have calculated beneficial ownership based on requirements of the Securities and Exchange Commission. All shares of our common stock subject to options or warrants currently exercisable or exercisable within 60 days after August 31, 2000 are deemed to be shares beneficially owned by the person holding such options, but are not deemed to be outstanding for computing the percentage ownership of any other person.
Except as otherwise indicated, each shareholder named in the table has sole voting and investment power with respect to the shares, subject to applicable community property laws, and, unless otherwise noted, the address of each beneficial owner listed in the table is c/o Cascade Microtech, Inc., 2430 N.W. 206th Avenue, Beaverton, Oregon 97006.
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
SHARES ----------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OFFERING OFFERING
------------------------------------ ------------ -------- --------
EXECUTIVE OFFICERS AND DIRECTORS:
Eric W. and/or Cynthia Strid(1)........................... 1,810,852 21.16%
K. Reed Gleason(2)........................................ 1,673,772 19.56%
F. Paul Carlson(3)........................................ 572,918 6.69%
Emmons J. Miles(4)........................................ 179,208 2.09%
Bruce A. and/or Cheryl McFadden(5)........................ 107,000 1.25%
George P. O'Leary(6)...................................... 104,263 1.22%
William R. Spivey(7)...................................... 69,799 *
John E. Pence(8).......................................... 58,325 *
Craig M. Swanson(9)....................................... 48,000 *
Scott R. Wright........................................... 5,000 *
All directors and executive officers as a group........... 4,731,137 55.28%
(13 persons)
OTHER 5% SHAREHOLDERS:
Teachers Insurance and Annuity............................ 1,500,000 17.53%
Assn. of America
730 Third Avenue
New York, NY 10017
Agilent Technologies, Inc................................. 1,424,819 16.65%
c/o Marie O. Huber, Esq.
395 Page Mill Road, MS A3-10
Palo Alto, CA 94303-0870
Dale E. and/or Cynthia Crow-Carlton....................... 514,801 6.02%
1869 N.W. 129th Place
Portland, Oregon 97229
Electroglas, Inc.......................................... 505,000 5.90%
c/o Curtis S. Wozniak
6024 Silver Creek Valley Road
Santa Clara, CA 95138
Maristeth Fund III, LLC................................... 416,667 4.87%
c/o F. Paul Carlson
1201 Pacific Avenue, Suite 1702
Tacoma, WA 98402
|
DESCRIPTION OF CAPITAL STOCK
GENERAL
After this offering, we will be authorized to issue up to shares of common stock, par value $0.01 per share, and shares of preferred stock, par value, $0.01 per share. Immediately after this offering, based on 8,557,894 shares outstanding at August 31, 2000, we estimate there will be approximately shares of common stock outstanding, 2,517,438 shares of common stock issuable on exercise of outstanding options, 275,000 shares of common stock issuable on exercise of outstanding warrants, and no shares of preferred stock outstanding. The weighted average exercise price of options outstanding at August 31, 2000 was $2.73 and the weighted average exercise price of warrants outstanding at August 31, 2000 was $9.44.
The following summary is qualified by reference to our second amended and restated articles of incorporation and amended and restated bylaws, which will be effective prior to the consummation of this offering. You should carefully read these documents which have been filed as exhibits to the registration statement, of which this prospectus is a part. Additionally, certain provisions of Oregon law may impact our capital stock.
COMMON STOCK
As of August 31, 2000, there were 4,961,408 shares of common stock outstanding and held of record by 108 shareholders. Each holder of our common stock is entitled to receive dividends if declared by our board of directors. See "Dividend Policy." Each holder of common stock is entitled to one vote per share on all matters on which common shareholders are entitled to vote. There are no cumulative subscription or preemptive rights to subscribe for any additional securities we may issue. There are also no conversion, redemption or sinking fund provisions applicable to our common stock. In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preference of any outstanding preferred stock. All outstanding shares of common stock are fully paid and nonassessable. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock, which our board of directors may designate in the future.
We plan to apply to list our common stock for trading and quotation on the Nasdaq National Market under the symbol "CCMT."
PREFERRED STOCK
As of August 31, 2000, there were 3,596,486 shares of preferred stock held of record by four shareholders. Upon the closing of this offering, all outstanding shares of our preferred stock will automatically convert on a one-for-one basis into shares of our common stock. Our board of directors has the authority, subject to any limitations prescribed by law, without shareholder approval, to designate and issue shares of preferred stock in one or more series and to designate the rights, preferences and privileges of each series, any or all of which may be greater than the rights of the common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of holders of the common stock until the board of directors determines the specific rights of the holders of such preferred stock. However, the effects might include restricting dividends on the common stock, diluting the voting power of the common stock, impairing the liquidation rights of the common stock and delaying or preventing a change in control without further action by our shareholders. We have no agreements or understandings for the issuance of preferred stock, and our board of directors have no current plans to issue any shares of preferred stock after the completion of this offering.
REGISTRATION RIGHTS
We have granted to the holders of all 3,596,486 shares of our preferred stock, the holders of warrants to purchase 275,000 shares of our capital stock, and our three founders who collectively hold 3,986,843 shares of our common stock, rights with respect to registration of these shares under the Securities Act of 1933. These rights are provided under the terms of an Investors' Rights Agreement between us and the holders of these registrable securities. Beginning 180 days following the completion of this offering, the holders of each of our Series A, Series B and Series C preferred stock may each require on one occasion that we register their shares for public resale. We are only obligated to register these shares if the outstanding registrable securities have an anticipated public offering price of at least $10.0 million. Also, the holders of registrable securities may require, once in any 12 month period, that we register their shares for public resale on Form S-3 or similar short form registration statement, if the value of the securities to be registered is at least $1.0 million. Furthermore, in the event we register any of our securities under the Securities Act, either for our own account or for the account of other security holders exercising their registration rights, the holders of registrable securities are entitled to include their shares of common stock in the registration. These "piggyback" registration rights apply to this offering; however, the holders of these rights have waived their rights with respect to this offering. We are generally required to bear all expenses in connection with any registration, other than underwriting discounts and commissions. These registration rights are subject to conditions and limitations, including the right of the underwriter of an offering to limit the number of shares of common stock to be included in the registration. All registration rights terminate as to each holder of registrable securities when such holder is able to sell all of its registrable securities in any three-month period without registration in compliance with Rule 144 of the Securities Act.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF OREGON LAW, THE RESTATED ARTICLES AND BYLAWS
Upon completion of the offering, we will become subject to the Oregon Control Share Act. The Oregon Control Share Act generally provides that a person who acquires voting stock of an Oregon corporation, in a transaction that results in the acquiror holding more than 20%, 33 1/3% or 50% of the total voting power of the corporation, cannot vote the shares acquired in the acquisition. An acquiror is broadly defined to include companies or persons acting as a group to acquire the shares of an Oregon corporation. This restriction does not apply if voting rights are given to the control shares by:
- a majority of each voting group entitled to vote; and
- the holders of a majority of the outstanding voting shares, excluding the control shares held by the acquiror and shares held by the Company's officers and employee directors.
The acquiror may, but is not required to, submit to the target company a statement including specific information about the acquiror and its plans for the Company. The statement may also request that the Company call a special meeting of shareholders to determine whether the control shares will be allowed to have voting rights. If the acquiror does not request a special meeting of shareholders, the issue of voting rights of control shares will be considered at the next annual or special meeting of shareholders. If the acquiror's control shares are allowed to have voting rights and represent a majority or more of all voting power, shareholders who do not vote in favor of voting rights for the control shares will have the right to receive the appraised fair value for their shares, which may not be less than the highest price paid per share by the acquiror for the control shares.
We are also subject to the Oregon Business Combination Act. The Business Combination Act generally provides that in the event a person or entity acquires 15% or more of the voting stock of an Oregon corporation, thereby becoming an "interested shareholder," the corporation and the interested shareholder, or any affiliated entity, may not engage in certain business combination transactions for a
period of three years following the date the person became an interested shareholder. Business combination transactions for this purpose include:
- a merger or plan of share exchange;
- any sale, lease, mortgage or other disposition of the assets of the corporation where the assets have an aggregate market value equal to 10% or more of the aggregate market value of the corporation's assets or outstanding capital stock; or
- certain transactions that result in the issuance of capital stock of the corporation to the interested shareholder.
These restrictions are not applicable if:
- as a result of the transaction in which a person became an interested shareholder, they will own at least 85% of the outstanding voting stock of the corporation (excluding shares owned by directors who are also officers, and certain employee benefit plans);
- the board of directors approves the share acquisition or business combination before the interested shareholder acquires 15% or more of the corporation's voting stock; or
- the board of directors and the holders of at least two-thirds of the outstanding voting stock of the corporation (excluding shares owned by the interested shareholder) approve the transaction after the interested shareholder has acquired 15% or more of the corporation's voting stock.
Our second amended and restated articles of incorporation contain provisions that
- divide our board of directors into three classes, each of which serves for a three-year term with one class elected each year
- provide that directors may be removed by our shareholders only for cause and only upon the vote of 75% of the outstanding shares of common stock, and
- permit the board of directors to issue preferred stock in one or more series and to fix the number of shares constituting any such series, the voting powers and all other rights and preferences of any such series, without any further vote or action by our shareholders.
The staggered terms for directors, the provisions allowing the removal of directors only for cause and the availability of preferred stock for issuance without shareholder approval may have the effect of lengthening the time required for a person to acquire control of our company through a proxy contest or the election of a majority of the board of directors and may deter any potential unfriendly offers or other efforts to obtain control. This could deprive our shareholders of opportunities to realize a premium for their common stock and could make removal of incumbent directors more difficult. At the same time, these provisions may have the effect of inducing any persons seeking control of our company to negotiate terms acceptable to the board of directors.
TRANSFER AGENT
The transfer agent and registrar for the shares of common stock is ChaseMellon Shareholder Services, LLC. ChaseMellon's address is 85 Challenger Road, Ridgefield Park, New Jersey 07660.
SHARES ELIGIBLE FOR FUTURE SALE
We cannot provide any assurance that a significant public market for our common stock will develop or be sustained after we complete this offering. The sale of substantial numbers of our shares of common stock in the public market, or the expectation of a sale of a significant number of our shares, could adversely affect prevailing market prices for our common stock. Furthermore, only a limited number of our shares of common stock currently held by our shareholders will be available for sale shortly after this offering because of contractual and legal restrictions on resale described below. Future sales of substantial amounts of our common stock in the public market after these restrictions lapse could adversely affect the market price and our ability to raise equity capital in the future.
Upon completion of this offering, and assuming no exercise after that date of the underwriters' over-allotment option or any outstanding options, we expect to have shares of common stock outstanding based on shares outstanding as of , 2000.
Of these shares, the shares that we expect to sell in this offering, and any shares of common stock sold upon exercise of the underwriters' over-allotment option, will be freely tradable without restriction under the Securities Act. However, there will be trading restrictions imposed on "affiliates" and "control persons" as defined under Rule 144. The remaining shares of common stock held by existing shareholders are restricted securities as that term is defined in Rule 144 of the Securities Act. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 promulgated under the Securities Act, which is summarized below. As a result of the contractual restrictions described below and the provisions of Rule 144, the restricted securities will be eligible for sale in the public market immediately following the offering subject to the expiration of 180-day lock-up agreements with representatives of the underwriters and to volume limitations and other conditions under Rule 144. Following this offering, the holders of an aggregate of of the outstanding shares of common stock have the right to require us to register their shares for sale upon meeting requirements to which the parties have previously agreed. See "Description of Capital Stock--Registration Rights" for additional information regarding registration rights.
The following table indicates approximately when the of our shares of common stock, held by existing shareholders, that are not being sold in the offering but which will be outstanding at the time the offering is complete will be eligible for sale into the public market:
ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN PUBLIC MARKET
----------------------------------------------------------
At effective date...........................................
90 days after effective date................................
180 days after effective date...............................
----
After 180 days post-effective date..........................
====
|
The shares eligible for sale includes shares outstanding as of , 2000 and assumes the automatic conversion of all outstanding preferred shares into shares of common stock upon completion of the offering.
LOCK-UP AGREEMENTS
As of , 2000, the holders of % of our outstanding capital stock, including, all of our officers and directors, have signed lock-up agreements with the underwriters under which they have agreed not to dispose of any shares of our common stock or securities convertible into or exchangeable for shares of our common stock for a period of 180 days from the date of this prospectus. Dispositions can be made sooner with the prior written consent of SG Cowen Securities Corporation.
OPTIONS AND WARRANTS
As of , 2000, we had 1,200,000 shares and 400,000 shares of common stock reserved for future issuance pursuant to our 2000 Stock Incentive Plan and 2000 Employee Stock Purchase Plan, respectively. An aggregate of shares of common stock issuable upon the exercise of our outstanding options will be vested 180 days following the date of this prospectus. We intend to file, shortly after effectiveness of this offering, a registration statement on Form S-8 under the Securities Act covering all shares of common stock reserved for issuance under our share plans. Holders of outstanding options exercisable for % of the underlying option shares are subject to 180-day lock-up agreements with the underwriters.
As of September , 2000, we had two fully-exercisable warrants outstanding, one warrant to purchase 250,000 shares of our Series C redeemable preferred stock and one warrant to purchase 25,000 shares of our common stock. The shares issuable upon exercise of each of these warrants have rights with respect to registration of the shares under the Securities Act. See "Description of Capital Stock--Registration Rights. The shares underlying these warrants are subject to 180-day lock-up agreements with the underwriters.
RULE 144
In general, under Rule 144, as in effect on the date of this prospectus, any person who has beneficially owned restricted securities for at least one year will be entitled to sell in any three-month period a number of shares that does not exceed the greater of:
- 1% of the then outstanding shares of common stock, which is equal to approximately shares immediately after the offering; or
- the average weekly trading volume of our shares of common stock on the Nasdaq National Market during the four calendar weeks immediately preceding the date on which notice of the sale is filed with the SEC. Sales of restricted securities pursuant to Rule 144 are subject to requirements relating to manner of sale, notice and availability of current public information about us. Our affiliates must also comply with the restrictions and requirements of Rule 144, other than the one-year holding period requirement, in order to sell shares of common stock which are not restricted securities.
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been one of our "affiliates" at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, generally including the holding period of any prior owner other than an "affiliate," is entitled to sell those shares without complying with the manner of sale, notice filing, volume limitation or notice provisions of Rule 144(k). Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately upon the completion of this offering.
RULE 701
Subject to limitations on the aggregate offering price of a transaction and other conditions, Rule 701 may be relied upon with respect to the resale of securities originally purchased from us by employees, directors, officers, consultants or advisers prior to the date we become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, pursuant to written compensatory benefit plans or written contracts relating to the compensation of such persons. In addition, the SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer in accordance with Rule 701 before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described above, beginning 90 days after the date of this prospectus, such securities may be sold:
- by persons other than our affiliates, subject only to the manner of sale provisions of Rule 144; and
- by our affiliates under Rule 144 without compliance with the one-year minimum holding period requirements.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated , 2000, the underwriters named below, through their representatives SG Cowen Securities Corporation, Chase Securities Inc., Adams, Harkness & Hill, Inc. and First Security Van Kasper, severally agreed to purchase from us the number of shares of common stock set forth opposite their names at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus.
NUMBER OF
UNDERWRITER SHARES
----------- ------------
SG Cowen Securities Corporation.............................
Chase Securities Inc........................................
Adams, Harkness & Hill, Inc.................................
First Security Van Kasper...................................
============
Total.....................................................
|
The underwriting agreement provides that the obligations of the underwriters are conditional and may be terminated at their discretion based on their assessment of the state of the financial markets and may also be terminated upon the occurrence of other events specified in the underwriting agreement. The underwriters are severally committed to purchase all of the common stock being offered by us if any of such shares are purchased, other than those covered by the over-allotment option described below.
The underwriters propose to offer the common stock directly to the public at the public offering price set forth on the cover page of this prospectus. The underwriters may offer the common stock to dealers at that price less a concession not in excess of $ per share. Dealers may reallow a concession not in excess of $ per share to other dealers. After the shares of common stock are released for sale to the public, the underwriters may vary the offering price and other selling terms from time to time.
We have granted to the underwriters an option, exercisable for up to 30 days after the date of this prospectus, to purchase up to additional shares of common stock at the public offering price set forth on the cover of this prospectus to cover over allotments, if any. If the underwriters exercise their over-allotment option, the underwriters have severally agreed, subject to limited conditions, to purchase approximately the same percentage that the number of shares of common stock to be purchased by each of them, as shown in the foregoing table, bears to the common stock covered by this prospectus.
At our request, the underwriters have reserved up to 5% of the shares of this offering for sale to our employees, vendors, customers and other persons and entities with whom we maintain business relationships at the offering price. The number of shares of common stock available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares which are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered hereby.
The following table shows the per share and total public offering price, the underwriting discounts and commissions to be paid by us to the underwriters and the proceeds from the sale of shares to the underwriters before our expenses. This information is presented assuming either no exercise or full exercise by the underwriters of their over-allotment option.
WITHOUT WITH
PER SHARE OPTION OPTION
----------- ----------- -----------
Public offering price.................................
Underwriting discounts and commissions................
Proceeds, before expenses, to Cascade Microtech.......
|
We have agreed to indemnify the underwriters against some liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect thereof.
Cascade Microtech and all of our directors, officers and other shareholders owning approximately % of our outstanding capital stock as of , 2000 have agreed that for a period of at least 180 days following the date of this prospectus, without the prior written consent of SG Cowen Securities Corporation, they will not directly or indirectly, offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, including, without limitation, common stock which may be deemed to be beneficially owned in accordance with rules and regulations promulgated under the Securities Act.
The representatives may engage in over-allotment transactions, open market purchases, stabilizing transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934, as amended. In connection with this offering, the underwriters may make short sales by selling more shares than they are obligated to purchase under the underwriting agreement. Covered short sales are sales made in an amount not greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters may close out a covered short sale by exercising their over-allotment option or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the price of shares in the open market compared to the price at which they may purchase shares under the over-allotment option. Naked short sales are sales made in an amount in excess of the number of shares available under the over-allotment option. The underwriters must close out any naked short sale by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by such syndicate member is purchased in a syndicate covering transaction to cover syndicate short positions. Any of these activities may cause the price of our common stock to be higher than it would otherwise be in the absence of these transactions. These transactions may be effected on the Nasdaq National Market or otherwise, and, if commenced, may be discontinued at any time.
The underwriters have advised us that they do not intend to confirm sales in excess of 5% of the common stock offered to any account over which they exercise discretionary authority.
Prior to this offering, there has been no public market for our common stock. Consequently, the initial public offering price has been determined by negotiations between the underwriters and us. Among the factors considered in these negotiations were prevailing market conditions, the market capitalizations and the stages of development of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, our results of operations in recent periods, the present state of our development and other factors deemed relevant.
We estimate that our out of pocket expenses for this offering will be approximately $ .
LEGAL MATTERS
The validity of the shares of common stock offered hereby and certain other legal matters relating to the offering are being passed upon for us by Ater Wynne LLP, Portland, Oregon. Certain legal matters relating to the offering are being passed upon for the underwriters by Latham & Watkins, Los Angeles, California.
EXPERTS
The consolidated financial statements and schedule of Cascade Microtech, Inc. as of December 31, 1998 and 1999 and each of the years in the three-year period ended December 31, 1999, have been included in this prospectus and in the registration statement in reliance upon the report of KPMG LLP, independent auditors, appearing elsewhere in this prospectus and registration statement and upon the authority of KPMG LLP as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration statement on Form S-1, including exhibits and schedules, under the Securities Act of 1933, as amended, with respect to the shares of our common stock to be sold in this offering. This prospectus, which forms a part of the registration statement, does not contain all the information included in the registration statement. Certain information is omitted and you should refer to the registration statement and its exhibits. With respect to references made in this prospectus to any of our contracts or other documents, such references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document. You may review a copy of the registration statement, including exhibits and schedules filed therewith, as well as the reports, proxy statements and other information that we have filed at the Securities and Exchange Commission's public reference facilities in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Securities and Exchange Commission located at 7 World Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may also obtain copies of such materials from the Public Reference Section of the Securities and Exchange Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Securities and Exchange Commission maintains a Web site at HTTP://WWW.SEC.GOV.
CASCADE MICROTECH, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
--------
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Redeemable Convertible Preferred
Stock and Shareholders' Equity............................ F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
|
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cascade Microtech, Inc.:
We have audited the accompanying consolidated balance sheets of Cascade Microtech, Inc. and subsidiaries as of December 31, 1998 and 1999, and the related consolidated statements of operations, redeemable convertible preferred stock and shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cascade Microtech, Inc. and subsidiaries as of December 31, 1998 and 1999, and the results of their operations, and their cash flows for each of the years in the three-year period ended December 31, 1999 in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Portland, Oregon
February 25, 2000
|
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, JUNE 30,
------------------- -------------------------
1998 1999 2000 2000
-------- -------- ----------- -----------
(UNAUDITED) (PRO FORMA)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 368 $13,511 $ 4,864 $ 4,864
Short-term investments.................................... -- -- 6,420 6,420
Accounts receivable, less allowance for doubtful accounts
of $50 and $66 at December 31, 1998 and 1999,
respectively, and $69 at June 30, 2000.................. 8,709 12,602 13,511 13,511
Inventories............................................... 5,716 6,254 7,386 7,386
Prepaid expenses and other................................ 918 98 303 303
Deferred income taxes..................................... 848 1,186 1,200 1,200
------- ------- ------- -------
Total current assets................................ 16,559 33,651 33,684 33,684
Long-term investments....................................... -- -- 1,547 1,547
Fixed assets, net........................................... 2,578 3,048 4,685 4,685
Other assets, net........................................... 1,412 1,415 1,388 1,388
------- ------- ------- -------
Total assets........................................ $20,549 $38,114 $41,304 $41,304
======= ======= ======= =======
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Current liabilities:
Lines of credit........................................... $ 2,640 $ 198 $ -- $ --
Current portion of long-term debt and obligations under
capital leases.......................................... 652 653 619 619
Accounts payable.......................................... 2,530 2,839 4,910 4,910
Accrued liabilities....................................... 2,383 3,949 4,563 4,563
------- ------- ------- -------
Total current liabilities........................... 8,205 7,639 10,092 10,092
Long-term debt and obligations under capital leases, less
current portion........................................... 1,513 859 506 506
Deferred income taxes....................................... 16 96 96 96
Other long-term liabilities................................. 275 647 752 752
------- ------- ------- -------
Total liabilities................................... 10,009 9,241 11,446 11,446
------- ------- ------- -------
Redeemable convertible preferred stock:
Series C, $0.01 par value; 1,500 shares authorized; -0-,
1,250 and 1,250 shares issued and outstanding at
December 31, 1998 and 1999 and June 30, 2000,
respectively; liquidation preference of $10,000......... -- 9,908 10,356 --
Commitments and contingencies (note 12)
Shareholders' equity:
Convertible preferred stock:
Series A, $0.01 par value; 1,337 shares authorized,
issued and outstanding at December 31, 1998 and 1999
and June 30, 2000; liquidation preference of $3,356... 3,332 3,332 3,332 --
Series B, $0.01 par value; 1,009 shares authorized; -0-,
1,009 and 1,009 shares issued and outstanding at
December 31, 1998 and 1999 and June 30, 2000,
respectively; liquidation preference of $6,055........ -- 5,894 5,894 --
Common stock, $0.01 par value; 12,000 shares authorized;
4,955, 5,004 and 4,969 shares issued and outstanding at
December 31, 1998 and 1999 and June 30, 2000,
respectively............................................ 1,350 1,446 813 19,908
Deferred stock-based compensation......................... -- -- (143) (143)
Notes receivable for common stock......................... (196) (196) (264) (264)
Accumulated other comprehensive loss -- unrealized holding
loss on investments..................................... -- -- (4) (4)
Retained earnings......................................... 6,054 8,489 9,874 10,361
------- ------- ------- -------
Total shareholders' equity.......................... 10,540 18,965 19,502 29,858
------- ------- ------- -------
Total liabilities, redeemable convertible preferred
stock and shareholders' equity.................... $20,549 $38,114 $41,304 $41,304
======= ======= ======= =======
|
See accompanying notes to consolidated financial statements.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
Net sales...................................... $40,322 $41,597 $51,530 $20,762 $31,860
Cost of sales.................................. 21,681 24,541 27,444 11,767 16,735
------- ------- ------- ------- -------
Gross profit............................... 18,641 17,056 24,086 8,995 15,125
------- ------- ------- ------- -------
Operating expenses:
Research and development..................... 5,911 6,194 5,887 2,430 3,725
Selling, general and administrative.......... 11,697 12,438 14,236 6,108 8,690
------- ------- ------- ------- -------
Total operating expenses................... 17,608 18,632 20,123 8,538 12,415
------- ------- ------- ------- -------
Income (loss) from operations.............. 1,033 (1,576) 3,963 457 2,710
------- ------- ------- ------- -------
Other income (expense):
Interest income.............................. 82 19 150 21 381
Interest expense............................. (246) (349) (198) (124) (52)
Other, net................................... 325 199 (218) 30 (76)
------- ------- ------- ------- -------
Total other income (expense), net.......... 161 (131) (266) (73) 253
------- ------- ------- ------- -------
Income (loss) before provision (benefit)
for income taxes......................... 1,194 (1,707) 3,697 384 2,963
Provision (benefit) for income taxes........... 523 (730) 1,223 155 1,130
------- ------- ------- ------- -------
Net income (loss).......................... 671 (977) 2,474 229 1,833
Accretion of preferred stock redemption........ -- -- 39 -- 448
------- ------- ------- ------- -------
Net income (loss) attributed to common
shareholders............................. $ 671 $ (977) $ 2,435 $ 229 $ 1,385
======= ======= ======= ======= =======
Net income (loss) per share:
Basic........................................ $ 0.15 $ (0.21) $ 0.49 $ 0.05 $ 0.28
Diluted...................................... 0.10 (0.21) 0.32 0.03 0.15
Shares used in computing net income (loss) per
share:
Basic........................................ 4,568 4,711 4,988 4,974 5,023
Diluted...................................... 6,590 4,711 7,577 7,159 9,472
Unaudited pro forma net income per share:
Basic........................................ $ 0.35 $ 0.16
Diluted...................................... 0.32 0.15
Unaudited shares used in computing pro forma
net income per share:
Basic........................................ 6,992 8,619
Diluted...................................... 7,577 9,472
|
See accompanying notes to consolidated financial statements.
CASCADE MICROTECH,INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY
(IN THOUSANDS)
REDEEMABLE
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK DEFERRED
------------------- ------------------- ------------------- STOCK-BASED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT COMPENSATION
-------- -------- -------- -------- -------- -------- -----------
Balances December 31, 1996.................... -- $ -- 1,337 $3,332 4,557 $ 372 $ --
Common stock issued........................... -- -- -- -- 168 253 --
Common stock repurchased...................... -- -- -- -- (122) (65) --
Tax benefit of stock option exercises......... -- -- -- -- -- 61 --
Net income.................................... -- -- -- -- -- -- --
----- ------- ----- ------ ----- ------- -----
Balance, December 31, 1997.................... -- -- 1,337 3,332 4,603 621 --
Common stock issued........................... -- -- -- -- 355 726 --
Common stock repurchased...................... -- -- -- -- (3) (3) --
Tax benefit of stock option exercises......... -- -- -- -- -- 6 --
Net loss...................................... -- -- -- -- -- -- --
----- ------- ----- ------ ----- ------- -----
Balance, December 31, 1998.................... -- -- 1,337 3,332 4,955 1,350 --
Series B preferred stock issued............... -- -- 1,009 5,894 -- -- --
Series C preferred stock issued............... 1,250 9,869 -- -- -- -- --
Common stock issued........................... -- -- -- -- 55 121 --
Common stock repurchased...................... -- -- -- -- (6) (25) --
Accretion of preferred stock redemption
preference.................................. -- 39 -- -- -- -- --
Net income.................................... -- -- -- -- -- -- --
----- ------- ----- ------ ----- ------- -----
Balance, December 31, 1999.................... 1,250 9,908 2,346 9,226 5,004 1,446 --
Common stock issued (unaudited)............... -- -- -- -- 112 253 --
Common stock repurchased (unaudited).......... -- -- -- -- (147) (1,029) --
Deferred compensation related to stock options
(unaudited)................................. -- -- -- -- -- 143 (143)
Accretion of preferred stock redemption
preference (unaudited)...................... -- 448 -- -- -- -- --
Unrealized holding loss on investments
(unaudited)................................. -- -- -- -- -- -- --
Net income (unaudited)........................ -- -- -- -- -- -- --
----- ------- ----- ------ ----- ------- -----
Balance, June 30, 2000 (unaudited)............ 1,250 $10,356 2,346 $9,226 4,969 $ 813 $(143)
===== ======= ===== ====== ===== ======= =====
NOTES
RECEIVABLE ACCUMULATED
FOR OTHER TOTAL
COMMON COMPREHENSIVE RETAINED SHAREHOLDERS'
STOCK LOSS EARNINGS EQUITY
-------- ------------ -------- -----------
Balances December 31, 1996.................... $ -- $-- $6,681 $10,385
Common stock issued........................... (30) -- -- 223
Common stock repurchased...................... -- -- (313) (378)
Tax benefit of stock option exercises......... -- -- -- 61
Net income.................................... -- -- 671 671
----- --- ------ -------
Balance, December 31, 1997.................... (30) -- 7,039 10,962
Common stock issued........................... (166) -- -- 560
Common stock repurchased...................... -- -- (8) (11)
Tax benefit of stock option exercises......... -- -- -- 6
Net loss...................................... -- -- (977) (977)
----- --- ------ -------
Balance, December 31, 1998.................... (196) -- 6,054 10,540
Series B preferred stock issued............... -- -- -- 5,894
Series C preferred stock issued............... -- -- -- --
Common stock issued........................... -- -- -- 121
Common stock repurchased...................... -- -- -- (25)
Accretion of preferred stock redemption
preference.................................. -- -- (39) (39)
Net income.................................... -- -- 2,474 2,474
----- --- ------ -------
Balance, December 31, 1999.................... (196) -- 8,489 18,965
Common stock issued (unaudited)............... (68) -- -- 185
Common stock repurchased (unaudited).......... -- -- -- (1,029)
Deferred compensation related to stock options
(unaudited)................................. -- -- -- --
Accretion of preferred stock redemption
preference (unaudited)...................... -- -- (448) (448)
Unrealized holding loss on investments
(unaudited)................................. -- (4) -- (4)
Net income (unaudited)........................ -- -- 1,833 1,833
----- --- ------ -------
Balance, June 30, 2000 (unaudited)............ $(264) $(4) $9,874 $19,502
===== === ====== =======
|
See accompanying notes to consolidated financial statements.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
Cash flows from operating activities:
Net income (loss)......................................... $ 671 $ (977) $ 2,474 $ 229 $ 1,833
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization......................... 907 944 1,283 606 661
(Gain) loss on disposal of fixed assets............... (172) (66) (3) (67) 1
Deferred income taxes................................. (290) (31) (258) (3) (14)
Tax benefit of stock option exercises................. 61 6 -- -- --
Increase (decrease) in cash resulting from changes in:
Accounts receivable................................. (2,798) 891 (3,893) 164 (836)
Inventories......................................... (2,202) 929 (538) (1,501) (1,132)
Prepaid expenses and other.......................... 54 (556) 705 515 (225)
Accounts payable.................................... 774 108 309 895 2,071
Accrued liabilities................................. 771 (677) 1,938 839 719
------- ------- ------- ------- --------
Net cash (used in) provided by operating
activities....................................... (2,224) 571 2,017 1,677 3,078
------- ------- ------- ------- --------
Cash flows from investing activities:
Purchase of investments................................... -- -- -- -- (9,044)
Proceeds from maturity of investments..................... -- -- -- -- 1,000
Purchases of fixed assets................................. (804) (1,461) (1,356) (337) (2,016)
Proceeds from disposal of fixed assets.................... 175 81 73 68 --
Investment in patents..................................... (224) (554) (355) (144) (115)
------- ------- ------- ------- --------
Net cash used in investing activities............. (853) (1,934) (1,638) (413) (10,175)
------- ------- ------- ------- --------
Cash flows from financing activities:
Net increase (decrease) in lines of credit................ 1,602 775 (2,442) (2,417) (198)
Principal payments on capital lease obligations........... (15) (21) (41) (20) (40)
Proceeds from issuance of long-term debt.................. -- 2,316 -- -- --
Principal payments on long-term debt...................... (731) (2,490) (612) (303) (468)
Proceeds from issuance of preferred stock................. -- -- 15,763 2,869 --
Proceeds from issuance of common stock.................... 223 560 121 91 185
Payments to repurchase common stock....................... (378) (11) (25) (25) (1,029)
------- ------- ------- ------- --------
Net cash provided by (used in) financing
activities....................................... 701 1,129 12,764 195 (1,550)
------- ------- ------- ------- --------
Net (decrease) increase in cash and cash
equivalents...................................... (2,376) (234) 13,143 1,459 (8,647)
Cash and cash equivalents at beginning of period............ 2,978 602 368 368 13,511
------- ------- ------- ------- --------
Cash and cash equivalents at end of period.................. $ 602 $ 368 $13,511 $ 1,827 $ 4,864
======= ======= ======= ======= ========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest................................................ $ 237 $ 362 $ 200 $ 125 $ 53
Income taxes............................................ 604 552 1,156 123 1,388
Noncash investing and financing activities:
Equipment acquired under capital leases................... $ -- $ 72 $ -- $ -- $ 121
Notes receivable for sale of common stock................. 30 166 -- -- 68
|
See accompanying notes to consolidated financial statements.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF BUSINESS
Cascade Microtech, Inc. (Cascade) is involved in the development, manufacturing and selling of wafer probing solutions used to measure and test complex semiconductors in wafer form in both design and production environments. Cascade's products are used to develop and test advanced integrated circuits and optoelectronic devices, or chips. Cascade designs, manufactures and assembles their products in Beaverton, Oregon, with global sales, service and support centers in North America, Europe and Japan.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Cascade Microtech, Inc. and its wholly-owned subsidiaries, Cascade Microtech Foreign Sales Inc., Cascade Microtech Japan, K.K. and Cascade Microtech Europe, Ltd. All significant intercompany accounts and transactions have been eliminated.
The functional currency of Cascade's foreign subsidiaries is the U.S. dollar. Nonmonetary balance sheet items are remeasured at historical rates and monetary balance sheet items are remeasured at current rates. Exchange gains and losses from remeasurement of monetary assets and liabilities are recognized currently in the consolidated statements of operations.
(C) REVENUE RECOGNITION
Revenue from product sales to customers that do not have acceptance criteria, including product sales to distributors, is recognized when a written purchase order has been obtained, the product is shipped, title has transferred and no obligations remain. Revenue from customers who have acceptance criteria is not recognized until all acceptance criteria are satisfied. Revenue for installation services is recognized when the services are performed.
Cascade provides for estimated costs to repair or replace products under one-year warranties and technical support costs when the related product revenue is recognized. The products are sold without a right of return.
(D) CASH EQUIVALENTS
Cash equivalents consist of money market funds, which are stated at cost, which approximates market value. For purposes of the statement of cash flows, Cascade considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
(E) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is computed on a currently adjusted standard basis (which approximates actual costs computed on a first-in, first-out basis).
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (F) INVESTMENTS IN MARKETABLE SECURITIES
Investments in marketable securities are classified as available-for-sale and recorded at current market value. Unrealized holding gains and losses are excluded from earnings and are reported as a separate component of shareholders' equity until realized. Dividend and interest income is recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities sold.
Short-term investments consist of highly liquid securities with remaining maturities of between three and twelve months. Long-term investments consist of highly rated securities with remaining maturities of greater than one year and less than two years.
(G) FIXED ASSETS
Equipment and leasehold improvements are stated at cost. Equipment under capital lease is recorded at the net present value of the future minimum lease payments at the inception of the lease. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Amortization of equipment under capital leases and leasehold improvements is provided using the straight-line method over the life of the lease or the asset, whichever is shorter.
(H) OTHER ASSETS
Other assets, which consists primarily of purchased technologies, other intangible assets and related rights, are stated at historical cost less accumulated amortization. The intangible assets are amortized using the straight-line method over estimated useful lives of five to seven years.
Accumulated amortization associated with intangible assets was $826 and $1,268 at December 31, 1998 and 1999. Amortization expense associated with purchased technology and intangible assets was $215, $225 and $467 in 1997, 1998 and 1999, respectively.
(I) ADVERTISING
Advertising costs are expensed as incurred and amounted to $178, $160 and $91 in 1997, 1998 and 1999, respectively.
(J) INCOME TAXES
Cascade accounts for income taxes under the asset and liability method. Under this method, deferred income taxes are established for the difference between the financial reporting and income tax basis of assets and liabilities as well as operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (K) FORWARD EXCHANGE CONTRACTS
Cascade generally enters into forward foreign currency exchange contracts, which typically settle within six months, to manage its exposure against foreign currency fluctuations on sales denominated in Japanese yen. Realized gains and losses on these contracts are recognized in the same period as the hedged transactions. Management believes that these contracts should not subject Cascade to undue risk from foreign exchange movements because gains and losses on these contracts should offset gains and losses on the transactions being hedged.
(L) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, accounts receivables, accounts payable, accrued liabilities and lines of credit approximate fair value due to the short maturities. The fair value of Cascade's long-term debt and capital lease obligations approximate carrying value as such instruments' stated interest rates do not differ significantly from current market rates.
The estimated fair value for foreign exchange contracts is based on quoted market prices. At December 31, 1998, foreign currency contracts to pay $46 were outstanding with an estimated fair value of $-0-. At December 31, 1997 and 1999, foreign currency contracts to receive $3,461 and $1,738, respectively, were outstanding with an estimated fair value of $3,271 and $1,849, respectively.
(M) 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, as well as revenues and expenses reported for the periods presented. Cascade regularly assesses these estimates and, while actual results may differ, management believes that the estimates are reasonable.
(N) NET INCOME (LOSS) PER SHARE
Cascade computes net income (loss) per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE, and SEC Staff
Accounting Bulletin (SAB) No. 98. Under the provisions of SFAS No. 128 and SAB
No. 98, basic net income (loss) per share is computed by dividing the net income
(loss) available to common shareholders for the period by the weighted average
number of shares of common stock outstanding during the period. Diluted net
income (loss) per share incorporates the incremental shares issuable upon the
assumed exercise of stock options and warrants and assumed conversions of
preferred stock, if dilutive.
Pro forma net income per share is computed using the weighted average number of common shares outstanding, including the pro forma effects of automatic conversion of all outstanding convertible preferred stock into shares of common stock effective upon the closing of Cascade's initial public offering as if such conversion occurred at the date of original issuance.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Pursuant to SAB No. 98, common shares issued for nominal consideration in each of the periods presented, if any, would be included in the per share calculations as if they were outstanding for all periods presented. No such shares have been issued.
The following table reconciles the shares used in calculating basic earnings per share to the shares used in calculating diluted earnings per share:
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------------- ------------------------------------
1997 1998 1999 1999 1999 2000 2000
-------- -------- -------- ----------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(PRO FORMA) (PRO FORMA)
Shares used to calculate basic earnings per
share.................................... 4,568 4,711 4,988 6,992 4,974 5,023 8,619
Dilutive effect of:
Outstanding stock options................ 685 -- 585 585 589 844 844
Outstanding warrants..................... -- -- -- -- -- 9 9
Convertible preferred stock.............. 1,337 -- 2,004 -- 1,596 3,596 --
----- ----- ----- ----- ----- ----- -----
Shares used to calculate diluted earnings
per share................................ 6,590 4,711 7,577 7,577 7,159 9,472 9,472
===== ===== ===== ===== ===== ===== =====
|
In 1998, common stock equivalents related to stock options and convertible preferred stock are excluded from the computation of diluted earnings per share due to their antidilutive effect as a result of Cascade's net loss. In 1999, warrants to purchase 250 shares of Series C redeemable preferred stock are also excluded from the computation of diluted earnings per share because the effect would be anti-dilutive.
(O) STOCK OPTION PLAN
Cascade applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations, in accounting for its fixed plan stock options. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, Cascade has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 123.
Cascade accounts for stock and stock options issued to non-employees in accordance with the provisions of Emerging Issues Task Force (EITF) consensus on Issue No. 96-18, ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING, GOODS OR SERVICES.
(P) RESEARCH AND DEVELOPMENT
Research and development expenses are charged to expense as incurred.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (Q) COMPREHENSIVE INCOME
Cascade has adopted the provisions of SFAS No. 130, REPORTING COMPREHENSIVE INCOME. Comprehensive income is defined as changes in shareholders' equity exclusive of transactions with owners, such as capital contributions and dividends. Unrealized holding gains and losses on Cascade's available-for-sale investments are included as a separate component of shareholders' equity until realized. The differences between net income and comprehensive income for the periods presented are not material.
(R) CERTAIN RISKS AND UNCERTAINTIES
Cascade's future operating results and financial condition are subject to influences driven by rapid technological changes, a highly competitive industry, a lengthy sales cycle, and the cyclical nature of general economic conditions. Future operating results will depend on many factors, including demand for Cascade's products, the introduction and industry acceptance of new products by Cascade and the level and timing of available shippable orders and backlog.
In addition, Cascade relies on several suppliers to provide certain key components used in Cascade's products. Some of these items are available from only one supplier or a limited group of suppliers. Any disruption in the availability and delivery of these items could materially adversely affect Cascade's business, financial condition and results of operations.
(S) PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)
Upon consummation of Cascade's initial public offering, all of the redeemable convertible preferred stock and the convertible preferred stock outstanding as of the closing date will automatically convert into an aggregate of 3,596 shares of common stock based on the outstanding shares of redeemable convertible preferred stock and convertible preferred stock as of December 31, 1999 and June 30, 2000. Unaudited pro forma shareholders' equity as of December 31, 1999 and June 30, 2000 reflects the impact of the conversion of the convertible preferred stock and is disclosed on the balance sheet.
(T) UNAUDITED QUARTERLY INFORMATION
The financial information included herein as of June 30, 2000 and for the six-month periods ended June 30, 1999 and 2000 is unaudited. Such information, however, reflects all adjustments consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The results of operations for the six-month period ended June 30, 2000 are not necessarily indicative of the results to be expected for the full year.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(2) INVENTORIES
Inventories consist of the following:
DECEMBER 31,
-------------------
1998 1999
-------- --------
Raw materials............................................... $2,312 $2,365
Work in process............................................. 275 745
Finished goods.............................................. 3,129 3,144
------ ------
$5,716 $6,254
====== ======
|
(3) FIXED ASSETS
Fixed assets consist of the following:
DECEMBER 31,
-------------------
1998 1999
-------- --------
Equipment................................................. $ 5,944 $ 5,518
Leasehold improvements.................................... 1,570 1,481
------- -------
7,514 6,999
Accumulated depreciation and amortization................. (4,936) (3,951)
------- -------
$ 2,578 $ 3,048
======= =======
|
Depreciation expense was $692, $719 and $816 in 1997, 1998 and 1999, respectively.
Included in fixed assets at December 31, 1998 and 1999 is $163 of equipment under capital lease. Amortization expense related to these assets for the years ended December 31, 1997, 1998 and 1999 was $18, $20 and $28, respectively.
(4) LINES OF CREDIT
During 1999, Cascade replaced its $7,500 operating line of credit maturing February 2000 with a new $6,500 operating line of credit maturing February 18, 2000. The line of credit represents the maximum available and is subject to a borrowing base calculation. The line bears interest at the bank's prime rate plus 1/4% and is secured by an interest in all accounts receivable, inventories, chattel paper, equipment, certain intangibles, goods, and products and proceeds of all the foregoing. Line of credit borrowings totaled $1,844 and $-0- at December 31, 1998 and 1999, respectively. The revolving line of credit contains covenants for quick ratio, tangible worth and ratio of total liabilities to tangible net worth. Cascade was in compliance with all covenant requirements at December 31, 1999. Cascade did not renew the line of credit beyond February 18, 2000.
Cascade Microtech Japan has a bank line of credit which allows for borrowings up to $1,468 (at the December 31, 1999 exchange rate). The line bears interest at the Japanese current short-term borrowing rate of 1.8% and is guaranteed by Cascade Microtech, Inc. The agreement is subject to review every six months. Borrowings totaled $796 and $198 at December 31, 1998 and 1999, respectively.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(5) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
DECEMBER 31,
-------------------
1998 1999
-------- --------
Accrued compensation and benefit costs...................... $ 885 $1,718
Anticipated warranty costs.................................. 447 544
Accrued sales representative commissions.................... 421 479
Income taxes payable........................................ 39 450
Other accrued liabilities................................... 591 758
------ ------
$2,383 $3,949
====== ======
|
(6) LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES
Long-term debt and obligations under capital leases consist of the following:
DECEMBER 31,
-------------------
1998 1999
-------- --------
7.71% term loan payable to financial institution, due in
monthly installments of $52 including interest through
February 2002, secured by accounts receivable,
inventories, equipment and certain intangibles............ $1,758 $1,249
9.00% note payable, due in quarterly installments of $24,
including interest through July 2000...................... 136 49
10.00% note payable, due in monthly installments of $2
including interest through July 2008...................... 166 149
11.67% obligation under capital lease, net of interest, due
in monthly installments of $2 including interest through
October 2001.............................................. 68 47
11.30% obligation under capital lease, net of interest, due
in monthly installments of $2 including interest through
May 2000.................................................. 37 18
------ ------
2,165 1,512
Current portion of long-term debt and obligations under
capital leases............................................ 652 653
------ ------
$1,513 $ 859
====== ======
|
The term loan payable to financial institution contains certain covenants, including a covenant for debt service coverage ratio. Cascade was in compliance with all covenant requirements at December 31, 1999.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(6) LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES (CONTINUED) The aggregate maturities of long-term debt and capital leases are as follows:
Year ending December 31:
2000...................................................... $ 653
2001...................................................... 630
2002...................................................... 118
2003...................................................... 16
2004...................................................... 17
Thereafter................................................ 78
------
$1,512
======
|
(7) PROVISION FOR INCOME TAXES
The provision (benefit) for income taxes consists of the following:
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
Current:
Federal.......................................... $ 430 $ (859) $1,175
State............................................ 64 3 105
Foreign.......................................... 319 157 201
------ ------- ------
Total current.................................. 813 (699) 1,481
------ ------- ------
Deferred:
Federal.......................................... (212) (19) (178)
State............................................ (47) (9) (43)
Foreign.......................................... (31) (3) (37)
------ ------- ------
Total deferred................................. (290) (31) (258)
------ ------- ------
Provision (benefit) for income taxes........... $ 523 $ (730) $1,223
====== ======= ======
|
Domestic and foreign pre-tax income (loss) is as follows:
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
Domestic........................................... $ 599 $(2,116) $3,208
Foreign............................................ 595 409 489
------ ------- ------
$1,194 $(1,707) $3,697
====== ======= ======
|
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The provision (benefit) for income taxes vary from the amounts computed by applying the Federal statutory rate to income (loss) before income taxes as follows:
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
-------- -------- --------
Federal income tax (benefit) computed at statutory 34.0% (34.0)% 34.0%
rates................................................
Foreign sales corporation tax benefit.................. (4.1) -- (1.5)
Difference in foreign tax rate......................... 6.0 1.1 0.6
State income taxes, net of federal benefit............. 2.7 (5.1) 4.0
Tax credits............................................ (5.6) (2.7) (1.4)
Changes in valuation allowance......................... -- 6.4 (3.0)
Other.................................................. 10.8 (8.5) 0.4
---- ----- ----
Effective tax rate..................................... 43.8% (42.8)% 33.1%
==== ===== ====
|
Significant components of deferred income tax assets and liabilities are as follows:
DECEMBER 31,
-------------------
1998 1999
-------- --------
Deferred tax assets:
Reserves and allowances................................... $ 531 $ 742
Accrued vacation.......................................... 88 141
Depreciation of fixed assets.............................. 59 --
Retirement benefit........................................ 114 163
Deferred intercompany profit.............................. 230 315
State net operating loss carryforward..................... 105 --
Other deferred tax assets................................. 207 205
------ ------
Gross deferred tax assets............................. 1,334 1,566
Valuation allowance....................................... (110) --
------ ------
Total deferred tax assets............................. 1,224 1,566
------ ------
Deferred tax liabilities:
Amortization of patents................................... 377 414
Depreciation of fixed assets.............................. -- 62
Other deferred tax liabilities............................ 15 --
------ ------
Total deferred tax liabilities........................ 392 476
------ ------
Net deferred tax assets............................... $ 832 $1,090
====== ======
|
Cascade did not record a valuation allowance at December 31, 1999 as management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets. The $110 reduction of the valuation allowance established in 1998 is primarily due to utilization of the previously reserved net operating loss carryforward.
At December 31, 1999, Cascade has no operating loss carryforward to offset future taxable income. In 1999, Cascade received income tax refunds from net operating loss carrybacks aggregating $866.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(8) REDEEMABLE CONVERTIBLE PREFERRED STOCK
In 1999, Cascade designated 1,500 shares of authorized preferred stock as Series C redeemable convertible preferred stock (Series C), of which 1,250 shares are issued and outstanding at December 31, 1999. At any time after December 2004, holders of 50% or more of the Series C then outstanding are entitled to sell, and Cascade is obligated to purchase all of the Series C at a purchase price equal to the original cost plus 9% interest compounded annually. Cascade may pay all or any portion of the purchase price in one or more unsecured notes payable in three equal installments of principal and interest at an annual rate of 6%. The put right terminates upon the occurrence of any of the same conditions as would effect an automatic conversion, as discussed herein. See note 9 for a description of additional features of the Series C.
PREFERRED STOCK WARRANTS
In December 1999, in connection with the Series C financing, Cascade issued warrants for the purchase of 250 shares of the Series C. The Series C warrants are exercisable at any time before December 31, 2002. The exercise price prior to December 31, 2000 is $10 per share. After that period, the exercise price is based on defined criteria in the agreement. The fair value of the warrant was determined using the Black-Scholes valuation model with the following assumptions: no dividend yield; risk-free interest rate of 6.19%; expected volatility of 81%; and contractual life of three years. The allocated value was $924 at December 31, 1999.
(9) SHAREHOLDERS' EQUITY
(A) CONVERTIBLE PREFERRED STOCK
Cascade has designated 1,337 shares of preferred stock as Series A convertible preferred stock (Series A) and 1,009 shares of preferred stock as Series B convertible preferred stock (Series B). Cascade has also designated and issued shares of Series C. Significant terms of the Series A, Series B and Series C are summarized below:
DIVIDENDS
Series A, Series B and Series C shareholders are entitled to receive annual dividends at the rate of $0.251, $0.60 and $0.80 per share, respectively. Such dividends are payable when and if declared by the Board of Directors and are noncumulative.
LIQUIDATION PREFERENCES
Upon liquidation, dissolution or winding up of Cascade, Series A, Series B and Series C shareholders are entitled to receive, prior and in preference to any distribution to common shareholders, $2.51, $6.00 and $8.00 per share, respectively, plus all accrued or declared but unpaid dividends. The common shareholders are entitled to receive, prior and in preference to any further distribution to Series A, Series B and Series C shareholders, $1.70 per share, plus all accrued or declared but unpaid dividends. After such payment, any remaining assets will be distributed among common shareholders and preferred shareholders in proportion to the common stock held and the
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(9) SHAREHOLDERS' EQUITY (CONTINUED) shares of common stock into which the shares of Series A, Series B and Series C could be converted.
VOTING
Each Series A, Series B and Series C shareholder is entitled to the number of votes equal to the number of shares of common stock into which such shares of Series A, Series B and Series C could be converted.
CONVERSION
At any time, Series A, Series B and Series C shareholders are entitled to convert their shares into common stock as is determined by dividing $2.51, $6.00 and $8.00, respectively, by the conversion price applicable to each share in effect on the date the certificate is surrendered for conversion. Each share of Series A, Series B and Series C preferred stock will automatically be converted into shares of common stock at the then effective conversion price upon the earlier of (i) the date specified by vote or written consent or agreement of holders of at least a majority of the shares of Series A, Series B and Series C then outstanding, in furtherance of (a) the sale of Cascade's common stock in a firm commitment, underwritten public offering registered under the Securities Act of 1933, as amended (Securities Act), (b) the acquisition of Cascade by means of merger or other form of corporate reorganization in which more than 50% of the outstanding shares of Cascade are exchanged, or (c) the sale of all or substantially all of the assets of Cascade; or (ii) the date on which a majority of the shares of Series A and Series B and all of the Series C originally issued has been converted into shares of Cascade's common stock or redeemed; or (iii) immediately upon the closing of the sale of Cascade's common stock in a firm commitment, underwritten public offering registered under the Securities Act at a public offering price equal to or exceeding 125% of the conversion price of the Series C and the aggregate proceeds to Cascade and any selling shareholders exceeds $20,000.
Cascade has reserved 1,337 shares of common stock for conversion of the Series A, 1009 shares for conversion of the Series B, 1,250 shares for conversion of the Series C, and 250 shares for exercise and conversion of Series C warrants.
(B) INVESTORS' RIGHTS AGREEMENT
Cascade and its principal shareholders have entered into an Investors' Rights Agreement that provides a repurchase option, right of first refusal and other rights.
REPURCHASE OPTION
Cascade or its designee has the option to repurchase all shares held by any significant shareholder that such shareholder proposes to sell, assign, pledge, encumber, transfer or otherwise dispose of for value to a competitor. Such repurchase will be at the same terms and conditions specified in a bona fide third party offer for any or all of such securities. The repurchase option lapses upon an initial public offering.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(9) SHAREHOLDERS' EQUITY (CONTINUED) RIGHT OF FIRST REFUSAL
Each significant common and preferred shareholder has the right of first refusal to purchase its pro rata share of any new issuance of equity securities. This right lapses upon an initial public offering.
(C) STOCK PUT AGREEMENT
Cascade has a stock put agreement with one of Cascade's original founders.
As part of the agreement, at the founder's annual option on or before July 1,
Cascade must purchase shares valued at up to $150 based on Cascade's last annual
valuation. Additional shares may be purchased at Cascade's discretion if so
agreed to by the founder. During 1998 and 1999, Cascade did not repurchase any
shares. During 1997, the Cascade repurchased 48 shares at $3.10 per share. At
December 31, 1997, 1998 and 1999, 536 shares are subject to this put agreement.
The stock put agreement will terminate upon the earlier of (i) the effectiveness
of a registration statement relating to an offering of Cascade's common stock
under the Securities Act of 1933, as amended, which results in aggregate
proceeds of at least $7,500 at a price per share of at least $6.00, (ii) a
merger or consolidation to which Cascade is a party and pursuant to which
(a) Cascade's shareholders exchange such shares for cash and/or tradable
securities, (b) Cascade is not the surviving corporation, and (c) the other
party does not control or is not controlled by or under common control with
Cascade immediately prior to such merger or consolidation.
(D) COMMON STOCK WARRANT
In 1998 Cascade issued a warrant for the purchase of 15 shares of common stock. The warrant entitled the holder to additional shares upon the satisfaction of certain conditions, as defined in the agreement. During 1999, one such condition occurred, increasing the number of shares eligible for purchase under the warrant to 25. The warrant is exercisable at $3.80 per share and expires on December 31, 2003. The fair value of the initial 15 shares and the additional 10 shares under the warrant was determined using the Black-Scholes valuation model with the following assumptions: no dividend yield; risk-free interest rates of 4.45% and 6.19%, respectively; expected volatility of 81%; and contractual lives of 5 and 4.5 years, respectively. The fair value of these warrants is not material to the financial statements.
(E) NOTES RECEIVABLE FOR COMMON STOCK
Cascade has sold shares of common stock for notes receivable. The notes are due and payable at various dates and bear interest at various rates. The notes are full recourse notes and are secured by the shares of common stock issued thereunder.
(F) STOCK OPTIONS
The 1993 Stock Incentive Plan (the 1993 Plan) provides for the granting to employees of either incentive stock options or non-qualified stock options. Incentive stock options must be granted at an exercise price not less than 100% of the fair market value per share at the grant date. Non-qualified stock options granted or shares sold under the 1993 Plan cannot be granted or sold at a price less than
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(9) SHAREHOLDERS' EQUITY (CONTINUED) 85% of the fair market value per share at the date of grant or sale. The term of options granted under the 1993 Plan is generally ten years, and the right to exercise options granted generally vests 20% each year, with varying initial holding periods. Cascade has reserved 1,833 shares of common stock for issuance under the 1993 Plan at December 31, 1999.
The 1993 Plan shall continue in effect for ten years unless terminated sooner pursuant to the plan's provisions.
At December 31, 1997, 1998 and 1999, there were 236, 243 and 335 additional shares available for grant under the 1993 Plan, respectively. The per share weighted-average fair value of stock options granted during the years ended December 31, 1997, 1998 and 1999 was $0.91, $0.89 and $2.35, respectively, on the date of grant using the Minimum Value option-pricing model with the following weighted-average assumptions:
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
Expected dividend yield........................... -0-% -0-% -0-%
Risk-free interest rate........................... 5.77% 4.45% 6.19%
Expected life..................................... 6 years 6 years 6 years
|
Cascade accounts for stock options granted as prescribed under APB Opinion
25. Accordingly, no compensation cost has been recognized in the consolidated
statements of operations. Had compensation cost been determined based upon the
fair value of the stock options at grant date consistent with the method SFAS
No. 123, Cascade's net income (loss) would have been reduced to the pro forma
amounts indicated below:
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
Net income (loss) attributed to common shareholders:
As reported....................................... $ 671 $ (977) $2,435
Pro forma......................................... 582 (1,048) 2,333
Basic net income (loss) per share:
As reported....................................... $0.15 $ (0.21) $ 0.49
Pro forma......................................... 0.13 (0.22) 0.48
Diluted net income (loss) per share:
As reported....................................... $0.10 $ (0.21) $ 0.32
Pro forma......................................... 0.09 (0.22) 0.31
|
Pro forma net income (loss) reflects only options granted subsequent to
January 1, 1995. Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro forma net income
(loss) amounts presented above because compensation cost is reflected over the
options' vesting period of 5 years and compensation cost for options granted
prior to January 1, 1995 is not considered.
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(9) SHAREHOLDERS' EQUITY (CONTINUED) Stock option activity for each of the years in the three-year period ended December 31, 1999 and the six-month period ended June 30, 2000, is as follows:
NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
Options outstanding at December 31, 1996............ 1,465 $ 1.54
Granted............................................. 255 3.10
Exercised........................................... (120) (.86)
Forfeited........................................... (54) (1.73)
-----
Options outstanding at December 31, 1997............ 1,546 1.84
Granted............................................. 117 3.80
Exercised........................................... (188) (.91)
Forfeited........................................... (130) (2.23)
-----
Options outstanding at December 31, 1998............ 1,345 2.11
Granted............................................. 250 3.81
Exercised........................................... (36) (1.35)
Forfeited........................................... (61) (2.84)
-----
Options outstanding at December 31, 1999............ 1,498 2.38
Granted (unaudited)................................. 178 5.16
Exercised (unaudited)............................... (112) (2.25)
Forfeited (unaudited)............................... (39) (3.29)
-----
Options outstanding at June 30, 2000 (unaudited).... 1,525 $ 2.69
=====
|
The following information relates to options outstanding and exercisable under the 1993 plan at December 31, 1999:
OPTIONS OUTSTANDING
-----------------------------------------------
WEIGHTED-AVERAGE OPTIONS EXERCISABLE
RANGE OF REMAINING ------------------------------
EXERCISE NUMBER OF CONTRACTUAL LIFE WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE
PRICES OPTIONS (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
------------------ --------- ---------------- ---------------- ----------- ----------------
$ 0.80--1.00 497 2.98 $0.88 497 $0.88
1.80--2.50 215 5.50 2.05 172 2.04
3.10--3.10 433 7.27 3.10 230 3.10
3.80--5.00 353 9.47 3.81 26 3.80
----- ---
$ 0.80--5.00 1,498 6.11 $2.38 925 $1.73
===== ===
|
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(10) RELATED PARTY TRANSACTIONS
Cascade had sales of approximately $752, $606 and $1,099 in 1997, 1998 and 1999, respectively, to Hewlett-Packard Company, a holder of the Cascade's Series A and Series B convertible preferred stock. At December 31, 1998 and 1999, $78 and $387, respectively, was receivable from Hewlett-Packard. Cascade also purchased goods and services from Hewlett-Packard of approximately $223, $220 and $400 in 1997, 1998 and 1999, respectively. During 1999, Hewlett-Packard created a separate company; Agilent Technologies, Inc., which is comprised of Hewlett-Packard's test and measurement, semiconductor products and certain other businesses. Cascade will continue to conduct business with both companies.
Consolidated sales for 1999 include $2,000 of license revenue pursuant to a license agreement between Cascade and Electroglas, Inc., a holder of the Cascade's Series B convertible preferred stock. The July 1999 agreement provides the right to incorporate certain of Cascade's technologies into certain products manufactured by Electroglas. Cascade has no further obligations under the license agreement. Electroglas has also agreed to pay Cascade royalty fees based on the sale or lease of products manufactured with the purchased technology. No royalty fees were earned in 1999. Cascade also made purchases of approximately $11 in 1999 from Electroglas.
(11) EMPLOYEE BENEFIT PLAN
Cascade sponsors a 401(k) savings plan (the Plan) which allows eligible employees to contribute a certain percentage of their salary to the Plan. Cascade matches 40% of eligible employee's contributions, up to a maximum of 2% of the employees earnings. Cascade's matching contribution for the savings plan was $119, $141 and $95 for 1997, 1998 and 1999, respectively.
(12) COMMITMENTS AND CONTINGENCIES
(A) OPERATING LEASES AND SUBLEASES
Cascade leases office and manufacturing space under operating leases that expire at various dates through 2009. In addition to lease expense, Cascade pays real property taxes, insurance, and repair and maintenance expenses for its corporate office and manufacturing facility. Lease expense was $1,009, $1,610 and $2,765 for 1997, 1998 and 1999, respectively. Future minimum lease payments and sublease
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(12) COMMITMENTS AND CONTINGENCIES (CONTINUED) rentals under non-cancelable operating leases with initial or remaining terms in excess of one year as of December 31, 1999, are as follows:
LESS
SUBLEASE NET RENTAL
COMMITMENTS RENTALS COMMITMENTS
----------- -------- -----------
Year ending December 31:
2000...................................... $ 2,605 $334 $ 2,271
2001...................................... 3,149 374 2,775
2002...................................... 1,939 89 1,850
2003...................................... 1,876 -- 1,876
2004...................................... 1,960 -- 1,960
Thereafter................................ 7,996 -- 7,996
------- ---- -------
$19,525 $797 $18,728
======= ==== =======
|
(B) LEGAL PROCEEDINGS
Cascade is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on Cascade's financial position, results of operations or liquidity.
(13) SEGMENT INFORMATION
Cascade operates in one segment and is involved in the development, manufacturing and selling of wafer probing solutions.
(A) PRODUCT LINES
Cascade's consolidated net sales by product lines are as follows:
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
Probe stations................................... $31,405 $32,384 $39,843
Analytical probes................................ 7,136 7,329 8,442
Production probe cards........................... 1,781 1,884 3,245
------- ------- -------
$40,322 $41,597 $51,530
======= ======= =======
|
CASCADE MICROTECH, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(13) SEGMENT INFORMATION (CONTINUED) (B) GEOGRAPHIC INFORMATION
Cascade's geographic revenues and identifiable assets are summarized as follows:
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
Geographic revenues:
United States.................................. $18,049 $19,835 $25,465
Japan.......................................... 10,670 10,240 11,011
Other.......................................... 11,603 11,522 15,054
------- ------- -------
$40,322 $41,597 $51,530
======= ======= =======
|
DECEMBER 31,
-------------------
1998 1999
-------- --------
Identifiable assets:
United States........................................... $15,354 $31,725
Japan................................................... 3,317 4,385
United Kingdom.......................................... 836 1,049
------- -------
$19,507 $37,159
======= =======
|
(14) UNAUDITED RECENT DEVELOPMENTS
On September 27, 2000, Cascade signed a commitment letter for a $5,000 revolving line of credit with a bank. This line of credit will expire on September 30, 2001. All borrowings under this line will bear interest at the bank's prime rate. Alternatively, Cascade has the option to incur interest on borrowings under the line at LIBOR or quoted Bankers Acceptance rates plus a spread based on Cascade's ratio of debt to tangible net worth. The line of credit will be unsecured. The line of credit will require Cascade to maintain quarterly financial covenants, including a minimum tangible net worth, minimum quick ratio and maximum leverage ratio.
On September 27, 2000, Cascade received a committment letter from a bank for a foreign exchange facility that provides for issuance of forward and spot currency contracts up to $40,000. The facility will allow for a maximum forward settlement date of 13 months, with maturity not to exceed March 31, 2002. Rates and availability are subject to current market conditions.
Description of Back Inside Cover Art
The graphic is entitled: "Our products enable the precise electrical and lightwave measurements..." and "...required to develop next-generation semiconductors" that frames, by placement at the top and bottom of the page, photos of our S300 Series Probe Station--captioned "S300 Series Probe Station for testing 300mm wafers"--and our analytical probes--captioned "Analytical Probes on GaAs (gallium arsenide) wafer," above an array of photos of end-user products that incorporate or are enabled by the types of semiconductors that customers develop and test using our products. Beneath the photo of the analytical probes and above the end-user products photos is a photo of a semiconductor chip captioned "Integrated Circuit or Optoelectronic Device." Directly beneath the semiconductor chip photo are four photos of end-user products that incorporate the types of semiconductors that customers develop and test using our products: a photo of a laptop computer, a photo of a wireless-connected home refrigerator, a photo of telecommunications infrastructure equipment and a photo of a cell phone with a video display. At the lower right is the Cascade Microtech logo with the tagline: "Innovating Test Technologies for better measurements faster."
______________ SHARES
[LOGO]
Cascade Microtech, Inc.
COMMON STOCK
SG COWEN
CHASE H&Q
ADAMS, HARKNESS & HILL, INC.
FIRST SECURITY VAN KASPER
, 2000
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
The following table sets forth the costs and expenses expected to be incurred by the Registrant in connection with the offering described in this registration statement.
SEC Registration Fee........................................ $ 18,216
NASD Filing Fee............................................. 30,500
Nasdaq Listing Fee.......................................... 95,000
Printing Expenses........................................... 200,000
Accounting Fees and Expenses................................ 300,000
Legal Fees and Expenses..................................... 300,000
Transfer Agent and Registrar Fees........................... 15,000
Miscellaneous Expenses...................................... 15,000
----------
Total..................................................... $ 973,716
==========
|
* All amounts are estimates except the SEC registration fee, the NASD filing fee and the Nasdaq listing fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As an Oregon corporation, we are subject to the Oregon Business Corporation Act ("OBCA") and the exculpation from liability and indemnification provisions contained therein. Pursuant to Section 60.047(2)(d) of the OBCA, Article 4 of our Second Amended Restated Articles of Incorporation (the "Restated Articles") eliminates the liability of our directors to us or our shareholders, except for any liability related to breach of the duty of loyalty, actions not in good faith and certain other liabilities.
Section 60.387 et seq. of the OBCA allows corporations to indemnify their directors and officers against liability where the director or officer has acted in good faith and with a reasonable belief that actions taken were in the best interests of the corporation or at least not adverse to the corporation's best interests and, if in a criminal proceeding, the individual had no reasonable cause to believe the conduct in question was unlawful. Under the OBCA, corporations may not indemnify against liability in connection with a claim by or in the right of the corporation but may indemnify against the reasonable expenses associated with such claims. Corporations may not indemnify against breaches of the duty of loyalty. The OBCA provides for mandatory indemnification of directors against all reasonable expenses incurred in the successful defense of any claim made or threatened whether or not such claim was by or in the right of the corporation. Finally, a court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances whether or not the director or officer met the good faith and reasonable belief standards of conduct set out in the statute. Article IV of the Restated Articles requires us to indemnify our directors and officers to the fullest extent not prohibited by law.
The OBCA also provides that the statutory indemnification provisions are not deemed exclusive of any other rights to which directors or officers may be entitled under a corporation's articles of incorporation or bylaws, any agreement, general or specific action of the board of directors, vote of shareholders or otherwise.
We also have entered into indemnity agreements with each of our executive officers and each member of our board of directors. These indemnity agreements provide for indemnification of the indemnitee to the fullest extent allowed by law.
II-1
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years prior to the effective date of this registration statement, we have issued and sold the following unregistered securities:
- Between November 8, 1998 and March 31, 1999, we issued and sold 27,879 shares of common stock to employees in lieu of $105,941 in aggregate compensation to such employees pursuant to a voluntary stock-in-lieu of salary program whereby each employee could elect to receive up to 15% of his or her net pay in shares of our common stock at $3.80 per share.
- On March 30, 1999, we issued and sold 504,167 shares of Series B preferred stock to investors for aggregate consideration of $3,025,002 in cash.
- On July 21, 1999, we issued and sold 505,000 shares of Series B preferred stock to investors for an aggregate consideration of $3,030,000 in cash.
- On December 16, 1999, we issued and sold 1,250,000 shares of Series C preferred stock and a warrant to purchase an additional 250,000 shares of Series C preferred stock to an investor for aggregate consideration of $10,000,000 in cash.
- Since September 30, 1997, we have granted options to purchase 738,843 shares of common stock to our employees, consultants and other service providers. As of September 29, 2000, 17,480 of those options have been exercised for an aggregate consideration of $88,968 and options for 81,340 shares have been canceled, leaving 640,023 options outstanding.
Upon completion of the offering covered by this registration statement, all outstanding shares of Series A, Series B and Series C preferred stock will automatically convert into 3,596,486 shares of common stock.
The sale of the above securities was deemed to be exempt from registration
under the Securities Act of 1933 in reliance upon Section 4(2) of the Securities
Act and/or Regulation D promulgated thereunder or Rule 701 promulgated under
Section 3(b) of the Securities Act as transactions by an issuer not involving
any public offering or transactions pursuant to compensation benefit plans and
contracts relating to compensation as provided under Rule 701. These sales were
made without general solicitation or advertising. The recipients of securities
in each such transaction represented their intentions to acquire the securities
for investment only and not with a view to or for sale in connection with any
distribution thereof. Each purchaser was a sophisticated investor with access to
all relevant information necessary to evaluate the investment.
ITEM 16. EXHIBITS.
(a) The following exhibits as filed herewith:
EXHIBIT
NO. DOCUMENT
------- --------
1.1* Form of Underwriting Agreement.
3.1 Restated Articles of Incorporation of Cascade
Microtech, Inc., as amended.
3.2** Second Amended and Restated Articles of Incorporation of
Cascade Microtech, Inc.
3.3** Third Amended and Restated Articles of Incorporation of
Cascade Microtech, Inc.
3.4 Restated Bylaws of Cascade Microtech, Inc.
3.5** Second Amended and Restated Bylaws of Cascade Microtech,
Inc.
4.1 Reference is made to Exhibit 3.1
4.2 Investor Rights' Agreement for Series A Preferred Stock
Investors, dated May 1, 1990.
4.3 Investor Rights' Agreement for Series C Preferred Stock
Investors, dated December 16, 1999.
|
II-2
EXHIBIT
NO. DOCUMENT
------- --------
4.4 Stock Purchase Warrant to Purchase Shares of Common Stock of
Cascade Microtech, Inc. dated December , 1998 granted to
Veber Investments V, L.L.C.
4.5 Cascade Microtech, Inc. Series C Preferred Stock Purchase
Warrant dated December 16, 1999 issued to Teachers
Insurance and Annuity Association of America.
5.1* Opinion of Ater Wynne LLP as to the legality of the Common
Stock being registered.
10.1 Form of Indemnity Agreement between the Company and each of
its Officers and Directors.
10.2 Cascade Microtech, Inc. 1993 Stock Incentive Plan, as
amended.
10.3** Cascade Microtech, Inc. 2000 Stock Incentive Plan.
10.4** Cascade Microtech, Inc. 2000 Employee Stock Purchase Plan.
10.5 Executive Employment Agreement between Cascade
Microtech, Inc. and Craig M. Swanson, dated October 11,
1999.
10.6 Loan and Security Agreement between Silicon Valley Bank and
Cascade Microtech, Inc. dated February 19, 1998, and Loan
Modification Agreements dated March 17, 1998,
February 18, 1999, May 7, 1999 and June 14, 1999 attached
thereto.
10.7 Lease Agreement between Poplar Development Company, III and
Cascade Microtech, Inc. dated October 28, 1986, as
amended.
10.8 Lease Agreement between Spieker Properties, L.P. and Cascade
Microtech, Inc. dated April 2, 1999.
10.9 Lease Agreements I and II between Amberjack, Ltd. and
Cascade Microtech, Inc. dated August 20, 1997, and
Amendment No. 2 to Lease Agreement I dated July 23, 1998,
and Amendment No. 2 to Lease Agreement II dated April 12,
1999.
10.10 Lease Agreement between Sumitomo Realty and Development Co.,
Ltd. and Cascade Microtech Japan, Inc., as amended.
10.11 Joint Development Agreement between Cascade Microtech, Inc.
and Electroglas, Inc., dated June 18, 1999.
10.12 Amendment to the Joint Development Agreement between Cascade
Microtech, Inc. and Electroglas, Inc., effective March 1,
2000.
10.13+ License Agreement between Cascade Microtech, Inc. and
Electroglas, Inc. dated July 21, 1999.
10.14+ Patent License Agreement between Micronics Japan Co., Ltd,
Hewlett-Packard Japan, Ltd., and Cascade Microtech
Japan, Inc. dated July 28, 1997.
10.15 Executive Compensation Plan for 2000.
21.1 List of Subsidiaries.
23.1* Consent of Ater Wynne LLP. Reference is made to Exhibit 5.1.
23.2 Independent Auditors' Report on Schedule and Consent of KPMG
LLP.
24.1 Powers of Attorney. Reference is made to the signature
page hereof.
27.1 Financial Data Schedule.
|
* To be filed by amendment.
** To be filed by amendment prior to the effectiveness of this Registration Statement if approved by the Board of Directors and Shareholders of Cascade Microtech, as applicable.
+ Confidential Treatment requested as to certain portions of this exhibit.
(b) Schedules have been omitted since they are not required or are not applicable or the required information is shown in the financial statement or related notes.
II-3
ITEM 17. UNDERTAKINGS.
We hereby undertake:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
- to include any prospectus required by section 10(a)(3) of the Securities Act;
- to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and
- to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of this offering.
(4) For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(5) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
We hereby undertake to provide to the underwriters at the closing specified in the underwriting agreements certificates in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Beaverton, State of Oregon, on September 29, 2000.
CASCADE MICROTECH, INC.
By: /s/ ERIC W. STRID
-----------------------------------------
Eric W. Strid
CHIEF EXECUTIVE OFFICER
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Eric W. Strid and Craig M. Swanson and each of them singly, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign the Registration Statement filed herewith and any or all further amendments to said Registration Statement (including post-effective amendments and new registration statements pursuant to Rule 462 or otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his substitute, may lawfully do or cause to be done by virtue hereof.
Witness our hands on the date set forth below. Pursuant to the requirements of the Securities Act, this Registration Statement has been duly signed by the following persons in the capacities indicated on September 29, 2000.
SIGNATURE TITLE
--------- -----
/s/ ERIC W. STRID
------------------------------------ Chairman and Chief Executive Officer
Eric W. Strid (Principal Executive Officer)
/s/ CRAIG M. SWANSON Chief Financial Officer, Treasurer
------------------------------------ (Principal Financial Officer and Accounting
Craig M. Swanson Officer)
/s/ K. REED GLEASON
------------------------------------ Director
K. Reed Gleason
/s/ F. PAUL CARLSON
------------------------------------ Director
F. Paul Carlson
|
II-5
SIGNATURE TITLE
--------- -----
/s/ GEORGE P. O'LEARY
------------------------------------ Director
George P. O'Leary
/s/ WILLIAM R. SPIVEY
------------------------------------ Director
William R. Spivey
/s/ SCOTT R. WRIGHT
------------------------------------ Director
Scott R. Wright
/s/ CURTIS S. WOZNIAK
------------------------------------ Director
Curtis S. Wozniak
|
II-6
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
CASCADE MICROTECH, INC.
(in thousands)
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
--------------------------------------------- ---------- ---------- ---------- ---------- -------------
Year ended December 31, 1999:
Reserves and allowances included in accrued
liabilities:
Warranty Reserve......................... $447 $423 $ -- $326 $544
Year ended December 31, 1998:
Reserves and allowances included in accrued
liabilities:
Warranty Reserve......................... $265 $839 $ -- $657 $447
Year ended December 31, 1997:
Reserves and allowances included in accrued
liabilities:
Warranty Reserve......................... $153 $554 $ -- $442 $265
|
EXHIBIT INDEX
(A) EXHIBITS:
1.1* Form of Underwriting Agreement.
3.1 Restated Articles of Incorporation of Cascade
Microtech, Inc., as amended.
3.2** Second Amended and Restated Articles of Incorporation of
Cascade Microtech, Inc.
3.3** Third Amended and Restated Articles of Incorporation of
Cascade Microtech, Inc.
3.4 Restated Bylaws of Cascade Microtech, Inc.
3.5** Second Amended and Restated Bylaws of Cascade Microtech,
Inc.
4.1 Reference is made to Exhibit 3.1
4.2 Investor Rights Agreement for Series A Preferred Stock
Investors, dated May 1, 1990.
4.3 Investor Rights Agreement for Series C Preferred Stock
Investors, dated December 16, 1999.
4.4 Stock Purchase Warrant to Purchase Shares of Common Stock of
Cascade Microtech, Inc. dated December , 1998 granted to
Veber Investments V, L.L.C.
4.5 Cascade Microtech, Inc. Series C Preferred Stock Purchase
Warrant dated December 16, 1999 issued to Teachers
Insurance and Annuity Association of America.
5.1* Opinion of Ater Wynne LLP as to the legality of the Common
Stock being registered.
10.1 Form of Indemnity Agreement between the Company and each of
its Officers and Directors.
10.2 Cascade Microtech, Inc. 1993 Stock Incentive Plan, as
amended.
10.3** Cascade Microtech, Inc. 2000 Stock Incentive Plan.
10.4** Cascade Microtech, Inc. 2000 Employee Stock Purchase Plan.
10.5 Executive Employment Agreement between Cascade
Microtech, Inc. and Craig M. Swanson, dated October 11,
1999.
10.6 Loan and Security Agreement between Silicon Valley Bank and
Cascade Microtech, Inc. dated February 19, 1998, and Loan
Modification Agreements dated March 17, 1998,
February 18, 1999, May 7, 1999 and June 14, 1999 attached
thereto.
10.7 Lease Agreement between Poplar Development Company, III and
Cascade Microtech, Inc. dated October 28, 1986, as
amended.
10.8 Lease Agreement between Spieker Properties, L.P. and Cascade
Microtech, Inc. dated April 2, 1999.
10.9 Lease Agreements I and II between Amberjack, Ltd. and
Cascade Microtech, Inc. dated August 20, 1997, and
Amendment No. 2 to Lease Agreement I dated July 23, 1998,
and Amendment No. 2 to Lease Agreement II dated April 12,
1999.
10.10 Lease Agreement between Sumitomo Realty and Development Co.,
Ltd. and Cascade Microtech Japan, Inc., as amended.
10.11 Joint Development Agreement between Cascade Microtech, Inc.
and Electroglas, Inc., dated June 18, 1999.
10.12 Amendment to the Joint Development Agreement between Cascade
Microtech, Inc. and Electroglas, Inc., effective March 1,
2000.
10.13+ License Agreement between Cascade Microtech, Inc. and
Electroglas, Inc. dated July 21, 1999.
10.14+ Patent License Agreement between Micronics Japan Co., Ltd,
Hewlett-Packard Japan, Ltd., and Cascade Microtech
Japan, Inc. dated July 28, 1997.
10.15 Executive Compensation Plan for 2000.
|
21.1 List of Subsidiaries.
23.1* Consent of Ater Wynne LLP. Reference is made to Exhibit 5.1.
23.2 Independent Auditors' Report on Schedule and Consent of KPMG
LLP.
24.1 Powers of Attorney. Reference is made to the signature
page hereof.
27.1 Financial Data Schedule.
|
* To be filed by amendment.
** To be filed by amendment prior to the effectiveness of this Registration Statement if approved by the Board of Directors and Shareholders of Cascade Microtech, as applicable.
+ Confidential Treatment requested as to certain portions of this exhibit.
(b) Schedules have been omitted since they are not required or are not applicable or the required information is shown in the financial statement
or related notes.
Exhibit 3.1
RESTATED ARTICLES OF INCORPORATION
OF
CASCADE MICROTECH, INC.
I, the undersigned, do hereby certify that the following are the Restated Articles of Incorporation of Cascade Microtech, Inc., an Oregon corporation, adopted May 29, 1990, and that these Restated Articles of Incorporation supersede and take the place of the heretofore existing Articles of Incorporation and Amendments thereto.
ARTICLE I
The name of this corporation shall be Cascade Microtech, Inc., and its existence shall be perpetual.
ARTICLE II
The purpose and the object of this corporation are to engage in any lawful activity for which corporations may be organized under the Oregon Business Corporation Act (Oregon Revised Statutes, Chapter 60), and by such statement the corporation shall have the power to engage in any lawful activity for which corporations may be organized under the foregoing Act, including, but not limited to, designing, manufacturing and selling microwave wafer probing equipment.
ARTICLE III
3.1 The corporation is authorized to issue two classes of shares, to be designated Preferred Stock ("Preferred Stock") and Common Stock ("Common Stock"), respectively. The total number of shares of capital stock that the corporation shall have authority to issue is sixteen million (16,000,000). The total number of shares of Preferred Stock that the corporation shall have authority to issue is four million (4,000,000). The total number of shares of Common Stock that the corporation shall have authority to issue is twelve million (12,000,000). The Preferred Stock shall have a par value of $0.01 per share, and the Common Stock shall have a par value of $0.01 per share.
3.2 The shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the corporation (the "Board of Directors") is expressly authorized to provide for the issue of all or any of the shares of the Preferred Stock in one or more series and to fix the number of shares and to determine or alter for each such series such
1 - RESTATED ARTICLES OF INCORPORATION
voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such shares (a "Preferred Stock Designation") and as may be permitted by the Oregon Business Corporation Act. The Board of Directors is also expressly authorized to increase or decrease (but not below the number of such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series. In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.
(A) The first series of Preferred Stock shall consist of 1,337,319 shares and is hereby designated "Series A Preferred Stock."
(B) The powers, preferences, rights, restrictions and other matters relating to the Series A Preferred Stock are as follows:
(1) DIVIDENDS.
(a) The holders of the Series A Preferred Stock shall be entitled to receive dividends at the rate of $0.251 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) per annum, payable out of funds legally available therefor. Such dividends shall be payable only when, as and if declared by the Board of Directors and shall be noncumulative.
No dividends (other than those payable solely in the form of Common Stock of the corporation) shall be paid on any Common Stock of the corporation during any fiscal year of the corporation until dividends in the total amount of $0.251 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) on the Series A Preferred Stock shall have been paid or declared and set apart during that fiscal year.
No right shall accrue to holders of shares of Series A Preferred Stock by reason of the fact that dividends on such shares are not declared in any prior year, and no undeclared or unpaid dividend shall bear or accrue any interest.
(b) In the event the corporation shall declare a distribution (other than any distribution described in Section (B)(2)) payable in securities of other persons, evidences of indebtedness issued by the corporation or other persons, assets (excluding cash dividends) or options or rights to purchase any such securities or evidences of indebtedness, then, in each such case, the holders of the Series A Preferred Stock shall be entitled to a proportionate share of any such distribution as though the holders of the Series A Preferred Stock were the holders of the number of shares of Common Stock of the corporation into which their shares of
2 - RESTATED ARTICLES OF INCORPORATION
Series A Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the corporation entitled to receive such distribution.
(2) LIQUIDATION AND REORGANIZATION PREFERENCES.
(a) In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, the holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the corporation to the holders of the Common Stock by reason of their ownership thereof, the amount of $2.51 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares), plus all accrued or declared but unpaid dividends on such share for each share of Series A Preferred Stock then held by them. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series A Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders of the Series A Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive.
(b) After payment to the holders of Series A Preferred Stock of the full amount set forth in Section (B)(2)(a) above, the entire remaining assets and funds of the corporation legally available for distribution, if any, shall be distributed among the holders of the Common Stock and the Series A Preferred Stock in proportion to the shares of Common Stock then held by them and the shares of Common Stock which they then have the right to acquire upon conversion of the shares of Series A Preferred Stock then held by them.
(c) For purposes of this Section (B)(2), (i) any acquisition of the corporation by means of merger or other form of corporate reorganization in which more than 50% of the outstanding shares of the corporation are exchanged for securities or other consideration issued or caused to be issued by the acquiring corporation or its subsidiary (other than a mere reincorporation transaction), or (ii) a sale of all or substantially all of the assets of the corporation, shall be treated as a liquidation, dissolution or winding up of the corporation and shall entitle the holders of Series A Preferred Stock and Common Stock to receive at the closing, in cash, securities or other property (valued as provided in Section (B)(2)(d) below) amounts as follows:
(i) The holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any cash, securities or other property to the holders of the Common Stock by reason of their ownership thereof, the amount of $2.51 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares), plus all accrued or declared but unpaid dividends on such share for each share of Series A Preferred Stock then held by them. If upon the occurrence of such event, the cash, securities and other property thus distributed among the holders of the Series A Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then
3 - RESTATED ARTICLES OF INCORPORATION
the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders of the Series A Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive;
(ii) After payment to the holders of Series A Preferred Stock of the full amount set forth in Section (B)(2)(c)(i) above, the holders of Common Stock shall be entitled to receive, prior and in preference to any further distribution of any cash, securities or other property to the holders of Series A Preferred Stock by reason of their ownership thereof, the amount of $1.70 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares), plus all accrued or declared but unpaid dividends on such share for each share of Common Stock then held by them. If upon the occurrence of such event, the cash, securities and other property thus distributed among the holders of Common Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders of Common Stock in proportion to the preferential amount each such holder is otherwise entitled to receive; and
(iii) After payment to the holders of Series A Preferred Stock and Common Stock of the full amounts set forth above in Sections (B)(2)(c)(i) and (ii), respectively, any remaining cash, securities or other property legally available for distribution, if any, shall be distributed among the holders of the Common Stock and the Series A Preferred Stock in proportion to the shares of Common Stock then held by them and the shares of Common Stock which they then have the right to acquire upon conversion of the shares of Series A Preferred Stock then held by them.
(d) Whenever the distribution provided for in this
Section (B)(2) shall be payable in securities or property other than cash, the
value of such distribution shall be the fair market value of such securities or
other property as determined in good faith by the Board of Directors.
(3) VOTING RIGHTS; DIRECTORS.
(a) Each holder of shares of the Series A Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which such shares of Series A Preferred Stock could be converted and shall have voting rights and powers equal to the voting rights and powers of the Common Stock (except as otherwise expressly provided herein or as required by law, voting together with the Common Stock as a single class) and shall be entitled to notice of any shareholders, meeting in accordance with the Bylaws of the corporation. Fractional votes, however, shall not be permitted, and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Series A Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). Each holder of Common Stock shall be entitled to one vote for each share of Common Stock held.
4 - RESTATED ARTICLES OF INCORPORATION
(b) The authorized number of directors of the Company shall be fixed by the Board of Directors, but in no event shall be fewer than four (4) or more than seven (7) members. The holders of a majority of the outstanding shares of Series A Preferred Stock, voting together as a class, shall be entitled to designate and elect one member of the Board of Directors, which member shall be subject to approval by the corporation, which approval shall not be unreasonably withheld. The holders of Series A Preferred Stock and the holders of Common Stock, voting together as a class, shall be entitled to designate and elect the remaining members of the Board of Directors.
(c) In the case of any vacancy in the office of a director designated and elected by the holders of the Series A Preferred Stock pursuant to Section (B)(3)(b) hereof, only the holders of Series A Preferred Stock, by affirmative vote of the holders of a majority of the outstanding shares thereof, may elect a successor to hold the office for the unexpired term of the director whose place shall be vacant, which successor shall be subject to approval by the corporation, which approval shall not be unreasonably withheld. Any director who shall have been elected by the holders of the Series A Preferred Stock and approved pursuant to Section (B)(3)(b) hereof or any director so elected and approved as provided in the preceding sentence hereof may be removed during the director's term of office, with or without cause, only by the affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred Stock.
(4) CONVERSION.
The holders of Series A Preferred Stock shall have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $2.51 by the Series A Conversion Price applicable to such share, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion. The price at which shares of Common Stock shall be deliverable upon conversion of shares of the Series A Preferred Stock (the "Series A Conversion Price") shall initially be $2.51 per share of Common Stock. Such initial Series A Conversion Price shall be adjusted as hereinafter provided.
(b) AUTOMATIC CONVERSION. Each share of Series A Preferred Stock shall automatically be converted into shares of Common Stock at the then-effective Series A Conversion Price upon the earlier of (i) the date specified by vote or written consent or agreement of holders of at least a majority of the shares of Series A Preferred Stock then outstanding, (ii) the date on which a majority of the shares of Series A Preferred Stock originally issued has been converted into shares of Common Stock or redeemed, or (iii) immediately upon the closing of the sale of the corporation's Common Stock in a firm commitment, underwritten
5 - RESTATED ARTICLES OF INCORPORATION
public offering registered under the Securities Act of 1933, as amended (the "Securities Act"), other than a registration relating solely to a transaction under Rule 145 under the Securities Act (or any successor thereto) or to an employee benefit plan of the corporation, at a public offering price (prior to underwriters, discounts and expenses) equal to or exceeding $6.00 per share of Common Stock (as adjusted for any stock dividends, combinations or splits with respect to such shares) and the aggregate proceeds to the corporation and any selling shareholders (after deduction for underwriters' discounts and expenses relating to the issuance, including without limitation fees of the corporation's counsel) of which exceed $7,500,000.
(c) MECHANICS OF CONVERSION.
(i) Before any holder of Series A Preferred Stock shall be entitled to convert the same into shares of Common Stock, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the corporation or of any transfer agent for such stock and shall give written notice to the corporation at such office that the holder elects to convert the same and shall state therein the name or names in which the holder wishes the certificate or certificates for shares of Common Stock to be issued. As soon as practicable thereafter, the corporation shall issue and deliver at such office to such holder of Series A Preferred Stock a certificate or certificates for the number of shares of Common Stock to which the holder shall be entitled as aforesaid. Such conversion shall 'be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Series A Preferred Stock to be converted and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.
(ii) If the conversion is in connection with an underwritten offering of securities pursuant to the Securities Act, the conversion, at the option of any holder tendering shares of Series A Preferred Stock for conversion, may be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock upon conversion of the Series A Preferred Stock shall not be deemed to have converted such Series A Preferred Stock until immediately prior to the closing of such sale of securities.
(d) ADJUSTMENTS TO SERIES A CONVERSION PRICE FOR CERTAIN DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this
Section (B)(4)(d), the following definitions shall apply:
(1) "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities (as defined below).
6 - RESTATED ARTICLES OF INCORPORATION
(2) "Original Issue Date" shall mean the date on which a share of Series A Preferred Stock was first issued.
(3) "Convertible Securities" shall mean any evidences of indebtedness, shares (other than Common Stock and Series A Preferred Stock) or other securities convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued (or, pursuant to Section (B)(4)(d)(iii), deemed to be issued) by the corporation after the original Issue Date, other than shares of Common Stock issued or issuable:
(A) upon conversion of shares of Series A Preferred Stock;
(B) pursuant to stock option or stock purchase plans or agreements on terms approved by the Board of Directors, to officers, directors or employees of, or consultants to, the corporation:
(1) who have provided services to the corporation in any such capacity beginning at any time up to but not including the Original Issue Date, but not exceeding 300,000 shares of Common Stock (net of any repurchases of such shares or cancellations or expirations of options); and
(2) who have provided or will provide services to the Company in any such capacity beginning at any time on or after the Original Issue Date, but not exceeding 400,000 shares of Common Stock (net of any repurchases of such shares or cancellations or expirations of options),
in each case subject to adjustment for any stock dividends, combinations or splits with respect to such shares;
(C) to officers, directors or employees of, or consultants to, the corporation
(1) which are repurchased by the corporation at the original issue price(s) thereof (but excluding any shares the issuance of which would have resulted in an adjustment of the Series A Conversion Price but for Section (B)(4)(d)(i)(4)(B)), provided that shares which are excluded from the definition of "Additional Shares of Common Stock" pursuant to this Section (B)(4)(d)(i)(4)(C) are reissued by the corporation at not less than such original issue price(s); or
7 - RESTATED ARTICLES OF INCORPORATION
(2) which become available for reissuance as a result of lapse without exercise of stock options;
(D) as a dividend or distribution on Series A Preferred Stock; or
(E) for which adjustment of the Series A Conversion Price is made pursuant to Section (B)(4)(e).
(ii) NO ADJUSTMENT OF CONVERSION PRICE. Any provision herein to the contrary notwithstanding, no adjustment in the Conversion Price for the Series A Preferred Stock shall be made in respect of the issuance of Additional Shares of Common Stock unless the consideration per share (determined pursuant to Section (B)(4)(d)(v) hereof) for an Additional Share of Common Stock issued or deemed to be issued by the corporation is less than the Series A Conversion Price in effect on the date of and immediately prior to such issue.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK. In the event the corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities (other than issuances pursuant to clauses (A) through (E) of Section (B)(4)(d)(i)(4)) or shall fix a record date for the determination of holders of any class of securities then entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein designed to protect against dilution) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date; provided, however, that in any such case in which Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustments in the Series A Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the corporation or decrease or increase in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Series A Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon, shall be recomputed, upon any such increase or decrease becoming effective, to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible
8 - RESTATED ARTICLES OF INCORPORATION
Securities; provided, however, that no such adjustment of the Series A Conversion Price shall affect Common Stock previously issued upon conversion of the Series A Preferred Stock;
(3) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Series A Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if:
(A) in the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common Stock issued were the shares of Common Stock if any, actually issued upon the exercise of such options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the corporation for the issue of all such Options, whether or not exercised, plus the consideration actually received by the corporation upon such exercise or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the corporation upon such conversion or exchange; and
(B) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such options and the consideration received by the corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the corporation (determined pursuant to Section (B)(4)(d)) upon the issue of the Convertible Securities with respect to which such Options were actually exercised;
(4) no readjustment pursuant to clause (2) or (3) above shall have the effect of increasing the Series A Conversion Price to an amount which exceeds the lower of (A) the Series A Conversion Price on the original adjustment date or (B) the Series A Conversion Price that would have resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date; and
(5) in the case of any Options which expire by their terms not more than 30 days after the date of issue thereof, no adjustment of the Series A Conversion Price shall be made until the expiration or exercise of all such Options, whereupon such adjustment shall be made in the same manner provided in clause (3) above.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event the corporation, at any time
after the Original Issue Date, shall issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Section (B)(4)(d)(iii)) without consideration or
9 - RESTATED ARTICLES OF INCORPORATION
for a consideration per share less than the Series A Conversion Price in effect on the date of and immediately prior to such issue, then and in such event, the Series A Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying the Series A Conversion Price by a fraction,
(1) the numerator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such issue plus (B) the number of shares of Common Stock which the aggregate consideration received by the corporation for the total number of Additional Shares of Common Stock so issued would purchase at the Series A Conversion Price in effect immediately prior to such issuance, and
(2) the denominator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such issue plus (B) the number of such Additional Shares of Common Stock so issued.
For the purpose of the above calculation, the number of shares of Common Stock outstanding immediately prior to such issue shall be calculated on a fully diluted basis, as if all shares of Series A Preferred Stock and all Convertible Securities had been fully converted into shares of Common Stock immediately prior to such issuance and any outstanding warrants, options or other rights for the purchase of shares of stock or convertible securities had been fully exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Common Stock, if so convertible) as of such date, but not including in such calculation any additional shares of Common Stock issuable with respect to shares of Series A Preferred Stock, Convertible Securities or outstanding options, warrants or other rights for the purchase of shares of stock or convertible securities solely as a result of the adjustment of the Series A Conversion Price (or other conversion ratio) resulting from the issuance of Additional Shares of Common Stock causing such adjustment.
(v) DETERMINATION OF CONSIDERATION. For purposes of this Section (B)(4)(d), the consideration received by the corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY. Such consideration:
(A) insofar as it consists of cash, shall be computed at the aggregate amount of cash received by the corporation excluding amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash, shall be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board; and
10 - RESTATED ARTICLES OF INCORPORATION
(C) insofar as it consists of cash and property, shall be computed as provided in clauses (A) and (B) above, prorated for the amount of each form of such consideration so received.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per share received by the corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section (B)(4)(d)(iii) relating to Options and Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or receivable by the corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against dilution) payable to the corporation upon the exercise of such options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities,
by (B) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against the dilution) issuable upon the exercise of such Options or conversion or exchange of such Convertible Securities.
(e) ADJUSTMENTS TO CONVERSION PRICES FOR STOCK DIVIDENDS AND FOR COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event that the corporation at any time or from time to time after the Original Issue Date shall declare or pay, without consideration, any dividend on the Common Stock payable in Common Stock or in any right to acquire Common Stock for no consideration or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by stock split, reclassification or otherwise than by payment of a dividend in Common Stock or in any right to acquire Common Stock) or in the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, then the Series A Conversion Price in effect immediately prior to such event shall be proportionately decreased or increased, as appropriate, concurrently with the effectiveness of such event. In the event that the corporation shall declare or pay, without consideration, any dividend on the Common Stock payable in any right to acquire Common Stock for no consideration, then the corporation shall be deemed to have made a dividend payable in Common Stock in an amount of shares equal to the maximum number of shares issuable upon exercise of such rights to acquire Common Stock.
(f) ADJUSTMENTS FOR RECLASSIFICATIONS AND REORGANIZATIONS. If the Common Stock issuable upon conversion of the Series A Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of
11 - RESTATED ARTICLES OF INCORPORATION
stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for in Section (B)(4)(e) above or a merger or other reorganization referred to in Section (B)(2)(c) above), the Series A Conversion Price then in effect shall be proportionately adjusted, concurrently with the effectiveness of such reorganization or reclassification, so that the Series A Preferred Stock shall be convertible into, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock equivalent to the number of shares of Common Stock that would have been subject to receipt by the holders upon conversion of the Series A Preferred Stock immediately before such change.
(g) NO IMPAIRMENT. The corporation will not, by amendment of its Restated Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section (B)(4) and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series A Preferred Stock against impairment.
(h) MINIMUM ADJUSTMENT. No adjustment of the Series A Conversion Price shall be made in an amount less than $.01 per share; provided, however, that any adjustments which are not required to be made as a result of the operation of this Section (B)(4)(h) shall be carried forward and shall be taken into account in any subsequent adjustment made prior to five years from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in Section (B)(4)(d)(iii)(4). no adjustment of the Series A Conversion Price pursuant to Section (B)(4)(d)(iv) shall have the effect of increasing the Series A Conversion Price above the Series A Conversion Price in effect immediately prior to such adjustment.
(i) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of the Series A Conversion Price pursuant to
this Section (B)(4), the corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred Stock a certificate executed by the
corporation's President or Chief Financial Officer setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation, upon the written request at any time of
any holder of Series A Preferred Stock, shall furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Series A Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of the Series A
Preferred Stock.
12 - RESTATED ARTICLES OF INCORPORATION
(j) NOTICES OF RECORD DATE. In the event that the corporation shall propose at any time (i) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus; (ii) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (iii) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or (iv) to merge or consolidate with or into any other corporation or sell, lease or convey all or substantially all of its assets or to liquidate, dissolve or wind up, then, in connection with each such event, the corporation shall send to the holders of Series A Preferred Stock:
(1) at least 20 days, prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights (and specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in Section (B)(4)(j)(iii) and (iv) above; and
(2) in the case of the matters referred to in Section (B)(4)(j)(iii) and (iv) above, at least 20 days, prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event).
(k) ISSUE TAXES. The corporation shall pay any and all issue and other taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series A Preferred Stock pursuant hereto; provided, however, that the corporation shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion.
(l) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock, such number of its shares of Common Stock as shall be sufficient from time to time to effect the conversion of all outstanding shares of Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, the corporation will take such corporate action as may be necessary, in the opinion of its counsel, to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including without limitation engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to these Restated Articles of Incorporation.
13 - RESTATED ARTICLES OF INCORPORATION
(m) FRACTIONAL SHARES. No fractional share shall be issued upon the conversion of any share or shares of Series A Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the corporation, in lieu of issuing any fractional share, shall pay the holder otherwise entitled to such fraction a sum in cash equal to the fair market value of such fraction on the date of conversion (as determined in good faith by the Board of Directors).
(n) NOTICES. Any notice required by the provisions of this
Section (B)(4) to be given to the any holder of shares of Series A Preferred
Stock shall be deemed given when personally delivered to such holder or when
deposited in the United States mail, postage prepaid and addressed to such
holder of record at the holder's address appearing on the books of the
corporation.
(5) RESTRICTIONS AND LIMITATIONS.
As long as any shares of Series A Preferred Stock remain outstanding, the corporation, without the vote or written consent by the holders of at least a majority of the outstanding shares of Series A Preferred Stock, voting as a class, shall not:
(a) Redeem, purchase or otherwise acquire for value (or pay into or set aside for a sinking fund for each purpose) any share or shares of Preferred Stock otherwise than by conversion in accordance with Section (B)(4) hereof or any share or shares of Common Stock; provided, however, that this restriction shall not apply to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for the Company or any subsidiary pursuant to agreements under which the Company has the option to repurchase such shares at cost upon the occurrence of certain events, such as the termination of employment.
(b) Authorize or issue or obligate itself to issue, any other equity security (including any security convertible into or exercisable for any equity security) senior to the Series A Preferred Stock as to dividend or liquidation preferences or any other rights, preferences or privileges of or powers granted to the Series A Preferred Stock;
(c) Increase or decrease (other than by conversion) the total number of authorized shares of Preferred Stock;
(d) Change, amend, modify or otherwise alter any of the rights, preferences or privileges provided for herein for the benefit of any shares of Series A Preferred Stock; or
14 - RESTATED ARTICLES OF INCORPORATION
(e) Change the authorized number of directors of the corporation or the provisions for the election of Directors of the corporation by class vote contained in Section (B)(3)(b) above.
(6) NO REISSUANCE OF SERIES A PREFERRED STOCK.
No share or shares of Series A Preferred Stock acquired by the corporation by reason of repurchase, conversion or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the corporation shall be authorized to issue.
ARTICLE IV
No director of the corporation shall be personally liable to the corporation or its shareholders for monetary damages for conduct as a director; provided, however, that this Article IV shall not eliminate the liability of a director for any act or omission for which such elimination of liability is not permitted under the Oregon Business Corporation Act. No amendment to the Oregon Business Corporation Act that further limits the acts or omissions for which elimination of liability is permitted shall affect the liability of a director for any act or omission which occurs prior to the effective date of such amendment.
ARTICLE V
5.1 DEFINITIONS.
A. PROCEEDING. The term "Proceeding" shall include any threatened, pending, or completed action, suit, or proceeding, whether brought in the right of the corporation or otherwise and whether of a civil, criminal, administrative, or investigative nature, in which a Fiduciary Person may be or may have been involved as a party or otherwise by reason of the fact that the person is or was a Fiduciary Person.
B. FIDUCIARY PERSON. A Fiduciary Person is a person who is or was a director or officer of the corporation or a fiduciary within the meaning of the Employee Retirement Income Security Act of 1974 with respect to any employee benefit plan of the corporation, or is or was serving at the request of the corporation as a director, officer, or fiduciary of an employee benefit plan of another corporation, partnership, joint venture, trust, or other enterprise, whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification or advancement of expenses can be provided under this Article.
5.2 INDEMNIFICATION. The corporation shall indemnify to the fullest extent not prohibited by law any Fiduciary Person who was or is a party or is threatened to be made a party to any Proceeding against all expenses (including attorney fees), judgments, fines, and amounts
15 - RESTATED ARTICLES OF INCORPORATION
paid in settlement actually and reasonably incurred by the person in connection with such Proceeding.
5.3 ADVANCEMENT OF EXPENSES. Expenses incurred by a director or officer of the corporation in defending a Proceeding shall in all cases be paid by the corporation in advance of the final disposition of such Proceeding at the written request of such person, if the person:
A. furnishes the corporation a written affirmation of the person's good faith belief that such person has met the standard of conduct described in the Oregon Business Corporation Act or is entitled to be indemnified by the corporation under any other indemnification rights granted by the corporation to such person; and
B. furnishes the corporation a written undertaking to repay such advance to the extent it is ultimately determined by a court that such person is not entitled to be indemnified by the corporation under this Article or under any other indemnification rights granted by the corporation to such person.
Such advances shall be made without regard to the person's ability to repay such advances and without regard to the person's ultimate entitlement to indemnification under this Article or otherwise.
5.4 NON-EXCLUSIVITY AND CONTINUITY OF RIGHTS. The indemnification and entitlement to advancement of expenses provided by this Article shall not be deemed exclusive of any other rights to which those indemnified may be entitled under the corporation's articles of incorporation or any statute, agreement, general or specific action of the board of directors, vote of stockholders, or otherwise, shall continue as to a person who has ceased to be a director or officer, shall inure to the benefit of the heirs, executors, and administrators of such person, and shall extend to all claims for indemnification or advancement of expenses made after the adoption of this Article.
5.5 AMENDMENTS. Any repeal of this Article shall only be prospective and no repeal or modification hereof shall adversely affect the rights under this Article in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any Proceeding.
Dated: May 29, 1990
/s/ Eric W. Strid
--------------------------------------
|
Eric W. Strid, President
16 - RESTATED ARTICLES OF INCORPORATION
AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
OF
CASCADE MICROTECH, INC.
ARTICLE V OF THE RESTATED ARTICLES OF INCORPORATION
IS AMENDED TO READ AS FOLLOWS:
V.
Capital Stock
5.1 The corporation is authorized to issue two classes of shares, to be designated Preferred Stock ("Preferred Stock") and Common Stock ("Common Stock"), respectively. The total number of shares of capital stock that the corporation shall have authority to issue is sixteen million (16,000,000). The total number of shares of Preferred Stock that the corporation shall have authority to issue is four million (4,000,000). The total number of shares of Common Stock that the corporation shall have authority to issue is twelve million (12,000,000). The Preferred Stock shall have a par value of $0.01 per share, and the Common Stock shall have a par value of $0.01 per share.
5.2 The shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the corporation (the "Board of Directors") is expressly authorized to provide for the issue of all or any of the shares of the Preferred Stock in one or more series and to fix the number of shares and to determine or alter for each such series such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such shares (a "Preferred Stock Designation") and as may be permitted by the Oregon Business Corporation Act. The Board of Directors is also expressly authorized to increase or decrease (but not below the number of such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series. In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.
(A) The first series of Preferred Stock shall consist of 1,337,319 shares and is hereby designated "Series A Preferred Stock." The second series of Preferred Stock shall consist of 1,009,167 shares and is hereby designated "Series B Preferred Stock." The third
1 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
series of Preferred Stock shall consist of 1,500,000 shares and is hereby designated "Series C Preferred Stock."
(B) The powers, preferences, rights, restrictions and other matters relating to the Series A, B and C Preferred Stock are as follows:
(1) DIVIDENDS.
(a) The holders of the Series A, B and C Preferred Stock shall be entitled to receive dividends at the rate of $0.251, $0.60 and $0.80 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) per annum, respectively, payable out of funds legally available therefor. Such dividends shall be payable only when, as and if declared by the Board of Directors and shall be noncumulative.
No dividends (other than those payable solely in the form of Common Stock of the Corporation) shall be paid on any Common Stock of the Corporation during any fiscal year of the Corporation until dividends in the total amount of $0.251, $0.60 and $0.80 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) on the Series A, B and C Preferred Stock, respectively, shall have been paid or declared and set apart during that fiscal year.
No right shall accrue to holders of shares of Series A, B and C Preferred Stock by reason of the fact that dividends on such shares are not declared in any prior year, and no undeclared or unpaid dividend shall bear or accrue any interest.
No dividend shall be paid on or declared and set apart for the shares of any series of Preferred Stock for any dividend period unless at the same time a like proportionate dividend for the same dividend period, ratably in proportion to the respective annual dividend rates fixed therefor, shall be paid on or declared and set apart for the shares of all other such series of Preferred Stock.
(b) In the event the Corporation shall declare a distribution (other than any distribution described in Section (B)(2)) payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights to purchase any such securities or evidences of indebtedness, then, in each such case, the holders of the Series A, B and C Preferred Stock shall be entitled to a proportionate share of any such distribution as though the holders of the Series A, B and C Preferred Stock were the holders of the number of shares of Common Stock of the Corporation into which their shares of Series A, B and C Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution.
2 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
(2) LIQUIDATION AND REORGANIZATION PREFERENCES.
(a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series A, B and C Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of the Common Stock by reason of their ownership thereof, the amount of $2.51, $6.00 and $8.00 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares), respectively, plus all accrued or declared but unpaid dividends on such share for each share of Series A, B and C Preferred Stock then held by them. The Series A, B and C Preferred Stock shall rank on a parity as to the receipt of the respective preferential amounts for each such series upon the occurrence of such event. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series A, B and C Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Series A, B and C Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive.
(b) After payment to the holders of Series A, B and C Preferred Stock of the full amount set forth in Section (B)(2)(a) above, the entire remaining assets and funds of the Corporation legally available for distribution, if any, shall be distributed among the holders of the Common Stock and the Series A, B and C Preferred Stock in proportion to the shares of Common Stock then held by them and the shares of Common Stock which they then have the right to acquire upon conversion of the shares of Series A, B and C Preferred Stock then held by them.
(c) For purposes of this Section (B)(2), (i) any acquisition of the Corporation by means of merger or other form of corporate reorganization in which more than 50% of the outstanding shares of the Corporation are exchanged for securities or other consideration issued or caused to be issued by the acquiring corporation or its subsidiary (other than a mere reincorporation transaction), or (ii) a sale of all or substantially all of the assets of the Corporation, shall be treated as a liquidation, dissolution or winding up of the Corporation and shall entitle the holders of Series A, B and C Preferred Stock and Common Stock to receive at the closing, in cash, securities or other property (valued as provided in Section (B)(2)(d) below) amounts as follows:
(i) The holders of the Series A, B and C Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any cash, securities or other property to the holders of the Common Stock by reason of their ownership
3 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
thereof, the amount of $2.51, $6.00 and $8.00 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares), respectively, plus all accrued or declared but unpaid dividends on such share for each share of Series A, B and C Preferred Stock then held by them. If upon the occurrence of such event, the cash, securities and other property thus distributed among the holders of the Series A, B and C Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Series A, B and C Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive;
(ii) After payment to the holders of Series A, B and C Preferred Stock of the full amount set forth in Section (B)(2)(c)(i) above, the holders of Common Stock shall be entitled to receive prior and in preference to any further distribution of any cash, securities or other property to the holders of Series A, B and C Preferred Stock by reason of their ownership thereof, the amount of $1.70 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares), plus all accrued or declared but unpaid dividends on such share for each share of Common Stock then held by them. If upon the occurrence of such event, the cash, securities and other property thus distributed among the holders of Common Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of Common Stock in proportion to the preferential amount each such holder is otherwise entitled to receive; and
(iii) After payment to the holders of Series A, B and C Preferred Stock and Common Stock of the full amounts set forth above in Sections (B)(2)(c)(i) and (ii), respectively, any remaining cash, securities or other property legally available for distribution, if any, shall be distributed among the holders of the Common Stock and the Series A, B and C Preferred Stock in proportion to the shares of Common Stock then held by them and the shares of Common Stock which they then have the right to acquire upon conversion of the shares of Series A, B and C Preferred Stock then held by them.
(d) Whenever the distribution provided for in this
Section (B)(2) shall be payable in securities or property other than cash, the
value of such distribution shall be the fair market value of such securities or
other property as determined in good faith by the Board of Directors.
(3) VOTING RIGHTS; DIRECTORS.
4 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
(a) Each holder of shares of the Series A, B and C be entitled to a number of votes equal to the number of shares of Common Stock into which such shares of Series A, B and C Preferred Stock could be converted and shall have voting rights and powers equal to the voting rights and powers of the Common Stock (except as otherwise expressly provided herein or as required by law, voting together with the Common Stock as a single class) and shall be entitled to notice of any shareholders' meeting in accordance with the Bylaws of the Corporation. Fractional votes, however, shall not be permitted, and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Series A, B and C Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). Each holder of Common Stock shall be entitled to one vote for each share of Common Stock held.
(b) The authorized number of directors of the Company shall be fixed by the Board of Directors, but in no event shall be fewer than four (4) or more than seven (7) members. The holders of a majority of the outstanding shares of Series A Preferred Stock, voting together as a class, shall be entitled to designate and elect one member of the Board of Directors, which member shall be subject to approval by the Corporation, which approval shall not be unreasonably withheld. So long as there remains outstanding not fewer than 505,000 shares of Series B Preferred Stock, the holders of a majority of the outstanding shares of Series B Preferred Stock, voting together as a class, shall be entitled to designate and elect one member of the Board of Directors, which member shall be subject to approval by the Corporation, which approval shall not be unreasonably withheld. So long as there remains outstanding not fewer than 1,000,000 shares of Series C Preferred Stock, the holders of a majority of the outstanding shares of Series C Preferred Stock, voting together as a class, shall be entitled to designate and elect one member of the Board of Directors, which member shall be subject to approval by the Corporation, which approval shall not be unreasonably withheld. The holders of Series A, B and C Preferred Stock and the holders of Common Stock, voting together as a class, shall be entitled to designate and elect the remaining members of the Board of Directors.
(c) In the case of any vacancy in the office of a director designated and elected by the holders of the Series A, B or C Preferred Stock pursuant to the second and third sentences of Section (B)(3)(b) hereof, only the holders of Series A, B and C Preferred Stock, as the case may be, by affirmative vote of the holders of a majority of the outstanding shares thereof, may elect a successor to hold the office for the unexpired term of the director whose place shall be vacant, which successor shall be subject to approval by the Corporation, which approval shall not be unreasonably withheld. Any director who shall have been elected by the holders of the Series A, B or C Preferred Stock and approved pursuant to Section (B)(3)(b) hereof or any director so elected and approved as provided in
5 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
the preceding sentence hereof may be removed during the director's term of office, with or without cause, only by the affirmative vote of the holders of a majority of the outstanding shares of Series A, B or C Preferred Stock, as the case may be.
(4) CONVERSION.
The holders of Series A, B and C Preferred Stock shall have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $2.51 by the Series A Conversion Price applicable to such share, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion. The price at which shares of Common Stock shall be deliverable upon conversion of shares of the Series A Preferred Stock (the "Series A Conversion Price") shall initially be $2.51 per share of Common Stock. Such initial Series A Conversion Price shall be adjusted as hereinafter provided. Each share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $6.00 by the Series B Conversion Price applicable to such share, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion. The price at which shares of Common Stock shall be deliverable upon conversion of shares of the Series B Preferred Stock (the "Series B Conversion Price") shall initially be $6.00 per share of Common Stock. Such initial Series B Conversion Price shall be adjusted as hereinafter provided. Each share of Series C Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $8.00 by the Series C Conversion Price applicable to such share, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion. The price at which shares of Common Stock shall be deliverable upon conversion of shares of the Series C Preferred Stock (the "Series C Conversion Price") shall initially be $8.00 per share of Common Stock. Such initial Series C Conversion Price shall be adjusted as hereinafter provided.
(b) AUTOMATIC CONVERSION. Each share of Series A, B and C Preferred Stock shall automatically be converted into shares of Common Stock at the then-effective Series A, B or C Conversion Price, respectively, upon the earlier, of (i) the
6 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
date specified by vote or written consent or agreement of holders of at least a
majority of the shares of Series A, B and C Preferred Stock then outstanding,
provided such vote, written consent or agreement is in furtherance of (A) the
closing of the sale of the Corporation's Common Stock in a firm commitment,
underwritten public offering registered under the Securities Act of 1933, as
amended (the "Securities Act"), (B) the closing of any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which more than 50% of the outstanding shares of the Corporation are exchanged
for securities or other consideration issued or caused to be issued by the
acquiring corporation or its subsidiary (other than a mere reincorporation
transaction), or (C) the closing of a sale of all or substantially all of the
assets of the Corporation; (ii) the date on which a majority of the shares of
Series A and B Preferred Stock and all of the Series C Preferred Stock
originally issued has been converted into shares of Common Stock or redeemed; or
(iii) immediately upon the closing of the sale of the Corporation's Common Stock
in a firm commitment, underwritten public offering registered under the
Securities Act, other than a registration relating solely to a transaction under
Rule 145 under the Securities Act (or any successor thereto) or to an employee
benefit plan of the Corporation, at a public offering price (prior to
underwriters' discounts and expenses) equal to or exceeding 125 percent of the
then applicable Conversion Price of the Series C Preferred Stock (as adjusted
for, any stock dividends, combinations or splits with respect to such shares)
and the aggregate proceeds to the Corporation and any selling shareholders
(after deduction for underwriters' discounts and expenses relating to the
issuance, including without limitation fees of the Corporation's counsel) of
which exceed $20,000,000 (a "Qualified Public Offering").
(c) MECHANICS OF CONVERSION.
(i) Before any holder of Series A, B or C Preferred Stock shall be entitled to convert the same into shares of Common Stock, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for such stock and shall give written notice to the Corporation at such office that the holder elects to convert the same and shall state therein the name or names in which the holder wishes the certificate or certificates for shares of Common Stock to be issued. As soon as practicable thereafter, the Corporation shall issue and deliver at such office to such holder of Series A, B or C Preferred Stock a certificate or certificates for the number of shares of Common Stock to which the holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Series A, B or C Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.
7 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
(ii) If the conversion is in connection with an underwritten offering of securities pursuant to the Securities Act, the conversion may be conditioned, at the option of any holder tendering shares of Series A, B or C Preferred Stock for conversion, upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock upon conversion of the Series A, B or C Preferred Stock shall not be deemed to have converted such Series A, B or C Preferred Stock until immediately prior to the closing of such sale of securities.
(d) ADJUSTMENTS TO SERIES A, B AND C CONVERSION PRICE FOR CERTAIN DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this
Section (B)(4)(d), the following definitions shall apply:
(1) "OPTIONS" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities (as defined below).
(2) "ORIGINAL ISSUE DATE" shall mean the date on which a share of Series C Preferred Stock was first issued.
(3) "CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness, shares (other than Common Stock and Series A, B and C Preferred Stock) or other securities convertible into or exchangeable for Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common Stock issued (or, pursuant to Section (B)(4)(d)(iii), deemed to be issued) by the Corporation after the Original Issue Date, other than shares of Common Stock issued or issuable:
(A) upon conversion of shares of Series A, B or C Preferred Stock;
(B) pursuant to stock option, stock incentive, or stock purchase plans or agreements on terms approved by the Board of Directors, to officers, directors or employees of, or consultants to, the Corporation, so long as shares issued or issuable under such plans and agreements, together with shares reserved for issuance under such plans and agreements total no more than 2,200,000 shares (subject to adjustment for any stock dividends, combinations or splits with respect to such shares);
8 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
(C) to officers, directors or employees of, or consultants to, the Corporation:
(1) which are subject to repurchase by the Corporation at the original issue price(s) thereof (but excluding any shares the issuance of which would have resulted in an adjustment of the Series A, B or C Conversion Price but for Section (B)(4)(d)(i)(4)(B)), provided that shares which are excluded from the definition of "Additional Shares of Common Stock" pursuant to this Section (B)(4)(d)(i)(4)(C) are reissued by the Corporation at not less than such original issue price(s); or
(2) which become available for reissuance as a result of lapse without exercise of stock options;
(D) as a dividend or distribution on Series A, B or C Preferred Stock; or
(E) for which adjustment of the Series A, B or C Conversion Price is made pursuant to Section (B)(4)(e).
(F) upon exercise of that certain warrant dated as of the Original Issue Date, to purchase up to 250,000 shares of Series C Preferred Stock.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. Any provision herein to the contrary notwithstanding, no adjustment in the Conversion Price for a series of Preferred Stock shall be made in respect of the issuance of Additional Shares of Common Stock unless the consideration per share (determined pursuant to Section (B)(4)(d)(v) hereof) for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the Conversion Price for such series of Preferred Stock in effect on the date of and immediately prior to such issue.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK. In the event the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities (other than issuances pursuant to clauses (A) through (E) of Section (B)(4)(d)(i)(4)) or shall fix a record date for the determination of holders of any class of securities then entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein designed to protect against dilution) of Common Stock issuable upon the exercise of such Options or, in the case of
9 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date; provided, however, that in any such case in which Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustments in the Series A, B or C Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Corporation or decrease or increase in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Series A, B or C Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon, shall be recomputed, upon any such increase or decrease becoming effective, to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; provided, however, that no such adjustment of the Series A, B or C Conversion Price shall affect Common Stock previously issued upon conversion of the Series A, B or C Preferred Stock;
(3) upon the expiration of any such options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Series A, B or C Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if:
(A) in the case of Convertible Securities or options for Common Stock, the only Additional Shares of Common Stock issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Corporation for the issue of all such options, whether or not exercised, plus the consideration actually received by the Corporation upon such exercise or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange; and
10 - AMENDMENT TO RESTATED
ARTICLES OF INCORPORATION
|
(B) in the case of Options for Convertible
|
Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation (determined pursuant to Section (B)(4)(d)) upon the issue of the Convertible Securities with respect to which such Options were actually exercised;
(4) no readjustment pursuant to clause (2) or
(3) above shall have the effect of increasing the Series A, B or C Conversion
Price to an amount which exceeds the lower of (A) the Series A, B or C
Conversion Price on the original adjustment date or (B) the Series A, B or C
Conversion Price that would have resulted from any issuance of Additional Shares
of Common Stock between the original adjustment date and such readjustment date;
and
(5) in the case of any options which expire by their terms not more than 30 days after the date of issue thereof, no adjustment of the Series A, B or C Conversion Price shall be made until the expiration or exercise of all such Options, whereupon such adjustment shall be made in the same manner provided in clause (3) above.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE
OF ADDITIONAL SHARES OF COMMON STOCK. In the event the Corporation, at any time
after the Original Issue Date, shall issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Section (B)(4)(d)(iii)) without consideration or for a consideration per share
less than the Conversion Price with respect to any series of Preferred Stock in
effect on the date of and immediately prior to such issue, then and in such
event, the Conversion Price for such series of Preferred Stock shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction,
(1) the numerator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such issue plus (B) the number of shares of Common Stock which the aggregate consideration (if any, as determined pursuant to Section (B)(4)(d)(v)) received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at such Conversion Price in effect immediately prior to such issuance, and
11 - AMENDMENT TO RESTATED
ARTICLES OF INCORPORATION
|
(2) the denominator of which shall be (A) the
|
number of shares of Common Stock outstanding immediately prior to such issue plus (B) the number of such Additional Shares of Common Stock so issued.
For the purpose of the above calculation, the number of shares of Common Stock outstanding immediately prior to such issue shall be calculated on a fully diluted basis, as if all shares of Series A, B and C Preferred Stock and all Convertible Securities had been fully converted into shares of Common Stock immediately prior to such issuance and any outstanding warrants, options or other rights for the purchase of shares of stock or convertible securities had been fully exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Common Stock, if so convertible) as of such date, but not including in such calculation any additional shares of Common Stock issuable with respect to shares of Series A, B or C Preferred Stock, Convertible Securities or outstanding options, warrants or other rights for the purchase of shares of stock or convertible securities solely as a result of the adjustment of the respective Conversion Prices (or other conversion ratio) resulting from the issuance of Additional Shares of Common Stock causing such adjustment.
(v) DETERMINATION OF CONSIDERATION. For purposes of this Section (B)(4)(d), the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY. Such consideration:
(A) insofar as it consists of cash, shall be computed at the aggregate amount of cash received by the Corporation excluding amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash, shall be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board; and
(C) insofar as it consists of cash and property, shall be computed as provided in clauses (A) and (B) above, prorated for the amount of each form of such consideration so received.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section (B)(4)(d)(iii) relating to Options and convertible Securities shall be determined by dividing:
12 - AMENDMENT TO RESTATED
ARTICLES OF INCORPORATION
|
(A) the total amount, if any, received or
|
receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against dilution) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible securities or, in the case of Options for Convertible Securities, the exercise of such options for Convertible Securities and the conversion or exchange of such Convertible securities,
by (B) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against the dilution) issuable upon the exercise of such options or conversion or exchange of such Convertible Securities.
(e) ADJUSTMENTS TO CONVERSION PRICES FOR STOCK DIVIDENDS AND FOR COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event that the Corporation at any time or from time to time after the Original Issue Date shall declare or pay, without consideration, any dividend on the Common Stock payable in Common Stock or in any right to acquire Common Stock for no consideration or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by stock split, reclassification or otherwise than by payment of a dividend in Common Stock or in any right to acquire Common Stock) or in the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, then the Conversion Price for any series of Preferred Stock in effect immediately prior to such event shall be proportionately decreased or increased, as appropriate, concurrently with the effectiveness of such event. In the event that the Corporation shall declare or pay, without consideration, any dividend on the Common Stock payable in any right to acquire Common Stock for no consideration, then the Corporation shall be deemed to have made a dividend payable in Common Stock in an amount of shares equal to the maximum number of shares issuable upon exercise of such rights to acquire Common Stock.
(f) ADJUSTMENTS FOR RECLASSIFICATIONS AND REORGANIZATIONS. If the Common Stock issuable upon conversion of the Series A, B and C Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for in Section (B)(4)(e) above or a merger or other reorganization referred to in Section (B)(2)(c) above), the Series A, B and C Conversion Price then in effect shall be proportionately adjusted, concurrently with the effectiveness of such reorganization or reclassification, so that the Series A, B and C Preferred Stock shall be convertible into, in lieu of the number of shares of Common Stock
13 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock equivalent to the number of shares of Common Stock that would have been subject to receipt by the holders upon conversion of the Series A, B and C Preferred Stock immediately before such change.
(g) NO IMPAIRMENT. The Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section (B)(4) and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A, B and C Preferred Stock against impairment.
(h) MINIMUM ADJUSTMENT. No adjustment of the Series A, B or C Conversion Price shall be made in an amount less than $.01 per share; provided, however, that any adjustments which are not required to be made as a result of the operation of this Section (B)(4)(h) shall be carried forward and shall be taken into account in any subsequent adjustment made prior to five years from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in Section (B)(4)(d)(iii)(4), no adjustment of the Series A, B or C Conversion Price pursuant to Section (B)(4)(d)(iv) shall have the effect of increasing the Series A, B or C Conversion Price above the Series A, B or C Conversion Price in effect immediately prior to such adjustment.
(i) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each adjustment or readjustment of any Conversion Price pursuant to this Section (B)(4), the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A, B or C Preferred Stock a certificate executed by the Corporation's President or Chief Financial Officer setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation, upon the written request at any time of any holder of Series A, B or C Preferred Stock, shall furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price for such series of Preferred Stock at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Series A, B or C Preferred Stock.
14 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
(j) NOTICES OF RECORD DATE. In the event that the Corporation shall propose at any time (i) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus; (ii) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (iii) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or (iv) to merge or consolidate with or into any other entity or sell, lease or convey all or substantially all of its assets or to liquidate, dissolve or wind up, then, in connection with each such event, the Corporation shall send to the holders of Series A, B and C Preferred Stock:
(1) at least 20 days' prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights (and specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in Section (B)(4)(j)(iii) and (iv) above; and
(2) in the case of the matters referred to in Section (B)(4)(j)(iii) and (iv) above, at least 20 days' prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event).
(k) ISSUE TAXES. The Corporation shall pay any and all issue and other taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series A, B or C Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion.
(l) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A, B and C Preferred Stock, such number of its shares of Common Stock as shall be sufficient from time to time to effect the conversion of all outstanding shares of Series A, B and C Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A, B and C Preferred Stock, the Corporation will take such corporate action as may be necessary, in the opinion of its counsel, to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including
15 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
without limitation engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to these Restated Articles of Incorporation.
(m) FRACTIONAL SHARES. No fractional share shall be issued upon the conversion of any share or shares of Series A, B or C Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A, B or C Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Corporation, in lieu of issuing any fractional share, shall pay the holder otherwise entitled to such fraction a sum in cash equal to the fair market value of such fraction on the date of conversion (as determined in good faith by the Board of Directors).
(n) NOTICES. Any notice required by the provisions of this
Section (B)(4) to be given to the holders of shares of Series A, B or C
Preferred Stock shall be deemed given when personally delivered to such holder
or when deposited in the United States mail, postage prepaid and addressed to
such holder of record at the holder's address appearing on the books of the
Corporation.
(5) RESTRICTIONS AND LIMITATIONS.
(a) As long as any shares of Preferred Stock remain outstanding, the Corporation, without the vote or written consent by (i) the holders of at least a majority of the outstanding shares of Series A, B and C Preferred Stock, voting together as a single class, and (ii) the holder of at least a majority of the outstanding shares of Series C Preferred Stock, voting as a separate class, shall not:
(i) Redeem, purchase or otherwise acquire for value (or pay into or set aside for a sinking fund for such purpose) any share or shares of Preferred Stock or any share or shares of Common Stock; provided, however, that this restriction shall not apply to (a) the conversion of shares of Preferred Stock in accordance with Section (B)(4) hereof, (b) the redemption of shares of Series C Preferred Stock in accordance with Section 2.25 of that certain Investors' Rights Agreement dated as of the Original Issue Date (the "Investors' Rights Agreement"), (c) the repurchase of Registrable Securities pursuant to the terms of Section 2.6 of the Investors' Rights Agreement, (d) the repurchase of shares of Common Stock from Dale E. Carlton and Cynthia Ann Crow-Carlton pursuant to the terms of the Stock Put Agreement dated October 14, 1992, (e) the repurchase of shares of Common Stock from K. Reed Gleason in an amount not to exceed $1,000,000 on terms approved by the Board of Directors provided such repurchase occurs not more than six (6) months from the Original Issue Date, and (f) repurchase of shares of Common Stock from current and
16 - AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
former employees, officers, directors, consultants or other persons performing services for the Company or any subsidiary pursuant to agreements under which the Company has the option to repurchase such shares and on terms approved by the Board of Directors.
(ii) Increase or decrease (other than by conversion) the total number of authorized shares of Preferred Stock;
(b) The Corporation shall not amend its Articles of Incorporation without the approval, by vote or written consent, by the holders of at least a majority of the outstanding shares of a series of Preferred Stock, if such amendment would change any of the rights, preferences or limitations provided for herein for the benefit of any shares of that series of Preferred Stock. Without limiting the generality of the preceding sentence, the Corporation will not amend its Articles of Incorporation without the approval of at least a majority of the outstanding shares of a series of Preferred Stock, if such amendment would:
(i) Authorize or obligate the Corporation to (a) issue
any additional Series A, B or C Preferred Stock above the 1,337,319, 1,009,167
and 1,500,000 shares of Series A, B and C Preferred Stock, respectively,
authorized as of the Original Issue Date, or (b) issue any other equity security
(including any security convertible into or exercisable for any equity security)
senior to the Series A, B or C Preferred Stock as to dividend or liquidation
preferences or any other rights, preferences or limitations of or powers granted
to the Series A, B or C Preferred Stock;
(ii) Change, amend, modify or otherwise alter any of the rights, preferences or limitations provided for herein for the benefit of any shares of Series A, B or C Preferred Stock; or
(iii) Change the provisions for the election of Directors of the Corporation by class vote contained in Section (B)(3)(b) above;
(c) The Corporation shall not amend its Articles of Incorporation if such amendment would change the rights, preferences or limitations of one or more series of Preferred Stock, unless such amendment is approved, by vote or written consent, by the holders of at least a majority of the outstanding shares of each of the other series of Preferred Stock.
(6) NO REISSUANCE OF SERIES A, B OR C PREFERRED STOCK.
17 - AMENDMENT TO RESTATED
ARTICLES OF INCORPORATION
|
No share or shares of Series A, B or C Preferred Stock acquired
|
by the Corporation by reason of repurchase, conversion or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Corporation shall be authorized to issue.
18 - AMENDMENT TO RESTATED
ARTICLES OF INCORPORATION
Exhibit 3.4
RESTATED BYLAWS
OF
CASCADE MICROTECH, INC.
ARTICLE I
OFFICES
1.1 PRINCIPAL OFFICE. The principal office of the corporation shall be located at 14255 S.W. Brigadoon Court, Suite B, Beaverton, Oregon 97005. The corporation may have such other offices as the Board of Directors may designate or as the business of the corporation may from time to time require.
1.2 REGISTERED OFFICE. The registered office of the corporation required by the Oregon Business Corporation Act to be maintained in the State of Oregon may be, but need not be, identical with the principal office in the State of Oregon, and the address of the registered office may be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
2.1 ANNUAL MEETING. The annual meeting of the shareholders shall be in the month of April, on a date to be set by the Board of Directors. The failure to hold an annual meeting at the time stated herein shall not affect the validity of any corporate action.
2.2 SPECIAL MEETINGS. Special meetings of the shareholders may be called by the President or by the Board of Directors and shall be called by the President (or in the event of absence, incapacity, or refusal of the President, by the Secretary or any other officer) at the request of the holders of not less than one-tenth of all the outstanding shares of the corporation entitled to vote at the meeting. The requesting shareholders shall sign, date, and deliver to the Secretary a written demand describing the purpose or purposes for holding the special meeting.
2.3 PLACE OF MEETINGS. Meetings of the shareholders shall be held at the principal business office of the corporation or at such other place, within or without the State of Oregon, as may be determined by the Board of Directors.
2.4 NOTICE OF MEETINGS. Written notice stating the date, time, and place of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called shall be mailed to each shareholder entitled to vote at the meeting at the shareholder's address shown in the corporation's current record of shareholders, with postage thereon prepaid, not less than 10 nor more than fifty (50) days before the date of the meeting.
2.5 WAIVER OF NOTICE. A shareholder may at any time waive any notice required by law, the Articles of Incorporation, or these Restated Bylaws. The waiver must be in writing, be signed by the shareholder entitled to the notice, and be delivered to the corporation for inclusion in the minutes for
1 - RESTATED BYLAWS
filing with the corporate records. A shareholder's attendance at a meeting waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting. The shareholder's attendance also waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.
2.6 RECORD DATE
(a) For the purpose of determining shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, or to vote or to take any other action, the Board of Directors may fix a future date as the record date for any such determination of shareholders, such date in any case to be not more than 70 days before the meeting or action requiring a determination of shareholders. The record date shall be the same for all voting groups.
(b) A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.
(c) If a court orders a meeting adjourned to a date more than 120 days after the date fixed for the original meeting, it may provide that the original record date continue in effect or it may fix a new record date.
2.7 SHAREHOLDERS' LIST FOR MEETING. After the record date for a shareholders' meeting is fixed by the Board of Directors, the Secretary of the corporation shall prepare an alphabetical list of the names of all its shareholders entitled to notice of the shareholders' meeting. The list must be arranged by voting group and within each voting group by class or series of shares and show the address of and number of shares held by each shareholder. The shareholders' list must be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. The corporation shall make the shareholders' list available at the meeting, and any shareholder or the shareholder's agent or attorney is entitled to inspect the list at any time during the meeting or any adjournment. Refusal or failure to prepare or make available the shareholders' list does not affect the validity of action taken at the meeting.
2.8 QUORUM; ADJOURNMENT. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. A majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action in that matter. A majority of shares represented at the meeting, although less than a quorum, may adjourn the meeting from time to time to a different time and place without further notice to any shareholder of any adjournment. At such adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting originally held. Once a share is represented for any purpose at a meeting, it shall be deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting, unless a new record date is set for the adjourned meeting.
2.9 VOTING REQUIREMENTS; ACTION WITHOUT MEETING. Unless otherwise provided in the Articles of Incorporation, each outstanding share entitled to vote shall be entitled to
2 - RESTATED BYLAWS
one vote upon each matter submitted to a vote at a meeting of shareholders. If a quorum exists, action on a matter, other than the election of directors, is approved if the votes cast by the shares entitled to vote favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by law or the Articles of Incorporation. If a quorum exists, directors are elected by a plurality of the votes cast by the shares entitled to vote unless otherwise provided in the Articles of Incorporation. No cumulative voting for directors shall be permitted unless the Articles of Incorporation so provide. Action required or permitted by law to be taken at a shareholders' meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action must be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action and delivered to the corporation for inclusion in the minutes for filing with the corporate records. Action taken under this section is effective when the last shareholder signs the consent, unless the consent specifies an earlier or later effective date. If the law requires that notice of proposed action be given to nonvoting shareholders and the action is to be taken by unanimous consent of the voting shareholders, the corporation must give its nonvoting shareholders written notice of the proposed action at least 10 days before the action is taken. The notice must contain or be accompanied by the same material that, under the Oregon Business Corporation Act, would have been required to be sent to nonvoting shareholders in a notice of meeting at which the proposed action would have been submitted to the shareholders for action.
2.10 PROXIES.
(a) A shareholder may vote shares in person or by proxy by signing an appointment, either personally or by the shareholder's attorney-in-fact. An appointment of a proxy shall be effective when received by the Secretary or other officer of the corporation authorized to tabulate votes. An appointment is valid for 11 months unless a longer period is provided in the appointment form. An appointment is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest that has not been extinguished.
(b) The death or incapacity of a shareholder appointing a proxy shall not affect the right of the corporation to accept the proxy's authority unless notice of the death or incapacity is received by the Secretary or other officer authorized to tabulate votes before the proxy exercises the proxy's authority under the appointment.
2.11 CORPORATION'S ACCEPTANCE OF VOTES.
(a) If the name signed on a vote, consent, waiver, or proxy appointment corresponds to the name of a shareholder, the corporation, if acting in good faith, is entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder.
(b) If the name signed on a vote, consent, waiver, or proxy appointment does not correspond to the name of a shareholder, the corporation, if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if:
(i) The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity;
(ii) The name signed purports to be that of an administrator, executor, guardian, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the
3 - RESTATED BYLAWS
corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
(iii) The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
(iv) The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, or proxy appointment; or
(v) Two or more persons are the shareholder as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners.
(c) The corporation is entitled to reject a vote, consent, waiver, or proxy appointment if the Secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder.
(d) The shares of a corporation are not entitled to vote if they are owned, directly or indirectly, by a second corporation, and the first corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation; provided, however, a corporation may vote any shares, including its own shares, held by it in a fiduciary capacity.
(e) The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this provision shall not be liable in damages to the shareholder for the consequences of the acceptance or rejection. Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this provision is valid unless a court of competent jurisdiction determines otherwise.
ARTICLE III
BOARD OF DIRECTORS
3.1 DUTIES. All corporate powers shall be exercised by or under the authority of the Board of Directors and the business and affairs of the corporation shall be managed by or under the direction of the Board of Directors.
3.2 NUMBER, ELECTION, AND QUALIFICATION. The number of directors of the corporation shall be a minimum of four (4) and a maximum of seven (7), as determined from time to time by the Board of Directors. The shareholders or Board of Directors may change from time to time the number of directors. If the Articles of Incorporation establish the number of directors, then, after shares are issued, only the shareholders may change the number of directors. The directors shall hold office until the next annual meeting of shareholders. Directors need not be residents of the State of Oregon or shareholders of the corporation. The number of directors may be increased or decreased from time to
4 - RESTATED BYLAWS
time by amendment of the Bylaws, but no decrease shall have the effect of shortening the term of any incumbent director.
3.3 CHAIRMAN OF THE BOARD OF DIRECTORS. The directors may elect a director to serve as Chairman of the Board of Directors to preside at all meetings of the Board of Directors and to fulfill any other responsibilities delegated by the Board of Directors.
3.4 REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held without other notice than this Section 3.4 immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Oregon, for the holding of additional regular meetings without other notice than the resolution.
3.5 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the President or any director. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Oregon, as the place for holding any special meeting of the Board of Directors called by them.
3.6 NOTICE. Notice of the date, time, and place of any special meeting of the Board of Directors shall be given at least three days prior to the meeting by any means provided by law. If mailed, notice shall be deemed to be given upon deposit in the United States mail addressed to the director at the director's business address, with postage thereon prepaid. If by telegram, notice shall be deemed to be given when the telegram is delivered to the telegraph company. Notice by all other means shall be deemed to be given when received by the director or a person at the director's business or residential address whom the person giving notice reasonably believes will deliver or report the notice to the director within 24 hours. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.
3.7 WAIVER OF NOTICE. A director may at any time waive any notice required by law, the Articles of Incorporation, or these Bylaws. Unless a director attends or participates in a meeting, a waiver must be in writing, must be signed by the director entitled to notice, must specify the meeting for which notice is waived, and must be filed with the minutes or corporate records.
3.8 QUORUM. A majority of the number of directors fixed by Section 3.2 shall constitute a quorum for the transaction of business at any meeting of the Board of Directors.
3.9 MANNER OF ACTING.
(a) The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a different number is provided by law, the Articles of Incorporation, or these Bylaws.
(b) Members of the Board of Directors may hold a board meeting by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other.
5 - RESTATED BYLAWS
Participation in such a meeting shall constitute presence in person at the meeting.
(c) Any action that is required or permitted to be taken by the directors at a meeting may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all of the directors entitled to vote on the matter. The action shall be effective on the date when the last signature is placed on the consent or at such earlier or later time as is set forth therein. Such consent, which shall have the same effect as a unanimous vote of the directors, shall be filed with the minutes of the corporation.
3.10 VACANCIES. Any vacancy, including a vacancy resulting from an increase in the number of directors, occurring on the Board of Directors may be filled by the shareholders, the Board of Directors, or the affirmative vote of a majority of the remaining directors if less than a quorum of the Board of Directors, or by a sole remaining director. If the vacant office is filled by the shareholders and was held by a director elected by a voting group of shareholders, then only the holders of shares of that voting group are entitled to vote to fill the vacancy. Any directorship not so filled by the directors shall be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose. A director elected to fill a vacancy shall be elected to serve until the next annual meeting of shareholders and until a successor shall be duly elected and qualified. A vacancy that will occur at a specific later date, by reason of a resignation or otherwise, may be filled before the vacancy occurs, and the new director shall take office when the vacancy occurs.
3.11 COMPENSATION. By resolution of the Board of Directors, the directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.
3.12 PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the Board of Directors or a committee of the Board of Directors shall be presumed to have assented to the action taken (a) unless the director's dissent to the action is entered in the minutes of the meeting, (b) unless a written dissent to the action is filed with the person acting as the secretary of the meeting before the adjournment thereof or forwarded by certified or registered mail to the Secretary of the corporation immediately after the adjournment of the meeting or (c) unless the director objects at the meeting to the holding of the meeting or transacting business at the meeting. The right to dissent shall not apply to a director who voted in favor of the action.
3.13 DIRECTOR CONFLICT OF INTEREST.
(a) A transaction in which a director of the corporation has a direct or indirect interest shall be valid notwithstanding the director's interest in the transaction if the material facts of the transaction and the director's interest are disclosed or known to the Board of Directors or a committee thereof and it authorizes, approves, or ratifies the transaction by a vote or consent sufficient for the purpose without counting the votes or consents of directors with a direct or indirect interest in the transaction; or the material facts of the transaction and the director's interest are disclosed or known to shareholders entitled to vote and they, voting as a single group, authorize, approve, or ratify the transaction by a majority vote; or the transaction is fair to the corporation.
6 - RESTATED BYLAWS
(b) A conflict of interest transaction may be authorized, approved, or ratified if it receives the affirmative vote of a majority of directors on the Board of Directors or a committee thereof who have no direct or indirect interest in the transaction. If a majority of such directors vote to authorize, approve, or ratify the transaction, a quorum is present for the purpose of taking action.
(c) A conflict of interest transaction may be authorized, approved, or ratified by a majority vote of shareholders entitled to vote thereon. Shares owned by or voted under the control of a director or an entity controlled by a director who has a direct or indirect interest in the transaction are entitled to vote with respect to a conflict of interest transaction. A majority of the shares, whether or not present, that are entitled to be counted in a vote on the transaction constitutes a quorum for the purpose of authorizing, approving, or ratifying the transactions.
(d) A director has an indirect interest in a transaction if (i) another entity in which the director has a material financial interest or in which the director is a general partner is a party to the transaction or (ii) another entity of which the director is a director, officer, or trustee is a party to the transaction and the transaction is or should be considered by the Board of Directors.
3.14 REMOVAL. The shareholders may remove one or more directors with or without cause at a meeting called expressly for that purpose, unless the Articles of Incorporation provide for removal for cause only. If a director is elected by a voting group of shareholders, only those shareholders may participate in the vote to remove the director.
3.15 RESIGNATION. Any director may resign by delivering written notice to the Board of Directors, its chairperson, or the corporation. Such resignation shall be effective, unless the notice specifies a later effective date, (a) on receipt, (b) five days after its deposit in the United States mails, if mailed postpaid and correctly addressed, or (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by addressee. Once delivered, a notice of resignation is irrevocable unless revocation is permitted by the Board of Directors.
ARTICLE IV
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
4.1 DESIGNATION OF EXECUTIVE COMMITTEE. The Board of Directors may designate two or more directors to constitute an executive committee. The designation of an executive committee, and the delegation of authority to it, shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed by law. No member of the executive committee shall continue to be a member thereof after ceasing to be a director of the corporation. The Board of Directors shall have the power at any time to increase or decrease the number of members of the executive committee, to fill vacancies thereon, to change any member thereof, and to change the functions or terminate the existence thereof. The creation of the executive committee and the appointment of members to it shall be approved by a majority of the directors in office when the action is taken, unless a greater number is required by the Articles of Incorporation or these Bylaws.
7 - RESTATED BYLAWS
4.2 POWERS OF EXECUTIVE COMMITTEE. During the interval between
meetings of the Board of Directors, and subject to such limitations as may be
imposed by resolution of the Board of Directors, the executive committee may
have and may exercise all the authority of the Board of Directors in the
management of the corporation, provided that the committee shall not have the
authority of the Board of Directors with respect to the following matters:
authorizing distributions; approving or proposing to the shareholders actions
that are required to be approved by the shareholders under the Articles of
Incorporation or these Bylaws or by law; filling vacancies on the Board of
Directors or any committee thereof; amending the Articles of Incorporation;
adopting, amending, or repealing bylaws; approving a plan of merger not
requiring shareholder approval; authorizing or approving a reacquisition of
shares, except according to a formula or method prescribed by the Board of
Directors; authorizing or approving the issuance or sale or contract for sale of
shares or determining the designation and relative rights, preferences, and
limitations of a class or series of shares except within limits specifically
prescribed by the Board of Directors.
4.3 PROCEDURES; MEETINGS; QUORUM.
(a) The Board of Directors shall appoint a chairperson from among the members of the executive committee and shall appoint a secretary who may, but need not, be a member of the executive committee. The chairperson shall preside at all meetings of the executive committee and the secretary of the executive committee shall keep a record of its acts and proceedings, which shall be filed with the minutes of the corporation.
(b) Regular meetings of the executive committee, of which no notice shall be necessary, shall be held on such days and at such places as shall be fixed by resolution adopted by the executive committee. Special meetings of the executive committee shall be called at the request of the President or of any member of the executive committee, and shall be held upon such notice as is required by these Bylaws for special meetings of the Board of Directors.
(c) Attendance of any member of the executive committee at a meeting shall constitute a waiver of notice of the meeting. A majority of the executive committee, from time to time, shall be necessary to constitute a quorum for the transaction of any business, and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of the executive committee. Members of the executive committee may hold a meeting of such committee by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such meeting shall constitute presence in person at the meeting.
(d) Any action that is required or permitted to be taken at a meeting of the executive committee may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all members of the executive committee entitled to vote on the matter. The action shall be effective on the date when the last signature is placed on the consent or at such earlier or later time as is set forth therein. Such consent, which shall have the same effect as a unanimous vote of the members of the executive committee, shall be filed with the minutes of the corporation.
(e) The Board of Directors may approve a reasonable fee for the members of the executive committee as compensation for attendance at meetings of the executive committee.
4.4 OTHER COMMITTEES. By the approval of a majority of the directors when the action is taken (unless a greater number is required by the
8 - RESTATED BYLAWS
Articles of Incorporation), the Board of Directors, by resolution, may create one or more additional committees, appoint directors to serve on them, and define the duties of such committee or committees. Each such committee shall have two or more members, who shall serve at the pleasure of the Board of Directors. Such additional committee or committees shall not have the powers proscribed in Section 4.2.
ARTICLE V
OFFICERS
5.1 NUMBER. The officers of the corporation shall be a President and a Secretary. Such other officers and assistant officers as are deemed necessary or desirable may be appointed by the Board of Directors and shall have such powers and duties prescribed by the Board of Directors or the officer authorized by the Board of Directors to prescribe the duties of other officers. A duly appointed officer may appoint one or more officers or assistant officers if such appointment is authorized by the Board of Directors. Any two or more offices may be held by the same person.
5.2 APPOINTMENT AND TERM OF OFFICE. The officers of the corporation shall be appointed annually by the Board of Directors at the first meeting of the Board of Directors held after the annual meeting of the shareholders. If the officers shall not be appointed at the meeting, a meeting shall be held as soon thereafter as is convenient for such appointment of officers. Each officer shall hold office until a successor shall have been duly appointed and qualified or until the officer's death, resignation, or removal.
5.3 QUALIFICATION. An officer need not be a director, shareholder, or a resident of the State of Oregon.
5.4 RESIGNATION AND REMOVAL. An officer may resign at any time by delivering notice of such resignation to the corporation. A resignation is effective on receipt unless the notice specifies a later effective date. If the corporation accepts a specified later effective date, the Board of Directors may fill the pending vacancy before the effective date, but the successor may not take office until the effective date. Once delivered, a notice of resignation is irrevocable unless revocation is permitted by the Board of Directors. Any officer appointed by the Board of Directors may be removed at any time with or without cause. Appointment of an officer shall not of itself create contract rights. Removal or resignation of an officer shall not affect the contract rights, if any, of the corporation or the officer.
5.5 VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise may be filled by the Board of Directors for the unexpired portion of the term.
5.6 PRESIDENT. The President shall be the chief operating officer of the corporation and shall be in general charge of its business and affairs, subject to the control of the Board of Directors. The President shall preside at all meetings of shareholders and at all meetings of directors (unless there is an acting Chairman of the Board presiding at the meeting). The President may execute on behalf of the corporation all contracts, agreements, stock certificates, and other instruments. The President shall from time to time report to the Board of Directors all matters within the President's knowledge affecting the corporation that should be brought to the attention of the Board of Directors. The President shall vote all shares of stock in other corporations owned by the corporation and is empowered to execute proxies, waivers of notice,
9 - RESTATED BYLAWS
consents, and other instruments in the name of the corporation with respect to such stock. The President shall perform other duties assigned by the Board of Directors.
5.7 VICE PRESIDENTS. In the absence of the President or in the event of the President's death or inability or refusal to act, the Vice President (or, in the event there be more than one Vice President, the Vice Presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their election), if any, shall perform the duties of the President and, when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President shall perform other duties assigned by the President or by the Board of Directors.
5.8 SECRETARY. The Secretary shall prepare the minutes of all meetings of the directors and shareholders, shall have custody of the minute books and other records pertaining to the corporate business, and shall be responsible for authenticating the records of the corporation. The Secretary shall countersign all instruments requiring the seal of the corporation and shall perform other duties assigned by the Board of Directors. In the event no Vice President exists to succeed to the President under the circumstances set forth in Section 5.7 above, the Secretary shall make such succession.
5.9 ASSISTANT SECRETARIES. The Assistant Secretaries, when authorized by the Board of Directors or the Bylaws, may sign, with the President or Vice President, certificates for shares of the corporation the issuance of which shall have been authorized by resolution of the Board of Directors. The Assistant Secretaries shall, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries shall, in general, perform such duties as shall be specifically assigned to them in writing by the President or the Board of Directors.
5.10 SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving such salary because the officer is also a director of the corporation.
ARTICLE VI
ISSUANCE OF SHARES
6.1 CERTIFICATES FOR SHARES.
(a) Certificates representing shares of the corporation shall be in a form determined by the Board of Directors. Such certificates shall be signed, either manually or in facsimile, by two officers of the corporation, at least one of whom shall be the President or a Vice President, and may be sealed with the seal of the corporation or a facsimile thereof. All certificates for shares shall be consecutively numbered or otherwise identified.
(b) Every certificate for shares of stock that are subject to any restriction on transfer pursuant to the Articles of Incorporation, the Bylaws, applicable securities laws, agreements among or between shareholders, or any agreement to which the corporation is a party shall have conspicuously noted on the face or back of the certificate either (i) the full text of the restriction or (ii) a statement of the existence of such restriction and that the corporation retains a copy of the restriction. Every certificate issued when the corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either (i) the full text of the designations,
10 - RESTATED BYLAWS
relative rights, preferences, and limitations of the shares of each class and series authorized to be issued and the authority of the Board of Directors to determine variations for future series or (ii) a statement of the existence of such designations, relative rights, preferences, and limitations and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge.
(c) The name and mailing address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. Each shareholder shall have the duty to notify the corporation of his or her mailing address. All certificates surrendered to the corporation for transfer shall be canceled, and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed, or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the Board of Directors prescribes.
6.2 TRANSFER OF SHARES. A transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by the holder's legal representative, who shall furnish proper evidence of authority to transfer, or by the holder's attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes.
6.3 TRANSFER AGENT AND REGISTRAR. The Board of Directors may from time to time appoint one or more transfer agents and one or more registrars for the shares of the corporation, with such powers and duties as the Board of Directors determines by resolution. The signatures of officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or by a registrar other than the corporation itself or an employee of the corporation.
6.4 OFFICER CEASING TO ACT. If the person who signed a share certificate, either manually or in facsimile, no longer holds office when the certificate is issued, the certificate is nevertheless valid.
ARTICLE VII
CONTRACTS, LOANS, CHECKS, AND OTHER INSTRUMENTS
7.1 CONTRACTS. The Board of Directors may authorize any officer or officers and agent or agents to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.
7.2 LOANS. No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances.
7.3 CHECKS; DRAFTS. All checks, drafts, or other orders for the payment of money and notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers and agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors.
11 - RESTATED BYLAWS
7.4 DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies, or other depositories as the Board of Directors may select.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 SEAL. The Board of Directors from time to time may provide for a seal of the corporation, which shall be circular in form and shall have inscribed thereon the name of the corporation, the state of incorporation and the words "Corporate Seal."
8.2 SEVERABILITY. Any determination that any provision of these Bylaws is for any reason inapplicable, invalid, illegal, or otherwise ineffective shall not affect or invalidate any other provision of these Bylaws.
ARTICLE IX
AMENDMENTS
These Bylaws may be altered, amended, or repealed and new bylaws may be adopted by the Board of Directors at any regular or special meeting, subject to repeal or change by action of the shareholders of the corporation.
/s/ Steven E. Wynne
------------------------------------
Steven E. Wynne, Secretary
|
ADOPTED: May 1, 1990.
12 - RESTATED BYLAWS
Exhibit 4.2
CASCADE MICROTECH, INC.
SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
EXHIBIT C
CASCADE MICROTECH, INC.
INVESTOR RIGHTS AGREEMENT
MAY 1, 1990
CASCADE MICROTECH, INC.
INVESTOR RIGHTS AGREEMENT
TABLE OF CONTENTS
1. Restrictions on Transferability of Securities; Registration Rights......1
1.1 CERTAIN DEFINITIONS............................................1
1.2 REQUESTED REGISTRATION.........................................3
1.3 COMPANY REGISTRATION...........................................5
1.4 EXPENSES OF REGISTRATION.......................................6
1.5 REGISTRATION ON FORM S-3.......................................6
1.6 REGISTRATION PROCEDURES........................................7
1.7 INDEMNIFICATION................................................8
1.8 INFORMATION BY HOLDER.........................................10
1.9 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES...........10
1.10 RULE 144 REPORTING............................................10
1.11 TRANSFER OR-ASSIGNMENT OF REGISTRATION RIGHTS.................11
1.12 "MARKET STAND-OFF" AGREEMENT..................................11
1.13 ALLOCATION OF REGISTRATION OPPORTUNITIES......................12
1.14 DELAY OF REGISTRATION.........................................12
1.15 TERMINATION OF REGISTRATION RIGHTS............................12
2. Covenants of the Company and the Shareholder...........................13
2.1 BASIC FINANCIAL INFORMATION...................................13
2.2 ADDITIONAL INFORMATION AND RIGHTS.............................13
2.3 RIGHT OF FIRST REFUSAL........................................14
2.4 RIGHT TO REMAIN EQUAL TO THE LARGEST OUTSIDE SHAREHOLDER......16
2.5 RIGHT TO MAKE COMPETING OFFER.................................16
2.6 COMPANY REPURCHASE OPTION.....................................17
2.7 PROMPT PAYMENT OF TAXES, ETC..................................19
2.8 MAINTENANCE OF PROPERTIES AND LEASES..........................19
2.9 INSURANCE.....................................................19
2.10 KEY PERSON LIFE INSURANCE.....................................20
2.11 ACCOUNTS AND RECORDS..........................................20
2.12 INDEPENDENT ACCOUNTANTS.......................................20
2.13 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES......20
2.14 MAINTENANCE OF CORPORATE EXISTENCE, ETC.......................20
2.15 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS.............20
2.16 EMPLOYEE AND OTHER STOCK ARRANGEMENTS.........................21
2.17 BOARD OF DIRECTORS............................................21
2.18 ATTENDANCE AT BOARD AND COMMITTEE MEETINGS....................21
2.19 INDEBTEDNESS..................................................21
|
2.20 EXTENSION OF CREDIT...........................................21
2.21 COMPENSATION OF EMPLOYEES.....................................21
2.22 TRANSACTIONS WITH AFFILIATES..................................21
2.23 RESTATED ARTICLES OF INCORPORATION............................22
2.24 CONFIDENTIAL DISCLOSURE AGREEMENT.............................22
2.25 HARDWARE PURCHASES............................................22
2.26 TERMINATION OF COVENANTS......................................22
3. Miscellaneous..........................................................23
3.1 GOVERNING LAW.................................................23
3.2 SUCCESSORS AND ASSIGNS........................................23
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER...........................23
3.4 NOTICES, ETC..................................................23
3.5 DELAYS OR OMISSIONS...........................................23
3.6 RIGHTS; SEPARABILITY..........................................24
3.7 TITLES AND SUBTITLES..........................................24
3.8 COUNTERPARTS..................................................24
|
EXHIBITS
Exhibit A: Confidential Disclosure Agreement
Exhibit B: Hardware Purchase Agreement
CASCADE MICROTECH, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is made as of the 1st day of May, 1990, by and among Cascade Microtech, Inc., an Oregon corporation (the "Company"), Hewlett-Packard Company, a California corporation (the "Shareholder"), and each of the Founders (as defined herein).
RECITAL:
WHEREAS, the Company and the Shareholder are parties to that certain Series A Preferred Stock Purchase Agreement, dated of even date herewith (the "Series A Agreement"), under which certain obligations of the Company and the Shareholder are conditioned upon the execution and delivery by the Company and the Shareholder of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants set forth herein,. the parties hereto agree as follows:
SECTION 1
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the meanings set forth below:
(a) "Closing" shall mean the date of the initial sale of the Company's Series A Preferred Stock.
(b) "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.
(d) "Founder" shall mean Eric W. Strid, Cynthia Strid, K. Reed Gleason, Dale E. Carlton and Cynthia Ann Crow-Carlton.
(e) "Founder Shares" shall mean any shares of the Company's Common Stock held by any Founder.
(f) "Holder" shall mean (i) the Shareholder, (ii) any holder of
Registrable Securities to whom the registration rights conferred by this
Agreement have been transferred in compliance with Section 1.11 hereof, and
(iii) except with respect to Section 2.3 hereof, the Founders.
(g) "Initiating Holders" shall mean any Holder or Holders other than the Founders who in the aggregate hold not less than fifty percent (50%) of the outstanding Registrable Securities other than Founder Shares. For purposes of such calculation, holders of Shares shall be considered to hold the shares of Common Stock then issuable upon conversion of such Shares.
(h) "Registrable Securities" shall mean (i) shares of Common Stock issued or issuable pursuant to the conversion of the Shares, (ii) Founder Shares, and (iii) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referred to in clauses (i) or (ii) above; provided, however, that Registrable Securities shall not include any shares of Common Stock which have previously been registered or which have been sold to the public.
(i) The terms "register," "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder and the declaration or ordering of the effectiveness of such registration statement.
(j) "Registration Expenses" shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including without limitation all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, fees and expenses under applicable state securities laws and expenses of any regular or special audits incident to or required by any such registration, but shall not include Selling Expenses and fees and disbursements of counsel for the Holders (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company).
(k) "Rule 144" shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any similar successor rule that may be promulgated by the commission.
(l) "Rule 145" shall mean Rule 145 as promulgated by the commission under the Securities Act, as such rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.
(m) "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.
(n) "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and disbursements of counsel for any Holder (other than the fees and disbursements of counsel included in Registration Expenses).
(o) "Shares" shall mean the Company's Series A Preferred Stock.
1.2 REQUESTED REGISTRATION
(a) REQUEST FOR REGISTRATION. If the Company shall receive from the Initiating Holders, at any time or times not earlier than the earlier of (x) f our years after the date of this Agreement and (y) six months after the effective date of the first registration statement filed by the Company covering an underwritten offering of any of its securities to the general public, a written request that the Company effect any registration with respect to all or a part of the Registrable securities having an aggregate offering price, net of underwriting discounts and expenses, equal to or exceeding $6.00 per share of Common Stock (as adjusted for any stock dividends, combinations or splits with respect to such shares) and the aggregate proceeds of which (after deduction for underwriter's discounts and expenses related to the issuance) exceed $7,500,000 the Company will:
(i) promptly give written notice of the proposed registration to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such registration (including without limitation filing post-effective amendments, appropriate qualifications under applicable state securities laws and appropriate compliance with the Securities Act) and as would permit or facilitate the sale and distribution of all or such number of such Registrable Securities as are specified in such request, together with all or such number of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within 20 days after such written notice from the Company is effective.
The Company shall not be obligated to ef fect or to take any action to effect, any such registration pursuant to this Section 1.2:
(A) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(B) After the Company has initiated two such registrations pursuant to this Section 1.2(a) (counting for these purposes only (1) registrations which have been declared or ordered effective and pursuant to which securities have been sold, and (2) registrations which have been withdrawn by the Holders as to which the Holders have not elected to bear the Registration Expenses pursuant to Section 1.4 hereof and would, absent such election, have been required to bear such expenses);
(C) During the period starting with the date 60 days prior to the Company's good faith estimate of the date of filing of, and ending on a date 180 days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective;
(D) If the Initiating Holders propose to dispose of shares of Registrable Securities which may be immediately registered on Form S-3 pursuant to a request made under Section 1.5 hereof;
(E) If the Initiating Holders do not request that such offering be firmly underwritten by underwriters selected by the Initiating Holders (subject to the consent of the Company, which consent will not be unreasonably withheld); or
(F) If the Company and the Initiating Holders are unable to obtain the commitment of the underwriter described in clause (E) above to a firmly underwritten offer.
(b) Subject to the foregoing clauses (A) through (F), the Company shall f ile a registration statement covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request or requests of the Initiating Holders; provided, however, that if (i) in the good faith judgment of the Board of Directors of the Company such registration would be seriously detrimental to the Company and the Board of Directors of the Company concludes as a result, that it is essential to defer the filing of such registration statement at such time, and (ii) the Company shall furnish to all participating Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company it would be seriously detrimental to the Company for such registration statement to be filed in the near future and that it is therefore essential to defer the filing of such registration statement, then the Company shall have the right to defer such filing for the period during which such disclosure would be seriously detrimental; and, provided further, that (except as provided in clause (C) above) the Company may not defer the filing for a period of more than 120 days after receipt of the request of the Initiating Holders; and, provided further, that the Company shall not def er its obligation in this manner more than once in any 12-month period. Subject to the provisions of Sections 1.2(b) and 1.13 hereof, the registration statement filed pursuant to the request of the Initiating Holders may include other securities of the Company with respect to which registration rights have been granted and may include securities of the Company being ~sold for the account of the Company.
(c) UNDERWRITING. The right of any Holder to registration pursuant to
Section 1.2 shall be conditioned upon the participation of such Holder in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities held by the Holder.
(d) PROCEDURES. If the Company shall request inclusion in any
registration pursuant to Section 1.2 of securities being sold for its own
account or if other persons shall request inclusion in any registration pursuant
to Section 1.2, the Initiating Holders shall offer to include such securities in
the underwriting on behalf of all Holders and may condition such offer on their
acceptance of the further applicable provisions of this Section 1 (including
Section 1.12). The Company (together with all Holders and other persons
proposing to distribute their securities through such underwriting) shall enter
into an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders, which underwriters shall be reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
1.2, if the representative of the underwriters advises the Initiating Holders in
writing that marketing factors require a limitation on the number of shares to
be underw itten, the number of shares to be included in the underwriting or
registration shall be allocated as set forth in Section 1.13 hereof. If a person
who has requested inclusion in such registration as provided above does not
agree to the terms of any such underwriting, such person shall, be excluded
therefrom by written notice from the Company, the underwriter or the Initiating
Holders. Any Registrable Securities or other securities so excluded shall also
be withdrawn from such registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to this Section
1.2(d), then the Company shall offer to all Holders who have retained rights to
include securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
shares do withdrawn, with such shares to be allocated among such Holders
requesting additional inclusion in accordance with Section 1.13.
1.3 COMPANY REGISTRATION.
(a) If the Company shall determine to register any of its securities either for its own account or the account of a security holder or holders exercising their respective demand registration rights (other than pursuant to Sections 1.2 or 1.5 hereof), other than a registration relating solely to employee benefit plans, a registration relating solely to a Rule 145 transaction or a registration on any registration form that does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its best ef f orts to include in such registration (and any related qualification under applicable state securities laws or other compliance), except as set forth in Section 1.3(b) below and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests made by any Holder within 20 days after the written notice from the Company described in clause (i) above is given. Such written request may specify all or any number of a Holder's Registrable Securities.
(b) UNDERWRITING. If the registration of which the company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 1.3(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 1.3 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting (together with the Company and the other holders of securities of the Company with registration rights to participate therein distributing their securities through such underwriting) shall enter into an underwriting agreement in customary f orm with the representative of the underw iter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 1.3, if the representative of the underwriters advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the representative may exclude all Registrable Securities from or limit the number of Registrable Securities to be included in the registration and underwriting (subject to the limitations set forth below). The Company shall so advise all holders of securities requesting registration and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated f irst to the Company for securities being sold for its own account and thereafter as set forth in Section 1.13. If any person does not agree to the terms of any such underwriting, such person shall be excluded therefrom by written notice from the Company or the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of shares of Registrable Securities to.be included in such registration was previously reduced as a result of marketing factors, the Company shall then offer to all persons who have retained the right, to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among the persons requesting additional inclusion in accordance with Section 1.13 hereof.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.3 and 1.5 hereof and all Registration Expenses and reasonable fees of
one counsel f or the selling shareholders in the case of registrations pursuant
to Section 1.2 shall be borne by the Company; provided, however, that if the
Holders bear the Registration Expenses f or any registration proceeding begun
pursuant to Section 1.2 and subsequently withdrawn by the Holders registering
shares therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 1.2 hereof, except in the event that such
withdrawal is based upon material adverse information relating to the Company
that is different from the information known or available (upon request from the
Company or otherwise) to the Holders requesting registration at the time of
their request for registration under Section 1.2, in which event such
registration shall not be treated as a counted registration for purposes of
Section 1.2 hereof, even though the Holders do not bear the Registration
Expenses for such registration. All Selling Expenses relating to securities so
registered shall be borne by the holders of such securities pro rata on the
basis of the number of shares of securities so registered on their behalf.
1.5 REGISTRATION ON FORM S-3
(a) After its initial public offering, the Company shall use its best efforts to qualify for registration on Form S-3 or any comparable or successor form or forms. After the Company has qualified for the use of Form S-3, the Holders of Registrable Securities shall have the right, in addition to the rights contained in the foregoing provisions of this Section 1, to request registrations on Form S-3 (such requests to be in writing and to state the number of shares of Registrable Securities to be disposed of and the intended methods of disposition of such shares by such Holder or Holders); provided, however, that the Company shall not be obligated to effect any such registration if (i) the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) on Form S-3 at an aggregate price to the public of less than $1,000,000, (ii) the Company shall furnish the certification described in Section 1.2(a)(ii) (but subject to the limitations set forth therein), (iii) in a given 12-month period the Company has effected one such registration in any such period For (iv) it is to be effected more than five years after the Company's initial public offering.
(b) If a request complying with the requirements of Section 1.5(a)
hereof is delivered to the Company, the provisions of Sections 1.2(a)(i) and
(ii) and 1.2(b) hereof shall apply to such registration. If the registration is
for an underwritten offering, the provisions of Sections 1.2(c) and 1.2(d)
hereof shall apply to such registration.
1.6 REGISTRATION PROCEDURES. In the case of each registration effected by the Company pursuant to Section 1, the Company will keep each Holder advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of 120 days or until the Holder or Holders shall have completed the distribution described in the registration statement relating thereto, whichever first occurs; provided, however, that (i) such 120-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company; and (ii) in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such 120-day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold, provided that Rule 145 or any successor rule under the Securities Act permits an offering on a continuous or delayed basis and provided further that applicable rules under the Securities Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment that (i) includes any prospectus required by Section 10(a)(3) of the Securities Act or (ii) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included in clauses (i) and (ii) above to be contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing and, at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable Securities registered pursuant to such registration statement and a CUSIP number for all such Registrable securities, in each case not later than the effective date of such registration;
(g) 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 covering the period of at least 12 months, but not more than 18 months, beginning with the first month after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; and
(h) In connection with any underwritten offering pursuant to a registration statement filed pursuant to Section 1.2 hereof, enter into an underwriting agreement reasonably necessary to effect the offer and sale of Common Stock, provided such underwriting agreement contains customary underwriting provisions and provided further that, if the underwriter so requests, the underwriting agreement will contain customary contribution provisions.
1.7 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers, directors and partners, legal counsel and accountants and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Section 1 and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act against all expenses, claims, losses, damages and liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or any violation by the Company of the Securities Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance and will reimburse each such Holder, each of its officers, directors, partners, legal counsel and accountants and each person controlling such Holder, each such underwriter and each person who controls any such underwriter f or any legal and other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by such Holder or underwriter and stated to be specifically for use therein. It is agreed that the indemnity agreement contained in this Section 1.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent has not been unreasonably withheld).
(b) Each Holder, if any Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, will indemnify the Company, each of its directors, officers, partners, legal counsel and accountants and each. underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, each other such Holder and each of its officers, directors and partners and each person controlling such Holder, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading and will reimburse the Company and such Holders, directors, officers, partners, legal counsel and accountants, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder; provided, however, that the obligations of such Holder hereunder shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities (or actions in respect
thereof) if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 1.7 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided, however, that counsel f or the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld) and the Indemnified Party may participate in such defense at such party's expense; and, provided further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 1 to the extent such failure is not prejudicial. No Indemnifying Party, in the defense of any such claim or litigation, shall consent, except with the consent of each Indemnified Party, to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnif ied Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunityto correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.
1.8 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Section 1.
1.9 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. From and after the date of this Agreement, the Company, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, shall not enter into any agreement with any holder or prospective holder of any securities of the company giving such holder or prospective holder any registration rights the terms of which are more favorable than the registration rights granted to the Holders hereunder.
1.10 RULE 144 REPORTING. With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of Registrable Securities to the public without registration, the Company agrees to use its best efforts to:
(a) Make and keep public information regarding the Company available as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after 90 days following the effective date of the first registration under the Securities Act filed by the Company for an offering of its securities to the general public;
(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at any time after it has become subject to such reporting requirements;
(c) As long as a Holder owns any Registrable Securities, furnish to the Holder forthwith upon written request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time from and after 90 days following the effective date of the first registration statement filed by the Company for an offering of its securities to the general public) and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.
1.11 TRANSFER OR-ASSIGNMENT OF REGISTRATION RIGHTS.
(a) Except as provided in Section 1.11(b) below, the rights to cause
the Company to register securities granted to a Holder by the Company under this
Section 1 may be transferred or assigned by a Holder only to a transferee or
assignee of not fewer than 50,000 shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits and the like); provided, however, that the
Company shall be given written notice at the time of or within a reasonable time
after such transfer or assignment, stating the name and address of the
transferee or assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned; and, provided further,
that the transferee or assignee of such rights shall assume the obligations of
such Holder under this Section 1.
(b) The rights to cause the Company to register securities granted to a Holder by the Company under this Section 1 may not be transferred or assigned by any Founder.
1.12 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an underwriter of Common Stock (or other securities) of the Company, a Holder shall not sell or otherwise transfer or dispose of any Common Stock (or other securities) of the Company held such Holder (other than those included in the registration) during the 120-day period following the effective date of a registration statement of the Company filed under the Securities Act, provided that:
(a) such agreement shall only apply to the first such registration statement of the Company, including securities to be sold on its behalf to the public in an underw itten offering; and
(b) all Holders and off icers and directors of the Company enter into similar agreements.
The obligations described in this Section 1. 12 shall not apply to a registration relating solely to employee benef it plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future or a registration relating solely to a commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares (or securities) subject to the foregoing restriction until the end of such 120-day period.
1.13 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in which all of the Registrable Securities requested to be included in a registration on behalf of the Holders and all of the shares held by any other shareholders cannot be so included as a result of limitations of the aggregate number of shares of Registrable Securities and other shares that may be so included, the number of shares of Registrable Securities and, other shares that may be so included shall be allocated as follows:
(a) first, among the Holders other than the Founders (the "Non-founding Holders") requesting inclusion of shares pro rata on the basis of the number of shares of Registrable Securities other than Founder Shares (the "Non-founder Registrable Securities") that would be held by the Non-founding Holders, assuming conversion; provided, however, that, in order that such allocation shall not operate so as to reduce the aggregate number of Non-founder Registrable Securities to be included in such registration, if any Non-founding Holder does not request inclusion of the maximum number of shares of Nonfounder Registrable Securities allocated to such Non-founding Holder pursuant to the procedure described in this Section 1.13, the remaining portion of such Non-founding Holder's allocation shall be reallocated among those requesting Non-founding Holders whose allocations did not satisfy their requests pro rata on the basis of the number of shares of Non-founder Registrable Securities which would be held by such Non-founding Holders, assuming conversion; and, provided further, that this procedure shall be repeated until all of the shares of the Non-founder Registrable Securities which may be included in the registration on behalf of the Non-founding Holders have been so allocated;
(b) second, among the Founders requesting inclusion of shares pro rata on the basis of the number of Founder Shares' that would be held by such Founders; and
(c) finally, among any other shareholders requesting inclusion of their shares of the Company's Common Stock pro rata. on the basis of the number of such shares that would be held by such shareholders.
In no event shall the Company limit the number of Non-founder Registrable Securities to be included in a registration pursuant to this Agreement in order to include shares held by Founders or shareholders with no registration rights, or, except with respect to a registration pursuant to Sections 1.3 and 1.5 above, shares for the Company's own account.
1.14 DELAY OF REGISTRATION. No Holder shall have any right to take any action toorestrain, enjoin or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1.
1.15 TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to request registration or inclusion in any registration pursuant to Section 1.2, 1.3 or 1.5 shall terminate on, or on such date after, the closing of the f irst Companyinitiated registered public offering of Common Stock of the Company if all shares of Registrable Securities held or entitled to be. held upon conversion by such Holder may immediately be sold under Rule 144 during any 90-day period.
SECTION 2
COVENANTS OF THE COMPANY AND THE SHAREHOLDER
The Company hereby covenants and agrees, as long as any Holder owns any Registrable Shares, as follows:
2.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following reports to each Holder:
(a) As soon as practicable after the end of each f iscal year of the company and in any event within 90 days thereafter, a consolidated balance sheet of the Company and its subsidiaries, if any, as at the end of such fiscal year and consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such year, prepared in accordance with generally accepted accounting principles consistently applied and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and certified by independent public accountants of recognized national standing selected by the Company;
(b) As soon as practicable after the end of the first, second and third quarterly accounting periods in each f iscal year of the Company and in any event within 45 days thereafter, a consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of each such quarterly period and consolidated statements of income and cash flows of the Company and its
subsidiaries for such period and for the current f iscal year to date, prepared. in accordance with generally accepted accounting principles consistently applied and setting forth in comparative form the figures for the corresponding periods of the previous fiscal year and to the Company's operating plan then in effect and approved by its Board of Directors, subject to changes resulting from normal year-end audit adjustments, all in reasonable detail and certified by the principal financial or accounting officer of the Company, except that such financial statements need not contain the notes required by generally accepted accounting principles; and
(c) From the date the Company becomes subject to the reporting requirements of the Exchange Act (which shall include any successor federal statute) and in lieu of the financial information required pursuant to Sections 2.1(a) and (b), copies of its annual reports on Form 10-K and its quarterly reports on Form 10-Q, respectively.
2.2 ADDITIONAL INFGRMATION AND RIGHTS
(a) The Company will permit any Holder (or its representative) to visit and inspect any of the properties of the Company, including its books of account and other records (and make copies thereof and take extracts therefrom) and to discuss its affairs, finances and accounts with the Company's officers and its independent public accountants, all at such reasonable times and as often as any such person may reasonably request.
(b) The Company will deliver the reports described below in this
Section 2.2 to each Holder:
(i) As soon as practical after the end of each month and in any event within 30 days thereafter, a consolidated balance sheet of the Company and its subsidiaries, if any, as at the end of such month and consolidated statements of income and cash flows of the Company and its subsidiaries, for each month and for the current fiscal year of the Company to date, all subject to normal year-end audit adjustments, prepared in accordance with generally accepted accounting principles consistently applied and certified by the principal financial or accounting officer of the Company, together with a comparison of such statements to the corresponding periods of the prior fiscal year and to the Company's operating plan then in effect and approved by its Board of Directors;
(ii) Annually (but in any event not later than 90 days after the commencement of each fiscal year of the Company) the business plan of the Companyj in such manner and form as approved by the Board of Directors of the Company, which business plan shall include a projection of income and a projected cash flow statement for such fiscal year and a projected balance sheet as of the end of such fiscal year. Any material changes in such business plan shall be submitted as promptly as practicable after such changes have been approved by the Board of Directors of the Company;
(iii) With reasonable promptness, such other information and data with respect to the Company and its subsidiaries as any Holder may from time to time reasonably request;
(iv) As soon as practicable after the end of each fiscal year and in any event within 90 days thereafter, (A) a report from the Company reporting on compliance with the terms and conditions of this Agreement and any other agreement pursuant to which the Company has borrowed money or sold its securities, and (B) a copy of the annual management review letter of the Company's independent public accountants; and
(v) As soon as practica b le after transmission or occurrence and in any event within 10 days thereof, copies of any reports or communications delivered to any class of the Company's security holders or broadly to the financial community, including any filings by the Company with any securities exchange, the Commission or the National Association of Securities Dealers, Inc.
(c) The provisions of Section 2.1 and this Section 2.2 shall not be in limitation of any rights which any Holder may have with respect to the books and records of the Company and its subsidiaries or to inspect their properties or discuss their affairs, finances and accounts, under the laws of the jurisdictions in which they are incorporated.
2.3 RIGHT OF FIRST REFUSAL. The Company hereby grants to each Holder who owns any Shares or any shares of Common Stock issued upon conversion of the Shares a right of first refusal to purchase its pro rata share of New Securities (as defined below) which the Company, from time to time, may propose to sell and issue. A Holder's pro rata share, for purposes of this right of first refusal, is the ratio of the number of shares of Common Stock owned by the Holder immediately prior to the issuance of' New Securities, assuming full conversion of the Shares, to the total number of shares of Common Stock outstanding immediately prior to the issuance of New Securities, assuming full conversion of the Shares and exercise of all outstanding rights, options and warrants to acquire Common Stock of the Company. Each Holder shall have a right of overallotment such that if any Holder fails to exercise its right hereunder to purchase its pro rata share of New Securities, the other Holders may purchase the non-purchasing Holder's portion on a pro rata basis within 10 days from the date such non-purchasing Holder f ails to exercise its right hereunder to purchase its pro rata share of New Securities. This right of first refusal shall be subject to the following provisions:
(a) "New Securities" shall mean any capital stock (including Common Stock or Preferred Stock) of the Company, whether now authorized or not, any rights, options or warrants to purchase such capital stock and securities of any type whatsoever that are or may become, convertible into capital stock; provided, however, that the term "New Securities" does not include (i) securities purchased under the Series A Agreement; (ii) securities issued upon conversion of the Shares; (iii) any borrowings, direct or indirect, from financial institutions or other persons by the Company, whether or not presently authorized, including any type of loan or payment evidenced by any type of debt instrument, provided such borrowings do not have any equity features including warrants, options or other rights to purchase capital stock and are not convertible into capital stock of the Company; (iv) securities issued to employees, consultants, officers or directors of the Company pursuant to any stock option, stock purchase or stock bonus plan, agreement or arrangement approved by the Board of Directors; (v) securities issued in connection with obtaining lease financing, whether issued to a lessor, guarantor or other person; (vi) securities issued in a firmly
written public offering pursuant to a registration under the Securities Act with
an aggregate offering price to the public of at least $7,500,000 at a price per
share of at least $6.00; (vii) securities issued in connection with any stock
split, stock dividend or recapitalization of the Company; and (viii) any right,
option or warrant to acquire any security convertible into the securities
excluded from the definition of New securities pursuant to clauses (i) through
(vii) above.
(b) In the event the Company proposes to undertake an issuance of New Securities, it shall give each Holder written notice of its intention, describing the type of New Securities and their price and the general terms upon which the Company proposes to issue the same. Each Holder shall have 30 days after any such notice is effective to agree to purchase its pro rata share of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased.
(c) In the event any Holder fails to exercise fully the right of first refusal within such 30-day period and after the expiration of 15-day period for the exercise of the overallotment provisions of this Section 2.3, the Company shall have 120 days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within 120 days from the date of such agreement) to sell the New Securities with respect to which the Holder's right of first refusal option set forth in this section 2.3 was not exercised, at a price and upon terms no more favorable to the purchasers thereof than specified in the company's notice to the other shareholders pursuant to Section 2.3(b). In the event the Company has not sold all of the New securities within such 120-day period or entered into an agreement to sell the New Securities in accordance with the foregoing within 120 days from the date of such agreement, the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Holder in the manner provided in Section 2.3(b) above.
(d) The right of first refusal granted hereunder shall expire upon, and shall not be applicable to, the first firmly underwritten sale of Common Stock of the Company to the public effected pursuant to a registration statement filed with and declared effective by the Commission under the Securities Act, with proceeds of at least $7,500,000 at a price per share of at least $6.00.
(e) The right of f irst refusal set forth in this Section 2.3 may not be assigned or transferred, except that such right is assignable by a Holder to any wholly owned subsidiary or parent of, or to any corporation or entity that is, within the meaning of the Securities Act, controlling, controlled by or under common control with, any Holder.
2.4 RIGHT TO REMAIN EQUAL TO THE LARGEST OUTSIDE SHAREHOLDER. The Shareholder shall have the right at any time to purchase, at a price per share equal to its then fair market value as determined in good faith by the Company's Board of Directors, such number of shares of the Company's Common Stock so as to hold, following such purchase, a total number of shares on an as-converted basis that is at least equal to the total number of shares on an as-converted basis that is held by the Company's largest outside shareholder.
2.5 RIGHT TO MAKE COMPETING OFFER.
(a) In the event that the Company proposes (i) to merge or consolidate the Company with or into any other corporation or any other entity or person, other than to mergethe Company into a wholly owned subsidiary corporation solely for the purpose of reincorporating the Company in Delaware, (ii) to merge, consolidate or undertake any other corporate reorganization, reclassification or other change of any stock or any recapitalization of the Company or any of its subsidiaries as a result of which the Company shall not be the surviving entity or the holders of the outstanding capital stock of the Company immediately prior to any such event shall own less than a majority of the outstanding capital stock of the company on an as-converted basis immediately after the consummation of any such event, (iii) to sell, lease, assign, transfer or otherwise convey all or substantially all of the assets of the Company, including without limitation a sale of all or substantially all of the assets of the Company to any of its subsidiaries, or (iv) to undertake a reorganization of the Company as defined in Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, or in which more than a majority of the outstanding stock of the Company is exchanged in any three-month period (each of such proposed transactions shall be referred to herein as a "Change of Control"), the Company shall notify the Shareholder in writing within seven days of receiving a good fAith written offer from a corporation, entity or person (a "Proposing Party") to engage in any such Change of Control, which notice shall include, to the full extent known to the Company, the terms and conditions of the proposed Change of Control and the name or names of the Proposing Party.
(b) Following delivery of such notice, the Shareholder shall have 15 days to notify the Company in writing whether the Shareholder intends , to submit a written competing offer (a "Competing Offer") within the next 30 days for consideration by the Company and its Board of Directors and, if applicable, its other shareholders.
(c) If the Shareholder so notifies the Company that it intends to submit a Competing offer, the Company, without the prior written consent of the Shareholder, shall not consummate any Change of Control with any other corporation, entity or person until the Shareholder has delivered its Competing Offer to the Company or notified the Company in writing that it does not intend to submit a Competing Offer.
(d) If the Shareholder delivers a Competing Offer to the Company
within such 30-day period, the Company and its Board of Directors shall be
obligated to consider the Competing Offer in good faith. If the Competing Offer
is a cash of f er at a higher price than a cash offer by the Proposing Party,
the Company and its Board of Directors shall be obligated to accept the
Competing Offer or if the Proposing Party's offer is to the Company's
shareholders, to recommend that such shareholders accept the Competing offer. If
(i) the Proposing Party's offer includes, in whole or in part, securities or
assets other than cash as part of the consideration to be paid to the Company or
its shareholders, and (ii) the Competing offer is determined to be of value
equal to or greater than the value of the Proposing Party's offer, as determined
by one or more nationally recognized independent investment banking firms
selected by the Company's Board of Directors to advise it in connection with
such transaction, then the Company shall be obligated to accept the Competing
Offer or, if the
Proposing Party I s offer is to the company's shareholders, to recommend that such shareholders accept the Competing offer.
(e) Each party shall bear its own costs and expenses in connection with the operation of this Section 2.5.
(f) The Company's Board of Directors shall be obligated to comply with the provisions of this Section 2.5 with respect to each subsequent counteroffer by the Proposing Party or any other corporation, entity or person following the submission of a Competing Offer.
2.6 COMPANY REPURCHASE OPTION.
(a) As provided in this Section 2.6, the Company or the Designee (as defined below) shall have an option to repurchase (the "Repurchase Option") all, but not fewer than all, Registrable Securities that the Shareholder proposes to sell, assign, pledge, encumber, transfer or otherwise dispose of for value (the "Offered Shares").
(b) In the event the Shareholder desires to accept a bonafide third party offer for any or all of the Offered Shares, the Shareholder shall promptly deliver to the Secretary of the Company, or such designee as the Company shall indicate to the Shareholder by prompt written notice (the "Designee"), written notice (the "Disposition Notice") of the offer and the basic terms and conditions thereof, including without limitation the proposed purchase price and the identity of the third party.
(c) The Company or the Designee, as the case may be, shall have 30 days following receipt of the Disposition Notice to exercise the Repurchase option to repurchase all of the Offered Shares, which repurchase, except as provided in Section 2.6(d) below, shall be upon the same terms and conditions specified in the Disposition Notice. In order to exercise the Repurchase Option, the Company or the Designee, as the case may be, shall deliver a written notice (the "Exercise Notice") to the Shareholder prior to the expiration of such 30-day period. If the Company or the Designee, as the case may be, exercises the Repurchase option with respect to all of the Offered Shares specified in the Disposition Notice, then the Company or the Designee, as the case may be, shall repurchase the Offered Shares within seven days after delivery of the Exercise Notice; and at such time the Shareholder shall deliver to the Company or the Designee, as the case I may be, the certificate(s) representing the Offered Shares to be repurchased, each certificate properly endorsed for transfer.
(d) If the purchase price specified in the Disposition Notice is payable in the form of property other than cash or in the form of indebtedness or cancellation of indebtedness, the company or the Designee, as the case may be, shall pay the Shareholder, in lieu of such property, indebtedness or cancellation of indebtedness, an equal amount of cash as provided herein. If the Company or the Desinee, as the case may be, and the Shareholder cannot agree on such cash value within 10 days after the receipt by the Company or the Designee, as the case may be, of the Disposition Notice, the valuation shall be made by one nationally recognized independent investment banking firm selected
jointly by the Company's Board of Directors or the Designee, as the case may be, and the Shareholder to advise the Company or the Designee, as the case may be, and the Shareholder in connection with the exercise of the Repurchase Option. In the event that the Company's Board of Directors or the Designee, as the case may be, and the Shareholder cannot agree on the selection of such firm, the Company's Board of Directors or the Designee, as the case may be, and the Shareholder shall each select one firm, and the two firms so selected shall jointly select a third firm to carry out the purposes of this Section 2.6(d). The Company or the Designee, as the case may be, and the Shareholder shall share equally any fees charged by any such firm or firms and any other related expenses.
(e) In the event that the Company or the Designee, as the case may be,
does not provide the Shareholder with the Exercise Notice within 30 days after
the receipt by the Company or the Designee, as the case may be, of the
Disposition-Notice or otherwise fails to comply with the requirements of this
Section 2.6, the Shareholder shall have 30 days from the expiration of such
30-day period in which to sell or otherwise dispose of the Offered Shares upon
terms or conditions (including without limitation the purchase price) no more
favorable to the third party purchaser than those specified in the Disposition
Notice, and the third party purchaser shall then own the Offered Shares free and
clear of the Repurchase Option. In the event that the Shareholder does not sell
or otherwise dispose of the Offered Shares within such latter 30-day period, the
Repurchase Option shall continue to apply to any subsequent proposed sale or
disposition of the Offered Shares by the Shareholder.
(f) All certificates representing Registrable Securities held by the Shareholder that are subject to the Repurchase option shall be endorsed with the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, PLEDGED, ENCUMBERED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE."
(g) In the event (i) the Shareholder desires to accept a bona fide third party offer for fewer than seventy-five percent (75%) of the Registrable Securities then held by the Shareholder, and (ii) the Company desires to indicate a Designee as provided in Section 2.6(b) above, the Shareholder shall have the right to approve the Designee, which approval shall not be unreasonably withheld. The Shareholder must deliver such approval in writing to the Company, and the 30-day period described in Section 2.6(c) above shall not commence until the Shareholder has delivered such approval.
(h) Except as provided in the last sentence of Section 2.6(e), the Company, upon the indication of a Designee, shall have no rights pursuant to this Section 2.6 to repurchase any Registrable Securities held by the Shareholder.
2.7 PROMPT PAYMENT OF TAXES, ETC. The Company will promptly pay and discharge or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Company or any subsidiary; provided, however, that any such tax, assessment charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company shall have set aside on its books adequate reserves with respect thereto; and, provided further, that the Company will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor. The Company will promptly pay or cau ' se to be paid when due or in conformance with customary trade terms or otherwise in accordance with policies related thereto adopted by the Company's Board of Directors, all other indebtedness incident to the operations of the Company.
2.8 MAINTENANCE OF PROPERTIES AND LEASES. The company will keep its properties and those of its subsidiaries in good repair, working order and condition, reasonable wear and tear excepted and from time to time will make all needful and proper repairs, renewals, replacements, additions and improvements thereto; and the Company and its subsidiaries will at all times comply with each material provision of all leases to which any of them is a party or under which any of them occupies property if the breach of such provision might have a material and adverse effect on the condition, financial or otherwise, or operations of the Company.
2.9 INSURANCE. Except as otherwise decided in accordance with policies adopted by the Company's Board of Directors, the Company will keep its assets and those of its subsidiaries which are of an insurable character insured by financially sound and reputable insurers against loss or damage by fire, explosion and other risks customarily insured against by companies in the Company's line of business and the Company will maintain, with financially sound and reputable insurers, insurance against other hazards and risks and liability to persons and property to the extent and in the manner customary for companies in similar businesses similarly situated.
2.10 KEY PERSON LIFE INSURANCE. The Company has as of the date hereof, or within 90 days of the date hereof shall use its best efforts to obtain, from financially sound and reputable insurers, and shall maintain at all times, term life insurance on the lives of Eric W. Strid and Dale E. Carlton in the amount of $1,300,000 each and on the life of K. Reed Gleason in the amount of $650,000. Such policies shall name the Company as loss payee and shall not be cancellable by the Company without prior approval of the Board of Directors.
2.11 ACCOUNTS AND RECORDS. The Company will keep true records and books of account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with generally accepted accounting principles applied on a consistent basis.
2.12 INDEPENDENT ACCOUNTANTS. The Company will retain independent public accountants of recognized national standing who shall certify the Company's financial statements at the end of each fiscal year. In the event the services of the independent public accountants so selected or any firm of, independent public accountants hereafter employed by the Company are terminated, the Company will promptly thereafter notify each Holder and will request the firm of independent public accountants whose services are terminated to deliver to the Holders a letter from such firm setting forth the reasons for the termination of their services. In the event of such termination, the Company will promptly thereafter engage another firm of independent public accountants of recognized national standing. In its notice to the Holders the Company shall state whether the change of accountants was recommended or approved by the Board of Directors of the Company or any committee thereof.
2.13 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. The Company and all its subsidiaries shall duly observe and conform to all valid requirements of governmental authorities relating to the conduct of their businesses or to their properties or assets, the violation of which may have a material and adverse effect on the financial condition or operations of the Company.
2.14 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company shall maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights in or to use patents, processes, licenses, trademarks, trade names, or copyrights and similar rights owned or possessed by it or any subsidiary and deemed by the Company to be necessary to the conduct of their business.
2.15 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. The Company will cause each employee or consultant now or hereafter employed or engaged by it or any subsidiary with access to confidential information to enter into a Proprietary Information and Inventions Agreement substantially in the form attached as Exhibit F to the Series A Agreement.
2.16 EMPLOYEE AND OTHER STOCK ARRANGEMENTS. Without the approval of the Board of Directors, the Company will not issue any of its capital stock, or grant an option or rights to subscribe for, purchase or acquire any of its capital stock, to any director, officer or employee of, or consultant to, the Company or any subsidiary thereof except for the issuance of up to an aggregate of 700,000 shares of Common Stock pursuant to stock purchase agreements or the exercise of stock options granted or to be granted, under the Company's 1986 Non-Qualified Stock Option Plan, as amended. Each acquisition of any shares of capital stock of the Company or any option or right to acquire any shares of capital stock of the Company by any such person will be conditioned upon the execution and delivery by the Company and such person of an agreement substantially in a form approved by the Board of Directors of the Company.
2.17 BOARD OF DIRECTORS. The Company shall use its good faith best efforts to cause the election to its Board of Director of the person designated by the holders of Series A Preferred Stock pursuant to the Company's Articles of Incorporation, as amended from time to time.
2.18 ATTENDANCE AT BOARD AND COMMITTEE MEETINGS.
In the event that the holders of Series A Preferred Stock shall fail for
any reason to designate a representative to be elected to the Company's Board of
Directors pursuant to the Company's Articles of Incorporation, as amended from
time to time, or the person so designated by the holders of Series A Preferred
shall not be elected to the Company's Board of Directors for any reason, then,
and in either such event, the Shareholder may designate a person who, upon
approval by the Company of his or her designation, which approval shall not be
unreasonably withheld, shall have the right to attend all meetings of the Board
of Directors and any committee thereof in a nonvoting observer capacity, to
receive notice of such meetings and to receive the information provided by the
Company to the Board of Directors and its committees at the same time as such
Board or Committee members shall receive such information or as soon thereafter
as practicable. The Shareholder may change the person designated under this
Section 2.18 upon 10 days advance written notice to the Company.
2.19 INDEBTEDNESS. The Company shall not, without the prior approval of the Board of Directors of the Company, incur any indebtedness in excess of $100,000, other than trade credit incurred in the ordinary course of business.
2.20 EXTENSION OF CREDIT. The Company shall not, without the prior approval of the Board of Directors of the Company, extend credit by any method or in any form or manner in excess of $100,000, other than open account credit extended to customers in the ordinary course of business.
2.21 COMPENSATION OF EMPLOYEES. The Company shall not, without the prior approval of the Board of Directors of the Company, compensate any of its employees, including officers, in an amount greater than $100,000.
2.22 TRANSACTIONS WITH AFFILIATES. The Company, without the approval of the disinterested members of the Company's Board of Directors, shall not engage in any loans, leases, contracts or other transactions with any director, officer or key employee of the Company or any member of any such person's immediate family, including the parents, spouse, children and other relatives of any such person, on terms less favorable than the Company would obtain in a transaction with an unrelated party, as determined in good faith by the Board of Directors.
2.23 RESTATED ARTICLES OF INCORPORATION. Within 90 days after the Closing, the company shall file with the Secretary of State of the State.of Oregon Restated Articles of Incorporation of the Company restating the Company's Articles of Incorporation with all amendments in existence immediately prior to the Closing and without any further amendment.
2.24 CONFIDENTIAL DISCLOSURE AGREEMENT. Prior to and as a condition to the fulfillment by the Company of any of the covenants, or the exercise by the Shareholder of any of the rights, set forth in sections 2.1(a) and (b), 2.2 and 2.18 above, the Shareholder shall execute and deliver to the Company a Confidential Disclosure Agreement in substantially the form attached hereto as Exhibit A.
2.25 HARDWARE PURCHASES. The Company shall have the right to purchase in each calendar year up to an aggregate of $300,000 of used test and measurement equipment from the Shareholder pursuant to the terms and conditions of the form of Hardware Purchase Agreement attached hereto as Exhibit B (the "Hardware Agreement"); provided, however, that any add-ons, upgrades or other additional products of the Shareholder purchased by the Company shall be purchased not pursuant to a Hardware Agreement but instead pursuant to the Shareholder's then current terms and conditions of sale and at a price equal to the Shareholder's then current published list price for such add-ons, upgrades or additional products; and, provided further, that the purchase price of any such add-ons, upgrades or additional products shall not be included in the $300,000 calendar year limitation set forth above.
2.26 TERMINATION OF COVENANTS.
(a) Except as provided in Section 2.26(b) below, the covenants set forth in this Section 2 shall terminate and be of no further force and effect after the time of effectiveness of the Company's first firmly underwritten public offering registered under the Securities Act for aggregate proceeds of at least $7,500,000 at a price per share of at least $6.00 (the "Initial Public Offering").
(b) (i) The covenants set forth in Sections 2.1(b), 2.2 (a) and 2.2
(b) shall terminate and be of no further force and effect only in the event that
a Holder owns fewer than 30,000 shares of Registrable Securities.
(ii) The covenants set forth in Sections 2.4, 2.5 and 2.18 shall terminate and be of no further force and effect only in the event that the Shareholder owns fewer than (a) 30, 000 shares of Registrable Securities or (b) five percent (5%) of the outstanding shares of the Company's capital stock on an as-converted basis.
(iii) The covenant set forth in Section 2.17 shall terminate and be of no further force and effect only upon amendment of the Company's Articles of Incorporation to eliminate the right of the holders of Series A Preferred Stock to designate and elect one director.
(iv) The covenant set forth in Section 2.25 shall terminate and be of no further force and effect only upon the earlier of (a) the effectiveness of the Company's Initial Public Offering, and (b) the consummation of a Change in Control.
SECTION 3
MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of Oregon.
3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement (including any Exhibits hereto) constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated, except by a written instrument signed by the Company and the Holders of at least a majority of the outstanding Registrable Securities, and any such amendment, waiver, discharge or termination shall be binding on all the Holders, but in no event shall the obligation of any Holder hereunder be materially increased, except upon the written consent of such Holder.
3.4 NOTICES, ETC.. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid or delivered personally addressed by hand or
special courier to the party to be notified at the address indicated for such
party on the signature page hereof, or at such other address as such party may
designate by 10 days' advance written notice to the other party or parties, as
the case may be, with, in the case of any notice to the Company, a copy to
Steven E. Wynne, Esq., Lindsay, Hart, Neil & Weigler, 222 S.W. Columbia, Suite
1800, Portland, Oregon 97210, in the case of any. notice to the Shareholder, a
copy to Ann 0. Baskins, Assistant Secretary and Corporate Counsel,
Hewlett-Packard Company, 3000 Hanover Street, MS: 20BQ, Palo Alto, California
94304, and, if to a Holder other than the Shareholder, at such address as such
Holder or permitted assignee shall have furnished to the Company in writing.
Delivery of all such notices and other written communications shall be effective
(i) if mailed, five days after mailing and (ii) if delivered upon delivery.
3.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right, power or remedy accruing to any Holder upon any breach or default of the Company under this Agreement shall impair any such right, power or remedy of such Holder and it shall not be construed to be a waiver of any such breach or default or an acquiescence therein or in any similar breach or default thereafter occurring; and no waiver of any single breach or default shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Holder of any breach or default under this Agreement or any waiver on the part of any Holder of any provisions or conditions of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise af forded to any Holder, shall be cumulative and not alternative.
3.6 RIGHTS; SEPARABILITY. Unless otherwise expressly provided herein, a Holder's rights hereunder are several rights, not rights jointly held with any of the other Holders. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
3.7 TITLES AND SUBTITLES. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
3.8 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
CASCADE MICROTECH, INC. HEWLETT-PACKARD COMPANY
By:/s/ Eric W. Strid By:/s/ Gerard V. Schenkkan
--------------------------------------- ---------------------------------
Eric W. Strid Gerard V. Schenkkan
President Business Development Manager
Address: 14255 Brigadoon Court Address: 3000 Hanover Street
Beaverton, OR 97005 MS 20BT
Palo Alto, CA 94304
|
FOUNDERS
/s/ Eric W. Strid
--------------------------------------------
Eric W. Strid
/s/ Dale E. Carlton
--------------------------------------------
Dale E. Carlton
/s/ K. Reed Gleason
--------------------------------------------
K. Reed Gleason
/s/ Cynthia Strid
--------------------------------------------
Cynthia Strid
/s/ Cynthia Ann Crow-Carlton
--------------------------------------------
Cynthia Ann Crow-Carlton
|
Exhibit 4.3
CASCADE MICROTECH, INC.
INVESTORS' RIGHTS AGREEMENT
DECEMBER 16, 1999
TABLE OF CONTENTS
SECTION 1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS..............................2
1.1 CERTAIN DEFINITIONS....................................................................2
1.2 REQUESTED REGISTRATION.................................................................4
1.3 COMPANY REGISTRATION...................................................................7
1.4 EXPENSES OF REGISTRATION...............................................................8
1.5 REGISTRATION ON FORM S-3...............................................................8
1.6 REGISTRATION PROCEDURES................................................................9
1.7 INDEMNIFICATION.......................................................................10
1.8 INFORMATION BY HOLDER.................................................................13
1.9 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES...................................13
1.10 RULE 144 REPORTING....................................................................13
1.11 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS.........................................13
1.12 "MARKET STAND-OFF" AGREEMENT..........................................................14
1.13 ALLOCATION OF REGISTRATION OPPORTUNITIES..............................................14
1.14 DELAY OF REGISTRATION.................................................................15
1.15 TERMINATION OF REGISTRATION RIGHTS....................................................15
1.16 RULE 144A.............................................................................15
SECTION 2. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS..................................................16
2.1 BASIC FINANCIAL INFORMATION...........................................................16
2.2 ADDITIONAL INFORMATION AND RIGHTS.....................................................16
2.3 RIGHT OF FIRST REFUSAL................................................................18
2.4 RIGHT TO REMAIN EQUAL TO THE LARGEST OUTSIDE SHAREHOLDER..............................19
2.5 RIGHT TO MAKE COMPETING OFFER.........................................................20
2.6 COMPANY REPURCHASE OPTION.............................................................21
2.7 RIGHT OF CO-SALE......................................................................23
2.8 PROMPT PAYMENT OF TAXES, ETC..........................................................26
2.9 MAINTENANCE OF PROPERTIES AND LEASES..................................................26
2.10 INSURANCE.............................................................................26
2.11 KEY PERSON LIFE INSURANCE.............................................................26
2.12 ACCOUNTS AND RECORDS..................................................................27
2.13 INDEPENDENT ACCOUNTANTS...............................................................27
2.14 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES..............................27
2.15 MAINTENANCE OF CORPORATE EXISTENCE, ETC...............................................27
2.16 EMPLOYEE INVENTION AND CONFIDENTIALITY AGREEMENT......................................27
2.17 EMPLOYEE AND OTHER STOCK ARRANGEMENTS.................................................27
2.18 BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD........................................27
2.19 ATTENDANCE AT BOARD AND COMMITTEE MEETINGS............................................28
i - Table of Contents
|
2.20 INDEBTEDNESS..........................................................................28
2.21 EXTENSION OF CREDIT...................................................................28
2.22 COMPENSATION OF EMPLOYEES.............................................................28
2.23 TRANSACTIONS WITH AFFILIATES..........................................................28
2.24 CONFIDENTIAL DISCLOSURE AGREEMENT.....................................................29
2.25 SERIES C PREFERRED STOCK PUT RIGHT....................................................29
2.26 AMENDMENT OF RESTATED ARTICLES OF INCORPORATION;
VOTING AGREEMENT......................................................................31
2.27 PROTECTIVE COVENANT...................................................................31
2.28 TERMINATION OF COVENANTS..............................................................31
SECTION 3. MISCELLANEOUS..................................................................................32
3.1 GOVERNING LAW.........................................................................32
3.2 SUCCESSORS AND ASSIGNS................................................................32
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER...................................................32
3.4 NOTICES...............................................................................32
3.5 DELAYS OR OMISSIONS...................................................................33
3.6 RIGHTS; SEVERABILITY..................................................................33
3.7 TITLES AND SUBTITLES..................................................................33
3.8 COUNTERPARTS..........................................................................33
3.9 TERMINATION OF JULY 1999 INVESTORS' RIGHTS AGREEMENT..................................33
|
ii - Table of Contents
SCHEDULES:
----------
SCHEDULE 1 LIST OF SHAREHOLDERS
EXHIBITS:
---------
EXHIBIT A EMPLOYEE INVENTION AND CONFIDENTIALITY AGREEMENT
EXHIBIT B NONDISCLOSURE AND RESTRICTED USE AGREEMENT
EXHIBIT C INSTALLMENT NOTE
iii - Table of Contents
|
CASCADE MICROTECH, INC.
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (the "Agreement") is made as of the 16th day of December, 1999, by and among Cascade Microtech, Inc., an Oregon corporation (the "Company"), each of the parties listed on SCHEDULE 1 hereto (the "Shareholders"), and each of Eric W. Strid, Cynthia Strid and K. Reed Gleason.
RECITALS:
WHEREAS, Agilent Technologies, Inc. (formerly known as Hewlett-Packard Company) ("Agilent Technologies"), Maristeth Fund III, LLC ("Maristeth"), and Electroglas, Inc. ("Electroglas") are the holders of the currently outstanding Series A and B Preferred Stock of the Company (the "Series A and B Preferred Stock") and possesses registration rights, information rights, rights of first refusal, and other rights pursuant to an Investors' Rights Agreement dated as of July 21, 1999, between the Company, Agilent Technologies, Maristeth, Electroglas and the Founders (as defined herein) (the "July 1999 Investors' Rights Agreement"); and
WHEREAS, the Founders hold shares of the Company's Common Stock and possess registration rights pursuant to the July 1999 Investors' Rights Agreement; and
WHEREAS, the Company has negotiated the sale of (i) 1,250,000 shares of its Series C Preferred Stock, and (ii) warrants to purchase 250,000 shares of its Series C Preferred Stock to Teachers Insurance & Annuity Association of America, a New York corporation ("TIAA") subject to the execution of this Agreement; and
WHEREAS, the Company and TIAA are parties to that certain Series C Preferred Stock and Warrant Purchase Agreement, dated of even date herewith (the "Series C Preferred Stock Purchase Agreement"), which provides that as a condition to the closing of the sale of the Series C Preferred Stock to TIAA, this Agreement must be executed and delivered by the Shareholders, each of Eric W. Strid, Cynthia Strid and K. Reed Gleason, and the Company; and
WHEREAS, in exchange for TIAA's willingness to make the investment in the Company as provided in the Series C Preferred Stock and Warrant Purchase Agreement, Agilent Technologies, Maristeth, Electroglas, Eric W. Strid, Cynthia Strid and K. Reed Gleason agree to terminate the July 1999 Investors' Rights Agreement and accept the additional rights and obligations, as the case may be, created pursuant to this Agreement in lieu of the rights and obligations created under the July 1999 Investors' Rights Agreement.
1 - Investors' Rights Agreement
NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants set forth herein, Agilent Technologies, Maristeth, Electroglas, Eric W. Strid, Cynthia Strid and K. Reed Gleason hereby agree that the July 1999 Investors' Rights Agreement shall be superseded and replaced in its entirety by this Agreement, and the parties hereto further agree as follows:
SECTION 1.
RESTRICTIONS ON TRANSFERABILITY OF
SECURITIES; REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the meanings set forth below:
(a) "CLOSING" shall mean the date of the initial sale of the Company's Series C Preferred Stock.
(b) "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
(c) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.
(d) "FOUNDER" shall mean Eric W. Strid, Cynthia Strid, K. Reed Gleason, Dale E. Carlton and Cynthia Ann Crow-Carlton.
(e) "FOUNDER SHARES" shall mean any shares of the Company's Common Stock held by any Founder.
(f) "HOLDER" shall mean (i) the Shareholders, (ii) any holder of the Series C Preferred Stock Warrant, (iii) any holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred in compliance with Section 1.11 hereof, and (iv) except with respect to Section 2.3 hereof, the Founders.
(g) "INITIAL PUBLIC OFFERING" shall mean consummation of the sale of securities pursuant to a registration statement filed by the Company under the Securities Act in connection with the firm commitment underwritten offering of its securities to the general public.
(h) "INITIATING HOLDERS" shall mean any holder or holders who in the aggregate hold not less than fifty percent (50%) of the outstanding shares of the Company's
2 - Investors' Rights Agreement
Series A, Series B or Series C Preferred Stock, including the shares of Common Stock issued upon conversion of such Preferred Stock.
(i) "QUALIFIED PUBLIC OFFERING" shall mean consummation of the sale of securities pursuant to a registration statement filed by the Company under the Securities Act in connection with the firm commitment underwritten offering of shares of common stock at an offering price of at least 125 percent of the then applicable conversion price of the Series C Preferred Stock (appropriately adjusted for any stock split, dividend, combination or other recapitalization) and resulting in net proceeds to the Company of at least $20,000,000.
(j) "REGISTRABLE SECURITIES" shall mean (i) shares of Common Stock issued or issuable pursuant to the conversion of the Shares, (ii) Founder Shares, and (iii) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referred to in clauses (i) or (ii) above; provided, however, that Registrable Securities shall not include any shares of Common Stock which have previously been registered or which have been sold to the public.
(k) The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder and the declaration or ordering of the effectiveness of such registration statement.
(l) "REGISTRATION EXPENSES" shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including without limitation all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, fees and expenses under applicable state securities laws and expenses of any regular or special audits incident to or required by any such registration, but shall not include Selling Expenses and fees and disbursements of counsel for the Holders (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company).
(m) "RULE 144" shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.
(n) "RULE 144A" shall mean Rule 144A as promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.
(o) "RULE 145" shall mean Rule 145 as promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.
3 - Investors' Rights Agreement
(p) "SECURITIES ACT" shall mean the Securities Act of 1933, amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.
(q) "SELLING EXPENSES" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and disbursements of counsel for any Holder (other than the fees and disbursements of counsel included in Registration Expenses).
(r) "SERIES C PREFERRED STOCK WARRANT" shall mean that certain Series C Preferred Stock Purchase Warrant of the Company to purchase up to 250,000 shares of the Company's Series C Preferred Stock issued to TIAA and dated of even date herewith.
(s) "SHARES" shall mean the Company's Series A, Series B and Series C Preferred Stock, including shares of Series C Preferred Stock if and when issued upon exercise of the Series C Preferred Stock Warrant.
(t) "SIGNIFICANT HOLDER" shall mean (i) any Shareholder that holds at least 50,000 Shares, or such number of shares of Common Stock issued upon conversion of 50,000 or more Shares, or any combination thereof (as adjusted for stock splits, stock dividends, combinations and other recapitalizations), (ii) any holder of Series C Preferred Stock Warrant(s) that represents the right to acquire at least 50,000 Shares, or (iii) any transferee of the foregoing, provided such transferee acquires at least 50,000 Shares, or such number of Shares of Common Stock issued upon conversion of 50,000 or more Shares, or Series C Preferred Stock Warrants to acquire at least 50,000 Shares, or any combination thereof.
1.2 REQUESTED REGISTRATION.
(a) If the Company shall receive from the Initiating Holders at any time or times not earlier than the earlier of (x) four years after the date of this Agreement and (y) six months after the effective date of the first registration statement filed by the Company covering an underwritten offering of any of its securities to the general public, a written request that the Company effect any registration with respect to all or a part of the Registrable Securities having an aggregate offering price, net of underwriting discounts and expenses, equal to or exceeding 150 percent of the then applicable conversion price of the Series B Preferred Stock (as adjusted for any stock dividends, combinations or splits with respect to such shares) and the aggregate proceeds of which (after deduction for underwriter's discounts and expenses related to the issuance) exceed $10,000,000 the Company will:
(i) promptly give written notice of the proposed registration to all other Holders; and
4 - Investors' Rights Agreement
(ii) as soon as practicable, use its best efforts to effect such registration (including without limitation filing post-effective amendments, appropriate qualifications under applicable state securities laws and appropriate compliance with the Securities Act) and as would permit or facilitate the sale and distribution of all or such number of such Registrable Securities as are specified in such request, together with all or such number of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within 20 days after such written notice from the Company is effective.
The Company shall not be obligated to effect or to take any action to effect, any such registration pursuant to this Section 1.2:
(A) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(B) After the holders of the Series A, Series B and Series C Preferred Stock have each initiated one such registration pursuant to this Section 1.2(a) (three registrations in total, counting for these purposes only (i) registrations which have been declared or ordered effective and pursuant to which Registrable Securities have been sold, and (ii) registrations which have been withdrawn by the Holders as to which the Holders have not elected to bear the Registration Expenses pursuant to Section 1.4 hereof and would, absent such election, have been required to bear such expenses);
(C) During the period starting with the date 60 days prior to the Company's good faith estimate of the date of filing of, and ending on a date 180 days after the effective date of, a Company-initiated registration; provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective;
(D) If the Initiating Holders propose to dispose of shares of Registrable Securities which may be immediately registered on Form S-3 pursuant to a request made under Section 1.5 hereof;
(E) If the Initiating Holders do not request that such offering be firmly underwritten by underwriters selected by the Initiating Holders (subject to the consent of the Company, which consent will not be unreasonably withheld); or
(F) If the Company and the Initiating Holders are unable to obtain the commitment of the underwriter described in clause (E) above to a firmly underwritten offer.
5 - Investors' Rights Agreement
(b) Subject to the foregoing clauses (A) through (F), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request or requests of the Initiating Holders; provided, however, that if (i) in the good faith judgment of the Board of Directors of the Company such registration would be seriously detrimental to the Company and the Board of Directors of the Company concludes, as a result, that it is essential to defer the filing of such registration statement at such time, and (ii) the Company shall furnish to all participating Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company it would be seriously detrimental to the Company for such registration statement to be filed in the near future and that it is therefore essential to defer the filing of such registration statement, then the Company shall have the right to defer such filing for the period during which such disclosure would be seriously detrimental; and, provided further, that (except as provided in clause (C) above) the Company may not defer the filing for a period of more than 120 days after receipt of the request of the Initiating Holders; and, provided further, that the Company shall not defer its obligation in this manner more than once in any 12-month period.
Subject to the provisions of Sections 1.2(b) and 1.13 hereof, the registration statement filed pursuant to the request of the Initiating Holders may include other securities of the Company with respect to which registration rights have been granted and may include securities of the Company being sold for the account of the Company.
(c) The right of any Holder to registration pursuant to
Section 1.2 shall be conditioned upon the participation of such Holder in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities held by the Holder.
(d) If the Company shall request inclusion in any registration pursuant to Section 1.2 of securities being sold for its own account or if other persons shall request inclusion in any registration pursuant to Section 1.2, the Initiating Holders shall offer to include such securities in the underwriting on behalf of all Holders and may condition such offer on their acceptance of the further applicable provisions of this Section 1 (including Section 1.12). The Company (together with all Holders and other persons proposing to distribute their securities through such underwriting) shall enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders, which underwriters shall be reasonably acceptable to the Company. Notwithstanding any other provision of this Section 1.2, if the representative of the underwriters advises the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, the number of shares to be included in the underwriting or registration shall be allocated as set forth in Section 1.13 hereof. If a person who has requested inclusion in such registration as provided above does not agree to the terms
6 - Investors' Rights Agreement
of any such underwriting, such person shall be excluded therefrom by written notice from the Company, the underwriter or the Initiating Holders. Any Registrable Securities or other securities so excluded shall also be withdrawn from such registration. If shares are so withdrawn from the registration and if the number of shares to be included in such registration was previously reduced as a result of marketing factors pursuant to this Section 1.2(d), then the Company shall offer to all Holders who have retained rights to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among such Holders requesting additional inclusion in accordance with Section 1.13.
1.3 COMPANY REGISTRATION.
(a) If the Company shall determine to register any of its securities either for its own account or the account of a security holder or holders exercising their respective demand registration rights (other than pursuant to Sections 1.2 or 1.5 hereof), other than a registration relating solely to employee benefit plans, a registration relating solely to a Rule 145 transaction or a registration on any registration form that does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its best efforts to include in such registration (and any related qualification under applicable state securities laws or other compliance), except as set forth in Section 1.3(b) below and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests made by any Holder within 20 days after the written notice from the Company described in clause (i) above is given. Such written request may specify all or any number of a Holder's Registrable Securities.
(b) If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
1.3(a)(i). In such event, the right of any Holder to registration pursuant to
this Section 1.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting (together with the Company and the
other Holders of securities of the Company with registration rights to
participate therein distributing their securities through such underwriting)
shall enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected by the Company.
7 - Investors' Rights Agreement
Notwithstanding any other provision of this Section 1.3, if the representative of the underwriters advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the representative may exclude all Registrable Securities from or limit the number of Registrable Securities to be included in the registration and underwriting (subject to the limitations set forth below). The Company shall so advise all Holders of securities requesting registration and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated first to the Company for securities being sold for its own account and thereafter as set forth in Section 1.13. If any person does not agree to the terms of any such underwriting, such person shall be excluded therefrom by written notice from the Company or the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of shares of Registrable Securities to be included in such registration was previously reduced as a result of marketing factors, the Company shall then offer to all persons who have retained the right to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among the persons requesting additional inclusion in accordance with Section 1.13 hereof.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Sections 1.3 and 1.5 hereof and all Registration Expenses and reasonable fees of one counsel for the selling Shareholders in the case of registrations pursuant to Section 1.2 shall be borne by the Company; provided, however, that if the Holders bear the Registration Expenses for any registration proceeding begun pursuant to Section 1.2 and subsequently withdrawn by the Holders registering shares therein, such registration proceeding shall not be counted as a requested registration pursuant to Section 1.2 hereof. Furthermore, in the event that such withdrawal is based upon material adverse information relating to the Company that is different from the information known or reasonably available (upon request from the Company or otherwise) to the Holders requesting registration at the time of their request for registration under Section 1.2, such registration shall not be treated as a counted registration for purposes of Section 1.2 hereof, even though the Holders do not bear the Registration Expenses for such registration. All Selling Expenses relating to securities so registered shall be borne by the Holders of such securities pro rata on the basis of the number of shares of securities so registered on their behalf.
1.5 REGISTRATION ON FORM S-3.
(a) After its Initial Public Offering, the Company shall use its best efforts to qualify for registration on Form S-3 or any comparable or successor form or forms. After the Company has qualified for the use of Form S-3, the Holders of Registrable Securities shall have the right, in addition to the rights contained in the foregoing provisions of this Section 1, to
8 - Investors' Rights Agreement
request registrations on Form S-3 (such requests to be in writing and to state the number of shares of Registrable Securities to be disposed of and the intended methods of disposition of such shares by such Holder or Holders); provided, however, that the Company shall not be obligated to effect any such registration (i) if the Holders, together with the Holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) on Form S-3 at an aggregate price to the public of less than $1,000,000, (ii) if the Company shall furnish the certification described in Section 1.2(b)(ii) (but subject to the limitations set forth therein), (iii) if in a given 12-month period the Company has effected one such registration in any such period, or (iv) if it is to be effected more than five years after the Company's Initial Public Offering, (v) if Form S-3 is not available for such offering by the Holders, or (vi) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance.
(b) If a request complying with the requirements of Section 1.5(a) hereof is delivered to the Company, the provisions of Sections 1.2(a)(i) and (ii) and 1.2(b) hereof shall apply to such registration. If the registration is for an underwritten offering, the provisions of Sections 1.2(c) and 1.2(d) hereof shall apply to such registration.
1.6 REGISTRATION PROCEDURES. In the case of each registration effected by the Company pursuant to Section 1, the Company will keep each Holder advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of 120 days or until the Holder or Holders shall have completed the distribution described in the registration statement relating thereto, whichever first occurs; provided, however, that (i) such 120-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company; and (ii) in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such 120-day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold, provided that Rule 145 or any successor rule under the Securities Act permits an offering on a continuous or delayed basis and provided further that applicable rules under the Securities Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment that (A) includes any prospectus required by Section 10(a)(3) of the Securities Act, or (B) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included in clauses (A) and (B) above to be contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the registration statement;
9 - Investors' Rights Agreement
(b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing and, at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities market on which similar securities issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable Securities registered pursuant to such registration statement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; and
(g) 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 covering the period of at least 12 months, but not more than 18 months, beginning with the first month after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; and
(h) In connection with any underwritten offering pursuant to a registration statement filed pursuant to Section 1.2 hereof, enter into an underwriting agreement reasonably necessary to effect the offer and sale of Common Stock, provided such underwriting agreement contains customary underwriting provisions and provided further that, if the underwriter so requests, the underwriting agreement will contain customary contribution provisions.
1.7 INDEMNIFICATION.
10 - Investors' Rights Agreement
(a) The Company will indemnify each Holder, each of its officers, directors, members, partners, legal counsel and accountants and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Section 1 and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act against all expenses, claims, losses, damages and liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or any violation by the Company of the Securities Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance and will reimburse each such Holder, each of its officers, directors, members, partners, legal counsel and accountants and each person controlling such Holder, each such underwriter and each person who controls any such underwriter for any legal and other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by such Holder or underwriter and stated to be specifically for use therein. It is agreed that the indemnity agreement contained in this Section 1.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent has not been unreasonably withheld).
(b) Each Holder, if any Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, will indemnify the Company, each of its directors, officers, partners, legal counsel and accountants and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, each other Holder and each of its officers, directors, members and partners and each person controlling such Holder, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading and will reimburse the Company and other Holders and each of their respective directors, officers, members, partners, legal counsel and accountants, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus,
11 - Investors' Rights Agreement
offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder; provided, however, that the obligations of such Holder hereunder shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities (or actions in respect thereof) if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld); and provided that in no event shall any indemnity under this Section 1.7 exceed the gross proceeds received by the Holder from the sale of Registrable Securities in the offering.
(c) Each party entitled to indemnification under this Section
1.7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, however, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld) and the Indemnified Party
may participate in such defense at such party's expense; and, provided further,
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
1.7 to the extent such failure is not prejudicial. No Indemnifying Party, in the
defense of any such claim or litigation, shall consent, except with the consent
of each Indemnified Party, to the entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 1.7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
12 - Investors' Rights Agreement
(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.
1.8 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Section 1.
1.9 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. From and after the date of this Agreement, the Company, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, shall not enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the terms of which are more favorable than the registration rights granted to the Holders hereunder.
1.10 RULE 144 REPORTING. With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of Registrable Securities to the public without registration, the Company agrees to use its best efforts to:
(a) Make and keep public information regarding the Company available as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after 90 days following the effective date of the first registration under the Securities Act filed by the Company for an offering of its securities to the general public;
(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at any time after it has become subject to such reporting requirements;
(c) As long as a Holder owns any Registrable Securities furnish to the Holder forthwith upon written request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time from and after 90 days following the effective date of the first registration statement filed by the Company for an offering of its securities to the general public) and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.
1.11 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS.
13 - Investors' Rights Agreement
(a) Except as provided in Section 1.11(b) below, the rights to cause the Company to register securities granted to a Holder by the Company under this Section 1 may be transferred or assigned by a Holder only to a transferee or assignee of not fewer than 50,000 shares of Registrable Securities (as presently constituted and subject to subsequent adjustments for stock splits, stock dividends, reverse stock splits and the like); provided, however, that the Company shall be given written notice at the time of or within a reasonable time after such transfer or assignment, stating the name and address of the transferee or assignee and identifying the securities with respect to which such registration rights are being transferred or assigned; and, provided further, that the transferee or assignee of such rights shall assume the obligations of such Holder under this Section 1.
(b) The rights to cause the Company to register securities granted to a Holder by the Company under this Section 1 may not be transferred or assigned by any Founder.
1.12 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an underwriter of Common Stock (or other securities) of the Company, a Holder shall not sell or otherwise transfer or dispose of any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) during the 120-day period following the effective date of a registration statement of the Company filed under the Securities Act, provided that:
(a) such agreement shall only apply to the first such registration statement of the Company, including securities to be sold on its behalf to the public in an underwritten offering; and
(b) all Holders and officers and directors of the Company enter into similar agreements.
The obligations described in this Section 1.12 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares (or securities) subject to the foregoing restriction until the end of such 120-day period.
1.13 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in which all of the Registrable Securities requested to be included in a registration on behalf of the Holders and all of the shares held by any other Shareholders cannot be so included as a result of limitations of the aggregate number of shares of Registrable Securities and other shares that may be so included, the number of shares of Registrable Securities and other shares that may be so included shall be allocated as follows:
14 - Investors' Rights Agreement
(a) first, among the Holders other than the Founders (the "Non-founding Holders") requesting inclusion of shares pro rata on the basis of the number of shares of Registrable Securities other than Founder Shares (the "Non-founder Registrable Securities") that would be held by the Non-founding Holders, assuming conversion; provided, however, that, in order that such allocation shall not operate so as to reduce the aggregate number of Non-founder Registrable Securities to be included in such registration, if any Non-founding Holder does not request inclusion of the maximum number of shares of Non-founder Registrable Securities allocated to such Non-founding Holder pursuant to the procedure described in this Section 1.13, the remaining portion of such Non-founding Holder's allocation shall be reallocated among those requesting Non-founding Holders whose allocations did not satisfy their requests pro rata on the basis of the number of shares of Non-founder Registrable Securities which would be held by such Non-founding Holders, assuming conversion; and, provided further, that this procedure shall be repeated until all of the shares of the Non-founder Registrable Securities which may be included in the registration on behalf of the Non-founding Holders have been so allocated;
(b) second, among the Founders requesting inclusion of shares pro rata on the basis of the number of Founder Shares' that would be held by such Founders; and
(c) finally, among any other Shareholders requesting inclusion of their shares of the Company's Common Stock pro rata on the basis of the number of such shares that would be held by such Shareholders.
In no event shall the Company limit the number of Non-founder Registrable Securities to be included in a registration pursuant to this Agreement in order to include shares held by Founders or Shareholders with no registration rights, or, except with respect to a registration pursuant to Sections 1.3 and 1.5 above, shares for the Company's own account.
1.14 DELAY OF REGISTRATION. No Holder shall have any right to take any action to restrain, enjoin or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1.
1.15 TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to request registration or inclusion in any registration pursuant to Section 1.2, 1.3 or 1.5 shall terminate on, or on such date after, the closing of the first Company-initiated registered public offering of Common Stock of the Company if all shares of Registrable Securities held or entitled to be held upon conversion by such Holder (and any affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) can be sold in any three (3)-month period without registration in compliance with Rule 144.
1.16 RULE 144A. At the request of a Significant Holder, the Company will deliver to the Significant Holder (or a prospective transferee thereof) such information as is required under Rule 144A in order to permit compliance by the Significant Holder with Rule 144A in connection with a transfer of any Registrable Securities.
15 - Investors' Rights Agreement
SECTION 2.
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
The Company hereby covenants and agrees, as long as any Holder owns any Registrable Shares, as follows:
2.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following reports to each Holder:
(a) As soon as practicable after the end of each fiscal year of the Company and in any event within 90 days thereafter, a consolidated balance sheet of the Company and its subsidiaries, if any, as at the end of such fiscal year and consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such year, prepared in accordance with generally accepted accounting principles consistently applied and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and certified by independent public accountants of recognized national standing selected by the Company;
(b) As soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company and in any event within 45 days thereafter, a consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of each such quarterly period and consolidated statements of income and cash flows of the Company and its subsidiaries for such period and for the current fiscal year to date, prepared in accordance with generally accepted accounting principles consistently applied and setting forth in comparative form the figures for the corresponding periods of the previous fiscal year subject to changes resulting from normal year-end audit adjustments, all in reasonable detail and certified by the principal financial or accounting officer of the Company, except that such financial statements need not contain the notes required by generally accepted accounting principles; and
2.2 ADDITIONAL INFORMATION AND RIGHTS.
(a) The Company will permit any Significant Holder (or its representative) to visit and inspect any of the properties of the Company, including its books of account and other records (and make copies thereof and take extracts therefrom) and to discuss its affairs, finances and accounts with the Company's officers and its independent public accountants, all at such reasonable times and as often as any such person may reasonably request.
(b) The Company will deliver the reports described below in this Section 2.2 to each Significant Holder:
(i) As soon as practical after the end of each month and in any event within 30 days thereafter, a consolidated balance sheet of the Company and its subsidiaries, if
16 - Investors' Rights Agreement
any, as at the end of such month and consolidated statements of income and cash flows of the Company and its subsidiaries, for each month and for the current fiscal year of the Company to date, all subject to normal year-end audit adjustments, prepared in accordance with generally accepted accounting principles consistently applied and certified by the principal financial or accounting officer of the Company, together with a comparison of such statements to the corresponding periods of the prior fiscal year and to the Company's operating plan then in effect and approved by its Board of Directors;
(ii) Not later than 30 days after the commencement of each fiscal year of the Company, the business plan of the Company, in such manner and form as approved by the Board of Directors of the Company, which business plan shall include a projection of income and a projected cash flow statement for such fiscal year and a projected balance sheet as of the end of such fiscal year. Any material changes in such business plan shall be submitted as promptly as practicable after such changes have been approved by the Board of Directors of the Company;
(iii) With reasonable promptness, notice of any material adverse change in the Company's business, assets or financial condition, including, but not limited to, notice of any material litigation involving the Company;
(iv) With reasonable promptness, such other information and data with respect to the Company and its subsidiaries as any Holder may from time to time reasonably request;
(v) As soon as practicable after the end of each fiscal year and in any event within 90 days thereafter, a copy of the annual management review letter of the Company's independent public accountants; and
(vi) As soon as practicable after transmission or occurrence and in any event within 10 days thereof, copies of any reports or communications delivered to any class of the Company's security holders.
(c) The provisions of Section 2.1 and this Section 2.2 shall not be in limitation of any rights which any Holder may have with respect to the books and records of the Company and its subsidiaries or to inspect their properties or discuss their affairs, finances and accounts, under the laws of the jurisdictions in which they are incorporated.
(d) Anything in Section 2 to the contrary notwithstanding, no Holder or Significant Holder by reason of this Agreement shall have access to any trade secrets or classified information of the Company; provided, however, that a Holder or Significant Holder shall have access to such information so long as the Holder or Significant Holder is a member of the Board of Directors of the Company or has designated a representative of such Holder or Significant Holder to the Board of Directors pursuant to Section 5.2(B)(3)(b) of the Company's
17 - Investor's Rights Agreement
Restated Articles of Incorporation. Each Holder hereby agrees to hold in confidence and trust and not to misuse or disclose any confidential information provided pursuant to this Section 2.2.
2.3 RIGHT OF FIRST REFUSAL.
(a) The Company hereby grants to each Significant Holder a right of first refusal to purchase its pro rata share of New Securities (as defined below) which the Company, from time to time, may propose to sell and issue. A Significant Holder's pro rata share, for purposes of this right of first refusal, is the ratio of the number of shares of Common Stock owned by the Significant Holder immediately prior to the issuance of New Securities, assuming full conversion of the Shares, to the total number of shares of Common Stock outstanding immediately prior to the issuance of New Securities, assuming full conversion of the Shares and exercise of all outstanding rights, options and warrants to acquire Common Stock of the Company. This right of first refusal shall be subject to the following provisions:
(b) "NEW SECURITIES" shall mean any capital stock (including Common Stock or Preferred Stock) of the Company, whether now authorized or not, any rights, options or warrants to purchase such capital stock and securities of any type whatsoever that are or may become, convertible into capital stock; provided, however, that the term "New Securities" does not include (i) securities purchased under the Series C Preferred Stock Purchase Agreement; (ii) securities issued upon conversion of the Shares; (iii) any borrowings, direct or indirect, from financial institutions or other persons by the Company, whether or not presently authorized, including any type of loan or payment evidenced by any type of debt instrument, provided such borrowings do not have any equity features including warrants, options or other rights to purchase capital stock and are not convertible into capital stock of the Company; (iv) securities issued to employees, consultants, officers or directors of the Company pursuant to any stock option, stock purchase or stock bonus plan, agreement or arrangement approved by the Board of Directors; (v) securities issued in connection with obtaining lease financing, whether issued to a lessor, guarantor or other person; (vi) securities issued in a firmly underwritten public offering pursuant to a registration under the Securities Act; (vii) securities issued in connection with any stock split, stock dividend or recapitalization of the Company; (viii) securities issued for a consideration less than $500,000 in any single transaction where the purchase price per share is not less than the then applicable conversion price of the Series C Preferred Stock, provided that the aggregate amount of all such transactions shall not exceed $1,500,000, (ix) Series C Preferred Stock issued upon the exercise of the Series C Preferred Stock Warrant, and (x) any right, option or warrant to acquire any security convertible into the securities excluded from the definition of New Securities pursuant to clauses (i) through (viii) above.
(c) In the event the Company proposes to undertake an issuance of New Securities, it shall give each Significant Holder written notice of its intention, describing the type of New Securities and their price and the general terms upon which the Company proposes to issue the same. Each Significant Holder shall have 30 days after any such notice is effective to agree to purchase its pro rata share of such New Securities for the price and upon the terms
18 - Investors' Rights Agreement
specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased, including the number of New Securities the Significant Holder will purchase if one or more other Significant Holders fail to notify the Company of their intention to purchase any New Securities or elects not to purchase their full pro rata share of New Securities as determined in accordance with Section 2.3(a). Failure to respond in writing to the Company's notice shall be deemed a rejection by the Significant Shareholder of the right to acquire its pro rata share of the New Securities. In the event one or more Significant Holders elects not to purchase the New Securities available to them, such New Securities shall be allocated on a pro rata basis to the other Significant Shareholders who requested New Securities in addition to their pro rata allotment.
(d) Following expiration of both the 30-day notice period referred to in Section 2.3(c) and the 10-day period for the exercise of the overallotment provisions of Section 2.3(a), the Company shall have 120 days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within 120 days from the date of such agreement) to sell the New Securities with respect to which the Significant Holders' right of first refusal option set forth in this Section 2.3 was not exercised, at a price and upon terms no more favorable to the purchasers thereof than specified in the Company's notice to the Significant Holders pursuant to Section 2.3(c). In the event the Company has not sold all of the New Securities within such 120-day period or entered into an agreement to sell the New Securities in accordance with the foregoing within 120 days from the date of such agreement, the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Significant Holders in the manner provided in Section 2.3(c) above.
(e) The right of first refusal granted hereunder shall expire upon, and shall not be applicable to, the Qualified Public Offering.
(f) The right of first refusal set forth in this Section 2.3 may not be assigned or transferred, except that such right is assignable by a Significant Holder to any wholly owned subsidiary or parent of, or to any corporation or entity that is, within the meaning of the Securities Act, controlling, controlled by or under common control with, any Significant Holder.
2.4 RIGHT TO REMAIN EQUAL TO THE LARGEST OUTSIDE SHAREHOLDER. Agilent Technologies shall have the right at any time to purchase, at a price per share equal to its then fair market value as determined in good faith by the Company's Board of Directors, such number of shares of the Company's Common Stock so as to hold, following such purchase, a total number of shares on an as-converted basis that is at least equal to the total number of shares on an as-converted basis that is held by the Company's largest outside Shareholder. Notwithstanding the foregoing sentence, if Agilent Technologies disputes the good faith valuation by the Company's Board of Directors, then the per share fair market value shall be determined by a nationally recognized independent investment banking firm selected unanimously by the Board of Directors in good faith. In the event that the investment banking
19 - Investors' Rights Agreement
firm's valuation is 90% or less than the valuation established by the Board of Directors, then all costs of such independent valuation shall be borne by the Company. Otherwise, all cost of the independent valuation shall be borne by Agilent Technologies.
2.5 RIGHT TO MAKE COMPETING OFFER.
(a) In the event that the Company proposes (i) to merge or
consolidate the Company with or into any other corporation or any other entity
or person, other than to merge the Company into a wholly-owned subsidiary
corporation solely for the purpose of reincorporating the Company in another
state, (ii) to merge, consolidate or undertake any other corporate
reorganization, reclassification or other change of any stock or any
recapitalization of the Company or any of its subsidiaries as a result of which
the Company shall not be the surviving entity or the holders of the outstanding
capital stock of the Company immediately prior to any such event shall own less
than a majority of the outstanding capital stock of the Company on an
as-converted basis immediately after the consummation of any such event, (iii)
to sell, lease, assign, transfer or otherwise convey all or substantially all of
the assets of the Company, including without limitation a sale of all or
substantially all of the assets of the Company to any of its subsidiaries, or
(iv) to undertake a reorganization of the Company as defined in Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, or in which more
than a majority of the outstanding stock of the Company is exchanged in any
three-month period (each of such proposed transactions shall be referred to
herein as a "Change of Control"), the Company shall notify Agilent Technologies
in writing within seven days of receiving a good faith written offer from a
corporation, entity or person (a "Proposing Party") to engage in any such Change
of Control, which notice shall include, to the full extent known to the Company,
the terms and conditions of the proposed Change of Control and the name or names
of the Proposing Party.
(b) Following delivery of such notice, Agilent Technologies shall have 15 days to notify the Company in writing whether it intends to submit a written competing offer (a "Competing Offer") within the next 30 days for consideration by the Company and its Board of Directors and, if applicable, its other Shareholders.
(c) If Agilent Technologies so notifies the Company that it intends to submit a Competing offer, the Company, without the prior written consent of Agilent Technologies, shall not consummate any Change of Control with any other corporation, entity or person until Agilent Technologies has delivered its Competing Offer to the Company or notified the Company in writing that it does not intend to submit a Competing Offer.
(d) If Agilent Technologies delivers a Competing Offer to the Company within such 30-day period, the Company and its Board of Directors shall be obligated to consider the Competing Offer in good faith. If the Competing Offer is a cash offer at a higher price than a cash offer by the Proposing Party, the Company and its Board of Directors shall be obligated to accept the Competing Offer or, if the Proposing Party's offer is to the Company's Shareholders, to recommend that such Shareholders accept the Competing Offer. If (i) the
20 - Investors' Rights Agreement
Proposing Party's offer includes, in whole or in part, securities or assets other than cash as part of the consideration to be paid to the Company or its Shareholders, and (ii) the Competing Offer is determined to be of value equal to or greater than the value of the Proposing Party's offer, as determined by one or more nationally recognized independent investment banking firms selected unanimously by the Company's Board of Directors to advise it in connection with such transaction, then the Company shall be obligated to accept the Competing Offer or, if the Proposing Party's offer is to the Company's Shareholders, to recommend that such Shareholders accept the Competing Offer. All costs of such independent valuation shall be borne by the Company.
(e) Each party shall bear its own costs and expenses in connection with the operation of this Section 2.5.
(f) The Company's Board of Directors shall be obligated to comply with the provisions of this Section 2.5 with respect to each subsequent counteroffer by the Proposing Party or any other corporation, entity or person following the submission of a Competing Offer.
2.6 COMPANY REPURCHASE OPTION.
(a) As provided in this Section 2.6, the Company or the Designee (as defined below) shall have an option to repurchase (the "Repurchase Option") all, but not fewer than all, Registrable Securities that a Shareholder proposes to sell, assign, pledge, encumber, transfer or otherwise dispose of for value (the "Offered Shares") to any party that (i) is in the business of manufacturing, distributing or selling any product or service which competes with any product or service of the Company, (ii) is in the business of manufacturing, distributing or selling any semiconductor test or measurement product or service to any party that manufactures semiconductors or integrated circuits, whether or not such semiconductor test or measurement product or service competes with any products or services of the Company, (iii) is in the business of manufacturing, distributing or selling semiconductors or integrated circuits, or (iv) is an affiliate of any of the foregoing unless the affiliate is a "qualified institutional buyer" as that term is defined in Rule 144A(a)(1) of the Securities Act.
(b) In the event a Shareholder desires to accept a bona fide third party offer for any or all of the Offered Shares, the Shareholder shall promptly deliver to the Secretary of the Company, or such designee as the Company shall indicate to the Shareholder by prompt written notice (the "Designee"), written notice (the "Disposition Notice") of the offer and the basic terms and conditions thereof, including without limitation the proposed purchase price and the identity of the third party.
(c) The Company or the Designee, as the case may be, shall have 30 days following receipt of the Disposition Notice to exercise the Repurchase Option to repurchase all of the Offered Shares, which repurchase, except as provided in Section 2.6(d) below, shall be upon the same terms and conditions specified in the Disposition Notice. In order to exercise the
21 - Investors' Rights Agreement
Repurchase Option, the Company or the Designee, as the case may be, shall deliver a written notice (the "Exercise Notice") to the Shareholder prior to the expiration of such 30-day period. If the Company or the Designee, as the case may be, exercises the Repurchase option with respect to all of the Offered Shares specified in the Disposition Notice, then the Company or the Designee, as the case may be, shall repurchase the Offered Shares within seven days after delivery of the Exercise Notice; and at such time the Shareholder shall deliver to the Company or the Designee, as the case may be, the certificate(s) representing the Offered Shares to be repurchased, each certificate properly endorsed for transfer.
(d) If the purchase price specified in the Disposition Notice is payable in the form of property other than cash or in the form of indebtedness or cancellation of indebtedness, the Company or the Designee, as the case may be, shall pay the Shareholder, in lieu of such property, indebtedness or cancellation of indebtedness, an equal amount of cash as provided herein. If the Company or the Designee, as the case may be, and the Shareholder cannot agree on such cash value within 10 days after the receipt by the Company or the Designee, as the case may be, of the Disposition Notice, the valuation shall be made by one nationally recognized independent investment banking firm selected jointly and unanimously by the Company's Board of Directors or the Designee, as the case may be, and the Shareholder to advise the Company or the Designee, as the case may be, and the Shareholder in connection with the exercise of the Repurchase Option. In the event that the Company's Board of Directors or the Designee, as the case may be, and the Shareholder cannot agree on the selection of such firm, the Company's Board of Directors or the Designee, as the case may be, and the Shareholder shall each select one firm, and the two firms so selected shall jointly select a third firm, which firm alone shall complete the valuation required by this Section 2.6(d). The Company or the Designee, as the case may be, and the Shareholder shall share equally any fees charged by any such firm or firms and any other related expenses.
(e) In the event that the Company or the Designee, as the case
may be, does not provide the Shareholder with the Exercise Notice within 30 days
after the receipt by the Company or the Designee, as the case may be, of the
Disposition Notice or otherwise fails to comply with the requirements of this
Section 2.6, the Shareholder shall have 30 days from the expiration of such
30-day period in which to sell or otherwise dispose of the Offered Shares upon
terms or conditions (including without limitation the purchase price) no more
favorable to the third party purchaser than those specified in the Disposition
Notice, and the third party purchaser shall then own the Offered Shares free and
clear of the Repurchase Option. In the event that the Shareholder does not sell
or otherwise dispose of the Offered Shares within such latter 30-day period, the
Repurchase Option shall continue to apply to any subsequent proposed sale or
disposition of the Offered Shares by the Shareholder.
(f) All certificates representing Registrable Securities held by the Shareholders that are subject to the Repurchase Option shall be endorsed with the following legend:
22 - Investors' Rights Agreement
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, PLEDGED, ENCUMBERED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE."
(g) In the event (i) a Shareholder desires to accept a bona fide third party offer for fewer than seventy-five percent (75%) of the Registrable Securities then held by such Shareholder, and (ii) the Company desires to indicate a Designee as provided in Section 2.6(b) above, the Shareholder shall have the right to approve the Designee, which approval shall not be unreasonably withheld. The Shareholder must deliver such approval in writing to the Company, and the 30 day period described in Section 2.6(c) above shall not commence until the Shareholder has delivered such approval.
2.7 RIGHT OF CO-SALE. No Founder will sell, assign, pledge or in any manner transfer any Founder Shares, whether voluntarily or by operation of law, or by gift or otherwise, except by a transfer that meets the requirements set forth in this Section 2.7.
(a) If a Founder desires to sell or otherwise transfer any Founder Shares, then the Founder will first give written notice thereof to the Company and to each Significant Holder. The notice will name the proposed transferee and state the number and type of Founder Shares to be transferred, the proposed consideration and all other terms and conditions of the proposed transfer.
(b) Each Significant Holder will have the right, exercisable upon written notice to the Founder within 30 days after receipt of the Founder's notice pursuant to Section 2.5(a), to participate in such sale of shares by the Founder on a pro rata basis on the same terms and conditions. Such notice will indicate the number of shares such Significant Holder wishes to transfer pursuant to this Section 2.7. To the extent one or more of the Significant Holders exercise such co-sale right, the number of Founder Shares the Founder may transfer in the transaction will be correspondingly reduced. For purposes of this Section 2.7, "participate on a pro rata basis" means that a Significant Holder may sell such proportion of the shares described in the Founder's notice equal to the ratio of (x) the number of shares of the Company's Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Shares) held by such Significant Holder to (y) the total number of shares of the Company's Common stock (including all shares issued or issuable upon conversion of the
23 - Investors' Rights Agreement
Shares) deemed to be held by the participating Significant Holders and the selling Founder as a whole at the close of business on the 10th day following the date of the Founder's notice described above.
(c) Each Significant Holder will effect its participation in the sale by promptly delivering to the Founder for transfer to the prospective transferee one or more certificates, properly endorsed for transfer, that represent the number of shares that such Significant Holder elects to transfer. The certificate or certificates that each Significant Holder delivers to the Founder will be transferred to the prospective transferee in consummation of the transfer of shares pursuant to the terms and subject to the conditions specified in the Founder's notice, and the Founder will concurrently therewith remit to such Significant Holder that portion of the sale proceeds to which such Significant Holder is entitled by reason of its participation in such sale. To the extent that any prospective transferee prohibits such assignment or otherwise refuses to purchase shares from a Significant Holder exercising its right of co-sale hereunder, the Founder will not transfer to such prospective transferee Founder Shares unless and until, simultaneously with such sale, the Founder purchases from such Significant Holder the shares such Significant Holder proposed to transfer hereunder.
(d) If, after the exercise of the right of co-sale (or failure to do so) by the Significant Holder(s), there is an unsubscribed number of shares, the Founder will have 90 days thereafter to sell that number of his or her Founder Shares equal to all of such unsubscribed shares subject to such Founder's notice at a price and upon general terms and conditions materially no more favorable to the purchasers thereof than specified in the Founder's notice. If the Founder has not sold such Founder Shares within said 90-day period, the Founder will not thereafter issue or sell such Founder Shares without first offering such securities to the Company and, if applicable, the Significant Holders in the manner provided in this Section 2.7.
(e) In the event that any Founder makes a transfer in contravention of this Section 2.7 (a "Prohibited Transfer"), each Significant Holder, in addition to such other remedies as may be available at law, in equity or hereunder, will have the put option provided below, and the Founder will be bound by the applicable provisions of such option. In the event of a Prohibited Transfer, each Significant Holder will have the right to sell to the Founder the type and number of shares equal to the type and number of shares such Significant Holder would have been entitled to transfer to the transferee had the Prohibited Transfer been effected in compliance with this Agreement. Such sale will be made on the following terms and subject to the following conditions:
(i) The price at which the Founder Shares are to be sold to the Founder will be equal to the price paid by the transferee to the Founder in the Prohibited Transfer. The Founder will also reimburse each Significant Holder for any and all fees and expenses, including reasonable legal fees and expenses, incurred pursuant to the exercise or the attempted exercise of the Significant Holder's rights hereunder.
24 - Investors' Rights Agreement
(ii) Within 30 days after the later of (1) the date on which a Significant Holder received notice of the Prohibited Transfer or (2) the date on which such Significant Holder otherwise became aware of the Prohibited Transfer, such Significant Holder will, if exercising the put option created hereby, deliver to the Founders the certificate or certificates representing shares to be sold, each certificate to be properly endorsed for transfer.
(f) Anything to the contrary contained herein notwithstanding,
the following transfers will be exempt from the provisions of this Section 2.7:
(i) a transfer of Founder Shares by a Founder to his or her spouse or one or
more of such Founder's family members, or a family trust, limited liability
company or partnership for the benefit of one or more of such Founder's family
members, (ii) a transfer of Founder Shares that is not exempt under (i) above
and where the amount of Founder Shares transferred constitutes, when aggregated
with other transfers made by such Founder not exempt under (i), less than 10% of
the total number of shares held by the Founder as of the date of this Agreement,
and (iii) as to K. Reed Gleason only, in addition to transfers under (ii) above,
the sale of Founder's Shares for an amount up to $1,000,000 to the Company on
terms approved by the Board of Directors, provided, however, that such sale is
completed not more than six months from the date of this Agreement. In the case
of any transfer under (i) above, the transferee of the Founder Shares will
receive and hold such Founder Shares subject to the provisions of this
Agreement, and there will be no further transfer of such Founder Shares except
in accord with this Agreement. In the case of a transfer under (ii) or (iii)
above, the transferee will receive and hold the Founder Shares free and clear of
the obligations of this Agreement.
(g) Any certificates or other documents representing Founder Shares held by Founder will bear on their face the following legend so long as the foregoing right of co-sale remains in effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF CO-SALE IN FAVOR OF CERTAIN SHAREHOLDERS OF THE CORPORATION AS SET FORTH IN THAT CERTAIN INVESTORS' RIGHTS AGREEMENT, DATED AS OF JULY 21, 1999, AND AS AMENDED FROM TIME TO TIME, AMONG THE CORPORATION AND CERTAIN OF ITS SHAREHOLDERS, A COPY OF WHICH IS AVAILABLE UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.
(h) The right of co-sale established by this Section 2.7 will terminate upon the effective date of the registration statement pertaining to the Qualified Public Offering.
(i) The co-sale right set forth in this Section 2.7 may not be assigned or transferred, except that such right is assignable by a Significant Holder to any wholly owned
25 - Investors' Rights Agreement
subsidiary or parent of, or to any corporation or entity that is, within the meaning of the Securities Act, controlling, controlled by or under common control with, any Significant Holder.
2.8 PROMPT PAYMENT OF TAXES, ETC. The Company will promptly pay and discharge or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Company or any subsidiary; provided, however, that any such tax, assessment charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company shall have set aside on its books adequate reserves with respect thereto; and, provided further, that the Company will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor. The Company will promptly pay or cause to be paid when due or in conformance with customary trade terms or otherwise in accordance with policies related thereto adopted by the Company's Board of Directors, all other indebtedness incident to the operations of the Company.
2.9 MAINTENANCE OF PROPERTIES AND LEASES. The Company will keep its properties and those of its subsidiaries in good repair, working order and condition, reasonable wear and tear excepted and from time to time will make all needful and proper repairs, renewals, replacements, additions and improvements thereto; and the Company and its subsidiaries will at all times comply with each material provision of all leases to which any of them is a party or under which any of them occupies property if the breach of such provision might have a material and adverse effect on the condition, financial or otherwise, or operations of the Company.
2.10 INSURANCE. Except as otherwise decided in accordance with policies adopted by the Company's Board of Directors, the Company will keep its assets and those of its subsidiaries which are of an insurable character insured by financially sound and reputable insurers against loss or damage by fire, explosion and other risks customarily insured against by companies in the Company's line of business and the Company will maintain, with financially sound and reputable insurers, insurance against other hazards and risks and liability to persons and property to the extent and in the manner customary for companies in similar businesses similarly situated.
2.11 KEY PERSON LIFE INSURANCE. The Company has obtained, from financially sound and reputable insurers, and shall maintain at all times, term life insurance on the lives of Eric W. Strid in the amount of $1,000,000 and K. Reed Gleason in the amount of $900,000. Such policies shall name the Company as loss payee and shall not be cancelable by the Company without prior approval of the Board of Directors.
2.12 ACCOUNTS AND RECORDS. The Company will keep true records and books of account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with generally accepted accounting principles applied on a consistent basis.
26 - Investors' Rights Agreement
2.13 INDEPENDENT ACCOUNTANTS. The Company will retain independent public accountants of recognized national standing who shall (i) provide an unqualified opinion on the Company's financial statements at the end of each fiscal year or set forth in writing the reasons for any qualification of such opinion; and (ii) deliver, to the Holders, a copy of any notice of termination of such accountants' engagement as the Company's public auditors, together with a description of the reasons for such termination.
2.14 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. The Company and all its subsidiaries shall duly observe and conform to all valid requirements of governmental authorities relating to the conduct of their businesses or to their properties or assets, the violation of which may have a material and adverse effect on the financial condition or operations of the Company.
2.15 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company shall maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights in or to use patents, processes, licenses, trademarks, trade names, or copyrights and similar rights owned or possessed by it or any subsidiary and deemed by the Company to be necessary to the conduct of their business.
2.16 EMPLOYEE INVENTION AND CONFIDENTIALITY AGREEMENT. The Company will cause each employee or consultant now or hereafter employed or engaged by it or any subsidiary with access to confidential information to enter into an Employee Invention and Confidentiality Agreement substantially in the form attached as EXHIBIT A hereto.
2.17 EMPLOYEE AND OTHER STOCK ARRANGEMENTS. Without the approval of the Board of Directors, the Company will not issue any of its capital stock, or grant an option or rights to subscribe for, purchase or acquire any of its capital stock, to any director, officer or employee of, or consultant to, the Company or any subsidiary thereof except for the issuance of up to an aggregate of 2,200,000 shares of Common Stock pursuant to stock purchase agreements or the exercise of stock options granted or to be granted, under the Company's 1993 Stock Incentive Plan, as amended. Each acquisition of any shares of capital stock of the Company or any option or right to acquire any shares of capital stock of the Company by any such person will be conditioned upon the execution and delivery by the Company and such person of an agreement substantially in a form approved by the Board of Directors of the Company.
2.18 BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD. The Company shall use its best efforts to cause the election to its Board of Director of the persons designated by the holders of Series A, Series B and Series C Preferred Stock pursuant to the Company's Restated Articles of Incorporation, as amended from time to time. The person designated as a director by the holders of the Series C Preferred Stock shall have the right to attend each and every committee of the Board of Directors which may be established from time to time.
27 - Investors' Rights Agreement
2.19 ATTENDANCE AT BOARD AND COMMITTEE MEETINGS. In the event that the holders of Series A, Series B or Series C Preferred Stock shall fail for any reason to designate a representative to be elected to the Company's Board of Directors pursuant to the Company's Restated Articles of Incorporation, as amended from time to time, or the person so designated by the holders of Series A, Series B or Series C Preferred Stock shall not be elected to the Company's Board of Directors for any reason, then, and in either such event, the holders of not less than a majority of the shares of Series A, Series B or Series C Preferred Stock, as the case may be, may designate a person (and in the case of the holders of Series C Preferred Stock, three persons) who, upon approval by the Company of his or her designation, which approval shall not be unreasonably withheld, shall have the right to attend all meetings of the Board of Directors and any committee thereof in a nonvoting observer capacity, to receive notice of such meetings and to receive the information provided by the Company to the Board of Directors and its committees at the same time as such Board or Committee members shall receive such information or as soon thereafter as practicable; provided, however, that in the case of the three designees of the holders of the Series C Preferred Stock, their attendance at the meetings of the Board of Directors and its committees is limited to any two of such three designees. The holders of Series A, Series B and Series C Preferred Stock may change their respective persons designated under this Section 2.19 upon 10 days advance written notice to the Company.
2.20 INDEBTEDNESS. The Company shall not, without the prior approval of the Board of Directors of the Company, incur any indebtedness in excess of $250,000, other than trade credit incurred in the ordinary course of business.
2.21 EXTENSION OF CREDIT. The Company shall not, without the prior approval of the Board of Directors of the Company, extend credit by any method or in any form or manner in excess of $250,000, other than open account credit extended to customers in the ordinary course of business.
2.22 COMPENSATION OF EMPLOYEES. The Company shall not, without the prior approval of the Board of Directors of the Company, compensate any of its employees, including officers, in an amount greater than $150,000, which amount shall include the employee's base salary and bonus, as well as the fair market value, as of the date of grant or issuance, of any shares of the Company's Common Stock granted or issued to the employee by option or otherwise.
2.23 TRANSACTIONS WITH AFFILIATES. The Company, without the approval of the disinterested members of the Company's Board of Directors, shall not engage in any loans, leases, contracts or other transactions with any director, officer or key employee of the Company or any member of any such person's immediate family, including the parents, spouse, children and other relatives of any such person, on terms less favorable than the Company would obtain in a transaction with an unrelated party, as determined in good faith by the Board of Directors.
28 - Investors' Rights Agreement
2.24 CONFIDENTIAL DISCLOSURE AGREEMENT. Prior to and as a condition to the fulfillment by the Company of any of the covenants, or the exercise by the Shareholders of any of the rights, set forth in Sections 2.1(a) and (b), 2.2 and 2.18 above, the Shareholders shall execute and deliver to the Company a Nondisclosure and Restricted Use Agreement in substantially the form attached hereto as EXHIBIT B.
2.25 SERIES C PREFERRED STOCK PUT RIGHT.
(a) At any time after the fifth anniversary of the date of this Agreement, holders of 50% or more of the Series C Preferred Stock then outstanding, upon notice to the Company (the "Put Notice"), shall be entitled to sell, and the Company shall be obligated to purchase from such holders, all, but not less than all, of the Series C Preferred Stock held by such holders at a per share purchase price (the "Put Option Purchase Price") equal to the greater of the Fair Market Value (as defined below) or $8.00 per share of Series C Preferred Stock (as adjusted for any stock splits, stock dividends, recapitalizations or the like) plus all declared but unpaid dividends on such share. For purposes of this Section 2.25, the Fair Market Value shall be the fair value of a share of Common Stock of the Company calculated on a fully-diluted basis as if all shares of Preferred Stock and all convertible securities had been fully converted into shares of Common Stock and any outstanding warrants, options or other rights for the purchase of shares of stock or convertible securities had been fully exercised as of the date of such valuation and all consideration paid upon such exercise had been received by the Company. The Fair Market Value shall be determined in good faith by the Board of Directors as of the date of receipt of a Put Notice. Notwithstanding the foregoing sentence, if the holders of not less than a majority of the Series C Preferred Stock dispute the good faith valuation by the Company's Board of Directors, then the Fair Market Value shall be determined by a nationally recognized independent investment banking firm selected unanimously by the Board of Directors in good faith. In the event that the investment banking firm's valuation is 110% or more than the valuation established by the Board of Directors, then all costs of such independent valuation shall be borne by the Company. Otherwise, all costs of the independent valuation shall be borne pro rata based on share holdings by those holders of the Series C Preferred Stock who elect to dispute the good faith valuation by the Company's Board of Directors.
(b) Upon receipt of the Put Notice, the Company shall be obligated to purchase the shares of Series C Preferred Stock specified therein, at the Put Option Purchase Price therefor, and shall, subject to Section 2.25(c) hereof, pay to each of the holders of the Series C Preferred Stock, against delivery of the securities evidencing any such Series C Preferred Stock, an amount equal to the Put Option Purchase Price multiplied by the number of shares of Series C Preferred Stock held by such holder, such amount to be payable in immediately available funds on such date as the Company shall specify to such holders, but in any event not later than 180 days after the receipt by the Company of the Put Notice. Any Series C Preferred Stock purchased by the Company pursuant to this Section 2.25 shall be canceled and shall not be reissued.
29 - Investors' Rights Agreement
(c) In lieu of paying all or any portion of the Put Option Purchase Price in immediately available funds, the Company may, at its sole election, pay any portion of the Put Option Purchase Price in the form of one or more Installment Purchase Notes (as hereinafter defined) the principal amount of which Installment Purchase Note(s), together with any immediately available funds, if any, paid to the holders of the Series C Preferred Stock, shall equal the number of shares of Series C Preferred Stock then outstanding multiplied by the Put Option Purchase Price. An "Installment Purchase Note" shall mean an unsecured note of the Company, payable in three (3) equal annual installments of principal and interest, bearing interest at a rate of 6% per annum from the date of issue and having the terms and conditions substantially the same as those set forth in EXHIBIT C hereto.
(d) Nothing in this Section 2.25 shall obligate the Company to purchase the Series C Preferred Stock following receipt of the Put Notice if the funds legally available at the time of the proposed purchase (including by way of issuance of Installment Purchase Notes) are insufficient to purchase all such shares. In the event such purchase shall be deemed by the Company to be unlawful, then the Company shall promptly so notify the holders of the Series C Preferred Stock who may elect, by notice to the Company from the holders of not less than a majority of the Series C Preferred Stock, sent within 15 days of the receipt of notice of nonpayment from the Company, to (i) withdraw the Put Notice, in which case the put right described in this Section 2.25 shall remain in full force and effect, or (ii) keep such Put Notice in effect, in which case the Company shall be obligated to initially purchase, in accordance with Section 2.25(b), only those number of shares of Series C Preferred Stock for which it has funds legally available at the time of the proposed purchase (including by way of issuance of Installment Purchase Notes), and subsequently purchase the remaining shares of Series C Preferred Stock as soon as such purchase is no longer unlawful.
(e) The put right provided for in this Section 2.25 shall terminate upon the earlier to occur of (i) a Qualified Public Offering, (ii) the closing of any acquisition of the Company by means of merger or other form of corporate reorganization in which more than 50% of the outstanding shares of the Company are exchanged for securities or other consideration issued or caused to be issued by the acquiring corporation or its subsidiary (other than a mere reincorporation transaction), (iii) the closing of a sale of all or substantially all of the assets of the Company, (iv) the date specified by vote, written consent or agreement of holders of at least a majority of the shares of Series C Preferred Stock then outstanding, and (v) the date on which all of the Series C Preferred Stock has been converted into shares of Common Stock or redeemed.
2.26 AMENDMENT OF RESTATED ARTICLES OF INCORPORATION; VOTING AGREEMENT. In order to increase the size of the Board of Directors of the Company to provide enough authorized Board seats to permit TIAA to designate a person to the Board without the need to terminate the service of any current Board member, the Company hereby agrees, at its next meeting of shareholders, but in any event not later than July 31, 2000, to (i) amend its Restated Articles of Incorporation to delete the first sentence of Section 5.2 (A)(3)(b) relating to the variable size of
30 - Investors' Rights Agreement
its Board of Directors and (ii) adopt an amendment to the Bylaws of the Company providing that the authorized number of directors of the Company shall be fixed by the Board of Directors, but in no event shall there be fewer than five (5) nor more than (9) members. At any such meeting of shareholders of the Company called for such purpose, whether by ballot, written consent, proxy or otherwise, each of the Shareholders, Eric W. Strid, Cynthia Strid, K. Reed Gleason and TIAA, hereby agrees to (i) vote all shares of the Company's capital stock held by such person to amend the Company's Restated Articles of Incorporation in the manner described in the foregoing sentence and (ii) to direct their respective designees to the Board of Directors to vote for an amendment to the Company's Bylaws in the manner described in the foregoing sentence.
2.27 PROTECTIVE COVENANT. From and after the date of the Agreement, the Company, without the prior written consent of (i) Agilent Technologies with respect to Sections 2.4 and 2.5, (ii) the holders of not less than a majority of the shares of each of the Series A, Series B, and Series C Preferred Stock with respect to Sections 2.7, 2.18, 2.19 and this Section 2.27, (iii) the holders of not less than a majority of the shares of Series C Preferred Stock with respect to Sections 2.25 and 2.26, and (iv) the holders of a majority of the Registrable Securities as to all other rights and covenants in this Section 2, shall not enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any rights the terms of which are more favorable than the rights and covenants granted to the Holders and Significant Holders in this Section 2.
2.28 TERMINATION OF COVENANTS. Unless otherwise provided in the Section
describing a particular covenant, each of the covenants set forth in this
Section 2 shall terminate as follows:
(a) The covenants set forth in Sections 2.1 and 2.2 shall terminate and be of no further force or effect upon the earlier to occur of an Initial Public Offering or when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act.
(b) The covenants set forth in Sections 2.4 and 2.5 shall terminate and be of no further force or effect immediately prior to an Initial Public Offering.
(c) The covenants set forth in Section 2.3 and Sections 2.6 through 2.27 shall terminate and be of no further force or effect upon a Qualified Public Offering.
SECTION 3.
MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of Oregon.
31 - Investors' Rights Agreement
3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement (including any Exhibits hereto) constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Subject to the limitations of Section 2.27 hereof, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated, except by a written instrument signed by the Company and the Holders of at least a majority of the outstanding Registrable Securities, and any such amendment, waiver, discharge or termination shall be binding on all the Holders, but in no event shall the obligation of any Holder hereunder be materially increased, except upon the written consent of such Holder.
3.4 NOTICES. Unless otherwise provided, any notice or other
communication required or permitted under this Agreement shall be given in
writing and shall be mailed by United States first-class mail, postage prepaid,
sent by facsimile and immediately followed by first-class mail, or delivered
personally by hand or by a nationally recognized overnight courier addressed to
the party to be notified at the address or facsimile number indicated for such
party on the signature page hereof or at such other address as such party may
designate by 10 days' advance written notice to the other parties hereto. All
such notices and other written communications shall be effective (i) if mailed,
three days after mailing, (ii) if delivered personally by hand, immediately,
(iii) if delivered by a nationally recognized overnight courier, one day after
the date deposited with such courier, or (iv) if sent by confirmed facsimile,
immediately if sent during normal business hours of the recipient, if not, then
on the next business day. In the case of any notice to the Company, a copy of
such notice shall be sent to Jack W. Schifferdecker, Jr., Esq., Ater Wynne LLP,
222 S.W. Columbia, Suite 1800, Portland, Oregon 97201, in the case of any notice
to Agilent Technologies, a copy of such notice shall be sent to Mario Oh Huber,
Assistant Secretary and Corporate Counsel, Agilent Technologies, Inc., 3000
Hanover Street, MS: 20BQ, Palo Alto, California, 94304, in the case of any
notice to Maristeth, a copy of such notice shall be sent to Mario D. Parisio,
Esq., Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim, P.L.L.C., 1201
Pacific Avenue, Suite 2200, Tacoma, Washington 98401-1157, in the case of any
notice to Electroglas, a copy of such notice shall be sent to Nelson D.
Crandall, Esq., Enterprise Law Group, Inc., 4400 Bohannon Drive, Menlo Park,
California 94025-1041 and in the case of any notice to TIAA, a copy of such
notice shall be sent to Robert Belke, Private Direct Equity Team, 730 Third
Avenue, New York, New York 10017.
3.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right, power or remedy accruing to any Holder upon any breach or default of the Company under this Agreement shall impair any such right, power or remedy of such Holder and it shall not be construed to be a waiver of any such breach or default or an acquiescence therein or in any similar breach or default thereafter occurring; and no waiver of any single breach or default shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Holder of any
32 - Investors' Rights Agreement
breach or default under this Agreement or any waiver on the part of any Holder of any provisions or conditions of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any Holder, shall be cumulative and not alternative.
3.6 RIGHTS; SEVERABILITY. Unless otherwise expressly provided herein, a Holder's rights hereunder are several rights, not rights jointly held with any of the other Holders. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
3.7 TITLES AND SUBTITLES. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
3.8 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
3.9 TERMINATION OF JULY 1999 INVESTORS' RIGHTS AGREEMENT. This Agreement supersedes and replaces the July 1999 Investors' Rights Agreement which, upon execution of this Agreement, is hereby terminated.
[REMAINDER OF PAGE DELIBERATELY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
CASCADE MICROTECH, INC.
By: /s/ Craig M. Swanson
---------------------------------
Craig M. Swanson
Chief Financial Officer
|
Address: 2430 N.W. 206th Avenue
Beaverton, OR 97006
33 - Investors' Rights Agreement
|
CASCADE MICROTECH, INC.
SIGNATURE PAGE
TO
INVESTORS' RIGHTS AGREEMENT
Dated as of December 16 , 1999
The undersigned Shareholder hereby executes and delivers the Investors' Rights Agreement to which this Signature Page is attached; which Investors' Rights Agreement Signature Page, together with the Investors' Rights Agreement and Signature Pages of other Shareholders, shall constitute counterpart copies thereof in accordance with the terms of the Investors' Rights Agreement.
Shareholder:
AGILENT TECHNOLOGIES, INC.
(Formerly known as Hewlett-Packard Company)
By: /s/ Scott R. Wright
--------------------------------------
Scott R. Wright
General Manager
Component Test Unit
|
Address: 1400 Fountaingrove Parkway
MS 3USP
Santa Rosa, CA 95403-1799
34 - Investors' Rights Agreement
|
CASCADE MICROTECH, INC.
SIGNATURE PAGE
TO
INVESTORS' RIGHTS AGREEMENT
Dated as of December 16 , 1999
The undersigned Shareholder hereby executes and delivers the Investors' Rights Agreement to which this Signature Page is attached; which Investors' Rights Agreement Signature Page, together with the Investors' Rights Agreement and Signature Pages of other Shareholders, shall constitute counterpart copies thereof in accordance with the terms of the Investors' Rights Agreement.
Shareholder:
MARISTETH FUND III, LLC
By: /s/ F. Paul Carlson
-----------------------------------
F. Paul Carlson, Sole Manager
Maristeth Fund III, LLC
|
Address: 1201 Pacific Avenue, Suite 1702
Tacoma, WA 98402
35 - Investors' Rights Agreement
|
CASCADE MICROTECH, INC.
SIGNATURE PAGE
TO
INVESTORS' RIGHTS AGREEMENT
Dated as of December 16 , 1999
The undersigned Shareholder hereby executes and delivers the Investors' Rights Agreement to which this Signature Page is attached; which Investors' Rights Agreement Signature Page, together with the Investors' Rights Agreement and Signature Pages of other Shareholders, shall constitute counterpart copies thereof in accordance with the terms of the Investors' Rights Agreement.
Shareholder:
ELECTROGLAS, INC.
By: /s/ Curtis S. Wozniak
--------------------------------------
Curtis S. Wozniak
Chief Executive Officer
|
Address: 3045 Sender Way
Santa Clara, CA 95054
36 - Investors' Rights Agreement
|
CASCADE MICROTECH, INC.
SIGNATURE PAGE
TO
INVESTORS' RIGHTS AGREEMENT
Dated as of December 16, 1999
The undersigned Shareholder hereby executes and delivers the Investors' Rights Agreement to which this Signature Page is attached; which Investors' Rights Agreement Signature Page, together with the Investors' Rights Agreement and Signature Pages of other Shareholders, shall constitute counterpart copies thereof in accordance with the terms of the Investors' Rights Agreement.
Shareholder:
TEACHERS INSURANCE & ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Thomas E. Solano
-----------------------------------
Name: Thomas E. Solano
---------------------------------
Title: Managing Director
------------------------------
|
Address: 730 Third Avenue
New York, NY 10017
37 - Investors' Rights Agreement
|
CASCADE MICROTECH, INC.
SIGNATURE PAGE
TO
INVESTORS' RIGHTS AGREEMENT
Dated as of December 9, 1999
The undersigned Founders hereby execute and deliver the Investors' Rights Agreement to which this Signature Page is attached; which Investors' Rights Agreement Signature Page, together with the Investors' Rights Agreement and Signature Pages of the Shareholders, shall constitute counterpart copies thereof in accordance with the terms of the Investors' Rights Agreement.
Founders:
/s/ Eric W. Strid ---------------------------------- Eric W. Strid /s/ Cynthia Strid ---------------------------------- Cynthia Strid /s/ K. Reed Gleason ---------------------------------- K. Reed Gleason |
38 - Investors' Rights Agreement
EXHIBIT C
[FORM OF PURCHASE INSTALLMENT NOTE]
CASCADE MICROTECH, INC.
6% INSTALLMENT NOTE
No._________ ________________ , 19___
$________________ PPN______________
FOR VALUE RECEIVED, the undersigned, Cascade Microtech, Inc. (the "Company"), a corporation organized and existing under the laws of the State of Oregon hereby promises to pay to Teachers Insurance and Annuity Association of America, or its registered assigns, the principal sum of _________________DOLLARS in three equal installments each in the amount of $____________________DOLLARS, the first payment to occur on _________,_____ with like payments to be made on the first and second anniversaries of such date. This Purchase Installment Note ("Note") shall bear interest (computed on the basis of a 360-day year) on the unpaid balance thereof at the rate of 6% per annum from the date hereof, and all accrued but unpaid interest shall be paid on the dates on which Note principal is to be paid as set forth in the preceding sentence.
Payments of principal and interest on this Note shall be made in lawful money of the United States of America at ________________ or at such other place as the holder of this Note shall have designated by written notice to the Company as provided in the Investors' Rights Agreement referred to below.
This Note is issued pursuant to Section 2.25 of the Investors' Rights Agreement, dated as of December 16, 1999 (as amended from time to time, the "Investors' Rights Agreement"), among and between the Company and the respective Investors and Shareholders named therein. Each holder of this Note will be deemed, by its acceptance hereof to have agreed to the confidentiality provisions set forth in the Nondisclosure and Restricted Use Agreement attached as Exhibit C to the Investors' Rights Agreement.
Any unpaid principal and accrued interest of this Note may be prepaid, in whole or from time-to-time in part, without penalty, at the sole election of the Company.
So long as this Note is outstanding, the registered holder shall be entitled to receive the following financial information of the Company:
(a) As soon as practicable after the end of each fiscal year of the Company and in any event within 90 days thereafter, a consolidated balance sheet of the Company and its subsidiaries, if any, as at the end of such fiscal year and consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such year, prepared in accordance with generally accepted accounting principles consistently
1 - Exhibit C
applied and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and certified by independent public accountants of recognized national standing selected by the Company;
(a) as soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company and in any event within 45 days thereafter, a consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of each such quarterly period and consolidated statements of income and cash flows of the Company and its subsidiaries for such period and for the current fiscal year to date, prepared in accordance with generally accepted accounting principles consistently applied and setting forth in comparative form the figures for the corresponding periods of the previous fiscal year subject to changes resulting from normal year-end audit adjustments, all in reasonable detail and certified by the principal financial or accounting officer of the Company, except that such financial statements need not contain the notes required by generally accepted accounting principles.
This Note is transferrable upon 10 days' prior written notice to the
Company; provided, however, that this Note may not be transferred to any party
that (i) is in the business of manufacturing, distributing or selling any
product or service which competes with any product or service of the Company,
(ii) is in the business of manufacturing, distributing or selling any
semiconductor test or measurement product or service to any party that
manufactures semiconductors or integrated circuits, whether or not such
semiconductor test or measurement product or service competes with any products
or services of the Company, (iii) is in the business of manufacturing,
distributing or selling semiconductors or integrated circuits, or (iv) is an
affiliate of any of the foregoing unless the affiliate is a "qualified
institutional buyer" as that term is defined in Rule 144A(a)(1) of the
Securities Act.
This Note is governed by the laws of the State of Oregon. The parties acknowledge that the state or federal courts located in Portland, Oregon constitute the sole and exclusive venue, and the exclusive jurisdiction, for disputes arising hereunder.
CASCADE MICROTECH, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
2 - Exhibit C
Exhibit 4.4
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND NO INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES, OR (ii) THE ISSUER RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF SAID SECURITIES SATISFACTORY TO THE ISSUER STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
CASCADE MICROTECH, INC
For value received, Cascade Microtech, Inc., an Oregon corporation (the "Company"), grants to Veber Investments V, L.L.C. (the "Initial Holder") the right, subject to the terms of this Stock Purchase Warrant (this "Warrant"), to purchase at any time and from time to time during the period commencing on the "Initial Exercise Date" (as defined below) and ending on the "Expiration Date" (as defined below), that number of fully paid and nonassessable shares of Common Stock of the Company as determined in accordance with Section 2 below. The exercise price shall be $3.80 per share (the "Exercise Price"). The Exercise Price and the number of shares that may be purchased are subject to adjustment under the terms of this Warrant.
SECTION 1. DEFINITIONS
As used in this Warrant, unless the context otherwise requires:
"COMMON STOCK" means the Company's common stock as authorized on the date of this Warrant, and any other securities into which or for which any of the securities described above may be converted or exchanged pursuant to a plan or reorganization, merger, sale of assets or otherwise.
1 - STOCK PURCHASE WARRANT
"COMPANY" means Cascade Microtech, Inc. and any corporation or entity that shall succeed to or assume the obligations of Cascade Microtech, Inc. hereunder.
"EXERCISE DATE" means any date when this Warrant is exercised, in whole or in part, in the manner indicated in Sections 3.1 and 3.2 below.
"EXERCISE PRICE" means the price at which Warrant Shares may be purchased upon exercise of this Warrant, as stated in the introductory paragraph; PROVIDED, HOWEVER, that if an adjustment is required under Section 8.1 of this Warrant, then the "Exercise Price" means, after such adjustment, the price at which each Warrant Share may be purchased upon exercise of this Warrant immediately after the last such adjustment.
"EXPIRATION DATE" means 12:00 midnight (Portland time) on the earlier of (i) December 31, 2003, or (ii) the date specified in Section 8.1(d) hereof.
"HOLDER" means the Initial Holder or, upon assignment of this Warrant by the Initial Holder (or a subsequent Holder), such assignee.
"INITIAL EXERCISE DATE" means the date of this Warrant.
"INITIAL HOLDER" has the meaning specified in the introductory paragraph.
"PERSON" means an individual, corporation, partnership, trust, joint venture or other form of business entity.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and all rules and regulations promulgated thereunder, or any act, rules or regulations which replace the Securities Act or any such rules and regulations.
"SUBSEQUENT WARRANT" has the meaning specified in Section 3.2(c) below.
"WARRANT SHARE(S)" means any share(s) of Common Stock, or other securities, issued or issuable upon exercise of this Warrant.
SECTION 2. NUMBER OF SHARES SUBJECT TO WARRANT
2.1 IMMEDIATELY EXERCISABLE. This Warrant is exercisable at any time with respect to 15,000 Warrant Shares.
2 - STOCK PURCHASE WARRANT
2.2 EXERCISABLE ONLY UPON COMPLETION OF EQUITY OR DEBT FINANCING. If, during the term of the Engagement Agreement between the Company and Veber Investments V, L.L.C. dated December 3, 1998 (the "Engagement Agreement") and for a period of one year thereafter, the Company completes a debt or equity financing pursuant to which the Company issues its debt or equity securities solely in exchange for cash, then this Warrant shall be exercisable for (i) 30,000 Warrant Shares for each $1.0 million dollars raised in such financing from parties contacted on behalf of the Company by Veber Investments V, L.L.C., up to a total of $2.0 million, and (ii) 15,000 Warrant Shares for each additional $1.0 million raised in excess of $2.0 million from parties contacted on behalf of the Company by Veber Investments V, L.L.C. For purposes of determining whether cash has been received in a financing from one or more parties contacted on behalf of the Company by Veber Investments V, L.L.C., Veber Investments V, L.L.C. shall deliver to the Company, on the first day of each week in which the Engagement Agreement remains in effect, an updated list of the persons and entities which Veber Investments V, L.L.C. has contacted on behalf of the Company, which list shall set forth (i) the name, address and phone number of the person or entity contacted, and (ii) a short summary of the current status of each party's interest in a possible transaction with the Company.
2.3 EXERCISABLE ONLY UPON COMPLETION OF A MERGER, SALE OR
TECHNOLOGY LICENSE TRANSACTION. If the Company completes a merger, sale or
technology license transaction, as those terms are defined below, with any party
that Veber Investments V, L.L.C. provides substantive consulting services to the
Company under the Engagement Agreement, including but not limited to
Electroglas, Inc., then this Warrant shall be exercisable for 10,000 Warrant
Shares at any time following the completion of such transaction. For purposes of
this Section 2.3, the term "merger or sale transaction" shall mean (i) a merger
or consolidation of the Company with or into any other corporation or any other
entity or person, other than a merger of the Company into a wholly owned
subsidiary corporation solely for the purpose of reincorporating the Company in
another state, (ii) a merger, consolidation or any other corporate
reorganization, reclassification or recapitalization of the Company as a result
of which the holders of the outstanding capital stock of the Company immediately
prior to any such event shall own less than a majority of the outstanding
capital stock of the Company on an as-converted basis immediately after the
consummation of any such event, (iii) any sale, lease, assignment, transfer or
other conveyance of 50% or more of the assets of the Company, or (iv) any sale
or transfer of a principal business unit of the Company. For purposes of this
Section 2.3, the term "technology license" shall mean the execution of a license
or use agreement with a third party granting such party the right to commercial
use of one or more of the principal technologies of the Company in exchange for
the payment of cash or other consideration to the Company with an expected value
of not less than $1,000,000.
SECTION 3. DURATION AND EXERCISE OF WARRANT
3 - STOCK PURCHASE WARRANT
3.1 EXERCISE PERIOD. Subject to the provisions hereof, this Warrant may be exercised at any time and from time to time in whole or in part during the period commencing on the Initial Exercise Date and ending on the Expiration Date. After the Expiration Date, this Warrant shall become void and all rights to purchase Warrant Shares hereunder shall thereupon cease.
3.2 METHOD OF EXERCISE AND PAYMENT.
(a) METHOD OF EXERCISE. Subject to Section 3.1 hereof and compliance with all applicable Federal and state securities laws, the purchase right represented by this Warrant may be exercised, in whole or in part, by the Holder by (i) surrender of this Warrant and delivery of the Exercise Form attached hereto as Exhibit A, duly executed, at the principal office of the Company, and (ii) payment to the Company of an amount equal to the product of the then applicable Exercise Price multiplied by the number of Warrant Shares then being purchased.
(b) CONVERSION RIGHT. In lieu of exercising this Warrant as specified in Section 3.2(a), Holder may from time to time convert this Warrant, in whole or in part, into a number of Warrant Shares determined by dividing (i) the aggregate fair market value of the Warrant Shares issuable upon exercise of this Warrant, minus the aggregate Exercise Price of such Warrant Shares by (ii) the fair market value of one Warrant Share. The fair market value of the Warrant Shares shall be determined as follows: If the Company's Common Stock is traded in a public market, the fair market value of the Warrant Shares shall be the closing price of the Common Stock reported for the business day immediately before Holder delivers its Exercise Form to the Company. If the Company's Common Stock is not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.
(c) METHOD OF PAYMENT. Payment shall be made either (i) by check drawn on a United States bank and for United States funds made payable to the Company, (ii) by wire transfer of United States funds for the account of the Company, (iii) by the cancellation of indebtedness of the Company to the Holder, but only at the option of the Holder, or (iv) any combination of the foregoing at the option of the Holder.
(d) DELIVERY OF CERTIFICATE. In the event of any exercise of the purchase right represented by this Warrant, certificates for the Warrant Shares so purchased shall be delivered to the Holder within thirty (30) days of delivery of the Exercise Form and payment and, unless this Warrant has been fully exercised or has expired, a new warrant representing the portion of the Warrant Shares with respect to which this Warrant shall not then have been exercised (the "Subsequent Warrant") shall also be issued to the Holder within such thirty (30)-day period.
4 - STOCK PURCHASE WARRANT
3.3 SECURITIES ACT COMPLIANCE/RESTRICTIONS UPON TRANSFER. Unless the issuance of the Warrant Shares shall have been registered under the Securities Act, as a condition of its delivery of certificates for the Warrant Shares, the Company may require the Holder (including the transferee of the Warrant Shares in whose name the Warrant Shares are to be registered) to deliver to the Company, in writing, representations regarding the Holder's sophistication, investment intent, acquisition for his own account and such other matters as are reasonable and customary for purchasers of securities in an unregistered private offering of securities. The Company may place conspicuously upon each Subsequent Warrant and upon each certificate representing the Warrant Shares a legend substantially in the following form, the terms of which are agreed to by the Holder (including any and all transferees):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND NO INTEREST THEREIN MAY
BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES, OR
(ii) THE ISSUER RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE
HOLDER OF SAID SECURITIES SATISFACTORY TO THE ISSUER STATING
THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.
The Company need not register a transfer of this Warrant or the Warrant Shares unless the conditions specified in such legend are satisfied. Subject to the foregoing transfer restrictions set forth in this Section 3.3, this Warrant is transferable, in whole or in part, on the books of the Company, upon surrender of this Warrant to the Company, together with a written assignment duly executed by the Holder and delivery of funds sufficient to pay any transfer taxes payable by reason of such transfer.
3.4 TAXES. The Company will pay any stamp, transfer or similar tax that may be payable in respect of the issuance of the Warrant Shares.
SECTION 4. VALIDITY AND RESERVATION OF WARRANT SHARES
The Company represents and warrants that all Warrant Shares issued upon exercise of this Warrant will be validly issued, fully paid nonassessable and not subject to preemptive or similar rights. The Company agrees that, as long as this Warrant may be exercised, the Company will have authorized and reserved for issuance upon exercise of this Warrant a sufficient number of shares of Common Stock to provide for exercise in full of this Warrant.
5 - STOCK PURCHASE WARRANT
SECTION 5. FRACTIONAL SHARES
No fractional Warrant Shares shall be issued upon the exercise of this Warrant, and the number of Warrant Shares to be issued shall be rounded to the nearest whole number.
SECTION 6. LIMITED RIGHTS OF WARRANT HOLDER
The Holder shall not, solely by virtue of being the Holder of this Warrant, have any of the rights of a shareholder of the Company, either at law or equity, until this Warrant shall have been exercised.
SECTION 7. LOSS OF WARRANT
Upon receipt by the Company of satisfactory evidence of the loss, theft, destruction or mutilation of this Warrant and either (in the case of loss, theft or destruction) reasonable indemnification and a bond satisfactory to the Company if requested by the Company or (in the case of mutilation) the surrender of this Warrant for cancellation, the Company will execute and deliver to the Holder, without charge, a new warrant of like denomination.
SECTION 8. CERTAIN ADJUSTMENTS OF EXERCISE PRICE
8.1 ADJUSTMENT OF EXERCISE PRICE. The number, class and Exercise Price of securities for which this Warrant may be exercised are subject to adjustment from time to time upon the happening of certain events as hereinafter provided:
(a) STOCK SPLITS AND STOCK DIVIDENDS. In the event the Company should at any time or from time to time after the date hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Exercise Price shall be appropriately decreased and the number of shares of Common Stock issuable upon exercise of this Warrant shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents.
6 - STOCK PURCHASE WARRANT
(b) COMBINATIONS. If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Exercise Price shall be appropriately increased and the number of shares of Common Stock issuable upon exercise of this Warrant shall be decreased in proportion to such decrease in outstanding shares.
(c) RECAPITALIZATIONS. If at any time or from time to time there shall be a merger, consolidation, reclassification, reorganization or other change in the capital structure of the Company (a "Recapitalization") (other than an event described in Sections 8.1(a) or 8.1(b) above or Section 8.1(d) below), provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant the number of shares of stock or other securities or property of the Company, or otherwise, to which a holder of Common Stock deliverable upon exercise would have been entitled on such Recapitalization. In any such case, appropriate adjustment shall be made in application of the provisions of Section 8.1 with respect to the rights of the Holder after the Recapitalization to the end that the provisions of Section 8.1 (including adjustment of the Exercise Price then in effect and the number of shares purchasable upon exercise of this Warrant) shall be applicable after that event, as nearly equivalent as may be practicable, in relation to any shares of stock or other property thereafter deliverable upon the exercise of this Warrant.
(d) OTHER RECAPITALIZATIONS. Notwithstanding the foregoing, in the event of (i) a the dissolution or complete liquidation of the Company, (ii) a Recapitalization resulting in the shareholders immediately preceding such Recapitalization, as a group, holding less than a majority of the outstanding capital stock of the Company immediately following such Recapitalization, including such Recapitalizations where the Company will not be the surviving corporation, or (iii) the sale of all or substantially all of the assets of the Company, the Warrant shall expire and become void and all rights to purchase Warrant Shares hereunder shall cease following the expiration of the notice period specified in Section 8.1(e) below.
(e) NOTICE. The Company shall provide the Holder with at least 20 days' prior written notice of the date when any such change in the capital structure of the Company as described in Section 8.1 shall take place.
(f) NO IMPAIRMENT. The Company will not, by amendment of its Articles of Incorporation or through any Recapitalization, transfer of assets, dissolution or liquidation, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of Section 8.1 and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against impairment.
7 - STOCK PURCHASE WARRANT
(g) MINIMUM ADJUSTMENT NOT REQUIRED. Anything in Section 8.1 to the contrary notwithstanding, the Company shall not be required, except as hereinafter provided, to make any adjustment of the Exercise Price in any case in which the amount by which such Exercise Price would be increased or reduced, in accordance with the foregoing provisions, would be less than $0.01 per share, but in such a case, any adjustment that would otherwise be required to be made will be carried forward and made at the time and together with the next subsequent adjustment.
8.2 NOTICE OF ADJUSTMENT. Whenever an event occurs requiring any adjustment to be made pursuant to Section 8.1, the Company shall promptly file with its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, a certificate of its chief executive officer specifying such adjustment, setting forth in reasonable detail the acts requiring such adjustment, and stating such other facts as shall be necessary to show the manner and figures used to compute such adjustment. Such chief executive officer's certificate shall be made available at all reasonable times for inspection by the Holder. Promptly (but in no event more than thirty (30) days) after each such adjustment, the Company shall give a copy of such certificate by certified mail to the Holder.
SECTION 9. SUBDIVISION OF WARRANT
At the request of the Holder in connection with a transfer of a portion of this Warrant, upon surrender of this Warrant for such purpose to the Company at its principal office, the Company, at its expense (except for any transfer tax payable), will issue and exchange therefor new Warrants of like tenor and date representing in the aggregate the amount of the Warrant Shares.
SECTION 10. REPRESENTATIONS AND WARRANTIES BY THE HOLDER
The Holder represents and warrants to the Company as follows:
10.1 This Warrant and the Warrant Shares issuable upon exercise thereof are being acquired for its own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act. Upon exercise of this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form satisfactory to the Company, that the securities issuable upon exercise of this Warrant are being acquired for investment and not with a view toward distribution or resale.
10.2 The Holder understands that the Warrant and the Warrant Shares have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act pursuant to Section 4(2) thereof, and that they must be held by the Holder indefinitely, and that the Holder must therefore
8 - STOCK PURCHASE WARRANT
bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Securities Act or is exempted from such registration.
10.3 The Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of this Warrant and the Warrant Shares purchasable pursuant to the terms of this Warrant and of protecting its interests in connection therewith.
10.4 The Holder is able to bear the economic risk of the purchase of the Warrant Shares pursuant to the terms of this Warrant.
SECTION 11. REGISTRATION RIGHTS
The Holder shall have the right to have the Warrant Shares registered for sale with the Securities and Exchange Commission in accordance with the piggyback and Form S-3 registration rights set forth in Sections 1.3 and 1.5, respectively, of the Investor Rights Agreement dated May 1, 1990 (the "Investor Rights Agreement"), the pertinent portions of which are attached hereto and incorporated herein as Exhibit B. Consistent with the allocation provisions set forth in Section 1.13 of the Investor Rights Agreement, Holder hereby acknowledges that the registration rights granted in this Section 11 shall be subordinate in priority and allocation to (i) the registration rights granted to Hewlett-Packard Company and the "Founders" as that term is defined in the Investor Rights Agreement attached hereto as Exhibit B, and (ii) unless otherwise specified in writing, any other registration rights which the Company may grant in the future, including but not limited to any registration rights which may be granted to investors, strategic or joint venture partners and the like in connection with a transaction in which the Company receives consulting services from Veber Investments V, L.L.C. under the Engagement Agreement. Further, Holder hereby acknowledges that in no event will Holder have registration rights which are superior to the piggyback and Form S-3 registration rights granted under the Investor Rights Agreement.
SECTION 12. MISCELLANEOUS
12.1 SUCCESSORS AND ASSIGNS. The provisions of this Warrant shall be binding upon and inure to the benefit of the Company, the Holder and their respective permitted successors and assigns hereunder.
12.2 NOTICE. All notices and statements provided for herein shall be in writing and shall be deemed given (i) three (3) days after deposit in the U.S. mail if sent by Registered or Certified mail, postage prepaid, addressed to the parties at their addresses set forth below; (ii) immediately upon personal deliver to a party, (iii) if by courier, on the date that the courier warrants that delivery will occur, or (iv) if by telex or facsimile, when receipt is confirmed by
9 - STOCK PURCHASE WARRANT
the transmission equipment or acknowledged by the addressee. A party may change its address by giving notice thereof to the other party as provided herein.
10 - STOCK PURCHASE WARRANT
IF TO THE COMPANY: IF TO THE HOLDER: Cascade Microtech, Inc Veber Investments V, L.L.C. Attention: Chief Financial Officer 4380 S.W. Macadam, Suite 250 2430 N.W. 206th Avenue Portland, OR 97201-6408 Beaverton, OR 97005 |
12.3 APPLICABLE LAW. The validity, interpretation and performance of this Warrant shall be governed by the laws of the State of Oregon.
12.4 HEADINGS. The headings herein are for convenience only and are not part of this Warrant and shall not affect the interpretation thereof.
DATED this _____ day of December, 1998.
CASCADE MICROTECH, INC.
By /s/ Randy Sadewic
---------------------------------------
Randy Sadewic
Chief Financial Officer
|
VEBER INVESTMENTS V, L.L.C.
By: /s/ Gayle Veber
---------------------------------------
Gayle Veber
|
11 - STOCK PURCHASE WARRANT
EXHIBIT A
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ___________ shares of the Common Stock of Cascade Microtech, Inc. pursuant to the term of the attached Stock Purchase Warrant dated December , 1998 (the "Warrant"), and tenders herewith payment of the purchase price of such shares in full in the following manner:
(a) ______ Check in the amount of $______________
(b) ______ Wire transfer in the amount of $____________
(c) ______ Cancellation of indebtedness in the
amount of $_________.
2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:
3. The undersigned represents that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of shares of Common Stock of the Company and that it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws.
(Date)
12 - STOCK PURCHASE WARRANT
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT (OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT) AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION THEREFROM.
CASCADE MICROTECH, INC.
Series C Preferred
Stock Purchase Warrant
Expiring December 31, 2002
No. W-1 Beaverton, Oregon
Private Placement Number: 14732 # 11 0 December 16, 1999
Cascade Microtech, Inc. (the "COMPANY"), an Oregon corporation, for value received, hereby certifies that Teachers Insurance and Annuity Association of America, or registered assigns, is entitled to purchase from the Company 250,000 duly authorized, validly issued, fully paid and nonassessable shares of Series C Preferred Stock, par value $.01 per share, of the Company (the "WARRANT SHARES") at an exercise price per share as determined below (the "EXERCISE PRICE"), at any time or from time to time prior to 5:00 P.M., New York City time, on December 31, 2002, all subject to the terms, conditions and adjustments set forth below in this Warrant.
Section 1. EXERCISE OF WARRANTS. (a) Upon the terms and subject to the conditions set forth in this Warrant, the holder of the Warrant (the "HOLDER") shall have the right, which may be exercised until 5:00 p.m., New York City time, on December 31, 2002 (the "EXPIRATION TIME"), to receive from the Company the number of fully paid and nonassessable Warrant Shares which the Holder may at the time be entitled to receive upon exercise of this Warrant and payment of the Exercise Price then in effect for such Warrant Shares.
The "EXERCISE PRICE" at any date of determination shall, except as provided
herein, be based on the total revenues of the Company from the sale of products sold by the Company's Pyramid Probe Division (excluding contract research revenues) as reflected in the general ledger of the Company for the calendar year ending December 31, 2000, with such Exercise Price determined in accordance with the following schedule:
(i) If revenues are greater than or equal to $11,000,000, then the Exercise Price shall be $18.00 per share.
(ii) If revenues are less than $11,000,000 and greater than $4,700,000, then the Exercise Price is equal to the sum of (x) $6.00, plus (y) .000001904 times the excess of such revenue over $4,700,000 per share.
(iii) If revenues are less than or equal to $4,700,000, then the Exercise Price shall be $6.00 per share.
The above determination shall be concluded by the Company not later than 90 days after the calendar year ending December 31, 2000, PROVIDED, however, that the initial Holder shall have the right to inspect the records and books of the Company in connection with such determination made by the Company. In the event that the initial Holder disputes the good faith determination by the Company, then such determination shall be made by a nationally recognized independent accounting firm selected unanimously by the Board of Directors of the Company in good faith. In the event that the accounting firm's determination is 105% or more than the determination of the Company, then all costs of such independent determination shall be borne by the Company. Otherwise, all costs of the independent determination shall be borne by the initial Holder.
As agreed to by the Company and the initial Holder, the Exercise Price for any exercise of the Warrant prior to final determination of the revenue of the Pyramid Probe Division for the calendar year 2000, is $10 per share, without further adjustment, except as provided in Section 5 hereof, and regardless of the revenue of the Pyramid Probe Division for the calendar year 2000.
(b) Warrants may be exercised upon surrender of this Warrant to the Company at its principal office during normal business hours on any business day, with the form of election to purchase attached hereto duly filled in and signed and upon payment to the Company of the Exercise Price for each of the Warrant Shares in respect of which such Warrants are then exercised. Payment of the aggregate Exercise Price shall be made by wire transfer or certified or official bank check to the order of the Company.
(c) Each exercise of the Warrant shall be deemed to have been
effected immediately prior to the close of business on the business day on which
the Warrant shall have been surrendered to the Company as provided in Section
1(b), and at such time the person or persons in whose name or names any
certificate or certificates for Warrant Shares shall be issuable upon such
exercise as provided in Section 1(c) shall be deemed to have become the holder
or holders of record thereof.
(d) Subject to the provisions of Section 2 hereof, upon such surrender of Warrants and payment of the aggregate Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Holder and in such name or names as the Holder may designate, (i) a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable Warrant Shares to which such Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such Holder would otherwise be entitled, cash in an amount equal to the same fraction of the market price per Warrant Share on the business day next preceding the date of such exercise, and (ii) in case such exercise is in part only, a new Warrant or Warrants of like tenor, calling in the aggregate on the face or faces thereof for the number of Warrant Shares to the number of such shares called for on the face of the Warrant minus the number of such shares designated by the Holder upon such exercise as provided in Section 1(b); PROVIDED that if any consolidation, merger, transfer or lease of assets is proposed to be effected by the Company as described in Section 5 hereof, or a tender offer or an exchange offer for Warrant Shares shall be made, upon such surrender of Warrants and payment of the Exercise Price as aforesaid, the Company shall, as soon as possible, but in any event not later than three business days thereafter, issue and cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence and/or any other consideration to be issued to such Holder pursuant to Section 5 hereof. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price.
(e) The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part, and, in the event
that a certificate evidencing Warrants is exercised in respect of fewer than all
of the Warrant Shares issuable upon such exercise at any time prior to the date
of expiration of the Warrants, a new certificate evidencing the remaining
Warrant or Warrants will be issued and delivered pursuant to the provisions of
Section 1(d).
Section 2. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; PROVIDED that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant or any certificates for Warrant Shares in a name other than that of the registered Holder, and the Company shall not be required to issue or deliver such Warrant or certificates for Warrant Shares unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
Section 3. MUTILATED OR MISSING WARRANT. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of, and (a) in the case of loss, theft or destruction, reasonable indemnity (which in the case of the initial Holder or another institutional Holder, may be such person's own unsecured agreement of indemnity), and (b) in the case of mutilation, upon surrender and cancellation of this Warrant, the Company will make and deliver in lieu of this Warrant a new Warrant of the same series and of like tenor of this Warrant.
Section 4. RESERVATION OF WARRANT SHARES AND CONVERSION SHARES. (a) The Company shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Series C Preferred Stock or its authorized and issued Series C Preferred Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Series C Preferred Stock which may then be deliverable upon the exercise of all outstanding Warrants. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants shall be duly authorized and will, upon payment of the Exercise Price therefor and the issuance thereof, be validly issued, fully paid, nonassessable with no liability on the part of the Holders thereof, free of preemptive rights, free from all taxes and free from all liens, charges and security interests, created by or through the Company, with respect to the issue thereof.
(b) The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Common Stock upon conversion of Series C Preferred Stock issued or issuable upon exercise of Warrants, the maximum number of shares of Common Stock (the "CONVERSION SHARES") which may then be deliverable upon the conversion of all Series C Preferred Stock issuable upon exercise of all outstanding Warrants. The Company covenants that all Conversion Shares which may be issued thereby, be fully paid, nonassessable, free of preemptive rights, free from all taxes and free from all liens, charges and security interests, created by or through the Company,
with respect to the issue thereof.
Section 5. REORGANIZATION OF THE COMPANY. (a) CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC. In case at any time the Company shall be a party to any transaction (including without limitation a merger, consolidation, sale or lease of all or substantially all of the Company's assets or recapitalization of the Series C Preferred Stock) in which the previously outstanding Series C Preferred Stock shall be changed into or exchanged for different securities of the Company or changed into or exchanged for common stock or other securities of another corporation or interests in a noncorporate entity or other property (including cash) or any combination of any of the foregoing (each such transaction being hereinafter referred to as the "TRANSACTION") then, as a condition to the consummation of the Transaction, lawful and adequate provisions shall be made so that, upon the basis and terms and in the manner provided in this Section 5, the Holder, upon the exercise of the Warrant, shall be entitled to receive, in lieu of the Series C Preferred Stock issuable upon such exercise prior to such consummation, the stock and other securities, cash and property to which the Holder would have been entitled upon the consummation of the Transaction if the Holder had exercised the Warrant immediately prior thereto, subject to adjustments (subsequent to such consummation) as nearly equival ent as possible to the adjustments provided for under the terms of the Series C Preferred Stock.
(b) Notwithstanding anything contained herein to the contrary, the Company will not effect any Transaction unless, prior to the consummation thereof, each corporation or entity (other than the Company) which may be required to deliver any stock, securities, cash or property upon the exercise of the Warrant as provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder, (i) the obligations of the Company hereunder (and if the Company shall survive the consummation of such Transaction, such assumption shall be in addition to, and shall not release the Company from, any continuing obligations of the Company hereunder) and (ii) the obligation to deliver to the Holder such shares of stock, securities, cash or property as, in accordance with the foregoing provisions, the Holder may be entitled to receive, and such corporation or entity shall have similarly delivered to the Holder an opinion of counsel for such corporation or entity, which counsel shall be reasonably satisfactory to the Holder, stating that the Warrant shall thereafter continue in full force and effect and the terms hereof shall be applicable to the stock, securities, cash or property which such corporation or entity may be required to deliver upon any conversion of any Warrants or the exercise of any rights pursuant hereto.
(c) Upon any liquidation, dissolution or winding up of the Company, the Holder shall receive such cash or property (less the Exercise Price) which the Holder would have been entitled to receive upon the happening of such liquidation, dissolution or winding up had the Warrant been exercised in full and the shares of Series C Preferred Stock in respect of such exercise issued immediately prior to the occurrence of such liquidation, dissolution or winding-up.
Section 6. CHANGES AFFECTING THE SERIES C PREFERRED STOCK. If the Company at any time while this Warrant, or any portion thereof, remains outstanding and unexpired shall pay any dividend or make any other distribution on the Series C Preferred Stock payable in shares of Series C Preferred Stock or shall split, subdivide or combine the Series C Preferred Stock into a different number of securities of the same class, the Exercise Price for such securities shall be proportionately decreased in the case of a stock dividend, split or subdivision or proportionately increased in the case of a combination and the number of the securities as to which purchase rights under this Warrant exist shall be increased or decreased proportionately in accordance with such stock dividend, split, subdivision or combination.
Section 7. NOTICES OF CORPORATE ACTION. In the event of
(a) any taking by the Company of a record of the holders of its Series C Preferred Stock for the purpose of determining the holders thereof who are entitled to receive any right,
(b) any subdivision of outstanding shares of Series C Preferred Stock into a larger number of shares of Series C Preferred Stock, or any combination of such shares into smaller number of shares of Series C Preferred Stock,
(c) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other person or any transfer of all or substantially all the assets of the Company to any other person, or
(d) any voluntary or involuntary dissolution, liquidation or winding-up of the Company,
the Company shall mail to each Holder a notice specifying (I) the date or expected date on which any such record is to be taken for the purpose of such right, and (II) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place and the time, if any such time is to be fixed, as of which the holders of record of Series C Preferred Stock shall be entitled to exchange their Warrant Shares for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least 15 business days prior to the date specified in subdivisions (i) and (ii) above.
Section 8. OWNERSHIP, TRANSFER AND SUBSTITUTION OF THE
WARRANT. OWNERSHIP OF WARRANT. (a) The Company or such designee as the Company
shall indicate to the initial Holder by prompt written notice, shall have an
option to repurchase the Warrant if the initial Holder proposes to sell, assign,
pledge, encumber, transfer or otherwise dispose of for value the Warrant to any
party that (I) is in the business of manufacturing, distributing or selling any
product or service which competes with any product or service of the Company,
(II) is in the business of manufacturing, distributing or selling any
semiconductor test or measurement product or service to any party that
manufactures semiconductors or integrated circuits, whether or not such
semiconductor test or measurement product or service competes with any products
or services of the Company, (III) is in the business of manufacturing,
distributing or selling semiconductors or integrated circuits, or (IV) is an
affiliate of any of the foregoing unless the affiliate is a "qualified
institutional buyer" as that term is defined in Rule 144A(a)(1) of the
Securities Act of 1933, as amended, or any similar successor federal statute and
the rules and regulations thereunder, all as the same shall be in effect from
time to time.
(b) The Company may treat the person in whose name the Warrant, or any Warrant or Warrants issued in substitution therefor, is registered on the register kept at the principal office of the Company as the owner and the Holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. A Warrant, if properly assigned, may be exercised by a new Holder without first having a new Warrant issued.
Section 9. TRANSFER AND EXCHANGE OF THE WARRANT. Upon the surrender of the Warrant, properly endorsed, for registration of transfer or for exchange at the principal office of the Company, the Company at its expense shall execute and deliver to or upon the order of the Holder thereof a new Warrant or Warrants of like tenor, in the
name of such Holder or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Series C Preferred Stock called for on the face or faces of the Warrant or Warrants so surrendered.
Section 10. REMEDIES. The Company stipulates that the remedies at law of the Holder in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of the Warrant are not and shall not be adequate and hereby agrees, to the fullest extent permitted by law, (A) such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise, and (B) to waive the defense in any action for specific performance that a remedy at law would be adequate.
Section 11. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in the Warrant shall be construed as conferring upon the Holder hereof any rights as a stockholder of the Company or as imposing any liabilities on such Holder to purchase any securities or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors or stockholders of the Company or otherwise.
Section 12. NOTICES. All notices and other communications under the Warrant, except notices of the exercise of any Warrant (which shall be effected in the manner provided in Section 1), shall be in writing and shall be mailed by registered or certified mail, return receipt requested, addressed as follows or to such other address as such party may have designated to the other in writing:
(a) if to the initial Holder, at:
Teachers Insurance and Annuity Association of America 730 Third Avenue New York, New York 10017 Attention: Robert Belke Private Direct Equity Team
or
(b) if to the Company, to it at:
Ater Wynne L.L.P.
222 S.W. Columbia, Suite 1800
Portland, OR 97201 Attn: Jack W. Schifferdecker, Jr., Esq.
or
(c) if to any other Holder, as such Holder may have specified in writing to the Company.
Section 13. GOVERNING LAW. (a) This Agreement shall be governed by and construed under the laws of the State of New York as applied to agreements among New York residents entered into and to be performed entirely within New York.
(b) Notwithstanding the other provisions of this Warrant, this Warrant is subject to the limitations (including, without limitation, any restrictions on transfer) and rights applicable thereto specified in the Investors' Rights Agreement.
Section 14. MISCELLANEOUS. The Warrant and any term hereof may be changed, waived, discharged or terminated (other than the expiration of this Warrant pursuant to its terms) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. The agreements of the Company contained in the Warrant other than those applicable solely to the Warrant and the Holder thereof shall inure to the benefit of and be enforceable by any Holder or Holders at the time of any Warrant Shares issued upon the exercise of the Warrant, whether so expressed or not. The section headings in the Warrant are for purposes of convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, Cascade Microtech, Inc. has caused this Warrant to be duly executed, as of December 16, 1999.
CASCADE MICROTECH, INC.
By: /s/ Craig M. Swanson
------------------------------------
Name: Craig M. Swanson
Title: Vice President - Finance and
Chief Financial Officer
|
FORM OF ELECTION TO PURCHASE
(To be Executed Upon Exercise of Warrant)
To:____________________
The undersigned hereby irrevocably elects to exercise Warrants for,
and purchases thereunder, ____* shares of Series C Preferred Stock of Cascade
Microtech, Inc. and has tendered tenders payment for such shares to the order of
Cascade Microtech, Inc. in the amount of $______ per share of Series C Preferred
Stock in accordance with the terms
hereof.
The undersigned requests that a certificate for such shares be registered in the name of _______________, whose address is _____________________, and that such shares be delivered to __________________, whose address is ____________________.
If said numbers of shares is less than all of the shares of Series C Preferred Stock purchasable under the Warrant, the undersigned requests that a new Warrant representing the remaining balance of such Warrants be registered in the name of _______________, whose address is _____________________, and that such shares be delivered to __________________, whose address is ____________________.
Dated:_______________________
Your Signature: [HOLDER]**
[Address]
--------
|
* Insert here the number of shares called for on the face of the Warrant (or, in the case of a partial exercise, the portion thereof as to which the Warrant is being exercised). In the case of a partial exercise, a new Warrant or Warrants shall be issued and delivered, representing the unexercised portion of the Warrant, to the holder surrendering the same. ** Signature must conform in all respects to name of holder as specified on the face of the Warrant.
By:_________________________ Name:
Title:
FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)
For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto ________________ the right represented by such Warrant to purchase ______ shares of Series C Preferred Stock of Cascade Microtech, Inc. to which such Warrant relates, and appoints ___________ Attorney to make such transfer on the books of Cascade Microtech, Inc. maintained for such purpose, with full power of substitu tion in the premises.
Dated: ______________
[HOLDER]*
[Address]
By__________________________ Name:
Title:
Signed in the presence of:
face of the Warrant.
Exhibit 10.1
INDEMNITY AGREEMENT
This Agreement is made as of the day of _____, 20__, by and between Cascade Microtech, Inc., an Oregon corporation (the "Corporation"), and __________ ("Indemnitee"), a director or officer of the Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as directors and officers the most capable persons available; and
WHEREAS, the increase in corporate litigation subjects directors and officers to expensive litigation risks at the same time that the availability and coverage of directors' and officers' liability insurance has been reduced; and
WHEREAS, it is now and has been the express policy of the Corporation to indemnify its directors and officers so as to provide them with the maximum possible protection permitted by law; and
WHEREAS, the articles of incorporation or bylaws of the Corporation require indemnification of the officers and directors of the Corporation to the fullest extent permitted by the Oregon Business Corporation Act {the "Act"); the Act contemplates that contracts may be entered into between the Corporation and members of the Board of Directors and officers with respect to indemnification of directors and officers; and
WHEREAS, Indemnitee does not regard the protection available under the Corporation's articles of incorporation, bylaws and insurance adequate in the present circumstances, and may not be willing to serve as a director or officer without adequate protection, and the Corporation desires Indemnitee to serve in such capacity.
NOW, THEREFORE, the Corporation and Indemnitee agree as follows:
1. AGREEMENT TO SERVE. Indemnitee agrees to serve or continue to serve as a director or officer of the Corporation for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders a resignation in writing.
2. DEFINITIONS. As used in this Agreement:
(a) The term "Proceeding" shall include threatened, pending or completed action, suit or proceeding, whether brought in the right of the Corporation or otherwise and whether of a civil, criminal, administrative or investigative nature, in which Indemnitee may be or may have been involved as a party or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer,
1 - INDEMNITY AGREEMENT
employee or agent of another corporation, partnership, joint venture, trust or other enterprise, whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification or reimbursement can be provided under this Agreement.
(b) The term "Expenses" includes, without limitation, expense of investigations, judicial or administrative proceedings or appeals, attorneys' fees and disbursements and any expenses of establishing a right to indemnification under Section 11 of this Agreement, but shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
(c) References to "other enterprise" shall include employee benefit plans; references to "fines" shall include any excise tax assessed with respect to any employee benefit plan; references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner reasonably believed to be in the interest of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Agreement.
3. INDEMNITY IN THIRD-PARTY PROCEEDINGS. The Corporation shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is a party to or threatened to be made a party to any Proceeding (other than a Proceeding by or in the right of the Corporation to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee in connection with such Proceeding, but only if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation and, in the case of a criminal proceeding, in addition, had no reasonable cause to believe that Indemnitee's conduct was unlawful.
4. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is a party to or threatened to be made a party to any Proceeding by or in the right of the Corporation to procure a judgment in its favor against all Expenses actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such Proceeding, but only if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which such person shall have been finally adjudged by a court to be liable to the Corporation, unless and only to the extent that any court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstance of the case, Indemnitee is fairly and reasonably entitled to indemnity.
2 - INDEMNITY AGREEMENT
5. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTS. Not withstanding any other provisions of this Agreement, to the extent that Indemnitee has been successful, on the merits or otherwise, in defense of any Proceeding or in defense of any claim, issue or matter therein, including the dismissal of an action without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.
6. ADDITIONAL INDEMNIFICATION.
(a) Notwithstanding any limitation in Sections 3, 4 or 5, the Corporation shall indemnify Indemnitee to the fullest extent permitted by law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Corporation to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee in connection with such Proceeding, provided that no indemnity shall be made under this Section 6(a) on account of Indemnitee's conduct which constitutes a breach of Indemnitee's duty of loyalty to the Corporation or its stockholders or is an act or omission not in good faith or which involves intentional misconduct or a knowing violation of the law.
(b) Notwithstanding any limitation in Sections 3, 4, 5 or
6(a), the Corporation shall indemnify Indemnitee to the fullest extent permitted
by law if Indemnitee is a party to or threatened to be made a party to any
Proceeding (including a Proceeding by or in the right of the Corporation to
procure a judgment in its favor) against all Expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by Indemnitee in
connection with such Proceeding.
(c) For purposes of Sections 6(a) and 6(b), the meaning of the phrase "to the fullest extent permitted by law" shall include, but not be limited to: (i) to the fullest extent permitted by the provision of the Act that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the Act; and (ii) to the fullest extent authorized or permitted by any amendments to or replacements of the Act adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.
7. EXCLUSIONS. Notwithstanding any provision in this Agreement, the Corporation shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:
(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under such insurance or other indemnity provision;
(b) for any transaction from which Indemnitee derived an improper personal benefit;
3 - INDEMNITY AGREEMENT
(c) for an accounting of profits made from the purchase
and sale by Indemnitee of securities of the Corporation within the meaning of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any state statutory law or common law;
(d) if a court having jurisdiction in the matter shall finally determine that such indemnification is not lawful under any applicable statute or public policy (and, in this respect, both the Corporation and Indemnitee have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication); or
(e) in connection with any Proceeding (or part thereof) initiated by Indemnitee, or any Proceeding by Indemnitee against the Corporation or its directors, officers, employees or other indemnitees, unless: (i) such indemnification is expressly required to be made by law; (ii) the Proceeding was authorized by the Board of Directors of the Corporation; (iii) such indemnification is provided by the Corporation, in its sole discretion, pursuant to the powers vested in the Corporation under applicable law; or (iv) the Proceeding is initiated pursuant to Section 11 hereof and Indemnitee is successful in whole or in part in such Proceeding.
8. ADVANCES OF EXPENSES. The Expenses incurred by Indemnitee in any Proceeding shall be paid by the Corporation in advance at the written request of Indemnitee, if Indemnitee:
(a) furnishes the Corporation a written affirmation of the Indemnitee's good faith belief that Indemnitee is entitled to be indemnified by the Corporation under this Agreement; and
(b) furnishes the Corporation a written undertaking to repay such advances to the extent that it is ultimately determined by a court that Indemnitee is not entitled to be indemnified by the Corporation. Such advances shall be made without regard to Indemnitee's ability to repay such expenses and without regard to Indemnitee's ultimate entitlement to indemnification under the other provisions of this Agreement.
9. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days after receipt by Indemnitee of notice of the commencement of any Proceeding, Indemnitee will, if a claim in respect thereof is to be made against the Corporation under this Agreement, notify the Corporation of the commencement thereof; provided, however, that the omission to notify the Corporation will not relieve the Corporation from any liability which it may have to Indemnitee otherwise than under this Agreement. With respect to any such Proceeding as to which Indemnitee notifies the Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its own expense.
(b) Except as otherwise provided below, the Corporation may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense,
4 - INDEMNITY AGREEMENT
assume the defense thereof, with legal counsel reasonably satisfactory to Indemnitee. Indemnitee shall have the right to employ separate counsel in such Proceeding, but the Corporation shall not be liable to Indemnitee under this Agreement, including Section 8 hereof, for the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense, unless: (i) Indemnitee reasonably concludes that there may be a conflict of interest between the Corporation and Indemnitee in the conduct of the defense of such Proceeding; or (ii) the Corporation does not employ counsel to assume the defense of such Proceeding. The Corporation shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Corporation or as to which Indemnitee shall have made the conclusion provided for in (i) above.
(c) If two or more persons who may be entitled to indemnification from the Corporation, including the Indemnitee, are parties to any Proceeding, the Corporation may require Indemnitee to engage the same legal counsel as the other parties. Indemnitee shall have the right to employ separate legal counsel in such Proceeding, but the Corporation shall not be liable to Indemnitee under this Agreement, including Section 8 hereof, for the fees and expenses of such counsel incurred after notice from the Corporation of the requirement to engage the same counsel as other parties, unless the Indemnitee reasonably concludes that there may be a conflict of interest between Indemnitee and any of the other parties required by the Corporation to be represented by the same legal counsel.
(d) The Corporation shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without its written consent, which shall not be unreasonably withheld. The Corporation shall be permitted to settle any Proceeding the defense of which it assumes, except the Corporation shall not settle any action or claim in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent, which may be given or withheld in Indemnitee's sole discretion.
10. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION. Any indemnification under Sections 3, 4, 5 or 6 of this Agreement shall be made no later than 90 days after receipt of the written request of Indemnitee for such indemnification and shall not require that a determination be made in accordance with the Act by the persons specified in the Act that indemnification is required under this Agreement; provided, however, that, unless it is ordered by a court in an enforcement action under Section 11 of this Agreement, no such indemnification shall be made if a determination is made within such 90-day period by: (a) the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such Proceeding; or (b) independent legal counsel in a written opinion (which counsel shall be appointed if such a quorum is not obtainable), that the Indemnitee is not entitled to indemnification under this Agreement.
11. ENFORCEMENT. Any right to indemnification or advances granted by this Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within 90 days of a written request therefor. Indemnitee, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of
5 - INDEMNITY AGREEMENT
prosecuting the claim. It shall be a defense to any such enforcement action (other than an action brought to enforce a claim for advancement of expenses pursuant to Section 8 hereof if the required affirmation and undertaking have been tendered to the Corporation) that Indemnitee is not entitled to indemnification under this Agreement, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors or its shareholders) to make a determination prior to the commencement of such enforcement action that indemnification of Indemnitee is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors or its shareholders) that such indemnification is improper shall be a defense to the action or create a presumption that Indemnitee is not entitled to indemnification under this Agreement or otherwise. The termination of any Proceeding by judgment, order of court, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that Indemnitee is not entitled to indemnification under this Agreement or otherwise.
12. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provisions of this Agreement to indemnification by the Corporation for some or a portion of the Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee in the investigation, defense, appeal or settlement of any Proceeding but not, however, for the total amount thereof, the Corporation shall indemnify Indemnitee for the portion of such Expenses, judgments, fines and amounts paid in settlement to which Indemnitee is entitled.
13. NON-EXCLUSIVITY AND CONTINUITY OF RIGHTS. The indemnification provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under the articles of incorporation, the bylaws, any other agreement, any vote of shareholders or directors, the Act, or otherwise, both as to action in Indemnitee's official capacity and as to action in another capacity while holding such office. The indemnification under this Agreement shall continue as to Indemnitee even though Indemnitee ceases to be a director or officer and shall inure to the benefit of the heirs and personal representatives of Indemnitee.
14. SEVERABILITY. If this Agreement or any portion thereof is invalidated on any ground by any court of competent jurisdiction, the Corporation shall indemnify Indemnitee as to Expenses, judgments, fines and amounts paid in settlement with respect to any Proceeding to the full extent permitted by any applicable portion of this Agreement that is not invalidated or by any other applicable law.
15. SUBROGATION. In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts necessary to secure such rights and to enable the Corporation effectively to bring suit to enforce such rights.
16. MODIFICATION AND WAIVER. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of
6 - INDEMNITY AGREEMENT
any of the provisions of this Agreement shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
17. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) if delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, at the time of such delivery, or (ii) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:
(a) If to Indemnitee, at the address indicated on the signature page hereof;
(b) If to the Corporation, to:
2430 N.W. 206th Avenue Beaverton, Oregon 97006 Attention: Chief Executive Officer
or to such other address as may have been furnished to Indemnitee by the Corporation.
18. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute the original.
19. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the law of the state in which the Corporation is incorporated.
20. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Corporation and its successors and assigns.
[REMAINDER OF PAGE DELIBERATELY LEFT BLANK]
7 - INDEMNITY AGREEMENT
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be duly executed and signed as of the day and year first above written.
CASCADE MICROTECH, INC.
By:________________________________________
Eric W. Strid
Chief Executive Officer
INDEMNITEE:
8 - INDEMNITY AGREEMENT
Exhibit 10.2
CASCADE MICROTECH, INC.
1993 STOCK INCENTIVE PLAN
AS AMENDED
(INCLUDING AMENDMENT AND RESTATEMENT OF THE
1986 NON-QUALIFIED STOCK OPTION PLAN)
1. PURPOSES OF THE PLAN. The purposes of this Stock Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to the Employees and Consultants of the Company and to promote the success of the Company's business.
Options granted hereunder may be either "incentive stock options," as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or "nonqualified stock options," at the discretion of the Board and as reflected in the terms of the written option agreement. In addition, shares of the Company's Common Stock may be Sold hereunder independent of any Option grant.
The Company's 1986 Non-Qualified Stock Option Plan (the "1986 Plan") is hereby amended and restated in its entirety. All outstanding options granted under the 1986 Plan shall be deemed Nonqualified Stock Options under this Plan subject to the terms and conditions hereof.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Committee, if one has been appointed, or the Board of Directors of the Company, if no Committee is appointed.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean Cascade Microtech, Inc., an Oregon corporation.
(e) "COMMITTEE" shall mean the Committee appointed by the Board of Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is appointed.
(f) "CONSULTANT" shall mean any person who is engaged by the Company or any Subsidiary to render consulting services and is compensated for such consulting services and any director of the Company whether compensated for such services or not.
1 - STOCK INCENTIVE PLAN
(g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the absence of any interruption or termination of service as an Employee or Consultant. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of sick leave, military leave, or any other leave of absence approved by the Board; provided that such leave is for a period of not more than ninety days or reemployment upon the expiration of such leave is guaranteed by contract or statute.
(h) "EMPLOYEE" shall mean any person, including officers and directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company.
(i) "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
(j) "NONQUALIFIED STOCK OPTION" shall mean an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
(k) "OPTION" shall mean a stock option granted pursuant to the Plan.
(l) "OPTIONED STOCK" shall mean the Common Stock subject to an Option.
(m) "OPTIONEE" shall mean an Employee or Consultant who receives an Option.
(n) "PARENT" shall mean a "parent corporation," whether now or hereafter existing, as defined in Section 425(e) of the Code.
(o) "PLAN" shall mean this Stock Incentive Plan.
(p) "SALE" or "SOLD" shall include, with respect to the sale of Shares under the Plan, the sale of Shares for consideration in the form of cash or notes, as well as a grant of Shares without consideration, except past or future services.
(q) "SHARE" shall mean a share of the Common Stock, as adjusted in accordance with Section 11 of the Plan.
(r) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now or hereafter existing, as defined in Section 425(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of shares which may be
optioned and/or Sold under the Plan is 2,200,000 shares of Common Stock. The
Shares may be authorized, but unissued, or reacquired Common Stock.
2 - STOCK INCENTIVE PLAN
If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future Option grants and/or Sales under the Plan. If Shares Sold under the Plan are repurchased by the Company pursuant to restrictions applicable to such Shares, the number of Shares repurchased shall, unless the Plan shall have been terminated, become available for future Option grants and/or Sales under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board of Directors of the Company.
(i) Subject to subparagraph (ii), the Board of Directors may appoint a Committee consisting of not less than three (3) members of the Board of Directors to administer the Plan on behalf of the Board of Directors, subject to such terms and conditions as the Board of Directors may prescribe. Once appointed, the Committee shall continue to serve until otherwise directed by the Board of Directors. From time to time the Board of Directors may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan.
Members of the Board who are either eligible for Options and/or Sales or have been granted Options or Sold Shares may vote on any matters affecting the administration of the Plan or the grant of any Options or Sale of any Shares pursuant to the Plan, except that no such member shall act upon the granting of an Option or Sale of Shares to himself, but any such member may be counted in determining the existence of a quorum at any meeting of the Board during which action is taken with respect to the granting of Options or Sale of Shares to him.
(ii) Notwithstanding the foregoing subparagraph
(i), if and in any event the Company registers any class of any equity security
pursuant to Section 12 of the Securities Exchange Act of 1934, from the
effective date of such registration until six (6) months after the termination
of such registration, any grants of options to officers or directors shall only
be made by the Board; provided, however, that if any member of the Board has
received an option grant or stock award under this Plan or any other stock
option or other stock plan of the Company, or any of its affiliates, at any time
within the preceding year, any grants of options to officers or directors must
be made by, or only in accordance with the recommendation of, a Committee
consisting of two or more persons, each of whom must be a member of the Board of
Directors of the Company, appointed by the Board and having full authority to
act in the matter, and none of whom has received any option grant or stock award
under this Plan or any other stock option or other stock plan of the Company, or
any of its affiliates at any time within the preceding year.
(b) POWERS OF THE BOARD. Subject to the provisions of the Plan, the Board shall have the authority, in its discretion: (i) to grant Incentive Stock Options in accordance with
3 - STOCK INCENTIVE PLAN
Section 422 of the Code, or nonqualified stock Options; (ii) to authorize Sales
of Shares of Common Stock hereunder; (iii) to determine, upon review of relevant
information and in accordance with Sec tion 8(b) of the Plan, the fair market
value of the Common Stock; (iv) to determine the exercise/purchase price per
share of Options to be granted or Shares to be Sold, which exercise/purchase
price shall be determined in accordance with Section 8(a) of the Plan; (v) to
determine the Employees or Consultants to whom, and the time or times at which,
Options shall be granted and the number of Shares to be represented by each
Option; (vi) to determine the Employees or Consultants to whom, and the time or
times at which, Shares shall be Sold and the number of Shares to be Sold; (vii)
to interpret the Plan; (viii) to prescribe, amend and rescind rules and
regulations relating to the Plan; (ix) to determine the terms and provisions of
each Option granted (which need not be identical) and, with the consent of the
holder thereof, modify or amend each Option; (x) to determine the terms and
provisions of each Sale of Shares (which need not be identical) and, with the
consent of the purchaser thereof, modify or amend each Sale; (xi) to accel erate
or defer (with the consent of the Optionee) the exercise date of any Option,
consistent with the provisions of Section 9 of the Plan; (xii) to accelerate or
defer (with the consent of the Optionee or purchaser of Shares) the vesting
restrictions applicable to Shares Sold under the Plan or pursuant to Options
granted under the Plan; (xiii) to authorize any person to execute on behalf of
the Company any instrument required to effectuate the grant of an Option or Sale
of Shares previously granted or authorized by the Board; (xiv) to determine the
restrictions on transfer, vesting restrictions, repurchase rights, or other
restrictions applicable to Shares issued under the Plan; (xv) to effect, at any
time and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding Options under the Plan and to grant in
substitution therefor new Options under the Plan covering the same or different
numbers of Shares, but having an Option price per Share con sistent with the
provisions of Section 8 of this Plan as of the date of the new Option grant; and
(xvi) to make all other determinations deemed necessary or advisable for the
administration of the Plan.
(c) EFFECT OF BOARD'S DECISION. All decisions, determinations and interpretations of the Board shall be final and binding on all Optionees and any other holders of any Options granted under the Plan or Shares Sold under the Plan.
5. ELIGIBILITY.
(a) PERSONS ELIGIBLE. Options may be granted and/or Shares Sold only to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee or Consultant who has been granted an Option or Sold Shares may, if he is otherwise eligible, be granted an additional Option or Options or Sold additional Shares.
(b) ISO LIMITATION. No Incentive Stock Option may be granted to an Employee which, when aggregated with all other Incentive Stock Options granted to such Employee by the Company or any Parent or Subsidiary, would result in Shares having an aggregate fair market value (determined for each Share as of the date of grant of the Option covering such Share) in excess of
4 - STOCK INCENTIVE PLAN
$100,000 becoming first available for purchase upon exercise of one or more Incentive Stock Options during any calendar year.
(c) SECTION 5(b) LIMITATIONS. Section 5(b) of the Plan shall apply only to an Incentive Stock Option evidenced by an "Incentive Stock Option Agreement" which sets forth the intention of the Company and the Optionee that such Option shall qualify as an Incentive Stock Option. Section 5(b) of the Plan shall not apply to any Option evidenced by a "Nonqualified Stock Option Agreement" which sets forth the intention of the Company and the Optionee that such Option shall be a Nonqualified Stock Option.
(d) NO RIGHT TO CONTINUED EMPLOYMENT. The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with his right or the Company's right to terminate his employment or consulting relationship at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years, unless sooner terminated under
Section 13 of the Plan.
7. TERM OF OPTION. The term of each Incentive Stock Option shall be ten (10) years from the date of grant thereof or such shorter term as may be provided in the Stock Option Agreement. The term of each Nonqualified Stock Option shall be ten (10) years and one (1) day from the date of grant thereof or such shorter term as may be provided in the Stock Option Agreement. However, in the case of an Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, (a) if the Option is an Incentive Stock Option, the term of the Option shall be five (5) years from the date of grant thereof or such shorter time as may be provided in the Stock Option Agreement, or (b) if the Option is a Nonqualified Stock Option, the term of the Option shall be five (5) years and one (1) day from the date of grant thereof or such shorter term as may be provided in the Stock Option Agreement.
8. EXERCISE/PURCHASE PRICE AND CONSIDERATION.
(a) EXERCISE/PURCHASE PRICE. The per-Share exercise/purchase price for the Shares to be issued pursuant to exercise of an Option or a Sale (other than a Sale which is a grant for which no purchase price is payable) shall be such price as is determined by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting
5 - STOCK INCENTIVE PLAN
power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than one hundred ten percent (110%) of the fair market value per Share on the date of the grant.
(B) granted to any other Employee, the per Share exercise price shall be no less than one hundred percent (100%) of the fair market value per Share on the date of grant.
(ii) In the case of a Nonqualified Stock Option or Sale.
(A) granted or Sold to a person who, at the time of the grant of such Option or authorization of such Sale, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise/purchase price shall be no less than one hundred ten percent (110%) of the fair market value per Share on the date of the grant or authorization of Sale.
(B) granted or Sold to any other person, the per Share exercise/purchase price shall be no less than eighty-five percent (85%) of the fair market value per Share on the date of grant or authorization of Sale.
(iii) In the case of an Option granted or Sale authorized on or after the effective date of registration of any class of equity security of the Company pursuant to Section 12 of the Exchange Act and prior to six (6) months after the termination of such registration, the per Share exercise/purchase price shall be no less than one hundred percent (100%) of the fair market value per Share on the date of grant or authorization of Sale.
(b) FAIR MARKET VALUE. The fair market value per Share shall be determined by the Board in its discretion; provided, however, that where there is a public market for the Common Stock, the fair market value per Share shall be the mean of the bid and asked prices of the Common Stock for the date of grant or authorization of Sale, as reported in THE WALL STREET JOURNAL (or, if not so reported, as otherwise reported by the National Association of Securities Dealers Automated Quotation (NASDAQ) System) or, in the event the Common Stock is listed on a stock exchange (including NASDAQ), the fair market value per Share shall be the closing price on such exchange on the date of grant of the Option or authorization of Sale, as reported in THE WALL STREET JOURNAL.
(c) CONSIDERATION. The consideration to be paid for the Shares to be issued upon exercise of an Option or pursuant to a Sale, including the method of payment, shall be determined by the Board and may consist entirely of cash, check, promissory note, other Shares of Common Stock having a fair market value on the date of surrender equal to the aggregate exercise/purchase price of the Shares as to which said option shall be exercised or Sale consummated, or any combination of such methods of payment for the issuance of Shares.
9. EXERCISE OF OPTION.
6 - STOCK INCENTIVE PLAN
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Board, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 8(c) of the Plan. Each Optionee who exercises an Option shall, upon notification of the amount due (if any) and prior to or concurrent with delivery of the certificate representing the Shares, pay to the Company amounts necessary to satisfy applicable federal, state and local tax withholding requirements. An Optionee must also provide a duly executed copy of any shareholder stock transfer agreement then in effect and determined to be applicable by the Board. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. If an Employee or Consultant ceases to serve as an Employee or Consultant (as the case may be), he may, but only within three (3) months (or with respect to Nonqualified Stock Options, such other period of time not exceeding the limitations of Section 7 above as is determined by the Board at the time of grant of the Nonqualified Stock Option) after the date he ceases to be an Employee or Consultant (as the case may be) of the Company, exercise his Option to the extent that he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise the Option at the date of such termination, or if he does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 9(b) above, in the event an Employee or Consultant is unable to continue his employment or consulting relationship (as the case may be) with the Company as a result of his total and permanent disability (as defined in Section 22(e)(3) of the Code), he may, but only within twelve (12) months (or with respect to Nonqualified Stock Options, such other period of time not exceeding the limitations of Section 7 above as is determined by the Board at the time of grant of the Nonqualified Stock Option)
7 - STOCK INCENTIVE PLAN
from the date of termination, exercise his Option to the extent he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise the Option at the date of termination, or if he does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee during the term of the Option who is at the time of his death an Employee or Consultant of the Company and who shall have been in Continuous Status as an Employee or Consultant since the date of grant of the Option, the Option may be exercised, at any time within twelve (12) months (or such other period of time not exceeding the limitations of Section 7 above as is determined by the Board at the time of grant of the Option) following the date of death, by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise as of the date of death.
10. NONTRANSFERABILITY OF OPTIONS. An Option may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised during the lifetime of the Optionee only by the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Option and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or sales made or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation
8 - STOCK INCENTIVE PLAN
or a parent or subsidiary of such successor corporation, unless the Board determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, that the Optionee shall have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. If the Board makes an Option fully exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of thirty (30) days from the date of such notice or such shorter period as the Board may specify in the notice, and the Option will terminate upon the expiration of such period.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all purposes, be the date on which the Board makes the determination granting such Option. Notice of the determination shall be given to each Employee or Consultant to whom an Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the Plan from time to time in such respects as the Board may deem advisable; provided that, the following revisions or amendments shall require approval of the stockholders of the Company in the manner described in Section 17 of the Plan:
(i) any increase in the number of Shares subject to the Plan, other than in connection with an adjustment under Section 11 of the Plan;
(ii) any change in the designation of the class of Employees or Consultants eligible to be granted Options; or
(iii) if the Company has a class of equity security registered under Section 12 of the Exchange Act at the time of such revision or amendment, any material increase in the benefits accruing to participants under the Plan.
(b) STOCKHOLDER APPROVAL. If any amendment requiring stockholder approval under Section 13(a) of the Plan is made subsequent to the first registration of any class of equity security by the Company under Section 12 of the Exchange Act, such stockholder approval shall be solicited as described in Section 17(a) of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or termination of the Plan shall not affect Options already granted, and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company.
9 - STOCK INCENTIVE PLAN
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant to the exercise of an Option or a Sale unless the exercise of such Option or consummation of the Sale and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, applicable state securities laws, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option or a Sale, the Company may require the person exercising such Option or to whom Shares are being Sold to represent and warrant at the time of any such exercise or Sale that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to approval by the stockholders of the Company within twelve months before or after the date the Plan is adopted. If such stockholder approval is obtained at a duly held stockholders' meeting, it may be obtained by the affirmative vote of the holders of a majority of the outstanding shares of the Company, such holders being present or represented and entitled to vote thereon. If and in the event that the Company registers any class of any equity security pursuant to Section 12 of the Exchange Act, the approval of such stockholders of the Company shall be:
(a) SOLICITATION.
(i) solicited substantially in accordance with
Section 14(a) of the Exchange Act and the rules and regulations promulgated
thereunder, or
(ii) solicited after the Company has furnished in writing to the holders entitled to vote substantially the same information concerning the Plan as that which would be required by the rules and regulations in effect under Section 14(a) of the Exchange Act at the time such information is furnished; and
10 - STOCK INCENTIVE PLAN
(b) TIME. Obtained at or prior to the first annual meeting of stockholders held subsequent to the first registration of any class of equity securities of the Company under Section 12 of the Exchange Act.
If such stockholder approval is obtained by written consent, it must be obtained by the written consent of stockholders of the Company in compliance with the requirements of applicable state law.
/s/ Eric W. Strid --------------------------------------- Eric Strid, President |
11 - STOCK INCENTIVE PLAN
Exhibit 10.5
CASCADE MICROTECH, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
PARTIES: CASCADE MICROTECH, INC. ("COMPANY")
2430 N.W. 206th Avenue
Beaverton, Oregon 97006
CRAIG M. SWANSON ("EXECUTIVE")
17580 Tree Top Way
Lake Oswego, Oregon 97034
DATE: October 11, 1999
RECITAL
Company wishes to obtain the services of Executive for the term of this Agreement, and Executive wishes to provide his services for such period, all upon the terms and conditions set out in this Agreement.
AGREEMENT
NOW, THEREFORE, for valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 "BASE SALARY" shall mean regular cash compensation paid to Executive on a periodic basis exclusive of benefit, bonuses or incentive payments.
1.2 "BOARD" shall mean the Board of Directors of Cascade Microtech, Inc.
1.3 "DISABILITY" shall mean, as reasonably determined by the Board after consultation with a qualified physician selected by the Board, the inability of Executive to perform, with reasonable accommodation, an essential function of his position under this
1 - Executive Employment Agreement
Agreement because of physical or mental incapacity for a period of three (3) months, and the determination that such inability is likely to continue for at least two (2) additional months. Executive shall cooperate in any physical examination and shall produce such medical records as may assist the Board in making a determination regarding disability.
1.4 "COMPANY" shall mean Cascade Microtech, Inc., and, any successor in interest by way of consolidation, operation of law, merger or otherwise.
ARTICLE 2.
EMPLOYMENT, DUTIES AND TERM
2.1 EMPLOYMENT. Upon the terms and conditions set forth in this Agreement, Company hereby employs Executive in the positions of (a) Vice President, Finance and (b) Chief Financial Officer, and Executive accepts such employment.
2.2 DUTIES. Executive shall devote his full-time and best efforts to Company and to fulfilling the duties of his position which shall include such duties as may from time to time be assigned him by the Chief Executive Officer. As part of his duties, Executive shall comply with Company's policies and procedures to the extent they are not inconsistent with this Agreement, in which case the provisions of this Agreement prevail.
2.3 TERM. This Agreement shall remain in effect until the earlier
of: (i) termination pursuant to Article 4 or Article 6 of this Agreement or,
(ii) two (2) years from the date of this Agreement.
ARTICLE 3.
COMPENSATION
3.1 BASE SALARY. For all services rendered under this Agreement, Company shall pay Executive an initial annual Base Salary of One Hundred Seventy-Five Thousand and 00/100 Dollars ($175,000). If Executive's salary is increased from time to time during the term of this Agreement, the increased amount shall be the Base Salary for the remainder of the term. All amounts payable to Executive under this Agreement, whether by way of Base Salary, bonus, severance or otherwise, shall be reduced by such amounts as are required to be withheld by law.
3.2 SIGNING BONUS. Company shall pay Executive a signing bonus of $32,000 payable on the first regular payroll date following Executive's first day of employment with Company. If Executive's employment with Company terminates for any reason prior to the first anniversary of this Agreement, Executive shall promptly, but in no event later than 90 days following such termination, repay the entire signing bonus to Company.
3.3 BONUS AND INCENTIVE. Beginning in fiscal year 2000, Executive shall be eligible to participate in any Executive Bonus Plan that is generally applicable to comparable executives
2 - Executive Employment Agreement
of Company. Executive's target bonus for fiscal year 2000 shall be 40% of Executive's Base Salary. Notwithstanding any other provision of this Agreement, Company shall have the right to alter, amend or eliminate all or any part of the Executive Bonus Plan, without compensation to Executive.
3.4 STOCK OPTIONS. Subject to approval by the Board, Company shall grant Executive options to purchase up to 120,000 shares of Company stock at an exercise price equal to the fair market value on the date of the grant (the "Options"). The Options shall vest ratably at the rate of 10% every six months over the five-year period following the date of hire; provided, however, that as of: (a) the date of an initial underwritten public offering of Company's common stock pursuant to which shares of Company's Preferred Stock shall automatically convert into shares of Common Stock in accordance with Article V, Section 5.2(B)(4)(b) of Company's Articles of Incorporation ("IPO"), or (b) the date of a Change of Control Termination, as defined in Section 6.1.2 below, the lesser of: (i) 24,000 unvested Options or (ii) the entire remaining unvested Options held by Executive as of the date of the IPO or Change of Control Termination, shall vest and become immediately exercisable. The Options shall be subject to the terms and conditions of the Cascade Microtech, Inc. 1993 Stock Incentive Plan.
3.5 EXECUTIVE BENEFIT PLANS. Executive shall have the right to enroll and participate in any of Company's employee benefit plans from time to time established by Company for the benefit of its executives generally. The cost to Executive for these plans shall be consistent with the terms of the plans. Such benefits may be modified or eliminated at Company's discretion, without compensation to Executive.
3.6 BUSINESS EXPENSES. Company shall, in accordance with, and to the extent of, its policies in effect from time to time, reimburse all ordinary and necessary business expenses reasonably incurred by Executive in performing his duties as an employee of Company, provided that Executive accounts promptly for such expenses to Company in the manner prescribed by Company.
ARTICLE 4.
TERMINATION
4.1 TERMINATION. This Article 4 governs termination of this Agreement at any time during the term of the Agreement; provided, however, that this Article shall not govern a "Change of Control Termination" as defined in Article 6, which is governed by the provisions of Article 6.
4.2 TERMINATION FOR CAUSE. Company may terminate this Agreement and Executive's employment immediately for "Cause" as that term is defined herein, upon written notice to Executive.
3 - Executive Employment Agreement
4.2.1 DEFINITION OF CAUSE. "Cause" means any one of the following by Executive: (a) fraud, (b) misrepresentation, (c) theft or embezzlement of Company assets, (d) intentional violations of law involving moral turpitude, (e) the continued failure to satisfactorily perform his duties as reasonably assigned to Executive pursuant to Section 2.2 of this Agreement for a period of thirty (30) days after a written demand for such satisfactory performance which specifically and with reasonable detail identifies the manner in which it is alleged Executive has not satisfactorily performed such duties, or (f) any material breach of this Agreement.
4.2.2 PAYMENT UPON TERMINATION FOR CAUSE. In the event of termination for Cause pursuant to this Section 4.2, Executive shall be paid his Base Salary through the date of termination specified in any notice of termination. Executive will not be entitled to any bonuses or incentives which are not earned and payable at the time of the termination and will not be entitled to any severance pay or benefits continuation or any other compensation of any kind.
4.3 TERMINATION WITHOUT CAUSE. Either Executive or Company may terminate this Agreement and Executive's employment without Cause by providing at least two weeks written notice; provided, however, that Company shall have the option of making termination of the Agreement and termination of Executive's employment effective immediately upon notice, in which case Executive shall be paid his Base Salary through a notice period of two weeks. This Section 4.3 shall not be applicable where Cause for termination exists.
4.3.1 BY COMPANY. If the notice of termination is given by Company, upon Executive's execution and delivery to Company of a full release of all claims satisfactory to Company, Company shall:
4.3.1.1 pay Executive an amount equal to one year's Base Salary payable at Company's sole discretion in either a lump sum or in approximately equal installments over a period of 12 months following Executive's termination; and,
4.3.1.2 reimburse Executive for the premiums Executive pays to maintain group health coverage pursuant to the Consolidated Omnibus Reconciliation Act of 1985 ("COBRA") until the earlier of: (i) 12 months following termination or (ii) the date Executive is no longer eligible for COBRA continuation coverage, and, provided Executive is eligible for and properly elects continuation of such coverage.
4.3.1.3 reimburse Executive for the reasonable and
necessary expenses of executive outplacement assistance until the earlier of:
(i) 12 months following the date of termination or (ii) the date Executive
secures full time employment; provided, however, in no event shall such total
reimbursements exceed $23,000.
4.3.2 BY EXECUTIVE. If the notice of termination is given by Executive, Company shall pay Executive his Base Salary through the date of termination, subject to termination for
4 - Executive Employment Agreement
Cause in the interim. Company shall have no obligation to pay Executive a pro-rata portion of any bonus or incentive or severance pay or any other compensation of any kind.
4.4 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement and Executive's employment shall terminate immediately in the event of death and may be terminated in the event of Disability. In the event of termination due to death or Disability, Executive shall be entitled to receive his Base Salary until the date of termination and shall be entitled to no further severance or bonus compensation or benefits of any kind under this Agreement.
4.5 ENTIRE TERMINATION PAYMENT. The compensation provided for in this Article 4 shall constitute Executive's sole remedy for termination pursuant to this Article.
ARTICLE 5.
CHANGE OF CONTROL
5.1 DEFINITIONS. For purposes of this Article 6, the following definitions shall be applied:
5.1.1 "CHANGE OF CONTROL" shall mean (a) a consolidation or merger of Company with or into another Company or other entity or person (excluding any merger effected exclusively for the purpose of changing Company's state of domicile), or any other corporate reorganization or other transaction or series of related transactions by Company, in any such case, in which more than 50 percent of the voting power of Company is transferred, or (b) a sale, conveyance or disposition of all or substantially all of the assets of Company.
5.1.2 "CHANGE OF CONTROL TERMINATION" shall mean, with respect to Executive, any of the following events occurring within twelve months after the earliest Change of Control event:
6.1.2.1 Termination of Executive's employment by Company for any reason other than death, disability, or for Cause, as Cause is defined in Section 4.2 of this Agreement.
6.1.2.2 Termination of employment with Company by Executive pursuant to Section 6.2 of this Article 6.
6.1.3 "GOOD REASON" shall mean that any one or more of the following events has occurred without Executive's express written consent, after a Change of Control, and Company's failure to correct such occurrence for a period of thirty (30) days following Executive's written notice to Company identifying the event alleged to provide Good Reason and stating Executive's intent to invoke Section 6.2 of this Article 6.
5 - Executive Employment Agreement
6.1.3.1 A change in Executive's titles or offices as in effect immediately prior to the Change of Control, or any removal of Executive from, or any failure to re-elect Executive to, any of such positions, which has the effect of materially diminishing Executive's responsibility or authority;
6.1.3.3 A requirement by Company that Executive be based anywhere other than within twenty-five (25) miles of Executive's job location at the time of the Change of Control;
6.1.3.4 Unless applicable to all executives of Company: (i) a material diminishment of Executive's Base Salary, pension, bonus, incentive, stock ownership, purchase, option, life insurance, health, accident, disability, or any other employee compensation or benefit plan, program or arrangement and/or any membership (collectively, "Benefit Plans"), in which Executive is participating immediately prior to a Change of Control; or (ii) the taking of any action by Company that would materially adversely affect Executive's participation or materially reduce Executive's benefits under any Benefit Plans or Benefit Plan;
5.2 CHANGE OF CONTROL TERMINATION RIGHT. For a period of twelve months following a Change of Control, Executive shall have the right to terminate employment with Company for Good Reason. Such termination shall be accomplished by, and effective upon, Executive giving written notice to Company of Executive's decision to terminate.
5.3 CHANGE OF CONTROL TERMINATION PAYMENT. In the event of a Change of Control Termination as defined in Section 6.1.2 and upon Executive's execution and delivery to Company of a full release of all claims satisfactory to Company the following shall occur:
6.3.1 SEVERANCE PAY. Within thirty (30) days of Executive's termination, Company shall pay Executive an amount equal to one year's Base Salary payable at Company's sole discretion in either a lump sum or in approximately equal installments over a period of 12 months following Executive's termination; and,
6.3.2 COBRA CONTINUATION. Company shall reimburse Executive for the premiums Executive pays to maintain group health coverage pursuant to the Consolidated Omnibus Reconciliation Act of 1985 ("COBRA") until the earlier of: (i) 12 months following termination or (ii) the date Executive is no longer eligible for COBRA continuation coverage, and, provided Executive is eligible for and properly elects continuation of such coverage.
6.3.3 OPTION ACCELERATION. As of the date of the Change in Control Termination, the lesser of: (i) 24,000 unvested Options held by Executive or (ii) the entire remaining unvested Options held by Executive, shall vest and become immediately exercisable.
6.3.4 OUTPLACEMENT. Company shall reimburse Executive for the reasonable and necessary expenses of executive outplacement assistance until the earlier of: (i) 12 months
6 - Executive Employment Agreement
following the date of termination or (ii) the date Executive secures full time employment; provided, however, in no event shall such total reimbursements exceed $23,000.
ARTICLE 6.
GENERAL PROVISIONS
6.1 NOTICES. All notices, requests and demands given to or made pursuant hereto shall, except as otherwise specified herein, be in writing and be delivered or mailed to any such party at its address as set forth at the beginning of this Agreement. Either party may change its address, by notice to the other party given in the manner set forth in this Section. Any notice, if mailed properly addressed, postage prepaid, registered or certified mail, shall be deemed dispatched on the registered date or that stamped on the certified mail receipt, and shall be deemed received within the third business day thereafter or when it is actually received, whichever is sooner.
6.2 CAPTION. The various headings or captions in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement.
6.3 GOVERNING LAW. The validity, construction and performance of this Agreement shall be governed by the laws of the State of Oregon.
6.4 MEDIATION. In case of any dispute arising under this Agreement which cannot be settled by reasonable discussion, the parties agree that, prior to commencing any arbitration proceeding as contemplated by Section 7.5 they will first engage the services of a professional mediator agreed upon by the parties and attempt in good faith to resolve the dispute through confidential non-binding mediation. Each party shall bear one-half (1/2) of the mediator's fees and expenses and shall pay all of its own attorneys' fees and expenses related to the mediation.
6.5 ARBITRATION. Any dispute concerning the interpretation, construction, breach or enforcement of this Agreement or arising in any way from Executive's employment with Company or termination of employment shall be submitted to final and binding arbitration. Such arbitration is to be before a single arbitrator in Portland, Oregon. In the event the parties are unable to agree upon an arbitrator, an arbitrator shall be appointed by the court pursuant to ORS 36.320. The arbitration shall be conducted pursuant to the American Arbitration Association ("AAA") Employment Dispute Resolution Rules. Executive and Company agree that, except as provided in Section 7.6 below, the procedures outlined in Section 7.4 and 7.5 are the exclusive method of dispute resolution.
6.6 CONSENT TO INJUNCTION. Executive agrees that Company will or would suffer an irreparable injury if Executive were to violate the provisions of Article 5 hereto and that Company would by reason of such violation be entitled to injunctive relief in a court of appropriate jurisdiction and Executive stipulates to the entering of such injunctive relief.
7 - Executive Employment Agreement
6.7 ATTORNEY FEES. If any action at law, in equity or by arbitration is taken to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled, including fees and expenses on appeal.
6.8 CONSTRUCTION. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.
6.9 WAIVERS. No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by law.
6.10 ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of Company and its successors and assigns, and shall be binding upon Executive, his administrators, executors, legatees, and heirs, In that this Agreement is a personal services contract, it shall not be assigned by Executive.
6.11 MODIFICATION. This Agreement may not be and shall not be modified or amended except by written instrument signed by the parties hereto.
6.12 ENTIRE AGREEMENT. This Agreement together with the Executive Invention and Confidentiality Agreement executed contemporaneously herewith constitute(s) the entire agreement and understanding between the parties hereto in reference to all the matters herein agreed upon. This Agreement replaces and supersedes all prior employment agreements or understandings of the parties hereto; provided, however, that the Executive Invention and Confidentiality Agreement continues in full force and effect according to its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
EXECUTIVE CASCADE MICROTECH, INC.
/s/ Craig M. Swanson /s/ Eric W. Strid
------------------------------------- ------------------------------------
Craig M. Swanson Eric W. Strid
CEO / Chairman
|
8 - Executive Employment Agreement
Exhibit 10.6
SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
Borrower: Cascade Microtech, Inc.
Address: 14255 S.W. Brigadoon Court
Beaverton, OR 97005
Date: February 19, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date
|
between SILICON VALLEY BANK ("Silicon"), whose address is 3003 Tasman Drive, Santa Clara, California 95054 and the borrower named above (the "Borrower"), whose chief executive office is located at the above address ("Borrower's Address").
1. LOANS.
1.1. LOANS. Silicon will make one or more loans to the Borrower (the "Loans") up to the amounts (the "Credit Limits") shown on the Schedule to this Agreement (the "Schedule") as the Credit Limit for such loans. The terms of the Loans are stated in this Agreement and in the Schedule. The terms of the Schedule are incorporated into this Agreement. The Borrower is responsible for monitoring the total amount of Loans and other Obligations outstanding from time to time, and the Borrower shall not permit the amount of any Loan to exceed at any time the applicable Credit Limit for such Loan. The Borrower shall not permit the total amount of Loans and all other obligations to exceed at any time the aggregate Credit Limit for the Loans. If at any time the total of all outstanding Loans and all other Obligations exceeds the aggregate Credit Limit, the Borrower shall immediately pay the amount of the excess to Silicon, without notice or demand.
Borrower and Silicon may also enter into a Loan and Security Agreement
(EXIM Program) and related documents (collectively, the "EXIM Documents")
relating to an Export-Import Bank of the United States credit facility (the
"EXIM Loan"). The form of such documents is attached to this Agreement. As of
the date of execution of this Agreement, the Borrower had not supplied Silicon
with all documentation necessary for the Borrower to qualify for the EXIM Loan.
No advances shall be allowed under the EXIM Loan until such documentation has
been provided to Silicon. Within five business days after Borrower's receipt of
a letter from Silicon to the effect that Silicon is prepared to activated the
EXIM Loan, the Borrower shall execute and deliver to Silicon the EXIM Documents.
Page 1 - LOAN AND SECURITY AGREEMENT
1.2. INTEREST: DEBT TO DEPOSIT ACCOUNTS. All Loans and all other monetary Obligations shall bear interest at the applicable rates shown on the Schedule. Interest shall be payable monthly on the due date shown on the monthly billing from Silicon to the Borrower. The Borrower shall regularly deposit all funds received from its business activities in accounts maintained by the Borrower at Silicon. The Borrower hereby requests and authorizes Silicon to debit any of the Borrower's accounts with Silicon, including without limitation account no. 3300066372, for payments of interest and principal due on the Loans and all other obligations owing by the Borrower to Silicon. Silicon shall promptly notify the Borrower of all debits which Silicon makes against the Borrower's accounts. Any such debit against the Borrower's accounts shall in no way be deemed a setoff by Silicon.
1.3. FEES. The Borrower shall pay to Silicon at closing a commitment fee and other fees in the amounts shown on the Schedule. These fees are in addition to all interest and other sums payable to Silicon and are not refundable.
1.4. ADDITIONAL COSTS. In case of any law, regulation, treaty or official directive or the interpretation or application thereof by any court or any governmental authority charged with the administration thereof or the compliance with any guideline or request of any central bank or other governmental authority (whether or not having the force of law) which:
(a) subjects Silicon to any tax with respect to payments of principal or interest or any other amounts payable hereunder by the Borrower or otherwise with respect to the transactions contemplated hereby (except for taxes on the overall net income of Silicon imposed by the United States of America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance, reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans by, Silicon; or
(c) imposes upon Silicon any other condition with respect to its performance under this Agreement,
and the results of any of the foregoing is to increase the cost to Silicon, reduce the income receivable by Silicon or impose any expense upon Silicon with respect to any loans, Silicon shall notify the Borrower thereof. Borrower agrees to pay to Silicon the amount to such increase in cost, reduction in income or additional expense as and when such cost, reduction or expense is incurred or determined, upon presentation by Silicon of a statement of the amount and setting forth Silicon's calculation thereof, all in reasonable detail.
2. GRANT OF SECURITY INTEREST.
2.1. OBLIGATIONS. The term "Obligations" as used in this Agreement means the following: the obligation to pay all Loans and all interest on the Loans when due, and to pay and perform when due all other present and future indebtedness (including but not limited to any
Page 2 - LOAN AND SECURITY AGREEMENT
amount outstanding under the EXIM Loan), liabilities, obligations, guarantees, covenants, agreements, warranties and representations of the Borrower to Silicon, whether joint or several, monetary or non-monetary, and whether created pursuant to this Agreement, the EXIM Documents or any other present or future agreement (such as future agreements relating to letters of credit issued by Silicon) or otherwise. Silicon may, in its discretion, require that the Borrower pay monetary Obligations in cash to Silicon, or charge them to the Borrower's Loan account, in which event they shall bear interest at the rates applicable to the Loan to which such amounts are charged.
2.2. COLLATERAL. As security for all Obligations, the Borrower
hereby grants Silicon a continuing security interest in all of the Borrower's
assets, including but not limited to all of the Borrower's interest in the types
of property described below, whether now owned or hereafter acquired, and
wherever located (collectively, the "Collateral"): (a) all accounts, contract
rights, chattel paper, letters of credit, documents, securities, money, and
instruments, and all other obligations now or in the future owing to the
Borrower; (b) all inventory, goods, merchandise, materials, raw materials, work
in process. finished goods, farm products, advertising, packaging and shipping
materials, supplies, and all other tangible personal property which is held for
sale or lease or furnished under contracts of service or consumed in the
Borrower's business, and all warehouse receipts and other documents; (c) all
equipment, including without limitation all machinery, fixtures, trade fixtures,
vehicles, furnishing, furniture, materials, tools, machine tools, office
equipment, computers, and peripheral devices, appliances, apparatus, parts,
dies, and jigs; (d) all general intangibles including, but not limited to,
deposit accounts, goodwill, names, trade names, trademarks and the goodwill of
the business symbolized thereby, trademark applications, trade secrets,
drawings, blueprints, customer lists, patents, patent applications, copyrights,
copyright applications, security deposits, loan commitment fees, federal, state
and local tax refunds and claims, all rights in all litigation presently or
hereafter arising therefrom, all rights to purchase or sell real or personal
property, all rights as a licenser or licensee of any kind, all royalties,
licenses, processes, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance), and all other rights,
privileges and franchise of every kind; (e) all books and records, whether
stored on computers or otherwise maintained; (f) all of the Borrower's cash; and
(g) all substitutions, additions and accessions to any of the foregoing, and all
products, proceeds and insurance proceeds of the foregoing, and all guaranties
of and security for the foregoing; and all books and records relating to any of
the foregoing. Silicon's security interest in any present or future technology
(including patents, trade secrets, and other technology) shall be subject to any
license or rights now or in the future granted by the Borrower to any third
parties in the ordinary course of the Borrower's business; provided that if the
Borrower proposes to sell, license or grant any other rights with respect to any
technology in a transaction that, in substance, conveys a major part of the
economic value of that technology, Silicon shall first be requested to release
its security interest, and Silicon may withhold such release in its reasonable
discretion. The Borrower shall not, either directly or through any agent,
employee, license or designee, file any assignment of any patent, trademark, or
copyright which the Borrower may acquire from a third party with the U.S. Patent
and Trademark Office, the U.S. Copyright Office, or any similar office or agency
in any other country, state, or political subdivision (the "Offices") unless the
Borrower shall, on or prior to the date of such filing, notify Silicon of such
filing, and upon request of
Page 3 - LOAN AND SECURITY AGREEMENT
Silicon, execute and deliver any and all assignments, agreements, instruments, documents and papers as Silicon may request to evidence Silicon's interest such patents, trademarks, or copyrights, as the case may be, including the goodwill and general intangibles of the Borrower relating thereto or represented thereby. The Borrower authorizes Silicon to amend any applicable notice of security interest or assignment executed pursuant to SECTION 4.9 of this Agreement without first obtaining the Borrower's approval of or signature to such amendment and to record such assignment with one or more of the Offices.
2.3. COLLATERAL DEFINITIONS. Notwithstanding SECTION 2.2, for purposes of this Agreement, the intellectual property comprising the Collateral may be further defined to include the following:
(a) Any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held, including without limitation those set forth in EXHIBIT A attached to the Intellectual Property Security Agreement (collectively, the "Copyrights");
(b) All patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, including without limitation the patents and patent applications set forth on EXHIBIT B attached to the Intellectual Property Security Agreement (collectively, the "Patents");
(c) Any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks, including without limitation those set forth on EXHIBIT C attached to the Intellectual Property Security Agreement (collectively, the "Trademarks"); and
(d) Any series of related images, however fixed or encoded (i) having or representing the predetermined, three-dimensional pattern of metallic, insulating or semiconductor material present or removed from the layers of a semiconductor chip product; and (ii) in which series the relation of the images to one another is that each image has the pattern of the surface of one form of the semiconductor chip product, including without limitation those set forth on EXHIBIT D attached to the Intellectual Property Security Agreement (collectively, the "Mask Works").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
The Borrower represents and warrants to Silicon as follows, and the Borrower covenants that the following representations shall continue to be true, and that the Borrower shall comply with all of the following covenants:
3.1. CORPORATE EXISTENCE AND AUTHORITY. The Borrower is and shall continue to be
Page 4 - LOAN AND SECURITY AGREEMENT
duly authorized, validly existing and in good standing under the laws of the state of its incorporation, as identified on the copy of the Borrower's Articles of Incorporation delivered to Silicon. The Borrower is and shall continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so would have a material adverse effect on the Borrower. The execution, delivery and performance by the Borrower of the Agreement, and all other documents executed by the Borrower in connection with the Loans have been duly and validly authorized, are enforceable against the Borrower in accordance with their terms, and do not violate any law or any provision of, and are not grounds for acceleration under, and agreement or instrument that is binding upon the Borrower.
3.2. NAME, TRADE NAMES AND STYLES. The name of the Borrower set forth in the heading to this Agreement is its correct name. Listed on an Exhibit to the Schedule are all prior names of the Borrower and all of the Borrower's present and prior trade names. The Borrower shall give Silicon 15 days' prior written notice before changing its name or doing business under any other name. The Borrower has complied, and shall in the future comply, with all laws relating to the conduct of business under a fictitious business name.
3.3. PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the heading to this Agreement is the chief executive office for the Borrower. In addition, the Borrower has places of business only at, and Collateral of the Borrower is located only at the locations set forth on the Schedule. The Borrower shall give silicon at least 15 days' prior written notice before changing its chief executive office or moving Collateral (other than inventory sold in the ordinary course of business) to any location other than a location listed on the Schedule.
3.4. TITLE OF COLLATERAL; PERMITTED LIENS. The Borrower is now, and shall at all times in the future be, the sole owner of all the Collateral, except for items of equipment that are leased by the Borrower and general intangibles subject to nonexclusive licenses granted by Borrower to its customers in charges, security interests, encumbrances and adverse claims, except of the following ("Permitted Liens"): (a) purchase money security interests in specific items of equipment financed by the Loans; (b) leases of specific items of equipment; (c) liens for taxes not yet payable; (d) additional security interests and liens consented to in writing by Silicon in its sole discretion; and (e) security interests being terminated substantially concurrently with this Agreement. Silicon shall have the right to require, as a condition to its consent under subparagraph (d) above, that the holder of the additional security interest or lien sign and intercreditor agreement on terms satisfactory to Silicon in its sole discretion, acknowledge that the holder's security interest is subordinate to Silicon's security interest. Silicon now has, and shall continue to have, a first priority, perfected and enforceable security interest in all of the Collateral. The Collateral shall not be subject to any other liens or security interests of any type except for the Permitted Liens. The Borrower shall at all times defend Silicon and the Collateral against all claims of others. None of the Collateral now is or shall be affixed to any real property in such a manner, or with such intent, as to become a fixture.
3.5. MAINTENANCE OF COLLATERAL. The Borrower shall maintain the Collateral in good working condition. The Borrower shall not use the Collateral for any unlawful purpose.
Page 5 - LOAN AND SECURITY AGREEMENT
3.6. BOOKS AND RECORDS. The Borrower has maintained and shall maintain at the Borrower's Address complete and accurate books and records, comprising an accounting system in accordance with generally accepted accounting principles.
3.7. FINANCIAL CONDITION AND STATEMENTS. All financial statements now or in the future delivered to Silicon have been, and shall be, prepared in conformity with generally accepted accounting principles and now and in the future shall completely and accurately reflect the financial condition of the Borrower, at the times and for the periods therein stated. Since the last date covered by any such statement, there has been no material adverse change in the financial condition or business of the Borrower. The Borrower is now and shall continue to be solvent.
3.8. TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. The Borrower has timely filed, and shall timely file, all tax returns and reports required by foreign, federal, state and local law. The Borrower has timely paid, and shall timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions now or in the future owned by the Borrower. The Borrower may, however, defer payment of any contested taxes, provided that the Borrower (a) in good faith contests the Borrower's obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Silicon in writing of the commencement of, and any material development in, the proceedings, and (c) posts bonds or takes any other steps required to keep the contested taxes from becoming a lien upon any of the Collateral. The Borrower is unaware of any claims or adjustments proposed for any of the Borrower's prior tax years which could result in additional taxes becoming due and payable by the Borrower. The Borrower has paid, and shall continue to pay all amounts necessary to fund all present and future pension, profit sharing and deferred compensation plans in accordance with their terms. The Borrower has not and shall not withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any such plan which could result in any liability of the Borrower, including, without limitation, any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
3.9. COMPLIANCE WITH LAW. The Borrower has complied, and shall comply, in all material respects, with all provisions of all foreign, federal, state and local laws and regulations relating to the Borrower, including, but not limited to, those relating to ownership of real or personal property, conduct and licensing of the Borrower's business, and environmental matters.
3.10. LITIGATION. Except as disclosed in the Schedule, there is no claim, suit, litigation, proceeding or investigation pending or (to best of the Borrower's knowledge) threatened by or against or affecting the Borrower in any court or before any governmental agency (or any basis therefore known to the Borrower) which may result, either separately or in the aggregate, in any material adverse change in the financial condition or business of the Borrower, or in any material impairment in the ability of the Borrower shall promptly inform Silicon in writing of any claim, proceeding, litigation or investigations in the future threatened or instituted by or against the Borrower involving amounts in excess of $100,000.
Page 6 - LOAN AND SECURITY AGREEMENT
3.11. USE OF PROCEEDS. All proceeds of all Loans shall be used solely for lawful business purposes.
3.12. NO PATENTS OR TRADEMARKS. The Borrower does not own, and the Borrower does not have pending any application for the registration of, any patent or trademark with the U.S. Patent and Trademark Office or any similar office or agency of any state of the United States of America or of any foreign jurisdiction, except as disclosed in the Schedule.
3.13. HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in this
Agreement, shall have the same meanings as set forth in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation
Act, 49 U.S.C. 1801, et seq., the Resource Conservation and Recovery Act, 49
U.S.C. 6901, et seq., or other applicable state or Federal laws, rules, or
regulations adopted pursuant to any of the foregoing. The Borrower represents
and warrants that: (a) the Borrower has no knowledge of (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened release of any
hazardous waste or substance by any prior owners or occupants of any of the real
properties owned or operated by the Borrower, or (ii) any actual or threatened
litigation or claims of any kind by any person relating to such matters; (b)
neither the Borrower nor any subtenant, contractor, agent or other user
authorized by Borrower of any of the real properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste or
substance on, under or about any of the real properties owned or operated by the
borrower except in compliance with all laws, regulations and ordinances
described above. The Borrower authorizes Silicon and its agents, upon 24 hours'
prior notice (which need not be in writing), to enter upon the real properties
to make such inspections and tests as Silicon may deem appropriate to determine
compliance of the real properties owned or operated by the Borrower with this
Section of the Agreement. Any inspections or test made by Silicon shall be at
Silicon's expense and for Silicon's purpose only, with such expense to be
reimbursed by Borrower if an environmental condition or hazard is discovered,
and shall not be construed to create any responsibility or liability on the part
of Silicon to the Borrower or to any other person unless Silicon or its agents
create or exacerbate an environmental hazard. The Borrower hereby (a) release
and waives any future claims against Silicon for indemnity or contribution in
the event the Borrower becomes liable for cleanup or other costs under any such
laws, and (b) agrees to indemnify and hold harmless Silicon against any and all
claims, losses, liabilities, damages, penalties, and expenses which Silicon may
directly or indirectly sustain or suffer resulting form a breach of this Section
of the Agreement or as a consequence of any use, generation, manufacture,
storage, disposal, release or threatened release occurring prior to the
Borrower's ownership or interest in the real properties, whether or not the same
was or should have been by the negligence or willful misconduct of Silicon. The
provisions of this Section of the Agreement, including the obligation to
indemnify, shall survive the payment of the obligations and the termination or
expiration of this Agreement and shall not be affected by Silicon's acquisition
of any interest in
Page 7 - LOAN AND SECURITY AGREEMENT
any of the real properties, whether by foreclosure or otherwise.
3.14. NO CONFLICTS. Performance of this Agreement does not conflict with or result in a breach of any agreement to which Borrower is a party or by which Borrower is bound, except to the extent that certain intellectual property agreements prohibit the assignment of the rights thereunder to a third party without the licensor's or other party's consent and this Agreement constitutes an assignment.
3.15. NO TRANSFERS OR ENCUMBRANCES. During the term of this Agreement, Borrower will not transfer or otherwise encumber any interest in the Collateral, except for non-exclusive licenses granted by Borrower in the ordinary course of business or as set forth in this Agreement and the Permitted Liens.
3.16. VALIDITY OF PATENTS. To its knowledge, each of the Patents, patent applications and like provisions are valid and enforceable, and no part of the Collateral has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Collateral violates the rights of any third party.
3.17. NOTICE OF CHANGE IN COMPOSITION. Borrower shall promptly advise Silicon of any material change in the composition of the Collateral, including but not limited to any subsequent ownership right of the Borrower in or to any Trademark, Patent or Copyright not specified in this Agreement.
3.18. DUTY TO PROTECT AND DEFEND. Borrower shall (i) protect, defend and maintain the validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use its best efforts to detect infringements of the Trademarks, Patents and Copyrights and advise Silicon in writing on a quarterly basis of material infringements detected, and (iii) not allow any Trademarks, Patents or Copyrights to be abandoned, forfeited or dedicated to the public without the written consent of Silicon, which shall not be unreasonably withheld, unless Borrower determines that reasonable business practices suggest that abandonment is appropriate.
3.19. AFTER ACQUIRED COLLATERAL. This Agreement creates, and in the case of after acquired Collateral, this Agreement will create at the time Borrower first has rights in such after acquired Collateral, in favor of Silicon a valid and perfected first priority security interest in the Collateral in the United States securing the payment and performance of the obligations evidenced by the Loan Agreement upon making the filings refereed to in clause 3.20 below.
3.20. NO AUTHORIZATION NECESSARY TO PLEDGE. To its knowledge, except for, and upon, the filing with the United States Patent and Trademark office with respect to the pledged Patents and Trademarks and the Register of Copyrights with respect to the pledged Copyrights necessary to perfect the security interests and assignment created hereunder, and except as has been already made or obtained, no authorization, approval or other action by, and no notice to or filing with, any U.S. governmental authority or U.S. regulatory body is required either (i) for the grant by Borrower of the security interest granted hereby or for the execution, delivery or performance of this Agreement by Borrower in the U.S., or (ii) for the perfection in the United States or the
Page 8 - LOAN AND SECURITY AGREEMENT
exercise by Silicon of its rights and remedies hereunder.
3.21. ACCURATE INFORMATION. All information heretofore, herein or hereafter supplied to Silicon by or on behalf of Borrower with respect to the Collateral is accurate and complete in all material respects.
3.22. NO CONFLICTING AGREEMENT. Borrower shall not enter into any agreement that would materially impair or conflict with Borrower's obligations hereunder without Silicon's prior written consent, which consent shall not be unreasonably withheld. Borrower shall not permit the inclusion in any material contract to which it becomes a party of any provisions that could or might in any way prevent the creation of a security interest in Borrower's rights and interests in any property included within the definition of the Collateral acquired under such contracts, except that certain contracts may contain anti-assignment provisions that could in effect prohibit the creation of a security interest in such contracts.
3.23. NOTICE OF IMPAIRMENT OF VALUE. Upon any executive officer of Borrower obtaining actual knowledge thereof, Borrower will promptly notify Silicon in writing of any event that materially adversely affects the value of any Collateral, the ability of Borrower to dispose of any Collateral or the rights and remedies of Silicon in relation thereto, including the levy of any legal process against any of the Collateral.
4. ADDITIONAL DUTIES OF THE BORROWER
4.1. FINANCIAL AND OTHER COVENANTS. The Borrower shall at all times comply with the financial and other covenants set forth in the Schedule.
4.2. OVERADVANCE; PROCEEDS OF ACCOUNTS. If for any reason the total of all outstanding Loans and all other Obligations exceeds the total Credit Limit, as stated in the Schedule, the Borrower will pay Silicon the amount necessary to cure such over advance within two banking days of written or oral notice form Silicon to Borrower that such over advance exists. If Borrower does not make the full payment described in the preceding sentence within the time provided, then, without limiting Silicon's other remedies, and whether or not Silicon declares an Event of Default, the Borrower shall remit to Silicon all checks and other proceeds of the Borrower's accounts and general intangibles, in the same form as received by the Borrower, within one day after the Borrower's receipt of the same, to be applied to the Obligation in order as Silicon shall determine in its discretion.
4.3. INSURANCE. The Borrower shall at all times insure all of the tangible personal property Collateral and carry such other business insurance, with insurers reasonably acceptable to Silicon, in such form and amounts as Silicon may reasonably require. All such insurance policies shall name Silicon as an additional loss payee, and shall contain a lenders loss payee endorsement in form reasonably acceptable to Silicon. Unless an Event of Default has occurred, Silicon shall release to the Borrower insurance proceeds with respect to equipment totaling less
Page 9 - LOAN AND SECURITY AGREEMENT
than $100,000, which shall be utilized by the Borrower for the replacement of the equipment with respect to which the insurance proceeds were paid. Silicon may require reasonable assurance that the insurance proceeds so released shall be so used. If the Borrower fails to provide or pay for any insurance, Silicon may, but is not obligated to, obtain the same at the Borrower's expense. The Borrower shall promptly deliver to Silicon copies of all reports made to insurance companies. Statutory notice regarding insurance:
WARNING
Unless you provide us with evidence of the insurance coverage as required by our contract or loan agreement, we may purchase insurance at your expense to protect our interest. This insurance may, but need not, also protect your interest. If the collateral becomes damaged, the coverage we purchase may not pay any claim you make or any claim made against you. You may later cancel this coverage by providing evidence that you have obtained property coverage elsewhere.
You are responsible for the cost of any insurance purchased by us. The cost of this insurance may be added to your contract or loan balance. If the cost is added to your contract or loan balance, the interest rate on the underlying contract or loan will apply to this added amount. The effective date of coverage may be the date your prior coverage lapsed or the date you failed to provide proof of coverage.
This coverage we purchase may be considerably more expensive than insurance you can obtain on your own and may not satisfy any need for property damage coverage or any mandatory liability insurance requirements imposed by applicable law.
4.4. REPORT. The Borrower shall provide Silicon with such written reports with respect to the Borrower as Silicon shall from time to time reasonably specify, including but not limited to the financial reports required as stated in the Schedule.
4.5. ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable times, and upon one business day notice, Silicon, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy the Borrower's accounting books, records, ledgers, journals, or registers and the Borrower's books and records relating to the Collateral, provided that no prior notice is required upon the occurrence and continuation of an Event of Default. Silicon shall take reasonable steps to keep confidential all information obtained in any such inspection or audit, but Silicon shall have the right to disclose any such information to its auditors, regulatory agencies and attorneys, and pursuant to any subpoena or other legal process. Silicon will provide notice and an opportunity for Borrower to object to such disclosures in those instances when Silicon, in its sole discretion, determines that such notice and opportunity to object are feasible. Silicon shall treat such confidential information with the same degree of care it would its own confidential information. The Borrower shall reimburse Silicon for Silicon's actual costs for conducting two such audits per year, in an amount not to exceed $1,250 per audit. Silicon may
Page 10 - LOAN AND SECURITY AGREEMENT
debit the Borrower's deposit accounts with Silicon for the cost of such audits, in which event Silicon shall send notification thereof to the Borrower.
4.6. NEGATIVE COVENANTS. Except as may be expressly permitted in the Schedule, the Borrower shall not, without Silicon's prior written consent, do any of the following: (a) merge or consolidate with another corporation, except that the Borrower may merge or consolidate with another corporation if the Borrower is the surviving corporation in the merger and the aggregate value of the assets acquired in the merger does not exceed 25% of the Borrower's Tangible Net Worth (as defined in the Schedule) as of the end of the month prior to the effective date of the merger, and the assets of the corporation acquired in the merger are not subject to any liens or encumbrances, except Permitted Liens; (b) acquire any assets, including stock of any other entity, outside the ordinary course of business for an aggregate purchase price (whether paid in cash, in stock of the Borrower or other consideration) exceeding 25% of the Borrower's Tangible Net Worth (as defined in the Schedule) as of the end of the month prior to the effective date of the acquisition; (c) enter into any other transaction outside the ordinary course of business (except as permitted by the other provisions of this Section); (d) sell or transfer any Collateral, except for the sale of finished inventory in the ordinary course of the Borrower's business; (e) make any loans of any money or any other assets to shareholders, employees or any other person except in the ordinary course of business; (f) incur any debts that are outside the ordinary course of business or that would have a material, adverse effect on the Borrower or on the prospect of repayment of the Obligations; (g) guarantee or otherwise become liable with respect to the obligations of another party or entity; (h) pay or declare any dividends on the stock of the Borrower (except for dividends payable solely in stock of the Borrower); (i) make any change in the Borrower's capital structure which has a material adverse effect on that Borrower or on the prospect of repayment of the Obligations; or (k) dissolve or elect to dissolve. Transactions permitted by the foregoing provisions of this Section are only permitted if no Event of Default and no event which (with notice or passage of time or both) would constitute an Event of Default would occur as a result of such transaction. Borrower will not unreasonably withhold consent with respect to clause (a) or clause (b) above.
4.7. LITIGATION COOPERATION. Should any third-party suit or proceeding be instituted by or against Silicon with respect to any Collateral or in any manner relating to the Borrower, the Borrower shall, without expense to Silicon, make available the Borrower and its officers, employees and agents and the Borrower's books and records to the extent that Silicon may deem reasonably necessary in order to prosecute or defend any such suit or proceeding.
4.8. VERIFICATION. Silicon may, from time to time, following prior notification to the Borrower, verify directly with the respective account debtors the validity, amount and other matters relating to the Borrower's accounts, by means of mail, telephone or otherwise, either in the name of the Borrower or Silicon or such other name as Silicon may reasonably choose, provided that no prior notification shall be required following an Event of Default. Silicon shall not be required to obtain the Borrower's consent prior to any such verification of accounts, whether or not an Event of Default has occurred.
Page 11 - LOAN AND SECURITY AGREEMENT
4.9. EXECUTE ADDITIONAL DOCUMENTATION. The Borrower agrees, as its expense, on request by Silicon, to execute from time to time all documents in form satisfactory to Silicon, as Silicon may deem reasonably necessary or useful in order to perfect and maintain Silicon's perfected security interest in the Collateral, and in order to fully consummate all of the transactions contemplated by this Agreement.
4.10. REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS. The Borrower shall register or cause to be registered (to the extent not already registered) with the United States Patent and Trademark Office or the United States Copyright Office, as applicable, those intellectual property rights listed on an exhibit to the Intellectual Property Security Agreement delivered to Silicon by the Borrower in connection with this Agreement within thirty (30) days of the date of this Agreement. Borrower shall register or cause to be registered with the United States Patent and Trademark Office or the United States Copyright Office, as applicable, those additional intellectual property rights developed or acquired by Borrower from time to time in connection with any product prior to the sale or licensing of such product to any third party, including without limitation revisions or additions to the intellectual property rights listed on such exhibit to instruments and documents from time to time as Silicon shall reasonably request to perfect Silicon's security interest in such additional intellectual property rights.
5. TERM.
5.1. MATURITY DATE. This Agreement shall continue in effect until the payment in full of the Obligations, provided, however, that the Borrower shall repay in full each Loan described on the Schedule, with all accrued but unpaid interest on that Loan, on or before the Maturity Date stated on the Schedule for such Loan.
5.2. EARLY TERMINATION. Subject to SECTION 5.3, this Agreement may be terminated, without penalty, prior to the Maturity Date as follows: (a) by the Borrower, effective three business days after written notice of termination is given to Silicon; or (b) by Silicon at any time after the occurrence of an Event of Default, without notice, effective immediately.
5.3. PAYMENT OF OBLIGATION. On the due dates stated in the Schedule, or on any earlier effective date of termination, the Borrower shall pay and perform in full all Obligations, whether evidenced by installment notes or otherwise, and whether or not all or any part of such Obligations are otherwise then due and payable. Notwithstanding any termination of this Agreement, all of Silicon's security interests in all of the Collateral and all of the terms and provisions of this Agreement shall continue in full force and effect until all Obligations have been paid and performed in full; provided that Silicon may, in its sole discretion, refuse to make any further Loans after termination. No termination shall in any way affect or impair any right or remedy of Silicon, nor shall any such termination relieve the Borrower of any Obligation to Silicon, until all of the Obligations have been paid and performed in full. Upon payment and performance in full of all the Obligations, Silicon shall promptly deliver to the Borrower termination statements, requests for reconveyances and such other documents as may be required to fully terminate any of Silicon's security interests.
Page 12 - LOAN AND SECURITY AGREEMENT
6. EVENTS OF DEFAULT AND REMEDIES.
6.1. EVENTS OF DEFAULT. The occurrence of any of the following events shall constitute an "Event of Default" under this Agreement, and the Borrower shall give Silicon immediate written notice thereof: (a) any warranty, representation, statement, report or certificate made or delivered to Silicon by the Borrower or any of the Borrower's officers or employees, now or in the future, shall be untrue or misleading in any material respect; or (b) the Borrower shall fail to pay when due any Loan or any interest thereon or any other monetary Obligation, including without limitation to the EXIM Loan; or (c) the total outstanding balance of any Loan exceeds the applicable Credit Limit, or the total Loans and other Obligations outstanding at any time exceed the aggregate Credit Limit for all Loans; or (d) the Borrower shall fail to comply with any of the financial covenants set forth in the Schedule or shall fail to perform any other non-monetary Obligation which by its nature cannot be cured; or (e) the Borrower shall fail to pay or perform any other non-monetary Obligation, under this Agreement or any other agreement or document relating to the Loans or under the EXIM Documents relating to the EXIM Loan; or (f) any levy, assessment, attachment, seizure, lien or encumbrance is made on all or any part of the Collateral; or (g) dissolution, termination of existence, insolvency or business failure of the Borrower, or appointment of a receiver, trustee or custodian for all or any part of the property of , assignment for the benefit of creditors by, or the commencement of any proceeding by the Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or (h) the commencement of any proceeding against the Borrower or any guarantor of any of the Obligations under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 90 days after the date commenced, or (i) revocation or termination of, or limitation of liability upon, any guaranty of the Obligations; or (j) commencement of proceedings by any guarantor of any of the Obligations under any bankruptcy or insolvency law; or (k) the Borrower makes any payment on account of any indebtedness or obligation which has been subordinated to the Obligations, unless such payment is permitted in the applicable subordination agreement, or if any person who has subordinated such indebtedness or obligations terminates or in any way limits his subordination agreement; or (l) the Borrower shall generally not pay its debts as they become due; or the Borrower shall conceal, remove or transfer any part of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (m) either the Borrower or any other party thereto shall breach any subordination agreement executed in connection with the Loans; or (n) the current common and preferred shareholders of the Borrower shall cease to own more than 50% of the outstanding common stock of the Borrower other than as the result of an initial public offering of securities by Borrower. If any of the foregoing defaults, other than a failure to pay money and breach of a financial covenant set forth in Schedule, is curable, it may be cured (and no Event of Default shall have occurred) if the Borrower cures the default within thirty days (or within ninety days in the case of clause (h) of this SECTION 6.1). Silicon may cease making any Loans hereunder during the above cure periods, and thereafter if an Event of Default has occurred.
Page 13 - LOAN AND SECURITY AGREEMENT
6.2. REMEDIES. Upon the occurrence of any Event of Default and the
expiration of any applicable cure period under SECTION 6.1, and at any time
thereafter, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by the Borrower), may do any one or
more of the following: (a) cease making Loans or otherwise extending credit to
the Borrower under this Agreement or any other document or agreement; (b)
accelerate and declare all or any part of the Obligations to be immediately due,
payable, and performable, notwithstanding any deferred or installment payments
allowed by any instrument evidencing or relating to any Obligation; (c) take
possession of any or all of the Collateral wherever it may be found, and for
that purpose the Borrower hereby authorizes Silicon without judicial process to
enter onto any of the Borrower's premises without interference to search for,
take possession of, keep, store, or remove any of the Collateral, and remain on
the premises or cause a custodian to remain on the premises in exclusive control
thereof without charge for so long as Silicon deems it reasonably necessary in
order to complete the enforcement of its rights under this Agreement or any
other agreement; provided, however, that should Silicon seek to take possession
of any or all of the Collateral by Court process, the Borrower hereby
irrevocably waives: (i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the commencement of any suit
or action to recover possession thereof; and (iii) any requirement that Silicon
retain possession of and not dispose of any such Collateral until after trial or
final judgment; (d) require the Borrower to assemble any or all of the
Collateral and make it available to Silicon at places designated by Silicon
which are reasonably convenient to Silicon and the Borrower, and to remove the
Collateral to such locations as Silicon may deem advisable; (e) require the
Borrower to deliver to Silicon, in kind, all checks and other payments received
with respect to all accounts and general intangibles, together with any
necessary endorsements, within one day after the date received by the Borrower;
(f) complete the processing, manufacturing or repair of any Collateral prior to
a disposition thereof and, for such purpose and for the purpose of removal,
Silicon shall have the right to use the Borrower's premises, vehicles, hoist,
lifts, cranes, equipment and all other property without charge; (g) sell, lease
or otherwise dispose of any of the Collateral in its condition at the time
Silicon obtains possession of it or after further manufacturing, processing or
repair, at any one or more public and/or private sales, in lots or in bulk, for
cash, exchange or other property, or on credit and to adjourn any such sale from
time to time without notice other than oral announcement at the time scheduled
for sale; Silicon shall have the right to conduct such disposition on the
Borrower's premises without charge, for such time or times as Silicon deems
reasonable, or on Silicon's premises, or elsewhere and the Collateral need not
be located at the place of disposition; Silicon may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition; any sale or other disposition of Collateral shall not relieve the
Borrower of any liability the Borrower may have if any Collateral is defective
as to title or physical condition or otherwise at the time of sale; (h) demand
payment of, and collect any accounts and general intangibles comprising
Collateral and, in connection therewith, the Borrower irrevocably authorizes
Silicon to endorse or sign the Borrower's name on all collections, receipts,
instruments and other documents, to take possession of and open mail addressed
to the Borrower and remove therefrom payments made with respect to any item of
the Collateral or proceeds thereof, and, in Silicon's sole discretion, to grant
extensions of time to pay, compromise claims and settle accounts and the like
for less than face value; (i) offset
Page 14 - LOAN AND SECURITY AGREEMENT
against any sums in any general, special or other deposit accounts maintained by the Borrower with Silicon; and (j) demand and receive possession of any of the Borrower's federal and state income tax returns and the books and records utilized in the preparation thereof or referring thereto. All reasonable fees of professionals (including attorney's fees, (expenses, costs, liabilities and obligations incurred by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. Without limiting any of Silicon's rights and remedies, from and after the occurrence of any Event of Default, the interest rate applicable to the Obligations shall be increased by an additional two percent per annum above the rate otherwise applicable.
6.3. STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. The Borrower and Silicon agree that a sale or other disposition (collectively, "Sale") of any Collateral which complies with the following standards shall conclusively be deemed to be commercially reasonable: (a) notice of the Sale is given to the Borrower at least seven days prior to the Sale, and, in the case of a public Sale, notice of the Sale is published at least seven days before the Sale in a newspaper of general circulation in the country where the Sale is to be conducted; (b) notice of the Sale describes the Collateral in general, non-specific terms; (c) the Sale is conducted at the place designated by Silicon, with or without the Collateral being present; (d) the Sale commences at any time between 8:00 a.m. and 6:00 p.m.; (e) payment of the purchase price in cash or by cashier's check or wire transfer is required; (f) with respect to any Sale of any of the Collateral, Silicon may (but is not obligated to) direct any prospective purchaser to ascertain directly from the Borrower any and all information concerning the same. Silicon may employ other methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable.
6.4. POWER OF ATTORNEY. Effective only upon the occurrence and
during the continuance of an Event of Default, the Borrower hereby irrevocably
appoints Silicon (and any of Silicon's designated officers, or employees) as the
Borrower's true and lawful attorney to: (a) send requests for verification of
accounts or notify account debtors of Silicon's security interest in the
accounts; (b) endorse the Borrower's name on any checks or other forms of
payment or security that may come into Silicon's possession; (c) sign the
Borrower's name on any invoice or bill of lading relating to any account, drafts
against account debtors, schedules and assignments of accounts, verifications of
amounts, and notices to account debtors; (d) make, settle, and adjust all claims
under and decisions with respect to the Borrower's policies of insurance; and
(e) settle and adjust disputes and claims respecting the accounts directly with
account debtors, for amounts and upon terms which Silicon determines to be
reasonable; provided Silicon may exercise such power of attorney to sign the
name of the Borrower on any of the documents described in SECTION 4.9 regardless
of whether an Event of Default has occurred. The appointment of Silicon as the
Borrower's attorney in fact, and each and every one of Silicon's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Silicon's obligation to
provide advances hereunder is terminated.
6.5. APPLICATION OF PROCEEDS. All proceeds realized as the result of any Sale of the Collateral shall be applied by Silicon first to the costs, expenses, liabilities, obligations and
Page 15 - LOAN AND SECURITY AGREEMENT
attorneys' fees incurred by Silicon in the exercise of its rights under this Agreement, second to the interest due upon any of the Obligations, and third to the principal of the Obligations, in such order as Silicon shall determine in its sole discretion. Any surplus shall be paid to the Borrower or other persons legally entitled thereto; the Borrower shall remain liable to Silicon for any deficiency. If Silicon, in its sole discretion, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any Sale or other disposition of Collateral, Silicon shall have the option, exercisable at any time, in its sole discretion, of either reducing the Obligations by the principal amount or purchase price or deferring the reduction of the Obligations until the actual receipt by Silicon of the cash therefor.
6.6. REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in this Agreement, Silicon shall have all the other rights and remedies accorded a secured party under the Uniform Commercial Code of Oregon and each state in which any Collateral is located, and under all other applicable laws, and under the EXIM Documents and any other instrument or agreement now or in the future entered into between Silicon and the Borrower, and all of such rights and remedies are cumulative and none is deemed an election, nor bar Silicon from subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of Silicon to exercise any other rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been fully paid and performed.
7. GENERAL PROVISIONS.
7.1. NOTICES. All notices to be given under this Agreement shall be
in writing and shall be given either personally or by regular first-class mail,
or certified mail return receipt requested, addressed to Silicon or the Borrower
at the addressees shown in the heading to this Agreement, or at any other
address designated in writing by one party to the other party. In addition,
Borrower shall send a copy of any notice to Silicon to the following address:
11000 S.W. Stratus, Suite 170, Beaverton, OR 97008-7113, Attn: Art Hiemstra. All
notices shall be deemed to have been given upon delivery in the case of notices
personally delivered to the Borrower or to Silicon, or at the expiration of two
business days following the deposit thereof in the United States mail, with
postage paid.
7.2. SEVERABILITY. Should any provisions of this Agreement be held by any court of competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this Agreement, which shall continue in full force and effect.
7.3. INTEGRATION. This Agreement and such other written agreements, documents and instruments as may be executed in connection herewith are the final, entire and complete agreement between the Borrower and Silicon and supersede all prior and contemporaneous negotiations and oral representations and agreements, all of which are merged and integrated in this Agreement. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. UNDER OREGON LAW, MOST
Page 16 - LOAN AND SECURITY AGREEMENT
AGREEMENTS, PROMISES AND COMMITMENTS MADE BY SILICON AFTER OCTOBER 3, 1989, CONCERNIGN LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY SILICON TO BE ENFORCEABLE.
7.4. WAIVERS. The failure of Silicon at any time or times to require the Borrower to strictly comply with any of the provisions of this Agreement or any other present or future agreement between the Borrower and Silicon shall not waive or diminish any right of Silicon later to demand and receive strict compliance therewith. Any waiver of any default shall not waive or affect any other default, whether prior or subsequent thereto. None of the provisions of this Agreement or any other agreement now or in the future executed by the Borrower and delivered to Silicon shall be deemed to have been waived by any act or knowledge of Silicon or its agents or employees, but only by a specific written waiver signed by an officer of Silicon and delivered to the Borrower. The Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial paper, instrument, account, general intangible, document or guaranty at any time held by Silicon on which the Borrower is or may in any way be liable, and notice of any action taken by Silicon, unless expressly required by this Agreement.
7.5. NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of its directors, officers, employees, agents, attorneys or any other person affiliated with or representing Silicon shall be liable for any claims, demands, losses or damages, of any kind whatsoever, made, claimed, incurred or suffered by the Borrower or any other party through the ordinary negligence of Silicon, or any of its directors, officers, employees, agents, attorneys or any other person affiliated with or representing Silicon.
7.6. AMENDMENT. The terms and provisions of this Agreement may not be waived or amended, except in a writing executed by the Borrower and a duly authorized officer of Silicon.
7.7 TIME OF ESSENCE. Time is of the essence in the performance by the Borrower of each and every obligation under this Agreement.
7.8. ATTORNEY'S FEES AND COSTS. The Borrower shall reimburse Silicon for all reasonable attorney's fees and fees of other professionals, and all filing, recording, search, title insurance, appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to, or in connection with, or relating to this Agreement (whether or not a lawsuit is filed), including, but not limited to, any reasonable attorney's fees and costs Silicon incurs in order to do the following: prepare and negotiate this Agreement and the documents relating to this Agreement; obtain legal advice in connection with this Agreement; enforce, or seek to enforce, any of its rights; prosecute actions against, or defend actions by, account debtors; commence, intervene in, or defend any action or proceeding (including any appeal or review); initiate any complaint to be relieved of the automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and inspect any of the Collateral or any of the Borrower's books and records; or protect, obtain possession of, lease, dispose of, or
Page 17 - LOAN AND SECURITY AGREEMENT
otherwise enforce Silicon's security interest in, the Collateral and otherwise represent Silicon in any litigation relating to the Borrower. If either Silicon or the Borrower files any lawsuit against the other predicated on a breach of this Agreement, the prevailing party in such action shall be entitled to recover its reasonable costs and professionals' fees, including (but not limited to) reasonable attorneys' fees and costs incurred in the enforcement of, execution upon or defense of any order, decree, award or judgment, and in any appeal or review by an appellate court. All fees and costs to which Silicon may be entitled pursuant to this Section shall immediately become part of the Borrower's Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations.
7.9. BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of the parties hereto; provided, however, that the Borrower may not assign or transfer any of its rights under this Agreement without the prior written consent of Silicon, and any prohibited assignment shall be void. No consent by Silicon to any assignment shall release the Borrower from its liability for the Obligations. The Borrower agrees and consents to Silicon's sale or transfer, whether now or later, of one or more participation interests in the Loans to one or more purchasers, whether now or later, of one or more participation interests in the Loans to one or more purchasers, whether related to unrelated to Silicon. Silicon may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Silicon may have about the Borrower or about any other matter relating to the Loans and the Borrower hereby waives any rights to privacy it may have with respect to such matters. Silicon shall require any such purchasers or potential purchasers to enter into a confidentiality agreement, in such form as Silicon may specify in its sole discretion, and such confidentiality agreement shall by its terms be enforceable by Borrower. The Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Silicon shall sell participation interests only to financial institutions it deems financially sound and responsible. The Borrower also agrees that the purchaser of any such participation interests shall be considered as the absolute owners of such interest in the Loans and shall have all the rights granted under the participation agreement or agreements governing the sale of such participation interests.
7.10. SECTION HEADINGS; CONSTRUCTION. Section headings are only used in this Agreement for convenience. The Borrower acknowledges that the headings may not describe completely the subject matter of the applicable section, and the headings shall not be used in any manner to construe, limit, define or interpret any term or provision of this Agreement. This Agreement has been fully reviewed and negotiated between the parties and no uncertainty or ambiguity in any term or provision of this Agreement shall be construed strictly against Silicon or the Borrower under any rule of construction or otherwise.
7.11. MUTUAL WAIVER OF JURY TRIAL. The Borrower and Silicon each hereby waive the right to trial by jury in any action or proceeding based upon, arising out of, or in any way relating to, this Agreement or any other present or future instrument or agreement between Silicon and the Borrower, or any conduct, acts or omissions of Silicon or the Borrower or any of their
Page 18 - LOAN AND SECURITY AGREEMENT
directors, officers, employees, agents, attorneys or any other person affiliated with Silicon or the Borrower, in all of the foregoing cases, whether sounding in contract or tort or otherwise.
7.12. GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and transactions hereunder and all rights and obligations of Silicon and the Borrower shall be governed by, and construed in accordance with, the laws of the State of Oregon. Any undefined term used in this Agreement that is defined in the Oregon Uniform Commercial Code shall have the meaning assigned to that term in the Oregon Uniform Commercial Code. As a material part of the consideration to Silicon to enter into this Agreement, the Borrower (i) agrees that all actions and proceedings relating directly or indirectly hereto shall at Silicon's option, be litigated in courts located within Oregon, and that the exclusive venue therefor shall be, at Silicon's option, Washington County or Multnomah County, Oregon; (ii) consents to the jurisdiction and venue of any such court and consents to service of process in any such action or proceeding by personal delivery or any other method permitted by law; and (iii) waives any and all rights the Borrower may have to object to the jurisdiction of any such court, or to transfer or change the venue of any such action or proceeding.
7.13. OTHER LOAN. Silicon has been informed that a subsidiary of Borrower, Cascade Microtech, Japan has borrowed 130,000,000 yen from Bank of Tokyo - Mitsubishi Ltd., which is guaranteed by Cascade Microtech, Inc.
BORROWER:
CASCADE MICROTECH, INC.
By: /s/ Randall Sadewic
-----------------------------------------
Title: CFO
--------------------------------------
|
SILICON:
SILICON VALLEY BANK
By: /s/ Bruce Helberg
-----------------------------------------
Title: Vice- President
--------------------------------------
|
Page 19 - LOAN AND SECURITY AGREEMENT
SCHEDULE TO LOAN AND SECURITY AGREEMENT
BORROWER: Cascade Microtech, Inc.
SECURED ACCOUNTS RECEIVABLE LINE OF CREDIT
CREDIT LIMIT: An amount not to exceed the lesser of: (i) $4,000,000
at any one time outstanding; or (ii) the amount of
the "Borrowing Base", as defined below. For purposes
of this Schedule, the "Borrowing Base" shall mean the
sum of 80% of the Net Amount of Borrower's eligible
accounts receivable. With respect to Borrower's
accounts, "Net Amount" means the gross amount of the
account, minus all applicable sales, use, excise and
other similar taxes and minus all discounts, credits
and allowances of any nature granted or claimed. All
Letters of Credit and Exchange Contracts issued under
this Secured Accounts Receivable Line of Credit shall
reduce dollar for dollar the amount otherwise
available for borrowing under this Loan.
Without limiting the fact that the determination of
which accounts are eligible for borrowing is a matter
of Silicon's discretion, the following shall not be
deemed eligible for borrowing: accounts in which
Silicon does not have a first priority, perfected
security interest; accounts outstanding for more than
90 days from the invoice date, accounts subject to
any contingencies, accounts owing from an account
debtor outside the United States (except as approved
in writing by Silicon), accounts owing from
governmental agencies in excess of $500,000, accounts
owing form one account debtor to the extent they
exceed 25% of total eligible accounts owing from an
account debtor to whom the Borrower is or may be
liable for goods purchased from such account debtor
or otherwise ("Contra Accounts"). Contra Accounts
shall be eligible to the extent of the net difference
between the account receivable and the account
payable; however, if the account payable exceeds the
account receivable, the entire account receivable
shall be ineligible. In addition, if more than 50% of
the total dollar amount of accounts owing from an
account debtor are outstanding more than 90 days from
the invoice date or are otherwise not eligible
accounts, then all accounts owing from that account
debtor shall be deemed ineligible for borrowing.
Account owing from a debtor outside of the United
States may, in Silicon's sole discretion, be
considered eligible for borrowing if they are
supported by letters of credit from foreign banks
acceptable to Silicon.
INTEREST RATE: The interest rate applicable to this Loan shall be a
rate
|
Page 21 - LOAN AND SECURITY AGREEMENT
equal to the "Prime Rate" in effect from time to
time, plus 0.255 per annum. Interest calculations
shall be made on the basis of a 360-day year and the
actual number of days elapsed. "Prime Rate" means the
rate announced from time to time by Silicon as its
"prime rate", it is a base rate upon which other
rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall
change on each date there is a change in the Prime
Rate.
COMMITMENT FEE: One-quarter of one percent per annum of the maximum
commitment amount of $6,000,000 or $15,000, which
fully earned and payable at closing. (Any Commitment
Fee previously paid by the Borrower in connection
with this loan shall be credited against this Fee.)
MATURITY DATE: February 18, 2000, at which time all unpaid principal
and accrued but unpaid interest shall be due and
payable.
LETTERS OF CREDIT: Subject to the terms of this Agreement, as amended
from time to time, Silicon shall issue or cause to be
issued under the Credit Limit standby and commercial
letters of credit for the account of Borrower in an
aggregate face amount not to exceed the Credit Limit.
Each such standby letter of credit that has an expire
date later than the Maturity Date shall be secured by
cash in Silicon's possession on and after the
Maturity Date in an amount equal to the face amount
of such letter of credit. All such letters of credit
shall be, in form and substance, acceptable to
Silicon in its sole discretion and shall be subject
to the terms and conditions of Silicon's form
application and letter of credit agreement.
FOREIGN EXCHANGE
SUBLIMIT: Borrower may utilize up to the Credit Limit for spot
and future foreign exchange contracts (the "Exchange
Contracts"). Exchange Contracts that provide for
delivery of settlement after the Maturity Date in an
amount equal to 10% of the gross amount of such
Exchange Contracts that provide for delivery of
settlement after the Maturity Date. The limit
available at any time shall be reduced by the
following amounts (the "Foreign Exchange Reserve") on
each day (the "Determination date"): (i) on all
outstanding Exchange Contracts on which delivery is
to be effected or settlement allowed more than two
business days from the determination Date, 10% of the
gross amount of the Exchange Contracts; plus (ii) on
all outstanding Exchange Contracts on which delivery
is to be effected or settlement allowed within two
business days after the Determination Date, 100% of
the gross amount of the Exchange Contract, the
Borrower may request that Silicon debit the
Borrower's bank account with Silicon for such amount,
provided Borrower has immediately available funds in
such amounts in its bank account.
|
Page 22 - LOAN AND SECURITY AGREEMENT
Whenever Borrower desires an advance, Borrower will notify Silicon by facsimile transmission or by telephone not later than 11:00 a.m. California time, two business days before the advance is to be made. Each such notification shall be promptly confirmed by a borrowing base certificate. Silicon shall be entitled to rely on any such telephone notice given by any person who Silicon reasonably believes to be an officer of Borrower, and Borrower shall indemnify and hold Silicon harmless for any damages or loss suffered by Silicon as a result of such reliance.
Silicon may, in its discretion, terminate the Exchange Contracts at any time (a) that an Event of Default occurs or (b) that there is no sufficient availability under the Credit Limit and Borrower does not have available funds in its bank account to satisfy the Foreign Exchange Reserve. If Silicon terminates the Exchange Contracts, and without limitation of the FX Indemnity Provisions (as referred to below), Borrower agrees to reimburse Silicon for any and all fees, costs and expenses relating thereto or arising in connection therewith.
Borrower shall not permit the total gross amount of all Exchange Contracts on which delivery is to be effected and settlement allowed in any two business day period to be more than the Credit Limit, nor shall Borrower permit the total gross amount of all Exchange Contracts of which Borrower is a party, outstanding at any one time, to exceed the Credit Limit.
The Borrower shall execute all standard form applications and agreements of Silicon in connection with the Exchange Contracts, and without limiting any of the terms of such applications and agreements the Borrower will pay all standard fees and charges of Silicon in connection with Exchange Contracts.
Without limiting any of the other terms of this Agreement or any such standard form applications and agreement of Silicon, Borrower agrees to indemnify Silicon and hold it harmless, from and against any and all claims, debts, liabilities, demands, obligations, actions, costs and expenses (including, without limitation, attorneys fees of counsel of Silicon's choice), of every nature and description which it may sustain or incur, based upon, arising out of, or in any way relating to any of the Exchange Contracts or any transactions relating thereto or contemplated thereby (collectively referred to as the "FX Indemnity Provisions").
Page 23 - LOAN AND SECURITY AGREEMENT
SECURED TERM LOAN NO. 1
CREDIT LIMIT: An amount not to exceed $2,150,000 at any one time
outstanding
Once the maximum amount of the principal has been
advanced under this Secured Term Loan No. 1,
Borrower is no longer entitled to further advances
on this Loan. Borrower shall not have the right to
reborrow any amount on this Secured Term Loan No.
1 that has been repaid by Borrower. Advances may
be requested in writing by Borrower or an
authorized person. Silicon may, but need not,
require that all oral requests be confirmed in
writing. The unpaid principal balance owing on
this Secured Term Loan No. 1 at any time may be
evidenced by Silicon's internal records, including
daily computer print-outs (which Silicon shall
provide to Borrower periodically).
PURPOSE: Borrowers shall use the proceeds of this Secured Term
Loan No. 1 to repay the existing term loan payable to
Bank of America.
INTEREST RATE: The interest rate applicable to the Secured Term Loan
No.1 shall be a fixed rate of 7.71% per annum.
Interest calculations shall be made on the basis of a
360-day year and the actual number of days elapsed.
AMORTIZATION: Borrower shall pay Silicon on the last day of each
month, commencing with March, 1998, payments of
principal and interest in the amount necessary to
repay fully the amount of the Secured Term Loan No. 1
in 48 equal month payments.
MATURITY DATE: February 28, 2002, at which time all unpaid principal
and accrued but unpaid interest, fees and other
charges shall be due and payable.
COMMITMENT
FEE: None.
|
SECURED EQUIPMENT TERM LOAN NO.2
CREDIT LIMIT: An amount not to exceed the lesser of (i) $1,500,000
at any one time outstanding; or (ii) the amount of
the "Equipment Borrowing Base", as defined below. For
purposes of this Schedule, the "Equipment Borrowing
Base" shall mean 100% of the invoice value of
equipment purchased by Borrower after December 1,
1997. Silicon will make advances against
|
Page 24 - LOAN AND SECURITY AGREEMENT
software and leasehold improvements in an amount not
to exceed 35% of the commitment amount of this Loan.
Silicon shall have no obligation to advance against
taxes, freight charges, installation charges or other
similar amounts relating to Borrower's equipment,
whether or not such amounts are identified on the
invoices submitted to Silicon. Equipment to be
included in the Equipment Borrowing Base must be new
equipment, at the time of purchase by Borrower, owned
by Borrower, in good working order, must not be
subject to any liens in favor of any person or entity
other than Silicon, and must be subject to a first
priority, perfected security interest in favor of
Silicon. Silicon shall have no obligation to make
advances against non-standard equipment. Silicon
shall have no obligation to make advances on this
Secured Equipment Term Loan No. 2 after that date
which is one year from the date of execution of this
Agreement. Advances under this Secured Equipment Term
Loan No. 2 will not be made until the third quarter
of 1998 and at such time as Borrower has provided
sufficient evidence, in Silicon's sole discretion,
that Borrower will be in compliance with the Debt
Service Coverage Ratio covenant set forth below. At
that time, Silicon shall make advances under this
Secured Equipment Term Loan NO. 2 from time to time,
based on invoices and other documentation as shall be
requested by Silicon to support such advances. The
Borrower's indebtedness to Silicon with respect to
this Schedule and the Loan Agreement, not by a
separate promissory note unless required by Silicon.
Borrower shall submit to Silicon such invoices,
advance requests and other information, in form
acceptable to Silicon, as Silicon shall reasonably
require from time to time.
Once the maximum amount of the principal has been
advanced under this Secured Equipment Term Loan No.
2, Borrower is no longer entitled to further advances
on this Loan. Borrower shall not have the right to
reborrow any amount on this Secured Equipment Term
Loan No. 2 that has been repaid by Borrower. Advances
may be requested in writing by Borrower or an
authorized person. Silicon may, but need not, require
that all oral requests be confirmed in writing. The
unpaid principal balance owing on this Secured
Equipment Term Loan No. 2 at any time may be
evidenced by Silicon's internal records, including
daily computer print-outs (which Silicon shall
provide to Borrower periodically).
PURPOSE: Borrowers shall use the proceeds of this Secured
Equipment Term Loan No. 2 to finance the purchase of
new equipment, software and leasehold improvements.
INTEREST RATE: The interest rate applicable to the Secured Equipment
Term Loan No. 2 shall be a rate equal to the "Prime
Rate" (as defined above) in effect from
|
Page 25 - LOAN AND SECURITY AGREEMENT
time to time, plus 0.50% per annum. Interest
calculations shall be made on the basis of a 360-day
year and the actual number of days elapsed. The
interest rate applicable to the Obligations shall
change on each date there is a change in the Prime
Rate. At the conclusion of the advance period, a
fixed rate alternative (set at 275 basis points in
excess of the yield of U.S. Treasury Bills of similar
maturity, as publicly announced in the Wall Street
Journal or other public source) will be made
available to Borrower by Silicon.
AMORTIZATION: Borrower shall pay Silicon monthly payments of
interest only on the last day each month commencing
with March, 1998. In addition, Borrower shall pay
Silicon on the last day of each month, commencing
with March 31, 1999, the amount necessary to repay
fully the amount of the Secured Equipment Term Loan
No. 2 in 36 monthly payments.
MATURITY DATE: February 28, 2002, at which time all unpaid principal
and accrued but unpaid interest, fees and other
charges shall be due and payable.
COMMITMENT
FEE: $5,000 payable at closing. This fee is fully earned
at closing and is non-refundable. (Any Commitment Fee
previously paid by the Borrower in connection with
this loan shall be credited against this Fee.)
PRIOR NAMES OF
BORROWER: See attached Exhibit B
TRADE NAMES OF
BORROWER: See attached Exhibit B
TRADEMARKS OF
BORROWER: See attached Exhibit B
OTHER LOCATIONS
AND ADDRESSES: See attached Exhibit B
MATERIAL ADVERSE
LITIGATION: See attached Exhibit B
FINANCIAL
COVENANTS: The Borrower shall at all time comply with all of the
following covenants, all of which shall be determined
and measured on a quarterly basis in accordance with
generally accepted accounting principles, on a
consolidated basis with any subsidiary of Borrower,
|
except as otherwise stated below:
Page 26 - LOAN AND SECURITY AGREEMENT
TANGIBLE NET
WORTH: Borrower shall at all times maintain a Tangible Net
Worth of not less than $9,000,000.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall at all times maintain a ratio of total
liabilities to Tangible Net Worth of not more than
1.50:1.00. For purposes of this calculation, total
liabilities shall exclude deferred revenues and debt,
if any, that has been subordinated to the Loans in a
written subordination agreement on terms satisfactory
to Silicon.
QUICK RATIO: Borrower shall maintain a ratio of Quick Assets
(defined below) to current liabilities less deferred
revenue of not less than .85:1.00 for the quarter
ending March 31, 1999 increasing to 1.00:1.00
beginning with the quarter following Borrower's
receipt of new equity in an amount not less than
$2,000,000 as reflected on Borrower's financial
statement (2/18/99).
DEBT SERVICE
COVERAGE RATIO: Borrower shall maintain (2/18/99) on a quarterly
basis, a Debt Service Coverage Ratio of not less than
1.50:1.00 measured on an annualized basis as of the
end of each fiscal quarter or Minimum Liquidity
Coverage. Borrower shall maintain on a quarterly
basis, a ratio of unrestricted cash (and equivalents)
plus not availability under the Revolving Facility
divided by all outstandings under Secured Term Loan
No. 1.
DEFINITIONS: "Quick Assets" means cash on hand or on deposit in
banks, readily marketable securities issued by the
United States, readily marketable commercial paper
rated "A-1" by Standard & Poor's Corporation (or a
similar rating by a similar rating organization),
certificates of deposit and banker's acceptances, and
accounts receivable (net of allowance for doubtful
accounts).
"Tangible Net Worth" means stockholders' equity plus
debt, if any, that has been subordinated to the Loans
in a written subordination agreement on terms of
satisfactory to Silicon, and accrued interest
thereon, less goodwill, patents, capitalized software
costs, deferred organizational costs, tradenames,
trademarks, and all other assets which would be
classified as intangible assets under generally
accepted accounting principles.
"Debt Service Coverage Ratio" means Earnings Before
Interest, Taxes, Depreciation and Amortization
(EBITDA), divided by the Current Maturities of
Long-Term Debt (CMLTD) plus interest, on an
annualized basis. For quarterly calculations,
quarterly EBITDA is matched against 25% of CMLTD plus
interest.
|
Page 27 - LOAN AND SECURITY AGREEMENT
OTHER COVENANTS: Borrower shall at all times comply with all of the
following additional covenants:
BANKING RELATIONSHIP. Borrower and its subsidiaries
shall at all times maintain their primary banking
relationship with Silicon. Neither Borrower nor its
subsidiaries shall establish any deposit accounts of
any type with any bank or other financial institution
other than Silicon without Silicon's prior written
consent.
FINANCIAL STATEMENTS AND REPORTS. The Borrower shall
provided Silicon: (a) within 30 days after the end of
each month, a monthly financial statement (consisting
of a income statement and a balance sheet) prepared
by the Borrower in accordance with generally accepted
accounting principles; (b) within 20 days after the
end of each moth, an accounts receivable aging report
and an accounts payable aging report, in such form as
silicon shall reasonably specify; (c) within 20 days
after the end of each month, a Borrowing Base
Certificate in the form attached to this Agreement as
Exhibit A, as Silicon may reasonably modify such
Certificate from time to time, signed by the Chief
Financial Officer of the Borrower only at such times
as (i) there are outstandings under the Revolving
Facility and prior to a disbursement when there are
no outstandings, or (ii) exposure under the Foreign
Exchange sublimit is greater than $500,000.(5/7/99);
(d) within 30 days after the end of each quarter, a
Compliance Certificate in such form as Silicon shall
reasonably specify, signed by the Chief Financial
Officer of the Borrower, setting forth calculations
showing compliance (at the end of each such calendar
quarter) with the financial covenants set forth on
the Schedule, and certifying that throughout such
quarter the Borrower was in full compliance with all
other terms and conditions of this Agreement and the
Schedule, and providing such other information as
Silicon shall reasonably request; (e) within 90 days
following the end of the Borrower's fiscal year,
complete annual CPA-audited financial statements,
such audit being conducted by independent certified
public accountants reasonably acceptable to Silicon,
together with an unqualified opinion of such
accountants; and (f) within 30 days after the end of
each quarter, an updated list of all Borrower's
Patents, Trademarks, Copyrights and Mask Works and a
report of material infringement claims under Section
3.18.
CONDITIONS TO
CLOSING: Before requesting any such advance, the Borrower
|
shall satisfy each of the following conditions:
1. LOAN DOCUMENTS:
Page 28 - LOAN AND SECURITY AGREEMENT
Silicon shall have received this Agreement, the Schedule, an Intellectual Property Security Agreement if requested by Silicon, executed by the Borrower, and such other loan documents as Silicon shall require, each duly executed and delivered by the parties thereto.
2. DOCUMENTS RELATING TO AUTHORITY, ETC.:
Silicon shall have received each of the following in form and substance satisfactory to it:
(a) Certified Copies of the Articles of Incorporation and Bylaws of the Borrower;
(b) A Certificate of Good Standing issued by the Secretary of State of the Borrower's state of incorporation and such other states as Silicon may reasonably request with respect to the Borrower;
(c) A certified copy of a Resolution adopted by the Board of Directors of the Borrower authorizing the execution, delivery and performance of this Agreement, and any other documents or certificates to be executed by the Borrower in connection with this transaction; and
(d) Incumbency Certificates describing the office and identifying the specimen signatures of the individuals signing all such loan documents on behalf of the Borrower.
3. PERFECTION AND PRIORITY OF SECURITY:
Silicon shall have received evidence satisfactory to
it that its security interest in the Collateral has
been duly perfected and that such security interest
is prior to all other liens, charges, security
interests, encumbrances and adverse claims in or to
the Collateral other than Permitted Liens, which
evidence shall include, without limitation, a
certificate from the appropriate state agencies
showing the due filing and first priority of the UCC
Financing Statements to be signed by the Borrower
covering the Collateral, and evidence of the due
filing of any Intellectual Property Security
Agreement with the U.S. Copyright Office or other
security documents required by Silicon.
4. INSURANCE: Silicon shall have received evidence satisfactory to
it that all insurance
|
Page 29 - LOAN AND SECURITY AGREEMENT
required by this Agreement is in full force and effect, with loss payee designations and additional insured designations as required by this Agreement.
5. OTHER INFORMATION:
Silicon shall have received such other statements, certificates, documents and information with respect to matters contemplated by this Agreement as it may reasonably request, all of which must be acceptable to Silicon.
Silicon shall have conducted an examination of the Borrower's books, records, ledgers, journals, and registers, as Silicon may deem necessary, and shall be satisfied with the results of such examination in its reasonable discretion.
Silicon and the Borrower agree that the terms of this Schedule supplement the Loan and Security Agreement between Silicon and the Borrower and agree to be bound by the terms of this Schedule:
BORROWER:
CASCADE MICROTECH, INC.
By: /s/ Randy Sadewic
-----------------------------------------
TITLE: CFO
--------------------------------------
|
SILICON:
SILICON VALLEY BANK
By: /s/ Bruce Helberg
-----------------------------------------
Title: VICE - PRESIDENT
--------------------------------------
|
Page 30 - LOAN AND SECURITY AGREEMENT
EXHIBIT A
[INSERT BORROWING BASE CERTIFICATE]
Page 31 - LOAN AND SECURITY AGREEMENT
ACCOUNTS RECEIVABLE ACTIVITY
1. Accounts Receivable Balance as of _____________ $____________
2. Minus: Ineligible Acccounts
a. Amounts over 90 days $_________
b. Cross Aging over 50% __________
c. Excess 25% concentration __________
d. Credit Balances over 90 days __________
e. Foreign accounts __________
f. Governmental accounts __________
g. Contra Accounts __________
h. Intercompany/Employee Accounts __________
i. Other: ______________ __________
3. Eligible Accounts Receivable (Line 1 minus Line 2) $____________
4. Funds Available $____________
(The lesser of Line 3 multiplied by 80% or $6,000,000)
LOAN ACTIVITY
5. Total funds Available:
(Line 4) $____________
6. Loan Balance as of ___________________ $____________
7. Less any L/C's outstanding $____________
8. Foreign Exchange Contracts outstanding $____________
8a. Foreign Exchange Reserve (Line 8 multiplied by 10%) $____________
9. Reserve Position (Line 5 minus Line 6,7 & Line 8a) $____________
|
The above listed collateral is subject to a security interest in favor of SILICON VALLEY BANK pursuant to the terms of a Loan and Security Agreement executed between the Bank and the undersigned.
Submitted By: Accepted By:
Page 32 - LOAN AND SECURITY AGREEMENT
CASCADE MICROTECH, INC. SILICON VALLEY BANK
EXHIBIT B
TRADENAMES
PRIOR NAMES
TRADEMARKS
OTHER LOCATIONS AND ADDRESSES
MATERIAL ADVERSE LITIGATION
[OTHER DISCLOSURES]
Page 33 - LOAN AND SECURITY AGREEMENT
EXHIBIT B
HEADQUARTERS
Cascade Microtech, Inc.
14255 SW Brigadoon Court
Beaverton, OR 97005
(503) 626-8245
(503) 626-4466 Fax
REGIONAL SALES OFFICES
Cascade Microtech, Inc.
43196 Christy Street
Fremont, CA 94538
(510) 440-8117
(510) 440-1742 Fax
Cascade Microtech, Inc.
4000 Barranca Parkway, Suite 250
Irvine, CA 92714
(714) 262-3224
(714) 262-3255 Fax
WHOLLY-OWNED SUBSIDIARIES
Cascade Microtech, Ltd. Europe
3 Somerville Court
Banbury Business Park
Adderbury
Oxon OX17 3 SN UK
011-44-1295-81-28-28
001-44-1295-81-28-29 Fax
Cascade Microtech Japan
Sumitomo Aobadai Hills Bldg. Rm 1F
7-7 Aobadai 4-chome
Meguro-ku, Tokyo 153 Japan
011-81-3-5478-6100
011-81-3-5478-6105 Fax
CURRENT LITIGATION
Micromanipulator Company
Page 34 - LOAN AND SECURITY AGREEMENT
Carson City, Nevada
Page 35 - LOAN AND SECURITY AGREEMENT
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of February 18, 1999, by and between Cascade Microtech, Inc. ("Borrower") and Silicon Valley Bank ("Silicon").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to, among other documents, a Loan and Security Agreement, dated February 19, 1998, as may be amended from time to time, together with any and all Schedules attached thereto (the "Domestic Loan Agreement"). The Domestic Loan Agreement provided for, among other things, a Secured Accounts Receivable Line of Credit in the original principal amount if Six Million Dollars ($6,000,000) ("Revolving Facility"), a Secured Term Loan No. 1 in the original principal amount of Two Million One Hundred Fifty Thousand Dollars ($2,150,000) ("Term Loan 1") and a Secured Equipment Term Loan No. 2 in the original principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) ("Term Loan 2"). The revolving Facility was modified pursuant to, among other documents, a Loan Modification Agreement dated March 17, 1998, pursuant to which, among other things, the Revolving Facility was decreased to Four Million Five Hundred Thousand Dollars ($4,500,000). Furthermore, Borrower is indebted to Silicon pursuant to, among other documents, a Loan and Security Agreement (Exim Program) dated February 19, 1998, as may be amended from time to time, together with any and all Schedules attached thereto, (the "Exim Loan Agreement"). The Exim Loan Agreement provided for, among other things, and Export Line of Credit in the original principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the "Exim Revolving Facility"). The Exim Revolving Facility was modified pursuant to, amount other documents, a Loan Modification Agreement dated March 17, 1998, pursuant to which, among other things, the Exim Revolving Facility was increased to Three Million Dollars ($3,00,000). The Domestic Loan Agreement and the Exim Loan Agreement shall be collectively referred to as the "Loan Agreements." Defined terms used but not otherwise defined herein shall have the same meanings as in the Loan Agreements.
Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred to as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTEES. Repayment of the indebtedness is secured by the Collateral as described in the Loan Agreements and by the Intellectual Property Collateral as described in the Intellectual Property Security Agreement. Additionally, repayment of the Exim Revolving Facility is guaranteed by the Export-Import Bank of the United States.
Hereinafter, the above-described security documents and guaranties, together with all other documents securing repayment of the Indebtedness shall be referred to as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO DOMESTIC LOAN AGREEMENT (AND SCHEDULE THERETO).
1. The first sentence of the Section entitled "Credit Limit" is hereby amended to read as follows:
An amount not to exceed the lesser of: (I) $4,000,000 at any one time outstanding of (ii) the amount of the "Borrowing Base" as defined therein.
2. The second paragraph of the Section entitled "Credit Limit" is hereby amended in part to read as follows:
Without limiting the fact that the determination of which accounts are eligible for borrowing is a matter of Silicon's discretion, the following shall not be deemed eligible for borrowing: accounts in which Silicon does not have a first priority, perfected security interest; accounts outstanding for more than 90 days from the invoice date, accounts subject to any contingencies, accounts owing from an account debtor outside the United States (except as approved in writing by Silicon), accounts owing from governmental agencies in excess of $500,000, accounts owing from one account debtor to the extent they exceed 25% of total eligible accounts outstanding, accounts owing from an affiliate of Borrower, and accounts owing from an account debtor to whom the Borrower is or may be liable for goods purchased from such account debtor or otherwise ("Contra Accounts").
3. The section entitled "Maturity Date" is hereby amended in its entirety to read as follows:
February 18, 2000, at which time all unpaid principal and accrued but unpaid interest shall be due and payable.
B. MODIFICATION(S) TO EXIM LOAN AGREEMENT.
1. The first paragraph of the Section entitled "Credit Limit" is hereby amended to read as follows:
An amount not to exceed the lesser of : (I) $2,500,000 at any one time outstanding or (ii) a total of 90% of the value of the Borrower's eligible export receivables, which are eligible of borrowing as provided in the EXIM Documents, plus 70% of the value of Borrower's exportable inventory which is eligible
for
borrowing as provided in the EXIM Documents, which Silicon in its reasonable discretion deems eligible for borrowing.
2. The section entitled "Maturity Date" is hereby amended in its entirety to read as follows:
February 18, 2000, at which time all unpaid principal and accrued but unpaid interest shall be due and payable.
C. MODIFICATION(S) TO LOAN AGREEMENTS.
1. The section entitled "Financial Covenants" is hereby amended in part to read as follows:
QUICK RATIO. Borrower shall maintain on a quarterly basis, a ration of Quick Assets (as defined therein) to current liabilities less defered revenue of not less than 0.85 to 1.00 beginning with the quarter ending March 31, 1999, increasing to 1.00 to 1.00 beginning with the quarter following Borrower's receipt of new equity in an amount not less than $2,000,000 as reflected on Borrower's financial statement.
2. Debt Service Coverage Ratio. Borrower shall maintain on a quarterly basis, a Debt Service Coverage Ratio (as defined therein) of not less than 1.50 to 1.00 measured on an annualized basis as of the end of each fiscal quarter;
OR
MINIMUM LIQUIDITY COVERAGE. Borrower shall maintain on a quarterly basis, a ratio of unrestricted cash (and equivalents) plus net availability under the Revolving Facility divided by all outstandings under Secured Term Loan No. 1 of not less than 2.00 to 1.00.
4. CONSISTENT CHANGES. The existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEES. Borrower shall pay to Silicon a fee in the amount of Ten Thousand Dollars ($10,000) (the "Domestic Loan Fee") and a fee in the amount of Thirty Seven Thousand Five Hundred Dollars ($37,500) (the "Exim Loan Fee") and collectively, the "Loan Fees", plus all out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing below) agrees that, as of the date hereof, it has no defenses against the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below) understands and agrees that in modifying the existing Indebtedness, Silicon is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Silicon's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Silicon to make any future modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Silicon and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Silicon in writing. No maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of this paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is conditioned upon (I) Borrower's payment of the Loan Fees and (ii) Bank's receipt of the Exim Borrower Agreement, fully executed by the Borrower.
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: SILICON:
CASCADE MICROTECH, INC. SILICON VALLEY BANK
By: /s/ Randall Sadewic By: /s/ Bruce Helberg
--------------------------------- ---------------------------------
Name: Randall Sadewic Name: Bruce Helberg
------------------------------- -------------------------------
Title: CFO Title: VP
------------------------------ ------------------------------
|
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of May 7, 1999, by and between Cascade Microtech, Inc. ("Borrower") and Silicon Valley Bank ("Silicon").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to, among other documents, a Loan and Security Agreement, dated February 19, 1998, as may be amended from time to time, together with any and all Schedules attached thereto (the "Domestic Loan Agreement"). The Domestic Loan Agreement provided for, among other things, a Secured Accounts Receivable Line of Credit in the original principal amount of Six Million Dollars ($6,00,000) ("Revolving Facility"), a Secured Term Loan No. 1 in the original principal amount of Two Million One Hundred Fifty Thousand Dollars ($2,150,000) ("Term Loan 1") and a Secured Equipment Term Loan No. 2 in the original principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) ("Term Loan 2"). The Revolving Facility was modified pursuant to among other documents, a loan Modification Agreement dated February 18, 1999, pursuant to which, among other things, the Revolving Facility was decreased to Four Million Dollars ($4,000,000). Furthermore, Borrower is indebted to Silicon pursuant to, among other documents, a Loan and Security Agreement (Exim Program) dated February 19, 1998, as may be amended from time to time, together with any and all Schedules attached thereto, (the "Exim Loan Agreement").The Exim Loan Agreement provided for, among other things, an Export Line of Credit in the original principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the "Exim Revolving Facility"). The Exim Revolving Facility was modified pursuant to, among other documents, a Loan Modification Agreement dated February 18,1999, pursuant to which, among other things, the Exim Revolving Facility was increased to Two Million Five Hundred Thousand Dollars ($2,500,000). The Domestic Loan Agreement and the Exim Loan Agreement shall be collectively referred to as the "Loan Agreements." Defined terms used but not otherwise defined herein shall have the same meanings as in the Loan Agreements. Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred to as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is secured by the Collateral as described in the Loan Agreements and by the Intellectual Property Collateral as described in the Intellectual Property Security Agreement. Additionally, repayment of the Exim Revolving Facility is guaranteed by the Export-Import Bank of the United States.
Hereinafter, the above-described security documents and guaranties, together with all other documents securing repayment of the indebtedness shall be referred to as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO DOMESTIC LOAN AGREEMENT (AND SCHEDULE THERETO).
1. The paragraph entitled "Financial Statements and
Reports" under the section entitled "Other Covenants"
is hereby amended in part to provide that Borrower
shall be required to provide Silicon a Borrowing Base
Certificate only at such times as (i)there are
outstandings under the Revolving Facility and prior
to a disbursement when there are no outstandings, or
(ii) exposure under the Foreign Exchange Sublimit is
greater than $500,000.
B. MODIFICATION(S) TO EXIM LOAN AGREEMENT (AND SCHEDULES THERETO).
1. The paragraph entitled "Financial Statements and Reports" under the section entitled "Other Covenants" is hereby amended in part ot provide that Borrower shall be required to provide Silicon a Borrowing Base Certificate within 5 days of a request of disbursement of funds, only at such times as (I) there are outstandings under the Exim Revolving Facility and prior to a disbursement when there are no outstandings, or (ii) exposure under the Foreign Exchange Sublimit (under the Domestic Loan Agreement) is greater that $500,000.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing below) agrees that, as of the date hereof, it has no defenses against the obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below) understands and agrees that in modifying the existing Indebtedness, Silicon is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Silicon's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Silicon to make any future modifications to the Indebtedness. Nothing in this Load Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Silicon and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Silicon in writing. No maker, endorser, or guarantor will be release by virtue of this Loan Modification
Agreement. The terms of this paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements.
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: SILICON:
CASCADE MICROTECH, INC. SILICON VALLEY BANK
By: /s/ Randall Sadewic By:
--------------------------------- ---------------------------------
Name: Randall Sadewic Name:
------------------------------- -------------------------------
Title: CFO Title:
------------------------------ ------------------------------
|
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of June 14, 1999, by and between Cascade Microtech, Inc. ("Borrower") and Silicon Valley Bank (Silicon").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to, among other documents, a Loan and Security Agreement, dated February 19, 1998, as may be amended from time to time, together with any and Schedules attached thereto (the "Domestic Loan Agreement"). The Domestic Loan Agreement provided for, among other things, a Secured Accounts Receivable Line of Credit in the original principal amount of Six Million Dollars ($6,000,000) ("Revolving Facility"), a Secured Term Loan No. 1 in the original principal amount of Two Million One Hundred Fifty Thousand Dollars ($2,150,000) ("Term Loan 1"). The Revolving Facility was modified pursuant to, among other documents, a Loan Modification Agreement dated February 18, 1999, pursuant to which, among other things, the Revolving Facility was decreased to Four Million Dollars ($4,000,000). Furthermore, Borrower is indebted to Silicon pursuant to, among other documents, a Loan and Security Agreement (Exim Program) dated February 19, 1998, as may be amended from time to time, together with any and all Schedules attached thereto, (the "Exim Loan Agreeement"). The Exim Loan Agreement provided for, among other things, an Export Line of Credit in the original principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the "Exim Revolving Facility"). The Exim Revolving Facility was modified pursuant to, among other documents, a Loan Modification Agreement dated February 19, 1999, pursuant to which, among other things, the Exim Revolving Facility was increased to Two Million Five Hundred Thousand Dollars ($2,500,000). The Domestic Loan Agreement and the Exim Loan Agreement shall be collectively referred to as the "Loan Agreements." Defined terms used but not otherwise defined herein shall have the same meanings as in the Loan Agreements. Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred to as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is secured by the Collateral as described in the Loan Agreements and by the Intellectual Property Collateral as described in the Intellectual Property Security Agreement. Additionally, repayment of the Exim Revolving Facility in guaranteed by the Export-Import Bank of the United States.
Hereinafter, the above-described security documents and guaranties, together with all other documents securing repayment of the Indebtedness shall be referred to as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO LOAN AGREEMENTS (AND SCHEDULE THERETO).
1. The paragraph entitled "Minimum Liquidity Coverage" is hereby amended in its entirety to read as follow:
Borrower shall maintain on a quarterly basis, a ratio of unrestricted case (and equivalents) plus met availability under the Revolving Facility divided by all outstandings under Secure Term Loan No. 1 of not less than 1.75 to 1.00.
B. MODIFICATION(S) TO DOMESTIC LOAN AGREEMENT (AND SCHEDULE THERETO).
1. The following paragraphs entitled "Equipment Advances" are incorporated in to the Loan Agreement Schedule to read as follows:
EQUIPMENT ADVANCES.
(a) Through December 14, 1999(the "Equipment Availability End Date"), Silicon will make advances ("Equipment Advance" and, collectively, "Equipment Advances") not exceeding $500,000. The Equipment Advances may only be used to purchase Equipment purchased on or after 180 days before the requested Equipment Advance and may not exceed 100% of the equipment invoice, excluding taxes, shipping, warranty charges, freight discounts and installation expense. Each Equipment Advance must be for minimum of $50,000 and the maximum number of Equipment Advances that will be made is 6.
(b) Interest rate. Equipment Advances accrue interest on the outstanding principal balance at a per annum rate of 0.50 percentage points above the Prime Rate. At Borrower's option, the outstanding Equipment Advances as of the Equipment Availability End Date may accrue interest on the outstanding principal balance through the Equipment Loan Maturity Date either (I) at a rate per annum of 0.50 percentage point above the Prime Rate or (ii) at a per annum fixed rate of equal to the Treasury Rate, as described below. Such fixed rate is subject to a Prepayment Fee, as described below. After an Event of Default, Obligations accrue interest at 5 percent above the rate effective immediately before the Event of Default. The interest rate increases or decreases when the Prime Rate changes. Interest is computed on
a 360
day year for the actual number of days elapsed and is payable monthly until the Equipment Availability End Date occurs. Equipment Advances outstanding on the Equipment Availability End Date are payable in 36 equal monthly installments of principal, plus accrued interest, beginning on the 14th day of each month following the Equipment Availability End Date and ending on December 14, 2002 the (Equipment Loan Maturity Date). Equipment Advances when repaid may not be reborrowed.
(c) To obtain an Equipment Advance, Borrower must notify Silicon (the notice is irrevocable) by facsimile no later than 3:00 p.m. Pacific time 1 Business Day before the day on which the Equipment Advance is to be made. The notice in the form of Exhibit B (Payment/Advance Form) must be signed by a Responsible Officer or designee and include a copy of the invoice for the Equipment being financed.
"Prepayment Fee" is a fee on any portion of the Obligations with a fixed interest rate (the "Fixed Obligations") paid before the payment due date. "Base Interest Rate" means Bank's initial cost of funding the Fixed Obligations. The Prepayment Fee is calculated as follows: First, Silicon determines a "Current Market Rate" based on what the Silicon would receive if it loaned the remaining amount on the prepayment date in a wholesale funding market matching maturity, remaining principal and interest amounts and principal and interest payment dates (the aggregate payments received are the "Current Market Rate Amount"). Silicon may select any wholesale funding market rate as the Current Market Rate. Second, Silicon will take the prepayment amount and calculate the present value of each remaining principal and interest payment which, without prepayment, the Silicon would have received during the term of the Fixed Obligations using the Base Interest Rate. The sum of the present value calculations is the "Mark to Market Amount." Third, the Silicon will subtract the Mark to Market Amount form the Current Market Rate Amount. Any amount greater than zero is the Prepayment Fee.
"Treasury Rate" is as of the Equipment Availability End Date, the per annum rate of interest (based on a year of 360 days) equal to the sum of (a ) the U.S. Treasury Note yield to maturity for a 36 months Treasury Note as quoted in The Wall Street Journal, plus (b) 275 basis points.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Silicon a fee in the amount of Five Hundred Dollars ($500) (the "Loan Fee") plus all out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing below) agrees that, as of the date herof, it has no defenses against the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below) understands and agres that in modifying the existing Indebtedness, Silicon is relying upon Borrower's representations, warrantes, and agreements, as set forth is the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Silicon's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Silicon to make any future modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Silicon and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Silicon in writing. No maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of this paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: SILICON: CASCADE MICROTECH, INC. SILICON VALLEY BANK By:_____________________________ By:___________________________ Name:___________________________ Name:_________________________ Title:__________________________ Title:________________________ |
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: CASCADE MICROTECH, INC. LOAN OFFICER: BRUCE HELBERG DATE: JUNE 14, 1999 |
LOAN FEE $500.00
DOCUMENTATION FEE $250.00
TOTAL FEES DUE $750.00
-------
|
{ } A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.
{ } DEBIT DDA#______________FOR THE TOTAL AMOUNT.
{ } LOAN PROCEEDS
BORROWER
----------------------------------------- AUTHORIZED SIGNER (DATE) ----------------------------------------- SILICON VALLEY BANK (DATE) ACCOUNT OFFICER'S SIGNATURE |
LOAN MODIFICATION AGREEMENT
This Loan Modification is entered into as of March 17, 1998, by and between Cascade Microtech, Inc. ("Borrower") whose address is 14255 SW Brigadoon Court, Beaverton, OR 97005 and Silicon Valley Bank ("Silicon") whose address is 3003 Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to, among other documents, a Loan and Security Agreement, dated February 19, 1998, as may be amended from time to time, together with any and all Schedules attached thereto (the "Domestic Loan Agreement"). The Domestic Loan Agreement provided for, among other things, a Secured Accounts Receivable Line of Credit in the original principal amount of Six Million Dollars ($6,000,000) (the "Revolving Facility"). Furthermore, Borrower is indebted to Silicon pursuant to, among other documents, a Loan and Security Agreement (Exim Program) dated February 19, 1998, as may be amended from time to time, together with any and all Schedules attached thereto, (the "Exim Loan Agreement"). The Exim Loan Agreement provided for, among other things, an Export Line of Credit in the original principal amount of One Million Five Hundred Thousand Dollars (1,500,000) (the "Exim Revolving Facility"). The Domestic Loan Agreement and the Exim Loan Agreement shall be collectively referred to as the "Loan Agreements. Defined terms used but not otherwise defined herein shall have the same meanings as in the Loan Agreements.
Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred to as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the indebtedness is secured by the Collateral as described in the Loan Agreements and by the Intellectual Property Collateral as described in the Intellectual Property Security Agreement.
Hereinafter, the above-described security documents and guaranties, together with all other documents securing repayment of the Indebtedness shall be referred to as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing of securing the Indebtedness shall be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO DOMESTIC LOAN AGREEMENT
1. The first sentence in the Section entitled "Credit Limit" under the Schedule to Loan and Security Agreement is hereby amended to read as follows:
An amount not to exceed the lesser of : (I) $4,500,000 at any one time outstanding; or (ii) the amount of the "Borrowing Base", as defined below.
B. MODIFICATION(S) TO EXIM LOAN AGREEMENT
1. The first two paragraphs in the Section entitled "Credit Limit" under the Schedule to Loan and Security Agreement (Exim Program) is hereby amended to read as follows:
An amount not to exceed the lesser of: (I) $3,000,000 at any one time outstanding; or (ii) a total of 90% of the value of Borrower's eligible export receivables, which are eligible for borrowing as provided below and in the EXIM Documents, plus 70% of the value of Borrower's exportable inventory which is eligible for borrowing as provided below and in the EXIM Documents, which Silicon in its reasonable discretion deems eligible for borrowing.
Without limiting the fact that the determination of which accounts are eligible for borrowing is a matter of Silicon's reasonable discretion, the following shall not be deemed eligible for borrowing: accounts in which Silicon does not have a first priority, perfected security interest; accounts outstanding for more than 60 days from the due date of the invoice, accounts subject to any contingencies, accounts in excess of $10,000 owing from an account debtor outside the United States (except as approve in writing by Silicon), accounts owing from governmental agencies, and accounts owing from an account debtor to whom the Borrower is or may be liable for goods purchased from such account debtor or otherwise ("Contra Accounts"). Contra Accounts shall be eligible to the extent of the net difference between the account receivable and the account payable; however, if the account payable exceeds the account receivable, the entire account receivable shall be ineligible. In addition, if more than 50% of the total dollar amount of accounts owing from an account debtor are outstanding more than 60 days from the due date of the invoice or are otherwise not eligible accounts, then all accounts owing from that account debtor shall be deemed ineligible for borrowing.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing below) agrees that, as of the date hereof, it has no defenses against the obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below) understands and agrees that in modifying the existing Indebtedness, Silicon is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Silicon's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Silicon to make any future modifications to the Indebtedness. Nothing in this loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Silicon and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Silicon in writing. No maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of this paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements.
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: SILICON:
CASCADE MICROTECH, INC. SILICON VALLEY BANK
By: /s/ Randall Sadewic By: /s/ Bruce Helberg
--------------------------------- ---------------------------------
Name: Randall Sadewic Name: Bruce Helberg
------------------------------- -------------------------------
Title: CFO Title: VP
------------------------------ ------------------------------
|
Exhibit 10.7
LEASE AGREEMENT
BETWEEN
CASCADE MICROTECH, INC. (LESSOR)
&
POPLAR DEVELOPMENT COMPANY, III (LESSEE)
THIS LEASE, made and entered into this twenty-eighth (28th) day of October 1986, by and between POPLAR DEVELOPMENT COMPANY III, hereinafter referred to as Lessor, and CASCADE MICROTECH, INC., hereinafter referred to as Lessee, WITNESSETH:
In consideration of One Thousand Nine Hundred Forty-Four and 13/100 Dollars (Deposit) the covenants and agreements herein contained, to be kept and performed by the Lessee, and Lessor does hereby lease, demise and let unto the Lessee, for the term hereinafter specified, those certain premises located in the City of Beaverton, County of Washington, and State of Oregon, known and described as follows:
BEAVERTON TECH CENTER, 14155 S.W. Brigadoon Court; Beaverton, Oregon 97005.
The premises is an area of approximately 11,250 square feet on the north end of 33,750 square foot Building "A" in the Beaverton Tech Center.
TO HAVE AND TO HOLD the same unto the said Lessee for a term beginning on and including the First (1st) day of March 1987, and continuing to and including the 28th day of February 1991, the Lessee paying therefore the monthly rental as follows, payable monthly in advance on the first (1st) day of each and every calendar month during said term:
RENT SCHEDULE:
March 1, 1987 thru February 28, 1988 $5,525.00/month
March 1, 1988 thru February 29, 1989 $7,400.50/month
March 1, 1989 thru February 28, 1990 $7,400.50/month
March 1, 1990 thru January 31, 1991 $7,400.50/month
Rent for the period of February 01, 1991 thru
February 28, 1991 shall be $5,455.37/month
|
LEASE TERM
The Lease term of 48 months shall begin thirty (30) days after occupancy. Occupancy shall be established as February 1, 1987. The first months payment of rent is due on March 1, 1987.
TERMINATION OF EXISTING LEASE:
The existing Lease between Lessor and Lessee in Building "B" Beaverton Tech Center shall be terminated and in no further force or effect and all rents due under said Lease shall cease on
March 1, 1987. Lessee is hereby released from all obligations and liabilities under the existing lease as of March 1, 1987.
It is further agreed that the purpose of the Lease Term/Termination of Existing
Lease Statement, as set forth above, is to provide the Lessee with a thirty (30)
day moving allowance without paying rent on the new space. Should the Lessor
experience delays in delivering possession by February 1, 1987, the Lessee's
Lease Commencement Date, Lease Term, Termination of Existing Lease, and thirty
(30) day moving allowance shall be extended as required, in tact, using the City
of Beaverton "Certificate of Occupancy" date as the new date of Occupancy, and
in no event caused by the Lessor, will the Lessee be required to pay rent on
both spaces at the same time. Lessee shall have the right to terminate the Lease
if the Lessor fails to deliver possession of said premises by April 1, 1987 in
which event the existing lease in Building "B" would remain in full force and
effect.
The Lessee does hereby covenant and agree to and with the Lessor as follows:
1. To pay said monthly rental property in advance on the dates herein stipulated.
2. To use said premises during the term of this lease as ADMINISTRATIVE, STORAGE, LIGHT MANUFACTURING, ASSEMBLY and RELATED OPERATIONS and not otherwise.
3. Not to assign this lease or any portion thereof, nor sublet the said premises or any portion thereof, nor permit any other person or persons to occupy the same or any portion thereof, unless the written consent of the Lessor shall first have been obtained. Such consent shall not be unreasonably withheld.
4. To make no unlawful, improper or offensive use of said premises or any portion thereof, and during said term or any extension thereof, to comply with all statutes of the United States and/or all ordinances, rules, regulations and laws of other governmental authority regarding the maintenance, upkeep, operation and use of said premises and appliances therein, all at his own expense; and to keep the roof of said leased premises and the drains leading form said roof and the sidewalks adjoining said premises free and clear from ice and snow, also at his own expense. Such expenses shall be pro rated to the extent that Lessee is obligated only in accordance with the same footage realized.
5. Not to commit or suffer any waste of said premises.
6. Not to make any changes in or additions to said premises without the prior written consent of the Lessor. Any and all new construction, alterations and additions to or upon said leased premises (if any such construction, alterations or additions be duly authorized in writing by the Lessor) shall be made at the sole cost and expenses of the Lessee; and Lessee will, at his own cost and expense, keep said premises, and any mechanical
equipment located therein, in a good state of repair, including the replacement of cracked, broken, or damaged glass and Lessor shall manage the repair and replacement of damages and will bill-back to Lessee all common area charges.
7. To keep said property, both the land, and building and improvements free from all liens of every kind and description caused or incurred by any act or omission of the Lessee, and the Lessee shall not have the right or authority to incur any mechanics', laborers', or any other liens that would be binding against the Lessor's interest in said leased premises.
8. To promptly, and as the bills therefor become due and payable, pay for any and all water and/or other utility service used by him in or about said premises during the term of this lease or any extension thereof, whether such bills be presented before or after the termination of the occupancy of said premises by the Lessee.
9. Not to do or allow to be done anything in or about said premises which will or may make the fire hazard greater than that common to premises of the same general character and used for similar purposes.
10. Not to overload the floors of said premises in such a way as to cause any undue or serious stress or strain upon the building or any part thereof; the Lessor shall at all times have the right and privilege of calling upon a reliable architect or engineer whom he may select and who is agreeable to Lessee to decide wether or not the floors of said premises or any part thereof are being overloaded so as to cause any undue or serious stress or strain upon said building or any part thereof. The decision of such architect or engineer shall be final and binding upon the Lessee in said matter. In the event that such architect or engineer shall find that the stress or strain is sufficient to endanger or injure said building or any part thereof, then the Lessee will immediately relieve such stress or strain either by reinforcing the building at his own expense or by lightening in a manner satisfactory o the Lessor the load causing such stress or strain.
11. The Lessor or his agents and representatives may at any and all reasonable times with ten days written notice enter into or upon said premises or any part thereof for the purpose of examining the condition thereof, and Lessor may place an appropriate "For Rent" sign upon said premises for a period of thirty days from the end of the term of this lease, and/or any extension thereof. Lessor may enter into or upon said premises at any time with ten days written notice for the purpose of making repairs to or improvements, at his own expense, in any part of the building in which said premises are located as he may deem advisable, and in the event of any such repairs or improvements being made as herein provided and the use of the premises hereby leased is impaired, Lessee shall be entitled to a reduction of rental proportionately to the extent the use of the premises is impaired and for the length of time such impairment continues.
12. At the end of said term, or upon any sooner termination of this lease, to quit and deliver up said premises to the Lessor peaceably and quietly, broom-cleaned and in as good order and condition, reasonable use and wear thereof, fire and other unavoidable casualties alone excepted, as the same now are or may hereafter be put into during the term of this lease.
It is further mutually agreed by and between the parties hereto as follows:
13. The Lessee herein agrees to accept the premises in their present condition and any alterations, additions, improvements or repairs thereto during the life of this lease shall be made and paid for at the sole cost and expense of said Lessee, and said alterations, additions, improvements or repairs, including electric wiring and conduits, plumbing fixtures and pipes, and interior wall decorations, shall thereupon become a part and parcel of the premises hereby leased, excepting only MANUFACTURING, RESEARCH AND DEVELOPMENT, and TEST EQUIPMENT and office fixtures which are not attached to or made a part of the premises. The Lessee shall not be held responsible for the roof or exterior walls, doors, windows, foundations and floors of said building, unless through neglect or abuse said Lessee causes same to be damaged.
14. The Lessor shall in no event be liable for any accident or injury to any goods or person whatsoever occurring in or about said premises, which accident or injury is caused by or arises out of the failure of the Lessee to observe any covenant, agreement or condition of this lease, or any statue or municipal ordinance, or which is caused by or arises out of any negligence on the part of any agent or employee of the Lessee, or of any person doing work under contract or otherwise for the Lessee, and the Lessor shall not be responsible or liable in any way for the injury or death of any person or damage to any property caused in or about the premises; nor shall the Lessor be liable for any damage or loss suffered by the business or occupation of the Lessee arising or resulting from any such accident or injury to any goods or person happening in or about the premises unless caused by Lessor's own acts or negligence. The Lessee does hereby jointly and severally covenant to indemnify and save the Lessor harmless from any loss, damage or liability resulting from or arising out of any such accident or injury (except those caused by Lessor's own acts or negligence), and in the event of any suit or action for damages being brought by any person whomsoever, the Lessee agrees at his own cost and expense to defend the Lessor against any such suit or action and any and all appeals therefrom, and to satisfy and discharge any judgment that may be awarded against the Lessor on account thereof so long as Lessee is required to indemnify Lessor.
15. The Lessor shall not be liable for any injury to the goods, stock or property of the Lessee or any other person in or upon said premises, resulting from fire or the collapse of said leased premises or any portion thereof, or from any other cause including, but not limited
to, damage by water, gas or steam, or by reason of any electrical apparatus in or about said premises unless caused by Lessors own acts or negligence.
16. This lease is intended and shall be deemed to be personal to the Lessee, and may at the option of the Lessor be forthwith terminated if this lease or the rights of the Lessee herein be transferred or attempted to be transferred by judicial process, or if the Lessee shall attempt to transfer the same otherwise than as herein provided, or if the Lessee shall become bankrupt or insolvent, or if his property or any part thereof be placed in charge of a receiver by order of any court.
17. In the event of the damage or destruction of said leased premises or of the building of which they are a part, by fire or fire and water or casualty to the extent of twenty-five (25%) percent centum or more of the sound value thereof prior to the casualty, the Lessor may elect either to reconstruct or not to reconstruct the same. If the election be not to reconstruct the said premises, then this lease shall terminate as of the date of said casualty. If, however, the damage so occasioned shall not amount to said per centum of the sound value thereof prior to the casualty, then the Lessor shall repair said premises with all convenients. In either event, if the Lessor shall reconstruct or repair the premises or the portion thereof damaged by casualty, he shall have the right to take possession of and occupy, to the exclusion of the Lessee, all of the premises or any part thereof, for the purpose of such reconstruction or repair; and the Lessee hereby agrees to vacate, upon request, all or any part of said premises which the Lessor may reasonably require for said purposes; and for the period of time between the date of such casualty and until said work shall have been completed, there shall be such an abatement of rent as the nature of the injury or damage, and its interference with the occupancy of the premises by the Lessee, shall warrant. But if said premises shall be but slightly injured and the damage so occasioned shall not cause any material interference with the occupancy of the premises by the Lessee, then there shall be no abatement of rent and the Lessor shall repair said premises with all convenient speed.
18. In the event that all of the demised premises or so much thereof as shall materially affect the ability of the Lessee to conduct his business therein, shall be taken, condemned or purchased by an authority having the power of eminent domain, then this lease shall terminate and be void from the time when possession thereof is required for the public use, and such taking shall not operate as or be deemed an eviction of the Lessee or a breach of the Lessor's covenant for quiet enjoyment. Lessee shall pay all rent due and perform all covenants up to the time possession is required for public use. In the event only a part of the demises premises shall be so taken by an authority having the right of eminent domain, which does not materially affect the right of the Lessee to conduct his business therein, then the rentals reserved shall be abated in proportion to the loss of occupancy of the Lessee and in case the parties cannot agree upon a reasonable abatement in that regard, the matter shall be submitted for decision to arbitration between the parties in the usual manner. Lessor shall receive the entire amount of the award of just
compensation paid or made by such authority without deduction for any estate or interest of the Lessee. Lessor shall refund any prepaid rental to the Lessee.
19. Any holding over by the Lessee after the expiration of the term of this lease or any extension thereof, shall be as tenant from month to month only, and not otherwise.
20. This lease is not intended to grant to the Lessee any rights to light and air by means of openings in the walls of said premises located in whole or in part on interior building lines.
21. The Lessee agrees that he will not use the outside walls of said premises or any part thereof for the display of his name and business or for any advertising purposes whatsoever, whether by painting thereon or by suspending any banner therefrom or otherwise, without obtaining in each instance the prior written consent of the Lessor. He shall have the right, however, to attach to the premises, immediately above the front windows of the ground floor (but not extending beyond the limits of the leased premises) a sign of reasonable size showing his name and business; and also to show such name and business by an inscription of instructions upon the front window or windows. Any such sign or window inscription shall be of good design and permanent materials. The Lessee may not place within the windows or paint hereon any banners or signs in violation of the intent and meaning of this paragraph. It is the spirit and intent of the provisions of this paragraph and the understanding and agreement of the parties hereto that the leased premises shall at all times be neat and attractive in appearance, and the Lessee agrees that he will do nothing in contravention of such understanding and agreement. Lessee agrees upon termination of tenantry to remove all signs and repair any damage caused thereby, at his own cost and expense.
22. Any waiver by the Lessor of a breach of any of the terms, covenants, agreements or conditions hereof, shall not be deemed a continuing waiver upon his part.
23. In the event that suit or action is instituted by Lessor or Lessee to enforce compliance with any of the terms, covenants and conditions of this agreement on the part of the other to be kept and performed, the prevailing party shall recover in addition to the costs and disbursements provided by statute such sums as the court may adjudge reasonable as attorney fees and in the event of appeal, such further sum as may be fixed by the appellate court on appeal in such suit or action.
24. The Lessee has examined and knows the condition of the premises, and no representations or warranties as to the condition thereof have been made by the Lessor, or Lessor's agents, that are not herein set forth.
25. The Lessee agrees not to permit any objectionable noise or odor to escape or be emitted from the premises, or permit anything to be done upon said premises in any way tending
to create a nuisance or disturb any other tenant of the building. However, Lessor recognizes and acknowledges that Lessee is a light manufacturing company and all sounds and odors reasonably connected herewith shall be deemed to not create a nuisance or disturbance of any other tenant of the building.
26. All rights, remedies and liabilities herein given to or imposed upon either of the parties hereto shall extend to the heirs, executors, administrators, successors in interest, representatives and (so far as this lease and the term hereby created are assignable hereunder) to the assigns of said parties.
27. Wheresoever the word "Lessor" or "Lessee" is used herein, it relates also to the Lessors or Lessees, jointly and severally, if there be more than one Lessor or Lessee herein, and to their respective heirs, personal representatives, successors in interest and assigns; and the pronouns used herein shall be construed in each instance as meaning "he" or "his", "she" or "her", "they" or "their", "it" or "its", as the context and the sense and general purport of this instrument may require.
28. Any notices herein provided to be given by Lessor to Lessee shall be deemed to be delivered if mailed by regular United States mail addressed to Lessee at 14225 S.W. Brigadoon Court, Suite "C", Beaverton, Oregon 97005 and any such notices herein to be given by Lessee to Lessor shall be deemed to be delivered if mailed by regular United States mail addressed to Lessor at Poplar Development Company III; 900 Poplar Place, South; Seattle, Washington 98144 to the attention of Mr. Nick Westlund.
29. TENANT IMPROVEMENTS:
Lessor, at his sole cost and expense, shall initially provide, according to City Building Codes, tenant improvements for 8,500 square feet. The tenant improvement floor plans shall be prepared at Lessors cost and approved by Lessee and shall include the following areas and items:
I. THE OFFICE AREA:
a. One (1) large Conference Room with wood trim similar to Baugh
Construction
b. Two (2) small meeting rooms
c. One machine room with one 300 CFM venting hood
d. One (1) demo room, with sheet vinyl floor covering
e. Three (3) private offices including wood paneling on one wall
similar to Baugh Construction
f. One (1) employee lunch room including sink placed in four (4)
foot long over and under cabinetry
g. Partitioned entry/reception area h. General office finishes:
1. Nine foot (9') high 2'x2' tegular lay-in acoustical ceiling throughout with 2'x4' recessed lights at one per one hundred (100) square feet.
2. The carpet will be standard direct glue down and static free where required. Sheet vinyl in the lunch room.
3. The entire area to be fully heated, air conditioned and balanced. 4. Perimeter offices to include relite glass in each
II. R&D/ENGINEERING AREA
a. One (1) R&D lab room with vinyl floor covering
b. Two (2) offices
c. One (1) library/quiet room
d. General R&D finishes:
1. Nine foot (9') high 2'x2' tegular lay-in acoustical
ceiling throughout with 2'x4' recessed lights at one
per one hundred (100) square feet
2. The carpet will be standard direct glue down and
static free where required.
3. The entire area to be fully heated, air conditioned
and balanced.
4. Perimeter offices to include relite glass in each
III. MANUFACTURING/ASSEMBLY AREA:
a. One (1) inventory room
b. Shipping/Receiving Area: The shipping/receiving area shall be
a demised area included within manufacturing/assembly area. 1.
No ceiling 2. No air conditioning (heat is provided by
individual electric unit heaters) 3. Roll-up doors are
existing 4. Lighting provided by single tube chain hung
fluorescent lights 5. Floors shall be sealed concrete
c. Provide two (2) dedicated 220V circuits
d. General manufacturing/assembly finishes:
1. CEILING - Nine foot high 2'x2' tegular acoustical
ceiling in the entire office area.
2. CARPETS - The carpet will be standard direct glue
down with static-free carpeting in all areas which
require static-free carpeting or 12"xl2"x3/32" VCT
floor covering.
3. LIGHTING - 2'x4' lay-in fluorescent recessed light
fixtures equivalent to one hundred foot candles (100
fc).
4. General power to work stations will be provided from
the ceiling by means of continuous plugmold.
5. The entire area to be fully heated, air conditioned
and balanced.
IV. TOILET ROOMS, STANDARD FINISHES AND FIXTURES:
a. Vinyl flooring, acoustical tile ceiling with painted walls
b. All city and county codes will be met
c. A minimum of one water closet, one sink and one hot water
heater all be provided for men and women
d. Included in the restrooms will be mirrors, tissue dispenser,
paper towel dispenser
V. SHOWER AND DRESSING ROOMS:
a. One each men and women shower room with the same standard
finishes as the toilet room
b. Prefabricated shower units
VI. In addition to the 8,500 square foot leased area, Lessor shall improve the adjacent 2750 square foot area in preparation for final improvements and occupancy as follows using the building standards as listed above. This space will be provided for Lessees' use rent-free for one (1) year.
1. Ceilings, lights, heating and air conditioning will be
installed complete.
2. All floor area will be covered with either carpet or VAT as
directed by Lessee.
3. Window covering will be installed.
4. A demising wall consistent with codes and agreed to by Lessor
and Lessee will be installed contiguous to the adjacent
unoccupied space.
SEE STANDARD PARAGRAPH 6.
VII. General balancing of the HVAC system for all spaces shall be complete when fully occupied with equipment and personel.
The Landlord will, at the tenant option, add general light fixtures where general lighting levels may be deficient.
30. ADDENDUM TO LEASE DATED OCTOBER 15, 1986 BY AND BETWEEN POPLAR DEVELOPMENT COMPANY III AS LESSOR CASCADE MICROTECH, INC. AS LESSEE
OPTION TO EXPAND
I. The Lessor hereby grants to Lessee the "Option to Expand" into the
adjacent area of approximately 5,625 square feet, which shall also be
improved to the standard described above in Tenant Improvements item
number twenty-nine (29).
If requested by Lessee in Option I, Lessor will furnish one (1) 400sf room to be called a "Thin Film" room. This room shall be a "clean environment" constructed and finished similar to the, then existing, lab and demo rooms and shall include:
Humidity & Temperature Control
Additional Air Filters Plumbing (Water & Waste) to the space
Lessee shall exercise the Option sixty (60) days prior to the Lessees first one year anniversary date, and extend the base lease one additional year.
The Lessor will then provide occupancy in the optional space sixty (60) days after written notification from Lessee. The Lessee shall have use of said expansion space for one (1) year rent free. The lease rate on the expansion space shall be at $.65 per square foot, per month, triple net.
II. If Lessee does not exercise Option I, Lessor will improve adjacent space for Lessee on an as needed basis. Additional space requirements of Lessee will be made available to Lessee at $0.65 triple net with improvements, providing three (3) or more years remains on the base lease.
III. At any time that Poplar Development III can not meet Cascade Microtech's future expansion needs at the Beaverton Tech Center, Poplar Development III will develop a "Build To Suit" facility at another site in the Portland area and cancel their then current lease upon occupancy of the new facility. The rental rate shall be established using the total cost of development at a ten percent (10%) cap rate, based on a triple net lease. Total development, including site selection, design and construction will require one (1) year written notice to proceed from Lessee.
PURCHASE OPTION:
Cascade Microtech shall be permitted the option to purchase the Beaverton Tech Center facility at any time during its lease period at a mutually agreed upon sale price. Sale price shall be established by the consensus of two (2) independent appraisals, one provided by Seller and one provided by Purchaser. If two appraisers are unable to reach a consensus, a third appraiser would be employed at the expense of the Lessee and Lessor who would then agree with the appraisal of one of the appraisers..
31. OPERATING EXPENSES
Lessee shall pay operating expenses based on $.25 per square foot for 8,500 square feet. Should at the end of a calendar year Lessee's pro-rata (based on square footage) share of Building "A" expenses be more than $.25 per square foot, Lessor shall bill lessee and provide an itemized breakdown of expenses. Lessee shall made a one-time annual payment for any difference of expenses paid with the following month's rent.
Should expenses be less than $.25 per square foot, Lessor shall give credit in the form of abatement to the next due payment of operating expenses.
Until occupied by Lessee, Lessee shall be required to pay only the costs of power and HVAC in the 2,750 square foot rent free expansion space. Water and Sewer costs will be divided equally between tenants because there are only two with approximately equal facilities. All other costs of operation for the 2,750 square foot expansion space shall be paid by the Lessor until February 14, 1988.
32. Either Landlord or Tenant may require that a "Short Form" memorandum of this Lease executed by both parties be recorded.
33. Lessor hereby grants to Lessee a "Covenant of Quite Enjoyment" allowing the Lessees continued use in the event Lessor sells the premises.
PROVIDED ALWAYS, and these presents are upon this condition, that if the said rent shall be in arrears for the space of ten days, or if any transfer or assignment, voluntary or involuntary, of this lease be attempted, or if the Lessee shall fail or neglect to keep or observe any or either of the covenants, terms and conditions herein contained, which are on his part to be performed, kept and observed, then and in either or any such case the Lessor lawfully may, immediately or at any time thereafter and while such neglect or default continues, and without notice or demand, enter into or upon the said premises or any part hereof in the name of the whole, and repossess the same as of his former estate and expel the Lessee and those claiming under him and remove his or their effects, forcibly if necessary, without being taken or deemed guilty in any manner of trespass and without prejudice to any remedies which might otherwise be used for arrears of rent or preceding breach or covenant or agreements.
IN WITNESS WHEREOF, the parties hereto have executed this instrument in triplicate on the day and year first herein written, any corporate signature being by authority of the Board of Directors of the executing corporation.
/s/ Eric Strid Feb. 2, 1987 /s/ Frank VanDeventer ------------------------------------ ------------------------------------ Cascade Microtech, Inc. Poplar Development Company, III |
President Partner ------------------------------------ ------------------------------------ Title Title |
AMENDMENT OF LEASE
This AGREEMENT is entered into between Poplar Development Company III (Lessor) and Cascade Microtech, Inc. (Lessee).
Lessor and Lessee entered into that certain Lease Agreement dated October 28, 1986 (the Lease) for premises consisting of 11,250 square feet of Beaverton Tech Center, 14255 S.W. Brigadoon Court in the City of Beaverton, Washington County, Oregon. The term of the Lease commenced on March 1, 1987, and shall terminate February 28, 1991. The parties desire to modify the Lease as set forth below. It is agreed:
1. ADDITIONAL SPACE AND RENT: The Lessee agrees to lease an additional 6,240 square feet adjacent to the current premises making a total leased area of 17,490 square feet. The lease amendment for base lease plus additional space and new rent schedule shall commence March l, 1988 and terminate February 29, 1992, unless future modifications are agreed to by the parties through additional amendments. All other terms and conditions of the agreement shall remain the same.
2. RENT SCHEDULE:
March 1, 1988 thru February 28, 1989 $7,400.50/Month March 1, 1989 thru February 28, 1990 $11,456.50/Month March 1, 1990 thru February 28, 1991 $11,456.50/Month March 1, 1991 thru January 31, 1992 $11,456.50/Month February 1, 1992 thru February 29, 1992 $ 9,512.37/Month |
The current Agreement concerning the payment of operating expenses by the Lessee shall be based upon the new leased area of 17,490 square feet.
3. CONDITION OF PREMISES: The Lessor shall, at his sole cost and expense, provide tenant improvements as specified and agreed to in the Lease Agreement dated October 28, 1986.
4. OTHER PROVISIONS: Except as expressly set forth in this Agreement, all other provisions, terms and conditions of the Lease shall remain in full force and effect.
Dated this 17th day of February, 1988.
POPLAR DEVELOPMENT COMPANY III CASCADE MICROTECH INC.
/s/ Frank VanDeventer /s/ Eric W. Strid
---------------------------------- ------------------------------------------
Date: 17 February 1988 Date: 2/24/88
------------------------------ --------------------------------------
|
AMENDMENT OF LEASE
Date: June 9, 1989
Re: 2700 sq.ft. Expansion in "Buildings A" at .50/sq.ft.
This AGREEMENT is entered into between Poplar Development Company III (Lessor) and Cascade microtech, Inc. (Lessee).
Lessor and Lessee entered into that certain Lease Agreement dated October 28, 1986 (the Lease) for premises consisting of 11,250 square feet of Beaverton Tech Center, 14255 S.W. Brigadoon Court in the City of Beaverton, Washington County, Oregon. The term of the Lease commenced on March 1, 1987, and shall terminate February 28, 1991. The parties desire to modify the Lease as set forth below. It is agreed:
1. ADDITIONAL SPACE AND RENT: The Leasee agrees to lease an additional 2,700 square feet in building A and depicted on the attached Exhibit "A" making the total leased area of 20,190 square feet. The lease amendment for base lease plus additional space and new rent schedule shall commence June 15, 1989 and terminate February 29, 1992, unless future modifications are agreed to by the parties through additional amendments. All other terms and conditions of the agreement shall remain the same.
2. RENT SCHEDULE:
June 15, 1989 thru February 28, 1990 $12,806.50 June 1, 1990 thru February 28, 1991 $12,806.50 June 1, 1991 thru January 31, 1992 $12,806.50 February 1, 1992 thru February 29, 1992 $10,862.37 |
The current Agreement concerning the payment of operating expense, deliver the space in the empty shell condition with the demising wall removed.
3. CONDITIONS OF PREMISES: The Lessor shall, at his sole cost and expense, deliver the space in the empty shell condition with the demising wall removed.
4. RIGHTS TO THIN FILM LAB TENANT IMPROVEMENTS: Notwithstanding any other provision of this Addendum, all improvements to the premises constructed and paid for by the tenant with respect to establishment of the Thin Film Lab shall constitute and remain the property of the Tenant, and the Tenant shall be entitled to remove such improvements from the premises upon the termination of this lease agreement.
5. Other Provisions: Except as expressly set forth in this Agreement, all other provisions, terms and conditions of the Lease shall remain in full force and effect.
Dated this 9th day of June, 1989
POPLAR DEVELOPMENT COMPANY III CASCADE MICROTECH, INC.
By: /s/ Frank Van DeVenter By: /s/ Eric Strid
------------------------------------ -----------------------------------
Frank Van DeVenter, Partner Eric Strid, President
|
AMENDMENT OF LEASE
DATED NOVEMBER 13, 1989
BY AND BETWEEN
POPLAR DEVELOPMENT COMPANY III, AS LESSOR
AND
CASCADE MICROTECH, INC., AS LESSEE
Re: Expansion in "Building A" at $0.65 per square foot Net, Net, Net for an additional 13,560 square feet of office area.
This AGREEMENT is entered into between Poplar Development Company III (Lessor) and Cascade Microtech, Inc. (Lessee).
Lessor and Lessee entered into that certain Lease Agreement dated October 28, 1986 (the Lessee) for premises consisting of 11,250 square feet of Beaverton Tech Center, 14255 S.W. Brigadoon Court in the City of Beaverton, Washington County, Oregon. The term of the Lease commenced on March 1, 1987, and shall terminate February 29, 1992. The parties desire to modify the Lease as set forth below. It is agreed:
1. ADDITIONAL SPACE AND RENT: By previous two addendums, the Tenant has leased through expansion additional space totaling 8,940 square feet. Now, the Lessee agrees to lease an additional 13,560 square feet in building A as depicted on the attached Exhibit "A" making the total leased area of 33,750 square feet comprising the total building. The lease amendment for the base lease plus the additional space and the new rent schedule shall commence January 1, 1990, and terminate February 29, 1992, unless future modifications are agreed to by the parties through additional amendments. All other terms and conditions of the agreement shall remain the same.
2. RENT SCHEDULE TO INCLUDE THE ADDITIONAL 13,560 SQUARE FEET SHALL BE:
January 1, 1990 through March 30, 1990 $12,806.50/month April 1, 1990 through February 28, 1990 $21,620.50/month March 1, 1900 through February 28, 1991 $21,620.50/month March 1, 1991 through January 31, 1992 $21,620.50/month February 1, 1992 through February 29,1992 $19,676.37/month |
The Current Agreement concerning the payment of operating expenses by the Lessee shall be based upon the new leased area of 33,750 square feet, which is 68% of the total 49,750 square feet of buildings.
3. CONDITIONS OF PREMISES: The Lessor shall provide two penetrations for the extension of the corridors. Remaining space shall be delivered "as is".
4. OPTION TO EXTEND: The Landlord shall grant to Tenant two (2) option to extend occupancy for one (1) year each at a rental rate of $.65/square foot per month NNN for the first year option period and $.71/square foot per month NNN for the second year of the option period. The written notice of Tenants exercise of option shall be delivered to the Landlord six (6) months prior to expiration of the lease term.
5. OTHER PROVISIONS: Except as expressly set forth in this Agreement, all other provisions, terms and conditions of the Lease shall remain in full force and effect.
Dated this 29th day of November, 1989.
POPLAR DEVELOPMENT COMPANY III CASCADE MICROTECH, INC.
By: /s/ Frank Van Deventer By: /s/ Eric Strid
------------------------------------ -----------------------------------
Frank Van DeVenter, Partner Eric Strid, President
|
AMENDMENT OF LEASE IV
DATED NOVEMBER 6,1991
BY AND BETWEEN
POPLAR DEVELOPMENT COMPANY III, AS LESSOR
AND
CASCADE MICROTECH, INC., AS LESSEE
This AGREEMENT is entered into between POPLAR DEVELOPMENT COMPANY III (Lessor) and CASCADE MICROTECH, INC. (Lessee).
Lessor and Lessee entered into that certain Lease Agreement dated October 28, 1986 (the Lease) for premises consisting of 11,250 square feet of Beaverton Tech Center, 14255 SW Brigadoon Court in the City of Beaverton, Washington County, Oregon. The term of the Lease commenced on March 1, 1987 and shall terminate February 29, 1992. The parties desire to modify the Lease as set forth below. It is agreed:
1. ADDITIONAL SPACE AND RENT:
By previous Three (3) Amendments, the Tenant has leased through expansion the total leased area of 33,750 square feet comprising the total building "A" space. The Lessee agrees to extend the lease term for a period of three (3) years commencing on January 1, 1992, at the Net, Net, Net rate of $0.65 per square foot. The lessor agrees to provide the lessee with a $10.00 per square foot Tenant Improvement allowance to improve the storage space, shown on the attached Exhibit "A" to office space. Total Sum of the allowance shall be $18,290.00. The lease amendment for the base lease plus the additional space and the rent schedule shall commence January 1, 1992 and terminate December 31, 1994, unless future modifications are agreed to by the parties through additional amendments. All other terms and conditions of the agreement shall remain the same.
2. RENT SCHEDULE:
January 1, 1992 through December 31, 1994 $21,620.50/month
The current Agreement concerning the payment of operating expenses by the Lessee shall be based upon the leased area of 33,750 square feet, which is 68% of the total 49,750 square feet of the buildings.
3. OPTION TO EXTEND:
The Landlord shall grant to Tenant two (2) options to extend occupancy for one (1) year each at a rental rate of $.65/square foot per month NNN for the first year option period and $.71 /square foot per NNN for the second year of the option period. The written
notice of Tenants exercise of option shall be delivered to the Landlord six (6) months prior to expiration of the lease term.
4. On page 12 of the original lease dated October 28, 1986, modify the next to the last sentence, beginning with "Provided Always,..." and ending with "...breach or covenant or agreements.", to read thirty (30) days in lieu of ten days.
5. Net basis (Net, Net, Net) is described as follows:
Additional Rent: All charges payable by Tenant other than Base Rent are called "Additional Rent." Unless this Lease provides otherwise, all Additional Rent shall be paid with the next monthly installment of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
A. Real Property Taxes
(1) Payment of Taxes. Tenant shall pay all real property taxes on the Property during the Lease Term.
(2) Definition of "Real Property Tax." "Real property tax" means (i) any fee, license fee, license tax, business license fee, commercial rental tax, levy, charge, assessment, penalty or tax imposed by any taxing authority against the Property or land upon which the Property is located; (ii) any tax on the Landlord's right to receive, or the receipt of, rent or income from the Property or against Landlord's business of leasing the Property; (iii) any tax or charge for fire protection, streets, sidewalks, road maintenance, refuse or other services provided to the Property by any governmental agency, (iv) any tax imposed upon this transaction or based upon a re-assessment of the Property due to a change in ownership or transfer of all or part of Landlord's interest in the Property; and (v) any charge or fee replacing any tax previously included within the definition of real property tax. "Real property tax" does not, however, include Landlord's federal or state income, franchise, inheritance or estate taxes.
(3) Joint Assessment. If the Property is not separately assessed, Tenant's share of the real property tax payable by Tenant shall be determined from the assessor's worksheets or other reasonably available information. Landlord shall make a reasonable determination of Tenant's proportionate share of such real property tax and Tenant shall pay such share to Landlord within fifteen (15) days after receipt of Landlord's written statement.
B. Utilities. Tenant shall pay, directly to the appropriate supplier, the cost of all natural gas, heat, light, power, sewer service, telephone, water, refuse disposal and other utilities and services supplied to the Property. However, if any services or
utilities are jointly metered with other property, Landlord shall make a reasonable determination of Tenant's proportionate share of the cost of such utilities and services and Tenant shall pay such share to Landlord.
C. Multiple Tenant Buildings, Rules and Regulations. If the Property is part of a larger building or group of buildings, Tenant shall pay its pro rata share of common area maintenance and repair costs as reasonably determined by Landlord. Tenant shall also comply with Landlord's rules and regulations respecting the management, care and safety of the common areas of such buildings and grounds, including parking areas, landscaped areas, walkways, hallways and other facilities provided for the common use and convenience of other occupants.
D. Insurance. During the Lease Term, Landlord shall maintain Commercial General Liability and Property Insurance (Special form including earthquake and flood) and Tenant shall pay its pro rata share of the Insurance premiums.
6. OTHER PROVISIONS:
Except as expressly set forth in this Agreement, all other provisions, terms and conditions of the Lease shall remain in full force and effect.
Dated this 20th day of December, 1991.
POPLAR DEVELOPMENT COMPANY III CASCADE MICROTECH, INC.
By: /s/ Frank Van Deventer By: /s/ Eric Strid
------------------------------------ -----------------------------------
Frank Van Deventer, Partner Eric Strid, President
|
Cascade Microtech, Inc. Lease Amendment IV October 31, 1994 |
Poplar Development III, landlord, does agree to and approves the requests of Cascade Microtech, Inc.
Please acknowledge your agreement to the terms and extensions by signing and returning one original copy of this confirmation letter.
/s/ Frank J. VanDeventer /s/ Randall S. Sadewic ---------------------------- -------------------------------------------- Frank J. VanDeventer Randall S. Sadewic, Chief Financial Officer Partner and Secretary Poplar Development III Cascade Microtech, Inc. |
October 31, 1994
Mr. Randy Sadewic
Ms. Pat Kostol
Cascade Microtech, Inc.
14255 S.W. Brigadoon Court
Beaverton, Oregon 97005
Re: Lease Amendment IV
Dear Randy and Pat:
Lease Amendment IV, dated November 6, 1991, provides in Paragraph 3 for two (2) one-year options to extend occupancy. On May 4, 1994, Cascade Microtech, Inc., exercised the first option to extend the lease term through December 31, 1995. On October 28, 1994, you requested to exercise the second option to extend the lease term through December 31,1996. You further requested an additional one (1) year option to extend at the $.71/square foot NNN rate for that period from January 1, 1997, through December 31, 1997.
You also requested that the $18,290 tenant improvement allowance included in Lease Amendment IV, but not yet used, be extended and be made available for use now.
NEW RENT SCHEDULE
January 1, 1995 through December 31, 1995....................$21,620.50/month January 1, 1996 through December 31, 1996....................$23,962.50/month January 1, 1997 thorough November 31, 1997 (option year).....$23,962.50/month |
The written notice of tenant's exercise of option shall be delivered to the landlord on or before June 1, 1996.
All other terms and conditions of the Lease through Lease Amendment IV shall remain the same and in full force and effect.
April 24, 1995
Mr. Randy Sadewic
Cascade Microtech, Inc.
14255 SW Brigadoon Court
Beaverton, Oregon 97005
RE: LEASE AMENDMENT V
Dear Randy:
Please consider this letter, Lease Amendment V to our lease agreement dated October 28, 1986, as previously modified by Amendments I, II, III and IV.
In consideration of Cascade Microtech, Inc. extending its lease term for a portion (Leased Area Two) of its leased premises to March 31, 2000, outlined below is the new rent schedule for Building "A":
LEASED AREA ONE: (as shown on the attached plan) contains approximately 23,750 Sq. ft. and shall have the lease term extend to March 31, 1998 and shall have the following rent schedule:
May 1, 1995 to March 31, 1998, 23,750 Sq. ft. @ .75/S.F./NNN or $17,812.50/Mo.
LEASED AREA TWO: (as shown on the attached plan) contains approximately 10,000 Sq. ft. and shall have the following rent schedule:
May 1, 1995 to March 31, 2000, 10,000 Sq. ft. @ .75/S.F./NNN or $7,500.00/Mo.
Landlord shall make modifications to existing space requested by tenant to a maximum cost of $100,000.00, including building permit costs. Tenant shall provide and pay for space planning design.
All other terms and conditions of the Lease through Lease Amendment V shall remain the same and in full force and effect.
Please acknowledge your agreement to the terms and extensions by signing and returning one original copy of this Lease Amendment V for attachment to the original lease document.
By: /s/ Frank J. VanDeventer By: /s/ Randall S. Sadewic ---------------------------- -------------------------------------------- Frank J. VanDeventer Randall S. Sadewic, Chief Financial Officer Partner and Secretary Poplar Development III Cascade Microtech, Inc. |
ADDENDUM TO LEASE
dated
October 28, 1986 Date of Lease
By and Between
Persis Corporation, Lessor
and
Cascade Microtech, Lessee
located at
14255 S.W. Brigadoon Court; Beaverton, Oregon
This Addendum will add to the Lease dated October 28, 1986 between Persis Corporation, Lessor and Cascade Microtech, Lessee; for two additions to the building.
1. The Lessee requests the Lessors permission for to install a liquid nitrogen tank as shown in Exhibit A attached. The tank will be set on a pad as required by the installers. the tank will be screened by a cyclone fence with Two Bullards to protect the tank from vandals. The curb and pad will extend two feet beyond the existing curb.
2. Construction of a penthouse on the roof of the building requiring structural modifications to the roof, as well as additional penetration. To be approved by Landlord.
Lessee agrees to remove these improvements at end of their occupancy and return the building to its original condition if requested by the Lessor.
Lessor shall give Lessee thirty (30) days written notice requesting the improvements to be removed.
If you are in agreement with the above stipulations, conditions, etc. please so signify by signing where provided below.
APPROVED and ACCEPTED:
PERSIS CORPORATION, Lessor CASCADE MICROTECH, Lessee
By: /s/ By: /s/ Randall Sadewic
------------------------- -------------------------
Date: 3/28/96 Date: MARCH 28, 1996
|
Amendment Six
To the lease dated October 28, 1986 between Cascade Microtech, Inc., Tenant, and Asa Properties, Inc., Landlord, for approximately 33,750 square feet, at 14255 SW Brigadoon Ct, Beaverton, Oregon.
TERM AND BASE
MONTHLY RENT: 4/01/1998 - 3/31/2000 $25,312.50
4/01/2000 - 3/31/2001 $27,000.00
4/01/2001 - 3/31/2002 $28,012.50
PORTABLE BUILDINGS: Tenant to be allowed to install portable
office buildings on the premises in the
locations indicated on Exhibit A. All
portable buildings to be installed and
maintained per all applicable codes, permit
processes, and licensing requirements.
Tenant acknowledges that portable buildings
will reduce the available parking and
assumes responsibility for the reduction in
parking stalls. At the end of the lease
term, Tenant to remove the portable
buildings and return the parking lot and
landscaping to its condition, prior to the
installation of the portable buildings. All
costs associated with the installation,
maintenance and removal of the portable
buildings to be the responsibility of the
Tenant.
OPERATING EXPENSES: Tenant to connect utilities to the portable
building from the electric meter in
14255 SW Brigadoon Court. Any increase, if
any in Park maintenance expenses as a result
of the installation of the portable
buildings shall be the responsibility of
Tenant.
OPTION TO CANCEL: Tenant to have the one-time option to cancel
the lease effective March 31, 2000. Tenant
must provide written notice prior to
September 30,1999, and a lump sum payment of
the unamortized tenant improvement allowance
or the option to cancel is void. For the
purposes of calculating the fee due to
cancel the lease, the amortization rate will
be 10%. In the event Tenant is in default
under the terms of the Lease at any time,
the option to cancel shall be null and void.
ALLOWANCE: Asa Properties, Inc., upon written notice
from Tenant, will provide an allowance of up
to $50,000.00 to be used for mutually
acceptable building improvements. Allowance
to be amortized from the date of issue
through 3/31/2002 using an interest rate of
10% per year. Tenant must provide request
for improvements
|
between 4/01/1998 and 3/31/2000 or the
allowance will no longer be available for
the Tenant's use.
|
All other terms of the lease to be in full force and effect except for those items modified above.
APPROVED AND ACCEPTED:
LANDLORD: TENANT:
/s/ /s/ Randall Sadewic
---------------------- ----------------------
Asa Properties, Inc. Cascade Microtech, Inc.
10/9/97 Oct. 15, 1997
Date Date
|
Amendment Seven
To the lease dated October 28, 1986 between Cascade Microtech, Inc., Tenant, and Asa Properties, Inc., Landlord, for approximately 33,750 square feet, at 14255 SW Brigadoon Ct, Beaverton, Oregon.
OPTION TO CANCEL: The option to Cancel the lease per Amendment Six is void.
APPROVED AND ACCEPTED: LANDLORD: TENANT: /s/ /s/ RANDALL SADEWIC --------------------------- --------------------------- Asa Properties, Inc. Cascade Microtech, Inc. 10/16/98 Oct. 16, 1998 Date Date |
All other terms of the lease to be in full force and effect except for those
items modified above. APPROVED AND ACCEPTED:
Exhibit 10.8
BASIC LEASE INFORMATION
INDUSTRIAL NET
LEASE DATE: April 2, 1999
TENANT: Cascade Microtech, Inc., an Oregon corporation
TENANT'S NOTICE ADDRESS: Grant Bennett, Facility Manager
2430 NW 206th Avenue, Beaverton, OR 97006
TENANT'S BILLING ADDRESS: 2430 NW 206th Avenue, Beaverton, OR 97006
TENANT CONTACT: Grant Bennett PHONE NUMBER: 503.601.1000
FAX NUMBER: 503.601.1001
LANDLORD: Spieker Properties, L.P., a California limited
Partnership
LANDLORD'S NOTICE ADDRESS: 4949 SW Meadows Road, Suite 260
Lake Oswego, OR 97035
LANDLORD'S REMITTANCE ADDRESS: Department 30211
P.O. Box 3900
Portland, OR 97208-3900
Project Description: Phase I, II & III of the Nimbus Corporate Center
Beaverton, OR 97008
Building Description: Building 7, 9100 SW Gemini Drive
Beaverton, OR 97008
Premises: Approximately 58,817 rentable square feet (rsf)
Permitted Use: General Office, Engineering, Light Manufacturing,
Shipping and Receiving and all uses allowed under
applicable zoning
Parking Density: 3.5 non-exclusive surface stalls per 1,000 rsf at no
charge (including visitor, handicapped stalls and truck/staging areas)
Scheduled Term Commencement Date: September 1, 1999
Schedule Length of Term: One hundred twenty (120) months
Scheduled Term Expiration Date: August 31, 2009
Rent:
Base Rent: 09/01/00-12/31/99 $36,712.00 per month triple net
01/01/00-08/31/01 $55,876.00 per month triple net
09/01/01-08/31/03 $58,817.00 per month triple net
09/01/03-08/31/05 $64,698.00 per month triple net
09/01/05-08/31/07 $67,640.00 per month triple net
1
|
09/01/07-08/31/09 $70,580.00 per month triple net
Estimated First Year Operating Expenses: $12,272.00 per month
Security Deposit: $70,580.00
(See Paragraph 19)
Tenant's Proportionate Share:
Of Building: N/A
Of Project: 0.13%
|
The foregoing Basic Lease Information is incorporated into and made a part of this Lease. Each reference in this Lease to any of the Basic Lease Information shall mean the respective information above and shall be construed to incorporate all of the terms provided under the particular Lease paragraph pertaining to such information. In the event of any conflict between the Basic Lease Information and the Lease, the latter shall control.
LANDLORD TENANT
Spieker Properties, L.P., Cascade Microtech, Inc.
a California limited partnership an Oregon corporation
By: Spieker Properties, Inc.
a Maryland corporation,
its general partner
By: /S/ LYNDA M. CLARKE By: /S/ ERIC W. STRID
----------------------------------- -----------------------------------
Lynda M. Clarke Eric W. Strid
Its: Vice President Its: Chief Executive Office
Date: 4-2-99 Date: April 2, 1999
|
LEASE
THIS LEASE is made as of the 2nd day of April, 1999, by and between Spieker Properties, L.P., a California limited partnership (hereinafter called "Landlord"), and Cascade Microtech, Inc. an Oregon corporation (hereinafter called "Tenant).
1. PREMISES
Landlord leases to Tenant and Tenant leases from Landlord, upon the terms and conditions hereinafter set forth, those premises (the "Premises") outlined in red on Exhibit B and described in the Basic Lease Information together with the nonexclusive right to use all common areas of the Building and the Project. The Premises shall be all or part of a building (the "Building") and of a project (the "Project"), which may consist of more than one building and additional facilities, as described in the Basic Lease Information. The Building and Project are outlined in blue and green respectively on Exhibit B. Landlord and Tenant acknowledge that physical changes may occur from time to time in the Premises, Building or Project, and that the number of buildings and additional facilities which constitute the project may change from time to time, which may result in an adjustment in Tenant's Proportionate Share, as defined in the Basic Lease Information, as provided in Paragraph 7.A.
2. POSSESSION AND LEASE COMMENCEMENT
B. Construction of Improvements. If this Lease pertains to a Building to be constructed or improvements to be constructed within a Building, the provisions of this Paragraph 2.B. shall apply in lieu of the provisions of Paragraph 2.A. above and the term commencement date ("Tern Commencement Date") shall be the earlier of the date on which: (1) Tenant takes possession of some or all of the Premises; or (2) the improvements to be constructed or performed in the Premises by Landlord (if any) shall have been substantially completed in accordance with the plans and specifications, if any, described on Exhibit C and Tenant's taking of possession of the Premises; or (2) the improvements to be constructed or performed in the Premises by Landlord (if any) shall have been substantially completed in accordance with the plans and specifications, if any, described on Exhibit C and Tenant's taking of possession of the Premises or any part thereof shall constitute Tenant's confirmation of substantial completion for all purposes hereof, whether or not substantial completion of the Building or Project shall have occurred. Landlord and Tenant shall complete a mutually agreed upon punchlist within five (5) business days of Tenant's possession of the Premises. Landlord shall use commercially reasonable efforts to complete said punchlist items within thirty (30) days therefrom. If for any reason landlord cannot deliver possession of the Premises to Tenant on the scheduled Term Commencement Date, Landlord shall not be subject to any liability therefor, not shall Landlord be in default hereunder not shall such failure affect the validity of this Lease, and Tenant agrees to accept possession of the Premises at such time as such improvements have been substantially completed, which date shall then be deemed the Term Commencement Date. Tenant shall not be liable for any Rent for any period prior to the Term Commencement Date (but without affecting any obligations of Tenant under any improvement agreement appended to this Lease). In the event of any dispute as to substantial completion of work performed or required to be performed by Landlord, the certificate of Landlord's architect or general contractor shall be conclusive. Substantial completion shall have occurred notwithstanding Tenant's submission of a punchlist to Landlord, which Tenant shall submit, if at all, within three (3) business days after the Term Commencement Date or otherwise in accordance with any improvement agreement appended to this Lease. Upon Landlord's request, Tenant shall promptly execute and return to landlord a "Start-Up Letter" in which Tenant shall agree, among other things, to acceptance of the Premises and to the determination of the Term Commencement Date, in accordance with the terms of this Lease, but Tenant's failure or refusal to do so shall not negate Tenant's acceptance of the Premises or affect determination of the Term Commencement Date. Notwithstanding anything to the contrary contained in this Paragraph 2.B., Tenant's rent shall commence after the Beneficial Occupancy period as defined in Paragraph 38,A, herein.
3. TERM
The term of this Lease (the "Term") shall commence on the Tern Commencement Date and continue in full force and effect for the number of months specified as the Length of Term in the Basic Lease Information or until this Lease is terminated as otherwise provided herein. If the Term Commencement Date is a date other than the first day of the calendar month, the Term shall be the number of months of the Length of Term in addition to the remainder of the calendar month following the Term Commencement Date.
4. USE
A. General. Tenant shall use the Premises for the permitted use specified in the Basic Lease Information ("Permitted Use") and for no other use or purpose. Tenant shall use reasonable efforts to control Tenant's employees, agents, customers, visitors, invitees, licensees, contractors, assignees and subtenants (collectively, "Tenant's Parties") in such a manner that Tenant and Tenant's Parties cumulatively do not exceed the parking density specified in the Basic Lease Information (the "Parking Density") at any time. So long as Tenant is occupying the Premises, Tenant and Tenant's Parties shall have the nonexclusive right to use, in common with other parties occupying the Building or Project, the parking areas, driveways and other common areas of the Building and Project, subject to the terms of this Lease and such rules and regulations as Landlord may from time to time prescribe. Landlord reserves the right, with reasonable notice but without liability to Tenant, and without the same constituting an actual or constructive eviction, to alter or modify the common areas from time to time, including the location and configuration thereof, and the amenities and facilities which Landlord may determine to provide from time to time; however, in no event shall Tenant's parking ratio be reduced by said modifications.
B. Limitations. Tenant shall not permit any odors, smoke, dust, gas, substances, noise or vibrations to emanate from the Premises or from any portion of the common areas as a result of Tenant's or any Tenant's Party's use thereof, not take any action which would constitute a nuisance or would disturb, obstruct or endanger any other tenants or occupants of the Building or Project or elsewhere, or interfere with their use of their respective premises or common areas. Storage outside the Premises of materials, vehicles or any other items in prohibited; however, Tenant shall be allowed to store liquid nitrogen outside of its premises, in a safe and clean manner. Tenant shall not use or allow the Premises to be used for any immoral, improper or unlawful purpose, nor shall Tenant cause or maintain or permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer the commission of any waste in, on or about the Premises. Tenant shall not allow any sale by auction upon the Premises, or place any loads upon the floors, walls or ceilings which could endanger the structure, or place any harmful substances in the drainage system of the Building or Project. No waste, materials or refuse shall be dumped upon or permitted to remain outside the Premises except in trash containers placed inside exterior enclosures designated for the purpose by Landlord. Landlord shall not be responsible to Tenant for the noncompliance by any other tenant or occupant of the Building or Project with any of the above-referenced rules or any other terms or provisions of such tenant's or occupant's lease or other contract.
C. Compliance with Regulations. By entering the Premises, Tenant accepts the Premises in the condition existing as of the date of such entry. Landlord represents to the best of its actual knowledge the Building and all improvements constructed by Landlord shall comply with all governmental rules and regulations at the Term Commencement Date. Tenant shall at its sole cost and expense strictly comply with all existing or future applicable municipal, state and federal and other governmental statutes, rules, requirements, regulations, laws and ordinances, including zoning ordinances and regulations, and covenants, easements and restrictions of record governing and relating to the use, occupancy or possession of the Premises, to Tenant's use of the common areas, or to the use, storage, generation or disposal of Hazardous Materials (hereinafter defined) (collectively "Regulations") and any other noncompliance with Regulations by Landlord in the construction of the Building, the Project or any other Existing Improvements. Tenant shall at its sole cost and expense obtain any and all licenses or permits necessary for Tenant's use of the Premises. Tenant shall at its sole cost and expense promptly comply with the requirements of any board of fire underwriters or other similar body now or hereafter constituted. Tenant shall not do or permit anything to be done in, on, under or about the Project or bring or keep anything which will in any way increase the rate of any insurance upon the Premises, Building or Project or upon any contents therein or cause a cancellation of said insurance or otherwise affect said insurance in any manner. Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord), protect and hold Landlord harmless from and against any loss, cost, expense, damage, attorneys' fees or liability arising out of the failure of Tenant to comply with any Regulation and any other noncompliance with Regulations by Landlord in the construction of the Building, the Project or any other Existing improvements. Notwithstanding anything to the contrary, Landlord shall be responsible at its sole cost and expense to comply with ADA standards in the common areas of the project. Tenant shall have the sole responsibility for complying, at Tenant's cost, with any and all provisions of the Americans with Disabilities Act of 1990, as it has been and may later be amended ("ADA"), (I) with respect to the Premises; and (ii) with respect to the common areas of the Project where in the case of this clause (ii) such compliance has been brought about by: (A) any Tenant Improvements or Alterations to the Premises or to the common areas made by or on behalf of Tenant, whether by Landlord or otherwise, and whether performed before or after the Term Commencement Date; (B) requirements of Tenant's employees, or any changes to Tenant's use of the Premises; or (C) any architectural barriers caused by Tenant's installation of any equipment, fixtures, furniture, or other personal property in or about the Premises (items (i) and (ii) collectively, "Tenant's ADA responsibilities"). Tenant shall indemnify, defend and hold Landlord, its agents and employees harmless from and against any and all claims, damages, or liabilities (including, without limitation, reasonable attorneys' fees and costs) arising directly or indirectly from Tenant's failure to satisfy any of Tenant's ADA Responsibilities. Landlord shall indemnify, defend and hold Tenant, its agents and employees harmless from and against any and all claims, damages or liabilities arising directly or indirectly from Landlord's failure to comply with any obligations of a landlord under the ADA, other than such claims, damages or liabilities arising from Tenant's failure to satisfy any of Tenant's ADA Responsibilities; provided, however, that Landlord may treat costs of ADA compliance with respect to the common areas of the Project but in no event in excess of $100,000.00 in the aggregate to the extent incurred after the Term
Commencement Date as an Operating Expense to be amortized over no few than sixty
(60) months. Tenant's obligations pursuant to the foregoing indemnity shall
survive the expiration or earlier termination of this Lease.
D. Hazardous Materials. As used in this Lease, "Hazardous Materials" shall include, but not be limited to, hazardous, toxic and radioactive materials and those substances defined as "hazardous substances," "hazardous wastes," "toxic substances," or other similar designations in any Regulation. Tenant shall not cause, or allow any of Tenant's Parties to cause, any Hazardous Materials to be handled, used generated, stored, released or disposed of in, on, under or about the Premises, the Building or the Project or surrounding land or environment in violation of any Regulations. Tenant must obtain Landlord's written consent prior to the introduction of any Hazardous Materials onto the Project. Notwithstanding the foregoing, Tenant may handle, store, use and dispose of any such Hazardous Materials in a safe and lawful manner and never allow such Hazardous Materials to contaminate the Premises, Building, or Project or surrounding land or environment, which indemnity shall include, without limitation, damages for personal or bodily injury, property damage, damage to the environment or natural resources occurring on or off the Premises, losses attributable to diminution in value or adverse effects on marketability, the cost of any investigation, monitoring, government oversight, repair, removal, remediation, restoration, abatement, and disposal, and the preparation of any closure or other required plans, whether such action is required or necessary prior to or following the expiration or earlier termination of this Lease. Neither the consent by Landlord to the use, generation, storage, release or disposal of Hazardous Materials nor the strict compliance by Tenant with all laws pertaining to Hazardous Materials shall excuse Tenant from Tenant's obligation of indemnification pursuant to this Paragraph 4>d. Tenant's obligations pursuant to the foregoing indemnity shall survive the expiration or earlier termination of this Lease. Landlord shall indemnify, defend and hold Tenant harmless from and against any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses, including without limitation reasonable attorneys' fees and costs, arising out of any Hazardous Material in, on or about the Project or the Premises which was created, handled, placed, stored, used, transported or disposed of by Landlord or by Landlord's agents, employees, invitees or representatives in violation of applicable Regulations, excluding, however, any Hazardous Material whose presence was caused by Tenant or any of Tenant's Parties. Landlord shall also indemnify, defend and hold Tenant harmless from and against any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses, including without limitation reasonable attorney's fees and costs, arising out of any Hazardous Material that migrates onto or under the Project of the Premises from any source or sources not within the Project or the Premises excluding, however, any Hazardous Material whose presence or migration was caused by Tenant or any of Tenant's Parties. Landlord's obligations pursuant to the foregoing indemnity shall survive the expiration or earlier termination of this Lease.
5. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the building rules and regulations attached hereto as Exhibit A and any other reasonable rules and regulations any an reasonable modifications or additions thereto which Landlord may from time to time prescribe in writing for the purpose of maintaining the proper care, cleanliness, safety, traffic flow and general order of the Premises or the Building or Project. Tenant shall cause Tenant's Parties to comply with such rules and regulations. Landlord shall use commercially reasonable efforts to ensure compliance by any other tenant or occupant of the Building or Project with any of such rules and regulations, any other tenant's or occupant's lease or any Regulations.
6. RENT
A. Base Rent. Tenant shall pay to Landlord and Landlord shall receive, without notice or demand throughout the Term, Base Rent as specified in the Basic Lease Information, payable in monthly installments in advance on or before the first day of each calendar month, in lawful money of the United States, without deduction or offset whatsoever, except as expressly provided herein, at the Remittance Address specified in the Basic Lease Information or to such other place as landlord may from time to time designate in writing. Base Rent for the first full month of the Term shall be paid by Tenant upon Tenant's execution of this Lease. If the obligation for payment of Base Rent commences on a day other than the first day of a month, then Base Rent shall be prorated and the prorated installment shall be paid on the first day
of the calendar month next succeeding the Term Commencement Date. The Base Rent payable by Tenant hereunder is subject to adjustment as provided elsewhere in this Lease, as applicable. As used herein, the term "Base Rent" shall mean the Base Rent specified in the Basic Lease Information as it may be so adjusted from time to time.
B. Additional Rent. All monies other than Base Rent required to be paid by Tenant hereunder, including, but not limited to, Tenant's Proportionate Share of Operating Expenses, as specified in Paragraph 7 of this Lease, charges to be paid by Tenant under Paragraph 15, the interest and late charge described in Paragraphs 26.C and D., and any monies spent by Landlord pursuant to Paragraph 30, shall be considered additional rent ("Additional Rent"). "Rent" shall mean Base Rent and Additional Rent.
7. OPERATING EXPENSES
A. Operating Expenses. In addition to the Base Rent required to be paid hereunder, Tenant shall pay as Additional Rent, Tenant's Proportionate Share of the Building and/or Project (as applicable), as defined in the Basic Lease Information, of Operating Expenses (defined below) in the manner set forth below. Tenant shall pay the applicable Tenant's Proportionate Share of each such Operating Expenses. Landlord and Tenant acknowledge that if the number of buildings which constitute the Project increases or decreases, or if physical changes are made to the Premises, Building or Project or the configuration of any thereof, Landlord may at its discretion reasonably adjust Tenant's Proportionate Share of the Building or Project to reflect the change. Landlord's determination or Tenant's Proportionate Share of the Building and the Project shall be conclusive so long as it is reasonable and consistently applied. "Operating Expenses" shall mean all expenses and costs of every kind of nature which Landlord shall pay or become obligated to pay, because of or in connection with the ownership, management, maintenance, repair, preservation, replacement and operation of the Building or Project and its supporting facilities and such additional facilities now and in subsequent years as may be determined by Landlord to be necessary or desirable to the Building and/or Project (as determined in a reasonable manner) other than those expenses and costs which are specifically attributable to Tenant or which are expressly made the financial responsibility of Landlord or specific tenants of the Building or Project pursuant to this Lease. Operating Expenses shall include, but are not limited to, the following:
(1) Taxes. All real property taxes and assessments, possessory interest taxes, sales taxes, personal property taxes, business or license taxes or fees, gross receipts taxes, service payments in lieu of such taxes or fees, annual or periodic license or use fees, excises, transit charges, and other impositions, general and special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind (including fees "in-lieu" of such tax or assessment) which are now or hereafter assessed, levied, charged, confirmed, or imposed by any public authority upon the Building or Project, its operations or the Rent (or any portion or component thereof), or any tax, assessment or fee imposed in substitution, partially or totally, of any of the above. Operating Expenses shall also include any taxes, assessments, reassessments, or other fees or impositions with respect to the development, leasing, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, Building or Project or any portion thereof, including, without limitation, by or for Tenant, and all increases therein or reassessments thereof whether the increases or reassessments result from increased rate and/or valuation (whether upon a transfer of the Building or Project or any portion thereof or any interest therein or for any other reason). Operating Expenses shall not include inheritance or estate taxes imposed upon or assessed against the interest of any person in the Project, or taxes computed upon the basis of the net income of any owners of any interest in the Project. If it shall not be lawful for Tenant to reimburse Landlord for all or any part of such taxes, the monthly rental payable to Landlord under this Lease shall be revised to net Landlord the same net rental after imposition of any such taxes by Landlord as would have been payable to Landlord prior to the payment of any such taxes. All said taxes shall be prorated over the Project as defined in Paragraph 1.
(2) Insurance. All insurance premiums and costs, including, but not limited to, any deductible amounts, premiums and other costs of insurance incurred by Landlord, including for the insurance coverage set forth in Paragraph 8.A herein.
(3) Common Area Maintenance.
(a) Repairs, replacements, and general maintenance of and for
the Building and Project and public and common areas and
facilities of and comprising the Building and Project,
including, but not limited to, the roof and roof membrane,
elevators, mechanical rooms, alarm systems, pest
extermination, landscaped areas, parking and service areas,
driveways, sidewalks, truck staging areas, rail spur areas,
fire sprinkler systems, sanitary and storm sewer lines,
utility services, hearing/ventilation/air conditioning
systems, electrical, mechanical or other systems, telephone
equipment and wiring servicing, plumbing, lighting and any
other items or areas which affect the operation or appearance
of the Building or Project, which determination shall be at
Landlord's discretion, except for those items expressly made
the financial responsibility of Landlord pursuant to Paragraph
10 hereof, those items to the extent paid for by the proceeds
of insurance; and those attributable solely or jointly to
specific tenants of the Building or Project.
(b) Repairs, replacements, and general maintenance shall
include the cost of any capital improvements in excess of
$20,000 made to or capital assets acquired for the Project or
Building that in Landlord's discretion may reduce any other
Operating Expenses, including present or future repair work,
are reasonably necessary for the health and safety of the
occupants of the Building or Project, or are required to
comply with any Regulation, such costs or allocable portions
thereof to be amortized over the useful life of said
maintenance or capital improvements together with Tenant's
prorata share of Landlord's interest on funds plus reasonable
finance charges borrowed for said purposes.
(c) Payment under or for any easement, license, permit,
operating agreement, declaration, restrictive covenant or
instrument relating to the Building or Project.
(d) All expenses and rental related to services and costs of
supplies, materials and equipment used in operating, managing
and maintaining the Premises, Building and Project, the
equipment therein and the adjacent sidewalks, driveways,
parking and service areas, including, without limitation,
expenses related to service agreements regarding security,
fire and other alarm systems, janitorial services to the
extent not addressed in Paragraph 11 hereof, window cleaning,
elevator maintenance, Building exterior maintenance,
landscaping and expenses related to the administration,
management and operation of the Project, including without
limitation salaries, wages and benefits below the title of
Vice President and limited to those parties working directly
on the Project and prorated appropriately, as reasonably
determined by Landlord, among the Building(s) for which they
are responsible.
(e) The cost of supplying any services and utilities which
benefit all or a portion of the Premises, Building or Project
to the extent not addressed in Paragraph 15 hereof.
(f) Legal expenses and the cost of audits by certified public
accountants; provided, however, that legal expenses chargeable
as Operating Expenses shall not include the cost of
negotiating leases, collecting rents, evicting tenants nor
shall it include costs incurred in legal proceedings with or
against any tenant or to enforce the provisions of any lease.
(g) A management and accounting cost recovery fee equal to
three percent (3%) of the sum of the Project's base rents and
Operating Expenses (0ther than such management and accounting
fee).
In addition, notwithstanding anything in the definition of Operating
Expenses in this Lease to the contrary, Operating Expenses shall not
|
include the following, except to the extent specifically provided:
(i) Any ground lease rental;
(ii) Costs of capital improvements, replacements or equipment and any depreciation or amortization expenses thereon, except to the extent included in Operating Expenses in Paragraph 7.A of this Lease;
(iii) Rentals for items (except when needed in connection with normal repairs and maintenance of permanent systems) which if purchased, rather that rented, would constitute a capital improvement which is specifically excluded in clause (ii) above (excluding, however, equipment not affixed to the Building or Project which is used in providing janitorial or similar services);
(iv) Costs incurred by Landlord for the repair of damage to the Building or Project, to the extent that Landlord is reimbursed by insurance proceeds;
(v) Costs, including permit, license and inspection costs, incurred with respect tot he installation of tenant or other occupant improvements made for tenants or other occupants in the Building or the Project or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for or the premises of other tenants or other occupants of the Building.
(vi) Marketing costs, including leasing commissions, attorneys' fees in connection with the negotiation and preparation or enforcement of letters, deal memos, letters of intent, leases, subleases and/or assignments, space planning costs, and other costs and expenses incurred in connection with lease, sublease and/or assignment negotiations and transactions with present or prospective tenants or other occupants of the Building or the Project;
(vii) Costs incurred by Landlord due to the violation by Landlord of the terms and conditions of any lease of space in the Building or the Project;
(viii) Except to the extent included in Operating Expenses in Paragraph 7.A(3) above, interest, principal, points and fees on debt or amortization payments on any mortgage or deed of trust or any other debt instrument encumbering the Building or Project or the land on which the Building or Project is situated;
(ix) Except for making repairs or keeping permanent systems in operation while repairs are being made, rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment ordinarily considered to be of a capital nature, except equipment not affixed to the Building or Project which is used in providing janitorial or similar services;
(x) Advertising and promotional expenditures (except for retail property promotions);
(xi) Costs incurred in connection with upgrading the Building or Project to comply with disability, life, fire and safety codes in effect prior to the issuance of the temporary certificate of occupancy for the Building;
(xii) Interest, fines or penalties incurred as a result of Landlord's failure to make payments when due unless such failure is commercially reasonable under the circumstances;
(xiii) Costs arising from Landlord's charitable or political contributions;
(xiv) Costs for acquisition of sculpture, paintings or other objects of art in common areas;
(xv) The depreciation of the Building and other real property structures in the Project;
(xvi) Landlord's general corporate overhead and general administrative expenses not related to the operation of the Building or the Project; except as specifically set forth in Paragraph 7.A of this Lease;
(xvii) Any bad debt loss, rent or reserves for bad debts or rent loss, or reserves for equipment or capital replacement.
If the rentable area of the Building and/or Project is not fully occupied during any fiscal year of the Term as determined by Landlord, an adjustment may be made in Landlord's discretion in computing the Operating Expenses for such year so that Tenant pays an equitable portion of all variable items (e.g., utilities, janitorial services and other component expenses that are affected by variations in occupancy levels) of Operating Expenses, as reasonably determined by Landlord; provided, however, that in no event shall Landlord be entitled to collect in excess of one hundred percent (100%) of the total Operating Expenses from all of the tenants in the Building or Project, as the case may be.
Operating Expenses shall not include the cost of providing tenant
improvements or other specific costs incurred for the account of, separately
billed to and paid by specific tenants of the Building or Project, the initial
construction cost of the Building, or debt service on any mortgage or deed of
trust recorded with respect to the Project other than pursuant to Paragraph
7.A(3)(b) above. Notwithstanding anything herein to the contrary, in any
instance wherein Landlord, in Landlord's sole discretion, deems Tenant to be
responsible for any amounts greater than Tenant's Proportionate Share, Landlord
shall have the right to allocate costs in any manner Landlord reasonable deems
appropriate.
The above enumeration of services and facilities shall not be deemed to impose an obligation on Landlord to make available or provide such services or facilities except to the extent if any that Landlord has specifically agreed elsewhere in this Lease to make the same available or provide the same. Without limiting the generality of the foregoing, Tenant acknowledges and agrees that it shall be responsible for providing adequate security for its use of the Premises, the Building and the Project and that Landlord shall have no obligation or liability with respect thereto, except to the extent if any that Landlord has specifically agreed elsewhere in this Lease to provide the same.
B. Payment of Estimated Operating Expense. "Estimated Operating Expenses" for any particular year shall mean Landlord's estimate of the Operating Expenses for such fiscal year made with respect to such fiscal year as hereinafter provided. Landlord shall have the right from time to time to revise its fiscal year and interim accounting periods so long as the periods as so revised are reconciled with prior periods in a reasonable manner. During the last month of each fiscal year during the Term, or as soon thereafter as practicable, Landlord shall give Tenant written notice of the estimated Operating Expenses for the ensuring fiscal year. Tenant shall pay Tenant's Proportionate Share of the Estimate Operating Expenses with installments of Base Rent for the fiscal year to which the Estimate Operating Expenses applies in monthly installments on the first day of each calendar month during such year, in advance. Such payment shall be construed to be Additional Rent for all purposes hereunder. If at any time during the course of the fiscal year, Landlord determines that Operating Expenses are projected to vary from the then Estimated Operating Expenses by more than five percent (5%), Landlord may, by written notice to Tenant, revise the Estimated Operating Expenses for the balance of such fiscal year, and Tenant's monthly installments for the remainder of such year shall be adjusted so that by the end of such fiscal year Tenant has paid to Landlord Tenant's Proportionate Share of the revised Estimated Operating Expenses for such year, such revised installment amounts to be Additional Rent for all purposes hereunder.
C. Computation of Operating Expense Adjustment. "Operating Expense Adjustment" shall mean the difference between Estimated Operating Expenses and actual Operating Expenses for any fiscal year determined as hereinafter provided. Within one hundred twenty (120) days after the end of each fiscal year just ended, accompanied by a computation of Operating Expense Adjustment. If such statement shows that Tenant's payment based upon Estimated Operating Expenses is less than Tenant's Proportionate Share of Operating Expenses, then Tenant shall pay to Landlord the difference within twenty (20) days after receipt
of such statement, such payment to constitute Additional Rent for all purposes
hereunder. If such statement shows that Tenant's payments of Estimated Operating
Expenses exceed Tenant's Proportionate Share of Operating Expenses, then
(provided that Tenant is not in default under this Lease) Landlord shall pay to
Tenant the difference within twenty (20) days after delivery of such statement
to Tenant. If this Lease has been terminated or the Term hereof has expired
prior to the date of such statement, then the Operating Expense Adjustment shall
be paid by the appropriate party within twenty (20) days after the date of
delivery of the statement. Should this Lease commence or terminate at any time
other than the first day of the fiscal year, Tenant's Proportionate Share of the
Operating Expense Adjustment shall be prorated based on a month of 30 days and
the number of calendar months during such fiscal year that this Lease is in
effect. Notwithstanding anything to the contrary contained in Paragraph 7.A or
7.B, Landlord's failure to provide any notices or statements within the time
periods specified in those paragraphs shall in no way excuse Tenant from its
obligation to pay Tenant's Proportionate Share of Operating Expenses.
D. Net Lease. This shall be a triple net Lease and Base Rent shall be paid to Landlord absolutely net of all costs and expenses, except as specifically provided to the contrary in this Lease. The provisions for payment of Operating Expenses and the Operating Expense Adjustment are intended to pass on to Tenant and reimburse Landlord for all costs and expenses of the nature described in Paragraph 7.A incurred in connection with the ownership, management, maintenance, repair, preservation, replacement and operation of the Building and/or Project and its supporting facilities and such additional facilities now and in subsequent years as may be determined by Landlord to be necessary or desirable to the Building and/or Project, and with all such expenses passed through to the Tenant as appropriate based on generally accepted accounting principals.
E. Tenant Audit. If Tenant shall dispute the amount set forth in any statement provided by Landlord under Paragraph 7.B or 7.C above, Tenant shall have the right, not later than twenty (20) days following receipt of such statement and upon the condition that Tenant shall first deposit with Landlord the full amount in dispute, to cause Landlord's books and records with respect to Operating Expenses for such fiscal year to be audited by certified public accountants selected by Tenant and subject to Landlord's reasonable right of approval. The Operating Expense Adjustment shall be appropriately adjusted on the basis of such audit. If such audit discloses a liability for a refund in excess of five percent (5%) of Tenant's Proportionate Share of the Operating Expenses previously reported, the cost of such audit shall be borne by Landlord, otherwise the cost of such audit shall be paid by Tenant. If Tenant shall not request an audit in accordance with the provisions of this Paragraph 7.E within twenty (20) days after receipt of Landlord's statement provided pursuant to Paragraph 7.B or 7.C, such statement shall be final and binding for all purposes hereof.
8. INSURANCE AND INDEMNIFICATION
A. Landlord's Insurance. All insurance maintained by Landlord shall be for the sole benefit of Landlord and under Landlord's sole control.
(1) Property Insurance. Landlord agrees to maintain property insurance insuring the Building against damage or destruction due to risk including fire, vandalism, and malicious mischief in an amount not less than the replacement cost thereof, in the form and with deductibles and endorsements as selected by Landlord. At its election, Landlord may instead (but shall have no obligation to) obtain "All Risk" coverage, and may also obtain earthquake, pollution, and/or flood insurance in amounts selected by Landlord.
(2) Optional Insurance. Landlord, at Landlord's option, may also (but shall have no obligation to) carry insurance against loss of rent, in an amount equal to the amount of Base Rent and Additional Rent that Landlord could be required to abate to all Building tenants in the event of condemnation or casualty damage for a period of twelve (12) months. Landlord may also (but shall have no obligation to ) carry such other insurance as Landlord may deem prudent or advisable, including, without limitation, liability insurance in such amounts and on such terms as Landlord shall determine. Landlord shall not be obligated to insure, and shall have no responsibility whatsoever for any damage to, any furniture, machinery, goods, inventory or
supplies, or other personal property or fixtures which Tenant may keep or maintain in the Premises, or any leasehold improvements, additions or alterations within the Premises.
B. Tenant's Insurance.
(1) Property Insurance. Tenant shall procure at Tenant's sole cost and expense and keep in effect from the date of this Lease and at all times until the end of the Term, insurance on all personal property and fixtures of Tenant and all improvements, additions or alterations made by or for Tenant to the Premises on an "All Risk" basis, insuring such property for the full replacement value of such property. Notwithstanding anything to the contrary contained in this Paragraph 8B(1), prior to or upon occupancy of the Premises by Tenant, Tenant shall purchase form Landlord, for a value of $1.00, all above-standard tenant improvements including, but not limited to, clean rooms, all HVAC, all electrical, and all plumbing equipment servicing said clean rooms, safety showers, and change rooms located on the Premises. Upon the expiration or earlier termination of this Lease, Tenant shall either (i) return to Landlord said above-standard tenant improvements in their then existing condition; or (ii) remove said above-standard tenant improvements at Landlord's sole discretion upon surrender of the Premises pursuant to Paragraph 36 of this Lease. In exchange for said transfer by Landlord to Tenant of said above-standard tenant improvements, Tenant shall procure and maintain at all times during the term of this Lease adequate property insurance for the full replacement value of such above-standard tenant improvements, including replacement of said above-standard improvements in the event of Casualty Damage as described in Paragraph 24 of this Lease.
(2) Liability Insurance. Tenant shall procure at Tenant's sole cost and expense and keep in effect from the date of this Lease and at all times until the end of the Term Commercial General Liability insurance covering bodily injury and property damage liability occurring in or about the Premises or arising out of the use and occupancy of the Premises and the Project, and any part of either, and any areas adjacent thereto, and the business operated by Tenant or by any other occupant of the Premises. Such insurance shall include contractual liability coverage insuring all of Tenant's indemnity obligations under this Lease. Such coverage shall have a minimum combined single limit of liability of at least Two Million Dollars ($2,000,000.00) and a minimum general aggregate limit of Three Million Dollars ($3,000,000.00), with an "additional Insured - Managers or Lessors of Premises Endorsement" and the "Amendment of the Pollution Exclusion Endorsement." All such policies shall be written to apply to all bodily injury (including death), property damage or loss, personal and advertising injury and other covered loss, however occasioned, occurring during the policy term, shall be endorsed to add Landlord and any party holding an interest to which this Lease may be subordinated as an additional insured, and shall provided that such coverage shall be "primary" and non-contributing with any insurance maintained by Landlord, which shall be excess insurance only. Such coverage shall also contain endorsements including employees as additional insureds if not covered by Tenant's Commercial General Liability Insurance. All such insurance shall provide for the severability of interests of insureds; and shall be written on an "occurrence" basis, which shall afford coverage for all claims based on acts, omissions, injury and damage, which occurred or arose (or the onset of which occurred or arose) in whole or in part during the policy period.
(3) Workers' Compensation and Employers' Liability Insurance. Tenant shall carry Workers' Compensation Insurance as required by any Regulation, throughout the Term at Tenant's sole cost and expense. Tenant shall also carry Employers' Liability Insurance in amounts not less than One Million Dollars ($1,000,000) each accident for bodily injury by accident; One Million Dollars ($1,000,000) policy limit for bodily injury by disease; and One Million Dollars ($1,000,000) each employee for bodily injury by disease, throughout the Term at Tenant's sole cost and expense.
(4) Commercial Auto Liability Insurance. Tenant shall procure at Tenant's sole cost and expense and keep in effect from the date of this Lease and at all times until the end of the Term commercial auto liability insurance with a combined limit of not less than One Million Dollars
($1,000,000) for bodily injury and property damage for each accident. Such insurance shall cover liability relating to any auto (including owned, hired and non-owned autos).
(5) General Insurance Requirements. All coverages described in this
Paragraph 8.B shall be endorsed to (I) provide Landlord with thirty
(30) days' notice of cancellation or change in terms; and (ii) waive
all rights or subrogation by the insurance carrier against Landlord. If
at any time during the Term the amount or coverage of insurance which
Tenant is required to carry under this Paragraph 8.B is, in Landlord's
reasonable judgment, materially less than the amount or type of
insurance coverage typically carried by owners or tenants of properties
located in the general area in which the Premises are located which are
similar to and operated for similar purposes as the Premises or if
Tenant's use of the Premises should change with or without Landlord's
consent. Landlord shall have the right to require Tenant to increase
the amount or change the types of insurance coverage required under
this Paragraph 8.B. All insurance policies required to be carried by
Tenant under this Lease shall be written by companies rate A X or
better in "Best's Insurance Guide" and authorized to do business in the
State of Oregon. In any event deductible amounts under all insurance
policies required to be carried by Tenant under this Lease shall not
exceed Five Thousand Dollars ($5,000.00) per occurrence. Tenant shall
deliver to Landlord on or before the Term Commencement Date, and
thereafter at least thirty (30) days before the expiration dates of the
expired policies, certified copies of Tenant's insurance policies, or a
certificate evidencing the same issued by the insurer thereunder; and,
if Tenant shall fail to procure such insurance, or to deliver such
policies or certificates, Landlord may, Landlord's option and in
addition to Landlord's other remedies in the event of a default by
Tenant hereunder, procure the same for the account of Tenant, and the
cost thereof shall be paid to Landlord as Additional Rent.
C. Indemnification. Tenant shall indemnify, defend by counsel reasonably acceptable to Landlord, protect and hold Landlord harmless from and against any and all claims, liabilities, losses, costs, loss of rents, liens, damages, injuries or expenses, including reasonable attorneys' and consultants' fees and court costs, demands, causes of action, or judgments, directly or indirectly arising out of or related to: (1) claims of injury to or death of persons or damage to property occurring or resulting directly or indirectly from the use of occupancy of the Premises, Building or Project by Tenant or Tenant's Parties, or from activities or failures to act of Tenant or Tenant's parties; (2) claims arising from work or labor performed, or for materials or supplies furnished to or at the request of Tenant in connection with performance of any work done for the account of Tenant within the Premises or Project; (3) claims arising from any breach or default on the part of Tenant in the performance of any covenant contained in this Lease; and (4) claims arising from the gross negligence or intentional acts or omissions of Tenant or Tenant's Parties. The foregoing indemnity by Tenant shall not be applicable to claims to the extent arising from the gross negligence or willful misconduct of Landlord. Landlord shall not be liable to Tenant and Tenant hereby waives all claims against Landlord for any injury or damage to any person or property in or about the Premises, Building or Project by or from any cause whatsoever (other than Landlord's gross negligence or willful misconduct ) and, without limiting the generality of the foregoing, whether caused by water leakage of any character from the roof, walls, basement or other portion of the Premises, Building or Project, or caused by gas, fire, oil or electricity in, on or about the Premises, Building or Project. Landlord shall indemnify, defend by counsel reasonably acceptable to Tenant, protect and hold Tenant harmless from and against any and all claims, liabilities, losses, costs, damages, injuries or expenses, including reasonable attorneys' and consultants' fees and court costs, demands, causes of action, or judgments arising out of or relating tot he gross negligence or willful misconduct or Landlord or Landlord's agents, employees or invitees. Notwithstanding the foregoing or anything to the contrary contained in this Lease, Landlord shall in no event be liable to Tenant and Tenant hereby waives all claims against Landlord for any injury or damage to any person or property in or about the Premises, Building, or Project, including without limitation the common areas, whether caused by theft, fire, rain or water leakage of any character from the roof, walls, plumbing, sprinklers, pipes, basement or any other portion of the Premises, Building or Project, or caused by gas, fire, oil or electricity in, on or about the Premises, Building or Project, or from any other systems except in each case to the extent caused by the gross negligence or willful misconduct of Landlord, or by acts of God (including without limitation flood or earthquake), acts of a public enemy, riot, strike, insurrection, war, court order, requisition, or order of governmental body or authority or from any other cause whatsoever, or for any damage or inconvenience which may arise through repair, subject to and
except as expressly otherwise provided in Paragraph 9 or 10 of this Lease (except to the extent caused directly by the gross negligence or willful misconduct of the Landlord). In addition, Landlord shall in no event be liable for (I) injury to Tenant's business or any loss of income or profit therefrom or from consequential damages, or (ii) sums up to the amount of insurance proceeds received by Tenant. The foregoing indemnity of Landlord shall not be applicable to claims to the extent arising from the gross negligence or willful misconduct of Tenant or Tenant's Parties. The foregoing indemnity by Landlord shall survive the expiration or earlier termination of this Lease. The provisions of this Paragraph shall survive the expiration or earlier termination of this Lease.
9. WAIVER OF SUBROGATION
To the extent permitted by law and without affecting the coverage provided by insurance to be maintained hereunder or any other rights or remedies, Landlord and Tenant each waive any right to recover against the other for: (a) damages for injury to or death of persons; (b) damages to property, including personal property; (c) damages to the Premises or any part thereof, and (d) claims arising by reason of the foregoing due to hazards covered by insurance maintained or required to be maintained pursuant to this Lease to the extent of proceeds recovered therefrom, or proceeds which would have been recoverable therefrom in the case of the failure of any party to maintain any insurance coverage required to be maintained by such party pursuant to this Lease. This provision is intended to waive fully, any rights and/or claims arising by reason of the foregoing, but only to the extent that any of the foregoing damages and/or claims referred to above are covered or would be covered, and only to the extent of such coverage, by insurance actually carried or required to be maintained pursuant to this Lease by either Landlord or Tenant. This provision is also intended to waive fully, and for the benefit of each party, any rights and/or claims which might give rise to a right of subrogation on any insurance carrier. Subject to all qualifications of this Paragraph 9, Landlord waives its rights as specified in this Paragraph 9 with respect to any subtenant that it has approved pursuant to Paragraph 21 but only in exchange for the written waiver of such rights to be given by such subtenant to Landlord upon such subtenant taking possession of the Premises or a portion thereof. Each party shall cause each insurance policy obtained by it to provide that the insurance company waives all right of recovery by way of subrogation against either party in connection with any damage covered by any policy.
10. LANDLORD'S REPAIRS AND MAINTENANCE
Landlord shall at Landlord's expense maintain in good repair, reasonable wear and tear excepted, the structural soundness of the roof, foundations, and exterior walls of the Building. The term "exterior walls" as used herein shall not include windows, glass or plate glass doors, dock bumpers or dock plates, special store fronts or office entries. Any damage caused by or repairs necessitated by any negligence or act of Tenant or Tenant's Parties may be repaired by Landlord at Landlord's option and Tenant's expense. Tenant shall immediately give Landlord written notice of any defect or need or repairs in such components of the Building for which Landlord is responsible, after which Landlord shall have a reasonable opportunity and the right to enter the Premises at all reasonable times to repair same; and Landlord agrees that if Landlord does not commence any Landlord repair within fourteen (14) days after a written request from Tenant to Landlord to conduct such repair and thereafter diligently pursue such repair, Tenant shall have the right upon five (5) days' written notice to commence such repair and bill Landlord for the cost thereof; provided that if Landlord disputes the need for such repair, within fourteen (14) days after the date of Tenant's written request, Tenant shall not have the right to make such a repair; provided further, if any emergency situation exists in which a Landlord repair must be commenced immediately to avoid material damage to a material portion of Tenant's Personal Property or Equipment and Landlord does not commence such repair within three (3) days of written notice from Tenant of the need for such repair, Tenant shall have the right to commence such repair and bill Landlord for the cost thereof. Landlord shall reimburse Tenant for said repairs within twenty (20) days of receipt of a bill from Tenant. Landlord's liability with respect to any defects, repairs, or maintenance for which Landlord is responsible under any of the provisions of this Lease shall be limited to the cost of such repairs or maintenance, and there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant's business arising from the making of repairs, alterations or improvements in or to any portion of the Premises, the Building or the Project or to fixtures, appurtenances or equipments in the Building, except as
provided in Paragraph 24. By taking possession of the Premises, Tenant accepts them "as is," as being in good order, condition and repair and the condition in which Landlord is obligated to deliver them and suitable for the Permitted Use and Tenant's intended operations in the Premises, whether or not any notice of acceptable is given.
11. TENANT'S REPAIRS AND MAINTENANCE
Tenant shall at all times during the Term at Tenant's expense, and subject to normal wear and tear, maintain all parts of the Premises and such portions of the Building as are within the exclusive control of Tenant in a first-class, good, clean and secure condition and promptly make all necessary repairs and replacements, as determined by Landlord, including but not limited to, all windows, glass, doors, walls, including demising walls, and wall finishes, floors and floor covering, heating, ventilating and air conditioning systems, ceiling insulation, truck doors, hardware, dock bumpers, dock plates and levelers, plumbing work and fixtures, downspouts, entries, skylights, smoke hatches, roof vents, electrical and lighting systems, and fire sprinklers, with materials and workmanship of the same character, kind and quality as the original. Tenant shall at Tenant's expense also perform regular removal of trash and debris. If Tenant uses rail and if required by the railroad company, Tenant agrees to sign a joint maintenance agreement governing the use of the rail spur, if any. Tenant shall, at Tenant's own expense, enter into a regularly scheduled preventative maintenance/service contract with a maintenance contractor for servicing all hot water, hearing and air conditioning systems and equipment within or serving the Premises. The maintenance contractor and the contract must be approved by Landlord. The service contract must include all services suggested by the equipment manufacturer within the operation/maintenance manual and must become effective and a copy thereof delivered to Landlord within (30) days after the Term Commencement Date. Landlord may, upon notice to Tenant, enter into such a service contract on behalf of Tenant or perform the work and in either case charge Tenant the cost thereof along with a reasonable amount for Landlord's overhead. Notwithstanding anything to the contrary contained herein, Tenant shall, at its expense, promptly repair any damage to the Premises or the Building or Project resulting from or caused by any negligence or act of Tenant or Tenant's Parties to the extent that insurance proceeds are unavailable or insufficient to pay for such repairs. Nothing herein shall expressly or by implication render Tenant Landlord's agent or contractor to effect any repairs or maintenance required of Tenant under this Paragraph 11, as to all of which Tenant shall be solely responsible.
12. ALTERATIONS
A. Tenant shall not make, or allow to be made, any alterations, physical additions, improvements or partitions, including without limitation the attachment of any fixtures or equipment, in, about or to be Premises ("Alterations") without obtaining the prior written consent of Landlord, which consent shall not be unreasonable withheld with respect to proposed Alterations which: (a) comply with all applicable Regulations; (b) are, in Landlord's opinion, compatible with the Building or the Project and its mechanical, plumbing, electrical, hearing/ventilation/air conditioning systems, and will not cause the Building or Project or such systems to be required to be modified to comply with any Regulations (including, without limitation, the Americans with Disabilities Act); and (c) will not interfere with the use and occupancy of any other portion of the Building or Project by any other tenant or its invitees. Specifically, but without limiting the generality of the foregoing, Landlord shall have the right of written consent, which shall not be unreasonably withheld, conditioned, or delayed, for all plans and specifications for the proposed Alterations, construction means and methods, all appropriate permits and licenses, any contractor or subcontractor to be employed on the work of Alterations, and the time for performance of such work, and may impose rules and regulations for contractors and subcontractors performing such work. Landlord's consent to Tenant's contractor and subcontractor, will not be unreasonably withheld. Notwithstanding the foregoing, Tenant shall have the right, without consent, but upon at least ten (10) business days' prior written notice (as provided under Paragraph 12.B below) to Landlord, to make non-structural. Alterations within the interior of the Premises (and which are not visible from the outside of the Premises), which do not impair the value of the Building, and which cost, in the aggregate, less than Ten Thousand Dollars ($10,000.00) in any twelve (12) month period during the Term of this Lease, and except for subtenant tenant improvements which cost, in the aggregate, less than Ten Thousand Dollars ($10,000.00) and that are non-structural, that may be required after the time period of December 31, 2000, provided that such
Alterations shall nevertheless be subject to all of the remaining requirements of this Paragraph 12, including without limitation, subparagraph (a) through (c) above, other than the requirement of Landlord's prior consent. In addition all Alterations shall be performed by duly licensed contractors or subcontractors reasonable acceptable to Landlord, proof of insurance shall be submitted to Landlord as required under Paragraph 8.B above, and Landlord reserves the right to impose reasonable rules and regulations for contractors and subcontractors. Landlord's consent to Tenant's contractor and subcontractor will not be unreasonable withheld. Tenant shall, if requested by Landlord, promptly furnish Landlord with complete as-built plans and specifications for any Alterations performed by Tenant to the Premises, at Tenant's sole cost and expense. Tenant shall also supply to Landlord any documents and information reasonable request by Landlord in connection with Landlord's consideration of a request for approval hereunder. Tenant shall cause all Alterations to be accomplished in a first-class, good and workmanlike manner, and to comply with all applicable Regulations and Paragraph 27 hereof. Tenant shall at Tenant's sole expense, perform any additional work required under applicable Regulations due to the Alterations hereunder. No review or consent by Landlord of or to any proposed Alteration or additional work shall constitute a waiver of Tenant's obligations under this Paragraph 12. Tenant shall reimburse Landlord for all costs which Landlord may incur in connection with granting approval to Tenant for any such Alterations, including any costs or expenses which Landlord may incur in electing to have outside architects and engineers review said plans and specifications and shall pay Landlord an administration fee five percent (5%) of the cost of the Alterations as Additional Rent hereunder. All such Alterations shall remain the property of Tenant until the expiration or earlier termination of this Lease, at which time they shall be and become the property of Landlord; provided, however, that Landlord may, at Landlord's option, required that Tenant, at Tenant's expense, remove any or all Alterations made by Tenant and restore the Premises by the expiration or earlier termination of this Lease, to their condition existing prior to the construction of any such Alterations; provided further, that Landlord shall, at the time Landlord approves each Alteration, advise Tenant as to whether Landlord will required such Alteration to be removed upon the expiration or early termination of this Lease. All such removals and restoration shall be accomplished in a first-class and good and workmanlike manner so as not to cause any damage to the Premises or Project whatsoever. If Tenant fails to remove such Alterations or Tenant" trade fixtures or furniture or other personal property, Landlord may keep and use them or remove any of them and cause them to be stored or sold in accordance with applicable law, at Tenant's sole expense. In addition to and wholly apart from Tenant's obligation to pay Tenant's Proportionate Share of Operating Expenses, Tenant shall be responsible for and shall pay prior to delinquency any taxes or governmental service fees, possessory interest taxes, fees or charges in lieu of any such taxes, capital levies, or other charges imposed upon, levied with respect to or assessed against its fixtures or personal property, on the value of Alterations within the Premises, and on Tenant's interest pursuant to this Lease, or any increase in any of the foregoing based on such Alterations. To the extent that any such taxes are not separately assessed or billed to Tenant, Tenant shall pay the amount thereof as invoiced to Tenant by Landlord.
At Landlord's reasonable election and provided Landlord has notified Tenant along with its approval of said alterations, Tenant shall pay to Landlord the cost of removing any such Alterations and restoring the Premises to their original condition and such amount may be deducted from the Security Deposit or any other sums or amounts held by Landlord under this Lease.
B. In compliance with Paragraph 27 hereof, at least ten (10) business days before beginning construction of any Alteration, Tenant shall give Landlord written notice of the expected commencement date of that construction to permit Landlord to post and record a notice of non-responsibility. Upon substantial completion of construction, if the law so provides, Tenant shall cause a timely notice of completion to be recorded in the office of the recorder of the county in which the Building is located.
C. Notwithstanding anything to the contrary contained in Paragraph 12.A, at the time Landlord gives its consent for any Alterations after the initial tenant improvements, Tenant shall also be notified whether or not Landlord will require that such Alterations be removed upon the expiration or earlier termination of this Lease. If Landlord fails to so notify Tenant, it shall be assumed that Landlord will required their removal.
13. SIGNS
Tenant shall not place, install, paint or maintain any signs, notices, graphics or banners whatsoever or any window decor which is visible in or from public view or corridors, the common areas or the exterior of the Premises or the Building, in or on any exterior window or window fronting upon any common areas or service area or upon any truck doors or man doors without Landlord's prior written approval which Landlord shall have the right to withhold in its absolute and sole discretion; provided that Tenant's name shall be included in any Building-standard door and director signage, if any, in accordance with Landlord's Building signage program, including without limitation, payment by Tenant of any fee charged by Landlord for maintaining such signage, which, fee shall constitute Additional Rent hereunder. Any installation of signs, notices, graphics or banners on or about the Premises or Project approved by Landlord shall be subject to any Regulations and to any other requirements imposed by Landlord. Tenant shall remove all such signs or graphics by the expiration or any earlier termination of this Lease. Such installations and removals shall be made in such manner as to avoid injury to or defacement of the Premises, Building or Project and nay other improvements contained therein, and Tenant shall repair any injury or defacement including without limitation discoloration caused by such installation or removal. Notwithstanding the foregoing, Tenant shall have the exclusive right to place on-building signage at Tenant's expense at two locations on the Building. Landlord and Tenant agree to work together to ensure all signage is professional and of a first-class nature. However, all signage shall require Landlord's written approval as to size, location, design and content, which approval shall not be unreasonable withheld, delayed or conditioned.
14. INSPECTION/POSTING NOTICES
After reasonable notice, except in emergencies where no such notice shall be required, Landlord and Landlord's agents and which shall be accompanied by a Tenant representatives, shall have the right to enter the Premises to inspect the same, to clean, to perform such work as may be permitted or required hereunder, to make repairs, improvements or alterations to the Premises, Building or Project or to other tenant spaces therein, to deal with emergencies, to post such notices as may be permitted or required by law to prevent the perfection of liens against Landlord's interest in the Project or to exhibit the Premises to prospective tenants, purchasers, encumbrances or others, or for any other purposes as Landlord may deem necessary or desirable; provided, however, that Landlord shall use reasonable efforts not to unreasonable interfere with Tenant's business operations. Tenant shall not be entitled to any abatement of Rent by reason of the exercise of any such right of entry. Tenant waives any claim for damages for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Premises, excluding Tenant's vaults and safes or special security areas (designated in advance), and Landlord shall have the right to use any and all means which Landlord may deem necessary or proper to open said doors in an emergency, in order to obtain entry to any portion of the Premises, and any entry to the Premises or portions thereof obtained by Landlord by any of said means, or otherwise, shall not be construed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction, actual or constructive, of Tenant from the Premises or any portions thereof. At any time within six (6) months prior to the expiration of the Term or following any earlier termination of this Lease or agreement to terminate this Lease, Landlord shall have the right to erect on the Premises, Building and/or Project a suitable sign indicating that the Premises are available for lease. Landlord and it's agents shall maintain confidentiality with regards to Tenant trade secrets or other confidential material they may observe in the course of any inspection.
15. SERVICES AND UTILITIES
A. Tenant shall pay directly for all water, gas, heat, air conditioning, light, power, telephone, sewer, sprinkler charges and other utilities and services used on or from the Premises, together with any taxes, penalties, surcharges or the like pertaining thereto, and maintenance charges for utilities and shall furnish all electric light bulbs, ballasts and tubes. If any such services are not separately billed or metered to Tenant, Tenant shall pay a proportion, as determined by Landlord, of all charges jointly serving other premises. All sums payable under this Paragraph 15 shall constitute Additional Rent hereunder.
B. Tenant acknowledges that Tenant has inspected and accepts the water, electricity, heat and air conditioning and other utilities and services being supplied or furnished to the Premises as of the date Tenant takes possession of the Premises, if any, as being sufficient in their present condition, "as is," for the Permitted Use, and for Tenant's intended operations in the Premises. Tenant agrees to keep and cause to be kept closed all window covering when necessary because of the sun's position, and Tenant also agrees at all times to cooperate fully with Landlord and to abide by all of the regulations and requirements which Landlord may prescribe for the proper functioning and protection of electrical, heating, ventilating and air conditioning systems.
C. Landlord shall not be liable for any damages directly or indirectly resulting from nor shall the Rent or any monies owed Landlord under this Lease herein reserved be abated by reason of: (a) the installation, use or interruption of use of any equipment used in connection with the furnishing of any such utilities or services, or any change in the character or means of supplying or providing any such utilities or services or any supplier thereof; (b) the failure to furnish or delay in furnishing any such utilities or services when such failure or delays caused by acts of God or the elements, labor disturbances of any character, or any other accidents or other conditions beyond the reasonable control of Landlord or because of any interruption of service due to Tenant's use of water, electric current or other resource in excess of that being supplied or furnished for the use of the Premises as of the date Tenant takes possession of the Premises; or (c) the inadequacy, limitation, curtailment, rationing or restriction on use of water, electricity, gas or any other form of energy or any other service or utility whatsoever serving the Premises or Project otherwise, or (d) the partial or total unavailability of any such utilities or services to the Premises or the Building, whether by Regulation or otherwise; nor shall any such occurrence constitute an actual or construction eviction of Tenant. Landlord shall further have no obligation to protect or preserve any apparatus, equipment or device installed by Tenant in the Premises, including without limitation by providing additional or after-hours heating or air conditioning. Landlord shall be entitled to cooperate voluntarily and in a reasonable manner with the efforts of national, state or local governmental agencies or utility suppliers in reducing energy or other resource consumption. The obligation to make services available hereunder shall be subject to the limitations of any such voluntary, reasonable program. In addition, Landlord reserves the right to change the supplier or provider of any such utility or service from time to time.
D. Notwithstanding anything to the contrary contained in this Lease, in the
event of interruption of any services or utilities necessary for the conduct of
Tenant's primary business, Landlord shall make reasonable efforts to restore
such services or utilities. If the failure or interruption of an essential
service or utility (i) is the result of the gross negligence of Landlord or its
agents, and (ii) repair of such interruption is within Landlord's reasonable
control, and (iii) continues to substantially interfere with the conduct of
Tenant's business in the Premises for more than five (5) days after notice of
such interruption or failure shall have been given to Landlord, the Base Rent to
be paid under this Lease shall be abated to such an extent as is fair and
reasonable under the circumstances based on the degree of interference from the
date of Tenant's notice to Landlord of such interruption until such service or
utility is restored. If the failure or interruption of an essential service or
utility (i.) is not due to a fire or other casualty or to any act, neglect or
omission of Tenant or any of the Tenant's Parties, and (ii) its cure is beyond
the reasonable control of Landlord and (iii) continues and substantially
interferes with the conduct of Tenant's business in the Premises for more than
fifteen (15) business days after notice of such interruption or failure shall
have been given to Landlord, then the Bas Rent to be paid under this Lease shall
be abated to such an extent as is fair and reasonable under the circumstances
based on the degree of interference from the date of Tenant's notice to Landlord
of such interruption until such service or utility is restored. If the failure
or interruption of an essential service or utility (i.) is the result of the
gross negligence of the Landlord or its agents, and (ii) repair of such
interruption is within Landlord's reasonable control, and (iii) continues or
substantially interferes with the conduct of Tenant's business in the Premises
for more than ninety (90) days after notice of such interruption or failure
shall have been given to Landlord, then Tenant shall have the option to
terminate this Lease upon written notice to Landlord of its election to
terminate the Lease, which notice must be given to Landlord no later than ten
(10) days following the end of such ninety (90) day period.
16. SUBORDINATION
Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, this Lease shall be and is hereby declared to be subject and subordinate at all times to: (a) all ground leases or underlying lease which may now exist or hereafter be executed affecting the Premises and/or the land upon which the Premises and Project are situated, or both; and (b) any mortgage or deed of trust which may now exist or be placed upon the Building, the Project and/or the land upon which the Premises or the Project are situated, or said ground leases or underlying leases, or Landlord's interest or estate in any of said items which is specified as security. Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be subordinated any such ground leases or underlying leases or any such liens to this Lease. If any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to and become the Tenant of the successor in interest to Landlord provided that Tenant shall not be disturbed in it possession under this Lease by such successor in interest so long as Tenant is not in default under this Lease. Within ten (10) days after request by Landlord, Tenant shall execute and deliver any additional documents evidencing Tenant's attornment or the subordination of this Lease with respect to any such ground leases or underlying leases or any such mortgage or deed of trust, in the form request by Landlord or by any ground landlord, mortgagee, or beneficiary under a deed of trust, subject to such nondisturbance requirement. If requested in writing by Tenant, Landlord shall use commercially reasonable efforts to obtain a subordination, nondisturbance and attornment agreement for the benefit of Tenant, Landlord shall use commercially reasonable efforts to obtain a subordination, nondisturbance and attornment agreement for the benefit of Tenant reflecting the foregoing from any current or future ground landlord, mortgagee or beneficiary, subject to such other terms and conditions as the ground landlord, mortgagee or beneficiary may require. In the event this Lease or the leasehold estate created hereunder is subject to the prior rights of any mortgagee or ground lessor, then Landlord shall secure from such mortgagee or ground lessor an agreement in writing whereby Tenant, so long as Tenant is not in default hereunder, may remain in possession of the Premises pursuant to the terms hereof and without any diminution of Tenant's rights should Landlord become in default with respect to such mortgage or ground lease or should the Premises become the subject of any action to foreclose any mortgage or to dispossess Landlord. Such agreement shall be secured and furnished to Tenant within sixty (60) days following the Term Commencement Date as defined herein.
Such agreement would provide, among other things, that the new owner following any foreclosure, sale or conveyance shall not be (i) liable for any act or omission of any prior landlord or with respect to events occurring prior to acquisition of ownership; (ii) subject to any offsets or defenses which Tenant might have against any prior landlord; (iii) bound by prepayment of more than one (1) month's Rent; or (iv) liable to Tenant for any security deposit not actually received by such new owner. Each ground landlord, mortgagee, or beneficiary under a deed of trust shall be an express third party beneficiary of the provisions of this Paragraph 16 and any other provisions of this Lease that are for the benefit of such party.
17. FINANCIAL STATEMENTS
At the reasonable request of Landlord from time to time, Tenant shall provide to Landlord Tenant's and any guarantor's current financial statements or other information discussing financial worth of Tenant and any guarantor, which Landlord shall use solely for purposes of this Lease and in connection with the ownership, management, financing and disposition of the Project, and which Landlord shall keep confidential.
18. ESTOPPEL CERTIFICATE
Tenant agrees from time to time, within ten (10) days after request of Landlord, to deliver to Landlord, or Landlord's designee, an estoppel certificate stating that this Lease is in full force and effect, that this Lease has not been modified (or stating all modifications, written or oral, to this Lease), the date to which Rent has been paid, the unexpired portion of this Lease, that there are no current defaults bv Landlord or Tenant under this Lease (or specifying any such defaults), that the leasehold estate granted by this Lease is the sole interest of Tenant in the Premises and/or the land at which the Premises are situated, and such other matters pertaining to this Lease as may be reasonable request by Landlord or any mortgagee, beneficiary, purchaser or prospective purchaser of the Building or Project or any interest therein. Failure by Tenant to execute and
deliver such certificate shall constitute an acceptance of the Premises and acknowledgment by Tenant that the statements included are true and correct without exception. Tenant agrees that if Tenant fails to execute and deliver such certificate within such ten (10) day period, Landlord may execute and deliver such certificate on Tenant's behalf and that such certificate shall be binding on Tenant. Landlord and Tenant intend that any statement delivered pursuant to this Paragraph may be relied upon by any mortgagee, beneficiary, purchaser or prospective purchaser of the Building or Project or any interest therein. The parties agree that Tenant's obligation to furnish such estoppel certificates in a timely fashion is a material inducement for Landlord's execution of this Lease, and shall be an event of default (without any cure period that might be provided under Paragraph 26.A(3) of this Lease) if Tenant fails to fully comply or makes any material misstatement in any such certificate.
19. SECURITY DEPOSIT
Tenant agrees to deposit with Landlord upon execution of this Lease, a security deposit as stated in the Basic Lease Information (the "Security Deposit"), which sum shall be held and owned by Landlord, without obligation to pay interest, as security for the performance of Tenant's covenants and obligations under this Lease. The Security Deposit is not an advance rental deposit or a measure of damages incurred by Landlord in case of Tenant's default. Upon the occurrence of any event of default by Tenant, Landlord may from time to time, without prejudice to any other remedy provided herein or by the law, use such fund as a credit to the extent necessary to credit against any arrears of Rent or other payments due to Landlord hereunder, and any other damage, injury, expense or liability caused by such event of default, and Tenant shall pay to Landlord, on demand, the amount so applied in order to restore the Security Deposit to its original amount. Although the Security Deposit shall be deemed the property of Landlord, any remaining balance of such deposit shall be returned by Landlord to Tenant at such time after termination of this Lease that all of Tenant's obligations under this Lease have been fulfilled, reduced by such amounts as may be required by Landlord to remedy defaults on the part of Tenant in the payment of Rent or other obligations of Tenant under this Lease, to repair damage to the Premises, Building or Project caused by Tenant or any Tenant's Parties and to clean the Premises. Landlord may use and commingle the Security Deposit with other funds of Landlord. Notwithstanding anything to the contrary contained in this Paragraph 19, in lieu of a Security Deposit Tenant may provide Landlord with a Letter of Credit pursuant to Paragraph 38 K of this Lease.
20. LIMITATION OF TENANT'S REMEDIES
The obligation and liability of Landlord to Tenant for any default by Landlord under the terms of this Lease are not personal obligations of Landlord or of the individual or other partners of Landlord or its or their partners, directors, officers, or shareholders, and Tenant agrees to look solely to Landlord's interest in the Project for the recovery of any amount from Landlord, and shall not look to other assets of Landlord nor seek recourse against the assets of the individual or other partners of Landlord or its or their partners, directors, officers or shareholders. Any lien obtained to enforce any such judgement and any levy of execution thereon shall be subject and subordinate to any lien, mortgage or deed of trust on the Project. Under no circumstances shall Tenant have the right to offset against or recoup Rent or other payments due and to become due to Landlord hereunder except as expressly provided in Paragraph 23.B below, which Rent and other payments shall be absolutely due and payable hereunder in accordance with the terms hereof. Notwithstanding anything to the contrary contained in this Paragraph 20, Tenant shall have available to it all remedies allowable under Oregon law.
21. ASSIGNMENT AND SUBLETTING
A. (1) General. This Lease has been negotiated to be and is granted as an accommodation to Tenant. Accordingly, this Lease is personal to Tenant, and Tenant's rights granted hereunder do not include the right to assign this Lease or sublease the Premises, or to receive any excess, either in installments or lump sum, over the Rent which is expressly reserved by Landlord as hereinafter provided, except as otherwise expressly hereinafter provided. Tenant shall not assign or pledge this Lease or sublet the Premises or any part thereof, whether voluntarily or by operation of law, or permit the use or occupancy of the Premises or any part thereof by anyone other than Tenant, or
suffer or permit any such assignment, pledge, subleasing or occupancy, without Landlord's prior written consent except as provided herein. If Tenant desires to assign this Lease or sublet any or all of the Premises, Tenant shall give Landlord written notice (the "Transfer Notice") at least twenty (20) business days prior to the anticipated effective date of the proposed assignment or sublease, which shall contain all of the information reasonable requested by Landlord to address Landlord's decision criteria specified hereinafter. Landlord shall then have a period of ten (10) business days following receipt of the Transfer Notice to notify Tenant in Writing that Landlord elects either (i) to terminate this Lease as to the space so affected as of the so request by Tenant; or (ii) to consent to the proposed assignment or sublease, subject, however, to Landlord's prior written consent of the proposed assignee or subtenant and of any related documents or agreements associated with the assignment or sublease. If Landlord should fail to notify Tenant in writing of such election within said period, Landlord shall be deemed to have waived option (i) above, but written consent by Landlord of the proposed assignee or subtenant shall still be required. If Landlord should fail to notify Tenant in writing of such election within said period, Landlord shall be deemed to have waived option (i) above, but written consent by Landlord of the proposed assignee or subtenant shall still be required. If Landlord does not exercise option (i) above, Landlord's consent to a proposed assignment or sublease shall not be unreasonable withheld. Consent to any assignment or subletting shall not constitute consent to any subsequent transaction to which this Paragraph 21 applies. Notwithstanding the foregoing Tenant shall have the right to sublease or assign to affiliates or subsidiaries with Landlord's prior written consent, which shall not be unreasonable withheld, delayed or conditioned.
(2) Conditions of Landlord's Consent. Without limiting the other instances in which it may be reasonable for Landlord to without Landlord's consent to an assignment or subletting, Landlord and Tenant acknowledge that it shall be reasonable for Landlord to withhold Landlord's consent in the following instances: if the proposed assignee does not agree to be bound by and assume the obligations of Tenant under this Lease in form and substance satisfactory to Landlord, the use of the Premises by such proposed assignee or subtenant would not be a Permitted Use or would violate any exclusivity or other arrangement which Landlord has with any other tenant or occupant or any Regulation; the assignment or subletting would entail any Alterations which would lessen the value of the leasehold improvements in the Premises or use of any Hazardous Materials or other noxious use or use which may disturb other tenants of the Project, or Tenant is in default of any obligation of Tenant under this Lease, or Tenant has defaulted under this Lease on three (3) or more occasions during any twelve (12) months preceding the date that Tenant shall request consent. In no event, however, shall Tenant or Tenant's agent solicit directly an present tenants in the Project for purposes of subletting Tenant's space, without landlord's prior written consent. Failure by or refusal of Landlord to consent to a proposed assignee or subtenant shall not cause a termination of this Lease. Upon a termination under paragraph 21.A(1)(i), Landlord may lease the Premises to any party, including parties with whom Tenant has negotiated an assignment or sublease, without incurring any liability to Tenant. At the option of Landlord, a surrender and termination of this Lease shall operate as an assignment to landlord of some or all subleases or subtenancies. Landlord shall exercise this option by giving notice of that assignment to such subtenants on or before the effective date of the surrender and termination. In connection with each request for assignment or subletting, Tenant shall pay to Landlord Landlord's standard fee of not to exceed $350.00 per transaction for approving such requests, as well as all costs incurred by Landlord or any mortgagee or groundlessor in approving each such requests, as well as all costs incurred by Landlord or any mortgagee or ground lessor in approving each such request and effecting any such transfer, including without limitation, reasonable attorney's fees.
B. Bonus Rent. Any Rent or other consideration realized by Tenant under any such sublease or assignment in excess of the Rent payable hereunder, after amortization of a reasonable brokerage commission incurred by Tenant, and after any approval costs and/or any administrative fees paid to Landlord for sublease Tenant Improvements, and after Tenant has recovered the cost of any tenant improvements paid for by Tenant and Tenant's other reasonable out of pocket costs of subleasing or assignment including, without limitation, reasonable attorneys' fees, shall be divided and paid , fifty percent (50%) to Tenant, fifty percent (50%) to Landlord. In any subletting or assignment undertaken by Tenant, Tenant shall diligently seek to obtain the maximum rental amount available in the marketplace for comparable space available for primary leasing.
C. Corporation. If Tenant is a corporation, a transfer of corporate shares by sale, assignment, bequest, inheritance, operation of law or other disposition (including such a transfer to or by a receiver or trustee in federal or state bankruptcy, insolvency or other proceedings) resulting in a substantial (fifty percent (50%) of the shares change hands) change in the present control of such corporation or any of its parent corporations, shall constitute an assignment for purposes of this Lease. Notwithstanding anything to the contrary in this Lease, the transfer of outstanding capital stock or other listed equity interests, or the purchase of outstanding capital stock or other listed equity interests, or the purchase of equity interests issued in an initial public offering or stock, by persons or parties other than "insiders" within the meaning of Securities Exchange Act of 1934, as amended, through the "over-the-counter" market or any recognized national or international securities exchange shall not be included in determining whether control has been transferred.
D. Unincorporated Entity. If Tenant is a partnership, joint venture, unincorporated limited liability company or other unincorporated business form, a transfer of the interest of persons, firms or entities responsible for managerial control of Tenant by sale, assignment, bequest, inheritance, operation of law or other disposition, so as to result in a change in the present control of said entity and/or of the underlying beneficial interests of said entity and/or a change in the identify of the persons responsible for the general credit obligations of said entity shall constitute an assignment for all purpose of this Lease.
E. Liability. No assignment or subletting by Tenant permitted or otherwise, shall relieve Tenant of any obligation under this Lease or alter the primary liability of the Tenant named herein for the payment of Rent or for the performance of any other obligations to be performed by Tenant, including obligations contained in Paragraph 25 with respect to any assignee or subtenant. Landlord may collect rent or other amounts or any portion thereof from any assignee, subtenant, or other occupant of the Premises, permitted or otherwise, and apply the net rent collected to the Rent payable hereunder, but no such collection shall be deeded to be a waiver of this Paragraph 21, or the acceptance of the assignee, subtenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of the obligations of Tenant under this Lease. Any assignment or subletting which conflicts with the provisions hereof shall be void.
22. AUTHORITY
Landlord represents and warrants that it has full right and authority to enter into this Lease and to perform all Landlord's obligations hereunder and that all persons signing this Lease on its behalf are authorized to do. Tenant and the person or persons, if any, signing on behalf of Tenant, jointly and severally represent and warrant that Tenant has full right and authority to enter into this Lease, and to perform all of Tenant's obligations hereunder, and that all persons signing this Lease on its behalf are authorized to do so.
23. CONDEMNATION
A. Condemnation Resulting in Termination. If the whole or any substantial part of the Premises should be taken or condemned for any public use under any Regulations, or by right of eminent domain, or by private purchase in lieu thereof, and the taking would percent or materially interfere with the Permitted Use of the Premises, either party shall have the right to terminate this Lease at its option. If any material portion of the Building or Project is taken or condemned for any public use under any Regulation or by right of eminent domain, or by private purchase in lieu thereof, Landlord may terminate this Lease at its option. In either of such events, the Rent shall be abated during the unexpired portion of this Lease, effective when the physical taking of said Premises shall have occurred.
B. Condemnation Not Resulting in Termination. If a portion of the Project of which the Premises are a part should be taken or condemned for any public use under any Regulation, or by right of eminent domain, or by private purchase in lieu thereof, and the taking prevents or materially interferes with the Permitted Use of the Premises, and this Lease is not terminated as provided in Paragraph 23.A. above, the Rent payable hereunder during the unexpired portion of this Lease shall be reduced, beginning on the date when the physical taking shall have occurred, to such amount as may be fair and reasonable under all of the circumstances. Notwithstanding anything to the contrary contained in this Paragraph, if the temporary use or occupancy of any part of the Premises shall be taken or appropriated under power of eminent domain
during the Term, this Lease shall be and remain unaffected by such taking or appropriation and Tenant shall continue to pay in full all Rent payable hereunder by Tenant during the Term; in the event of any such temporary appropriation or taking, Tenant shall be entitled to receive that portion of any award which represents compensation for the use of or occupancy of the Premises during the Term, and Landlord shall be entitled to receive that portion of any award which represents the cost to Landlord of restoration of the Premises and the use and occupancy of the Premises.
C. Award. Landlord shall be entitled to (and Tenant shall assign to Landlord) any and all payment, income, rent, award or any interest therein whatsoever which may be paid or made in connection with such taking or conveyance and Tenant shall have no claim against Landlord or otherwise for any sums paid by virtue of such proceedings whether or not attributable to the value of any unexpired portion of this Lease, except as expressly provided in this Lease. Notwithstanding the foregoing, any compensation specifically and separately awarded Tenant for Tenant's personal property and moving costs, shall be and remain the property of Tenant.
24. CASUALTY DAMAGE
A. General. If the Premises or Building should be damaged or destroyed by fire, tornado, or other casualty (collectively, "Casualty"), Tenant shall give immediate written notice thereof to Landlord. Within thirty (30) days after Landlord's receipt of such notice, Landlord shall notify Tenant whether in Landlord's estimation material restoration of the Premises can reasonable be made within one hundred eighty (180) days from the date of such notice and receipts of required permits for such restoration. Landlord's determination shall be binding on Tenant.
B. Within 180 Days. If the Premises or Building should be damaged by Casualty to such extent that material restoration can in Landlord's estimation be reasonably completed within one hundred eighty (180) days after the date of such notice and receipt of required permits for such rebuilding or repair, then landlord shall have the option of either: (1) terminating this Lease effective upon the date of the occurrence of such damage, in which event the Rent shall be abated during the unexpired portion of this Lease; or (2) electing to rebuild or repair the Premises diligently and in the manner determined by Landlord. Landlord shall notify Tenant of its election within thirty (30) days after Landlord's receipt of notice of the damage or destruction. Notwithstanding the above, Landlord shall not be required to rebuild, repair or replace any part of any Alterations which may have been placed, on or about the Premises by Tenant. If the Premises are untenantable in whole or in part following such damage, the Rent payable hereunder during the period in which they are untenantable shall be abated proportionately, but only to the extent the Premises are unfit for occupancy.
D. Greater than 270 Days. If the Premises or Building should be damaged by Casualty to such extent that rebuilding or repairs cannot in Landlord's estimation be reasonable completed within two hundred seventy (270) days after receipts of required permits for rebuilding or repair, and such damage materially and adversely interferes with the conduct of Tenant's business in the Premises, then either party shall have the right to cancel this Lease by giving the other party written notice within ten (10) days from the date of Landlord's notice that material restoration of the Premises cannot be made within such two hundred seventy (270) say period or notice that Landlord has elected not to rebuild or repair the Premises. Said cancellation shall be effective thirty (30) days from the first day that either party gives its notice to cancel. If neither party elects to so cancel this Lease, Landlord shall proceed to rebuild and repair the Premises diligently and in the manner determined by Landlord, except that Landlord shall not be required to rebuild, repair or replace any part of any Alterations which may have been placed on or about the Premises by Tenant. If the Premises are untenantable in whole or in part following such damage, the Rent payable hereunder during the period in which they are untenantable shall be abated proportionately, but only to the extent the Premises are unfit for occupancy.
E. Casualty to Clean Rooms and Thin Film Rooms. If the clean rooms and thin film rooms located within the Premises are substantially damaged by Casualty to such extent that rebuilding or repairs cannot in Landlord and Tenant's mutual estimation be reasonably completed within ninety (90) days after access to the Premises has been granted by any governmental authority to safely allow an inspection of the
Premises, and an inspection conducted jointly by Landlord and Tenant has then been made, then Tenant shall have the right to cancel this Lease by giving the Landlord written notice within ten (10) days from the date of Landlord's notice that material restoration of the Premises cannot be made within such ninety (90) day period. Said cancellation shall be effective thirty (30) days from the first day that Tenant gives Landlord its notice to cancel. If Tenant elects to not cancel this Lease, Landlord shall proceed to rebuild and repair the Premises diligently and in this manner determined by Landlord, except that Landlord shall not be required to rebuild, repair or replace any part of any Alterations which may have been placed on or about the Premises by Tenant. If the Premises are untenantable in while or in part following such damage, the Rent payable hereunder during the period in which they are untenantable shall be abated proportionately, but only to the extent the Premises are unfit for occupancy.
F. Tenant's Fault. Notwithstanding anything herein to the contrary, if the Premises or any other portion of the Building are damaged by Casualty resulting from the fault, negligence, or breach of this Lease by Tenant or any of Tenant's Parties, Base Rent and Additional Rent shall not be diminished during the repair of such damage and Tenant shall be liable to Landlord for the cost and expense of the repair and restoration of the building caused thereby to the extent such cost and expense in not covered by insurance proceeds.
G. Insurance Proceeds. Notwithstanding anything herein to the contrary, if the Premises or Building are damaged or destroyed and are not fully covered by the insurance proceeds received by Landlord or if the holder of any indebtedness secured by a mortgage or deed of trust covering the Premises requires that the insurance proceeds be applied to such indebtedness, then in either case Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within thirty (30) days after the date of notice to Landlord that said damage or destruction is not fully covered by insurance or such requirement is made by any such holder, as the case may be, whereupon this Lease shall terminate.
H. Tenant's Personal Property. In the Event of any damage or destruction of the Premises or the Building, under no circumstances shall Landlord be required to repair any injury or damage to, or make any repairs to or replacements of, Tenant's personal property.
I. Waiver. This Paragraph 24 shall be Tenant's sole and exclusive remedy in the event of damage or destruction to the Premises or the Building. As a material inducement to Landlord entering into this Lease, Tenant hereby waives any rights it may have under any law, statute or ordinance now or hereafter in effect.
25. HOLDING OVER
Unless Landlord expressly consents in writing to Tenant's holding over, Tenant shall be unlawfully and illegally in possession of the Premises, whether or not Landlord accepts any rent from Tenant or any other person while Tenant remains in possession of the Premises without Landlord's written consent. If Tenant shall retain possession of the Premises or any portion thereof without Landlord's consent following the expiration of this Lease or sooner termination for any reason, then Tenant shall pay to Landlord an amount for Base Rent equal to one and one-quarter (1.25) the Base Rent as of the last month prior to the date of expiration or earlier termination. Tenant shall also indemnify, defend, protect and hold Landlord harmless from any loss, liability or cost, including consequential and incidental damages and reasonable attorneys' fees, incurred by Landlord resulting from delay by Tenant in surrendering the Premises, including, without limitation, any claims made by the succeeding tenant founded on such delay. Acceptance of Rent by Landlord following expiration or earlier termination of this Lease, or following demand by Landlord for possession of the Premises, shall not constitute a renewal of this Lease, and nothing contained in this Paragraph 25 shall waive Landlord's right of reentry or any other right. Additionally, if upon expiration or earlier termination of this Lease, or following demand by Landlord for possession of the Premises, Tenant has not fulfilled its obligation with respect to repairs and cleanup of the Premises or any other Tenant obligations as set forth in this Lease, then Landlord shall have the right to perform any such obligations as it deems necessary at Tenant's sole cost and expense, and any time required by Landlord to complete such obligations shall be considered a period of holding over and the terms of this Paragraph 25 shall apply. The provisions of this Paragraph 25 shall survive any expiration or earlier termination of this Lease.
26. DEFAULT
A. Events of Default. The occurrence of any of the following shall constitute an event of default on the part of Tenant:
(1) Abandonment. Abandonment or vacation of the Premises for a continuous period in excess of twenty (20) days, and said abandonment occurs in conjunction with unpaid rent.
(2) Nonpayment of Rent. Tenant shall fail to pay any installment of the rent herein reserved when due, or any payment with respect to taxes hereunder when due, or any other payment, and such failure shall continue for a period of five (5) days from the date such payment was due; provided, however, Tenant shall not be in default of this Lease the first time in a twelve (12) month period that Tenant fails to pay rent when due so long as Tenant pays such overdue rent within five (5) days of notice from Landlord that such overdue amount is payable.
(3) Other Obligations. Failure to perform any obligation, agreement or covenant under this Lease other than those matters specified in subparagraphs (1) and (2) of this Paragraph 26.A., such failure continuing for fifteen (15) days after written notice of such failure, as to which time is of the essence; provided, however, Tenant shall not be in default of this Lease if such failure cannot be cured within such fifteen (15) day period so long as Tenant commences such cure within such fifteen (15) day period and thereafter diligently pursues such cure, and so long as Tenant's delay in curing such failure will not (as determined by Landlord in Landlord's business judgment) adversely affect Landlord or the Premises.
(4) General Assignment. A general assignment by Tenant for the benefit of creditors.
(5) Bankruptcy. The filing of any voluntary petition in bankruptcy by Tenant, or the filing of an involuntary petition by Tenant's creditors, which involuntary petition remains undischarged for a period of thirty (30) days. If under applicable law, the trustee in bankruptcy or Tenant has the right to affirm this Lease and continue to perform the obligations of Tenant hereunder, such trustee or Tenant shall, in such time period as may be permitted by the bankruptcy court having jurisdiction, cure all defaults of Tenant hereunder outstanding as of the date of the affirmance of this Lease and provide to Landlord such adequate assurances as may be necessary to ensure Landlord of the continued performance of Tenant's obligations under this Lease.
(6) Receivership. The employment of a receiver to take possession of substantially all of Tenant's assets or the Premises, if such appointment remains undismissed or undischarged for a period of fifteen (15) days after the order therefor.
(7) Attachment. The attachment, execution or other judicial seizure of all or substantially all of Tenant's assets for Tenant's leasehold of the Premises, if such attachment or other seizure remains undismissed or undischarged for a period of fifteen (15) days after the levy thereof.
(8) Insolvency. The admission by Tenant in writing of its inability to pay its debts as they become due.
B. Remedies Upon Default. Upon the occurrence of any events of default described in Paragraph 26.A of this Lease, Landlord shall have the option to pursue any one or more of the following
remedies without any notice or demand whatsoever. Nothing in this Paragraph 26.B shall relieve Landlord of any duty to exercise its reasonable efforts to mitigate its damages, as required by law.
(1) Terminate Lease. Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which Landlord may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part of the Premises, by self-help means, at Landlord's option, without being liable for prosecution or any claim of damages therefor, and Tenant agrees to pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the Premises on satisfactory terms or otherwise. Landlord's right to any and all damages and remedies shall survive termination of this Lease.
(2) Recover Possession. Enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part of the Premises, by self-help means, at Landlord's option, without being liable for prosecution or any claim for damages, and relet the Premises for such terms ending before, on or after the expiration date of the Term of this Lease, at such rentals and upon such other conditions (including concessions and prior occupancy periods) as Landlord in its sole discretion may determine, and receive the rent for such reletting; and Tenant agrees to pay to Landlord on demand any deficiency that may arise by reason of such reletting together with all costs incurred by Landlord in connection with such reletting (including without limitation attorneys' fees and costs). Landlord shall have no obligation to relet the Premises in advance of any other available space owned by Landlord and shall not be liable for refusal or failure to relet or in the event of reletting the Premises at a rental in excess of that agreed to be paid by Tenant pursuant to the terms of this Lease, Landlord and Tenant each mutually agree that Tenant shall not be entitled, under any circumstances, to such excess rental, and Tenant does hereby specifically waive any claim to such excess rental.
(3) Right to Cure. Enter upon the Premises, by self-help, at Landlord's option, without being liable for prosecution or any claim for damages therefor, and do whatever Tenant is obligated to do under the terms of this Lease and Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in this effecting compliance with Tenant's obligations under this Lease (including without limitation attorneys' fees and costs), and Tenant further agrees that Landlord shall not be liable for any damages resulting to Tenant from such action, whether caused by the negligence of Landlord or otherwise.
(4) Damages After Default. Whether or not Landlord terminates this Lease, retakes possession or relets the Premises, Landlord shall have the right to recover unpaid Rent and all damages caused by Tenant's default, including, without limitation, attorneys' fees and costs. Damages shall include, without limitation, (1) the worth at the time of award of the unpaid Rent and other amounts which had been earned at the time of termination, (2) the worth at the time of award of the amount by which the unpaid Rent and other amounts that would have been earned after the date of termination until the time of award exceeds the amount of such Rent loss that Tenant proves could have been reasonably avoided; (3) the worth at the time of award of the amount by which the unpaid Rent and other amounts for the balance of the Term after the time of award exceeds the amount of such Rent loss that the Tenant proves could be reasonably avoided; and (4) any other amount and court costs necessary to compensate Landlord for all detriment proximately caused by Tenant's failure to perform Tenant's obligations under this Lease or which, in the ordinary course of things, would be likely to result therefrom. The "worth at the time of award" as used in (1) and (2) above shall be computed at the Applicable Interest Rate (defined below). The "worth at the time of award" as used in (3) above shall be
computed by discounting such amount at the Federal Discount Rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). If this Lease provides for any periods during the Term during which Tenant is not required to pay Base Rent or if Tenant otherwise receives a Rent concession, then upon the occurrence of any event of defaults, Tenant shall owe to Landlord the full amount of such Base Rent or value of such Rent concession, plus interest at the Applicable Interest Rate, calculated from the date that such Base Rent or Rent concession would have been payable.
(5) Multiple Actions. Landlord may sue periodically to recover damages during the period corresponding to the remainder of the Term, and no action for damages shall bar a later action for damages subsequently accruing.
(6) Cumulative Remedies. Pursuit of any of the foregoing remedies shall not preclude Landlord from pursuit of any of the other remedies provided in this Lease or any other remedies provided by law or at equity, such remedies being cumulative and nonexclusive, nor shall pursuit of any remedy in this Lease provided constitute a forfeiture or waiver of any rent due to Landlord under this Lease or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions, conditions, and covenants contained in this Lease. No act or thing done by Landlord or its agents shall be deemed a termination of this Lease or an acceptance of the surrender of the Premises, and no agreement to terminate this Lease or accept a surrender of the Premises shall be valid unless in writing signed by Landlord. No waiver by Landlord of any violation or breach of any of the terms, provisions and covenants contained in this Lease shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions, conditions, and covenants contained in this Lease. Landlord's acceptance of the payment of rental or other payments under this Lease after the occurrence of an Event of Default shall not be construed as a waiver of such default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord from enforcing one or more of the remedies provided in this Lease upon an event of default shall not be deemed or construed to constitute a waiver of such default or of Landlord's right to enforce any such remedies with respect to such default or any subsequent default.
C. Late Charge. In addition to its other remedies, Landlord shall have the right without notice or demand to add to the amount of any payment required to be made by Tenant hereunder, and which is not paid and received by Landlord on or before the first day of each calendar month, an amount equal to five percent (5%) of the delinquency for each month or portion thereof that the delinquency remains outstanding to compensate Landlord for the loss of the use of the amount not paid and the administrative costs caused by the delinquency, the parties agreeing that Landlord's damage by virtue of such delinquencies would be extremely difficult and impracticable to compute and the amount stated herein represents a reasonable estimate thereof. Any waiver by Landlord of any late charges or failure to claim the same shall not constitute a waiver of other late charges or any other remedies available to Landlord.
D. Interest. Interest shall accrue on all sums not paid when due hereunder at the lesser of eighteen percent (18%) per annum or the maximum interest rate allowed by law ("Applicable Interest Rate") from the due date until paid in full.
27. LIENS
Tenant shall at all times keep the Premises and the Project free from liens arising out of or related to work or services performed, materials or supplies furnished or obligations incurred by or on behalf of Tenant or in connection with work made, suffered or done by or on behalf of Tenant in or on the Premises or Project. If Tenant shall not, within ten (10) days following the imposition of any such lien, cause the same to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as Landlord shall deem proper, including payment of the claim giving rise to such lien. All
sums paid by Landlord on behalf of Tenant and all expenses incurred by Landlord in connection therefor shall be payable to Landlord by Tenant on demand with interest at the Applicable Interest Rate as Additional Rent. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or required by law, or which Landlord shall deem proper, for the protection of Landlord, the Premises, the Project and any other party having an interest therein, from mechanics' and materialmen's liens, and Tenant shall give Landlord not less than five (5) business days prior written notice of the commencement of any work in the Premises or Project which could lawfully give rise to a claim for mechanics' or materialmen's liens to permit Landlord to post and record a timely notice of non-responsibility, as Landlord may elect to proceed or as the law may from time to time provide, for which purpose, if Landlord shall so determine, Landlord may enter the Premises. Tenant shall not remove any such notice posted by Landlord without Landlord's consent, and in any event not before completion of the work which could lawfully give rise to a claim for mechanics' or materialmen's liens.
28. TRANSFERS BY LANDLORD
In the event of a sale or conveyance by Landlord of the Building or a foreclosure by any creditor of Landlord, the same shall operate to release Landlord from any liability upon any of the covenants or conditions, express or implied, herein contained in favor of Tenant, to the extent required to be performed after the passing of title to Landlord's successor-in-interest. In such event, Tenant agrees to look solely to the responsibility of the successor-in-interest of Landlord under this Lease with respect to the performance of the covenants and duties of "Landlord" to be performed after the passing of title to Landlord's successor-in-interest. This Lease shall not be affected by any such sale and Tenant agrees to attorn to the purchaser or assignee. Landlord's successor(s)-in-interest shall not have liability to Tenant with respect to the failure to perform any of the obligations of "Landlord," to the extent required to be performed prior to the date such successor(s)-in-interest became the owner of the Building.
29. RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS
All covenants and agreements to be performed by Tenant under any of the terms of this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any abatement of Rent. If Tenant shall fail to pay any sum of money, other than Base Rent, required to be paid by Tenant hereunder or shall fail to perform any other act on Tenant's part to be performed hereunder, including Tenant's obligations under Paragraph 11 hereof, and such failure shall continue for fifteen (15) days after notice thereof by Landlord, in addition to the other rights and remedies of Landlord, Landlord may make any such payment and perform any such act on Tenant's part. In the case of an emergency, no prior notification by Landlord shall be required. Landlord may take such actions without any obligation and without releasing Tenant from any of Tenant's obligations. All sums so paid by Landlord and all incidental costs incurred by Landlord and interest thereon at the Applicable Interest Rate, from the date of payment by Landlord, shall be paid to Landlord on demand as Additional Rent.
30. WAIVER
If either Landlord or Tenant waives the performance of any term, covenant or condition contained in this Lease, such waiver shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein, or constitute a course of dealing contrary to the expressed terms of this Lease. The acceptance of Rent by Landlord shall not constitute a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, regardless of Landlord's knowledge of such preceding breach at the time Landlord accepted such Rent. Failure by Landlord to enforce any of the terms, covenants or conditions of this Lease for any length of time shall not be deemed to waive or decrease the right of Landlord to insist thereafter upon strict performance by Tenant. Waiver by Landlord of any term, covenant or condition contained in this Lease may only be made by a written document signed by landlord, based upon full knowledge of the circumstances.
31. NOTICES
Each provision of this Lease or of any applicable governmental laws, ordinances, regulations and other requirements with reference to sending, mailing, or delivery of any notice or the making of any payment by Landlord or Tenant to the other shall be deemed to be complied with when and if the following steps are taken:
A. Rent. All Rent and other payments required to be made by Tenant to Landlord hereunder shall be payable to Landlord at Landlord's Remittance Address set forth in the Basic Lease Information, or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. Tenant's obligation to pay Rent and any other amounts to Landlord under the terms of this Lease shall not be deemed satisfied until such Rent and other amounts have been actually received by Landlord.
B. Other. All notices, demands, consents and approvals which may or are required to be given by either party to the other hereunder shall be in writing and either personally delivered, sent by commercial overnight courier, mailed, certified or registered, postage prepaid or sent by facsimile with confirmed receipt (and with an original sent by commercial overnight courier), and in each case addressed to the party to be notified at the Notice Address for such party as specified in the Basic Lease Information or to such other place as the party to be notified may from time to time designate by at least fifteen (15) days notice to the notifying party. Notices shall be deemed served upon receipt or refusal to accept delivery. Tenant appoints as its agent to receive the service of all default notices and notice of commencement of unlawful detainer proceedings the person in charge of or apparently in chart of occupying the Premises at the time, and, if there is no such person, then such service may be made by attaching the same on the main entrance of the Premises.
C. Required Notices. Tenant shall immediately notify Landlord in writing of any notice of a violation or a potential or alleged violation of any Regulation that relates to the Premises or the Project, or of any inquiry, investigation, enforcement or other action that is instituted or threatened by any governmental or regulatory agency against Tenant or any other occupant of the Premises, or any claim that is instituted or threatened by any third party that relates to the Premises or the Project.
32. ATTORNEYS' FEES
If Landlord places the enforcement of this Lease, or any part thereof, or the collection of any Rent due, or to become due hereunder, or recovery of possession of the Premises in the hands of an attorney, Tenant shall pay to Landlord, upon demand, Landlord's reasonable attorneys' fees and court costs, whether incurred at trial, appeal or review. In any action which Landlord or Tenant brings to enforce its respective rights hereunder, the unsuccessful party shall pay all costs incurred by the prevailing party including reasonable attorneys' fees, to be fixed by the court, and said costs and attorneys' fees shall be a part of the judgment in said action.
33. SUCCESSORS AND ASSIGNS
This Lease shall be binding upon and inure to the benefit of Landlord, its successors and assigns, and shall be binding upon and inure to the benefit of Tenant, its successors, and to the extent assignment is approved by Landlord as provided hereunder, Tenant's assigns.
34. FORCE MAJEURE
If performance by a party of any portion of this Lease is made impossible by any prevention, delay, or stoppage caused by strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes for those items, government actions, civil commotions, fire or other casualty, or other causes beyond the reasonable control of the party obligated to perform, performance by
that party for a period equal to the period of that prevention, delay, or stoppage is excused. Tenant's obligation to pay Rent, however, is not excused by this Paragraph 35.
35. SURRENDER OF PREMISES
Tenant shall, upon expiration or sooner termination of this Lease, surrender the Premises to Landlord in the same condition, excepting normal wear and tear, as existed on the date Tenant originally took possession thereof, including, but not limited to, all interior walls cleaned, all holes in walls repaired, all HVAC equipment in operating order and in good repair, and all floors cleaned and free of any Tenant-introduced marking or painting, all to the reasonable satisfaction of Landlord. However, Tenant shall be responsible for removing all specialty tenant improvements and equipment that specifically relate to Tenant's manufacturing and production of testing and calibration equipment (i.e., clean rooms, electrical, plumbing and HVAC service to support clean rooms), which were installed for and by the immediately preceding Tenant, all of which will be in place at the time of Tenant's occupancy, and for restoring the Premises to shell condition in areas where said tenant improvements and equipment are removed. Landlord and Tenant shall mutually agree upon which specialty improvements shall be the Tenant's responsibility to remove from the Premises upon vacation of the Premises, and areas where restoration will be anticipated, and both parties shall enter into a separate agreement identifying said specialty tenant improvements within thirty (30) days after Tenant's occupancy. Tenant shall remove all of its debris from the Project. At or before the time of surrender, Tenant shall comply with the terms of Paragraph 12.A. hereof with respect to Alterations to the Premises and all other matters addressed in such Paragraph. If the Premises are not so surrendered at the expiration or sooner termination of this Lease, the provisions of Paragraph 25 hereof shall apply. All keys to the Premises or any part thereof shall be surrendered to Landlord upon expiration or sooner termination of the Term. Tenant shall give written notice to Landlord at least thirty (30) days prior to vacating the Premises and shall meet with Landlord for a joint inspection of the Premises at the time vacating, but nothing contained herein shall be construed as an extension of the Term or as a consent by Landlord to any holding over by Tenant. In the event of Tenant's failure to give such notice or participate in such joint inspection, Landlord's inspection at or after Tenant's vacating the Premises shall conclusively be deemed correct for purposes of determining Tenant's responsibility for repairs and restoration. Any delay caused by Tenant's failure to carry out its obligations under this Paragraph 36 beyond the term hereof, shall constitute unlawful and illegal possession of Premises under Paragraph 25 hereof.
36. MISCELLANEOUS
A. General. The term "Tenant" or any pronoun used in place thereof shall indicate and include the masculine or feminine, the singular or plural number, individuals, firms or corporations, and their respective successors, executors, administrators and permitted assigns, according to the context hereof.
B. Time. Time is of the essence regarding this Lease and all of its provisions.
C. Choice of Law. This Lease shall in all respects be governed by the laws of the State of Oregon.
D. Entire Agreement. This Lease, together with its Exhibits, addenda and attachments and the Basic Lease Information, contains all the agreements of the parties hereto and supercedes any previous negotiations. There have been no representations made by the Landlord or understandings made between the parties other than those set forth in this Lease and its Exhibits, addenda and attachments and the Basic Lease Information.
E. Modification. This Lease may not be modified except by a written instrument signed by the parties hereto. Tenant accepts the area of the Premises as specified in the Basic Lease Information as the approximate area of the Premises for all purposes under this Lease, and acknowledges and agrees that no other definition of the area (rental, usable or otherwise) of the Premises shall apply. Tenant shall in no event be entitled to a recalculation of the square footage of the Premises, rental, usable or otherwise, and no recalculation, if made, irrespective of its purpose, shall reduce
Tenant's obligations under this Lease in any manner, including without limitation the amount of Base Rent payable by Tenant or Tenant's Proportionate Share of the Building and of the Project.
F. Severability. If, for any reason whatsoever, any of the provisions hereof shall be unenforceable or ineffective, all of the other provisions shall be and remain in full force and effect.
G. Recordation. Tenant shall not record this Lease or a short form memorandum hereof, unless it is required by a prospective lender of Tenant, in which case a Memorandum in a form substantially similar to the form attached hereto as Exhibit "D," and which has been reasonably approved by landlord, can be recorded by Tenant.
H. Examination of Lease. Submission of this Lease to Tenant does not constitute an option or offer to lease and this Lease is not effective otherwise until execution and delivery by both Landlord and Tenant.
I. Accord and Satisfaction. No payment by Tenant or a lesser amount than the total Rent due nor any endorsement on any check or letter accompanying any check or payment of Rent shall be deemed an accord and satisfaction of full payment of Rent, and Landlord may accept such payment without prejudice to Landlord's right to recover the balance of such Rent or to pursue other remedies. All offers by or on behalf of Tenant of accord and satisfaction are hereby rejected in advance.
J. Easements. Landlord may grant easements on the Project and dedicate for public use portions of the Project without Tenant's consent; provided that no such grant or dedication shall materially interfere with Tenant's Permitted Use of the Premises or Tenant's overall parking ratio. Upon Landlord's request, Tenant shall execute, acknowledge and deliver to Landlord documents, instruments, maps and plats necessary to effectuate Tenant's covenants hereunder.
K. Drafting and Determination Presumption. The parties acknowledge that this Lease has been agreed to by both the parties, that both Landlord and Tenant have consulted with attorneys with respect to the terms of this Lease and that no presumption shall be created against Landlord because Landlord drafted this Lease. Except as otherwise specifically set forth in this Lease, with respect to any consent, determination or estimation shall be given or made solely by Landlord in Landlord's reasonable and good faith opinion, whether or not objectively reasonable.
L. Exhibits. The Basic Lease Information, and the Exhibits, addenda and attachments attached hereto are hereby incorporated herein by this reference and made a part of this Lease as though fully set forth herein.
M. No Light, Air or View Easement. Any diminution or shutting off of light, air or view by any structure which may be erected on lands adjacent to or in the vicinity of the Building shall in no way affect this Lease or impose any liability on Landlord.
N. No Third Party Benefit. This Lease is a contract between Landlord and Tenant and nothing herein is intended to create any third party benefit.
O. Quiet Enjoyment. Upon payment by Tenant of the Rent, and upon the observance and performance of all of the other covenants, terms and conditions on Tenant's part to be observed and performed. Tenant shall peaceably and quietly hold and enjoy the Premises for the term hereby demised without hindrance or interruption by Landlord or any other person or persons lawfully or equitably claiming by, through or under Landlord, subject, nevertheless, to all of the other terms and conditions of this Lease. Landlord shall not be liable for any hindrance, interruption, interference or disturbance by other tenants or third persons, nor shall Tenant be released from any obligations under this Lease because of such hindrance, interruption, interference or disturbance.
P. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be deemed an original.
Q. Multiple Parties. If more than one person or entity is named herein as Tenant, such multiple parties shall have joint and several responsibility to comply with the terms of this Lease.
R. Jury Trial Waiver. Each party hereto (which includes any Assignee, successor heir or personal representative of a party) shall not seek a jury trial, hereby waives trial by jury, and hereby further waives any objection to venue in the county in which the Building is located, and agrees and consents to personal jurisdiction of the courts of the state in which the Property is located, in any action or proceeding or counterclaim brought by any party hereto against the other on any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, or any claim of injury or damage, or the enforcement of any remedy under any statute, emergency or otherwise, whether any of the foregoing is based on this Lease or on tort law. Each party represents that it has had the opportunity to consult with legal counsel concerning the effect of this Paragraph 37.R. The provisions of this Paragraph 37.R shall survive the expiration or earlier termination of this Lease.
S. Prorations. Any Rent or other amounts payable to Landlord by Tenant hereunder for any fractional month shall be prorated based on a month of 30 days. As used herein, the term "fiscal year" shall mean the calendar year or such other fiscal year as Landlord may deem appropriate.
T. Disclosure. Landlord is a licensed real estate organization and parties affiliated with Landlord are licensed real estate brokers or salespersons. This disclosure is made pursuant to OAR 863-10-046.
38. ADDITIONAL PROVISIONS
A. Beneficial Occupancy. Beneficial Occupancy shall be the date Tenant takes possession of the Premises which is anticipated to occur on or before August 1, 1999. The Lease shall commence on the first Monday after Tenant has had thirty (30) days of Beneficial Occupancy of the Premises to install its equipment, furniture and phone and Landlord has presented Tenant with a Certificate allowing legal occupancy and use of the Premises as intended under this Lease. The installation of network/data and phone related cabling shall be contracted for by Tenant and coordinated with Landlord and completed during construction.
B. Option to Renew. Tenant shall, provided this Lease is in full force and effect and Tenant is not and has not been in default under any of the terms and conditions of this Lease beyond the applicable cure period, have one option to renew this Lease for a term of five (5) years, for the Premises in "as is" condition and on the same terms and conditions set forth in this Lease, except as modified by the terms, covenants and conditions set forth below:
(1) If Tenant elects to exercise such option, then Tenant shall provide Landlord with written notice no earlier than the date which is no earlier than two hundred seventy (270 days prior to the expiration of the then current term of this Lease, but no later than 5:00 p.m. (Pacific Standard Time) on the date which is one hundred eighty (180) days prior to the expiration of the then current term of this Lease. If Tenant fails to provide such notice, Tenant shall have no further or additional right to extend or renew the term of this Lease.
(2) The Base Rent in effect at the expiration of the then current term of this Lease shall be increased to reflect the then current fair market rental for comparable space in the Building or Project and in other similar buildings in the same rental market as of the date the renewal term is to commence, taking into account the specific provisions of this Lease which will remain constant, and the Building amenities, location, identity, quality, age, conditions, term of lease, tenant improvements, services provided, and other pertinent items.
(3) Landlord shall advise Tenant of the new Base Rent for the Premises for the applicable renewal term which will be based on Landlord's determination of fair market rental value, as well as additional terms and conditions for the renewal term, no later than fifteen (15) days after receipt of Tenant's exercise of its option to renew.
(4) Landlord and Tenant shall negotiate in good faith to agree on
the fair market rental value of the Premises and terms and
conditions for the first (1) through sixtieth (60) months of
the Term and for each subsequent rental increase to be based
on fair market rental as set forth in the Basic Lease
Information. If Tenant and Landlord are unable to agree on a
mutually acceptable rental rate for any such increase period
within thirty (30) days after modification by Landlord to
Tenant of Landlord's determination of the new Base Rent for
the applicable increase period, but in any event no later than
the date which is ninety (90) days prior to the expiration of
the then current Term, then on or before such date Landlord
and Tenant shall each appoint a licensed real estate broker
with at least ten (10) year's experience in leasing industrial
space in the area in which the Building is located to act as
arbitrators. The two (2) arbitrators so appointed shall
determine the fair market rental value for the Premises for
the applicable increase period based on the above criteria and
each shall submit his or her determination of such fair market
rental value to Landlord and Tenant in writing, within sixty
(60) days after their appointment.
If the two (2) arbitrators so appointed cannot agree on the fair market rental value for the applicable increase period within such 60-day period, the two (2) arbitrators shall within five (5) days thereafter appoint a third arbitrator who shall be a licensed real estate broker with at least ten (10) year's experience in leasing industrial space in the area in which the Building is located. The third arbitrator so appointed shall independently determine the fair market rental value for the Premises for the applicable increase period with thirty (30) days after appointment, by selecting form the proposals submitted by each of the first two arbitrators the one that most closely approximates the third arbitrator's determination of such fair market rental value. The third arbitrator shall have no right to adopt a compromise or middle ground or any modification of either of the proposals submitted by the first two arbitrators. The proposal chosen by the third arbitrator as most closely approximating the third arbitrator's determination of the fair market rental value for the applicable increase period shall constitute the decision and award of the arbitrators and shall be final and binding on the parties.
Each party shall pay the fees and expenses of the arbitrator appointed by such party and one-half (1/2) of the fees and expenses of the third arbitrator. Notwithstanding the foregoing, in the event the Base Rent for the applicable increase period is found to be within five percent (5%) of the original rate quoted by the Landlord, then Tenant shall bear the full cost of the arbitration process.
C. Existing Improvements. No existing improvements or related equipment will be removed from the Premises prior to Tenant's occupancy, except for those items confirmed by Tenant. All items of interest to Tenant will be confirmed in writing by both parties.
D. Competitive Bidding. Tenant shall not the right to approve the general contractor, however said approval shall not be unreasonably withheld. Landlord shall enter into a contract with the successful general contractor.
E. Tenant's Contractors. Tenant shall have the right to retain its own specialty contractors to perform any portion of the work necessary to construct and outfit the Premises (which will not be part of the general contractor's scope of work nor shall a mark-up be added). All subcontractors used by Tenant shall be licensed, bonded and insured.
F. Project Oversight. Tenant shall want to manage some of the Tenant Improvement installations, including those paid for out of the improvement allowance. Landlord and Tenant shall mutually agree upon which items Tenant shall manage.
G. Design Working Drawings. Tenant will provide Landlord on or before April 15, 1999, with a preliminary space plan that may include furniture layout, equipment placement and electrical/phone/data placement and specifications. Landlord shall cause its architect to, as part of the Base Building and at its sole cost, complete all construction documents to code, including but not limited to mechanical, electrical, structural and other required detail for design, permitting and construction of the tenant improvements.
H. Signage/Identity. Tenant shall have the right to install "top of building" and "monument" signage on or about the building with Landlord's approval, which shall not be unreasonably withheld, subject to park-wide CC&R's.
I. Code Compliance. Landlord shall be responsible for delivering, at its sole cost and expense, the building, Tenant's tenant improvements and common areas compliant with all applicable governmental or recorded codes, ordinances, laws, rules, covenants and restrictions. Compliance shall include, and not be limited to structural, electrical, mechanical, construction labor and materials, based on codes that were in place at the time the building was constructed.
J. Tenant Improvements. Spieker Properties will provide a tenant improvement allowance of up to $12.00 per rsf based upon a mutually agreeable space plan, to be used for tenant improvements in the building. Said allowance may be used for hardwalls, doors, relites, carpet, paint, plumbing, cabinetry, cleanrooms, utility systems, process improvements, related electrical and equipment. Landlord shall obtain bids for the proposed improvements, based on agreed upon space plans, specifications and architecture drawings.
Tenant shall be allowed to carry over and draw on the tenant improvement allowance of $12.00 per square foot through the time period no later than December 31, 2000; however, in no event shall the funds that may be carried over to the calendar year 2000 be in excess of $400,000.00. If the $12.00 per square foot tenant improvement allowance has not been entirely used at the point of Tenant's initial occupancy, then Tenant shall provide Landlord with appropriate notice as described in Paragraph 12, Alterations, prior to proceeding with additional tenant improvements or alterations. Upon completion of any Landlord-approved tenant improvements or alterations during the calendar year 2000, Tenant shall present Landlord with an invoice(s), along with all appropriate backup, for reimbursement. Landlord shall reimburse Tenant for said invoice(s) within 20 business days of receipt of said invoice(s).
Tenant shall be allowed to use the $12.00 per square foot tenant improvement allowance toward any and all work described in the attached Exhibit "C-1", Tenant Improvements.
K. Delivery of Letter of Credit. In lieu of depositing a security deposit with Landlord, Tenant may, on execution of this Lease, deliver to Landlord and cause to be in effect during the Lease Term an unconditional, irrevocable letter of credit ("LOC") in the amount specified for the Security Deposit in the Basic Lease Information, as it may be increased as provided in this Lease (the "LOC Amount") for an initial term extending 30 days beyond the expiration date of this Lease. The LOC shall be in a form acceptable to Landlord and shall be issued by an LOC bank selected by Tenant and acceptable to Landlord. An LOC bank is a bank that accepts deposits, maintains accounts, has a local office that will negotiate a letter of credit, and the deposits of which are insured by the Federal Deposit Insurance Corporation. Tenant shall pay all expenses, points, or fees incurred by Tenant in obtaining the LOC. The LOC shall not be mortgaged, assigned or encumbered in any manner whatsoever by Tenant without the prior written consent of Landlord. Tenant acknowledges that Landlord has the right to transfer or mortgage, Landlord shall have the right to transfer or assign the LOC and/or the LOC Security Deposit (as defined below) to the transferee or mortgagee for the return of the LOC and/or the LOC Security Deposit.
(i) Replacement of Letter of Credit. Tenant may, from time to
time, replace any existing LOC with a new LOC if the new LOC
(a) becomes effective at least thirty (30) days before
expiration of the LOC that it replaces; (b) is in the required
LOC amount; (c) is issued by an LOC bank acceptable to
Landlord; and (d) otherwise complies with the requirements of
this Paragraph K.
(ii) Landlord's Right to Draw on Letter of Credit. Landlord shall hold the LOC as security for the performance of Tenant's obligations under this Lease. If, after notice and failure to cure within any applicable period provided in this lease, Tenant defaults on any provision of this Lease, Landlord may, without prejudice to any other remedy it has, draw on that portion of the LOC necessary to (a) pay Rent or other sum in default; (b) pay or reimburse Landlord for any amount that Landlord may spend or become obligated to spend in exercising Landlord's rights under Paragraph 30 (Right of Landlord to Perform Tenant's Covenant), and/or compensate Landlord for any expense, loss, or damage that Landlord may suffer because of Tenant's default. If Tenant fails to renew or replace the LOC at least thirty (30) days before its expiration, Landlord may, without prejudice to any other remedy it has, draw on the entire amount of the LOC.
(iii) LOC Security Deposit. Any amount of the LOC that is drawn on by the Landlord but not applied by Landlord shall be held by Landlord as a security deposit (the "LOC Security Deposit") in accordance with Paragraph 19 of this Lease.
(iv) Restoration of Letter of Credit and LOC Security Deposit. If Landlord draws on any portion of the LOC and/or applies all or any portion of such draw, Tenant shall, within five (5) business days after demand by Landlord, either (a) deposit cash with Landlord in an amount that, when added to the amount remaining under the LOC and the amount of any LOC Security Deposit, shall equal the LOC Amount then required under this Paragraph K, or (b) reinstate the LOC to the full LOC Amount.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year first above written.
LANDLORD TENANT
Spieker Properties, L.P., Cascade Microtech, Inc.
a California limited partnership an Oregon corporation
By: Spieker Properties, Inc.
a Maryland corporation,
its general partner
By: /s/ LYNDA M. CLARKE By: /s/ ERIC W. STRID
----------------------------------- -----------------------------------
Lynda M. Clarke Eric W. Strid
Its: Vice President Its: Chief Executive Office
Date: 4-2-99 Date: April 2, 1999
|
Exhibit 10.9
LEASE I
FOR
1875 BUILDING, SUITE 200
AMERGLEN BUSINESS CENTER
BY AND BETWEEN
AMBERJACK, LTD.
"LANDLORD"
AND
CASCADE MICROTECH, INC.
"TENANT"
1 - AMBERGLEN STANDARD LEASE FORM - LEASE I
AMBERGLEN BUSINESS CENTER
OFFICE/FLEX LEASE
1. PARTIES.
This Lease, dated for reference purposes only August 20, 1997, is made by and between AMBERJACK, LTD., an Arizona corporation ("Landlord") and Cascade Microtech, Inc., an Oregon corporation ("Tenant").
2. SUMMARY OF BASIC TERMS.
As used in this Lease, the following terms shall have the meanings set forth below, subject to the qualifications, adjustments and exceptions set forth elsewhere in this Lease:
a) PREMISES: All of the space on the first and second floors of the Building,, and located substantially as shown on the floor plan attached hereto as Exhibit "A".
b) BUILDING: The office/flex/light manufacturing building and associated parking and access areas located as 2430 NW 206th Avenue, Hillsboro, Oregon including all lobbies, office, manufacturing and other space totaling 63,793 rentable square feet, to be built by Landlord substantially in accordance with the Construction Document Set prepared by Ankrom Moisan Associated Architects dated April 15, 1997, ("Building Plans") pursuant to a building permit to be issued by the City of Hillsboro ("Building Permit"), subject to modification and changes in the Building Plans that do not substantially change the Building footprint or basic quality of materials or construction..
c) AMBERGLEN BUSINESS CENTER COMMON AREAS: The land (developed and undeveloped as shown on Exhibit "B" attached.
d) PERMITTED USE: Office; marketing; research and development; Engineering; and shipping and receiving; and ancillary functions for the design, light manufacturing and machining of electronic testing systems utilized by the computer industry.
e) LEASE TERM: Ten (10) years and zero (0) months, subject to extension as set forth in Section 27.
f) SCHEDULED COMMENCEMENT DATE: July 1, 1998.
g) EXPIRATION DATE: June 30, 2008.
1 - AMBERGLEN STANDARD LEASE FORM - LEASE I
h) MONTHLY BASE RENT: Months 1 through 60: Sixty-one Thousand
Two Hundred Forty-one and 28/100 Dollars ($61,241.28) based on a base rent per
square foot per month of $0.96; months 61 through 120: Seventy two Thousand
Eighty-six and 09/100 Dollars ($72,086.09) based on a base rent per square foot
per month of $1.13; renewal term/months 121 through 180: Eighty-four and 69/100
Dollars ($84,844.69) based on a base rent per square foot per month of $1.33.
Monthly Base Rent for any period after the 180th month (during a renewal period)
shall be established through the process specified in Section 27.2.1. and
27.2.2. of this Lease. Tenant acknowledges that any lease term greater than 120
months is not part of the initial Lease Term, and that in order to secure rights
to the Premises after the 120th month, the Lease Term will need to be extended
pursuant to Section 27 of this Lease.
i) INITIAL RENTABLE AREA OF PREMISES: 63,793 sq.ft. The usable square footage of Premises if 58,856.
j) SECURITY DEPOSIT: [Alternative provisions are set forth in
Section 6.2, plus first month's Monthly Base Rent].
k) TENANT'S GUARANTOR: NOT APPLICABLE.
l) LANDLORD'S ADVISOR: CUSHMAN & WAKEFIELD OF OREGON, INC.
m) TENANT'S ADVISOR: CORPORATE REALTY ADVISORS, INC.
n) LANDLORD'S ADDRESS FOR NOTICES:
Birtcher Property Services 27611 La Paz Road P.O. Box 30009 Laguna Niguel, California 92607-0009 Attn: Director of Property Management
Copy to:
Birtcher Property Services
1600 N.W. Compton Drive
Suite 109
Beaverton, Oregon 97006
2 - AMBERGLEN STANDARD LEASE FORM - LEASE I
o) TENANT'S ADDRESS FOR NOTICES:
Cascade Microtech, Inc. 1875 NW Amberbrook Drive #100 Beaverton, Oregon 97006
Copy to:
Christopher T. Matthews
Ater Wynne Hewitt Dodson & Skerritt, LLP
222 SW Columbia, Suite 1800
Portland, OR 97201
3. PREMISES.
3.1 GRANT OF PREMISES. Landlord hereby leases to Tenant and Tenant leases from Landlord those certain Premises stated above situated in the County of Washington, City of Hillsboro, State of Oregon (hereinafter referred to as the "Premises".)
3.2 OFFICE/FILES/LIGHT MANUFACTURING BUILDING. The Premises, together with and including other property owned by Landlord, comprise and office/flex light/manufacturing building (hereinafter referred to as the "Building"). Tenant's use and occupancy of the Premises shall include the use, in common with others, of the AmberGlen Business Center Common Areas, but excepting therefrom and reserving unto Landlord the exterior faces of all exterior walls, the roof and the right to install, use and maintain where necessary in the Premises all pipes, ductwork, conduits and utility lines through hung ceiling space, partitions, beneath the floor or through other parts of the Leased Premises. Buildings located in AmberGlen's Northwest Campus shown on Exhibit "A" ("Northwest Campus") shall be connected by underground conduit through which fiber optic and other types of data/communications networking is accessible. The Premises included one (1) four-inch (4") conduit which connects the Building to the 1875 Building located within AmberGlen at 1875 NW Amberbrook Drive; and shall include one (1) four-inch (4") conduit which connects the Building to the 1875 Building located within AmberGlen at 20475 NE Amberwood Drive, but only if Tenant exercises the 20475 Option identified in Section 28 of this LEASE.
3.3 RENTABLE AREA. With respect to each floor of the Building, the "Rentable Area" of a floor shall follow the BOMA standard method for measuring Floor Area in Office Buildings and shall mean the total area of the floor enclosed by the dominant portion, minus the major vertical penetrations on that same floor. The term "dominant portion" means the portion of the outside finished surface of the permanent outside building wall which is fifty percent (50%) or more of the vertical floor-to-ceiling dimension, at the given point being measured as one moves horizontally along the wall. The term "finished surface" shall mean a wall, including glass, as prepared for tenant use, excluding the thickness of any special surfacing materials such as paneling, furring strips and/or carpet. The term "major vertical penetrations" shall mean the area of stairs, elevator shafts, flues, pipe shafts,
3 - AMBERGLEN STANDARD LEASE FORM - LEASE I
vertical ducts and the like, and their enclosing walls on that floor. Not included are (I) vertical penetrations built for the private use of a tenant occupying more than one floor, (ii) structural columns, (iii) openings for vertical electrical cable or telephone distribution, and opening for plumbing lines. For any disputes regarding Rentable Area, the parties shall be bound by the definition of that term, and the other defined terms need in that definition, as set forth in BOMA STANDARD FOR MEASURING FLOOR AREA IN OFFICE BUILDING, 1196 ANSI/BOMA SECTION 65.1-1996.
3.4 ACCEPTANCE OF PREMISES. The space plans ("Plans") for the tenant improvements to be performed by Landlord ("Tenant Improvements") and the terms under which they are to be finalized and executed are attached to this Lease as Exhibit "C". Except as otherwise provided in Exhibit "C". The Premises shall be accepted by the Tenant as provided in Section 2.14.1 of this Lease and upon such acceptance, Tenant shall be deemed to have accepted the Premises in its then condition and subject to all applicable recorded covenants, conditions and restrictions and all applicable zoning, municipal, county, state and federal laws, ordinances and regulations governing and regulating the use of Premises. Landlord agrees that the Tenant Improvements shall be built by Landlord to comply with all codes applicable to the Tenant Improvements and in effect on the Commencement Date (as defined herein.) Landlord may rely on and Tenant shall accept issuance of a final occupancy permit as evident that this Lease requirement has been met. Landlord agrees further that on the Commencement Date the water, sewage, gas, electrical, mechanical, heating, ventilating and air conditioning systems of the Premises will be in good working condition. Landlord not made and does not make any representations as to suitability of the Leased Premises for the conduct of Tenant's business except as described in Section 2 (d).
4. TERMS.
4.1 LEASE TERM. The term ("Term") of this Lease is stated above in
2 (e), and subject to Tenant's 365-Day and 180-Day Termination Option provided
for in this Section 4.1, shall commence on the Scheduled Commencement Date
unless the Premises are not "Ready for Occupancy" as hereinafter defined, on the
Scheduled Commencement Date, in which case the commencement and termination
dates of the Lease shall be adjusted accordingly based on the date the Premises
are Ready for Occupancy. Excepting Tenant's 365-Day Termination Option and
180-Day Termination Option as they are defined in this Section 4.1, the deferral
of Tenant's rental obligation with respect to the Premises shall be in full
satisfaction of any and all rights which Tenant might otherwise have a result of
the delayed commencement date of the Lease Term hereof. "Ready for Occupancy" as
used herein shall mean the date that Landlord shall have substantially completed
the work to be performed by Landlord as set forth in Exhibit "C", as certified
to by Landlord's architect, and a Certificate of Occupancy has been issued by
the City of Hillsboro, but in no event earlier than July 1, 9998. The date the
Premises are Ready for Occupancy shall be the "Commencement Date" of this Lease.
If the commencement of the Lease Term is delayed as aforesaid and the
Commencement Date would otherwise occur on a day other than the first day of the
month, such Commencement Date shall be further delayed until the first day of
the following month and Tenant shall pay proportionate Rent at the same monthly
rate set forth herein (also in advance) for such partial month. In the event the
Commencement Date
4 - AMBERGLEN STANDARD LEASE FORM - LEASE I
is delayed, the expiration of the Term hereof shall also be delayed so that the Lease Term will continue for the full period set forth above. As soon as the Lease Term commences, Landlord and Tenant shall execute an amendment to this Lease, which may be required by either party, setting forth the exact Commencement Date and expiration date of the Lease Term. Subject to force majeure (as defined in Section 4.5 of this Lease) and Tenant Delay (as defined in Exhibit "C" of this Lease), if Landlord fails to have the Premises Ready for Occupancy within 180 days from and after the Scheduled Commencement Date specified in Section 2(f) of this Lease, then Tenant shall have the option (exercisable within the thirty (30) day period after the 180th day or such later day determined by operation of force majeure or Tenant Delay, following the Scheduled Commencement Date) to terminate this Lease ("180-Day Termination Option"). Subject to Tenant Delay, if Landlord fails to have the Premises Ready for Occupancy within 364 days from and after the Scheduled Commencement Date, then Tenant shall have the option (exercisable in writing within the (30) day period after the 365th day following the Scheduled Commencement Date) to terminate this Lease ("365-Day Termination Option"). Excepting the 365-Day and 180-Day Termination Option, this Lease shall not be terminable by Tenant, and Tenant shall in no event be entitled to an abatement or reduction of rent except as expressly set forth in Section 12.3 or Section 13.1. Additionally, Landlord shall not be liable to Tenant for damages in the event Landlord cannot deliver the Premises on the Scheduled Commencement Date, or by the 365th day after the Scheduled Commencement Date, defined in Section 2(f) of this Lease.
4.2 EARLY POSSESSION. Tenant shall be allowed access to the Building thirty (30) days prior to the Commencement Date of the Lease (which occurs on a date determined by operation of Section (4.1) and payment of Rent for the purpose of manufacturing process fit-up and testing. In conjunction with preparation of the Working Drawings specified in Section 2.2 of Exhibit "C", Landlord and Tenant shall develop a detailed construction schedule that reasonable identifies the phases in which the Tenant Improvements are to be constructed ("TI Schedule") with the intent that Tenant's light manufacturing space be built out early during construction of the Tenant Improvements for the purpose of enabling Tenant to smoothly transition its existing operations into the Premises. Landlord agrees to use reasonable best efforts to cause its contract to construct the Tenant Improvements in substantial conformance with the TI Schedule with the intention of delivering the first phase(s) to Tenant approximately thirty (30) days prior to the date the Premises are expected to be Ready for Occupancy in order to permit Tenant to conduct fit-up and testing, subject to Tenant's coordination of such efforts with Landlord and its contractor, and provided that Tenant's activities during fit-up and testing do not unreasonably interfere with Landlord's completion of the Tenant Improvements. If Tenant avails itself of such early access for fi-up and testing. Tenant agrees to observe and perform all the provisions of this Lease, except those requiring payment of Rent. If Landlord believes it will be unable to deliver the Premises to Tenant by the Scheduled Commencement Date, it shall give Tenant thirty (30) days' prior written notice of the date Landlord reasonable anticipates the Premises will be Ready for Occupancy.
If, prior to commencement of the Lease Term, Tenant uses or occupies the Premises or any part thereof with Landlord's prior written consent, for the purpose of completing alterations to the Premises, Tenant agrees to observe and p[reform all the provisions of this Lease,
5 - AMBERGLEN STANDARD LEASE FORM - LEASE I
except those which require payment of Rent; provided however, if Tenant commences business (fit-up and testing do not constitute business) in any part of the Premises prior to commencement of the Lease Term, Tenant shall pay Landlord an occupation Rent for such part of the Premises for each day prior to commencement of the term, calculated on the basis of the per diem rental and all other sums which would be due to Landlord from Tenant if the term had then commenced, including its percentage share of annual Common Area Expenses.
4.3 TENANT DELAYS. The Commencement Date shall not be delayed or postponed due to Tenant delays (as defined in Exhibit "C" to this Lease), and the Term, Tenants obligations to pay Rent and all of Tenant's other obligations under this Lease shall commence upon the date which would have been the Commencement Date but for Tenant delays.
4.4 LEASE TERM EXTENSIONS. (See Section 27 below).
4.5 FORCE MAJEURE. The time during which Landlord is prevented or delayed in making the Premises Ready for Occupancy, or the time during which Landlord is prevented or delayed in the performance of constructing the Tenant Improvements, due to matters that are beyond Landlord's reasonable control including, without limitation, inclement weather which materially delays completion of construction, fire, catastrophe, strikes, civil commotion, acts of God or the public enemy, acts or omissions of cities, counties or other governmental agencies, or the inability to obtain standard building materials. Any time of such delay shall be added to Landlord's time for performance of its obligations pursuant to this Lease, and Landlord shall have not liability to the Tenant by reason thereof. In the event Landlord is delayed in making the Premises Ready for Occupancy because of an inability to obtain standard building materials, Landlord will use reasonable best efforts to notify Tenant to that effect for the purpose of allowing Landlord and Tenant an opportunity to determine whether substitute materials may be incorporated into the work..
5. USE.
5.1 PERMITTED USE. Tenant shall use the Premises solely for the use stated in 1 (d) and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord.
5.2 RESTRICTIONS ON USE. Tenant shall not do or permit anything to
be done in or about the Premises nor bring or keep anything therein which will:
(a) increase the existing rate of, cause the cancellation of or otherwise
adversely affect any insurance for the Building or any part thereof or any of
its contents; (b) impair the proper and economic maintenance, operation and
repair of the Building or any portion thereof; (c) obstruct or interfere with
the rights of other tenants or occupants of the Building or injure or annoy
them; or (d) cause any nuisance in or about the Premises, the Building or
AmberGlen Business Center Common Areas. Tenant shall not use or allow any part
of the Premises to be used for the storage, manufacturing or sale of food or
beverages or for the retail sale or auction of merchandise, goods of property of
any kind, or as a school or classroom (other
6 - AMBERGLEN STANDARD LEASE FORM - LEASE I
than for employee training), or for any unlawful or objectionable purpose. Tenant shall not commit or allow to be committed any waste to the Premises, the Building or AmberGlen Business Center Common Areas.
5.2 COMPLIANCE WITH LAWS. Tenant shall not use the Premises or permit anything to be done in or about the Premises, the Building or AmberGlen Business Center Common Areas which will in any way conflict with any law, statute, ordinance, code, rule, regulation, requirement, license, permit, certificate, judgment, decree, order or direction of any governmental quasi-governmental authority, agency, department, board, panel or court (singularly and collectively "Laws"). Prior to exercising Landlord's remedies pursuant to Section 18 of this Lease, Landlord will give Tenant notice of any default of its obligations under this Section and an opportunity to cure the default as more specifically set out in Section 17.3. Tenant shall, at its expense, promptly comply with all Laws which are now in effect or which may hereafter be in effect and with the requirements of any board of fire insurance underwriters or other similar bodies now or hereafter constituted, relating to or affecting the condition, use or occupancy of the Premises with respect to the Tenant Improvements located in or about the Premises with respect to the Tenant Improvements located in or about the Premises or with respect to the Building or common areas on the floor or floors on which the Premises are located. However, at Landlord's option, Landlord shall have the right to complete such required modifications to the Premises or common areas for the account of Tenant, which costs shall be treated as Additional Rent (as that term is defined in Section 6.3 of this Lease). If the estimated cost of such work exceeds Ten Thousand Dollars ($10,000.00), Landlord shall have the work competitively bid by three 3 contractors selected by Landlord, and award a contract for the work to the lowest responsive and responsible bidder. Tenant shall obtain and maintain in effect during the Lease Term all licenses and permits required for the proper and lawful conduct of Tenant's business in the Premises, and shall at all times comply with such licenses and permits. The judgment of any court of competent jurisdiction or the admission of Tenant in any action or proceeding (whether Landlord is a party or not) that Tenant has violated any Laws shall be conclusive of that fact as between Landlord and Tenant.
5.4 LANDLORD'S RULES AND REGULATIONS. Tenant shall observe and comply with the Building rules and regulations which are in effect on the date thereof (a copy of which is attached hereto as Exhibit "E") and such reasonable amendments and additions thereof as Landlord may, from time to time, promulgate. Landlord shall not be responsible for the non-performance of said rules and regulations of any other tenants of the Building.
5.5 HAZARDOUS SUBSTANCES. Tenant shall not cause or permit the release, discharge, or disposal nor the presence, use, transportation, generation, or storage of any Hazardous Material (as hereafter defined) in, on, under, about, to, or from the Premises by either Tenant, Tenant's employees, agents, contractors, or invitees (collectively the "Tenant") other than (I) the use of such materials in the minimum quantities reasonably necessitated by the Tenant's regular business activities; (ii) those referred to and used (in existing quantities and through existing processes) on the attached Exhibit "J"; or (iii) those subsequently approved in writing by Landlord in its reasonable discretion. Such materials shall be used, stored and transported from the Premises in strict accordance with this Section
7 - AMBERGLEN STANDARD LEASE FORM - LEASE I
5.5 and the restrictions and limitations set forth on Exhibit "J". For purposes of this Section 5.5 Landlord's discretion shall be deemed reasonable if materials proposed by Tenant are more toxic or hazardous, used in greater quantities or used through different processes, than those referred to in Exhibit "J".
Tenant further agrees and covenants to Landlord, its agents, employees, affiliates and share holders (collectively the "Landlord") the following:
1. To comply with all Environmental Laws in effect, or may come into effect, applicable to the Tenant or Tenant's use and occupancy of the Premises;
2. To immediately notify Landlord, in writing, of any existing, pending or threatened (a) investigation, inquiry, claim or action by any governmental authority in connection with any Environmental Laws; (b) third part claims; (c) regulatory actions; and/or (d) contamination of the Premises;
3. Tenant shall, at Tenant's expense, investigate, monitor, remediate, and/or clean up any Hazardous Material or other environmental condition on, about, or under the Premises required as a result of Tenant's use or occupancy of the Premises;
4. To keep the Premises free of any lien imposed pursuant to any Environmental Laws; and
5. To indemnify, defend, and save Landlord harmless from and against any and all claims (including personal injury, real, or personal property damage), actions, judgments, damages, penalties, fines, costs, liabilities, interest, or attorney fees that arise, directly or indirectly, from Tenant's violation of any Environmental Laws or the presence of any Hazardous Materials on, under or about the Premises.
The Tenant's obligations, responsibilities, and liabilities under this Section shall survive the expiration of the Lease.
For purposes of this Section the following definitions apply:
"Hazardous Materials" shall mean: (1) any "hazardous waste" and/or "hazardous substance" defined pursuant to any Environmental Laws' (2) asbestos or any substance containing asbestos; (3) polychlorinated biphenyl's; (4) lead; (5) radon; (6) pesticides; (7) petroleum or any other substance containing hydrocarbons; (8) any substance which, when on the Premises, is prohibited by an Environmental Laws requires special handing or notification of any governmental authority in its collection, storage, treatment, or disposal or (ii) is defined or classified as hazardous, dangerous or toxic pursuant to any legal requirements.
8 - AMBERGLEN STANDARD LEASE FORM - LEASE I
"Environmental Laws" shall mean: any and all federal, state and local laws, statutes, codes, ordinances, regulations, rules or other requirements, relating to human health or safety or to the environment, including, but not limited to, those applicable to the storage, treatment disposal, handling and release of any Hazardous Materials, all as amended or modified from time to time.
6. RENT.
6.1 RENT. Without any prior notice, demand, offset or deduction, Tenant shall pay the Monthly Base Rent, the Additional Rent and Taxes and any other costs or expenses as required by this Lease in accordance with the Terms of this Lease.
Rent shall be payable without offset on or before the first day of each calendar month to Landlord's managers in advance at Birtcher Property Services, 26711 La Paz Road, P.O. Box 60009, Laguna Niguel, California 92607-0009 or such other place as may be designated by Landlord from time to time.
6.2 SECURITY DEPOSIT AND ADVANCE RENT. Concurrent with execution
of this Lease for purposes of this Lease, "Lease I", Tenant has executed a lease
(for purposes of this Lease, "Lease II") of a portion of the space in an
office/flex building located at 1875 NW Amberbrook Drive, Hillsboro, Oregon. To
secure Tenant's compliance with all of the terms and provisions of this Lease
I., and with all of the terms and provisions of Lease II, upon execution of this
Lease, Tenant shall provided Landlord one security deposit of either:
6.2.1 An unconditional, irrevocable letter of credit for a period of twelve years (and if the term of this Lease is extended by Landlord or Tenant, then for the entire period of such extension) in the amount of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) in a form and from an institution acceptable to Landlord or;
6.2.2 A cash security deposit equal to $0.965 multiplied by the sum
of the rentable square footage leased in Lease I and Lease II, plus fifty
percent (50%) of the cost of the building site modifications as described in
Section 31 hereof; provided, however, the total cash security deposit shall not
exceed Two Hundred Thousand and 00/100 Dollars ($200,000.00).
If the cash security deposit method is elected by Tenant, it shall be paid to
Landlord one-half (1/2) upon execution of Lease I and Lease II, plus fifty
percent (50%) of the cost of the building site modifications as described in
Section 31 hereof; provided, however, the total cash security deposit shall not
exceed Two Hundred Thousand and 00/100 Dollars ($200,000.00).
Provided Tenant has never been in monetary default of Lease I and/or Lease II during the initial thirty-six (36) months following the Commencement Date of each Lease, and provided Tenant has never been in non-monetary default of Lease I and/or Lease II during either of said thirty-six (36) month periods which has not been cured as provided in either such Lease, a portion of any cash security deposit provided to this Section 6.2.2 shall be within thirty (30) days after the thirty-seventh (37th) month following the Commencement
9 - AMBERGLEN STANDARD LEASE FORM - LEASE I
Dated of Lease II, if, and only if Tenant demonstrates to Landlord that Tenant has received market capitalization (meaning the fair market value of all outstanding shares of Tenant's stock during the entirety of the 37th month) in the amount not less than Fifty Million Dollars and 00/100 ($50,000,000.00). The amount of cash security deposit refundable pursuant to this Section 6.2 shall be the amount of cash deposited that exceeds the sum of all Rentable Area leased in Lease I and Lease II multiplied by Ninety-Six Cents ($0.96).
Landlord shall have the right to offset against the deposit any sums owing from Tenant to Landlord not paid when due, any damages caused by Tenant's default, the cost of curing any default by Tenant should Landlord elect to do so, and the cost of performing any repair or cleanup that is Tenant's responsibility under this Lease. Offset against the deposit shall not be an exclusive remedy, but may be made by Landlord in its sole and unlimited discretion, in addition to and not exclusive of any right or remedy provided by law of this Lease. Landlord shall give notice to Tenant each time an offset is claimed against the deposit, and, unless the Lease is terminated, Tenant shall within ten (10) calendar days following any such notice deposit with Landlord a sum equal to the amount of the offset so that the total deposit amount, net of offset, shall remain constant through the Term.
Landlord shall not be required to segregate any security deposit made by Tenant, buy may commingle any security deposit with the landlord's other funds and accounts. Landlord shall place the deposit in one or more federally-insured interest bearing savings accounts, the nature of which shall be selected by Landlord in its commercially reasonable discretion. The interest from any cash security deposit made pursuant to this Section 6.2.2 shall accrue to Tenant and, at Landlord's option, may be paid to Tenant on or before January 31 of each year the deposit is held or credited annually to the operating expenses reconciliation pursuant to Section 6 hereof. If Landlord sells its interest in the Premises, Landlord may deliver any cash deposit to the purchaser of Landlord's interest and thereupon be relieved of any further liability or obligation with respect to the Security Deposit.
In addition to the Security Deposit, the first months' Monthly Base Rent shall be paid thirty (30) days prior to the date the Premises is Ready for Occupancy (as that term is defined in Section 4.1), which dated shall be determined by Landlord based on the progress of construction of the Tenant Improvements, and provided to Tenant in writing.
6.3 ADDITIONAL RENT.
6.3.1 This is a "net" lease. Excepting the Monthly Base Rent and those items which this Lease expressly requires Landlord to pay, all deposits, costs, charges and expenses which Tenant assumes, agrees or is required to pay under this Lease shall be deemed "Additional Rent". The Monthly Base Rent, together with the Additional Rent is sometimes collectively referred to in this Lease as "Rent". Tenant shall not be charged for the use of inter-building conduit during the initial or extension term of this Lease.
6.3.2 If any installment of Monthly Base Rent or any other payment of Rent is not paid when due, in addition to any other consequence or charge associated with such late payment, Tenant shall pay to Landlord a late fee of five percent (5%) of the amount of such Monthly Base Rent, Additional Rent, Rent or other charge ("Late Fee").
10 - AMBERGLEN STANDARD LEASE FORM - LEASE I
The Late Fee shall be due and payable to Landlord at the address showing Section 2(h) of this Lease thirty (30) days after the date such Late Fee accrues, which date shall be the date of payment default.
6.4 DEFINITION OF OPERATING EXPENSES. The term "Operating Expenses" shall include all costs for the operation, repair and maintenance of the Building and all AmberGlen Business Center Common Areas incurred by Landlord on account of operating and maintenance of the Building and AmberGlen Business Center Common Areas and the real property on which it is situated. Landlord agrees to make reasonable efforts to minimize operating costs by taking advantage of cash discounts trade discounts or quantity discounts actually received by Landlord or its management representative, insofar as such efforts are not inconsistent with Landlord's intent to operate and maintain the Building and Amber Glen Common Area in a first-class manner. Operating expenses may include, but shall not be limited to:
6.4.1 All taxes (except franchise, estate, inheritance, net income and excess profits taxes), assessments, purchases, water and sewer rents, and other governmental impositions and charges whatsoever which may create a statutory lien upon the Premises, the Building or AmberGlen Business Center Common Areas, which are assessed levied or imposed during the term of this Lease, surcharges levied upon or assessed against parking space or areas, and any tax, levy or license fee measured by the rent payable to Tenant under this Lease, surcharges levied upon or assessed against parking space or areas, and any tax, levy or license fee measured by the rent payable to Tenant under this Lease which may be in lieu of or in addition to current taxes (except Landlord's net income taxes) or any obligation to any governmental entity assessed upon Landlord as a result of its ownership or operation and all reasonable costs and expenses incurred by Landlord in contesting or negotiating the same with governmental authority if Landlord, in its reasonable discretion, elects to contest or negotiate the same.
6.4.2 All costs and expenses to Landlord in maintaining fire and extended coverage insurance including all risk endorsement on the property, public liability, rent loss insurance, difference in conditions and any other insurance maintained by Landlord covering the use and operation the Building and AmberGlen Business Center Common Areas, the part of any claim required to be paid under the deductible portion of any insurance policies carried by Landlord in connection with the Building (all such insurance shall be in such amounts as Landlord may reasonably determine).
6.4.3 All costs and expenses of repairing, replacing, operating and maintaining the heating, ventilating and air conditioning systems for the Building, including maintenance contracts therefor and the cost of all utilities (that are not separately metered to Tenant) required in the operating of all such systems, except those required to be paid directly by a tenant of the Building.
11 - AMBERGLEN STANDARD LEASE FORM - LEASE I
6.4.4 All costs and expenses to Landlord in providing standard services and utilities to tenants of the Building, including common area janitorial services, window washing and utilities not separately metered; together with the costs of replacement of electric light bulbs and florescent tubes and ballasts, which Landlord shall have the exclusive right to provide and install at Tenant's sole cost and expense.
6.4.5 Costs incurred by accountants and experts or other consultants to assist the accountants in making the computations required hereunder.
6.4.6 All costs and expenses incurred by Landlord in operating, managing (including administrative costs), maintaining and repairing the Building and AmberGlen Business Center Common Areas, including all sums expended in connection with the common areas for general maintenance and repairs, resurfacing, painting, restriping, cleaning, sweeping and janitorial services, window washing, maintenance and repair of elevators, stairways, sidewalks, curbs, and Building signs, sprinkler systems, planting and landscaping, lighting and other utilities; maintenance and repair of any fire protection systems, automatic sprinkler systems, lighting systems, storm drainage systems and any other utility systems; cost of all supplies and personnel to implement such services and to police the Building and AmberGlen Business Center Common Areas; rental and/or depreciation of machinery and equipment used in such maintenance and services; security and fire protection services, trash removal services; all cost and expenses pertaining to snow and ice removal, alarm systems, patrol service, utilities, premiums and other costs for workers compensation insurance, wages, withholding taxes, social security taxes, personal property taxes, fees for required licenses and permits, supplies and charges for management of the Building and AmberGlen Business Center Common Areas and an overhead cost equal to five percent (5%) of the total Operating Expenses. Costs and expenses incurred by Landlord in operating, managing and maintaining the Building and AmberGlen Business Center Common Areas which are incurred exclusively for the benefit of specific tenants of the Building will be billed accordingly and will not be included within the Operating Expenses. Landlord, however, may cause any or all of said services to be provided by an independent contractor(s).
6.4.7 Cost of capital improvements, structural repairs or replacements to the Building as deemed necessary by Landlord. The cost of any such improvements, repairs or replacements deemed necessary by one other than the Landlord shall be paid by Tenant as Additional Rent.
6.5 EXCLUSIONS FROM OPERATING EXPENSES. Operating Expenses shall not include:
6.5.1 Costs associated with the operation of the business of the ownership or entity which constitutes "Landlord", as distinguished from the costs of building operations, including, but not limited to, ownership accounting and legal fees, costs of defending any lawsuits with any mortgagee (except as the actions or omissions of Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any
12 - AMBERGLEN STANDARD LEASE FORM - LEASE I
of Landlord's interest in the Building, costs of any disputes between Landlord and its employees (if any) not engaged in Building operation, disputes of Landlord with Building management, or outside fees paid in connection with disputes with other tenants;
6.5.2 Costs incurred in connection with the original construction of the Building or in connection with any major change in the Building, including but not limited to the addition or deletion of floors but excluding items specified in Section 6.4.7;
6.5.3 Costs of alterations or improvements to the Premises or the premises of other tenants, but excluding items specified in Section 6.4.7;
6.5.4 Depreciation, interest and principal payments on mortgage and other debt costs, if any, but excluding items specified in Section 6.4.7;
6.5.5 Costs or warranty work and costs of correcting defects in the original construction of the Building;
6.5.6 Legal fees, space planners' fees, real estate brokers' leasing Commissions, and advertising expenses incurred in connection with the original development or original leasing of the Building or future leasing of the Building;
6.5.7 Costs for which Landlord is reimbursed by its insurance carrier or any tenant's insurance carrier;
6.5.8 Any bad debt loss, rent loss, or reserves for bad
debts or rent loss;
6.5.9 The expense of extraordinary services provided to
|
other tenants in the Building;
6.5.10 The wages of any employee who does not devote substantially all of his or her time to activities within AmberGlen;
6.5.11 Fines, penalties, and interest except those that cannot reasonable be avoided;
6.5.12 Capital expenditures required by Landlord's failure to comply with laws enacted on or before the date the Building's Temporary Certificate of Occupancy is validly issued;
6.5.13 Costs incurred by Landlord with respect to goods and services (including utilities sold and supplied to tenants and occupants of the Building) to the extent that Landlord is reimbursed for such costs;
6.5.14 Costs, including permit, license and inspection cots, incurred
13 - AMBERGLEN STANDARD LEASE FORM - LEASE I
with respect to the installation of tenant improvements made for new tenants in the Building or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant rentable space for tenants or other occupants of the Building;
6.5.15 Expenses in connection with services or other benefits for which Tenant is charged directly but which are provided to another tenant or occupant of the Building;
6.5.16 Overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord, excluding Landlord's development and management representative, for services in the Building to the extent the same exceeds the reasonable cost of such services rendered by similarly qualified, experienced unaffiliated third parties on a competitive basis;
6.5.17 Rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment ordinarily considered to be of a capital nature, except equipment not affixed to the Building which is used in providing janitorial or similar services but excluding items specified in Section 6.4.7;
6.5.18 All items and services for which Tenant or any other tenant in the Building reimburses Landlord;
6.5.19 Electric power costs for which any tenant directly contracts (subject to conditions described in Section 8) with the local public service company; and
6.5.20 Building janitorial expenses unless provided by
Landlord.
6.6 COLLECTION OF ACTUAL TENANT CHARGES. Unless Landlord
|
exercises the option contained in Section 6.7 below for a particular calendar year, Tenant shall pay actual Tenant Charges for each month of such calendar year immediately upon receipt of invoice from Landlord for such monthly Tenant Charges.
6.7 COLLECTION OF TENANT CHARGES BASED ON ESTIMATES. For each calendar year of the Least Term, Landlord shall, at its option, reasonable estimate the total Operating Expenses for the following calendar year. Tenant shall pay its proportionate share of the Operating Expenses. In the event the Building and/or AmberGlen Business Center occupancy if not one hundred percent (100%), said Operating Expenses shall be adjusted to equal what the total Operating Expenses would be if the occupancy were one hundred percent (100%). Tenant's initial percentage or proportionate share of Operating Expenses for the Building and Building Common Areas is one-hundred percent (100%); and Tenant's percentage share of Operating Expenses for the AmberGlen Business Center Common Areas is one hundred percent (100%) of such Operating Expenses charged to the Building. The percentage of AmberGlen Business Center Common Areas expenses charged to the Building is two and 34/100ths percent (2.34%). For each year of the Least Term, Tenant shall pay to Landlord in advance on or before the first day of each month, without demand or notice, one-twelfth (1/12th) of Tenant's share of the estimated annual Operating Expenses. It the term of this Lease commenced on a day other than the first day of a
14 - AMBERGLEN STANDARD LEASE FORM - LEASE I
calendar month, Tenant shall pay to Landlord on the first day of the term, a sum determined by multiplying one three-hundred-sixty-fifth (1/365th) of the Tenant's share of the estimated Operating Expenses by the number of days remaining in the first calendar month of the term. Any change in the Tenant's percentage or proportionate share of the Operating Expenses for the Building Common Area pr the AmberGlen Common Area resulting from changes in (I) the Tenant's floor area, (ii) Building floor area, or (iii) total AmberGlen Business Center Common Area, shall be effective as of the first day of the month following the change.
6.8 REESTIMATIONS. At any time from time to time during the term hereof, Landlord may furnish Tenant with written notice of a reestimation of the annual Operating Expenses to reflect more accurately, in Landlord's sole opinion, the current Operating Expenses. Commencing with the first day of the calendar quarter next succeeding delivery of such notice to Tenant, and continuing on the first day of each calendar month during the term (until subsequently reestimated), Tenant shall pay to Landlord one-twelfth (1/12th) of the Tenant's share of the estimated Operating Expenses, as reestimated.
6.9 ANNUAL ADJUSTMENTS. Within a reasonable time following the end of each calendar year during the Term of this Lease, Landlord shall furnish to Tenant an itemized statement certified as correct by Landlord, setting forth the total Operating Expenses for the preceding calendar year, the amount of Tenant's share of such Operating Expenses and the payments made by Tenant with respect to such calendar year. If Tenant's share of the actual Operating Expenses for such year exceeds the payment so made by Tenant, based on the receipt of said statement. If said payments by Tenant, based on Landlord's estimate, exceed Tenant's share of the actual Operating Expenses, Landlord will credit the amount of such overpayment against Tenant's next Operating Expense payment due. Until Tenant receives a settlement setting forth the new amounts of Tenant's estimated share of Operating Expenses for the new calendar year ("New Statement"), Tenant shall continue to pay at the rate being paid for the year just completed. Tenant shall commence payment to Landlord of the estimated share of Operating Expenses shown on the New Statement, beginning on the first day of the month following the month in which the New Statement is received.
6.10 RECORDS AND AUDIT. Landlord agrees to maintain accurate records of the cost of items with respect to which Tenant is required to pay as Additional Rent in accordance with reasonably accounting practices for similar projects. Landlord shall provide to Tenant reasonable detail of the calculations of the Operating Expenses ("Expense Statement") as soon as reasonably practicable after the end of each calendar year ("Expense Statement Date"). The Expense Statement shall reflect total Operating Expenses for the Building and Common Area and all adjustments corresponding to the requirements set forth in this Lease. Landlord shall also provide in reasonable detail the calculations of Tenant's pro rata share of the Operating Expenses as said calculations are delineated in this Lease. For a period of sixty (60) days after Tenant is provided with the Expense Statement ("Audit Period"), Tenant shall have the right, at its own cost and expense, to audit or inspect Landlord's records with respect to Operating Expenses for that lease year. All of the information obtained through Tenant's audit, as well as any settlement, compromise or
15 - AMBERGLEN STANDARD LEASE FORM - LEASE I
adjustment reached between Landlord and Tenant relative to the results of the audit shall be held in strict confidence by Tenant and its officers, agents (including any third-party auditor), directors, shareholders and employees. Tenant shall give Landlord not less than five (5) business days' prior written notice of its intention to conduct any such audit. In the event Tenant elects to audit Landlord's Operating Expense records, such audit, if conducted by a third party, may not be compensated by Tenant on a contingency fee basis. Landlord shall make such records available to Tenant, Tenant's designated employees or agents, for inspection during normal business hours. Tenant, Tenant's designated employees or agents shall be entitled to make photostatic copies of such records, provided Tenant bears the expense of such copying. If, as a result of the audit, Tenant believes that Tenant's share of the Operating Expenses has been overstated, written objection shall be delivered to Landlord specifying the claimed error(s). Such objection shall be delivered to Landlord within the thirty (30) day Audit Period or all objections will be deemed to have been waived by Tenant. If such audit discloses that the amount paid by Tenant as Tenant's share of Operating Expenses has been overstated, if Landlord agrees with the Audit, Land lord shall repay such overpayment ("Expense Overpayment") to Tenant within thirty (30) days after the Audit Period. If the Expense Overpayment is more than five percent (5%) of the variable Operating Expenses (not including Taxes or insurance), if Landlord agrees with the audit then Landlord shall also pay Tenant's reasonable costs of audit at the same time. If Landlord disputes the audit, Landlord and Tenant shall mediate or arbitrate the dispute before a single arbitrator mutually selected by the Landlord and Tenant. "If arbitrated, the Landlord and Tenant agree to be bound by the arbitrator's decision. If the arbitrator finds that the Expense Overpayment is more than five percent (5%) of the variable Operating Expenses (not including Taxes or insurance), then Landlord shall also pay Tenant's reasonable costs of audit and all arbitration costs within thirty (30) days of the date of decision. If, however, the arbitrator finds that there is not Expense Overpayment, then Tenant shall pay Landlord's reasonable costs related to the audit and all arbitration costs within thirty (30) days of the dated of decision. If, however, the arbitrator finds that there is no Expense Overpayment, then Tenant shall pay Landlord's reasonable costs related to the audit and all arbitration costs with thirty (30) days of the date of decision.
7. REPAIRS AND MAINTENANCE.
7.1 LANDLORD'S OBLIGATION. The following are the obligation of the Landlord:
a) Repair, maintenance and replacement of the Skybridge (see Section 31), roof, gutters, exterior walls (including painting), bearing walls, structural members and foundations of the Building.
b) Repair and maintenance of sidewalks, driveways, curbs, parking areas and areas used in common by Tenant and Landlord or tenants of other parts of the Building and removal of snow and ice therefrom.
c) Repair and maintenance of water, fire, sewage, gas and electrical service and of conduits (see Section 3.1) from the public right-of-way to the exterior walls of the Building.
16 - AMBERGLEN STANDARD LEASE FORM - LEASE I
d) Repair and maintenance of heating, ventilating and air conditions (HVAC) systems which service the Premises as well as other parts of the Building.
e) Maintenance and replacement of landscaping for the land on which the Building is situated and AmberGlen Business Center Common Area.
Although performance of the foregoing are the obligation of
Landlord, the cost of all of the foregoing shall be a Tenant Charge shared on
proportionate basis by Tenant as set forth in Section 6. Except as set forth in
Section 7.1, Landlord shall not otherwise be required to repair or maintain the
Premises or perform any other duties with respect to the Premises.
7.2 TENANT'S OBLIGATION. The following are the obligation of the Tenant:
a) Repair and maintenance of the interior of the Premises, including without limitation keeping the interior of the Premises in a clean and sanitary condition free of debris; janitorial service for the Premises which will be arranged for by Tenant with Landlord's approval, which will not be unreasonably withheld; repair and maintenance of all plumbing within the Premises and repair of any damage resulting from water leaks; replacement of all glass in windows or doors of the Premises which become chipped, cracked or broken; repair and/or replacement of lighting fixtures, ballasts or light bulbs; repair and maintenance of water, fire, sewage gas, electrical and conduit systems within the Building.
b) Any repair necessitated by the use, misuse, abuse wrongful act, negligence or breach of or default under this Lease of or by Tenant, its agents, employees or invitees. Tenant shall not allow the Premises to deteriorate or fall out of repair.
c) Any repairs or alterations required in order for Tenant to comply Rules and Regulations as set forth in Exhibit "E".
d) All repairs to and maintenance of the Premises other
than repairs and maintenance which are the obligation of Landlord as stated in
Section 7.1.
e) Any costs to install, repair or maintain Tenant's fiber optic cable and/or other types of data/communications networking, which cables or networks shall be installed in the underground conduit provided to Tenant by Landlord.
7.3 REIMBURSEMENT FOR REPAIRS ASSUMED. If Tenant fails or refuses to make repairs which are required to be made by Tenant by this Section 7, Landlord will provide Tenant with a written notice stating repairs to be made. Tenant shall have ten (10) calendar days in which to complete said repairs. In the event Tenant again fails to complete repairs following receipt of Notice, Landlord may make the repairs and charge the costs of such repairs to Tenant. Such expenditures by Landlord shall be reimbursed by Tenant on demand together with interest as set forth in Section 25.16 from the date of expenditure by Landlord until repayment in full.
17 - AMBERGLEN STANDARD LEASE FORM - LEASE I
7.4 DUTY TO MAKE REPAIRS. The duty to the Landlord to make repairs shall not mature until a reasonable time after Landlord has received notice in writing from Tenant of the repairs that are required.
8. UTILITIES. Tenant shall pay all utility charges with respect to the Premises, including but not limited to water, sewer, gas, electricity (including utilities servicing all central HVAC systems servicing the Premises), telephone, and garbage removal ("Utilities"). All utilities shall be separately metered. Tenant may not separately contract with utility providers to acquire any public utilities or any private utilities except telephone, without Landlord's prior written consent.
9. TAXES AND ASSESSMENTS.
9.1 PAYMENT OF PROPORTIONATE SHARE. Tenant shall be liable for payment of its proportionate share of all current assessments, real estate taxes, taxes, fees, levies and other similar charges (all of the foregoing herein called "Taxes") imposed by any governmental jurisdiction against the Premises, the Building or AmberGlen Business Center Common Areas, either directly or indirectly.
Tenant's proportionate share of any Taxes shall be based only on that Portion of the Taxes which is allocable to the Premises during the Term. For these purposes, an assessment related to a local improvement district shall be deemed to have a useful life of ten (10) years and Tenant's proportionate share shall be equal to a fraction the numerator of which is the remainder of the Term and the denominator of which is ten (10) years. Tenant shall pay all taxes levied on or with respect to Tenant's personal property located on the Premises.
9.2 TAXES ON RENT. If, at any time during the Term of this Lease under the laws of the United States Government, the State of Oregon, or any political subdivision thereof in which the Premises are located, a tax or excise on rent, or any other tax however described, is levied or assessed by any such political body against Landlord on account of rent payable to Landlord hereunder, such tax or excise shall be considered for the purpose of this Lease a real property tax payable by Tenant. If real estate taxes are withdrawn in whole or in part and any substitute tax is made therefor, such tax shall in any event for the purpose of the Lease be considered real property tax, a proportionate share of which shall be paid by Tenant, regardless of the source from which it is collected. Nothing in this Section 9 is intended to require Tenant to pay any income, franchise, or excess profits tax of Landlord.
10. ALTERATIONS AND ADDITIONS.
10.1 LANDLORD'S CONSENT.
a) Tenant shall not make or permit to be made any alterations, additions or improvements (singularly and collectively "Alterations") to or of the Building or the Premises or any part thereof without the prior written consent of Landlord in each instance. However, Landlord's consent shall not be required for minor decorations of the Premises such as wall coverings and wall hangings, built-in cabinetry and movable
18 - AMBERGLEN STANDARD LEASE FORM - LEASE I
partitions, nor for the installation of furnishings or non-structural Alterations which do not require a building permit and the total hard cost of which are valued at less than Ten Thousand Dollars ($10,000.00) (collectively,"Exempt Alterations"). If the value of any Exempt Alterations is greater than Two Thousand Five Hundred Dollars ($2,500.00), Tenant shall give Landlord prior written notice of the Exempt Alteration, which notice shall include a copy of the plans for such Exempt Alteration.
b) Landlord will not unreasonable withhold or delay its
consent to any Alterations provided that provided that all of the following
conditions shall be satisfied: (i) the Alterations do not affect the outside
appearance of the Building, (ii) the Alternations are nonstructural and do not
impair the strength of the Building or any part thereof; (iii) the Alterations
are to the interior of the premises and do not affect any part of the Building
outside of the Premises; (iv) the Alterations do not affect the proper
functioning of the heating, ventilating and air conditioning ("HVAC"),
mechanical, electrical, sanitary or other utilities, systems and services of the
Bu9ilding, or increase the usage thereof by Tenant; (v) Landlord shall have
approved the final plans and specifications for the Alterations and all
contractors who will perform the alterations; (vi) Tenant pays to Landlord
out-of-pocket cost and expenses up to $1,000.00, actually incurred by Landlord
in reviewing Tenants' plans and specifications and inspecting the Alterations to
determine whether they are performed in accordance with the approved and
specifications and in compliance with laws, including, without limitation, the
fees of any architect or engineer employed by Landlord for such purpose; and
(viii) before processing with any Alteration which will cost more than
$10,000.00 (exclusive of Section 10.2), Tenant obtains and delivers financial
assurances to Landlord. For purposes of this Section 10.1(b) the term "financial
assurances" means either: (A) a performance bond and a labor and materials
payment bond for the benefit of Landlord, issued by a corporate surety licensed
to do business in Oregon each in an amount equal to one hundred twenty-five
percent (125%) of the estimated cost of the Alterations and in form satisfactory
to Landlord, or (B) such other security as shall be reasonable satisfactory to
Landlord or (C) Tenant's selection of a contractor from a list of four (4)
contractors provided to Tenant by Landlord. Unless all of the foregoing
conditions (i) through (vii) are satisfied, Landlord shall have the right to
withhold its consent to the Alterations in Landlord's sole and absolute
discretion. Excepting the conditions set forth in this Section (b), Landlord
will impose no other conditions to approval of requested Alterations.
c) All Alterations and Exempt Alterations must comply with all laws which are then in effect, the other terms of this Lease, and the final plans and specifications approved by Landlord, and Tenant shall fully and promptly comply with and observe the rules and regulations of Landlord then in force with respect to the making of such Alterations. Landlord's review and approval of Tenant's plans and specifications are solely for Landlord's benefit. Landlord shall have no duty toward Tenant, nor shall Landlord be deemed to have made any representation or warranty to Tenant, with respect to the safety, adequacy, correctness, efficiency or compliance with Laws of the design of the Alterations and/or Exempt Alterations, the plans and specifications therefor, or any other
19 - AMBERGLEN STANDARD LEASE FORM - LEASE I
matter regarding the Alterations. Tenant shall deliver to Landlord a complete set of "as built" plans and specifications for each Alteration.
10.2 OWNERSHIP AND SURRENDER OF ALTERATIONS. Upon their installations, all Alterations and Exempt Alternations, including, but not limited to wall covering paneling and built-in cabinetry, but excluding movable furniture, trade fixtures and office equipment ("Tenant's Property") , shall become a part of the realty and belong to Landlord and shall be surrendered with the Premises. However, upon the expiration or sooner termination of the Lease Term, Tenant shall, upon written demand by Landlord, at Tenant's expense, immediately remove any Alterations made by Tenant which are designated by Landlord to be removed in its consent to such Alteration and/or those Exempt Alterations which Landlord notifies Tenant shall be removed, and repair any damage to the Premises or the Building caused by such removal, and restore the Premises to its original condition and configuration. Landlord's notice of removal in respect of Exempt Alterations will be given promptly after Landlord receives Tenant's written notice of Exempt Alteration required by Section 10.1(a) of this Lease.
10.2 ADDITIONAL REQUIREMENTS. Tenant, at its expense , shall obtain all necessary permits and certificates for the commencement and performance of Alterations and Exempt Alterations and for final approval thereof upon completion, and shall cause such alterations to be performed in compliance therewith and with all applicable insurance requirement, and in a good, first-class and workmanlike manner. Tenant , at it's expense, shall diligently cause the cancellation or discharge of all notices of violation arising from or connected with Alterations, or any other work, labor, services or materials done for or supplied to Tenant or Tenant's Affiliates, or by any person claiming through or under Tenant or Tenant's Affiliates.Alterations and Exempt Alterations shall be performed so as not to interfere with any other expense on Landlord in the construction, maintenance, repair or operations of the Building. Throughout the performance of the Alterations and Exempt Alterations, Tenant, at its expense, shall carry, or cause to be carried, in addition to the insurance as Landlord may reasonably compensation insurance in statutory limits and such other insurance as Landlord may reasonably require, with insurers reasonably satisfactory to Landlord. Tenant shall furnish Landlord with satisfactory evidence that such insurance is in effect at or before the commencement of the Alterations and, upon request, at reasonable intervals thereafter until the completion of the Alterations and Exempt Alterations.
10.4 ADDITIONAL REQUIREMENTS. Tenant, at its expense, shall obtain all necessary permits and certificates for the commencement and performance of Alterations and Exempt Alternations and for final approval thereof upon completion, and shall cause alterations to be performed in compliance therewith and with all applicable insurance requirements, and in a good, first-class and workmanlike manner. Tenant, at its expense, shall diligently cause the cancellation or discharge of all notices of violation arising from or otherwise connected with Alterations, or any other work, labor, services or materials done for or supplied to Tenant or Tenant's Affiliates, or by any person claiming through or under Tenant or Tenant's Affiliates. Alterations and Exempt Alterations shall be performed so as not to interfere with any other tenant in the Building, cause labor disharmony therein, or delay or impose any additional expense on Landlord in the construction, maintenance, repair
20 - AMBERGLEN STANDARD LEASE FORM - LEASE I
or operations of the Building. Throughout the performance of the Alterations and Exempt Alterations, Tenant, at its expense, shall carry, or cause to be carried, in addition the insurance described in this Lease, workers' compensation insurance in statutory limits and such other insurance as Landlord may reasonably require, with insurers reasonably satisfactory to Landlord. Tenant shall furnish Landlord with satisfactory evidence that such insurance is in effect at or before the commencement of the Alterations and Exempt Alterations and, upon request, at reasonable intervals thereafter until completion of the Alterations and Exempt alterations.
11. INSURANCE.
11.1 LIABILITY, PROPERTY DAMAGE AND WORKER'S COMPENSATION. Tenant shall, at all times during the Lease Term or any extension thereof, and its own cost and expense, procure damage liability insurance adequate to protect Landlord and naming Landlord, Landlord's Manager, any persons, firms or corporation designation by Landlord, any mortgagee or the Building of whose identity Tenant is notified, as an additional insured, against liability for injury or death of any person in connection with the use, operation or condition of the Premises. Such property damage and bodily injury liability insurance shall at all times be in a combined limit of not less that $1,000,000.00 on an occurrence basis. The limits of such insurance shall not limit the liability of Tenant.
11.2 PROPERTY INSURANCE. Landlord shall maintain insurance on an
all risk basis on the Building in the amount of the full insurable replacement
cost of the Building. Landlord shall have the right to place on the Building any
other insurance as Landlord shall reasonable deem necessary, with (for
Landlord's successors only) only reasonable deductibles. Tenant shall bear the
expense of any insurance insuring the property of Tenant and Tenant Improvements
on the Premises against such risks. As Additional Rent for the Premises, Tenant
shall reimburse Landlord for Tenant proportionate share of the cost of all
insurance maintained by Landlord with respect to the Building at set forth in
Section 6.4.2.
11.3 WAIVER OF SUBROGATION Tenant and Landlord each waives any and all right of recovery against the other, or against the other, or against the officers, partners, employees, agents and representatives of the other, for loss of or damage to such waiving party or its property or the property of others under its control, if and to the extent that such loss or damage is insured against under any insurance policy in force at the time of such loss or damage.
12.1 PARTIAL DAMAGE. If the Premises are partly damage and Section 12.2 does not apply, the Premises shall be repaired by Landlord provided, however, Landlord shall not be required to repair or restore any Tenant Improvements or additions other than the Initial Tenant Improvements ( as defined exhibit "C"); and provided further, Landlord shall be required to make repairs or restoration only to the extent it receives or has the right to receive insurance proceeds from either ( I ) a Landlord or Tenant's insurance policy required by section 11 of this Lease or (ii) a policy required by Section 11 of this lease in a form typically acquired for buildings similar to the Building which is the subject of this Lease, in an amount sufficient to pay the cost of such repairs and restoration. If the Premises are partially damaged during the last eighteen (18) months of the Term (as it may be
21 - AMBERGLEN STANDARD LEASE FORM - LEASE I
extended from time-to-time), and Section 12.2 does not apply, and the time for repair or restoration is more than 120 days ( as deemed by Landlord's architect or engineer within thirty (30) days after the date of damage), either Landlord or Tenant may elect to terminate this Lease as of the date of such damage.
12.2 DESTRUCTION. If the Premises are destroyed or damaged such that the cost or repair exceeds seventy-five percent (75%) of the value of the Building before the damage as reasonably determined by Landlord, either party may elect to terminate this Lease as of the date of the damage or destruction by giving written notice to the other party not later than forty-five (45) calendar days following the date of damage, provided however Tenant may not elect to terminate if the damage or destruction was caused by the wrongful act or negligence of Tenant failure by Tenant to comply with any of the provisions of this Lease. In the event the Lease is terminated, all rights and obligations of the parties shall cease as of the date of termination, and Tenant shall be entitled to the reimbursement of any prepaid amounts paid by Tenant and attributable to the anticipated Term. If neither party elects to terminate, Landlord shall proceed to restore the premises to substantially the same form as prior to the damage or destruction provided, however, Landlord shall not be required to repair or restore any Tenant Improvement or additions other than the Initial Tenant Improvements ( as defined in Exhibit "C" ); and, provided further. Landlord shall be required to make repairs or restoration only to the extent it receives insurance proceeds sufficient to pay the cost of such repairs or restoration.
12.3 RENT ABATEMENT. Rent shall be abated during the repair of any damage inproportion to the extent the Premises are untenantable , except that there shall be no rent abatement where the damage occurred as the result of the wrongful act, negligence or failure to comply with any provisions of this Lease of or by Tenant that results in a judicial or arbiter's determination that insurance coverage required by Section 11 is lost as a result of Tenant's act or failure to act.
13. EMINENT DOMAIN.
13.1 PARTIAL TAKING. If a portion of the Premises, vehicular access to the Building, or parking spaces allocated to the Northwest Campus, is condemned and Section 13.2 below does not apply, this Lease shall continue on the following terms;
(a) Landlord shall be entitled to all of the proceeds of condemnation, and Tenant shall have no claim against Landlord as a result of the condemnation except Tenant may make a separate claim against the condemning authority for relocation, tenant improvements other than the Tenant Improvements, and personal property of Tenant.
(b) Landlord shall proceed as soon as reasonably possible to make such repairs and alterations to the Premises as are necessary to restore the remaining Premises to a condition as comparable as reasonably practicable to that existing at the time of the condemnation.
22 - AMBERGLEN STANDARD LEASE FORM - LEASE I
(c) After the date on which title vests in the condemning authority or an earlier date on which alterations or repairs are commenced by Landlord to restore the balance of the Premises in anticipation of taking, the Rent shall be reduced in proportion to the reduction in the condemnation, there are less than two (2) vehicular access points to the Northwest Campus, or there is more than a ten percent (10%) reduction in the number of parking spaces provided for under this Lease. If the parties are unable to agree upon the amount of the reduction of rent, the amount shall be determined by an acceptable arbitrator on by either party as provided under Oregon Law. The determination of the arbitrator shall be final and binding on the parties.
(d) If a portion of Landlord's property not included in
the Premises is taken and severance damages are awarded on the account of the
Premises, or an award is made for detriment to the Premises as a result of
activity by public body not involving a physical taking of any portion of the
Premises, this shall be regarded as a potion condemnation to which Section 13.1
(a) and Section 13.1 (c) apply, and the rent shall be reduced in proportion to
percent of the Premises taken.
13.2 TOTAL TAKING. If a condemning authority takes all the Premises, or a portion sufficient, to render the remaining Premises reasonably unsuitable for the use of which Tenant was then making of the Premises, or all access points to the Northwest Campus, this Lease shall terminate as of the date the title vests in the condemning authorities. If the parties cannot agree on the suitability of the remainder Premises for Tenant's use, the issue of suitability shall be submitted to an arbitrator as provided in Section 13.1 (c). Landlord shall be entitled to all of the proceeds of condemnation, and Tenant shall have no claim against Landlord as a result of the condemnation.
13.3 SALE IN LIEU OF CONDEMNATION. Sale of all or part of the Premises to a purchaser with the power of eminent domain in the face of a threat or probability of the exercise of the power shall be treated for the purposes of this Section 13 as a taking by condemnation.
14. LIENS AND INDEMNIFICATION.
14.1 LIENS.
(a) Except with respect to activities for which Landlord is responsible, Tenant shall pay when due all claims for work done on and for services rendered or material or equipment furnished to the Premises and shall keep the Premises, the Building and AmberGlen Business Center Common Areas free from any liens, security interest or encumbrances (including without limitation, all statutory liens, mechanics liens, and the like) arising in connection with Tenant's use or occupancy of the Premises, or any labor, services, materials or equipment provided for or at the request of Tenant or Tenants agents or consultant's (collectively " Tenant's Affiliates"), or any other act or omission of Tenant or Tenant's Affiliates. If Tenant fails to pay any such claims or to discharge any lien within the time provided in Section 17.3 of this Lease, in addition to any other rights and remedies provided by law, Landlord may do so and collect the cost as Additional Rent. Any amount so added shall bear interest as set forth in Section 25.16 from the date expended by Landlord
23 - AMBERGLEN STANDARD LEASE FORM - LEASE I
until payment in full and shall be payable on demand. Such action by Landlord shall not constitute a waiver of any right or remedy which Landlord may have on account of Tenant's default and shall not act to cure Tenant's default.
(b) Tenant may withhold payment of any claim in connection with a good faith dispute over the obligation to pay so long as Landlord's property interests are not jeopardized and the amount claimed in contested in good faith by appropriate proceedings. If a lien is filed as a result of nonpayment, Tenant shall, within (10) calendar days after Tenant learns of the filing, secure the discharge of the lien or deposit with Landlord cash or sufficient corporate surety bond or other surety satisfactory to landlord in the amount sufficient to discharge the lien, plus any costs, attorney fees, and other charges that could accrue as a result of a foreclosure of sake under the lien.
14.2 INDEMNIFICATION. Tenant shall indemnify, hold harmless, and defend (with counsel reasonably acceptable to Landlord.) Landlord from and against any claim, loss, or liability arising out of or related to any activity of Tenant or Tenant's Affiliates on the Premises or any condition of the Premises in the possession under the control of Tenant. Landlord shall have no liability to Tenant for any loss or damage caused by third parties or by any condition of the Premises.
15. QUIET ENJOYMENT. So long as Tenant pays all rent and performs all of its other obligation as required hereunder, Tenant shall quietly enjoy the Premises without hindrance or molestation by Landlord, subject to the terms of this Lease and the terms of any Superior Leases and Mortgages to the extent provided for in Section 20 of this Lease, and all other agreement or matters of record or to which this Lease is subordinate. As used in this Lease, the term "Superior Lease and Mortgages" means all present and future ground leases, underlying leases, mortgages, deeds of trust or other encumbrances, and all renewals, modifications, consolidations, replacements or extensions thereof or advances made thereunder, affecting all or any portion of the Premises, the Building or Common Areas.
16. ASSIGMENT AND SUBLETTING
16.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not voluntarily or by operation of law or otherwise, assign, transfer, mortgage, sublet or otherwise transfer or encumber all or any part of Tenant's intereins in this Lease or in the Premises without Landlord's prior written consent, which Landlord shall not unreasonable without or delay. Except as otherwise provided in Section 16.2 below, any attempted assignment, transfer, mortgage, encumbrance or subletting by Tenant without such consent shall void shall constitute a breach or a default under this Lease. Landlord shall not be deemed unreasonable to have withheld consent if Landlord has sought but not obtained any required consent of a lender to Landlord, a partner of Landlord, or shareholder of Landlord.
16.2 LANDLORD'S RIGHT TO TERMINATED LEASE. If tenant desires to
assign interests in this Lease or to sublease all or any part the Premises.
Tenant shall notify Landlord in writing. This notice shall be accompanied by:
(a) a statement setting forth the name and business of the proposed assignee or
subtenant; (b) an executed copy of the proposed assignment of sublease (and any
collateral agreements) setting forth all of the
24 - AMBERGLEN STANDARD LEASE FORM - LEASE I
terms and the financial details of the sublease or assignment (including,
without limitation, the term, the rent and any security deposit, and amounts
payable for Tenant's property and the common use of any personnel or equipment);
(c) financial statements certified by an independent certified public accountant
and other information concerning the proposed assignment or sublease which
Landlord may reasonable request. It Tenant proposes to assign this Lease or
sublet twenty-five (25%) or more of the Premises ("Proposed Sublease Space"),
Landlord shall have the right in its sole and absolute discretion, to notify
Tenant in writing of its intent to terminate this Lease as to the Proposed
Sublease Space only within thirty (30) days after receipt of Tenant's notice and
the information described above or the receipt of any additional information
requested by Landlord. If Tenant fails to withdraw the proposed assignment or
sublease with ten (10) days after Landlord's notice of intent to terminate, and
Landlord elects to terminate this Lease as to the Proposed Sublease Space, this
Lease shall terminated as to such Space as of the effective date of the proposed
assignment or commencement of the term of the proposed sublease as set forth in
Tenant's notice, and Landlord shall have the right (but no obligation) to enter
into a direct lease with the proposed assignee or subtenant. Tenant may withdraw
its request for Landlord's consent at any time prior to, but not after, Landlord
delivers a written notice of termination.
16.3 NO RELEASE OF TENANT. Regardless of Landlord's consent, no subletting or assignment shall release Tenant of its obligations hereunder to pay the rent and perform all other obligations to be performed by Tenant hereunder unless otherwise agreed in writing between Landlord and Tenant. The provisions of this Lease shall be binding upon any assignee, transferee, mortgagee, sublessee or holder of any encumbrance on or with respect to this Lease. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting.
16.4 CORPORATE AND PARTNERSHIP TRANSACTION. If Tenant is a corporation, a dissolution of the corporation or a transfer by one or more transactions) of a majority of the voting stock of Tenant shall be deemed to be an assignment of this Lease subject to the provisions of this Article. However, if Tenant is a publicly traded corporation, then these provisions shall not apply to transactions with a corporation into or with which Tenant is merged or consolidated or to which substantially all of Tenant's stock or assets are transferred or which controls, is controlled by, or is under common control with., Tenant, if a principal purpose of the merger or transfer if not the assignment of this Lease and Tenant's successor has a net worth not less than the net worth of Tenant on the execution of this Lease and successor assumes all responsibilities under this Lease. Tenant shall cause reasonable satisfactory proof of such net worth to be delivered to at least thirty (30) days prior to the effective dated of the transaction. If Tenant is a partnership, a dissolution of the partnership (including a "technical" dissolution) or a transfer of the controlling interest in the Partnership (including the admission of new partners or the withdrawal of existing partners having a controlling interest) shall be deemed an assignment of this Lease subject to the provisions of this Article, regardless of whether the transfer is made by one or more transactions, or whether one or more persons hold the controlling interest prior to or after the transfer.
25 - AMBERGLEN STANDARD LEASE FORM - LEASE I
16.5 DOCUMENTATION. All document utilized by Tenant as evidence of any subletting or assignment to which Landlord has consented shall be subject to prior written approval by Landlord or its counsel. Tenant shall pay, as Additional Rent, all Landlord's actual out-of-pocket costs and expenses, including reasonable attorney fees, up to $1,000.00, incurred in determining whether or not to consent to any requested subletting or assignment and in reviewing and approving such documentation.
17. DEFAULT. The following events shall constitute an "Event of Defaults" under this Lease:
17.1 DEFAULT IN RENT. Failure of Tenant to pay when due Monthly Base Rent, Additional Rent, Taxers or any other charges payable by Tenant pursuant to this Lease, and the continuation of such failure for a period of five (5) days after the same is due ("Rent Grace Period"); provided that if Tenant has failed three (3) or more times to make such payment within five (5) days after the due date, no Grace Period shall thereafter be applicable under this Lease. Landlord will not pursue its remedies under Section 18 of this Lease for any violation to pay when due Monthly Base Rent, Additional Rent, Taxes or any other charges payable by Tenant pursuant to this Lease until Landlord gives Tenant written notice of default and seven (7) days after any available Rent Grace Period to cure the default; provided, however, Landlord shall not be required to give such notice more than one (1) time in any twelve (12) month period.
17.2 VIOLATION OF SECTION 16. Any attempted assignment, transfer, mortgage, encumbrance or subletting in violation of Section 16.
17.3 DEFAULT IN OTHER COVENANTS. Failure of Tenant to comply with
any term or condition or fulfill any obligation of this Lease (other than the
payment of Rent or other charges and compliance with Section 16) within thirty
(30) calendar day period, this provision shall be compiled with if Tenant begins
correction of the default within the twenty (20) calendar day period and
thereafter proceeds with reasonable diligence and in good faith to effect the
remedy as soon as practicable to prosecute the same completion.
17.4 BANKRUPTCY, ETC. An assignment by Tenant for the benefit of creditors; the filing by Tenant of a voluntary petition in bankruptcy; an adjudication that Tenant is bankrupt or the appointment of a receiver of the properties of Tenant; thence filing of any involuntary petition of bankruptcy and failure of Tenant to secure a dismissal of the petition within thirty (30) calendar days after filing; attachment of or the levying of execution on the leasehold interest of Tenant in the Premises and failure of Tenant to secure discharge of the attachment or release of the levy of execution within ten (10) days after the making thereof. If Tenant consists of two or more individuals or business entries, the events of default specified in this Section 17.4 shall apply to each individual and each business entity.
26 - AMBERGLEN STANDARD LEASE FORM - LEASE I
17.5 ABANDONMENT. Failure of Tenant for thirty (30) successive calendar days or more in any twelve (12) month time period to occupy the Premises for one or more of the purposes permitted under this Lease unless such failure is excused under other provisions of this Lease, which failure constitutes an abandonment of the Premises.
17.6 CROSS-DEFAULT. Any monetary default or any non-monetary default not cured within the time permitted under this Lease, if any, shall be considered an Event of Default under Lease II (as defined in Section 6.2, under the 20475 Option to Lease Agreement and the Thin Film Lab Agreement between Landlord and Tenant of even dated herewith; and under any other lease between Landlord and Tenant in effect on the date of the default ("Subsequent Lease")(. Any event of default under Lease II, the 20475 Option to Lease Agreement, the Think Film Lab Agreement or any Subsequent Lease shall be considered an Event of Default under this Lease.
18. REMEDIES ON DEFAULT
18.1 TERMINATION. In the event of a default, this Lease may be terminated at the option of Landlord by Landlord giving written notice to Tenant. If the Lease is not terminated by election of Landlord or otherwise, Landlord shall be entitled to recover damages from Tenant for the default. If the Lease is terminated, Tenant's liability to Landlord for damages shall survive such termination, and Landlord may re-enter, take possession of the Premises, and remove any persons or property by legal action or by self-help with the use of reasonable force and without liability for damages to Tenant, its property, any other persons, and/or their property.
18.2 RELETTING. Following re-entry or abandonment, Landlord may relet the premises and in that connection may make any suitable alterations or refurbish the Premises, or both, or change the character or use of the Premises, but Landlord shall not be required to relet for any use o9r purpose other than that specified in the Lease or which Landlord may reasonable consider injurious to the Premises, or to an tenant which Landlord may reasonable consider objectionable. Landlord may relet all or part of the Premises, alone or in conjunction with other properties, for term longer or shorter than the term of this Lease, upon any reasonable terms and conditions, including the granting of some rent-free occupancy or other rent concessions.
18.3 DAMAGES. In the event of termination on default, Landlord shall be entitled to recover immediately, without waiting the due date of any future rent or until the date fixed for expiration of the term, the following amounts as damages:
a) The loss of reasonable rental value from the date of default until a new tenant has been, or with the exercise of reasonable efforts could have been secured.
b) The reasonable cost of reentry and Reletting including without limitation, the cost of any clean up, refurbishing, removal of Tenant's property and fixtures, or any other expense occasioned by Tenant's failure to quit the Premises upon
27 - AMBERGLEN STANDARD LEASE FORM - LEASE I
termination and to leave them in the required condition, any remodeling costs, attorney fees, court costs, broker commissions and advertising costs.
c) Any excess of the value of the rent and all of the Tenant's other obligations under this Lease over the reasonable expected return from the Premises for the period commencing on the earlier of the date of trial or the date the Premises are relet and continuing through the end of the Term. The present value of future amounts 2ill be computed using a discount rate equal to the prime commercial loan rate of United States National Bank of Oregon in effect on the date of trail.
18.4 RIGHT TO SUE MORE THAN ONCE. Landlord may sue periodically to recover damages during the period corresponding to the remainder of the Term, and not action for damages shall bar a later action for damage subsequently accruing.
18.5 REMEDIES CUMULATIVE. The foregoing remedies shall be in addition to and shall not exclude any other remedy available to Landlord under this Lease or applicable law.
19. DEFAULT OF LANDLORD. Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord with in thirty (30) calendar days after written notice by Tenant to Landlord specifying wherein Landlord has failed to perform such obligations; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) calendar days are required for performance, then Landlord shall not be in default if Landlord commencing performance within such thirty (30) calendar day period and thereafter diligently prosecutes the same to completions. If any Landlord default results in an emergency condition that threatens life or personal safety, or involves a substantial increase of damage to the Premises or Tenant's personal property that can be mitigated only by precipitous action prior to giving notice to Landlord, then Tenant may take only such curative action as reasonably necessary to mitigate Landlord's and/or Tenant's damages, and invoice Landlord for Tenant's reasonable and actual out-of-pocket costs, which Landlord shall pay to Tenant within thirty (30) days after the date the invoice is received.
20. SUBORDINATION. This Lease, at Landlord's option, shall be subordinate to any ground lease, mortgage, deed of trust or any other hypothecation for security now or hereafter placed upon the Premises, the Building and/or AmberGlen Business Center Common Areas, and to an and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Tenant's right to quest possession of the Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground lessor shall elect to have this Lease subordinate to the lien of this mortgage deed to trust or ground lease, and shall give written notice thereof to Tenant, this Lease shall be deemed subordinate to such mortgage deed of trust or ground lease, whether this Lease is dated prior or subsequent to the date of such mortgage, deed of trust or ground lease on the dated of recording thereof.
28 - AMBERGLEN STANDARD LEASE FORM - LEASE I
Tenant agrees to execute, acknowledge and deliver within twenty (20) days of Landlord's request any document reasonable requested by Landlord pursuant to this Section including , but not limited to any document necessary to effectuate such subordination or to make this Lease subordinate to the lien of any mortgage, deed of trust or ground lease, as the case may be, and failing to do so, within fifteen (15) calendar days after written demand from Landlord such requested document shall automatically by deemed approved in the exact form requested by Landlord.
If any proceedings are brought for foreclosure, or in the event of the exercise of a power of sale under any mortgage or deed of trust made by Landlord covering the Premises, Tenant shall attorney to the purchaser upon any such foreclosure or sale, or to the mortgagee or trustee and shall recognize such purchaser, mortgagee or trustees Landlord under this Lease.
21. SIGNS AND DIRECTORIES.
21.1 TENANT'S SIGNS. Subject to Landlord's approval and approval of the AmberGlen Architectural Control. Committee, Tenant shall be allowed to install one building sign, either on the 2430 Building or the 1875 Building (but not both), that complies with (a) the AmberGlen sign guidelines published by Landlord from time to time; (b) all governmental sign regulations and restrictions in effect throughout the Lease Term; and (c) the AmberGlen Protective Covenants, a summary of which is attached as Exhibit "D" and an entire copy of which was provided to Tenant prior to execution of this Lease. The cost of installation of such sign shall be paid out of the Landlord-supplied Tenant Improvement Allowance provided for in Exhibit "C" to this Lease. Tenant shall not install or keep any other signs on or about the Premises without prior written consent of Landlord, which Landlord in its sole discretion may give or withhold. Tenant shall pay all costs of signs and all costs and expenses of installation of such other signs. If there if any sign on or about the Premises or building without the consent of cost of removal together with interest as set forth in Section 25.16 from date of expenditure until payment is made in full. Tenant shall pay promptly after Landlord invoices Tenant for such costs. If Landlords consents to such signs, Tenant shall repair any damage which alteration or renovation of its signs may cause during or at the expiration not the Term. Tenant at its expense shall remove all of its signs from the Premises at the termination of this Lease, repair any damage to the Premises, and restore the face of the Building to its original conditions as the Commencement Date, exclusive of normal wear and tear.
21.2 TENANT IDENTIFIER SIGN; DIRECTORY. After the Commencement Date of this Lease, Landlord shall at its own expense, install a tenant identified sign indicating Tenant's location in the Northwest Campus of AmberGlen Business Center. The location of the Premises within the Building shall be designated through one or more interior identification signs placed at one or more points deemed appropriate by Landlord the building. All such tenant identifier signs and building directories shall be designed and installed at the sole discretion of the Landlord. Tenant shall bear the expense of this inclusion and maintenance of Tenant's name and location on such signs and such expense shall be treated as a Tenant Charge.
29 - AMBERGLEN STANDARD LEASE FORM - LEASE I
22. SURRENDER AT TERMINATION.
22.1 CONDITION OF PREMISES. Upon expiration of the Term or earlier termination on account of default, Tenant shall deliver all keys to Landlord and surrender the Premises in good condition, normal wear and tear casualty excepted. Alterations and improvement constructed by Tenant with permission of Landlord shall not be removed or restored to the original condition unless the terms of such approval is so stated to allow for or requires remove.
22.2 FIXTURES
a) All fixtures placed upon Premises during the Term, other than Tenant's trade fixtures, shall, at Landlord's option, become the property of Landlord. If Landlord elects, Tenant shall remove all fixtures which would otherwise remain property of Landlord, and shall repair any physical damage resulting from the removal. If Tenant fails to remove such fixtures, Landlord may do so and charge the cost to the Tenant with interest as set forth in Section 25.17 from the date of expenditure until repayment in full.
b) Prior to expiration or termination of the Term, Tenant shall remove all furnishings, furniture, and trade fixtures which remain its property. If Tenant fails to do so, the failure to do so shall be an abandonment of the property, and Landlord may retain the property and all rights of Tenant with respect to it shall cease or by giving written notice to Tenant within twenty (20) days after removal was required. Landlord may elect to hold Tenant to its obligation of removal. If Landlord elects to require Tenant to remove, Landlord may effect a removal and place the property in public storage for Tenant's account and expense. Tenant shall be liability to Landlord for the cost of removal, transportation to storage, and storage, with interest as set forth in Section 25.16 on all such expenses from the date of expenditure by Landlord until repayment in full.
22.3 HOLDOVER.
a) If Tenant does not vacate the Premises at the time required, Landlord shall have the option to treat Tenant as a tenant from month to month, subject to all of the provisions of this Lease except the provisions for term and renewal and at a rental rate equal to one hundred twenty-five percent (125%) of the rent last paid by Tenant during the Term. Failure of Tenant to remove fixtures, furniture, furnishing, or trade fixtures which Tenant is required to remove under this Lease shall constitute a failure to vacate to which this Section 22.3(a) shall apply if the property not removed will substantially interfere with occupancy of the Premises by another tenant or with occupancy by Landlord for any purpose, including preparation for a new tenant.
b) If a month to month tenancy results from a holdover
by Tenant under this Section22.3, the tenancy shall be terminable at the end of
any monthly rental period on written notice from Landlord given at least ten
(10) calendar days prior to the termination date which shall be specified in the
notice. Tenant waives any notice which would otherwise be provided by law with
respect to a month to month tenancy.
30 - AMBERGLEN STANDARD LEASE FORM - LEASE I
23. NO BROKER. Tenant represents, warrants and covenants that no broker was instrumental in bring about or consummating this Lease (except as state in 2 (m) above) and that Tenant had no conversations, negotiations, or agreements with any broker concerning the leasing of the Premises. Tenant agrees to indemnify and hold harmless Landlord from and against any claims for any brokerage commissions and all costs, expenses and liabilities in connection therewith, including without limitation, attorney fees and expenses, arising out of any conversations, negotiations or agreement of Tenant with any broker
25. MISCELLANEOUS.
25.1 MEMORANDUM OF LEASE. Tenant shall not record this Lease. If requested by Landlord, simultaneously with execution and delivery hereof or at any later time designated by Landlord, Tenant shall execute, acknowledge and deliver to Landlord a Memorandum of Lease suitable for recording. In its sole and unlimited discretion, Landlord may record or not record such Memorandum of Lease. Such Memorandum of Lease shall not be deemed to change or otherwise affect any of the provisions of this Lease.
25.2 ESTOPPEL CERTIFICATE.
a) Tenant shall at any time, upon at least ten (10)
calendar days written notice from Landlord, execute, acknowledge and deliver to
Landlord a statement in writing in form and substance satisfactory to Landlord
(i) certifying that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which the
rent, security deposit and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults, if any, which are
claimed. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrance of the Premises. If requested by Landlord, Tenant shall
also furnish Landlord with a certificate of Tenant's secretary as to corporation
resolution a form satisfactory to Landlord.
b) Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant that (i) this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) there are no uncured defaults in Landlord's performance, and (iii) not more than two (2) months rent has been paid in advance.
c) If Landlord desires to finance, refinance, sell or otherwise transfer the Premises, the Building or the land described on Exhibit "A", or any part thereof, Tenant hereby agrees to deliver to Landlord, any lender, buyer or other party participating in a transfer designated by Landlord such regularly prepared financial statements of Tenant as may be reasonable requested by Landlord or such lender or other transfer not more than one (1) time in any twelve (12) month period. Such statements shall include the past three (3) years' financial statements of Tenant. All such financial statements shall be received by
31 - AMBERGLEN STANDARD LEASE FORM - LEASE I
Landlord in confidence and shall be used only for the purposes herein set forth, and shall be returned after review.
25.3 LANDLORD'S INTEREST. "Landlord" as used herein shall mean only the owner or owners at the time in question of the Landlord's interest in the Premises. In the event of any transfer of title to the Premises, Landlord herein named (and, in case of any subsequent transfers, the then grantor) shall be relieved from and after the date of such transfer of all liability as respects Landlord's obligations thereafter to be performed if and to the extent such liability is assumed by the successor, provided that any funds in the hands of Landlord or the then grantor at the time of such transfer, in which Tenant has an interest, shall be delivered to the grantee. The obligations contained in this "Leas to be performed by Landlord shall be binding on Landlord's successors and assigns only during their respective period of ownership.
25.4 SEVERABILITY. If any term or provision of this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by law.
25.5 HEADINGS. The headings in this Lease are for the purpose of reference only, and shall not limit or otherwise affect any of the terms or provisions hereof.
25.6 INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all agreements of the parties with respect to the subject matter hereof. No prior agreement or understanding with respect thereto shall be effective. This Lease may be modified only by a writing, signed by the parties in interest at the time of the modification.
25.7 WAIVERS. No waiver by Landlord of any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Tenant of the same or any other provision. Landlord's consent to or approval of any act shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act by Tenant. The acceptance of rent hereunder by Landlord shall not be a waiver of any preceding breach of default by Tenant of any provision hereof, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach default at the time of acceptance of such rent.
25.8 COVENANTS AND CONDITIONS. Each provision of this Lease performable by Tenant shall be deemed both covenant and a condition.
25.9 MERGER. The voluntary or other surrender of this Leave by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, terminate all or any existing subtenancies or may, at the option of Landlord operate as an assignment to Landlord of an and/or all of such subtenancies.
25.10 TENANT LIABILITY. If more than one party has executed this Lease as Tenant, the obligations of Tenant under this Lease shall be the joint and several obligations of each of such parties.
32 - AMBERGLEN STANDARD LEASE FORM - LEASE I
25.11 AUTHORITY TO ENTER INTO LEASE. If Tenant is a corporation,
each individual executing this Lease on behalf of the corporation represents and
warrants that he is duly authorized to execute and deliver this Lease on behalf
of the corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation, and that this Lease is binding on the corporation
in accordance with its terms. If Tenant is a partnership, each individual Tenant
is a partnership, each individual executing this Lease on behalf of the
partnership represents and warrants that he is duly authorized to execute and
deliver this Lease on behalf of the partnership represents and warrants that he
is duly authorized to execute and deliver this Lease on behalf of the
partnership, in accordance with the partnership agreement and any statement s of
partnership or certificate of limited partnership of the partnership, and that
this Lease is binding on the partnership in accordance with its terms. Tenant
shall within thirty (30) days of the execution of this `Lease deliver to
Landlord: (a) if Tenant is a corporation, a certified copy of a resolution of
the board of directors of the corporation and a certificate of incumbency
relating to the signer; or (b) if Tenant is a partnership, a copy of the
Statement of Partnership or Certificate of Limited Partnership of Tenant; and
(c) other evidence reasonable satisfactory to Landlord authorizing or ratifying
the execution of this lease.
25.12 ATTORNEY FEES. If suit action or arbitration is instituted in connection with any controversy arising out of this Lease, the prevailing party shall be entitle to recover in addition to costs such sum as the court or arbitrator may a judge reasonable as attorney fees whether at hearing, on trial or appeal.
25.13 NOTICES. Any notice or communication required or permitted under this Lease shall be deemed given and made when actually delivered if personally delivered, or on the date of receipt if received or refused, if deposited in the United States mail (certified or registered), return receipt requested, postage prepaid, addressed to the party to whom such notice is being given at the address indicated 2 (n) for Landlord and 2 (o) for Tenant or to such other address as may be specified from time to time by either of the parties in writing;.
25.14 SUCCESSION. This Lease shall be binding upon and inure to the benefit of the parties, their respective permitted successors and assigns.
25.15 ENTRY FOR INSPECTION.
a) Landlord shall have the right to enter up9on Premises (excepting the portion used for research and development during normal business hours after notice to Tenant and to the portion used for research and development upon twenty-four (24) hour notice and adherence to Tenant's security procedures (sign-in and accompaniment by a Tenant employee or agent), or at other times by prior arrangement with Tenant's approval , to determine Tenant's compliance with this Lease, to determine the necessity of repair or maintenance to make necessary repairs to the Building or to the Premises, or to show the Premises (excepting the portion used for research and development) to any prospective tenant or purchaser, and in addition shall have the right during business hours, or at other times by prior arrangement, during the last two months of
33 - AMBERGLEN STANDARD LEASE FORM - LEASE I
the Term of this Lease, to place and maintain upon the Building or the Premises notices for leasing or selling of the Building or the Premises.
b) Landlord shall have the right to enter upon the Premises at any time in the event of an emergency.
25.16 INTEREST ON RENT AND OTHER CHARGES OR EXPENDITURES. Any rent or other payment required to be made by Tenant by this Lease shall, if not paid when due, bear interest at a variable rate equal to the United State National Bank of Oregon's prime commercial rate as adopted from time to time plus (2%) (but in no event greater than the maximum interest rate allowed under applicable law.
25.17 AMENDMENTS TO STATUTES, ETC. Reference in this Lease to an particular law, statute, ordinance, rule, regulation or administrative order includes reference to any successors or amendments thereto.
25.18 GOVERNING LAW. This Lease shall be governed as to validity and interpretation by the laws of the State of Oregon.
26. SATELLITE DISH. Tenant's installation and use of a satellite dish on the Building root shall be allowed provided that (i) Landlord and Tenant enter into a writte4n agreement containing reasonable specifications and restrictions relating to size, installation, screening, use, liability, operation and removal of the dish, (ii) the installation and use complies with the AmberGlen Protective Covenants and the AmberGlen Rules and Regulations; and (iii) the installation and use complies with applicable federal, state, regional and local governmental statues, laws, regulations, ordinances, directives, orders and restrictions.
27. EXTENSION OF THE LEASE TERM.
27.1 TENANTS OBLIGATION TO EXTEND LEASE I OR LEASE II, During the
calendar month following the expiration of the on-hundred-first (101st) month of
Lease II, Tenant shall extend the Lease Term of either Least I or Lease II for
an additional eighteen (18) months beyond the expiration date of the current
Lease Term of the extended Lease. Tenant shall have the obligation to notify
Landlord in writing ("Mandatory Extension Notice") during the one-hundred first
(101st) month of the initial term of Lease II, whether Lease I or Lease II shall
be extended ("Extended Lease"). If Tenant does not provide the Mandatory
Extension Notice as required herein, then Tenant shall be deemed to have elected
to make Lease 1 the Extended Lease. The Extended Lease shall be governed by all
provisions of this Lease, except the Monthly Base Rent for the Extended Lease
shall be One Dollar Thirty-three Cents ($1.33) per rentable square foot for the
eighteen (18) month period its then "AS IS" condition except for work required
to be performed by Landlord pursuant to this Lease.
27.2 TENANT'S OPTION TO EXTEND LEASE TERM. Provided there is not current uncured Event of Default by Tenant under this Lease, and there have not been more than two (2) prior Events of Default which have been previously cured pursuant to the terms
34 - AMBERGLEN STANDARD LEASE FORM - LEASE I
of this Lease within the last twenty-four (24) months, and
Tenant provides Landlord with written notice ("Tenant's Optional Extension
Notice") during the thirteenth (13th) calendar month prior to expiration of the
Lease (as it may have been previously extended through operation of the
mandatory extension provided for in Section 27.1 or the Landlord's optional
extension provided for in Section 27.3 hereof), Tenant shall have the option to
extend the then current expiration date of Lease I and Lease II for all ("Full
Space Extension") or any portion (subject to the conditions stated below)
(Partial Space Extension") of the Lease I Premises and Lease II premises for one
(1) additional term of five (5) years under the same terms and conditions then
in effect under the applicable Lease excepting (i) the Premises shall remain and
be accepted by the Tenant in then "AS IS" condition except for work required to
be performed by Landlord pursuant to this Lease and (ii) Monthly Base Rent Shall
be One Dollar, Thirty-Three Cents ($1.33) per rentable square foot through the
180th month of this Lease, as so extended, and if the extension results in a
Lease term exceeding 180 months, the Monthly Base Rent for the period exceeding
180 months shall be established as follows, but in no event less than One
Dollar, Thirty-Three Cents ($1.33) per rentable square foot.
27.2.1 NEGOTIATED MONTHLY BASE RENT. An amount that is agreed mutually agreed upon in good faith negotiations between Landlord and Tenant within thirty (30) days after Landlord's receipt of the Tenant's Optional Extension Noticed based on the Rent Establishment Factors set forth in Section 27.2.2 below.
27.2.2 ARBITRATED MONTHLY BASE . If Landlord and Tenant cannot agree on the Monthly Base Rent, the amount that shall be arbitrated under the laws of the state of Oregon. The arbitrator shall be appointed in accordance with the following prices ("Rent Arbitration Process")" Landlord and Tenant each shall name one (1) arbitrator who shall be a real estate professional knowledgeable in the area of industrial real estate. The arbitrators decision regarding Monthly Base Rent shall be based on (i) market conditions current on the anticipated commencement date of the extension period and (ii) base rental rates for comparable building in comparable locations with a comparable level of tenant improvements, with tenants of comparable use and financial strength as Tenant ("Rent Establishment Factors"). The arbitrators shall independently reach an opinion regarding Monthly Base Rent and, if the lower option is within five percent (5%) of the high opinion., the Monthly Rend shall be the average of the two. If the two opinions are more than five percent (5%) apart, the two arbitrators shall select a third arbitrator, who shall independently reach an opinion regarding Monthly Base Rent (based on the Rent Establishment Factors set forth above), and the Monthly Base Rent shall e the average of the opinions of all three arbitrators. The arbitrators' decision shall be final and binding upon Landlord and Tenant, but in no event shall the Monthly Base Rent be less than One Dollar Thirty-Three Cents ($1.33) per rentable square foot. Landlord and Tenant shall share equally the arbitrators' fees and each shall pay its own arbitration costs.
The Tenant's Optional Extension Notice shall specify where it it's a full Space Extension or Partial Space Extension. The location and configuration of space for any Partial Space Extension shall be subject to Landlord's reasonable approval and must be in full floor configurations in the event corridors are not then in place for the proposed Partial Space Extension space and must include at least fifty percent (50%) of the square footage
35 - AMBERGLEN STANDARD LEASE FORM - LEASE I
originally reached by Tenant pursuant to Lese I and Lease II. Tenant shall be obligated to exte4nd Lease I and Lease II once the Tenant's Optional Extension Notice is received by Landlord. The cost of demising the Partial Space Extension space shall be shared equally between Landlord and Tenant, including the cost of constructing multi-tenant corridors. Tenant's share of such costs shall be paid to Landlord in cash prior to Landlord's commencement of construction of the required improvements.
Cascade Microtech's rights under this Section 27.2 are personal to Cascade Microtech only, are not assignable or transferable, except to a corporation into which Cascade Microtech is merged and which at the time of transfer and exercise of the option, has a net worth on a current (not more than six months old) audited balance sheet of at least Ten Million and 00/100 Dollars ($10,000,000.00).
27.3 LANDLORD OPTION TO EXTEND LEASE. In the event that Tenant exercises the 20475 Building Option, upon execution of the 20475 Building Lease, the Landlord shall have the option to require tenant to extend the then existing Lease Terms of Lease I and Lease II for a period of up to an additional thirty-six (36) months ("Landlord's Optional Extension Period") at a Monthly Base Rent of One Dollar Thirty-Three Cents ($1.33) per square foot during such extension period; the Tenant agrees to accept the Premises during such extended term units then "AS IS" except for work required to be performed by Landlord pursuant to this Lease. The exercise of Landlord's option to extend all entitled Tenants to modify its option to extend as set forth in Section 27.2 for as few as twenty-four (24 months or as many as sixty (60) months, provided that Tenant elects the duration of the modification within thirty (30) day after Landlord's notice to Tenant that Landlord elects its extension, and such election does not violate the condition set forth in Section 27.4 below.
27.4 EXPIRATION LIMITATION. Landlord and Tenant agree that there shall be no less than an eighteen (18) month separation between the earliest to occur and latest to occur of the expiration dates (as they may be extended from time-to-time) of Qualifying Leases (as defined in this Section 27.4) within any two (2) building occupied by Tenant in the Northwest Campus and not less than a thirty-six (36) month separation between expiration dates of Qualifying Leases within any three (3) buildings occupied by Tenant in the Northwest Campus. A "Qualifying Lease" is any lease for space within the 2430 Building, the 1875 Building or the 20475 Building with a Rentable Area of not less than 10,000 square feet. The expiration date separation requirements shall be directly related to the number of Northwest Campus building in which Tenant has leased space. For example, if Tenant leases space only in the 1875 Building or the 20475 Building with a Rentable Area of not less than 10,000 square feet. The expiration date separation requirements shall be directly related to the number of Northwest Campus building in which Tenant has leased space. For example, if Tenant leases space only in the 1875 Building and 2430 Building, the lease separation requirement shall be 18 months. However, if Tenant leases space in all three Northwest Campus buildings; then the lease separation requirements shall be measures serially, such that there is not less than thirty-six (36) month separation between the earliest to occur and the latest to occur of the expiration dates of Qualifying Leases. If through operation of Sections 27.1, 27.2 and/or 27.3 the applicable expiration dates are less than eighteen (18) months or thirty-six months apart (as applicable)/ Tenant and Landlord agree
36 - AMBERGLEN STANDARD LEASE FORM - LEASE I
to extend the expiration date of one of the Qualifying Leases to achieve the minimum eighteen (18) month expiration date separation.
28. OPTION TO LEASE 20475 NE AMBERWOOD DRIVE. Reference is made to the 20475 Option to Lease Agreement of even date therewith, a copy of which is attached as Exhibit "F" ("20475 Building Option"). Said option generally contemplates Tenant may lease 25,000 to 51.600 square feet in an AmberGlen Business Center, Northwest Campus Building, to be located at 20475 NW Amberwood Drive, Hillsboro, Oregon.
29. THIN FILM LAB AGREEMENT. Reference is made to the Thin Film Lab Agreement of even date herewith, a copy of which is attached as Exhibit "G" ("Thin Film Agreement"). Said agreement generally contemplates Tenant and Landlord will negotiate to lease 20,000 to 60,000 square feet in AmberGlen Business Center, at a location to be determined as provided therein.
30. BUILDING MODIFICATION FOR SKYBRIDGE, LOADING DOCK AND STORAGE AREA. Landlord and Tenant agree that Landlord shall construct an enclosed pedestrian walkway (the "Skybridge") that connects the second floor of 2430 NW 206th Avenue (the "2430 Building") with the second floor 1875 NW Amberbrook Drive ("1875 Building"), in accordance with a design and specifications that are mutually acceptable to Landlord and Tenant; provided, however, that the Skybridge design and finishes shall be consistent with the quality of design and construction found in AmberGlen as determined by Landlord in its final judgment. In addition, Landlord agrees to modify the design of the proposed loading dock area between the 1875 Building and the 2430 Building generally as shown on the partial site plan attached hereto as Exhibit "H", to include a covering over the loading dock are, and to provide screening for Tenant's outside storage.
Tenant and Landlord agree to each pay one-half (1/2) of the total actual costs for the Skybridge, the loading dock modifications and the storage screening.
Tenant shall have the option to pay its one-half (1/2) costs in cash on or before the Commencement Date of Lease I or Lease II, whichever is earlier. If Tenant does not elect to pay its one-half (1/2) in cash, the Landlord shall treat Tenant's one-half (1/2) of the obligation as a debt to be amortized over the term of LeaseI at ten percent (10%) per annum. In the event this Tenant obligation is amortized, Tenant shall sign a Promissory Note for the obligation, a form of which note is attached as Exhibit "1".
As long as Tenant leases space in either the 2430 Building or the 1875 Building, the Tenant shall pay all Operating Expenses associated with the Skybridge. For such time as both Leases are in effect, one-half (1/2) of the Skybridge-related operating expenses shall be attributed to each Lease. Upon expiration or termination of on of the Leases, all operating expenses relating to Skybridge shall be allocated to the mailing Lease. The Skybridge shall be excluded from the rentable square footage of Lease I and Lease II for the purposes of calculating the Monthly Base Rent. If at any time during the Term of Lease I or Lease II, Tenant does not lease space on the second floor of both 2430 Building and the 1875
37 - AMBERGLEN STANDARD LEASE FORM - LEASE I
Building, Landlord shall have full authority to use, modify or dispose of the Skybridge at its sole cost and discretion, in which case Tenant shall have no obligation to pay Operating Expenses associated with the Skybridge.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day and year first hereinabove written.
TENANT LANDLORD
CASCADE MICROTECH, INC., AMBERJACK, LTD.,
AN OREGON CORPORATION AN ARIZONA CORPORATION.
By: /s/ Bruce McFadden By: /s/ Neil O. Brown
----------------------------------- ---------------------------------
Its: President Its: President
---------------------------------- --------------------------------
Date: 10/10/97 Date: 10/22/97
--------------------------------- -------------------------------
By: By: /s/ Earl B. Johnson Jr.
----------------------------------- ---------------------------------
Its: Its: Vice President
---------------------------------- --------------------------------
Date: Date: 10/22/97
--------------------------------- -------------------------------
|
38 - AMBERGLEN STANDARD LEASE FORM - LEASE I
AMENDMENT NO. 2
TO LEASE DATED AUGUST 20, 1997
BY AND BETWEEN
AMBERJACK, LTD., AS LANDLORD
AND
CASCADE MICROTECH, INC. AS TENANT
THIS AMENDMENT NO. 2 TO LEASE is entered into and made as of the 12th day of April, 1999 by and between AMBERJACK, LTD., an Arizona corporation ("Landlord") and CASCADE MICROTECH, INC., an Oregon corporation ("Tenant").
R E C I T A L S
WITNESSETH:
A. WHEREAS, on or about August 20, 1997, Landlord and Tenant entered into that certain Lease, as amended by Amendment No. 1 dated February 23, 1998 (collectively "the Lease") of space located at 2430 NW 206th Avenue, Suite 100, Beaverton, Oregon (the "Premises");
B. WHEREAS, Landlord and Tenant desire to amend and modify the Lease in the manner described herein below;
NOW, THEREFORE, in consideration of the premises recited herein above, the terms, provisions, conditions, covenants and agreements of this Amendment set forth herein below, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by each of the parties hereto, Landlord and Tenant do hereby agree to modify and amend the Lease as follows:
A G R E E M EN T
1. The defined terms in this Amendment are indicated by initial capital letters. Defined terms shall have the same meaning in this Amendment as they do in the Lease.
2. Section 2 (f) of the Lease, entitled Scheduled Commencement Date, is hereby amended as follows: The commencement date for the first floor is July 21, 1998 and commencement date for the second floor is July 28, 1998.
3. Section 2 (g) of the Lease, entitled Expiration Date, is hereby amended as follows: July 31, 2008 (First and Second Floor).
4. Section 2 (h) of the Lease, entitled Monthly Base Rent, is hereby amended as follows:
07/21/98 - 07/31/98(First Floor) $11,374.82/month(*) 07/28/98 - 07/31/98(Second Floor) $ 3,762.21/month(**) 08/1/98 - 07/31/03(First and Second Floor) $61,213.44/month(***) 08/1/03 - 07/31/08(First and Second Floor) $72,053.32/month(****) |
(*) Prorated July rent of $11,374.82 (for first floor only) based on 33,392 rentable sq. ft. @ $.96/rsf (**) Prorated July rent of $3,762.21 (for second floor only)based on 30,372 rentable sq. ft. @ $.96/rsf (***) Based on 63,764 rentable sq. ft. @ $.96/rsf (****) Based on 63,764 rentable sq. ft. @ $1.13
5. SECTION 2 (I) of the Lease, entitled Initial Rentable Area of Premises, is hereby amended as follows: 63,764 rentable square feet.
6. SECTION 6.7 of the Lease, entitled Collection of Tenant Charges Based on Estimates, is hereby amended as follows: Landlord and Tenant agree Tenant's initial percentage of proportionate share of Operating Expenses for the Building and Building Common Area shall be as follows:
07/21/98 - 07/31/98(First Floor) 52.4% 07/28/98 - 07/31/08(First and Second Floor) 100% |
7. Except as set forth in paragraph 2 through 6 above, all terms, provisions, conditions, covenants and agreements of the Lease shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date and year first above written.
"TENANT" "LANDLORD"
CASCADE MICROTECH, INC. AMBERJACK, LTD., an Arizona
an Oregon Corporation Corporation
By: /s/ Randall Sadewic By:
-------------------------------- ---------------------------------
Its: CFO Its:
------------------------------- --------------------------------
Date: Oct 30, 1998 Date:
------------------------------ -------------------------------
By: By:
-------------------------------- ---------------------------------
Its: Its:
------------------------------- --------------------------------
Date: Date:
------------------------------ -------------------------------
|
LEASE II
FOR
1875 BUILDING, SUITE 200
AMERGLEN BUSINESS CENTER
BY AND BETWEEN
AMBERJACK, LTD.
"LANDLORD"
AND
CASCADE MICROTECH, INC.
"TENANT"
AMBERGLEN BUSINESS CENTER
STANDARD OFFICE/FLEX LEASE FORM
TABLE OF CONTENTS
SECTION 1. PARTIES...........................................................................1
SECTION 2. SUMMARY OF BASIC TERMS............................................................1
SECTION 3. PREMISES..........................................................................3
3.1 Grant of Premises............................................................3
3.2 Office/Flex/Light Manufacturing Building.....................................3
3.3 Rentable Area................................................................3
3.4 Acceptance of Premises.......................................................4
3.5 Additional Initial Rentable Area.............................................4
SECTION 4. TERM...................................................................................5
4.1 Lease Term...................................................................5
4.2 Early Possession.............................................................6
4.3 Tenant Delays................................................................6
4.4 Lease Term Extensions........................................................7
4.5 Force Majeure................................................................7
SECTION 5.........USE
5.1 Permitted Use................................................................7
5.2 Restrictions on Use..........................................................7
5.3 Compliance with Laws.........................................................7
5.4 Landlord's Rules and Regulations.............................................8
5.5 Hazardous Substances.........................................................8
SECTION 6. RENT..............................................................................9
6.1 Rent .......................................................................10
6.2 Security Deposit and Advance Rent...........................................10
6.3 Additional Rent.............................................................11
6.4 Definition of Operating Expenses ...........................................12
6.5 Exclusions from Operating Expenses..........................................13
6.6 Collection of Actual Tenant Charges.........................................15
6.7 Collection of Tenant Charges Based on Estimates.............................15
6.8 Reestimations...............................................................16
6.9 Annual Adjustments..........................................................16
6.10 Records and Audit...........................................................16
SECTION 7. REPAIRS AND MAINTENANCE..........................................................17
7.1 Landlord's Obligations......................................................17
7.2 Tenant's Obligations........................................................18
7.3 Reimbursement for Repairs Assumed...........................................18
7.4 Duty to Make Repairs........................................................19
|
SECTION 8. UTILITIES........................................................................19
SECTION 9. TAXES AND ASSESSMENTS............................................................19
9.1 Payment of Proportionate Share..............................................19
9.2 Taxes on Rent...............................................................19
SECTION 10. ALTERATIONS AND ADDITIONS........................................................20
10.1 Landord's Consent...........................................................20
10.2 Ownership and Surrender of Alterations......................................21
10.3 Additional Requirements.....................................................21
SECTION 11. INSURANCE........................................................................21
11.1 Liability, Property Damage and Workers Compensation.........................21
11.2 Property Insurance..........................................................22
11.3 Waiver of Subrogation.......................................................22
SECTION 12. DAMAGE AND DESTRUCTION...........................................................22
12.1 Partial Damage..............................................................22
12.2 Destruction.................................................................22
12.3 Rent Abatement..............................................................23
SECTION 13. EMINENT DOMAIN...................................................................23
13.1 Partial Taking..............................................................23
13.2 Total Taking................................................................24
13.3 Sale in Lieu of Condemnation................................................24
SECTION 14. LIENS AND IDEMNIFICATION.........................................................24
14.1 Liens.......................................................................24
14.2 Indemnification.............................................................25
SECTION 15. QUIET ENJOYMENT..................................................................25
SECTION 16. ASSIGNMENT AND SUBLETTING........................................................25
16.1 Landlord's Consent Required.................................................25
16.2 Landlord's Right to Terminate Lease.........................................25
16.3 No Release of Tenant........................................................26
16.4 Corporate and Partnership Transaction.......................................26
16.5 Documentation...............................................................27
SECTION 17. DEFAULT..........................................................................27
17.1 Default in Rent.............................................................27
17.2 Violation of Section........................................................27
17.3 Default in Other Covenants..................................................27
17.4 Bankruptcy, Etc.............................................................27
17.5 Abandonment.................................................................28
SECTION 18. REMEDIES ON DEFAULT..............................................................28
18.1 Termination.................................................................28
18.2 Reletting...................................................................28
18.3 Damages.....................................................................28
18.4 Right to Sue More than Once.................................................29
18.5 Remedies Cumulative.........................................................29
SECTION 19. DEFAULT OF LANDLORD..............................................................29
SECTION 20. SUBORDINATION....................................................................29
SECTION 21. SIGNS AND DIRECTORIES............................................................30
21.1 Tenant's Signs..............................................................30
|
21.2 Tenant Identifier Sign; Director............................................31
SECTION 22. SURRENDER AT TERMINATION.........................................................31
22.1 Condition of Premises.......................................................31
22.2 Fixtures....................................................................31
22.3 Holdover....................................................................31
SECTION 23. NO BROKER........................................................................32
SECTION 25. MISCELLANEOUS....................................................................32
25.1 Memorandum of Lease.........................................................32
25.2 Estoppel Certificate........................................................32
25.3 Landlord's Interest.........................................................33
25.4 Severability................................................................33
25.5 Headings....................................................................33
25.6 Incorporation of Prior Agreements; Amendments...............................33
25.7 Waivers.....................................................................33
25.8 Covenants and Conditions....................................................34
25.9 Merger......................................................................34
25.10 Tenant Liability...........................................................34
25.11 Authority to Enter into Lease..............................................34
25.12 Attorney Fees..............................................................34
25.13 Notices....................................................................34
25.14 Succession.................................................................35
25.15 Entry for Inspection.......................................................35
25.16 Interest on Rent and Other Charges or Expenditures.........................35
25.17 Amendments to Statutes, Etc................................................35
25.18 Governing Law..............................................................35
SECTION 26. SATELLITE DISH...................................................................35
SECTION 27. EXTENSION OF THE LEASE TERM......................................................36
27.1 Tenant's Obligation to Extend Lease I or Lease II ..........................36
27.2 Tenant's Option to Extend Lease Term........................................36
27.2.1 Negotiated Monthly Base Rate..............................................36
27.2.2 Arbitrated Monthly Base Rate..............................................36
27.3 Landlord's Option to Extend Lease...........................................37
27.4 Expiration Limitation.......................................................38
SECTION 28. OPTION TO LEASE 20475 NW AMBERWOOD DRIVE.........................................38
SECTION 29. THIN FILM LAB AGREEMENT..........................................................38
SECTION 30. PARKING..........................................................................38
SECTION 31. BUILDING MODIFICATION FOR SKYBRIDGE,
LOADING DOCK AND STORAGE AREA....................................................38
SECTION 32. RIGHT OF FIRST OPPORTUNITY TO LEASE
ADDITIONAL SPACE.................................................................39
32.1 Expansion Conditions........................................................39
32.1.1 No Default................................................................39
32.1.2 Financial Requirements....................................................40
32.1.3 UDP Space.................................................................40
32.2 UDP Expansion...............................................................40
32.3 Right of First Opportunity..................................................40
|
SECTION 33. CONDITION PRECEDENT..............................................................42
EXHIBIT A PREMISES FLOOR PLAN AND LOCATION KEY...............................................
EXHIBIT B AMBERGLEN BUSINESS CENTER COMMON AREAS.............................................
EXHIBIT C TENANT IMPROVEMENTS................................................................
EXHIBIT C-1 NORTHWEST CAMPUS INTERIOR IMPROVEMENT
SPECIFICATIONS.....................................................................
EXHIBIT D SUMMARY COVENANTS, CONDITIONS AND
RESTRICTIONS.......................................................................
EXHIBIT E RULES AND REGULATIONS..............................................................
EXHIBIT F 20475 OPTION TO LEASE AGREEMENT....................................................
EXHIBIT G THIN FILM LAB AGREEMENT............................................................
EXHIBIT H PARTIAL SITE PLAN FOR SKYBRIDGE AND LOADING
DOCK...............................................................................
EXHIBIT I PROMISSORY NOTE....................................................................
EXHIBIT J HAZARDOUS SUBSTANCES AND MATERIALS.................................................
EXHIBIT K VANILLA BOX IMPROVEMENTS...........................................................
|
AMBERGLEN BUSINESS CENTER
OFFICE/FLEX LEASE
1. PARTIES.
This Lease, dated for reference purposes only August 20, 1997 ("Effective Date"), is made by and between AMBERJACK, LTD., an Arizona corporation ("Landlord") and Cascade Microtech, Inc., an Oregon corporation ("Tenant").
2. SUMMARY OF BASIC TERMS.
As used in this Lease, the following terms shall have the meanings set forth below, subject to the qualifications, adjustments and exceptions set forth elsewhere in this Lease:
(a) PREMISES: The space on the second floor of the Building, designated as Suite 200, and located substantially as shown on the floor plan attached hereto as Exhibit "A".
(b) BUILDING: The office/flex/light manufacturing building and associated parking and access areas located at 1875 N.W. Amberbrook Drive, Hillsboro, Oregon, including all lobbies, office, manufacturing and other space totaling 63,793 rentable and 55,840 usable square feet, to be built by Landlord substantially in accordance with the Revised Construction Documents dated June 17, 1997, prepared by Ankrom Mosian Associated Architects ("Building Plans"), pursuant to building permit number 20790 issued July 11, 1997, ("Building Permit"), subject to modification and changes in the Building Plans that do not substantially change the Building footprint or basic materials or construction.
(c) AMBERGLEN BUSINESS CENTER COMMON AREAS: The land (developed and undeveloped) as shown on Exhibit "B" attached.
(d) PERMITTED USE: Office; marketing; research and development; engineering; shipping and receiving; and ancillary functions for the design, light manufacturing and machining of electronic testing systems utilized in the computer industry.
(e) LEASE TERM: Ten (10) years and zero (0) months subject to extension as set forth in Section 27.
(f) SCHEDULED COMMENCEMENT DATE: June 1, 1998.
(g) EXPIRATION DATE: May 31, 2008.
(h) MONTHLY BASE RENT: Months 1 through 60: Sixteen Thousand Three Hundred Twenty and 00/100 Dollars ($16,320.00) based on a base rent per square foot per month of $0.96; Months 61 through 120: Nineteen Thousand Two Hundred Ten and 00/100 Dollars ($19,210.00) based on a base rent per square foot per month of $1.13; renewal term months 121 through 180: Twenty-two Thousand Six Hundred Ten and 00/100 Dollars ($22,610.00) based on a base rent per square foot per month of $1.33. Monthly Base Rent for any period after the 180th month (during a renewal period) shall be established through the process
1 - AMBERGLEN STANDARD LEASE FORM - LEASE II
specified in Section 27.2.1 and 27.2.2 of this Lease. Tenant acknowledges that any lease term greater than 120 months is not part of the initial Lease Term, and that in order to secure rights to the Premises after the 120th month, the Lease Term will need to be extended pursuant to Section 27 of this Lease.
(i) INITIAL RENTABLE AREA OF PREMISES: 17,000 sq. ft., or more as provided in Section 3.5.
(j) SECURITY DEPOSIT: [Alternative provisions are set forth in Section 6.2, plus first month's Monthly Base Rent].
(k) TENANT'S GUARANTOR: N/A.
(l) LANDLORD'S ADVISOR: Cushman & Wakefield of Oregon, Inc.
(m) TENANT'S ADVISOR: Corporate Realty Advisors, Inc.
(n) LANDLORD'S ADDRESS FOR NOTICES:
Birtcher Property Services
27611 La Paz Road
P.O. Box 30009
Laguna Niguel, California 92607-0009
Attn: Director of Property Management
Copy to:
Birtcher Property Services
1600 N.W. Compton Drive
Suite 109
Beaverton, Oregon 97006
(O) TENANT'S ADDRESS FOR NOTICES:
Cascade Microtech, Inc. 1875 N.W. Amberbrook Drive, #200 Beaverton, Oregon 97005
Copy to:
Christopher T. Matthews
Ater Wynne Hewitt Dodson & Skerritt, LLP
2 - AMBERGLEN STANDARD LEASE FORM - LEASE II
222 SW Columbia, Suite 1800 Portland, Oregon 97201
3. PREMISES.
3.1 GRANT OF PREMISES. Landlord hereby leases to Tenant and Tenant leases from Landlord those certain Premises stated above situated in the County of Washington, City of Hillsboro, State of Oregon (hereinafter referred to as the "Premises").
3.2 OFFICE/FLEX/LIGHT MANUFACTURING BUILDING. The Premises, together with and including other property owned by Landlord, comprise an office/flex/light manufacturing building (hereinafter referred to as the "Building"). Tenant's use and occupancy of the Premises shall include the use, in common with others, of the AmberGlen Business Center Common Areas, but excepting therefrom and reserving unto Landlord the exterior faces of all exterior walls, the roof and the right to install, use and maintain where necessary in the Premises all pipes, ductwork, conduits and utility lines through hung ceiling space, partitions, beneath the floor or through other parts of the Leased Premises. Buildings located in AmberGlen's Northwest Campus as shown on Exhibit "A" ("Northwest Campus") shall be connected by underground conduit through which fiber optic and other types of data/communications networking is accessible. The Premises includes one (1) four-inch (4") conduit which connects the Building to the 2430 Building located within AmberGlen at 2430 NW 206th Avenue; and shall include one (1) four-inch (4") conduit which connects the Building to the 20475 Building within AmberGlen at 20475 NW Amberwood Drive, but only if Tenant exercises the 20475 Building Option identified in Section 28 of this Lease.
3.3 RENTABLE AREA. With respect to each floor of the Building, the
"Rentable Area" of a floor shall follow the BOMA standard method for measuring
floor area in office buildings, and shall mean the total area of the floor
enclosed by the dominant portion, minus the major vertical penetrations on that
same floor. The term "dominant portion" means the portion of the outside
finished surface of the permanent outside building wall which is fifty percent
(50%) or more of the vertical floor-to-ceiling dimension, at the given point
being measured as one moves horizontally along the wall. The term "finished
surface" shall mean a wall, including glass, as prepared for tenant use,
excluding the thickness of any special surfacing materials such as paneling,
furring strips and/or carpet. The term "major vertical penetrations" shall mean
the area of stairs, elevator shafts, flues, pipe shafts, vertical ducts and the
like, and their enclosing walls on that floor. Not included are (i) vertical
penetrations built for the private use of a tenant occupying more than one
floor, (ii) structural columns, (iii) openings for vertical electrical cable or
telephone distribution, and (iv) openings for plumbing lines. For any disputes
regarding Rentable Area, the parties shall be bound by the definition of that
term, and the other defined terms used in that definition, as set forth in BOMA,
Standard Method for Measuring Floor Area in Office Buildings, 1996 ANSI/BOMA
Section 65.1-1996.
3 - AMBERGLEN STANDARD LEASE FORM - LEASE II
3.4 ACCEPTANCE OF PREMISES. The space plans ("Plans") for the
tenant improvements to be performed by Landlord ("Tenant Improvements") and the
terms under which they are to be finalized and executed are attached to this
Lease as Exhibit "C". Except as otherwise provided in Exhibit "C", Landlord
shall, at its expense, construct Tenant Improvements as provided in Section 1 of
this Lease and upon such acceptance, Tenant shall be deemed to have accepted the
Premises in its then condition and subject to all applicable recorded covenants,
conditions and restrictions and all applicable zoning, municipal, county, state
and federal laws, ordinances and regulations governing and regulating the use of
Premises. Landlord agrees that the Tenant Improvements shall be built by
Landlord to comply with all codes applicable to the Tenant Improvements and in
effect on the Commencement Date (as defined herein). Landlord may rely on and
Tenant shall accept issuance of a final occupancy permit as evidence that this
Lease requirement has been met. Landlord agrees further that on the Commencement
Date the water, sewage, gas, electrical, mechanical, heating, ventilating and
air conditioning systems of the Premises will be in good working condition.
Landlord has not made and does not make any representations as to suitability of
the Leased Premises for the conduct of Tenant's business except as described in
Section 2(d).
3.5 ADDITIONAL INITIAL RENTABLE AREA.
3.5.1 EXPANSION OF INITIAL RENTABLE AREA. Tenant shall have until October 17, 1997 ("Initial Space Expansion Period"), to increase the number of rentable square feet of Initial Rentable Area within the Building, up to and including the entire balance of the Building ("Expanded Initial Rentable Area"). The Expanded Initial Rentable Area shall be adjacent to the Initial Rentable Area and shall be considered as part of the Initial Rentable Area for all purposes under this Lease. If Tenant elects to rent part or all of the Building pursuant to this Section 3.5, it shall give Landlord written notice to that effect ("Initial Space Expansion Notice") on or before the expiration of the Initial Space Expansion Period. The Initial Space Expansion Notice shall specify the amount and location of the Expanded Initial Rentable Area and describe the basic tenant improvements requested by Tenant within such area. The tenant improvements within the Expanded Initial Rentable Area shall be treated in the same manner as the Tenant Improvements described in Exhibit "C", including Tenant Improvement Allowance, space planning, preparation of Working Drawings, cost estimation, construction and payment. If Tenant has not given the Initial Space Expansion Notice within the Initial Space Expansion Period, the Tenant's right to expand pursuant to this Section 3.5 shall automatically expire without notice or further action by Landlord.
3.5.2 ALTERNATE INITIAL RENTABLE AREA EXPANSION METHOD. After the Initial Space Expansion Period, Landlord will make reasonable efforts to first lease space within the Building that is not contiguous to the Premises shown on Exhibit "A", and to keep Tenant reasonably informed concerning leasing activity regarding the Building. Any space within the Building that is not the subject of a signed letter of intent with another Tenant, up to the Commencement Date of this Lease, may be added to the Initial Rentable Area and upon such addition, shall be considered as part of the Initial Rentable Area and subject to all terms and conditions of this Lease.
4 - AMBERGLEN STANDARD LEASE FORM - LEASE II
3.5.3 AMENDMENT TO LEASE. Upon expansion of the Initial Rentable Area pursuant to Section 3.5.1 or 3.5.2 above, the Landlord and Tenant shall execute an amendment to this Lease which specifies (i) the location and actual square footage of the additional Rentable Area and (ii) the revised Monthly Base Rent amount resulting from addition of the space.
4. TERM.
4.1 LEASE TERM. The term ("Term") of this Lease is stated above in
2 (e), and subject to Tenant's 365-Day and 180-Day Termination Option provided
for in this Section 4.1, shall commence on the Scheduled Commencement Date
unless the Premises are not "Ready for Occupancy" as hereinafter defined, on the
Scheduled Commencement Date, in which case the commencement and termination
dates of the Lease shall be adjusted accordingly based on the date the Premises
are Ready for Occupancy. Excepting Tenant's 365-Day Termination Option and
180-Day Termination Option as they are defined in this Section 4.1, the deferral
of Tenant's rental obligation with respect to the Premises shall be in full
satisfaction of any and all rights which Tenant might otherwise have as a result
of the delayed commencement date of the Lease Term hereof. "Ready for Occupancy"
as used herein shall mean the date that landlord shall have substantially
completed the work to be performed by Landlord as set forth in Exhibit "C", as
certified to by Landlord's architect, and a Certificate of Occupancy has been
issued by the City of Hillsboro, but in no event earlier than July 1, 1998. The
date the Premises are Ready for Occupancy shall be the "Commencement Date" of
this Lease. If the commencement of the Lease Term is delayed as aforesaid and
the Commencement Date would otherwise occur on a day other than the first day of
the month, such Commencement Date shall be further delayed until the first day
of the following month and Tenant shall pay proportionate Rent at the same
monthly rate set forth herein (also in advance) for such partial month. In the
event the Commencement Date is delayed, the expiration of the Term hereof shall
also be delayed so that the Lease Term will continue for the full period set
forth above. As soon as the Lease Term commences, Landlord and Tenant shall
execute an amendment to this Lease, which may be required by either party,
setting forth the exact "Commencement Date" and expiration date of the Lease
Term. Subject to force majeure (as defined in Section 4.5 of this Lease) and
Tenant Delay (as defined in Exhibit "C" of this Lease), if Landlord fails to
have the Premises Ready for Occupancy within 180 days from the Scheduled
Commencement Date specified in Section 2(f) of this Lease, then Tenant shall
have the option (exercisable within the thirty (30) day period after the 180th
day or such later day determined by operation of the force majeure or Tenant
Delay following the Scheduled Commencement Date) to terminate this Lease
("180-Day Termination Option"). Subject to Tenant Delay, if Landlord fails to
have the Premises Ready for Occupancy within 365 days from and after the
Scheduled Commencement Date, then Tenant shall have the option (exercisable in
writing within the thirty (30) day period after the 365th day following the
Scheduled Commencement Date) to terminate this Lease ("365-Day Termination
Option"). Excepting the 365-Day and 180-Day Termination Options, this Lease
shall not be terminable by Tenant, and Tenant shall in no event be entitled to
an abatement or reduction of Rent except as expressly set forth in Section 12.3
or Section 13.1. Additionally, Landlord shall not be liable to Tenant for
damages in the event landlord cannot deliver the Premises on the Scheduled
Commencement Date, or by the 365th day after the Scheduled Commencement Date,
defined in Section 2 (f) of this Lease.
5 - AMBERGLEN STANDARD LEASE FORM - LEASE II
4.2 EARLY POSSESSION. Tenant shall be allowed access to the Building thirty (30) days prior to the Commencement Date of the Lease (which occurs on a date determined by operation of Section 4.1) and payment of Rent for the purpose of manufacturing process fit-up and testing. In conjunction with preparation of the Working Drawings specified in section 2.2 of Exhibit "C", Landlord and Tenant shall develop a detailed construction schedule that reasonably identifies the phases in which the Tenant Improvements are to be constructed ("TI Schedule") with the intent that Tenant's light manufacturing space be built out early during construction of the Tenant Improvements for the purpose of enabling Tenant to smoothly transition its existing operation into the Premises. Landlord agrees to use reasonable best efforts to cause its contractor to construct the Tenant Improvements in substantial conformance with the TI Schedule with the intention of delivering the first phase(s) to Tenant approximately thirty (30) days prior to the date the Premises are expected to be Ready for Occupancy in order to permit Tenant to conduct fit-up and testing, subject to Tenant's coordination of such efforts with landlord and its contractor, and provided that Tenant's activities during fit-up and testing do not unreasonably interfere with Landlord's completion of the Tenant Improvements. If Tenant avails itself of such early access for fit-up and testing, Tenant agrees to observe and perform all the provisions of this Lease, except requiring payment of Rent. If Landlord believes it will be unable to deliver the Premises to Tenant by the Scheduled Commencement Date, it shall give Tenant thirty (30) days' prior written notice to that effect. Landlord shall make reasonable best efforts to give Tenant thirty (30) days written notice of the date Landlord reasonably anticipates the Premises will be Ready for Occupancy.
If, prior to commencement of the Lease Term, Tenant uses or occupies the Premises or any part thereof with landlord's prior written consent, for the purpose of completing alterations to the Premises, Tenant agrees to observe and perform all the provisions of this Lease, except those which require payment of Rent; provided, however, if Tenant commences business (fit-up and testing do not constitute business) in any part of the Premises prior to commencement of the Lease Term, Tenant shall pay Landlord an occupation Rent for such part of the Premises for each day prior to commencement of the term, calculated on the basis of the per diem rental and all other sums which would be due to Landlord from Tenant if the term had then commenced, including its percentage share of annual Common Area Expenses.
4.3 TENANT DELAYS. The Commencement Date shall not be delayed or postponed due to Tenant Delays (as defined in Exhibit "C" to this Lease), and the Term, Tenant's obligations to pay Rent and all of Tenant's other obligations under this Lease shall commence upon the date which would have been the Commencement Date, but for Tenant delays.
4.4 LEASE TERM EXTENSIONS. (See Section 27 below.)
4.5 FORCE MAJEURE. The time during which Landlord is prevented or delayed in making the Premises Ready for Occupancy, or the time during which Landlord is prevented or delayed in the performance of constructing the Tenant Improvements, due to matters that are beyond the Landlord's reasonable control, including, without limitation, inclement
6 - AMBERGLEN STANDARD LEASE FORM - LEASE II
weather which materially delays completion of construction, fire, catastrophe, strikes, civil commotion, acts of God or the public enemy, acts or omissions of cities, counties or other governmental agencies, or the inability to obtain standard building materials. Any time of such delay shall be added to Landlord's time for performance of its obligations pursuant to this Lease, and Landlord shall have no liability to the Tenant by reason thereof. In the event Landlord is delayed in making the Premises Ready for Occupancy because of an inability to obtain standard building materials, Landlord will use reasonable best efforts to notify Tenant to that effect for the purpose of allowing Landlord and Tenant an opportunity to determine whatever substitute materials may be incorporated into the work.
5. USE.
5.1 PERMITTED USE. Tenant shall use the Premises solely for the use stated in 1(d) and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord.
5.2 RESTRICTIONS ON USE. Tenant shall not do or permit anything to
be done in or about the Premises nor bring or keep anything therein which will:
(a) increase the existing rate of, cause the cancellation of or otherwise
adversely affect any insurance for the Building or any part thereof of any of
its contents; (b) impair the proper and economic maintenance, operation and
repair of the Building or any portion thereof; (c) obstruct or interfere with
the rights of other tenants or occupants of the Building or injure or annoy
them; or (d) cause any nuisance in or about the Premises, the Building or
AmberGlen Business Center Common Areas. Tenant shall not use or allow any part
of the Premises to be used for the storage, manufacturing or sale of food or
beverages or for the retail sale or auction of merchandise, goods or property of
any kind, or as a school or classroom (other than for employee training), or for
any unlawful or objectionable purpose. Tenant shall not commit or allow to be
committed any waste to the Premises, the Building or AmberGlen Business Center
Common Areas.
5.3 COMPLIANCE WITH LAWS. Tenant shall not use the Premises or permit anything to be done in or about the Premises, the Building or AmberGlen Business Center Common Areas which will in any way conflict with any law, statute, ordinance, code, rule, regulation, requirement, license, permit, certificate, judgment, decree, order or direction of any governmental or quasi-governmental authority, agency, department, board, panel or court (singularly and collectively "Laws"). Prior to exercising Landlord's remedies pursuant to Section 18 of this Lease, Landlord will give Tenant notice of any default of its obligations under this Section and an opportunity to cure the default as more specifically set out in Section 17.3. Tenant shall, at its expense, promptly comply with all Laws which are now in effect or which may hereafter be in effect and with the requirements of any board of fire insurance underwriters or other similar bodies now or hereafter constituted, relating to or affecting the condition, use or occupancy of the Premises with respect to the Tenant Improvements located in or about the premises or with respect to the Building or common areas on the floor or floors on which the Premises are located. However, at Landlord's option, Landlord shall have the right to complete such required modifications to the Premises or common areas, for the account of Tenant, which costs shall be treated as Additional Rent (as that term is defined in Section 6.3 of this Lease). If the estimated cost
7 - AMBERGLEN STANDARD LEASE FORM - LEASE II
of such work exceeds Ten Thousand Dollars ($10,000.00), Landlord shall have the work competitively bid by three (3) contractors selected by Landlord, and award a contract for the work to the lowest responsive and responsible bidder. Tenant shall obtain and maintain in effect during the Lease Term all licenses and permits required for the proper and lawful conduct of Tenant's business in the Premises, and shall at all times comply with such licenses and permits. The judgment of any court of competent jurisdiction or the admission of Tenant in any action or proceeding (whether Landlord is a party or not) that Tenant has violated any Laws shall be conclusive of that fact as between Landlord and Tenant.
5.4 LANDLORD'S RULES AND REGULATIONS. Tenant shall observe and comply with the Building rules and regulations which are in effect on the date thereof (a copy of which is attached hereto as Exhibit "E") and such reasonable amendments and additions thereto as Landlord may, from time to time, promulgate. Landlord shall not be responsible for the non-performance of said rules and regulations of any other tenants of the Building.
5.5 HAZARDOUS SUBSTANCES. Tenant shall not cause or permit the release, discharge, or disposal nor the presence, use, transportation, generation, or storage of any Hazardous Material (as hereafter defined) in, on, under, about, to, or from the Premises by either Tenant, Tenant's employees, agents, contractors, or invitees (collectively the "Tenant") other than (i) the use of such materials in de minimus quantities reasonably necessitated by the Tenant's regular business activities; (ii) those referred to and used (in existing quantities and through existing processes) on the attached Exhibit "J"; or (iii) those subsequently approved in writing by Landlord in its reasonable discretion; such materials shall be used, stored and transported from the premises in strict accordance with this Section 5.5 and the restrictions and limitations set forth on Exhibit "J". For purposes of this Section 5.5, Landlord's discretion shall be deemed reasonable if materials proposed by Tenant are more toxic or hazardous, used in greater quantities or used through different processes, than those referred to in Exhibit "J".
Tenant further agrees and covenants to Landlord, its agents, employees, affiliates and shareholders (collectively the "Landlord") the following:
1. To comply with all Environmental Laws in effect, or may come into effect, applicable to the Tenant or Tenant's use and occupancy of the Premises;
2. To immediately notify Landlord, in writing, of any existing, pending or threatened (a) investigation, inquiry, claim or action by any governmental authority in connection with any Environmental Laws; (b) third party claims; (c) regulatory actions; and/or (d) contamination of the Premises;
3. Tenant shall, at Tenant's expense, investigate, monitor, remediate, and/or clean up any Hazardous Material or other environmental condition on, about, or under the Premises required as a result of Tenant's use or occupancy of the Premises;
4. To keep the Premises free of any lien imposed pursuant to any Environmental Laws; and
8 - AMBERGLEN STANDARD LEASE FORM - LEASE II
5. To indemnify, defend, and save Landlord harmless from and against any and all claims (including personal injury, real, or personal property damage), actions, judgments, damages, penalties, fines, costs, liabilities, interest, or attorney fees that arise, directly or indirectly, from Tenant's violation of any Environmental Laws or the presence of any Hazardous Materials on, under or about the Premises.
The Tenant's obligations, responsibilities, and liabilities under this Section shall survive the expiration of the Lease.
For purposes of this Section the following definitions apply:
"Hazardous Materials" shall mean: (1) any "hazardous waste" and/or "hazardous substance" defined pursuant to any Environmental Laws; (2) asbestos or any substance containing asbestos; (3) polychlorinated biphenyls; (4) lead; (5) radon; (6) pesticides; (7) petroleum or any other substance containing hydrocarbons; (8) any substance which, when on the Premises, is prohibited by any Environmental laws; (9) petroleum; and (10) any other substance, material, or waste which (i) by any Environmental Laws requires handling or notification of any governmental authority in its collection, storage, treatment, or disposal or (ii) is defined or classified as hazardous, dangerous or toxic pursuant to any legal requirements.
"Environmental Laws" shall mean: any and all federal, state and local laws, statutes, codes, ordinances, regulations, rules or other requirements, relating to human health or safety or to the environment, including, but not limited to, those applicable to the storage, treatment, disposal, handling and release of any Hazardous Materials, all as amended or modified from time to time.
6. RENT.
6.1 RENT. Without any prior notice, demand, offset or deduction, Tenant shall pay the Monthly Base Rent, the Additional Rent and Taxes and any other costs or expenses as required by this Lease in accordance with the Terms of this Lease.
Rent shall be payable without offset on or before the first day of each calendar month to Landlord's managers in advance at Birtcher Property Services, 27611 La Paz Road, P.O. Box 60009, Laguna Niguel, California 92607-0009 or such other place as may be designated by Landlord from time to time.
6.2 SECURITY DEPOSIT AND ADVANCE RENT. Concurrent with execution of this Lease (for purposes of this Lease, "Lease II"), Tenant has executed a Lease (for purposes of this Lease, "Lease I") of all space in an office/flex building located at 2430 NW 206th Avenue, Hillsboro, Oregon. To secure Tenant's compliance with all of the terms and provisions of this Lease II, and with all of the terms and provisions of Lease I, Tenant shall provide Landlord one security deposit of either:
9 - AMBERGLEN STANDARD LEASE FORM - LEASE II
6.2.1 An unconditional, irrevocable letter of credit for a period of twelve (12) years (and if the Term of this Lease is extended by Landlord or Tenant, then for the entire period of such extension), in the amount of Two Hundred Fifty Thousand and 00/100 dollars ($250,000.00) in a form and from an institution acceptable to Landlord or;
6.2.2 A cash security deposit equal to $0.96 multiplied by the sum
of the rentable square footage leased in Lease I and Lease II, plus fifty
percent (50%) of the cost of the building site modifications as described in
Section 31 hereof; provided, however, the total cash security deposit shall not
exceed Two Hundred Thousand and 00/100 Dollars ($200,000.00).
If the cash security deposit method is elected by Tenant, it shall be paid to Landlord one-half (1/2) upon execution of Lease I and Lease II, and one-half (1/2) when Landlord commences construction of the Tenant Improvements pursuant to either Lease I or Lease II. If the letter of credit method is elected y Tenant, the letter of credit shall be delivered to Landlord upon execution of Lease I and Lease II. Only one of the security deposits required by Lease I and Lease II shall be required to secure Tenant's performance of both Leases.
Provided Tenant has never been in monetary default of Lease I and/or Lease II during the initial thirty-six (36) months following the Commencement Date of each Lease, and provided Tenant has never been in non-monetary default of Lease I and/or Lease II during either of said thirty-six (36) month periods which has not been cured as provided in either such Lease, a portion of any cash security deposit provided pursuant to this Section 6.2.2 shall be refundable within thirty (30) days after the thirty-seventh (37th) month following the Commencement Date of Lease II, provided that Tenant demonstrates to Landlord that Tenant has received in the amount not less than Fifty Million Dollars and 00/100 ($50,000,000.00) market capitalization (meaning the fair market value of all outstanding shares of Tenant's stock during the entirety of the 37th month). The amount of cash security deposit refundable pursuant to this Section 6.2 shall be the amount of cash deposited that exceeds the sum of all Rentable Area leased in Lease I and Lease II multiplied by Ninety-Six Cents ($0.96).
Landlord shall have the right to offset against the deposit any sums owing from Tenant to Landlord not paid when due, any damages caused by Tenant's default, the cost of curing any default by Tenant should Landlord elect to do so, and the cost of performing any repair or cleanup that is Tenant's responsibility under this Lease. Offset against the deposit shall not be an exclusive remedy, but may be made by Landlord in its sole and unlimited discretion, in addition to and not exclusive of any right or remedy provided by law of this Lease. Landlord shall give notice to Tenant each time an offset is claimed against the deposit, and, unless the Lease is terminated, Tenant shall within ten (10) calendar days following such notice deposit with Landlord a sum equal to the amount of the offset so that the total deposit amount, net of offset, shall remain constant throughout the Term.
Landlord shall not be required to segregate any security deposit made by Tenant, but may commingle any security deposit with the Landlord's other funds and accounts. Landlord shall place the deposit in one or more federally-insured interest-bearing savings accounts, the nature of which shall be selected by Landlord in its commercially reasonable discretion.
10 - AMBERGLEN STANDARD LEASE FORM - LEASE II
The interest from any cash security deposit made pursuant to Section 6.2.2 shall accrue to Tenant and, at Landlord's option, may be paid to Tenant on or before January 31 of each year the deposit is held or credited annually to the Operating Expenses Reconciliation pursuant to Section 6 hereof. If Landlord sells its interest in the Premises, Landlord may deliver any cash deposit to the purchaser of Landlord's interest and thereupon be relieved of any further liability or obligation with respect to the Security Deposit.
In addition to the Security Deposit, the first month's rent shall be paid thirty
(30) days prior to the date the Premises is Ready for Occupancy (as that term is
defined in Section 4.1), which date shall be determined by Landlord based on the
progress of construction of the Tenant Improvements, and provided to Tenant.
6.3 ADDITIONAL RENT.
6.3.1 This is a "net" lease. Excepting the Monthly Base Rent and those items which this Lease expressly requires Landlord to pay, all deposits, costs, charges and expenses which Tenant assumes, agrees or is required to pay under this Lease shall be deemed "Additional Rent." The Monthly Base Rent, together with the Additional Rent is sometimes collectively referred to in this Lease as "Rent." Tenant shall not be charged for the use of inter-building conduit during the initial or extension term of this Lease.
6.3.2 If any installment of Monthly Base Rent or any other payment of Rent is not paid when due, in addition to any other consequence or charge arising out of such late payment, Tenant shall pay to Landlord a late fee of five percent (5%) of the amount of such Monthly Base Rent, Additional Rent, Rent or other charge ("Late Fee"). The Late Fee shall be due and payable to Landlord at the address shown in Section 2(h) of this Lease, thirty (30) days after the date such Late Fee accrues, which date shall be the date of payment default.
6.4 DEFINITION OF OPERATING EXPENSES. The term "Operating Expenses" shall include all costs for the operation, repair and maintenance of the Building and AmberGlen Business Center Common Areas incurred by Landlord on account of operating and maintenance of the Building and AmberGlen Business Center Common Areas and the real property on which it is situated. Landlord agrees to make reasonable efforts to minimize operating costs by taking advantage of cash discounts, trade discounts or quantity discounts actually received by Landlord or its management representative, insofar as such efforts are not inconsistent with Landlord's intent to operate and maintain the Building and AmberGlen Common Area in a first-class manner. Operating expenses may include, but shall not be limited to:
6.4.1 All taxes (except franchise, estate, inheritance, net income and excess profit taxes), assessments, purchases, water and sewer rents, and other governmental impositions and charges whatsoever which may create a statutory lien upon the Premises, the Building or AmberGlen Business Center Common Areas, which are assessed, levied or imposed during the term of this Lease, surcharges levied upon or assessed against parking space or areas, and any tax, levy or license fee measured by the rent payable to Tenant under this
11 - AMBERGLEN STANDARD LEASE FORM - LEASE II
Lease which may be in lieu of or in addition to current taxes (except Landlord's net income taxes), or any obligation to any governmental entity assessed upon Landlord as a result of its ownership or operation and all reasonable costs and expenses incurred by Landlord in contesting or negotiating the same with governmental authority if Landlord, in its reasonable discretion, elects to contest or negotiate the same.
6.4.2 All costs and expenses to Landlord in maintaining fire and extended coverage insurance including all risk endorsement on the property, public liability, rent loss insurance, difference in conditions and any other insurance maintained by Landlord covering the use and operation of the Building and AmberGlen Business Center Common Areas, the part of any claim required to be paid under the deductible portion of any insurance policies carried by Landlord in connection with the Building (all such insurance shall be in such amounts as Landlord may reasonably determine).
6.4.3 All costs and expenses of repairing, replacing, operating and maintaining the heating, ventilating and air conditioning systems for the Building, including maintenance contracts therefor and the cost of all utilities (that are not separately metered to Tenant) required in operating all such systems, except those required to be paid directly by a tenant of the Building.
6.4.4 All costs and expense to Landlord in providing standard services and utilities to tenants of the Building, including common area janitorial services, window washing and utilities not separately metered; together with the costs of replacement of electric light bulbs and florescent tubes and ballasts, which Landlord shall have the exclusive right to provide and install at Tenant's sole cost and expense.
6.4.5 Costs incurred by accountants and experts or other consultants to assist the accountants in making the computations required hereunder.
6.4.6 All costs and expenses incurred by Landlord in operating, managing (including administrative costs), maintaining and repairing the Building and AmberGlen Business Center Common Areas, including all sums expended in connection with the common areas for general maintenance and repairs, resurfacing, painting, restriping, cleaning, sweeping and janitorial services, window washing, maintenance and repair of elevators, stairways, sidewalks, curbs and Building signs, sprinkler systems, planting and landscaping, lighting and other utilities; maintenance and repair of any fire protection systems, automatic sprinkler systems, lighting systems, storm drainage systems and any other utility systems; cost of all supplies and personnel to implement such services and to police the Building and AmberGlen Business Center Common Areas; rental and/or depreciation of machinery and equipment used in such maintenance and services; security and fire protection services; trash removal services; all costs and expenses pertaining to snow and ice removal, alarm systems, patrol service, utilities, premiums and other costs for workers' compensation insurance, wages, withholding taxes, social security taxes, personal property taxes, fees for required licenses and permits, supplies and charges for management of the Building and AmberGlen Business
12 - AMBERGLEN STANDARD LEASE FORM - LEASE II
Center Common Areas and an overhead cost equal to five percent (5%) of the total Operating Expenses. Costs and expenses incurred by Landlord in operating, managing and maintaining the Building and AmberGlen Business Center Common Areas which are incurred exclusively for the benefit of specific tenants of the Building will be billed accordingly and will not be included within the Operating Expenses. Landlord, however, may cause any or all of said services to be provided by an independent contractor(s).
6.4.7 Cost of capital improvements, structural repairs or replacements to the Building as deemed necessary by Landlord. The cost of any such improvement, repair or replacement deemed necessary by one other than Landlord shall be paid by Tenant as Additional Rent.
6.5 EXCLUSIONS FROM OPERATING EXPENSES. Operating Expenses shall not include:
6.5.1 Costs associated with the operating of the business of the ownership or entity which constitutes "Landlord," as distinguished from the costs of building operations, including, but not limited to, ownership accounting and legal fees, costs of defending any lawsuits with any mortgagee (except as the actions or omissions of Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord's interest in the Building, costs of any disputes between Landlord and its employees (if any) not engaged in Building operation, disputes of Landlord with Building management, or outside fees paid in connection with disputes with other tenants;
6.5.2 Costs incurred in connection with the original construction of the Building or in connection with any major change in the Building, including but not limited to the addition or deletion of floors but excluding items specified in Section 6.4.7;
6.5.3 Costs of alterations or improvements to the Premises or the premises of other tenants, but excluding items specified in Section 6.4.7;
6.5.4 Depreciation, interest and principal payments on mortgages, and other debt costs, if any, but excluding items specified in Section 6.4.7;
6.5.5 Costs of warranty work and costs of correcting defects in the original construction of the Building;
6.5.6 Legal fees, space planners' fees, real estate brokers' leasing commissions, and advertising expenses incurred in connection with the original development or original leasing of the Building or future leasing of the Building;
6.5.7 Costs for which Landlord is reimbursed by its insurance carrier or any tenant's insurance carrier;
6.5.8 Any bad debt loss, rent loss, or reserves for bad debts or
rent loss;
6.5.9 The expense of extraordinary services provided to other
|
tenants in the Building;
13 - AMBERGLEN STANDARD LEASE FORM - LEASE II
6.5.10 The wages of any employee who does not devote substantially all of his or her time to activities within AmberGlen;
6.5.11 Fines, penalties, and interest except those that cannot reasonably be avoided;
6.5.12 Capital expenditures required by Landlord's failure to comply with laws enacted on or before the date the building's Temporary Certificate of Occupancy is validly issued;
6.5.13 Costs incurred by Landlord with respect to goods and services
(including utilities sold and supplied to tenants and occupants of the Building)
to the extent that Landlord is reimbursed for such costs:
6.5.14 Costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements, made for new tenants in the Building or Incurred in renovating or otherwise improving, decorating, painting or redecorating vacant rentable space for tenants or other occupants of the Building;
6.5.15 Expenses in connection with services or other benefits for which Tenant is charged directly but which are provided to another tenant or occupant of the Building;
6.5.16 Overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord, excluding Landlord's development and management representative, for services in the Building to the extent the same exceeds the reasonable costs of such services rendered by similarly qualified, experienced unaffiliated third parties on a competitive basis;
6.5.17 Rentals and other related expenses incurred in leasing air
conditioning systems, elevators or other equipment ordinarily considered to be
of a capital nature, except equipment not affixed to the Building which is used
in providing janitorial or similar services, but excluding items specified in
Section 6.4.7;
6.5.18 All items and services for which Tenant or any other tenant in the Building reimburses Landlord;
6.5.19 Electric power costs for which any tenant directly contracts (subject to conditions described in Section 8) with the local public service
company;
6.5.20 Building janitorial expenses unless provided by Landlord,
6.6 COLLECTION OF ACTUAL TENANT CHARGES. Unless Landlord exercises
|
the option contained in Section 6.7 below for a particular calendar year, Tenant shall pay actual Tenant Charges for each month of such calendar year immediately upon receipt of invoice from Landlord for such monthly Tenant Charges.
6.7 COLLECTION OF TENANT CHARGES BASED ON ESTIMATES. For each calendar year of the Lease Term, Landlord shall, at its option, reasonably estimate the total Operating Expenses for the following calendar year. Tenant shall pay its proportionate share of the
14 - AMBERGLEN STANDARD LEASE FORM - LEASE II
Operating Expenses. In the event the Building and/or AmberGlen Business Center occupancy is not one hundred percent (100%), said Operating Expenses shall be adjusted to equal what the total Operating Expenses would be if the occupancy was one hundred percent (100%). Tenant's initial percentage or proportionate share of Operating Expenses for the Building and Building Common Areas is twenty-six and sixty-five one hundredths percent (26.65%); and Tenant's percentage share of Operating Expenses for the AmberGlen Business Center Common Areas is twenty-six and sixty-five one hundredths percent (26.65%) of such Operating Expenses charged to the Building. The percentage of AmberGlen Business Center Common Areas expenses charged to the Building is two and 58/100ths percent (02.58%). For each year of the Lease Term, Tenant shall pay Landlord in advance on or before the first day of each month, without demand or notice, one-twelfth (1/12th) of Tenant's share of the estimated annual Operating Expenses. If the terms of this Lease commences on a day other than the first day of a calendar month. Tenant shall pay to Landlord on the first day of the term, a sum determined by multiplying on e three-hundred-sixty-fifth (1/365th) of the Tenant's share of the estimated Operating Expenses by the number of days remaining in the first calendar month of the term. Any change in the Tenant's percentage or proportionate share of the Operating Expenses for the Building Common Area of the AmberGlen Common Area resulting from changes in (i) the Tenant's floor area, (ii) Building floor area, or (iii) total AmberGlen Business Center Common Area, shall be effective as of the first day of the month following the change.
6.8 REESTIMATIONS. At any time from time to time during the term hereof, Landlord may furnish Tenant with written notice of a reestimation of the annual Operating Expenses to reflect more accurately, in Landlord's sole opinion, the current Operating Expenses. Commencing with the first day of the calendar quarter next succeeding delivery of such notice to Tenant, and continuing on the first day of each calendar month during the term (until subsequently reestimated), Tenant shall pay to Landlord one-twelfth (1/12th) of the Tenant's share of the estimated Operating Expenses, as reestimated.
6.9 ANNUAL ADUSTMENTS. Within a reasonable time following the end of each calendar year during the Term of this Lease, Landlord shall furnish to Tenant an itemized statement certified as correct by Landlord, setting forth the total Operating Expenses for the preceding calendar year, the amount of Tenant's share of such Operating Expenses and the payments made by Tenant with respect to such calendar year. If Tenant's share of the actual Operating Expenses for such year exceeds the payment so made by Tenant, based on the Landlord's estimate, Tenant shall pay Landlord the deficiency within thirty (30) days after receipt of said statement. If said payments by Tenant, based on Landlord's estimate, exceed Tenant's share of the actual Operating Expenses, Landlord will credit the amount of such overpayment against Tenant's next Operating Expense payment due. Until Tenant receives a statement setting forth the new amounts of Tenant's estimated share of Operating Expenses for the new calendar year ("New Statement"). Tenant shall continue to pay at the rate being paid for the year just completed. Tenant shall commence payment to Landlord of the estimated of Operating Expenses shown on the New Statement, beginning on the first day of the month following the month in which the New Statement is received.
6.10 RECORDS AND AUDIT. Landlord agrees to maintain accurate records of the cost of items with respect to which Tenant is required to pay as Additional Rent in
15 - AMBERGLEN STANDARD LEASE FORM - LEASE II
accordance with reasonably accepted accounting practices for similar projects. Landlord shall provide to Tenant reasonable detail of the calculations of the Operating Expenses ("Expenses Statement") as soon as reasonably practicable after the end of each calendar year ""Expenses Statement Date"). The Expenses Statement shall reflect total Operating Expenses for the Building and Common Area and all adjustments corresponding to the requirements set forth in this Lease. Landlord shall also provide in reasonable detail the calculations of Tenant's pro rata share of the Operating Expenses for the Building and Common Area and all adjustments corresponding to the requirements set forth in this Lease. For a period of sixty (60) days after Tenant is provided with the Expense Statement ("Audit Period"), Tenant shall have the right, at its own costs and expense, to audit or inspect Landlord's records with respect to Operating Expenses for that lease year. All of the information obtained through Tenant's audit, as well as any settlement, compromise or adjustment reached between Landlord and Tenant relative to the results of the audit shall be held in strict confidence by Tenant and its officers, agents (including any third-party auditor), directors, shareholders and employees. Tenant shall give Landlord not less than five (5) business days' prior written notice of its intention to conduct any such audit. In the event Tenant elects to audit Landlord's Operating Expense records, such audit, if conducted by a third party, may not be compensated by Tenant on a contingency fee basis. Landlord shall make such records available to Tenant, Tenant's designated employees or agents, for inspection during normal business hours. Tenant, Tenant's designated employees or agents, shall be entitled to make photostatic copies of such records, provided Tenant bears the expense of such copying. If, as a result of the audit, Tenant believes that Tenant's share of the Operating Expense has been overstated, written objection shall be delivered to Landlord specifying the claimed error(s). Such objection shall be delivered to Landlord within the thirty (30) day Audit Period or all objections will be deemed to have been waived by Tenant. If such audit discloses that the amount paid by Tenant as Tenant's share of Operating Expenses has been overstated, if Landlord agrees with the audit, Landlord shall repay such overpayment ("Expense Overpayment") to Tenant within thirty (30) days after the Audit Period. If the Expenses Overpayment is more than five percent (5%) of the variable Operating Expenses (not including Taxes or insurance), if Landlord agrees with the audit, then Landlord shall also pay Tenant's reasonable costs of audit at the same time. If Landlord disputes the audit, Landlord and Tenant shall mediate or arbitrate the dispute before a single arbitrator mutually selected by the Landlord and Tenant. If arbitrated, the Landlord and Tenant agree to be bound by the arbitrator's decision. If the arbitrator finds that the Expense Overpayment is more than five percent (5%) of the variable Operating Expenses (not including Taxes or insurance), then Landlord shall also pay Tenant's reasonable costs of audit and all arbitration costs within thirty (30) days of the date of decision. If, however, the arbitrator finds that there is no Expense Overpayment, then Tenant shall pay Landlord's reasonable costs related to the audit and all arbitration costs within thirty (30) days of the date of the decision.
7. REPAIRS AND MAINTENANCE
7.1 LANDLORD'S OBLIGATION. The following are the obligation of the Landlord:
16 - AMBERGLEN STANDARD LEASE FORM - LEASE II
(a) Repair, maintenance and replacement of the Skybridge structure (see Section 31), and the roof, gutters, exterior walls (including painting), bearing walls, structural members and foundations of the Building.
(b) Repair and maintenance and replacement of the Skybridge structure (see Section 31), and the roof, gutters, exterior walls (including painting), bearing walls, structural members and foundations of the Building.
(c) Repair and maintenance of water, fire, sewage, gas, and electrical and mechanical systems service and conduits (see Section 3.1) from the public right-of-way to the exterior walls of the Building;
(d) Repair and maintenance of heating, ventilating and air conditioning (HVAC) systems which service the Premises as well as other parts of the Building.
(e) Maintenance and replacements of landscaping for the land on which the Building is situated and AmberGlen Business Center Common Area.
(f) Janitorial service for Building common areas of the Building.
Although performance of the foregoing are the obligation of Landlord,
the cost of all of the foregoing shall be a Tenant Charge shared on
proportionate basis by Tenant as set forth in Section 6. Except as set forth in
Section 7.1, Landlord shall not otherwise be required to repair or maintain the
Premises or perform any other duties with respect to the Premises.
7.2 TENANT'S OBLIGATION. The following are the obligation of Tenant:
(a) Repair and maintenance of the interior of the Premises, including without limitation keeping the interior of the Premises in a clean and sanitary condition free of debris; janitorial service for the Premises which will be arranged for by Tenant with Landlord's approval, which will not be unreasonably withheld; repair and maintenance of all plumbing within the Premises and repair of any damage resulting from water leaks; replacement of all glass in windows of doors of the Premises which become chipped, cracked or broken; and repair and/or replacement of lighting fixtures, ballasts or light bulbs; repair and maintenance of water, fire, sewage, gas, electrical and conduit systems within the Building.
(b) Any repair necessitated by the use, misuse, abuse, wrongful act, negligence or breach of or default under this Lease of or by Tenant, its agents, employees or invitees. Tenant shall not allow the Premises to deteriorate or fall out of repair.
(c) Any repairs or alternations required in order for Tenant to comply with Rules and Regulations as set forth in Exhibit "E".
(d) All repairs to and maintenance of the Premises other
than repairs and maintenance which are the obligation of Landlord as stated in
Section 7.1.
17 - AMBERGLEN STANDARD LEASE FORM - LEASE II
(e) Any costs to install, repair or maintain Tenant's fiber optic cable and/or other types of data/communications networking, which cables or networks shall be installed in the underground conduit provided to Tenant by Landlord.
7.3 REIMBURSEMENT FOR REPAIRS ASSUMED. If Tenant fails or refuses to make repairs which are required to be made by Tenant by this Section 7, Landlord will provide Tenant with a written notice stating repairs to be made. Tenant shall have ten (10) calendar days in which to complete said repairs. In the event Tenant again fails to complete repairs following receipt of Notice, Landlord may make the repairs and charge the costs of such repairs to Tenant. Such expenditures by Landlord shall be reimbursed by Tenant on demand together with interest as set forth in Section 25.16 from the date of expenditure by Landlord until repayment in full.
7.4 DUTY TO MAKE REPAIRS. The duty of the Landlord to make repairs shall not mature until a reasonable time after Landlord has received notice in writing from Tenant of the repairs that are required.
8. UTILITIES. Tenant shall pay all utility charges with respect to the Premises, including but not limited to water, sewer, gas, electricity (including utilities servicing all central HVAC systems servicing the Premises), telephone, and garbage removal ("Utilities"). All utilities shall be separately metered. Tenant may not separately contract with utility providers to acquire any public utilities or any private utilities except telephone, without Landlord's prior written consent.
9. TAXES AND ASSESSMENTS.
9.1 PAYMENT OF PROPORTIONATE SHARE. Tenant shall be liable for payment of its proportionate share of all current assessments, real estate taxes, fees, levies and other similar charges (all of the foregoing herein called "Taxes") imposed by any governmental jurisdiction against the Premises, the Building or AmberGlen Business Center Common Areas, either directly or indirectly.
Tenant's proportionate share of any Taxes shall be based only on that portion of the Taxes which is allocable to the Premises during the Term. For these purposes, an assessment related to a local improvement district shall be deemed to have a useful life of ten (10) years and Tenant's proportionate share shall be equal to a fraction the numerator of which is the remainder of the Term and the denominator of which is ten (10) years. Tenant shall pay all taxes levied on or with respect to Tenant's personal property located on the Premises.
9.2 TAXES ON RENT. If, at any time during the Term of this lease under the laws of the United States Government, the State of Oregon, or any political subdivision thereof in which the Premises are located, a tax or excise on rent, or any other tax however described, is levied or assessed by any such political body against Landlord on account of rent payable to Landlord hereunder, such tax or excise shall be considered for the purpose of this Lease a real property tax payable by Tenant. If real estate taxes are withdrawn in whole or in part
18 - AMBERGLEN STANDARD LEASE FORM - LEASE II
and any substitute tax is made therefore, such tax shall in any event for the purpose of this Lease be considered a real property tax, a proportionate share of which shall be paid by Tenant, regardless of the source from which it is collected. Nothing in this Section 9 is intended to require Tenant to pay any income, franchise, or excess profits tax of Landlord.
10. ALTERATIONS AND ADDITIONS.
10.1 LANDLORD'S CONSENT.
(a) Tenant shall not make or permit to be made any alterations, additions or improvements (singularly and collectively "Alterations") to or of the Building or the Premises or any part thereof without the prior written consent of Landlord in each instance. However, Landlord's consent shall not be required for minor decorations of the Premises such as wall coverings and wall hangings, built-in cabinetry and movable partitions, installation of furnishings or non-structural Alterations which do not require a building permit and the total hard costs of which are valued at less than Ten Thousand Dollars ($10,000.00)(collectively, "Exempt Alterations"). If the value of any Exempt Alterations is greater than Two Thousand Five Hundred Dollars ($2,500,00), Tenant shall give Landlord prior written notice of the Exempt Alteration, which notice shall include a copy of the plans for such Exempt Alteration.
(b) Landlord will not unreasonably withhold or delay its
consent to any Alterations provided that all of the following conditions shall
be satisfied: (i) the Alterations do not affect the outside appearance of the
Building; (ii) the Alterations are nonstructural and do not impair the strength
of the Building or any part thereof; (iii) the Alterations are to the interior
of the Premises and do not affect any part of the Building outside of the
Premises; (iv) the Alterations do not affect the proper functioning of the
heating, ventilating and air conditioning ("HVAC"), mechanical, electrical,
sanitary or other utilities, systems and services of the Building, or increase
the usage thereof by Tenant; (v) Landlord shall have approved the final plans
and specifications for the Alterations and all contractors who will perform the
alterations; (vi) Tenant pays to Landlord out-of-pocket costs and expenses up to
$1,000.00, actually incurred by Landlord in reviewing Tenant's plans and
specifications and inspecting the Alterations to determine whether they are
performed in accordance with the approved plans and specifications and in
compliance with laws, including, without limitation, the fees of any architect
or engineer employed by Landlord for such purpose; and (vii) before proceeding
with any Alteration which will cost more than $10,000 (exclusive of Section
10.2), Tenant obtains and delivers financial assurances to Landlord. For the
purpose of this Section 10.1(b) the term "financial assurances" means, either:
(A) a performance bond and a labor and materials payment bond for the benefit of
the Landlord, issued by a corporate surety licensed to do business in Oregon
each in an amount equal to one hundred twenty-five percent (125%) of the
estimated cost of the Alterations and in form satisfactory to Landlord; or (B)
such other security as shall be reasonably satisfactory to Landlord or (C)
Tenant's selection of a contractor from a list of
19 - AMBERGLEN STANDARD LEASE FORM - LEASE II
four (4) contractors provided to Tenant by Landlord. Unless all of the foregoing conditions (i) through (vii) are satisfied, Landlord shall have the right to withhold its consent to the Alterations in Landlord's sole and absolute discretion. Excepting the conditions set forth in this Section (b), Landlord will impose no other conditions to approval of requested Alteration.
(c) All Alterations and Exempt Alterations must comply with all Laws which are then in effect, the other terms of this Lease, and the final plans and specifications approved by Landlord, and Tenant shall fully and promptly comply with and observe the rules and regulations and approval of Tenant's plans and specifications are solely for Landlord's benefit. Landlord shall have not duty toward Tenant, nor shall Landlord be deemed to have made any representation or warranty to Tenant, with respect to the safety, adequacy, correctness, efficiency or compliance with Laws of the design of the Alterations and/or Exempt Alterations, the plans and specifications therefore, or any other matter regarding the Alterations. Tenant shall deliver to Landlord a complete set of "as built" plans and specifications for each Alteration.
10.2 OWNERSHIP AND SURRENDER OF ALTERATIONS. Upon their installation, all Alterations and Exempt Alterations, including, but not limited to, wall covering, paneling and built-in cabinetry, but excluding movable furniture, trade fixtures and office equipment ("Tenant's Property"), shall become a part of the realty and belong the Landlord and shall be surrendered with the Premises. However, upon the expiration or sooner termination of the Lease Term, Tenant shall, upon written demand by Landlord, at Tenant's expense, immediately remove any Alterations made by Tenant which are designated by Landlord to be removed in its consent to such Alteration and/or those Exempt Alterations which Landlord notifies Tenant shall be removed, and repair any damage to the Premises or the Building caused by such removal, and restore the Premises to its original condition and configuration. Landlord's notice of removal in respect of Exempt Alterations will be given promptly after Landlord receives Tenant's written notice of Exempt Alterations required by Section 10.1(a) of this Lease.
10.4 ADDITIONAL REQUIREMENTS. Tenant, at its expense, shall obtain all necessary permits and certificates for the commencement and performance of Alterations and Exempt Alterations and for final approval thereof upon completion, and shall cause alterations to be performed in compliance therewith all applicable insurance requirements, and in a good, first-class and workmanlike manner. Tenant, at its expense, shall diligently cause the cancellation or discharge of all notices of violation arising from or otherwise connected with alterations, or any other work, labor, services or materials done for or supplied to Tenant or Tenant's Affiliates, or by any person claiming through or under Tenant or Tenant's Affiliates. Alterations and Exempt Alterations shall be performed so as not to interfere with any other tenant in the Building, cause labor construction, maintenance, repair or operations of the Building. Throughout the performance of the Alterations and Exempt Alterations, Tenant, at its expense, shall carry, or cause to be carried, in addition to the insurance described in this Lease, workers' compensation insurance in statutory limits and such other insurance as may reasonably require, with insurers reasonably satisfactory to Landlord. Tenant shall furnish Landlord with satisfactory evidence that such insurance is in effect at or
20 - AMBERGLEN STANDARD LEASE FORM - LEASE II
before the commencement of the Alterations and Exempt Alterations and, upon request, at reasonable intervals thereafter until completion of the Alterations and Exempt Alterations.
11. INSURANCE.
11.1 LIABILITY, PROPERTY DAMAGE AND WORKER'S COMPENSATION. Tenant shall, at all times during the Lease Term or any extension thereof, and at its own cost and expense, procure and maintain in force worker's compensation insurance, bodily injury liability and property damage liability insurance adequate to protect Landlord and naming Landlord, Landlord's Manager, any persons, firms or corporation designated by Landlord, any mortgagee of the Building of whose identity Tenant is notified, as an additional insured, against liability for injury or death of any person in connection with the use, operation or condition of the Premises. Such property damage and bodily injury liability insurance shall at all times be in a combined limit of not less than $1,000,000.00 on an occurrence basis. The limits of such insurance shall not limit the liability of Tenant.
11.2 PROPERTY INSURANCE. Landlord shall maintain insurance on an
all risk basis on the Building in the amount of the full insurable replacement
cost of the Building. Landlord shall have the right to place on the Building any
other insurance as Landlord shall reasonably deem necessary, with (for
Landlord's successors only) only reasonable deductibles. Tenant shall bear the
expense of any insurance insuring the property of Tenant and Tenant Improvements
on the Premises against such risks. As Additional Rent for the Premises, Tenant
shall reimburse Landlord for Tenant's proportionate share of the cost of all
insurance maintained by Landlord with respect to the Building as set forth in
Section 6.4.2.
11.3 WAIVER OF SUBROGATION. Tenant and Landlord each waives any and all right of recovery against the other, or against the officers, partners, employees, agents and representatives of the other, for loss of or damage to such waiving party or its property or the property of others under its control, if and to the extent that such loss or damage is insured against under any insurance policy in force at the time of such loss or damage.
12. DAMAGE AND DESTRUCTION.
12.1 PARTIAL DAMAGE. If the Premises are partly damaged and Section 12.2 does not apply, the Premises shall be repaired by Landlord provided, however, Landlord shall not be required to repair or restore any Tenant Improvements or additions other than the Initial Tenant Improvements (as defined in Exhibit "C"); and provided further, Landlord shall be required to make repairs or restoration only to the extent it receives or has the right to receive insurance proceeds from either (i) a Landlord or Tenant's insurance policy required by Section II of this lease or (ii) a policy required by Section 11 of this Lease in a form typically acquired for buildings similar to the Building which is the subject of this Lease, in an amount sufficient to pay the cost of such repairs and restoration. If the Premises are partially damaged during the last eighteen (18) months of the Term (as it may be extended from time-to-time), and Section 12.2 does not apply, and the time for repair or restoration is more than 120 days (as deemed by Landlord's architect or engineer within thirty (30) days after the date of damage), either Landlord or Tenant may elect to terminate this Lease as of the date of such damage.
21 - AMBERGLEN STANDARD LEASE FORM - LEASE II
12.2 DESTRUCTION. If the Premises are destroyed or damaged such that the cost of repair exceeds seventy-five percent (75%) of the value of the Building before the damage as reasonably determined by Landlord; either party may elect to terminate this Lease as of the date of the damage or destruction by giving written notice to the other party not later than forty-five (45) calendar days following the date of damage, provided however Tenant may not elect to terminate if the damage or destruction was caused by the wrongful act or negligence of Tenant or by the failure by Tenant to comply with any of the provisions of this Lease. In the event the Lease is terminated, all rights and obligations of the parties shall cease as of the date of termination, and Tenant shall be entitled to the reimbursement of any prepaid amounts paid by Tenant and attributable to the anticipated Term. If neither party elects to terminate, Landlord shall proceed to restore the premises to substantially the same form as prior to the damage or destruction provided, however, Landlord shall not be required to repair or restore any Tenant Improvements or additions other than the Initial Tenant Improvements (as defined in Exhibit "C"); and, provided further, Landlord shall be required to make repairs or restoration only to the extent it receives insurance proceeds sufficient to pay the cost of such repairs or restoration.
12.3 RENT ABATEMENT. Rent shall be abated during the repair of any damage in proportion to the extent the Premises are untenantable, except that there shall be no rent abatement where the damage occurred as the result of the wrongful act, negligence or failure to comply with any provisions of this Lease of or by Tenant that results in a judicial or arbiter's determination that insurance coverage required by Section 11 is lost as a result of Tenant's act or failure to act.
13. EMINENT DOMAIN.
13.1 PARTIAL TAKING. If a portion of the Premises, vehicular access to the Building, or parking spaces allocated to the Northwest Campus, is condemned and Section 13.2 below does not apply, this Lease shall continue on the following terms:
(a) Landlord shall be entitled to all of the proceeds of condemnation, and Tenant shall have no claim against Landlord as a result of the condemnation except Tenant may make a separate claim against the condemning authority for relocation, tenant improvements other than the Tenant Improvements, and personal property of Tenant.
(b) Landlord shall proceed as soon as reasonably possible to make such repairs and alterations to the Premises as are necessary to restore the remaining Premises to a condition as comparable as reasonably practicable to that existing at the time of the condemnation.
(c) After the date on which title vests in the condemning authority or an earlier date on which alterations or repairs are commenced by Landlord to restore the balance of the Premises in anticipation of taking, the Rent shall be reduced in proportion to the reduction in proportion to percent of the Premises taken. The Rent may be further reduced if, as a result of the condemnation, there are less than two (2) vehicular access point to the Northwest Campus, or there is more than a ten percent (10%) reduction in the number of parking spaces provided for under this Lease. If the parties are unable to agree upon the amount of
22 - AMBERGLEN STANDARD LEASE FORM - LEASE II
the reduction of rent, the amount shall be determined by an acceptable arbitrator on request by either party as provided under Oregon law. The determination of the arbitrator shall be final and binding on the parties.
(d) If a portion of Landlord's property not included in the Premises is taken and severance damages are awarded on account of the Premises, or an award is made for detriment to the Premises as a result of activity by a public body not involving a physical taking of any portion of the Premises, this shall be regarded as a partial condemnation to which Section 13.1(a) and Section 13.1(c) apply, and the rent shall be reduced in proportion to percent of the Premises taken.
13.2 TOTAL TAKING. If a condemning authority takes all of the Premises, or a portion sufficient, to render the remaining Premises reasonably unsuitable for the use which Tenant was then making of the Premises, or all access points to the Northwest Campus, this Lease shall terminate as of the date the title vests in the condemning authorities. If the parties cannot agree on the suitability of the remainder Premises for Tenant's use, the issue of suitability shall be submitted to an arbitrator as provided in Section 13.1(c). Landlord shall be entitled to all of the proceeds of condemnation, and Tenant shall have no claim against Landlord as a result of the condemnation.
13.3 SALE IN LIEU OF CONDEMNATION. Sale of all or part of the Premises to a purchaser with the power of eminent domain in the face of a threat or probability of the exercise of the power shall be treated for the purposes of this Section 13 as a taking by condemnation.
14. LIENS AND INDEMNIFICATION.
14.1 LIENS.
(a) Except with respect to activities for which Landlord is responsible, Tenant shall pay when due all claims for work done on and for services rendered or material or equipment furnished to the Premises and shall keep the Premises, the Building and AmberGlen Business Center Common Areas free from any liens, security interests or encumbrances (including without limitation, all statutory liens, mechanics liens, and the like) arising in connection with Tenant's use or occupancy of the Premises, or any labor, services, materials or equipment provided for or at the request of Tenant or Tenants agents or consultants (collectively "Tenant's Affiliates"), or any other act or omission of Tenant or Tenant's Affiliates. If Tenant fails to pay any such claims or to discharge any lien within the time provided in Section 17.3 of this Lease, in addition to any other rights and remedies provided by law, Landlord may do so and collect the cost as Additional Rent. Any amount so added shall bear interest as set forth in Section 25.16 from the date expended by landlord until payment in full and shall be payable on demand. Such action by Landlord shall not constitute a waiver of any right or remedy which Landlord may have on account of Tenant's default and shall not act to cure Tenant's default.
(b) Tenant may withhold payment of any claim in connection with a good faith dispute over the obligation to pay so long as Landlord's property interests are not
23 - AMBERGLEN STANDARD LEASE FORM - LEASE II
jeopardized and the amount claimed is contested in good faith by appropriate proceedings. If a lien if filed as a result of nonpayment, Tenant shall, within ten (10) calendar days after Tenant learns of the filing, secure the discharge of the Lien or deposit with Landlord sufficient cash or sufficient corporate surety bond or other surety satisfactory to Landlord in an amount sufficient to discharge the lien, plus any costs, attorney fees, and other charges that could accrue as a result of a foreclosure or sale under the lien.
14.2 INDEMNIFICATION. Tenant shall indemnify, hold harmless, and defend (with counsel reasonably acceptable to Landlord), Landlord from and against any claim, loss, or liability arising out of or related to any activity of Tenant or Tenant's Affiliates on the Premises or any condition of the Premises in the possession or under the control of Tenant. Landlord shall have no liability to Tenant for any loss or damage caused by third parties or by any condition of the Premises.
15. QUIET ENJOYMENT. So long as Tenant pays all rent and performs all of its other obligation as required hereunder, Tenant shall quietly enjoy the Premises without hindrance or molestation by Landlord, subject to the terms of this Lease and the terms of any Superior Leases and Mortgages to the extent provided for in Section 20 of this Lease, the term "Superior Lease and Mortgages" means all present and future ground leases, underlying leases, mortgages, deeds of trust or other encumbrances, and all renewals, modifications, consolidations, replacements or extensions thereof or advances made thereundner, affecting all or any portion of the Premises, the Building or the Common Areas.
16. ASSIGNMENT AND SUBLETTING.
16.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not voluntarily or by operation of law or otherwise, assign, transfer, mortgage, sublet or otherwise transfer or encumber 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 or delay. Except as otherwise provided in Section 16.2 below, any attempted assignment, transfer, mortgage, encumbrance or subletting by Tenant without such consent shall be void and shall constitute a breach or a default under this Lease. Landlord shall not be deemed unreasonably to have withheld consent if Landlord has sought but not obtained any required consent of a lender to Landlord, a partner of Landlord, or shareholder of Landlord.
16.2 LANDLORD'S RIGHT TO TERMINATE LEASE. If Tenant desires to
assign its interest in this Lease or to sublease or any part of the Premises,
Tenant shall notify Landlord in writing. This notice shall be accompanied by:
(a) a statement setting forth the name and business of the proposed assignee or
subtenant; (b) an executed copy of the proposed assignment or sublease (and any
collateral agreements) setting forth all of the terms and the financial details
of the sublease or assignment (including, without limitation, the term, the rent
and any security deposit, and amounts payable for Tenant's property and the
common use of any personnel or equipment); (c) financial statements certified by
an independent certified public accountant and other information requested by
Landlord relating to the proposed assignee or subtenant; and (d) any other
information concerning the proposed assignment or sublease which Landlord may
reasonably request. If Tenant proposes to
24 - AMBERGLEN STANDARD LEASE FORM - LEASE II
assign this Lease or sublet twenty-five percent (25%) or more of the Premises ("Proposed Sublease Space"), Landlord shall have the right, in its sole and absolute discretion, to notify Tenant in writing of its intent to terminate this Lease as to the Proposed Sublease Space only within thirty (3) days after receipt of Tenant's notice and the information described above or the receipt of any additional information requested by Landlord. If Tenant fails to withdraw the proposed assignment or sublease within ten (10) days after Landlord's notice of intent to terminate, the Landlord elects to terminate this Lease as to the Proposed Sublease Space, this Lease shall terminate as to such Space as of the effective date of the proposed assignment or commencement of the term of the proposed sublease as set forth in Tenant's notice, and Landlord shall have the right (but no obligation) to enter into a direct lease with the proposed assignee or subtenant. Tenant may withdraw its request for Landlord's consent at any time prior to, but not after, Landlord delivers a written notice of termination.
16.3 NO RELEASE OF TENANT. Regardless of Landlord's consent, no subletting or assignment shall release Tenant of its obligations hereunder to pay the rent and perform all other obligations to be performed by Tenant hereunder unless otherwise agreed in writing between Landlord and Tenant. The provisions of this Lease shall be binding upon any assignee, transferee, mortgagee, sublessee or holder of any encumbrance on or with respect to this Lease. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting.
16.4 CORPORATE AND PARTNERSHIP TRANSACTION. If Tenant is a corporation, a dissolution of the corporation or a transfer (by one or more transactions) of a majority of the voting stock of Tenant shall be deemed to be an assignment of this Lease subject to the provisions of this Article. However, if Tenant is a publicly traded corporation, then these provisions shall not apply to transactions with a corporation into or with which Tenant is merged or consolidated or to which substantially all of Tenant's stock or assets are transferred or which controls, is controlled by, or is under common control with, Tenant, if a principal purpose of the merger or transfer is not the assignment of this Lease and Tenant's successor has a net work not less than the net worth of Tenant on the execution of this Lease and successor assumes all responsibilities under this Lease. Tenant shall cause reasonably satisfactory proof of such net worth to be delivered at least thirty (30) days prior to the effective date of the transaction. If Tenant is a partnership, a dissolution of the partnership (including a "technical" dissolution) or a transfer of the controlling interest in the Partnership (including the admission of new partners or the withdrawal of existing partners having a controlling interest) shall be deemed an assignment of this Lease subject to the provisions of this Article, regardless of whether the transfer is made by one or more transactions, or whether one or more persons hold the controlling interest prior to or after the transfer.
16.5 DOCUMENTATION. All documents utilized by Tenant as evidence of any subletting or assignment to which Landlord has consented shall be subject to prior written approval by Landlord or its counsel. Tenant shall pay, as Additional Rent, all Landlord's actual out-of-pocket costs and expenses, including reasonable attorney fees, up to $1,000.00, -incurred in determining whether or not to consent to any requested subletting or assignments in reviewing and approving such documentation.
25 - AMBERGLEN STANDARD LEASE FORM - LEASE II
17. DEFAULT. The following events shall constitute an "Event of Defaults" under this Lease:
17.1 DEFAULT IN RENT. Failure of Tenant to pay when due Monthly Base Rent, Additional Rent, taxes or any other charge payable by Tenant pursuant to this Lease, and the continuation of such failure for a period of five (5) days after the same is due ("Rent Grace Period"); provided that if Tenant has failed three (3) or more times to make such payment within five (5) days after the due date, no Rent Grace Period shall thereafter be applicable under this Lease. Landlord will not pursue its remedies under Section 18 of this Lease for any violation to pay when due Monthly Base Rent, Additional Rent, Taxes or any other charges payable by Tenant pursuant to this Lease until Landlord gives Tenant written notice of default and seven (7) days after any available Rent Grace Period to cure the default; provided, however, Landlord shall not be required to give such notice more than one (1) time in any twelve (12) month period.
17.2 VIOLATIONS OF SECTION 16. Any attempted assignment, transfer, mortgage, encumbrance of subletting in violation of Section 16.
17.3 DEFAULT IN OTHER COVENANTS. Failure of Tenant to comply with
any term or condition or fulfill any obligation of this Lease (other than the
payment of Rent or other charges and compliance with Section 16) within thirty
(30) calendar days after written notice by Landlord specifying the nature that
it cannot be completely remedied within the thirty (30) calendar day period,
this provision shall be complied with if Tenant begins correction of the default
within the twenty (20) calendar day period and thereafter proceeds with
reasonable diligence and in good faith to effect the remedy, as soon as
practicable to prosecute the same to completion.
17.4 BANKRUPTCY, ETC. An assignment by Tenant for the benefit of creditors; the filing by Tenant of a voluntary petition in bankruptcy; an adjudication that Tenant is bankrupt or the appointment of a receiver of the properties of Tenant; the filing of any involuntary petition of bankruptcy and failure of Tenant to secure a dismissal of the petition within thirty (30) calendar days after filing; attachment of or the levying of execution on the leasehold interest of Tenant in the Premises and failure of Tenant to secure discharge of the attachment or release of the levy execution within ten (10) days after the making thereof. If Tenant consists of two or more individuals or business entities, the events of default specified in this Section 17.4 shall apply to each individual and each business entity.
17.5 ABANDONMENT. Failure of Tenant for thirty (30) successive calendar days or more in any twelve (12) month time period to occupy the Premises for one or more of the purposes permitted under this Lease unless such failure is excused under other provisions of this Lease, which failure constitutes an abandonment of the Premises.
17.6 CROSS-DEFAULT. Any monetary default or any non-monetary default not cured within the time permitted under this Lease, if any, shall be considered an Event of Default under Lease II, (as defined in Section 6.2), under the 20475 Option to Lease Agreement and the Thin Film Lab Agreement between Landlord and Tenant of even date herewith; and
26 - AMBERGLEN STANDARD LEASE FORM - LEASE II
under any other lease between Landlord and Tenant in effect on the date of the default ("Subsequent Lease"). Any event of default under Lease II, the 20475 Option to Lease Agreement, the Thin Film Lab Agreement or any Subsequent Lease shall be considered an Event of Default under this Lease.
18. REMEDIES ON DEFAULT.
18.1 TERMINATION. In the event of a default, this Lease may be terminated at the option of Landlord giving written notice to Tenant. If the Lease is not terminated by election of Landlord or otherwise, Landlord shall be entitled to recover damages from Tenant for the default. If the Lease is terminated, Tenant's liability to Landlord for damages shall survive such termination, and Landlord may re-enter, take possession of the Premises, and remove any persons or property by legal action or by self-help with the use of reasonable force and without liability for damages to Tenant, its property, any other persons, and/or their property.
18.2 RELETTING. Following re-entry or abandonment, Landlord may relet the Premises and in that connection may make any suitable alterations or refurbish the Premises, or both, or change the character or use of the Premises, but Landlord shall not be required to relet for any use of purpose other than that specified in the Lease or which Landlord may reasonably consider injurious to the Premises, or to any tenant which Landlord may reasonably consider objectionable. Landlord may relet all or part of the Premises, alone or in conjunction with other properties, for a term longer or shorter than the term of this Lease, upon any reasonable terms and conditions, including the granting or some rent-free occupancy or other rent concessions.
18.3 DAMAGES. In the event of termination on default, Landlord shall be entitled to recover immediately, without waiting the due date of any future rent or until the date fixed for expiration of the Term, the following amounts as damages:
(a) The loss of reasonable rental value from the date of default until a new tenant has been, or with the exercise of reasonable efforts could have been, secured.
(b) The reasonable costs of reentry and reletting including, without limitation, the cost of any clean up, refurbishing, removal of Tenant's property and fixtures, or any other expense occasioned by Tenant's failure to quite the Premises upon termination and to leave them in the required condition, any remodeling costs, attorney fees, court costs, broker commissions, and advertising costs.
(c) Any excess of the value of the rent and all of Tenant's other obligations under this Lease over the reasonable expected return from the Premises for the period commencing on the earlier of the date of trial or the date the Premises are relet and continuing through the end of the Term. The present value of future amounts will be computed using a discount rate equal to the prime commercial loan rate of United States National Bank of Oregon in effect on the date of trial.
27 - AMBERGLEN STANDARD LEASE FORM - LEASE II
18.4 RIGHT TO SUE MORE THAN ONCE. Landlord may sue periodically to recover damages during the period corresponding to the remainder of the Term, and no action for damages shall bar a later action for damages subsequently accruing.
18.5 REMEDIES CUMULATIVE. The foregoing remedies shall be in addition to and shall not exclude any other remedy available to Landlord under this Lease or applicable law.
19. DEFAULT OF LANDLORD. Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within thirty (30) calendar days after written notice by Tenant to Landlord specifying wherein Landlord has failed to perform such obligations; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) calendar days are required for performance, then Landlord shall not be in default if Landlord commences performance within such thirty (30) calendar day period and thereafter diligently prosecutes the same to completion. If any Landlord default results in an emergency condition that threatens life or personal safety, or involves a substantial increase of damage to the Premises or Tenant's personal property that can be mitigated only by precipitous action prior to giving notice to Landlord, then Tenant may take only such curative action as reasonably necessary to mitigate landlord's and/or Tenant's damages, and invoice Landlord for Tenant's reasonable and actual out-of-pocket costs, which Landlord shall pay to Tenant within thirty (30) days after the date the invoice is received.
20. SUBORDINATION. This Lease, at Landlord's option, shall be subordinate to any ground lease, mortgage, deed of trust or any other hypothecation for security now or hereafter placed upon the Premises, the Building and/or AmberGlen Business Center Common Areas, and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Tenant's right to quiet possession of the Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground leasor shall elect to have this Lease subordinate to the lien of this mortgage, deed of trust or ground lease, and shall give written notice thereof to Tenant, this Lease shall be deemed subordinate to such mortgage, deed of trust, or ground lease, whether this Lease is dated prior or subsequent to the date of such mortgage, deed of trust or ground lease on the date of recording thereof.
Tenant agrees to execute, acknowledge and deliver within twenty (20) days of Landlord's request any documents reasonably requested by Landlord pursuant to this Section including, but not limited to any documents necessary to effectuate such subordination or to make this Lease subordinate to the lien of any mortgage, deed of trust or ground lease, as the case may be, and, failing to do so, within fifteen (15) calendar days after written demand from Landlord, such requested documents shall automatically be deemed approved in the exact form requested by Landlord.
If any proceedings are brought for foreclosure, or in the event of the exercise of a power of sale under any mortgage or deed of trust made by Landlord covering the premises, Tenant shall attorn to the purchaser upon any such foreclosure or sale, or to the mortgagee
28 - AMBERGLEN STANDARD LEASE FORM - LEASE II
or trustee and shall recognize such purchaser, mortgagee or trustee as Landlord under this Lease.
21. SIGNS AND DIRECTORIES.
21.1 TENANT'S SIGNS. Subject to Landlord's approval and approval of the AmberGlen Architectural Control Committee, Tenant shall be allowed to install one building sign, either on the 2430 Building or the 1875 Building (but not both), that complies with (a) the AmberGlen sign guidelines published by the Landlord from time to time; (b) all governmental sign regulations and restrictions in effect throughout the Lease Term; and (c) the AmberGlen Protective Covenants, a summary of which is attached as Exhibit "D" and an entire copy of which was provided to Tenant prior to execution of this Lease. The cost of installation of such sign shall be paid out of the Landlord-supplied Tenant Improvement allowance provided for in Exhibit be paid out of the Landlord-supplied Tenant Improvement Allowance provided for in Exhibit "C" to this Lease. Tenant shall not install or keep any other signs on or about the Premises without the prior written consent of Landlord, which Landlord in its sole discretion may give or withhold. Tenant shall pay all costs of signs and all costs and expenses of installation of such other signs. If there is any sign on or about the Premises or Building without the consent of Landlord, Landlord shall be free to remove any such signs and Tenant shall pay Landlord the cost of removal together with interest as set forth in Section 25.16 from date of expenditure until cost of removal together with interest as forth in Section 25.16 from date of expenditure until payment is made in full. Tenant shall pay promptly after Landlord invoices Tenant for such costs. If Landlord consents to such signs, Tenant shall repair any damage which alteration or renovation of its signs may cause during or at the expiration of the Term. Tenant at its expense shall remove all of its signs from the Premises at the termination of this Lease, repair any damage to the Premises, and restore the face of the Building to its original condition as of the Commencement Date, exclusive of normal wear and tear.
21.2 TENANT IDENTIFIER SIGN: DIRECTORY. After the Commencement Date of this Lease, Landlord, at its own expense, install a tenant identifier sign indicating Tenant's location in the Northwest Campus of AmberGlen Business Center. The location of the Premises within the Building shall be designated through one or more interior identification signs placed at one or more points deemed appropriate by the Building. All such tenant identifier signs and building directories shall be designed and installed at the sole discretion of Landlord. Tenant shall bear the expense of this inclusion and maintenance of Tenant's name and location on such signs and such expense shall be treated as a Tenant Charge.
22. SURRENDER AT TERMINATION.
22.1 CONDITION OF PREMISES. Upon expiration of the Term of earlier termination on account of default, Tenant shall deliver all keys to Landlord and surrender the Premises in good condition, normal wear and tear and casualty excepted. Alterations and improvements constructed by Tenant with permission of Landlord shall not be removed or restored to the original condition unless the terms of such approval is so stated to allow for or requires such removal.
29 - AMBERGLEN STANDARD LEASE FORM - LEASE II
22.2 FIXTURES.
(a) All fixtures placed upon the Premises during the Term, other than Tenant's trade fixtures, shall, at Landlord's option, become the property of Landlord. If Landlord elects, Tenant shall remove any or all fixtures which would otherwise remain the property of Landlord, and shall repair any physical damage resulting from the removal. If Tenant fails to remove such fixtures, Landlord may do so and charge the cost to Tenant with interest as set forth in Section 25.17 from the date of expenditure until repayment in full.
(b) Prior to expiration or termination of the Term, Tenant shall remove all furnishings, furniture, and trade fixtures which remain its property. If Tenant fails to do so, the failure to do so shall be an abandonment of the property, and Landlord may retain the property and all rights of Tenant with respect to it shall cease or, by giving written notice to Tenant within twenty (20) days after removal was required, Landlord may elect to hold Tenant to its obligation of removal. If Landlord elects to require Tenant to remove, Landlord may effect a removal and place the property in public storage for Tenant's account and expense. Tenant shall be liable to Landlord for the cost of removal, transportation to storage, and storage, with interest as set forth in Section 25.16 on all such expenses from the date of expenditure by Landlord until repayment in full.
22.3 HOLDOVER.
(a) If Tenant does not vacate the Premises at the time required, Landlord shall have the option to treat Tenant as a tenant from month to month, subject to all of the provisions of this Lease except the provisions for term and renewal at a rental rate equal to one hundred twenty-five percent (125%) of the rent last paid by Tenant during the Term. Failure of Tenant to remove fixtures, furniture, furnishings, or trade fixtures which Tenant is required to remove under this Lease shall constitute failure to vacate to which this Section 22.3(a) shall apply if the property not removed will substantially interfere with occupancy of the Premises by another tenant or with occupancy by Landlord for any purpose, including preparation for a new tenant.
(b) If a month to month tenancy results from a holdover
by Tenant under this Section 22.3, the tenancy shall be terminable at the end of
any monthly rental period on written notice from Landlord given at least ten
(10) calendar days prior to the termination date which shall be specified in the
notice. Tenant waives any notice which would otherwise be provided by law with
respect to a month to month tenancy.
23. NO BROKER. Tenant represents, warrants and covenants that no broker was
instrumental in bringing about or consummating this Lease (except as stated in 2
(m) above) and that Tenant had no conversations, negotiations or agreements with
any broker concerning the leasing of the Premises. Tenant agrees to indemnify
and hold harmless Landlord from and against any claims for any brokerage
commissions and all costs, expenses and liabilities in connection therewith,
including, without limitation, attorney fees and expenses, arising out of any
conversations, negotiations or agreements of Tenant with any broker.
30 - AMBERGLEN STANDARD LEASE FORM - LEASE II
25. MISCELLANEOUS.
25.1 MEMORANDUM OF LEASE. Tenant shall not record this Lease. If requested by Landlord, simultaneously with execution and delivery hereof or at any later time designated by Landlord, Tenant shall execute, acknowledge and deliver to Landlord a Memorandum of Lease suitable for recording. In its sole and unlimited discretion, Landlord may record or not record such Memorandum of Lease. Such Memorandum of Lease shall not be deemed to change or otherwise affect any of the provisions of this Lease.
25.2 ESTOPPEL CERTIFICATE.
(a) Tenant shall at any time, upon at least ten (10)
calendar days written notice from Landlord, execute, acknowledge and deliver to
Landlord a statement in writing in form and substance satisfactory to Landlord
(i) certifying that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which the
rent, security deposit and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults, if any, which are
claimed. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises. If requested by Landlord, Tenant
shall also furnish Landlord with a certificate of Tenant's secretary as to
corporate resolutions in a form satisfactory to Landlord.
(b) Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant that (i) this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) there are no uncured defaults in Landlord's performance, and (iii) not more than two (2) months' rent has been paid in advance.
(c) If Landlord desires to finance, refinance, sell or otherwise transfer the Premises, the Building or the land described on Exhibit "A", or any part thereof, Tenant hereby agrees to deliver to Landlord, any lender, buyer or other party participating in a transfer designated by Landlord such regularly prepared financial statements of Tenant as may be reasonably requested by Landlord or such lender or other transferee not more than one (1) time in any twelve (12 month period. Such statements shall include the past three (3) years' financial statements of Tenant. All such financial statements shall be received by Landlord in confidence and shall be used only for the purposes herein set forth, and shall be returned after review.
25.3 LANDLORD'S INTEREST. "Landlord" as used herein shall mean only the owner or owners at the time in question of the Landlord's interest in the Premises. In the event of any transfer of title to the premises, Landlord herein named (and, in case of any subsequent transfers, the then grantor) shall be relieved from and after the date of such transfer of all liability as respects Landlord's obligations thereafter to be performed if an to the extent such liability is assumed by the successor, provided that any funds in the hands of Landlord or the grantor at the time of such transfer, in which Tenant has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Landlord shall be
31 - AMBERGLEN STANDARD LEASE FORM - LEASE II
binding on Landlord's successors and assigns only during their respective periods of ownership.
25.4 SEVERABILITY. If any term or provision of this Lease shall, to any extent, by invalid or unenforceable, the remainder of this Lease shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by law.
25.5 HEADINGS. The headings in this Lease are for the purpose of reference only, and shall not limit or otherwise affect any of the terms or provisions hereof.
25.6 INCORPORATION OF PRIOR AGREEMENTS: AMENDMENTS. This Lease contains all agreements of the parties with respect to the subject matter hereof. No prior agreement or understanding with respect thereto shall be effective. This Lease may be modified only by a writing, signed by the parties in interest at the time of modification.
25.7 WAIVERS. No waiver by Landlord of any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Tenant of the same or any other provision. Landlord's consent to or approval of any act shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act by Tenant. The acceptance of rent hereunder by Landlord shall not be a variety of any preceding breach of default by Tenant of any provision hereof, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach or default at the time of acceptance of such rent.
25.8 COVENANTS AND CONDITIONS. Each provision of this Lease performable by Tenant shall be deemed both a covenant and a condition.
25.9 MERGER. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, terminate all or any existing subtenancies or may, at the option of Landlord, operate as an assignment to Landlord of any and/or all of such subtenancies.
25.10 TENANT LIABILITY. If more than one party has executed this Lease as Tenant, the obligation of Tenant under this Lease shall be the joint and several obligations of each of such parties.
25.11 AUTHORITY TO ENTER INTO LEASE. If Tenant is a corporation, each individual executing this Lease on behalf of the corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of the corporation, in accordance with a duly adopted resolution of the board of directors of said corporation or in accordance with the by-laws or general resolution of said corporation, and that this Lease is binding on the corporation in accordance with its terms. If Tenant is a partnership, each individual executing this Lease on behalf of the partnership represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of the partnership, in accordance with the partnership agreement and any statements of partnership or certificates of limited partnership of the partnership, and that this Lease is binding on the partnership in
32 - AMBERGLEN STANDARD LEASE FORM - LEASE II
accordance with its terms. Tenant shall, within thirty (30) days of the execution of this Lease, deliver to Landlord: (1) if Tenant is a corporation, a certified copy of a resolution of the board of directors of the corporation and a certificate of incumbency relating to the signer; or (b) if Tenant is a partnership, a copy of the Statement of Partnership or Certificate of Limited Partnership of Tenant; and (c) other evidence reasonably satisfactory to Landlord authorizing or ratifying the execution of this Lease.
25.12 ATTORNEY FEES. If suit, action or arbitration is instituted in connection with any controversy arising out of this Lease, the prevailing party shall be entitled to recover in addition to costs such sums as the court or arbitrator may adjudge reasonable as attorney fees whether at hearing, on trial or appeal.
25.13 NOTICES. Any notice or communication required or permitted under this Lease shall be deemed given and made when actually delivered if personally delivered, or on the date of receipt if received or refused, if deposited in the United States mail (certified or registered), return receipt requested, postage prepaid, addressed to the party to whom such notice is being given at the address indicated in 2 (n) for Landlord and 2 (o) for Tenant or to such other address as may be specified from time to time by either of the parties in writing.
25.14 SUCCESSION. This Lease shall be binding upon and inure to the benefit of the parties, their respective permitted successors and assigns.
25.15 ENTRY FOR INSPECTION.
(a) Landlord shall have the right to enter upon the Premises (excepting the portion used for research and development) during normal business hours after notice to Tenant, and to the portion used for research and development upon twenty-four (24) hour notice and adherence to Tenant's security procedures (sign-in and accompaniment by a Tenant employee or agent), or at other times by prior arrangement with Tenant's approval, to determine Tenant's compliance with this Lease, to determine the necessity of repair or maintenance, to make necessary repairs to the Building or to the Premises, or to show the Premises (excepting the portion used for research and development) to any prospective tenant or purchaser, and in addition shall have the right during business hours, or at other times by prior arrangement, during the last two months of the Term of this Lease, to place and maintain upon the Building or the Premises notices for leasing or selling of the Building or the Premises.
(b) Landlord shall have the right to enter upon the Premises at any time in the event of an emergency.
25.16 INTEREST ON RENT AND OTHER CHARGES OR EXPENDITURES. Any rent or other payment required to be made by Tenant by this Lease shall, if not paid when due, bear interest at a variable rate equal to the United States National Bank of Oregon's prime commercial rate as adopted from time to time plus two percent (2%) (but in no event greater than the maximum interest rate allowed under applicable law).
33 - AMBERGLEN STANDARD LEASE FORM - LEASE II
25.17 AMENDMENTS TO STATUTES, ETC. Reference in this Lease to any particular law, statute, ordinance, rule, regulation or administrative order includes reference to any successors or amendments thereto.
25.18 GOVERNING LAW. This Lease shall be governed as to validity and interpretation by the laws of the State of Oregon.
26. SATELLITE DISH. Tenant's Installation and use of a satellite dish on the Building roof shall be allowed provided that (i) Tenant obtains the prior written approval of Landlord; (ii) Landlord and Tenant enter into a written agreement concerning installation, screening, use, liability, operation and removal of the dish; (iii) the installation and use complies with the AmberGlen Protective Covenants and the AmberGlen Rules and Regulations; and (iv) the installation and use complies with applicable federal, state, regional and local governmental statues, laws, regulations, ordinances, directives, orders and restrictions.
27. EXTENSION OF THE LEASE TERM.
27.1 TENANT'S OBLIGATION TO EXTEND LEASE I OR LEASE II. During the
calendar month following the expiration of the one-hundred-first (101st) month
of Lease II, Tenant shall extend the Lease Term of either Lease I or Lease II
for an additional eighteen (18) months beyond the expiration date of the current
Lease Term of the extended Lease. Tenant shall have the obligation to notify
Landlord in writing ("Mandatory Extension Notice") during the one-hundred-first
(101st) month of the initial Term of Lease II, whether Lease I or Lease II shall
be extended ("Extended Lease"). If Tenant does not provide the Mandatory
Extension Notice as required herein, then Tenant shall be deemed to have elected
to make Lease I the Extended Lease. The Extended Lease shall be governed by all
provisions of this Lease, except the Monthly Base Rent for the Extended Lease
shall be One Dollar Thirty-Three Cents ($1.33) per rentable square foot for the
eighteen (18) month period in its then "AS IS" condition, except for work
required to be performed by Landlord pursuant to this Lease.
27.2 TENANT'S OPTION TO EXTEND LEASE TERM. Provided there is no current uncured Event of Default by Tenant under this Lease, and there have not been more than two (2) prior Events of Default which have been previously cured pursuant to the terms of this Lease within the last twenty-four (24) months, and Tenant provides Landlord with written notice ("Tenant's Optional Extension Notice") during the thirteenth (13th) calendar month prior to expiration of this Lease (as it may have been previously extended through operation of the mandatory extension provided for in Section 27.1 or the Landlord's optional extension provided for in Section 27.3 hereof), Tenant shall have the option to extend the extend the then current expiration date of Lease I and Lease II for all ("Full Space Extension") or any portion (subject to the conditions stated below)("Partial Space Extension") of the Lease I Premises and Lease II Premises for one (1) additional term of five (5) years under the same terms and conditions then in effect under the applicable Lease
34 - AMBERGLEN STANDARD LEASE FORM - LEASE II
excepting (i) the Premises shall remain and be accepted by the Tenant in its then "AS IS" condition, except for work required to be performed by the Landlord pursuant to this Lease; and (ii) Monthly Base Rent shall be One Dollar Thirty-Three Cents ($1.33) per rentable square foot through the 180th month of this Lease, as so extended, and if the extension results in a Lease term exceeding 180 months, the Monthly Base Rent for the period exceeding 180 months shall be established as follows, but in no event less than One Dollar Thirty-Three Cents ($1.33) per rentable square foot:
27.2.1 NEGOTIATED MONTHLY BASE RENT. An amount that is mutually
agreed upon in good faith negotiations between Landlord and Tenant within thirty
(30) days after Landlord's receipt of the Tenant's Optional Extension Notice
based on the Rent Establishment Factors set forth in Section 27.2 below.
27.2.2 ARBITRATED MONTHLY BASE RENT. If Landlord and Tenant cannot agree on the Monthly Base Rent, the amount thereof shall be arbitrated under the laws of the State of Oregon. The arbitrator shall be appointed in accordance with the following process ("Rent Arbitration Process"): Landlord and Tenant each shall name one (1) arbitrator who shall be a real estate professional knowledgeable in the area of industrial real estate. The arbitrators' decision regarding Monthly Base Rent shall be based on (i) market conditions current on the anticipated commencement date of the extension period and (ii) base rental rates for comparable buildings is comparable locations with a comparable level of tenant improvements, with tenants of comparable use and financial strengths as Tenant ""Rent Establishment Factors"). The arbitrators shall independently reach an opinion regarding Monthly Base Rent and, if the lower opinion is within five percent (5%) of the higher opinion, the Monthly Rent Base Rent shall be the average of the two. If the two opinions are more than five percent (5%) apart, the two arbitrators shall select a third arbitrator, who shall independently reach an opinion regarding Monthly Base Rent (based on the Rent Establishment Factors set forth above), and the Monthly Base Rent shall be the average of the opinions of all three arbitrators. The arbitrators' decision shall be final and binding upon Landlord and Tenant, but in no event shall the Monopoly Base Rent be less than $1.33 per rentable square foot. Landlord and Tenant shall share equally the arbitrators' fees and each shall pay its own arbitration costs.
The Tenant's Optional Extension Notice shall specify whether it is a Full Space Extension or Partial Space Extension. The location and configuration of space for any Partial Space Extension shall be subject to Landlord's reasonable approval and must be in full floor configuration in the event corridors are not then in place for the proposed Partial Space Extension space and must include at least fifty percent (50%) of the square footage originally leased by Tenant pursuant to Lease I and Lease II. Tenant shall be obligated to extend Lease I and Lease II once the Tenant's Optional Extension Notice is received by Landlord. The cost of demising the Partial Space Extension space shall be shared equally between Landlord and Tenant, including the cost of constructing multi-tenant corridors. Tenant's share of such costs shall be paid to Landlord in cash prior to Landlord's commencement of construction of the required improvements.
Cascade Microtech's rights under this Section 27.2 are personal to Cascade Microtech, are not assignable or transferable, except to a corporation into which Cascade Microtech is
35 - AMBERGLEN STANDARD LEASE FORM - LEASE II
merged and which, at the time of transfer and exercise of the option, has a net worth on a current (not more than six months old) audited balance sheet of at least Ten Million and No/100 Dollars $10,000,000.00).
27.3 LANDLORD OPTION TO EXTEND LEASE. In the event that Tenant exercises the 20475 Building Option, upon execution of the 20475 Building Lease, the Landlord shall have the option to require Tenant to extend the then existing Lease Terms of Lease I and Lease II for a period of up to an additional thirty-six (36) months ("Landlord's Optional Extension Period") at a Monthly Base Rent of One Dollar Thirty-Three Cents ($1.33) per square foot during such extension period; the Tenant agrees to accept the Premises during such extended term in its then "AS IS" condition. The exercise of Landlord's option to extend shall entitle Tenant to modify its option to extend as set forth in Section 27.2 for as few as twenty-four (24) months or as many as sixty (60) months, provided that Tenant elects the duration of the modification within thirty (30) days after the Landlord's notice to Tenant that Landlord elects its extension, and such election does not violate the conditions set forth in Section 27.4 below.
27.4 EXPIRATION LIMITATION. Landlord and Tenant agreed that there shall be no less than an eighteen (18) month separation between the earliest to occur and latest to occur of the expiration dates (as they may be extended from time-to-time) of Qualifying Leases (as defined in this Section 27.4) within any two (2) buildings occupied by Tenant in the Northwest Campus and no less than a thirty-six (36) month separation between expiration dates of Qualifying Leases within any three (3) buildings occupied by Tenant in the Northwest Campus. A "Qualifying Lease" is any lease for space within the 2430 Building, the 1875 Building or the 20475 Building requirements shall be directly related to the number of Northwest Campus buildings in which Tenant has leased space. For example, if Tenant leases space only in the 1875 Building and 2430 Building, the lease separation requirement shall be 18 months. However, if Tenant leases space in all three Northwest Campus buildings; then the lease separation requirements shall be measured serially, such that there is not less than a thirty-six (36) month separation between the earliest to occur and the latest to occur of the expiration dates of Qualifying Leases. If through operation of Sections 27.1, 27.2 and/or 27.3 the applicable expiration dates are less than eighteen (18) months or thirty-six (36) months apart (as applicable). Tenant and Landlord agree to extend the expiration date of one of the Qualifying Leases to achieve the minimum eighteen (18) month expiration date separation.
28. OPTION TO LEASE 20475 NW AMBERWOOD DRIVE. Reference is made to the 20475 Option to Lease Agreement of even date herewith, a copy of which is attached as Exhibit "G" ("20475 Building Option"). Said option generally contemplates Tenant may lease 25,000 to 51,6000 square feet in an AmberGlen Business Center, Northwest Campus Building, to be located at 20475 NW Amberwood Drive, Hillsboro, Oregon.
29. THIN FILM LAB AGREMENT. Reference is made to the Thin Film Agreement of even date herewith, a copy of which is attached as Exhibit "H" ("Thin Film Agreement"). Said agreement generally contemplates Tenant and Landlord will negotiate to lease 20,000 to 60,000 square feet in AmberGlen Business Center, at a location to be determined as provided therein.
36 - AMBERGLEN STANDARD LEASE FORM - LEASE II
30. PARKING. Parking shall be in common with all Tenants of the three buildings comprising the Northwest Campus of AmberGlen Business Center. The current parking ratio for the Northwest Campus is approximately four (4) cars per 1,000 rentable square feet, depending on final loading dock configuration, and Landlord shall retain such approximate ratio, subject to parking reductions that may result from imposition of governmental parking restrictions. Tenant acknowledges that it shall have no right to use parking spaces in AmberGlen beyond those provided for pursuant to this Lease; Lease I; any space expansions that may occur as provided in Lease I; and any 20475 Building or Thin film Lab Lease.
31. BUILDING MODIFICATION FOR SKYBRIDGE, LOADING DOCK AND STORAGE AREA. Landlord and Tenant agree that Landlord shall construct an enclosed pedestrian walkway (the "Skybridge") that connects the second floor of 2430 NW 206th Avenue (the "2430 Building") with the second floor of 1875 NW Amberbrook Drive ("1875 Building"), in accordance with a design and specifications that are mutually acceptable to Landlord and Tenant; provided, however, that the Skybridge design and finishes shall be consistent with the quality of design and construction found in AmberGlen as determined by Landlord in its final judgment. In addition, Landlord agrees to modify the design of the proposed loading dock area between the 1875 Building and the 2430 Building generally as shown on the partial site plan attached hereto as Exhibit "H", to include a covering over the loading dock area, and to provide screening for Tenant's outside storage.
Tenant and Landlord agree to each pay one-half (1/2) of the total actual costs for the Skybridge, the loading dock modifications and the storage screening.
Tenant shall have the option to pay its one-half (1/2) costs in cash on or before the Commencement Date of Lease I or Lease II, whichever is earlier. If Tenant does not elect to pay its one-half (1/2) in cash, then Landlord shall treat Tenant's one-half (1/2) of the obligation as a debt to be amortized over the initial ten (10) year term of Lease I at ten percent (10%) per annum. In the event this Tenant obligation is amortized, Tenant shall sign a Promissory Note for the obligation, a form of which note is attached as Exhibit "I".
As long as Tenant leases space in either the 2430 Building or the 1875 Building, the Tenant shall pay all Operating Expenses associated with the Skybridge. For such time as both Leases are in effect, one-half (1/2) of the Skybridge-related operating expenses shall be attributed to each Lease. Upon expiration or termination of one of the Leases, all operating expenses relating to the Skybridge shall be allocated to the remaining Lease. The Skybridge shall be excluded from the useable square footage of Lease I and Lease II for the purposes of calculating the Monthly Base Rent. If at any time during the Term of Lease I or Lease II, Tenant does not occupy space on the second floor of both the 2430 Building and the 1875 Building, Landlord shall have full authority to use, modify or dispose of the Skybridge at its sole discretion, in which case Tenant shall have no obligation to pay Operating Expenses associated with the Skybridge.
32. RIGHT OF FIRST OPPORTUNITY TO LEASE ADDITIONAL SPACE.
37 - AMBERGLEN STANDARD LEASE FORM - LEASE II
32.1 EXPANSION CONDITIONS. Except during the first twelve (12) months following the Commencement Date, Tenant shall have the right of first opportunity to lease any and all space that becomes available for tenancy in the Building "the "1875 Expansion Area"). If the space becoming available is Second Generation Space (as defined in Section 32.3) the right of first opportunity to lease shall apply to all and only all of the space under the lease. Tenant's first opportunity to lease that space within 1875 Expansion area is contingent as follows:
32.1.1 NO DEFAULT. Tenant is not in default under the terms and conditions of Lease I, Lease II, the 20475 Lease, the Thin Film Lab Agreement or any subsequent lease on the date it gives Landlord notice of its desire to lease all or a portion of the 1875 Expansion Area, and has not been in a default (which Tenant has cured within the time permitted under the applicable Lease or agreement) more than two times during the term of any such Leases or agreement.
32.1.2 FINANCIAL REQUIREMENTS. The financial condition of Tenant must be satisfactory to Landlord. As of the date of any lease for 1875 Expansion Area, Tenant shall demonstrate to Landlord its ability to satisfy all of its rental obligations pursuant to Leases with Landlord, and in no event shall Tenant's net worth on a current (not more than six months old) audited balance sheet be less than Ten Million Dollars 00/100 $10,000,000.00).
32.1.3 UDP SPACE. Tenant's right of first opportunity as to the UDP
space (defined in Section 332.2 below) shall be limited to that specified in
Section 32.2 of this Lease.
32.2 UDP EXPANSION. As to the premises consisting of approximately 16,500 square feet within the Building, leased by United Data Processing ("UDP Premises"). Tenant shall notify Landlord in writing of its intention, if any, to expand into all and only all of the UDP Premises effective upon expiration date of the UDP Lease. Tenant shall give notice of its intention to lease the UDP Premises during the nineteenth (19th) month prior to the expiration of UDP's lease of the UDP Premises. Landlord shall notify Tenant in writing promptly after it learns of the precise expiration date of the UDP Lease. Upon such notification, Landlord shall not permit UDP to extend the initial term of its lease, and shall lease the UDP Premises to Tenant for a term of one-hundred-twenty (120) months. If Tenant desires to lease all of the UDP premises at any time prior to eighteen (18) months before expiration of the UDP Lease, Tenant shall give Landlord written notice to that effect and Landlord may request UDP to relocate to another space within AmberGlen; the Tenant understands that Landlord shall have no obligation to relocate UDP. In the event UDP agrees to relocate and Tenant leases the UDP Premises, Tenant herein shall be required to pay for all costs and expenses associated with relocating UDP which costs shall include, without limitation.
32.3 RIGHT OF FIRST OPPORTUNITY. If any space, other than the UDP
Premises, becomes available or will become available in the next eighteen (18)
months in the 1875 Expansion Area during or after the thirteenth (13th) month of
this Lease, Landlord shall notify Tenant of such availability. Tenant shall have
the right of first opportunity to lease such space and, no later than thirty
(30) days from receipt of such notice, Tenant shall exercise such right for a
term of not less than one-hundred-twenty (120) months. This lease
38 - AMBERGLEN STANDARD LEASE FORM - LEASE II
of space in the 1875 Expansion Area shall be on terms and conditions set forth
on a separate Lease with terms identical to those set forth in this Lease,
except the Monthly Base Rate shall be established in accordance with Section
2(h) of this Lease, calculating the month from the Commencement Date of this
Lease. For example, if the 1875 Expansion Area is leased during months one (1)
to sixty (60) of this Lease, then the Monthly Base Rent for the 1875 Expansion
Area for those months only, will be $0.96 per rentable square foot, and when the
Monthly Base Rent of this Lease increases, the Monthly Base Rent for the 1875
Expansion Area will increase to the same amount. In the event that Tenant does
not elect to lease the available space and execute a Lease within the thirty
(30) day period, Tenant's right of first opportunity to lease shall
automatically expire as to such space and Landlord shall have no further
obligation to Tenant with respect to such space.
In the event that 1875 Expansion Area space is improved only to the Building Shell Standards defined below ("First Generation Space"), Landlord shall provide a tenant improvement allowance of Twenty-Five and 00/100 Dollars ($25.00) per useable square foot with improvements to be constructed and paid for as provided in the applicable portions of Exhibit "C". The term "Building Shell Standards" shall mean those shown on the Revised Construction Documents for the Building dated June 17, 1997, prepared by Ankrom Mosian Associated Architects. The First Generation Space shall be constructed in substantial conformance with the Building Shell Standards.
If the 1875 Expansion Area space has been built on at the time Tenant gives
notice of its intention to lease such space ("Second Generation Space"), the
space shall be leased in its then "AS IS" condition, there shall be no tenant
improvement allowance and Tenant shall have no obligation to restore such space
to an unimproved condition unless modifications or alterations to the 1875
Expansion Area are made by Tenant without Landlord's approval in accordance with
Section 10 (alterations) of the new lease. Landlord agrees that Second
Generation Space shall have at least a drop ceiling with building standard
lighting, perimeter finished walls with electrical outlets, carpeting, and HVAC
serving the 1875 Expansion Area, and such other improvements as are described on
Exhibit "K".
Landlord agrees to incorporate a relocation clause substantially in the form reflected in Section 24 of Landlord's AmberGlen Standard Lease Form in all Northwest Campus leases executed from and after the Effective Date of this Lease (except that the reference in the fifth line of such section to "Building" shall be changed to "AmberGlen Business Center") and to use such relocation clauses to facilitate Tenant's desired expansion as provided herein. Landlord further agrees as follows:
(i) if the tenant under any other Northwest Campus lease elects to terminate its lease rather than relocate within AmberGlen Business Center under the applicable relocation clause of its lease, Landlord shall not exercise its right to reinstate the lease pursuant to such relocation clause; provided, however, notwithstanding the negotiated terms set forth in the first paragraph of this Section 32.3, the terms of the new lease with tenant, including Monthly Base Rent, shall not be less advantageous to Landlord than those provided for in the terminated lease;
39 - AMBERGLEN STANDARD LEASE FORM - LEASE II
(ii) if any new building in the AmberGlen Business Center is scheduled to be Ready for Occupancy within six (6) months of the date Tenant desires the space as stated in the notice to exercise its right of first opportunity, Landlord will include such space in its inventory of space within AmberGlen Business Center for relocation purposes; and
(iii) within fourteen (14) days after Tenant's written request, Landlord shall notify Tenant of the status (availability, lease expiration or lease renewal option of all space within AmberGlen Business Center during the twelve (12) months following the date of request for purposes of evaluating space that may be used for relocation of tenants within the 1875 Building and shall cooperate with Tenant by responding to Tenant's questions as to the availability and timing of expansion into the 1875 Expansion Area. Tenant agrees that all information disclosed to Tenant by Landlord pursuant to this subsection (iii) is confidential and proprietary to Landlord, Tenant agrees not to disclose such information to any third party, and to disclose such information to Tenant's agents only on a need to know basis, only after specific approval by Landlord, and only after such agent(s) agrees to be bound by such confidentiality restriction.
Tenant shall give Landlord written notice at least twelve (12) months in advance
of Tenant's desire to exercise its right of first opportunity to lease the
currently leased space within the 1875 Expansion Act ("Tenant's Expansion
Notice"). If Landlord has no space for any tenant to be relocated that is
comparable to the premises leased by such tenant, as of the date Tenant desires
to occupy the space within the 1875 Expansion Area, within thirty (30) days of
the date Landlord receives the Tenant's Expansion Notice Landlord shall notify
Tenant of if and when comparable space will be available during the twenty-four
(24) months following the date of Tenant's Expansion Notice. If such space
becomes available within said twenty-four (24) month period, Landlord will use
the relocation clause in the lease of the tenant to be relocated, to use best
efforts to make the space within the 1875 Expansion Area identified in Tenant's
Expansion Notice available for Tenant on such date. If a relocation clause is
used by Landlord to accommodate Tenant's expansion, then Tenant shall pay,
within ten (10) days after relocation costs are invoiced to Landlord, all costs
and expenses associated with such relocation as reasonably negotiated by
Landlord, after waiving such costs and expenses reasonably approved by Tenant in
advance.
33. CONDITION PRECEDENT. Landlord shall have no obligation under this Lease unless and until full execution of Lease I (as defined in Section 6.2) through which Tenant leases from Landlord and Landlord leases to Tenant the entire 2430 Building within the AmberGlen Northwest Campus located at 2430 NW 206th Avenue, Beaverton, Oregon 97006.
40 - AMBERGLEN STANDARD LEASE FORM - LEASE II
IN WITNESS WHEREOF, the parties have executed this Lease of the day and year first hereinabove written.
TENANT LANDLORD
CASCADE MICROTECH, INC., AMBERJACK, LTD.,
AN OREGON CORPORATION AN ARIZONA CORPORATION
By: /s/ Bruce McFadden By: /s/ Neil O. Brown
------------------------------------- ---------------------------------
Its: President Its: President
------------------------------------ --------------------------------
Date: 10/10/97 Date: 10/22/97
----------------------------------- -------------------------------
By: By: /s/ Earl B. Johnson Jr.
------------------------------------- ---------------------------------
Its: Its: Vice President
------------------------------------ --------------------------------
Date: Date: 10/22/97
----------------------------------- -------------------------------
|
41 - AMBERGLEN STANDARD LEASE FORM - LEASE II
Exhibit 10.10
DATE:
LEASE AGREEMENT
THE LESSOR: SUMITOMO REALTY AND DEVELOPMENT CO., LTD.
THE LESSEE: CASCADE MICROTECH JAPAN, INC.
|
LEASE AGREEMENT
THIS AGREEMENT is made and entered between Sumitomo Realty and Development Co., Ltd. (hereinafter referred to as "the Lessor") and Cascade Microtech Japan, Inc. (hereinafter referred to as "the Lessee"), concerning the lease of premises in Sumitomofudosan Aobadai Hills (hereinafter referred to as "the Building") located in 4-7-7, Aobadal, Meguro-ku, Tokyo. The parties have agreed as set forth below.
Article 1. Premises
The Lessor shall lease to the Lessee part of the Building
(hereinafter referred to as "the Premises") defined in the
attached page at the end of this agreement and the Lessee
shall take the Premises for lease.
Article 2. Purpose
The Lessee shall use the Premises only for the following
purpose, and not for any other purposes.
Purpose of Use: Business Office
Article 3. Duration of Term
A. The duration of term shall be for two (2) years beginning on the 1st day of May, 1996 until the 30th day of April, 1998.
B. In the event neither the Lessor nor the Lessee gives
a written notice of refusal of renewal or termination
of this Agreement to the other at least six (6)
months prior to the expiration date of this
Agreement, this Agreement shall be renewed for two
(2) more years from the day after the expiration
date. The same shall apply to every subsequent
renewal.
Article 4. Early Termination
A. The Lessor or the Lessee may terminate this Agreement
by giving a written notice to the other at least nine
(9) months prior to the desired termination date.
However, the Lessee may immediately terminate this
Agreement, instead of advance notice, by paying to
the Lessor the amount equivalent to the rental and
common fees for nine (9) months.
B. In the event the Lessee cancels this Agreement after the signing of this Agreement and before the beginning of lease term due to the Lessee's reasons the Lessee shall pay to the Lessor the penalty of the amount equivalent to the rental and common fees for nine (9) months.
C. The Lessee may not alter the date of termination defined in Items A and B without the Lessor's approval.
Article 5. Rental Fee
The rental fee shall be as set forth below. The Lessee shall
pay to the Lessor or the Lessor's appointee the rental fee for
the following month by the 20th day of each month by personal
delivery or instead by remitting the rental fee to the bank
account designated by the Lessor. Y2,093,000 per month
(Y13,500 per 3.3057 square meters, amount less than Y1,000 is
omitted.) The rental fee for less than one (1) month shall be
calculated per diem.
Article 6. Common Fee
A. The Lessee shall pay, in addition to the rental fee defined in the foregoing Article, the maintenance and management fee for the common areas (hereinafter referred to as "the Common Fee") of the amount described below in the same manner with the payment of rental fee. Y697,000 per month (Y4,500 per 3.3057 square meters, amount less than Y1,000 is omitted). The Common Fee for less than one (1) month shall be calculated per diem.
B. The Lessee shall bear the consumption tax imposed on the rental fee and Common Fee described in Article 5 and 6 respectively and all other taxable payments made by the Lessee to the Lessor.
Article 7. Revision of Fees
A. Either the Lessor or the Lessee may revise the
rental fee and the Common Fee defined in Article 5
and 6 upon renewal of this Agreement after
consultation with the other.
B. In the event that the rental fee and the Common Fee defined in Articles 5 and 6 respectively have become inappropriate due to fluctuation of consumer's prices, increase or decrease of the taxes and public charges for land and building, increase or decrease of the management cost, or any remarkable fluctuation of the economic conditions, either the Lessor or the Lessee may revise the fees upon consultation with the other.
Article 8. Lessee's Liabilities
The Lessee shall be liable for the following cost and expenses
arising from the use of Premises. In the event that the Lessor
has paid such expenses for the Lessee, the Lessee shall refund
the amount, on demand from the Lessor, to the Lessor or the
Lessor's appointee by personal delivery by the date designated
by the Lessor. The Lessee may remit, instead of the personal
delivery, the amount to the bank account designated by the
Lessor.
1) Air conditioning cost for the Premises.
2) Electric cost for lighting, equipment and other
appliances in the Premises.
3) Water cost for the Premises.
4) Actual cleaning and sanitary cost for the Premises.
5) Other payment the Lessee is required to pay.
6) All the consumption taxes imposed on the above
payments.
Article 9. Deposit Money
A. The deposit money is set at Y20,937,000
(Y135,000 per 3.3057 square meters, amount less than
Y1,000 is omitted), and in the following manner
the Lessee shall deposit it with the Lessor with no
interest.
1) At the signing of this Agreement:
Y4,187,400
2) At the time of moving into the Premises:
Y16,749,600
B. In the event of any increase or decrease of the rental fee, the Lessor or the Lessee shall increase or decrease the deposit money up to 600% of the revised amount without delay.
C. The Lessee shall not assign or set a mortgage against the right of refund of the deposit money to third parties.
D. The Lessee shall not claim to the Lessor offset of any obligation, such as the rental fee, with the deposit money.
E. Upon termination of this Agreement, through expiration, cancellation or dissolution, etc., of the Agreement, in the event that the Lessee owes any debt to the Lessor, the Lessor shall apply the deposit money for settlement. Any remaining amount shall be refunded to the Lessee after the complete redelivery of the Premises by the Lessee.
Article 10. Administration
The Lessee shall use the Premises and the common areas with
the care expected of a good administrator.
Article 11. Nonassignable Right
The Lessee shall refrain from committing the following
actions.
1) Assignment of or mortgaging any rights of the Agreement to third parties.
2) Subleasing or allowing third parties to use whole or part of the Premises.
3) Using the Premises as a residence or for any similar purposes.
4) Allowing third parties to share the Premises or display nameplates other than the Lessee's own. However, the foregoing phrase does not apply to the case in which the Lessee obtained the Lessor's written approval in
advance.
5) Any actions that may cause trouble to other tenants or damages to the Premises or the Building.
Article 12. Alteration to Original Condition
A. The Lessee shall obtain written approval from the
Lessor prior to performing the following actions. The
Lessee shall bear all the costs required even if the
Lessor obtained the Lessor's approval.
1) Installation, addition or alteration of
partitions, interiors or other fixtures in the
Premises.
2) Installation, addition or alteration
of electrical wiring, water, air conditioning,
and other facilities.
3) Installation or addition of safes or other
heavy objects or computers and other objects
which require large electric capacity.
4) Installation of signboards, name plates,
or advertisements.
B. The Lessee shall perform the work in the foregoing
items according to the regulations provided
separately by the Lessor and by the designers and
constructors appointed or approved by the Lessor.
C. The Lessee shall bear the real estate acquisition
tax and fixed property tax, whomever the addressee
of taxes are.
Article 13. Work
|
The Lessee shall put out the cleaning and other work for the Premises to contract by the company appointed by the Lessor.
Article 14. Management Regulations The Lessee shall faithfully observe the Management Regulations of the Building provided by the Lessor.
Article 15. Damage Compensation
A. In the event that the Lessee or the Lessee's agent, employees, contractors, visitors or other related personnel cause damages either intentionally or by accident to bodies or properties of the Lessor or third parties including other tenants, the Lessee shall compensate for all the damages.
B. The Lessee shall not lay claims to the Lessor for any damages suffered by the Lessee and caused by third parties including other tenants either intentionally or by accident.
C. In the event that the Lessee fails to fulfill any monetary obligation including the payment of rental fee, the Lessee shall pay to the Lessor indemnity for arrears calculated at the rate of Y0.05 per diem to the payable amount for the period beginning the day after due payment date until the day of complete payment.
Article 16. Exemption
A. The Lessor shall be excepted from responsibility for any damage caused by earthquake, fire, flood and other disaster by force majeure or malfunction of facilities, theft, loss, power suspension or other reasons beyond the Lessor's responsibility.
B. In the event that use of the common areas or part of the Premises is suspended or limited due to construction required for building repair or remodeling conducted by the Lessor under the inevitable circumstances, the Lessee shall not demand compensation to the Lessor. The Lessor shall give the Lessee an advance notice in written form concerning the scale, period of time, reasons for the work. In the event that the period of suspension or limitation of use is prolonged or severely affective, the Lessor and the Lessee shall consult with each other to reach a settlement.
Article 17. Inspection
A. The Lessor or the Lessor's appointees may enter the
Premises for Inspection and take appropriate measures
after notifying the Lessee if they deem it necessary
for the management of the Building. In case of
emergency the foregoing paragraph on notification
does not apply.
B. In the foregoing event, the Lessee shall cooperate with the Lessor.
Article 18. Repair
A. In the event that any fixtures or facilities in the
Premises or the Building need repair due to breakage
or malfunction, the Lessee shall immediately notify
the Lessor.
B. In the event the Lessor received the above notification from the Lessee and the Lessor deems it necessary to repair for the maintenance of the Building, the Lessor shall conduct the repair work at its cost. The same shall apply to cases that the Lessor deems necessary without notice from the Lessee.
C. The Lessee shall bear the cost of repair work described below notwithstanding the foregoing provision.
1) Repair of fixtures, blinds, lighting, switches, electrical outlets, and attachments in the Premises.
2) Small repairs (including repainting and retilling) of the walls, ceiling, and floor of the Premises.
3) Repair of damage attributable to the Lessee.
4) Repair of the fixtures and facilities owned by the Lessee.
D. The Lessee shall obtain the Lessor's written approval in advance concerning the method of repair of fixtures or facilities which the Lessee has installed in the Premises according to the provision of Article 12, and conduct the repair work based on the Lessor's specifications even when the Lessee conducts it on its own responsibility and cost. However, in case of emergency, the Lessee shall notify the Lessor as soon as possible after such action.
Article 19. Notification of Change in Registered Items
The Lessee shall notify the Lessor in written form any of the changes in the Lessee's head office, firm name or representative personnel without delay.
Article 20. Dissolution
A. In the event that the Lessee commits any of the
following actions, the Lessor shall advise the Lessee
to fulfill its liability within a certain period. If
the Lessee still fails to fulfill, the Lessor may
dissolve this Agreement.
1) Default in payment of the rental, common and other fees for two (2) months or more.
2) Noncompliance with this Agreement or any agreements incidental to this Agreement.
B. In the event that the Lessee commit any of the following actions or is in any of the following conditions, the Lessor may immediately dissolve this Agreement without any advice nor procedures to the Lessee.
1) Nonuse of the Premises for two (2) months or more without proper reason.
2) Declared, or applying for bankruptcy, private settlement, company reorganization or company rehabilitation, etc.
3) Receiving compulsory execution, petition for auction, preservative
measure, disposition for tax arrearage, etc.
4) Considerable disturbance to other tenant's occupation or use of the Building.
5) Grave changes in the Lessee's assets, credit or business that the Lessor deems to cause difficulty in continuing this Agreement.
C. In the event that the Lessor dissolve the Agreement due to a reason described in Items A and B herein, the Lessee shall pay to the Lessor the amount equivalent to the rental and common fees for six (6) months. This clause does not prevent the Lessor from claiming damage compensation to the Lessee.
Article 21. Redelivery
Upon termination of this Agreement, through either expiration,
cancellation or dissolution, the Lessee shall redeliver the
Premises without delay according to the following procedure.
1) The Lessee shall remove all the fixtures and facilities that the Lessee has installed or added in the Premises and other Lessee's properties at the time when the Lessee moved into the Premises by retilling the floor and repainting the ceiling by the termination date of this Agreement. However, upon the Lessor's agreement the Lessee may redeliver the Premises in its current condition.
2) In the event that the Lessee fails to restore the Premises to its original condition by the termination date of this Agreement, the Lessor may execute the restoration work at the Lessee's cost. The Lessor may freely dispose of any property the Lessee left within, regarding them as gratuitous goods.
3) Upon redelivery of the Premises, the Lesee shall not demand the Lessor to purchase fixtures or facilities that were installed or added in the Premises by the Lessee, nor shall the Lessee demand to refund expenditures made by the Lessee on the Premises. The Lessee shall not demand any compensation for moving, vacating the Premises or any other indemnity.
4) In the event that the Lessee fails to redeliver the Premises upon termination of this Agreement, the Lessee shall pay to the Lessor as compensation double the amount of the rental fee calculated per diem, along with the Common Fee, electricity and water costs during the period between the day following the termination of this Agreement and the day of the complete redelivery. The Lessee shall complete redelivery. The
Lessee shall compensate for any damages if the Lessor has suffered due to the delayed redelivery.
5) The Lessor may appropriate the deposit money for settlement, if the Lessee fails to fulfill the liabilities to the Lessor.
Article 22. Extinguishment of Agreement
A. In the event that the whole or part of the Building is destroyed due to nature disaster or force majeure, and use of the Premises became impossible or the restoration requires much cost, this Agreement shall be extinguished.
B. In the event this Agreement is extinguished due to the cause described in Item A, if the Lessee has unpaid liabilities including the rental fee the Lessor may appropriate the deposit money for settlement of such liabilities. The Lessor shall refund the remaining amount of deposit money to the Lessee if any balance exists.
Article 23. Arbitration
Any dispute arising from this Agreement shall be settled at Tokyo Regional Court.
Article 24. Mutual Faith
In the event that any question arises from cases not covered in this Agreement, the Lessor and the Lessee shall discuss and settle the problem in mutual good faith.
IN WITNESS WHEREOF, two copies of t his Agreement shall be made and after signing and sealing both copies the Lessor and the Lessee shall retain one copy each.
Date:
The Lessor: Junji Takashima, President
Sumitomo Realty and Development Co., Ltd.
2-4-1, Nishi-Shinjuku, Shinjuku-ku, Tokyo
The Lessee:
|
MEMORANDUM
THIS MEMORANDUM is an addendum to the lease agreement (hereinafter referred to as "the Original Agreement"), which was signed by and between Sumitomo Realty & Development Co., Ltd. (hereinafter referred to as "the Lessor") and Cascade Microtech Japan, Inc. (hereinafter referred to as "the Lessee") on February the 21st, 1996, concerning the premises in the Sumitomofudosan Aobadai Hills Building. Concerning airconditioning within the premises, the Lessor and the Lessee have agreed as set forth below.
Article 1. The Lessor shall operate and supply airconditioning in the premises as set forth below.
Airconditioning hours:
Weekdays (Monday through Friday): 8:30 - 19:00
Article 2. The Lessee shall pay to the Lessor the following amount as the airconditioning fee together with the payment of the rental fee defined In Article 5 of the Original Agreement in the same manner of payment.
Aiconditioning fee: Y155,000 per month
Article 3. In the event that the Lessee wishes to use airconditioning equipment after hours defined in Article 1 of this Memorandum (hereinafter referred to as "the extra time airconditioning"), the Lessee may use airconditioning by paying to the Lessor the extra time airconditioning fee separately stipulated by the Lessor.
Article 4. The Lessor of the Lessee may revise the airconditioning fees defined in Article 2 and 3 of this Memorandum upon consultation between the Lessor and the Lessee at the time of each renewal of the Original Agreement or in the event of fluctuation of prices, increase or decrease in the cost and expenses of management, or any other substantial fluctuation of economic conditions.
Article 5. Items not covered by this Memorandum shall be settled in accordance with the provisions of the Original Agreement.
IN WITNESS WHEREOF, this Memorandum has been prepared in duplicate and the Lessor and the Lessee shall retain one copy each after signing and placing their official seals on the documents.
Date:
The Lessor: Junji Takashima
President
Sumitomo Realty & Development Co., Ltd.
2-4-1, Nishi-Shinjuku, Shinjuku-ku, Tokyo
|
The Lessee: |
MEMORANDUM
THIS MEMORANDUM is an addendum to the lease agreement (hereinafter referred to as "the Original Agreement"), which was signed by and between Sumitomo Realty & Development Co., Ltd. (hereinafter referred to as "the Lessor") and Cascade Microtech Japan, Inc. (hereinafter referred to as "the Lessee) on February the 21st, 1996, concerning the premises in the Sumitomofudosan Aobadai Hills Building. The Lessor and the Lessee have agreed as set forth below.
Article 1. The Lessor shall exempt the Lessee from the payment of the rental fee defined in Article 5 of the Original Agreement for the period between May the 1st , 1996 and July the 31st, 1996.
Article 2. In the event that the Lessee wishes to move into the premises before the commencement date of the lease (May the 1st, 1996), the Lessee may move into the premises by depositing with the Lessor the remaining amount of the deposit money defined in Item B of Article 9 of the Original Agreement and paying to the Lessor the common fee defined in Article 6 and the cost and expenses defined in Article 8 respectively in the Original Agreement, In the foregoing event, the Lessee shall observe the provisions of the Original Agreement.
Article 3. In the event that the Lessee terminates the Original Agreement during the lease term defined in Article 3 of the Original Agreement, the Lessee shall pay to the Lessor the amount equivalent to the rental fee exempted under Article 1 and 2 of this Memorandum, In addition to the amount applied under Item A of Article 4 of the Original Agreement.
Article 4. Neither the Lessor and the Lessee shall disclose the contents of the Memorandum to third parties.
IN WITNESS WHEREOF, this Memorandum has been prepared in duplicate and the Lessor and the Lessee shall retain one copy each after signing and placing their official seals on the documents.
Date:
The Lessor: Junji Takashima
President
Sumitomo Realty & Development Co., Ltd.
2-4-1 Nishi-Shinjuku, Shinjuku-ku, Tokyo
|
The Lessee:
Exhibit 10.11
ELECTROGLAS, INC.
JOINT DEVELOPMENT AGREEMENT
This Joint Development Agreement (the "Agreement") is entered into at Santa Clara, California as of June 18, 1999 (the "Effective Date") between ELECTROGLAS, INC. a Delaware corporation ("Electroglas"), and CASCADE MICROTECH, INC., an Oregon corporation ("Cascade"), and is as follows:
RECITALS
A. Electroglas produces and sells a fully automatic prober (the "Prober") used in the production process by semiconductor fabrication plants. Cascade sells parametric probers to advanced research and development laboratories for semiconductor companies in the development of improved manufacturing technologies.
B. Cascade has certain low leakage, low noise parametric probing technology related to chucks, cabling, and shielding more particularly set forth in Exhibit A hereto (the "Technology") and including: (1) all related patented technology, process techniques, and know how developed by Cascade prior to and throughout the term of this Agreement; and (2) all related non patentable modifications, adjustments or enhancements that Cascade makes, during the term of the license agreement currently contemplated by the parties, to either purchased components or the Technology. The Technology excludes technology related to probes and probe cards.
C. The parties can substantially enhance the performance of the Prober in parametric applications by integrating the Technology into the Prober to create two probers meeting the specifications (the "Specifications") set forth in Exhibit B hereto (collectively the "Parametric Probers " and individually, as set forth in the Specifications, "Parametric Prober One" and "Parametric Prober Two").
D. Electroglas seeks to develop the Parametric Probers and license the Technology to enable it to sell products which exceed the performance criteria of Electroglas's competitors to silicon wafer fabrication plants with a view to meeting anticipated increased performance criteria necessary to support increasing complexity in silicon wafer manufacturing. Additionally, Electroglas seeks to enhance its revenue and profitability by manufacturing Parametric Probers for the research and development laboratory, wafer production, and process integration markets.
E. Cascade seeks to develop the Parametric Probers and license the Technology to give Cascade an outlet for the Technology without having to design, develop, and manufacture
its own prober for sale in the production market, and to enable Cascade to focus on further enhancing the Technology and other areas specific to Cascade's sales in the engineering laboratory and process integration markets. Additionally, Cascade seeks to enhance its revenues and profitability by licensing the Technology for Parametric Probers sold into the production and process integration markets.
F. Both parties are willing to expend the effort and incur the cost of jointly incorporating the Technology into the Prober to create the Parametric Probers (the "Development Effort") in consideration of the willingness of each party to enter into a license agreement substantially in the form attached as Exhibit C (the "License Agreement") and a stock purchase agreement and related documents substantially in the form attached as Exhibit D (the "Stock Purchase Agreement").
Accordingly, the parties agree as follows:
1. DEVELOPMENT
1.1. CASCADE. Promptly upon execution of this Agreement, Cascade shall commence work on the Development Effort. In so doing, Cascade shall place primary emphasis on modifying the design and specifications of the Technology as necessary to incorporate the Technology into the Parametric Probers and secondary emphasis on recommending changes to the Probers and Prober manufacturing process needed to incorporate the Technology into the Parametric Probers. In addition, Cascade shall alert Electroglas to any opportunities to make changes to the Probers or Prober manufacturing process that will reduce the costs associated with manufacturing or operating the Probers. Cascade shall permit Electroglas to review the designs, specifications, and drawings of the Technology to assist Cascade personnel in incorporating the Technology into the Parametric Probers.
1.2. ELECTROGLAS. Promptly upon execution of this Agreement, Electroglas shall commence work on the Development Effort. In so doing, Electroglas shall make available Electroglas's personnel for assistance in the Development Effort. Electroglas shall permit representatives of Cascade to examine such documents, specifications, manufacturing processes; and other materials, information or processes that Cascade may request that are reasonably' related to incorporating the Technology into the Parametric Probers. Electroglas shall review the designs, specifications, and drawings of the modifications and enhancements proposed by Cascade to the Prober, and shall complete the detailed designs of such modifications and enhancements according to the engineering standards and manufacturing documentation requirements of Electroglas.
1.3. OWNERSHIP OF RESULTANT INTELLECTUAL PROPERTY. As between the parties, Cascade shall be the sole owner of all enhancements or modifications to
the Probers which affect its low leakage or low noise parametric performance developed during the term of this Agreement and Electroglas shall be the sole owner of all other enhancements or modifications to the Probers developed during the term of this Agreement, regardless of who is deemed to be the author or inventor of such modification. Each party shall ensure that the party's employees, agents. and subcontractors involved in the Development Effort are party to a binding agreement obligating such person to assign to such party all intellectual property rights resulting from the Development Effort.
1.4 INDEMNIFICATION FOR INFRINGEMENT Each party shall ensure that all code prepared in connection with the Development Effort and all other modifications or enhancements to the Technology or the Probers completed by such party or such party's employees are an original work prepared without copying or otherwise infringing the intellectual property rights of any other person, and shall indemnify, defend and hold the other party harmless from any infringement claim arising from the other party's use of such modifications or enhancements as permitted by the License Agreement. Such indemnification shall be limited to the intellectual property rights of others in force as of the Effective Date of this Agreement, and the total liability of each party for defending and holding the other party harmless under this Section 1.4 shall not exceed one-half of all payments received by CASCADE from ELECTROGLAS under the License Agreement. The indemnifying party shall have control of the defense of any lawsuit based on such infringement claim, and the indemnified party shall assist the indemnifying party without cost in the defense of such suit or action by providing information and fact witnesses as needed. The indemnified party shall have the right to be represented by it own attorneys at the indemnified party's own expense, which attorneys will act only in an advisory capacity. Nothing herein shall authorize the indemnifying party to settle any lawsuit without the written consent of the indemnified party if, by such settlement, the indemnified party is obligated t6 make any monetary payment, to transfer any property or any interest in property, to become subject to an injunction, to grant any license or other rights under its intellectual property rights, or to acknowledge any action or inaction of the indemnified party disputed by such party. The indemnifying party shall have the right to change any of its prior modifications or enhancements so as to avoid such infringement claim with respect to future Parametric Probers subject to a renegotiation of the royalty payment and exclusivity minimums to reflect any reduction in performance of the Parametric Probers. If the indemnified party does not implement such a change within sixty (60) days after notice by the indemnifying party of such change, then the indemnifying party's obligations under this Section 1.4 with respect to such infringement claim shall not apply to infringements which occur thereafter.
2. RESOURCE COMMITMENTS
2.1. RESOURCES. The parties shall devote such personnel and equipment to the Development Effort as they deem necessary under the circumstances.
2.2. COSTS AND EXPENSES.
Each, party shall bear its own costs and expenses in connection with providing the foregoing resources and any other costs and expenses incurred in connection with this Agreement.
3. POST DEVELOPMENT MATTERS
3.1. PROJECT COMPLETION. Each party shall promptly notify the other in writing in accordance with Section 7.2 upon the successful development of Parametric Prober One or Parametric Prober Two. Neither party shall be required to deliver the notice required pursuant to this Section 3.1 unless the applicable Parametric Prober in question meets the Specifications applicable thereto to the satisfaction of such party, provided, however, that such notice shall not be unreasonably withheld, delayed, or denied. Electroglas shall make a best effort to complete the pro-forma analysis described in Section (a) iii) of Exhibit B within two (2) weeks after notification by Cascade of the successful development of the applicable Parametric Prober.
3.2. LICENSE AND STOCK PURCHASE AGREEMENT.
Within Thirty (30) days after both parties have received the notice required by
Section 3.1 with respect to Parametric Prober One, both parties shall execute
the License and Stock Purchase Agreements in the forms attached as Exhibits C
and D hereto, respectively, subject only to the condition set forth in
Section 3.3.
3.3. TECHNOLOGY DUE DILIGENCE. The obligation of Electroglas to enter into the License and Stock Purchase Agreements shall be expressly conditioned upon Electroglas satisfying itself that Cascade owns the Technology and may grant an exclusive license to the Technology; provided, however, that nothing in this Section 3.3 shall relieve either party of its obligation to make the representations and warranties contained in the License and Stock Purchase Agreements. The condition described in this Section 3.3 shall be deemed to have been satisfied unless, no later than May 28, 1999, Electroglas shall have notified Cascade of a specified impediment to Cascade's rights described in this Section 3.3.
3.4. DEFAULT FEE.
In the event of a breach by either party of Sections 3.1 or Section 3.2
(subject, at all times, to the limitation on Electroglas's obligation imposed by
Section 3.3), the parties shall be obligated to pay a default fee as set forth
below.
3.4.1. In the event of a breach of Sections 3.1 or 3.2 by Electroglas (subject, at all times, to the limitation on Electroglas's obligation imposed by Section 3.3), Electroglas shall pay Three Hundred Thousand Dollars ($300,000) to Cascade within. Sixty (60) days from the date of such breach.
3.4.2. In the event of a breach of Sections 3.1 or 3.2 by Cascade, Cascade shall pay Two Hundred Thousand Dollars ($200,000) to Electroglas within Sixty (60) days from the date of such breach.
3.4.3. Payment of the default fee specified in this Section 3.4 shall constitute the -sole and exclusive remedy of the parties for a breach of Sections 3.1 or 3.2.
4. CONFIDENTIAL INFORMATION
4.1. DEFINITION OF CONFIDENTIAL INFORMATION. "Confidential Information" means:
(a) All specifications, drawings, designs, and 6ther material of any kind, in whatever form, related to the Technology, the Probers, or the production or manufacture thereof, any intellectual property resulting from the Development Effort, any relevant sales and marketing information, including, but not limited to product pricing, market positioning strategy, customer lists, and the like;
(b) any other information disclosed by a party which is in written or other tangible form and is marked "Confidential," "Proprietary," or in some other manner to indicate its confidential nature;
(c) all nonpublic information concerning the customers and clients of the parties to this Agreement;
(d) the nonpublic terms of this Agreement and all nonpublic reports and pricing and sales information provided pursuant to this Agreement;
(e) oral information disclosed by a party and which is designated as confidential at the time of disclosure; and
(f) other information, whether written or oral, that by its nature is such that the parties, being sensitive to the need to protect the confidential information of the other, should inquire as to its confidential status (unless upon inquiry the party is advised that the information is not confidential).
Information ceases to be Confidential Information if the owner or possessor of the information (the "Owner") discloses it to a third party free from restrictions similar to those imposed by this Agreement. Information is deemed to be Confidential Information unless the party to whom the information is disclosed (the "Recipient") proves otherwise.
4.2. EXCLUSIONS. Notwithstanding. the above, "Confidential Information" does not include information that the Recipient can prove:
(a) is in the public domain at the time it is disclosed or enters in the public domain other than through an infringement of the rights of the Owner;
(b) is known to the Recipient, without restriction, at the time of disclosure; or
(c) is independently developed by the Recipient without any use of the Confidential Information of the Owner.
4.3. OBLIGATION TO KEEP CONFIDENTIAL INFORMATION CONFIDENTIAL. Each Recipient shall treat as confidential all Confidential Information of the Owner. A Recipient shall not use Confidential Information of an Owner except as permitted in this Agreement or the License Agreement. A Recipient shall not disclose Confidential Information to any employee, agent, or third party except as may be reasonably required in connection with this Agreement. Each Recipient shall use at least the same degree of care with respect to the Confidential Information of the other party as the Recipient uses to prevent the disclosure of its own confidential information of like importance, but in no event less care than a reasonably prudent business person.
4.4. PERMITTED DISCLOSURES. When disclosing Confidential Information as permitted by this Agreement, the Recipient shall impose confidentiality obligations on the subsequent recipient at least as protective as those set forth in this Agreement. Each party shall enter into written confidentiality agreements with its employees who have access to such information obligating them to respect the confidentiality of the Confidential Information of the other party. Each Recipient shall assist. the Owner in enforcing such agreements.
4.5. DISCLOSURE PURSUANT TO GOVERNMENT ORDER. A Recipient may disclose Confidential Information pursuant to the order or requirement of a court, administrative agency, or other governmental body if the Recipient gives immediate notice of the request for the information to the Owner so that the Owner may seek a protective order or otherwise preserve the confidentiality of the information.
4.6. ACKNOWLEDGMENTS. Each party hereby acknowledges that the Confidential Information of the other party is commercially and competitively valuable; that by this Agreement, the parties are taking reasonable steps to protect their legitimate interest in the Confidential Information; and that the restrictions contained in this Agreement are reasonably necessary to protect each party's legitimate interest in its Confidential Information.
5. CONDUCT ON PREMISES
A party (the "Guest Party") to this Agreement sending employees, agents, or subcontractors to the facility of the other party (the "Host Party") shall take reasonable precautions to prevent the occurrence of any injury to persons or property during the progress of the Development Effort and, except to the extent that any injury to a Guest Party employee, agent, or subcontractor is due solely and directly to negligence of the Host Party, the Guest Party shall indemnify the Host Party against all losses which may result in any way from any .negligent act or omission of the Guest Party or the Guest Party's agents, employees, or subcontractors. Guest Party shall maintain
such public liability, property damage and employer's liability compensation insurance as will protect Host Party from risks and. from claims under any applicable worker's compensation or occupational disease acts. Guest Party shall instruct and require Guest Party's visiting employees, agents, and subcontractors to observe and obey all rules, policies, and procedures in effect at the facilities of Guest Party.
6. TERM AND TERMINATION
6.1. TERM. The term of this Agreement and the Development Effort shall begin on the Effective Date hereof and continue for a total of Two Hundred Seventy (270) days.
6.2. SURVIVAL. The provisions of Articles 1.4, 4, 5, and 7 shall survive the expiration, cancellation, or termination of this Agreement.
7. MISCELLANEOUS
7.1. AMENDMENTS, WAIVERS, AND CONSENTS. This Agreement shall not be am-ended except in a writing signed by the parties. No course of dealing between the parties shall constitute an amendment of this Agreement. No waiver or consent shall be binding except in a writing signed by the party making the waiver or giving the consent. No waiver of any provision or consent to any action shall constitute a waiver of any other provision or consent to any other action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent except to the extent specifically set forth in writing.
7.2. NOTICE. Any notice, instruction, or communication required or permitted to be given under this Agreement to any party shall be in writing (which may include telecopier or other similar form of reproduction followed by a mailed hard copy, but not electronic mail) and shall be deemed given when actually received or, if earlier, five days after deposit in the United States Mail by certified or express mail, return receipt requested, postage prepaid addressed to the party at its principal address noted below. Each party shall make an ordinary, good faith effort to ensure that the person to be given notice actually receives such notice. A party giving notice shall deliver a copy of the notice to the recipient's attorney indicated below, at the same time and in the same or an equivalent manner. Each party shall ensure that the other parties to this Agreement have a current address, fax number, and telephone number for the party and if desired, the party's attorney, for the purpose of giving notice. The principal offices of the parties and their attorneys are presently located at the following addresses:
Electroglas: Electroglas, Inc.
3045 Stender Way
Santa Clara, California 95054
|
Attn.: Joseph A. Savarese, Vice President
(409) 992-8011 (FAX)
(408) 727-6500 (Voice)
Electroglas Counsel: Enterprise Law Group, Inc.
Menlo Oaks Corporate Center 4400
Bohannon Drive, Suite 280 Menlo
Park, CA 94025-1041
Attn.: Wayland M. Brill, Esq. /
Nelson D. Crandall, Esq.
650-462-4747 (FAX)
650-462-4700 (Voice)
Cascade: Cascade Microtech, Inc.
2430 N.W. 206 th Avenue
Beaverton, Oregon 97006
Attn.: Bruce McFadden
(503)601-1001 (FAX)
(503)601-1000 (Voice)
Cascade Counsel: Ater, Wynne, Hewitt, Dodson
& Skerritt
222 S.W. Columbia, Suite 1800
Portland, Oregon 97201-6618
Attn.: Jack Schifferdecker, Esq.
503 226-1191 (FAX)
503 226-0079 (Voice)
|
A party may change his or its address for purposes of this Section 7.2 by giving the other party written notice of the new address in the manner set forth above.
7.3. GOVERNING LAW. The rights and obligations of the parties shall be governed by, and this Agreement shall be construed and enforced in accordance with, the laws of the State of California, excluding any rules that would apply the law of another jurisdiction.
7.4. JURISDICTION AND VENUE. With respect to any legal proceeding instituted by Cascade involving this Agreement, the parties hereto consent to the personal jurisdiction of all federal and state courts in California, and agree that venue shall lie exclusively in Santa Clara County, California. With respect to any legal proceeding instituted by Electroglas involving this Agreement, the parties hereto consent to the personal jurisdiction of all federal and state courts in Oregon, and agree that venue shall lie exclusively in Multnomah County, Oregon.
7.5. ENTIRE AGREEMENT. This Agreement and the documents and agreements contemplated in this Agreement constitute the entire agreement between the parties with regard to the subject matter hereof and thereof. This Agreement supersedes all previous agreements between or among the parties. There are now no agreements, representations. or warranties between or among the parties other than those set forth in this Agreement or the documents and agreements contemplated in this Agreement. In the event of any inconsistency between custom and practice in any trade or industry and, this Agreement, this Agreement is intended to modify trade custom and shall control. Neither custom and practice in any trade or industry, nor any course of dealing between the parties, shall be deemed to supplement this Agreement where this Agreement is silent.
7.6. SEVERABILITY. If any provision of this Agreement, or the application of such provision to any person or circumstances, is held invalid or unenforceable, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall continue in full force without being impaired or invalidated.
7.7. TIME OF ESSENCE. Time is of the essence of this Agreement and the time periods set forth in this Agreement are to be strictly construed and enforced. Where no definite time for performance is specified, however, a delay or omission to exercise any right, power, or remedy hereunder upon any breach or default under this Agreement shall not impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach or default, or of any similar breach or, default thereafter occurring, or an acquiescence therein.
7.8. NO PARTNERSHIP, ETC. This Agreement does not make the parties partners or joint venturers with each other, nor does it create any principal and agent or trustee and beneficiary relationship or other association between any of the parties, except as expressly stated otherwise. No action taken by any party pursuant to this Agreement shall create any such relationship in the absence of express language in this Agreement to the contrary. The relationship of the parties to each other is that of independent contractors.
7.9. CONSTRUCTION OF AGREEMENT. The terms of this Agreement have been negotiated by the parties hereto, and no provision of this Agreement shall be construed against either party as the drafter thereof.
7.10. EXECUTION OF AGREEMENT. Each party has. been represented by counsel in the negotiation and execution of this Agreement. This Agreement is executed voluntarily without any duress or undue influence on the part of or on behalf of the parties hereto. The parties acknowledge that they have read and understood this Agreement and its legal effect.
7.11. AUTHORITY OF EXECUTING PARTIES. The undersigned represent that they are authorized to execute and deliver this Agreement on behalf of the respective parties hereto. Each party has relied upon the authority of the other in executing and delivering this Agreement.
7.12. EXHIBITS. All Exhibits hereto shall be deemed to be a part of this Agreement and are fully incorporated in this Agreement by this reference.
7.13. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Joint Development Agreement as of the date first referenced above.
"Electroglas" "Cascade" Electroglas, Inc., Cascade Microtech, Inc., a Delaware corporation an Oregon corporation By: /s/ CURT WOZNIAK By: /s/ ERIC STRID -------------------------------- ---------------------------- Curt Wozniak, Eric Strid, Chief Executive Officer Chief Executive Officer |
Exhibit 10.12
AMENDMENT TO JOINT DEVELOPMENT AGREEMENT
This Amendment is entered into, at Santa Clara, California between ELECTROGLAS, INC., a Delaware corporation (ELECTROGLAS) and CASCADE MICROTECH, INC., an Oregon corporation (CASCADE), and is as follows:
WHEREAS, ELECTROGLAS and CASCADE entered into a Joint Development Agreement as of June 18, 1999 (the Agreement), and now wish to extend both the duration and the scope of the Agreement;
NOW, THEREFORE, the parties agree to amend the Agreement as follows:
1. In paragraph C of the Recitals, delete the text in its entirety and substitute the following paragraph: "The parties can substantially enhance the performance of the Prober in parametric applications by integrating the Technology into the Prober to create probers meeting the specifications (the "SPECIFICATIONS") set forth in Exhibits B and E hereto (collectively the "PARAMETRIC PROBERS," and individually, as set forth in the specifications, "PARAMETRIC PROBER ONE," PARAMETRIC PROBER TWO," "PARAMETRIC PROBER THREE," and "PARAMETRIC PROBER FOUR").
2. In Article 2.2, delete the text in its entirety and substitute the following paragraph: "Following the date of this amendment, CASCADE's compensation for providing the foregoing resources and incurring costs and expenses in connection with this Agreement shall be pursuant to purchase orders issued from time-to-time by ELECTROGLAS."
3. In Article 3.3, delete the first sentence in its entirety and add the following sentence: Each party shall promptly notify the other in writing in accordance with Section 7.2 upon the successful development of Parametric Prober One, Parametric Prober Two, Parametric Prober Three, or Parametric Prober Four.
4. In Article 4.1, add the following paragraph: "In order to be treated as Confidential Information in the case of an oral disclosure, the disclosing party must contemporaneously tell the receiving party that the information is confidential, and within 15 calendar days the disclosing party must deliver to the receiving party a document describing the information disclosed orally."
5. In Article 6.1, delete the words "for a total of Two Hundred Seventy
(270) Days" and substitute the words "until December 14, 2000.
6. Add Exhibit E in the form attached hereto.
Page 1 - AMENDMENT TO JOINT DEVELOPMENT AGREEMENT
7. The remainder of the Agreement shall remain in full force and effect according to its terms except to the extent that any term is inconsistent with this amendment.
IN WITNESS WHEREOF, the undersigned have executed this Amendment to Joint Development Agreement effective as of March 1, 2000.
Electrogas, Inc., a Delaware corporation
By /s/ CURT WOZNIAK
-------------------------------
Curt Wozniak,
Chief Executive Officer
|
Cascade Microtech, Inc., an Oregon corporation
By /s/ ERIC W. STRID
-------------------------------
Eric Strid
Chief Executive Officer
|
Page 2 - AMENDMENT TO JOINT DEVELOPMENT AGREEMENT
Exhibit 10.13
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
LICENSE AGREEMENT
This Agreement is entered into as of July 21,1999 (the "Effective Date") between CASCADE MICROTECH, INC., an Oregon corporation ("CASCADE"), and ELECTROGLAS, INC., a Delaware corporation ("ELECTROGLAS"), and is as follows:
RECITALS
A. CASCADE and ELECTROGLAS have entered into a Joint Development Agreement as of June 18, 1999 (the "Joint Development Agreement"), pursuant to which CASCADE has incorporated certain of its technology into ELECTROGLAS fully-automatic probers used in production processes by semiconductor fabrication plants, so as to enhance the performance of such probers in the parametric testing of wafers.
B. This Agreement constitutes a portion of the parties' performance under the terms of the Joint Development Agreement.
Accordingly, the parties agree as follows:
1. DEFINITIONS
In this Agreement, unless the context otherwise requires, the following terms shall have the following meanings:
1.1 "Licensed Technology"
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
"Licensed Technology" means CASCADE's low leakage, low noise parametric probing technology related to "Licensed Technology" means CASCADE's low leakage, low noise parametric probing technology related to chucks, cabling, and shielding more particularly set forth in Exhibit A to the Joint Development Agreement and including: (1) all related patented technology, process techniques, and know how developed by CASCADE prior to and throughout the term of the Joint Development Agreement; and (2) all related non patentable modifications, adjustments or enhancements that CASCADE makes, during the term of this Agreement to either purchased components or the Licensed Technology. The Licensed Technology excludes technology related to probes and probe cards.
1.2 "Licensed Trademarks"
"Licensed Trademarks" means the trademarks FEMTOGUARD, ATTOGUARD,
MICROCHAMBER and INNER GROUND PLANE.
1.3 "Fully-Automatic Prober"
"Fully-Automatic Prober" means a prober having an automatic wafer loader, automatic pad to probe alignment system, and probe card ring carrier, and having no microscope, microscope mount,.or individual probe positioners.
1.4 "Production Market"
"Production Market" means the market for probers which are used to test wafers having devices intended for sale in the ordinary course of business, for production use.
1.5 "Process Integration Market"
"Process Integration Market" means the market for probers usually used to test wafers for the purpose of process development or improvement.
1.6 "Engineering Laboratory Market"
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
"Engineering Laboratory Market" means the market for probers which are usually used to test wafers for the purpose of product or process design or development, not for production use.
1.7 "Parametric Prober"
"Parametric Prober" means any Fully-Automatic Prober which incorporates any of the Licensed Technology, including without limitation any current and future generations of such probers for testing 200 mm or 300 mm wafers.
1.8 "Field of Use"
"Field of Use" means the Production Market and Process Integration Market, but excludes the Engineering Laboratory Market.
2. LICENSE
CASCADE grants to ELECTROGLAS a worldwide license to use the Licensed Technology and Licensed Trademarks to enable ELECTROGLAS to manufacture, market, and sell any Parametric Prober within the Field of Use. ELECTROGLAS shall not sublicense the rights granted herein, and shall not use the Licensed Technology or Licensed Trademarks other than as permitted by this Agreement. An exception to the foregoing right to manufacture shall be with respect to any upper guard structure in any Parametric Prober manufactured or marketed in Japan. CASCADE shall sell any such upper guard structure to ELECTROGLAS at cost (not including the royalty payable to the Japanese licensor) for incorporation into any Parametric Prober manufactured or marketed in Japan during the term of this Agreement.
3. PAYMENTS BY ELECTROGLAS
In return for the rights granted in Section 2 hereof, ELECTROGLAS shall make the following payments to CASCADE:
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
3.1 Concurrently with the execution of this Agreement, a license fee payment in the amount of One Million Five Hundred Thousand Dollars ($1,500,000);
3.2 Within ten (10) days after both parties have received the notice required by Section 3.1 of the Joint Development Agreement with respect to Parametric Prober Two described therein, an additional license fee payment of Five Hundred Thousand Dollars ($500,000);
3.3 In addition, throughout the term of this Agreement, royalty payments based on each sale or lease by ELECTROGLAS of any Parametric Prober to a party other than CASCADE, as follows:
(a) [**] Dollars($[**]) for each 200 mm Parametric Prober sold or leased on or before July 31, 2007, and [**] Dollars ($[**]) for each 200 mm Parametric Prober sold or leased thereafter;
(b) [**] Dollars($[**]) for each larger-than-200 mm Parametric Prober sold or leased on or before July 31, 2011, and [**] Dollars($[**]) for each larger-than-200 mm Parametric Prober sold or leased thereafter;
(c) For any Parametric Prober not covered by at least one valid claim of a patent included within the Licensed Technology, the royalty payments in Sections 3.3(a) and 3.3(b) will be reduced by [**] Percent ([**]%); a claim of any patent within the Licensed Technology shall be deemed to be invalid from the time that there shall be a final judgment of a Federal Court from which no appeal is, or can be, timely taken holding such claim invalid;
(d) Sections 3.3(a) and 3.3(b) shall be subject to a downward adjustment in the event that CASCADE imposes changes in the Licensed Technology which reduce the performance of future Parametric Probers to the extent agreed to by the parties pursuant to Section 1.4 of the Joint Development Agreement;
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(e) It is not intended that any royalty will be payable on equipment provided for demonstration purposes in a manner consistent with accepted practice in the industry. A royalty will be payable on former demonstration equipment that is subsequently sold or leased other than for demonstration purposes.
4. PAYMENT DATES AND REPORTS
Reports shall be made by ELECTROGLAS to CASCADE quarterly within thirty
(30) days after the first days of January, April, July, and October of each
calendar year, specifying the numbers of Parametric Probers, by model, which are
subject to the royalty payments required by Section 3.3 for the preceding
three-month period. Each report shall be accompanied by a payment for the amount
due CASCADE under Section 3.3 for the three-month period covered by the report.
ELECTROGLAS agrees to keep full, accurate and complete records pertaining to the
sale, lease, or other disposition of each Parametric Prober, and to permit
CASCADE or its duly-authorized agent to inspect such records during ordinary
business hours on ten (10) days' notice.
5. EXCLUSIVITY
5.1 The rights granted to ELECTROGLAS in Section 2 with respect to the Licensed Technology shall be exclusive, with respect to the Production Market only, for an initial [**]([**]) year period after the Effective Date of this Agreement. Thereafter, in order for ELECTROGLAS to retain such exclusivity, ELECTROGLAS must have made minimum royalty payments under Section 3.3 to CASCADE as follows:
[**] ([**]) YEAR PERIOD MINIMUM ROYALTY PAYMENTS FOLLOWING EFFECTIVE DATE FOR EACH [**] ([**]) YEAR PERIOD ------------------------ ----------------------------- [**] and [**] $ [**] [**] and [**] $ [**] [**] and [**] $ [**] |
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Each [**] ([**]) year period thereafter $[**]
In the event ELECTROGLAS has failed to pay CASCADE at least the
foregoing minimum royalty payments within thirty (30) days after the end of
any applicable [**] ([**]) year period, then CASCADE shall have the right,
but not the obligation, to make all of the rights granted to ELECTROGLAS in
Section 2 nonexclusive by giving ELECTROGLAS written notice of CASCADE's
intention to do so. Provided, however, that if within 30 days of
such written notice ELECTROGLAS at its option pays CASCADE, the deficit
between the total royalty payments actually paid for the applicable [**] ([**])
year period and the foregoing minimum royalty payments for such [**] year
period, then such notice shall be ineffective. Any royalty payments actually
paid in excess of the minimum royalty payments, for the [**] ([**]) year
period immediately preceding the [**] ([**]) year period for which such a
deficit occurs, shall be credited against such deficit.
5.2 The exclusivity defined in Section 5.1 shall continue without any
requirement for minimum royalty payments after such time as CASCADE has received
license fees and royalty payments under Sections 3.1, 3.2 and 3.3 totaling
[**] Dollars ($[**]).
5.3 Section 5.1 shall be subject to a downward adjustment in the event that CASCADE imposes changes in the Licensed Technology which reduce the performance of future Parametric Probers to the extent agreed to by the parties pursuant to Section 1.4 of the Joint Development Agreement.
6. RIGHTS WITH RESPECT TO NEW TECHNOLOGY NOT WITHIN THE LICENSED TECHNOLOGY
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
With respect to technology of CASCADE not within the Licensed Technology, ELECTROGLAS shall have the right to obtain from CASCADE a nonexclusive license, to manufacture, market, and sell Fully-Automatic Probers within the Field of Use, using patentable low noise, low leakage technology applicable to chucks, cabling, and shielding (but not to probes or probe cards) if CASCADE licenses such technology to a third party. The terms and conditions of such license shall otherwise be at least as favorable to ELECTROGLAS as CASCADE provides in such license of the same technology to such third party.
7. SALES AND MARKETING
The parties shall use their reasonable best efforts to present a nonthermal version of the Parametric Prober at Semicon West, 1999, and shall work together in developing a marketing strategy. ELECTROGLAS intends to market the Parametric Prober within the Field of Use, while CASCADE intends to market and sell non-full-featured versions of the Parametric Prober in the Engineering Laboratory Market and the Process Integration Market. The parties shall meet semiannually to review sales and marketing information including, but not limited to, unit sales, selling price of the competition, marketing strategy, and the need for product improvement or new technology.
8. PRODUCTION AND SERVICE
ELECTROGLAS will build, service, and provide spare parts for the Parametric Prober. After the first ten (10) installed units, ELECTROGLAS shall assume primary responsibility for application support with respect to installations. CASCADE and ELECTROGLAS will jointly ensure that ELECTROGLAS application engineers have adequate training to provide first-tier application support with respect to installations; for CASCADE, such training shall be limited to three (3) man
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
months per year during the first three (3) years of this Agreement. CASCADE shall also provide one (1) man month of application support to Electroglas for the first two (2) years of this Agreement, during which time ELECTROGLAS shall pay for travel expenses for CASCADE personnel providing such application, support. Thereafter, CASCADE shall provide application support to Electroglas at its normal billable rate and under the same terms and conditions as CASCADE provides with other products for such services. ELECTROGLAS shall provide goods and services to its customers under the same terms and conditions as ELECTROGLAS provides with other products. Each party will market ELECTROGLAS service contracts with their respective versions of the Parametric Prober.
9. QUALITY CONTROL
ELECTROGLAS expressly recognizes the importance to CASCADE, to customers, and to potential customers, of maintaining high, uniformly-applied standards with respect to the nature and quality of Parametric Probers which utilize the Licensed Trademarks, and their packaging, advertising and promotional materials. ELECTROGLAS agrees that the quality of Parametric Probers utilizing the Licensed Trademarks hereunder, and their packaging, advertising and promotional materials, shall be at least as high as that of the probers currently sold by ELECTROGLAS. ELECTROGLAS will cooperate with CASCADE in making any changes necessary to maintain such quality. ELECTROGLAS further agrees that it shall produce, package and sell such Parametric Probers in compliance with all applicable laws and government regulations and good manufacturing practices prevailing in the industry.
10. PROSECUTION OF INFRINGERS
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
For the duration of the exclusive rights described in Section 5, ELECTROGLAS, at its sole discretion and expense and for its sole benefit, shall have the right to prosecute infringement within the Field of Use of any patent within the Licensed Technology which is incorporated in an ELECTROGLAS Parametric Prober. ELECTROGLAS shall have the right to join CASCADE as a complainant in such suit, but shall indemnify CASCADE against liability by reason of such joinder. If ELECTROGLAS does not prosecute any such infringement for six (6) months after written notice given by CASCADE, then CASCADE may thereafter prosecute such infringement at its own expense and for its own 'benefit to the exclusion of ELECTROGLAS. ELECTROGLAS may be joined as a complainant in such latter suit but shall be indemnified by CASCADE against liability by reason of such joinder. Each party hereby irrevocably consents to being joined as a complainant pursuant to this Section.
11. TERM OF AGREEMENT
11.1 Unless sooner terminated under Section 12, the term of this Agreement shall begin on the Effective Date, and shall expire at the earlier of:
(a) The expiration of all CASCADE patents within the Licensed Technology;
(b) On [**]; or
(c) At such time as CASCADE has received license fees and royalty payments under Sections 3.1, 3.2 and 3.3 totaling [**] Dollars($[**]).
11. 2 If this Agreement expires pursuant to Section 11. 1, the rights granted in Section 2 shall survive such expiration, subject to Section 9, with no further requirement for royalty payments under this Agreement. Moreover, if this Agreement expires pursuant to Section 11. 1 (c), the rights granted
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
in Sections 5.2 and 10 with respect to exclusivity shall likewise survive such expiration with no further requirement for royalty payments under this Agreement.
12. TERMINATION FOR CAUSE
In the event ELECTROGLAS shall fail promptly to make any payment provided for in this Agreement when the same becomes due, then CASCADE may at any time thereafter, while such default or condition continues, at its option terminate this Agreement by giving ELECTROGLAS at least thirty (30) days' written notice of such termination, stating with particularity in such notice the default or condition alleged to have occurred; provided that such termination shall not become effective if, within such thirty (30) day period of notice, ELECTROGLAS shall correct such default or condition. Time is of the essence of this Agreement. Upon the termination of this Agreement for cause pursuant to this section, ELECTROGLAS shall not thereafter use the Licensed Technology or Licensed Trademarks, except that upon any such termination ELECTROGLAS shall have the right to complete the manufacture of any Parametric Prober which is in the course of manufacture at the time of ELECTROGLAS' receipt of notice of termination atid to sell or permit the sale of such Parametric Prober so completed or held in stock by it'at the time such notice is received, subject to the payments and the observance of the other conditions specified in this Agreement. No termination of this Agreement for any reason shall relieve the parties from any payment, report, records inspection or other obligation with respect to any period prior to the effective date of such termination.
13. CONFIDENTIAL INFORMATION
The provisions of Section 4 of the Joint Development Agreement are hereby incorporated by reference.
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
14. WARRANTY OF TITLE
CASCADE warrants and represents to ELECTROGLAS that CASCADE is the sole and exclusive owner of all proprietary rights included in the Licensed Technology, and has not entered into any agreement or understanding with any other party in conflict herewith.
15. SURVIVAL
The provisions of Sections 1, 2, 5, 9, 10, 11, 12, 14, and 18 shall survive the expiration or termination of this Agreement to the extent necessary to satisfy the conditions of Sections 5, 11 and 12. The provisions of Sections 13 and 17 shall survive the expiration or termination of this Agreement for any reason.
16. ASSIGNABILITY
Each parties' right under this Agreement shall generally be assignable together with its business relating to the Licensed Technology, provided that the assignee accepts all obligations owed to the nonassigning party. Assignment shall not be permitted to a direct competitor of ELECTROGLAS within the Production Market, or to an affiliate of such direct competitor. In addition, any material breach of this Agreement by the assignee, which remains uncorrected after thirty (30) days' written notice by ELECTROGLAS specifying such breach, shall result in ELECTROGLAS receiving a fully paid-up nonexclusive license from the date of such breach. Otherwise, no assignment of the respective rights of the parties under this Agreement is permitted without the written consent of the other party.
17. MISCELLANEOUS
The provisions of Section 7 of the Joint Development Agreement are hereby incorporated by reference.
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
18. PATENT AND TRADEMARK NOTICES
18. 1. Each party agrees, to the extent practical, to properly affix a statutory patent notice to all of its products covered by any patent licensed pursuant to this Agreement. CASCADE will supply ELECTROGLAS with written identifications of the products that should bear such notices, reasonable instructions for affixing the notices, and copies of the notices desired to be affixed.
18.2. All uses of any of the Licensed Trademarks by ELECTROGLAS shall include any notice designations legally required or useful for enforcement of the rights in the mark, as requested from time-to-time by CASCADE upon reasonable notice to ELECTROGLAS. In addition, any product, advertising, product literature or product documentation using any of the Licensed Trademarks shall include a notice naming any such mark or marks so used and indicating that such marks are trademarks of CASCADE.
IN WITNESS WHEREOF, the undersigned have executed this License Agreement as of the Effective Date first referenced above.
"ELECTROGLAS" "CASCADE"
ELECTROGLAS, INC., CASCADE MICROTECH, INC.,
a Delaware corporation an Oregon corporation
By /s/ CURT WOZNIAK By /s/ ERIC W. STRID
-------------------------------------- ------------------------
Curt Wozniak, Eric W. Strid,
Chief Executive Officer Chief Executive Officer
|
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
Exhibit 10.14
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
PATENT LICENSE AGREEMENT
between
Micronics Japan Co., Ltd.;
Hewlett-Packard Japan Ltd.;
and
Cascade Microtech Japan, Inc.
Table of Contents
1. DEFINITIONS...........................................................3
1.1 "LICENSED PATENTS"................................3
1.2 "LICENSED PRODUCTS"...............................3
1.3 "AFFILIATE".......................................3
2. GRANT OF LICENSE......................................................3
3. PAYMENT AND REPORTS...................................................4
3.3a MINIMUM ROYALTIES.................................4
3.3b ADDRESSES FOR PAYMENTS AND REPORTS................5
|
4. WARRANTY AND DISCLAIMER...............................................5
5. TERM AND TERMINATION..................................................6
6. GENERAL...............................................................6
AGREEMENT
This Agreement is made by and between MICRONICS JAPAN CO., LTD., a corporation of Japan having a principal place of business at 2-6-8 Hon-Cho, Kichijoji, Musashino-Shi, Tokyo, Japan ("MJC"); HEWLETT-PACKARD JAPAN, LTD., a corporation of Japan having a principal place of business at 9-1, Takakura-Co, Hachioji-Shi, Tokyo, Japan ("HPJ"); and CASCADE MIROTECH JAPAN, INC., a corporation of Japan having a principal place of business at Sumitomo Aobadai Hills, 4-7-7 Aobadai, Megura-Ku, Tokyo, Japan ("CMJ").
This Agreement shall become effective as of the date (hereinafter the "EFFECTIVE DATE") it has been signed by all parties.
WHEREAS, MJC AND HPJ jointly own or control, and have the rights to license certain patent applications relating to electric circuit measurement apparatuses; and both of MJC and HPJ desire to grant and CMJ desires to accept a non-exclusive license under those rights;
THEREFORE, the parties agree as follows:
1. DEFINITIONS
1.1 "LICENSED PATENTS" means a pending patent application Tokugan Hei 5-177572 (Tokkai Hei 7-84003) filed with Japanese Patent Office on June 25, 1993 and all divisions and conversions thereof, which are all unexpired and not finally rejected or finally held invalid by the Japanese Patent Office or a court of final jurisdiction.
1.2 "LICENSED PRODUCTS" means CMJ's products in the field of electric circuit measurement apparatuses such as parametric probing systems manufactured or used or sold in Japan which manufacture or use or sale is covered by one or more claims of a LICENSED PATENT issued or pending in Japan, provided that any such pending LICENSED PATENT must ultimately be granted with one or more issued claims covering such manufacture, use or sale.
1.3 "AFFILIATE" means any entity which controls CMJ, which is controlled by CMJ, or which is controlled by an entity which controls CMJ.
2. GRANT OF LICENSE
2.1 MJC and HPJ hereby grant to CMJ and its AFFILIATEs a non-exclusive worldwide license, without the right to sublicense, under the LICENSED PATENTS to make, have made, use, lease, sell or otherwise transfer the LICENSED PRODUCTS. No license is granted by MJC and HPJ under this Agreement, either directly or by implication, under any patent other than the LICENSED PATENTS.
2.2 The license granted in Section 2 of this Agreement shall take effect on the EFFECTIVE DATE of this Agreement.
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
3. PAYMENT AND REPORTS
3.1 As consideration for the license granted in this Agreement, CMJ shall pay, to MJC [**] Japanese yen ((Y)[**]) per each LICENSED PRODUCT sold, leased or otherwise disposed of by CMJ or its AFFILIATEs, and to HPJ [**] Japanese yen ((Y)[**]) per each LICENSED PRODUCT sold, leased or otherwise disposed of by CMJ or its AFFILIATEs, as of and subsequent to December 15, 1995. Such payment shall be made as set forth in paragraphs 3.1a, 3.2, 3.2a, 3.3 and 3.3a.
3.1a Only one royalty shall be payable with respect to any LICENSED PRODUCT which may be subject to royalty by utilization of more than one LICENSED PATENT.
3.2 In consideration of the payments made as provided for bellow, and effective as of the date of receipt by both of MJC and HPJ of such payments, MJC and HPJ will release CMJ, its AFFILIATEs, and all purchasers and users of LICENSED PRODUCTS from all claims or liability for past infringement of the LICENSED PATENTS, from the dates specified in Paragraphs 3.2a. No royalty shall be due on products which are not LICENSED PRODUCTS as this term is defined in Paragraph 1.2, above.
3.2a Within sixty (60) days after the date a patent is granted in Japan to MJC and HPJ upon the pending application of MJC and HPJ by the Japanese Patent Office as identified in Paragraph 1.1, CMJ shall pay to MJC and HPJ royalties computed in accordance with the provision of Paragraphs 3.1 and 3.1a, above, without interest, for all manufacture and sales of LICENSED PRODUCTS in Japan during the period from December 15, 1995 to the date such patent aforesaid is granted.
3.3 For royalties accrued after the date a patent is granted in Japan to MJC and HPJ upon the pending application of MJC and IIPJ as identified in Paragraph 1.1, a Payment Period will be each half fiscal year of CMJ (one being January 1st through June 30th and the other being July 1st through December 31st) during the term of this Agreement. Each payment shall be preceded by a report from CMJ to MJC and HPJ setting forth the bases of the computation of royalties and the amounts payable.
CMJ shall be liable for interest on any overdue payment at a rate of 10% per year.
3.3a MINIMUM ROYALTIES
Should royalties in Paragraph 3.3 accrued during a fiscal year,
computed in accordance with the provision of Paragraph 3.1. be zero, CMJ
shall pay to MJC [**] Japanese yen ((Y)[**]) for the fiscal year within sixty
(60) days after the last day of the fiscal year.
3.4 ADDRESSES FOR PAYMENTS AND REPORTS
3.4a Payments and reports to MJC will be forwarded directly to the following address:
Micronics Japan Co., Ltd.
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
General Affairs Department
2-6-8, Kichijoji Hon-Cho, Musashino-Shi,
Tokyo, 180 Japan
3.4b Payments and reports to HPJ will be forwarded directly to the following
address:
HEWLETT-PACKARD JAPAN, LTD.,
Hachioji Semiconductor Test Division
c/o Tadanori Furutsuki
9-1, Takakura-Cho, Hachioji-Shi
Tokyo, 192 Japan
3.5 CMJ shall keep adequate records to accurately determine the payments
|
due under this Agreement. Once each calendar year and upon reasonable advance written notice to CMJ, MJC and HPJ may have an independent auditor audit the applicable records of CMJ, at expense on both of MJC and CMJ, to verify the accuracy of the royalty calculations. All such records shall be treated as Confidential Information by said independent auditor and shall not be disclosed to MJC and HPJ except insofar as necessary to verify to MJC and HPJ the accuracy of CMJ's payments to MJC and HPJ. Should any payment be underpaid by at least 10%, then the CMJ shall pay the reasonable expense of such audit. Any underpayment or overpayment shall be included or credited with the next payment under this Agreement.
3.6 Any sum of money paid by CMJ hereunder shall not be refunded for any reason, whatsoever, except as otherwise provided hereunder or where both parties agree that an overpayment occurred through mistake.
3.6a Should any LICENSED PATENT be finally rejected or finally held invalid by the Japanese Patent Office or the court of final jurisdiction, MJC and HPJ shall refund to CMJ any sum of royalties paid for sales of LICENSED PRODUCT subsequent to such final holding where such sum was paid solely by reason of said LICENSED PATENT.
4. WARRANTY AND DISCLAIMER
4.1 MJC and HPJ warrant that they have the right to grant the license set forth in Section 2 hereof. MJC and HPJ make no other representations or warranties, express or implied, nor do MJC and HPJ assume any liability in respect to any infringement of patents or other rights of third parties due to CMJ's operation under the license granted herein, nor do MJC and HPJ assume any responsibility for enforcement of the LICENSED PATENTS against third parties.
5. TERM AND TERMINATION
5.1 Unless sooner terminated as hereinafter provided, the term of this Agreement shall be from the EFFECTIVE DATE hereof until the expiration date of the last to expire of the LICENSED PATENTS.
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
5.2a MJC and HPJ may forthwith terminate this Agreement by written notice of termination to CMJ, in the event that CMJ becomes insolvent, or voluntarily or otherwise enters into liquidation or bankruptcy, or has a receiver or trustee appointed to administer its property or affairs.
5.2b If CMJ should, at anytime, fail to pay any fee or royalty or breach any material provision of this Agreement and such failure should not be cured within sixty (60) days after written notice from MJC and HPJ to CMJ specifying the nature of the default, MJC and HPJ shall have the right to terminate this Agreement by giving written notice to CMJ, and upon the giving of such notice, such license shall terminate forthwith.
5.3 Any termination pursuant to this Section shall not relieve CMJ of any obligation or liability accrued hereunder prior to such termination, and such termination shall not affect in any manner any rights of any of MJC and HPJ under this Agreement, or rescind or give rise to any right to rescind anything done by CMJ or any payments made or other consideration given to MJC or HPJ hereunder prior to the time such termination becomes effective.
5.4 In the event of termination of this Agreement, all rights and
obligations which by their nature survive the expiration or termination of this
Agreement shall remain in effect, including specifically the confidentiality
provisions contained in Paragraph 6.9 and the warranty provisions contained in
Section 4.
6. GENERAL
6.1 This Agreement constitutes the entire agreement between the parties relating to the subject matter of this Agreement, and supersede all prior proposals, agreements, representations and other communications between the parties with respect to the subject matter of this Agreement.
6.2 No change in the provisions of this Agreement shall be valid unless in writing and signed by all parties.
6.3 The laws of Japan shall be employed for construction and interpretation of this Agreement and determination of the legal relations between the parties hereunder.
6.4 With regard to any dispute arising out of this Agreement, the parties shall first attempt to settle the same by means of amicable, sensible and generally reasonable discussions and/or negotiation held between the parties.
6.5 Neither party may assign this Agreement to any party at any time without written consent of the other, except that this Agreement may be assigned by either party to any person, corporation or other business entity succeeding to such party's entire business in the LICENSED PRODUCTS, provided such assignee shall, without delay, accept in writing the provisions of this Agreement and agree to become in all respects bound thereby.
6.6 The failure or delay of either party in exercising any of its rights hereunder, including any rights with respect to a breach or default by the other party, shall in no way operate as a waiver of
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
such rights or prevent the assertion of such rights with respect to any later breach or default by the other party.
6.7 Should any provision of this Agreement be held to be unenforceable, such ruling shall not affect the validity and enforceability of the remaining provisions of this Agreement.
6.8 Any notice or acceptance provided for in this Agreement shall be in writing and shall be deemed to have been given on the date such communication is deposited in certified or registered first class mail, in an appropriately stamped envelope, addressed:
To MJC: Micronics Japan Co., Ltd.
Research and Development Center
Development Control Section
MHC Bldg.
8-7-3, Shimorenjaku, Mitaka-Shi,
Tokyo, 181 Japan
Phone: +81-422-45-0710
To HPJ: Hewlett-Packard Japan, Ltd.
Hachioji Semiconductor Test Division
9-1, Takakura-Cho, Hachioji-Shi
Tokyo, 192 Japan
Attention: Kenzo Ishiguro
Phone: +81-426-60-2158
To CMJ: Cascade Microtech Japan, Inc.
Sumitomo Aobadai Hills Bldg.
7-7 Aobadai 4-chome, Meguro-ku,
Tokyo, 163 Japan
Attention: Naoya Koiso
Phone: +81-3-5478-6100
|
6.9 The parties agree that the terms of this Agreement are confidential and each party shall use the same degree of care to prevent disclosure of the terms of this Agreement to third parties as it uses to protect its own confidential information of similar nature. Any advertising or publicity concerning this Agreement, including press releases, which mentions the other party by name shall be agreed upon by both parties in writing prior to any release, notwithstanding the foregoing, either party may disclose the terms of this Agreement to a bona fide prospective successor to such party's entire business in the LICENSED PRODUCTS.
6.10 The headings used in this Agreement are for reference and convenience only and shall not be used in interpreting the provisions of this Agreement.
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
6.11 Nothing contained in this Agreement shall be deemed to grant, either
directly or by implication, estoppel, or otherwise, any license under patents or
other intellectual property rights other than as specifically provided in
Section 2 of this Agreement.
IN WITNESS WHEREOF, this Agreement is hereby executed by a duly authorized representative of each party.
MICRONICS JAPAN CO., LTD. HEWLETT-PACKARD JAPAN, LTD.
By /S/ Yoshiei Hasegawa By /S/ Minoru Ebihara
-------------------------- ----------------------------------------
Yoshiei Hasegawa Minoru Ebihara
---------------------- ----------------------------------
Typed Name Typed Name
General Manager
President Hachioiji Semiconductor Test Division
---------------------- ----------------------------------
Title Title
July 28, 1997 July 23, 1997
---------------------- ----------------------------------
Date Date
CASCADE MICROTECH JAPAN, INC.
By /S/ Naova Koiso
---------------------------
Naova Koiso
-----------------------
Typed Name
General Manager
-----------------------
Title
July 14, 1997
----------------------
Date
|
[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Exhibit 10.15
EXECUTIVE COMPENSATION PLAN FOR 2000
Finalized 12/20/99
Measures applied by position:
---------------- ------------------------------ ---------------- ------------------
PPD Revenue EPD Op Income Qtr Objectives
---------------- ------------------------------ ---------------- ------------------
CEO, COO, CFO 40% 30% 30%
---------------- ------------------------------ ---------------- ------------------
PPD 60% 10% 30%
---------------- ------------------------------ ---------------- ------------------
EPD & Ops 10% 60% 30%
---------------- ------------------------------ ---------------- ------------------
NA Sales 40% (PPD NA/ROW bookings) 30% 30%
---------------- ------------------------------ ---------------- ------------------
|
PPD REVENUE (INCLUDING CONTRACT REVENUES):
- Target is $7.1M, per the Op Plan
- Same lower revenue target as the warrant pricing (start at $4.7M), but no upper limit
[A graph is located here in the original document. The X axis is PPD Consolidated Revenue, with reference points of $4.7M, $7.1M and $8.8M. The Y axis designates the percentage payout. A line connecting certain intersectional points illustrates a sliding scale of payouts. At $4.7M there is 0% payout. $7.1M earns a 100% payout. $8.8M earns a 200% payout. The line continues indefinitely, illustrating higher percentage payouts for revenue greater than 8.8M.]
EPD Op Income
- Op Plan target is $5.3M (about 10% of revenue)
- Since semi equipment is so volatile, don't use a steep slope on EPD income, but the forecasts are very strong and an upside would help us spend more in PPD. 50% of target is roughly the op income we hit in 1998; 150% of target would be a stretch. Estimated 1999 result is $4.0M (excluding EG license fee and associated expenses and reserves).
[A graph is located here in the original document. The X axis is EPD Consolidated Operating Income, with reference points of $2.65M, $5.3M and $7.6M. The Y axis designates the percentage payout. A line connecting certain intersectional points illustrates a sliding scale of payouts. At $2.65M there is 0% payout. $5.3M earns a 100% payout. $7.6M earns a 200% payout. The line continues indefinitely, illustrating higher percentage payouts for income greater than 7.6M.]
Quarterly objectives: (payout quarterly)
- Half of this payout (15% of total): 0 to 100% for meeting quarterly departmental must-do objectives in 2000 (equal portion for each objective, 25% possible each quarter) Failure to have a clear measure(s) or assumptions and contingency plans for any must-do interpreted as missing the objective; objective drops out if its assumptions did not hold. (Same process as 1999).
- Other half of this payout (15% of total): Paid for hitting or exceeding quarterly EPS "guidance", as if we were telling analysts X cents per share (rounded to nearest cent, just as we would report earnings). No payout for missing it. Paid quarterly. Targets set in December 99:
Q1 1 cent
Q2 1 cent
Q3 4 cents
Q4 6 cents
Exhibit 21.1
List of Subsidiaries
Cascade Microtech Japan, Inc.
Sumitomo Aobadai Hills Bldg 1F
7-7 Aobadai 4-Chome
Meguro-KU, Tokyo 153-0042
Telephone: 011-81-3-5478-6101
Fax: 011-81-3-5478-6107
Cascade Microtech Europe Limited
3 Somerville Court
Banbury Business Park
Adderbury
Oxon OX17 3 SN UK
Telephone: 011-44-1295-81-28-28
Fax: 011-44-1295-81-28-29
Cascade Microtech Foreign Sales, Inc.
Abacus Trust and Banking Services, Inc.
Collymore Rock
P.O. Box 634C
St. Michael
Barbados, West Indies
Telephone: 246-436-7000
Fax: 246-436-7057
EXHIBIT 23.2
INDEPENDENT AUDITORS' REPORT ON SCHEDULE AND CONSENT
The Board of Directors
Cascade Microtech, Inc.:
The audits referred to in our report dated February 25, 2000 included the related financial statement schedule as of December 31, 1998 and 1999 and for each of the years in the three-year period ended December 31, 1999, included in the Registration Statement on Form S-1. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We consent to the use of our report dated February 25, 2000 included in the Registration Statement on Form S-1 of Cascade Microtech, Inc. relating to the consolidated balance sheets of Cascade Microtech, Inc. and subsidiaries as of December 31, 1998 and 1999, and the related consolidated statements of operations, redeemable convertible preferred stock and shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1999, and to the reference to our firm under the headings "Selected Consolidated Financial Data" and "Experts" in the Registration Statement.
/s/ KPMG LLP
Portland, Oregon
September 29, 2000
|
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN CASCADE MICROTECH, INC.'S REGISTRATION STATEMENT ON FORM S-1 FILED WITH THE COMMISSION ON SEPTEMBER 29, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR | YEAR | 6 MOS |
| FISCAL YEAR END | DEC 31 1998 | DEC 31 1999 | DEC 31 2000 |
| PERIOD START | JAN 01 1998 | JAN 01 1999 | JAN 01 2000 |
| PERIOD END | DEC 31 1998 | DEC 01 1999 | JUN 30 2000 |
| CASH | 368 | 13,511 | 4,864 |
| SECURITIES | 0 | 0 | 7,967 |
| RECEIVABLES | 8,759 | 12,668 | 13,580 |
| ALLOWANCES | 50 | 66 | 69 |
| INVENTORY | 5,716 | 6,254 | 7,386 |
| CURRENT ASSETS | 16,559 | 33,651 | 33,684 |
| PP&E | 7,514 | 6,999 | 9,072 |
| DEPRECIATION | 4,936 | 3,951 | 4,387 |
| TOTAL ASSETS | 20,549 | 38,114 | 41,304 |
| CURRENT LIABILITIES | 8,205 | 7,639 | 10,092 |
| BONDS | 0 | 0 | 0 |
| PREFERRED MANDATORY | 0 | 9,908 | 10,356 |
| PREFERRED | 3,332 | 9,226 | 9,226 |
| COMMON | 1,350 | 1,446 | 813 |
| OTHER SE | 5,858 | 8,293 | 9,463 |
| TOTAL LIABILITY AND EQUITY | 20,549 | 38,114 | 41,304 |
| SALES | 41,597 | 51,530 | 31,860 |
| TOTAL REVENUES | 41,597 | 51,530 | 31,860 |
| CGS | 24,541 | 27,444 | 16,735 |
| TOTAL COSTS | 24,541 | 27,444 | 16,735 |
| OTHER EXPENSES | 18,632 | 20,123 | 12,415 |
| LOSS PROVISION | 0 | 0 | 0 |
| INTEREST EXPENSE | 349 | 198 | 52 |
| INCOME PRETAX | (1,707) | 3,697 | 2,963 |
| INCOME TAX | (730) | 1,223 | 1,130 |
| INCOME CONTINUING | (977) | 2,474 | 1,833 |
| DISCONTINUED | 0 | 0 | 0 |
| EXTRAORDINARY | 0 | 0 | 0 |
| CHANGES | 0 | 0 | 0 |
| NET INCOME | (977) | 2,474 | 1,833 |
| EPS BASIC | (0.21) | 0.50 | 0.36 |
| EPS DILUTED | (0.21) | 0.33 | 0.19 |